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The Earl of Bradford: I was delighted that my noble and learned friend the Minister felt that this subject needed to be looked at and considered in a code of conduct in the future. It is there to protect the public. Sadly, at the moment there are practices, all too rife in the restaurant industry, which try to persuade the customer to part with more money than he should have to. Recently, a noble Baroness asked me about a certain restaurant to which she intended to go. She asked me what she should do. I said that when the bill arrived she would find that the restaurant had added on 12½ per cent. for service and that her credit card slip would be left open. The following week she thanked me fulsomely and said that without the advice I had given she would have added an extra tip in the place indicated.

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The noble and gallant Lord, Lord Bramall, made some cogent points. When somebody is paying a bill and wishes to leave a tip it is easy for him to request that so much should be added to it and that it should be put on his credit card, or he could leave it in cash. I accept what my noble and learned friend the Minister said; namely, that it is inappropriate for this provision to be included. Therefore, if there are strong objections to it and the amendment is supported I shall have to withdraw the clause.

Lord Monson: I am grateful to all noble Lords who have spoken and for the wide range of views expressed. I agree with the noble Lord who spoke immediately after me. All too often service charges go in whole or in part into the pocket of management rather than the staff. This is a deplorable practice. I tabled an amendment to the Bill to outlaw that practice but was told that it was inconsistent with the Long Title and therefore had to withdraw it.

The noble Earl, Lord Lindsey and Abingdon, told us of his experience last night. I suggest that what he has said justifies my amendment. He did what anybody else would do in similar circumstances: he put a line through the credit card and paid cash. He was exercising his judgment and was perfectly free to do so. But he might not have had any cash with him and have preferred to add something to the credit card slip in lieu. As the noble Viscount has told us, by law that must go to the staff and not the management.

I have received support from the Government and the noble Earl, Lord Bradford. If the Government's view is that this is not an appropriate Bill in which to abolish the practice of leaving open credit card slips it may be right for the amendment to be accepted. I am in the hands of the Committee. If it is the Government's wish, perhaps the view of the Committee can be tested.

On Question, amendment agreed to.

The Deputy Chairman of Committees: If Amendment No. 3 is agreed to, I cannot call Amendments Nos. 4 to 7.

Viscount Thurso moved Amendment No. 3:


Page 1, leave out lines 23 to 25.

The noble Viscount said: In moving Amendment No. 3 I should like to speak also to Amendments Nos. 4 to 7 and Amendments Nos. 8 and 10. The effect of Clause 1 is to abolish service charges. For the benefit of noble Lords who are not familiar with the industry, perhaps I may make clear the difference between service charges and tips or gratuities. Service charges are obligatory or optional charges that are applied by the management, managed by them and handed out to the staff. As the noble Lord, Lord Cadman, pointed out, those charges may be used for their benefit. That has now been abolished. Tips and gratuities are entirely at the discretion of the client. The client may or may not leave them, as he thinks fit. The purpose of Amendments Nos. 3, 8 and 10 is to ensure that tips and gratuities are not actively discouraged.

The amendment proposed by the noble Earl, which he will move if this amendment is not agreed to, would mean that VAT and service would be stated to be

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inclusive. If one has just abolished service, it is impossible then to state on a bill that service is included. It would make clients think that some form of payment was going to the staff, when in fact the effect of the Bill is to remove service charges. To say, "inclusive of service" is more misleading than the current situation.

Secondly, to state "inclusive of VAT" brings into the Bill an element which was not present on Second Reading. Furthermore, as the Minister said, it cuts across a great deal of other legislation. I am grateful to the Minister for pointing out the effect of the clause. So, rather than go through all the arguments I had rehearsed, I shall say that a code of practice is set up by Clause 2. If a code of practice is set up with Amendments Nos. 8 and 9, which require the Secretary of State to consult the industry, any point can be considered and included in the code of practice. However, if paragraph (c) is allowed to remain, then the Secretary of State will be obliged to do so. Therefore what the noble Earl seeks can still be achieved if the amendment is agreed to. If it is not agreed to, what I seek cannot be achieved. I beg to move.

Lord Bramall: Perhaps I may ask the noble Viscount a question. He may know something that I do not know. When talking about the service charge, he used the words, "that has now been abolished". As I understand it, the service charge has not been abolished. It is still there, but it is merely included in the price. So the customers will know when they are ordering their Dover sole, or whatever it is, that the price is inclusive. Included in the price is the service charge which is still passed on to the staff.

