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The Earl of Bradford: While I accept that the purpose behind this amendment is to simplify, the advice that I was given as regards its wording was that it had to fit in with the Consumer Protection Act 1987, and if it was going to be added to that Act, it needed to be phrased and tabled in this way. The purpose of the amendment is certainly not totally to discourage tips.

Basically, there are two purposes here: first, that a service charge should not be levied and, secondly, a cover charge should not be levied except in respect of entertainment. The Minister has advised us that we are all deficient in our drafting and that we may have to rethink this matter at a later date. I very much hope that he will accept that those are the two purposes behind the wording and not tipping.

8 p.m.

Viscount Mountgarret: I listened to my noble friend with interest. I am a little disappointed that the Government are not supportive of the Bill because I think that consumers should be protected in restaurants. There may well be the Consumer Protection Act, but nonetheless at numerous establishments all kinds of sums are added to bills and people can become very confused. However, having said that it is fairly clear from what my noble friend said that this falls outside the Consumer Protection Act and I would not like to suggest anything that will make life more difficult. Although I agree with the noble Viscount, Lord Thurso, it seems that it may be better to leave the provisions as they stand in the clause.

However, the point has been made. If the Consumer Protection Act can be improved, perhaps we are better to follow that course. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 agreed to.

Clause 2 [Code of practice]:

Lord Monson moved Amendment No. 2:


Page 1, leave out lines 21 and 22.

The noble Lord said: Paragraph (b) of Clause 2 is surely excessively restrictive and paternalistic. Why should not people be free to decide at the last moment to add a tip via their credit card if they so wish? Not everybody carries enough cash around with them to constitute a tip and if they do have enough cash, it may well be of the wrong denomination. Anyone in the income bracket which makes them eligible for a credit card must be supposed to have sufficient nous not to be thrown or intimidated by a blank space on the credit card slip which he or she is perfectly free to complete or to ignore. I beg to move.

Lord Cadman: Although I appreciate the sentiments behind the amendment, I think that we should resist it.

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Apart from the implicit suggestion contained in the practice, in many cases the money raised in this way does not get into the pockets of the staff; rather, it is applied for their benefit. The provision of coffee and drinks machines in staff rooms is one such application. I am informed that free transport to, say, staff sporting events or staff outings is another. I am sure that restaurant staff would be much happier if they could receive any gratuities personally rather than at the behest of their employers. Also, if the customer is careless and neglects to fill in the total, as is quite common, there is a possibility that fraud may be encouraged.

Lord Bramall: I should first declare my interest in that for six years I was chairman of the Dorchester Hotel and still keep in close touch with the hotel. That has enabled me to carry out some research there recently. I must confess that I see no problem with the clause as drafted. I think that we are all agreed that people should be able to go into a restaurant, look at the menu and see exactly what they will pay for a particular course without having to take into account a lot of hidden charges.

It is not a question of whether or not the staff actually get the tips. They get some tips anyhow because the service charge is included in the price. The point is that unless the customer particularly wants to do so, he should not have to pay twice for service.

Many people pay by credit card. When a customer is given his bill he has an opportunity to say whether he wants to give anything in addition. He is not expected to do so because it is all included in the price, but he has that opportunity. The customer can either give an extra tip in cash or, when he is giving his credit card to the waiter, he can say, "Now, go and make out the credit card form and put in x per cent. (or £x), bring it back and I will sign it". That is perfectly proper. However, if the customer does not want to give anything extra and the debit slip is returned with a gap, the total box not having been filled in, that is putting a pistol to his head and saying, "Service charges are indeed included, but, as you can see from the gap, you are expected to pay something else as well". That seems to me to be putting undue pressure on the customer.

I find the provisions as drafted acceptable. I know that establishments such as the Dorchester Hotel and others of that calibre follow that practice already. Their menus make it perfectly clear that the price includes all cover charges (if there are any), VAT and the service charge. If a customer does not specify to the contrary, the debit slip for the credit card is returned completed. If the customer then makes up his mind that he wants to give something extra, there is a third alternative: he can say to the waiter, "Will you go away and tear up the debit slip and make out a new one?" The customer can do that, but it is easier if he pays the tip in cash or tells the waiter of his intentions in advance when he gives him his credit card. I can see no objection to the provisions.