Viscount Thurso: I am sure that the noble Lord is aware that there is a difference between an optional service charge and a compulsory one. An optional service charge suffers from neither national insurance nor VAT. So, when it is given to the staff, it is of greater benefit to them. By making the service charge fully inclusive, by definition, it is no longer optional. It is then an obligatory service charge. Whether it is said to be included or not, it is obligatory. At that point, national insurance and VAT come into play.

I cannot see proprietors becoming suddenly more generous and paying their staff more. There is enough pressure on customers to pay. I do not see the prices going up. The only effect would be to cause earnings, effectively, to go down. If the service charge is compulsory, it does not exist. One pays a set amount of money for one's dish of Dover sole. Whether the management chooses to pay a commission, which is effectively what a service charge has become, is another matter. The customer does not want to know that, any more than he wants to know whether there is a commission when he purchases an item of clothing in a shop.

Viscount Mountgarret: I support the amendment so ably moved by the noble Viscount. With the leave of the Committee, I shall refer to Amendment No. 10, which contains the important point. As the noble Viscount said, that amendment requires the code of practice to take

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account of the numerous issues which will arise in people's minds, and not just what is on the Marshalled List. There may be other factors.

The point was made on Second Reading that this is not a matter for government or legislation. It is not right for this place or the other place, or this government or any other government, to lay down the law as to how a certain industry conducts its affairs. It would be far better to require the Secretary of State to look at the whole problem of people being deceived, intentionally or accidentally, in restaurants. We recognise that there is a problem. So let us have the Bill with the requirement that the Secretary of State shall set up a code of practice.

As the noble Viscount rightly said, if we include in the Bill specific points which the code of practice must take on board, that takes away freedom of judgment and flexibility. It would be helpful for the Bill in its future stages to incorporate the amendment. Everything else should be included in the code of practice.

Lord Cadman: We should resist the amendment. My noble friend has recognised that the wording of the clause needs attention. He has tabled amendments to address the point. The Government have indicated that legislation in this area is inappropriate. In that, I am inclined to agree. However, the restaurant trade has failed to address itself to the fact that those of its members who are fortunate enough, in a competitive world, to get away with imposing a charge for the service of a meal has encouraged my noble friend to promote the Bill. The amendment would allow them to indulge in the practice without informing their customers of their intentions. Under the circumstances, I leave the Committee to draw its own conclusions.

Lord Fraser of Carmyllie: I can address the matter briefly. My objection to paragraph (c) of Clause 2 is the same as the objection I indicated in relation to paragraph (b), and my broader concern is that any code of practice, whether or not it related to a different range of goods and services, would have to include this provision. There are some fundamental problems with it. I cannot elaborate, but the one point that I should make clear is that, if the amendment were agreed to, for better or for worse, Amendments Nos. 4 to 7 could not then be moved.

The Earl of Bradford: To outline briefly what underlies the Bill, we must be the only country in the world where our restaurateurs confuse the public in the way that they do. If one goes to America, one knows clearly what is the standard procedure. One tips somewhere around 15 per cent. to 17.5 per cent. That is common to all restaurants. If one goes to France, everything is inclusive nowadays. If one goes to Japan, they would be insulted if one offered a tip.

In this country, some restaurants have tipping; some add service charges of between 10 per cent. and 15 per cent.; some have suggested service charges or gratuities, generally between 10 per cent. and 15 per cent.; and some restaurants charge all-inclusive prices. One should try explaining to tourists coming to this country what is expected of them when they go to

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a restaurant. All one can say is that they will be totally confused; they will have to study the fine print themselves to discover what they will be charged for.

All I am attempting to do in paragraph (c) is to make it clear that, if we have all-inclusive prices, that is what the customer can expect. However, I fully accept that to go ahead with the phrase:


    "and staff do not expect a tip or gratuity",
is going too far. I therefore propose to amend the paragraph so that we follow the French practice of saying that tax and service are included. I hear what the noble Viscount says: we cannot have service if service has been abolished. However, I believe that in such circumstances one has to make that clear to the customer, otherwise he will remain confused about the restaurant's policy.

I cannot agree to the amendment. I realise that there are deficiencies in the drafting of my amendment and I should be happy if the Minister were to assure me that a code of conduct will be introduced in the near future which applies to all restaurants in this country. However, codes of practice have been attempted many times. The other day I had a highly dispiriting experience when sitting in a committee meeting of the Restaurateurs Association of Great Britain listening to intelligent restaurateurs arguing but producing no consensus view whatever. I tried to stay out of the argument.

The industry is fragmented. We are alienating the customer and upsetting tourists in particular. All I seek to do is to put everyone on the same fair footing. Clause 2 would seek to create for the customer a clear understanding of the way that he is charged.


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