The Earl of Lindsey and Abingdon: I too would like to see the clause retained in the Bill. Perhaps I may give as an example what happened to me last night.

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I shall not give the name of the restaurant, but the menu made it absolutely plain that service and cover charges were included. However, when I asked for my bill and sought to pay by credit card, a gap for gratuities was left at the bottom of the slip. That invites double-tipping. I raised that matter on Second Reading because I think that it is entirely wrong. I put a line through the gap and tipped the waiter cash as I left because, as has been said, we do not know where the gratuities go. They do not necessarily go to the waiter concerned. The money goes into a pot and we do not know whether it goes to the management. It is all right if the place is properly run, but that is not always the case. That is why I should like the clause to be retained in the Bill.

Viscount Mountgarret: My Lords, perhaps for a moment I may take issue with the noble and gallant Lord, Lord Bramall, who said that if you wanted to add a little more by way of your debit card, it would not be difficult to ask the waiter to tear up the first slip and to start again. I do not know what other noble Lords think, but it seems to take long enough to be given one credit card slip to sign at the end of a meal in a restaurant, let alone having to ask someone to tear that up and to bring back another.

We are presupposing that the service charge to which noble Lords are referring as inclusive in the price is actually specified. One restaurant may decide to put, say, 5 per cent. on to the price of a steak while another restaurant decides to add on 10 per cent. However, in that case the consumer does not know one way or the other what the service charge is on his bill. The customer will simply go to where he receives the best value at the best price, whatever the restaurant.

Diners must be entirely free to give tips. As has been said, one sometimes wonders just what happens to the gratuities that one may add to a credit card slip. On that basis, I think that the amendment is flawed. I believe that my noble friend has it about right and the amendment should not be supported.

Lord Bramall: I did not suggest that the tearing up of the credit card slip was a standard procedure. That is only for the benefit of those who have not made up their minds earlier. Normally, they will do it in advance or will pay cash. As far as getting the best value for money is concerned, the Dorchester has no difficulty in getting clients, even though it adopts that particular procedure.

Viscount Thurso: I put one point to the noble Lord, Lord Cadman. I believe that as a matter of law gratuities left by clients, as opposed to service charges, are the property of the staff for whom they are left. Therefore, it is illegal for that money to be used in any way other than for the benefit of the staff. That is not so in the case of the service charge which Clause 1 seeks to abolish.

Lord Fraser of Carmyllie: I have listened keenly to this interesting debate. However, I wish to be clear that at the moment we are dealing with Amendment No. 2 rather than Clause 2 in its totality. For the benefit of a number of Members of the Committee who have shown an interest in this matter but did not have an opportunity to participate at Second Reading, perhaps I may repeat

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the following to set the matter in context. The Government have undertaken to revise the guidance on restaurant service charges given in the current code of practice for traders on price indications when the code is reviewed. When that review takes place we shall consult widely with all interested parties on the advice which it will be appropriate to include. No doubt the issues addressed both by the clause and the amendments proposed to it will be considered.

As I hope I made clear on Second Reading, however, the approach adopted in the Bill of seeking to regulate a specific sector through primary legislation, which has application to price indications for virtually all goods and services, is fundamentally unacceptable. To seek to change the scope of the provisions of Part III of the Consumer Protection Act 1987 to include regulation of practices within a specific sector can have the effect of casting doubt on the application of that part of the Act to all price indications. While I understand what is sought to be done--whether those who participate are in favour of the clause or wish to restrict it--I am concerned that in a broader legal context it will have some seriously undesirable effects.

As regards this particular clause, a further objection is that it will produce the impracticality of requiring any code of practice approved under Section 25 of the Consumer Protection Act 1987 to include the three matters specified in the clause, regardless of the subject matter of that code. Therefore, the deletion proposed in Amendment No. 2 will in some respects overcome the objection to which I have made reference. In that respect the amendment will be a welcome one. I say for the convenience of the Committee that that applies equally to Amendment No. 3.

As far as concerns Amendment No. 2, I agree with the noble Lord, Lord Monson, that it is not appropriate for the Bill to deal with the non-closure of credit card slips. The issues around this practice were debated on Second Reading. If a further remedy is needed--it is clear from the debate that there is a widespread view that something ought to be done to attack this extremely undesirable practice--I regret to say that I cannot indicate to the Committee that this is an appropriate vehicle to bring about such a change.


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