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New Cars: Delivery Charges

2.59 p.m.

Lord Strathcarron asked Her Majesty's Government:

The Minister of State, Department of Trade and Industry (Lord Fraser of Carmyllie): My Lords, the

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Government have no plans to do so. The Government consider that the legislation which regulates car pricing--namely, the Price Marking Order 1991 and the Consumer Protection Act 1987--adequately protects consumers.

Lord Strathcarron: My Lords, I thank my noble and learned friend the Minister for his reply. However, is he aware that the average delivery charge of a new car is in the region of £450, in addition to which there is the cost of number plates? Indeed, the delivery charge in particular is a great shock to many motorists who buy a new car. Is my noble and learned friend also aware that certain manufacturers already quote what are known as on the road prices? They include the delivery charge, the number plates, the road tax at £140, and also a full tank of petrol. Does he not consider this to be a much fairer way of presenting new car prices?

Lord Fraser of Carmyllie: My Lords, first of all I am aware that the average delivery price is about £450. As regards all-inclusive on the road prices, I can certainly envisage that for a number of would-be purchasers that would be an extremely attractive way to buy a car as they would know exactly what is involved. However, it seems to me a matter of commercial policy for those who are selling cars to note that those who have adopted this approach--there is a number of them now--have done so successfully and therefore to follow their example. I am not persuaded that it is a matter for government to determine how these commercial decisions should be taken. What is important, however, is that the law should ensure that people are not subject to fraud or are misled about what might be included.

Lord Peston: My Lords, I do not wish to disagree with that reply. However, I speak as a consumer when I say that I can think of few practices as irritating as that mentioned in the Question, even though one knows it is going to happen. I am perfectly well aware that once one walks into a shop to ask what something costs the price will be marked up. However, has the noble and learned Lord any explanation for what can happen to car buyers, given how annoying it is? Has he any explanation for the fact that many more sellers of cars do not adopt what one would regard as a much more rational and transparent approach? The only practice I know that is as bad as the one we are discussing is the selling of computers ex-VAT. That is almost as annoying. However, the matter we are discussing has been getting up my nose for donkey's years. I wonder why the forces of competition do not somehow deal with it more effectively.

Lord Fraser of Carmyllie: My Lords, those manufacturers who sell at an all-inclusive on-the-road price will clearly be of interest to the noble Lord. However, when people buy and sell cars they are often trading in them and it may be the one transaction where there is an element of haggling. Under the price marking order, if there is to be a price for other ancillary goods or services--for which the consumer must pay in order to obtain the principal item--those additional items and

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their prices have to be stated with equal prominence. I am bound to say there are occasions when I have some doubts whether equal prominence has been achieved. However, I am also aware that a number of major manufacturers have been prosecuted for failing to meet that requirement.

Lord Skelmersdale: My Lords, in these days of deregulation why do we need a price marking order at all?

Lord Fraser of Carmyllie: My Lords, it is appropriate that there should be such a provision when there are ancillary items. It is important that they should be stated clearly and prominently. It is not a matter of dictating at what levels they should be set, or indeed what should be included, but it seems to me appropriate that they should be clearly stated so that the consumer knows what additional items are involved before he is able to complete the purchase.

Lord McIntosh of Haringey: My Lords, I do not wish to detract from the agreement across the Front Benches about the undesirability of government intervention, but surely if the delivery charge is a genuine charge it ought not to be bundled with the cost of the car? The purchaser ought to be given the opportunity of not paying the delivery charge but of collecting the car instead.

Lord Fraser of Carmyllie: My Lords, the noble Lord puts forward his particular proposal for haggling on the purchase of his next car. It may be just that sort of arrangement which could be adjusted. That is why I suggest it is appropriate to leave it to the commercial judgment of those who are selling or buying to discuss whether or not they are prepared to have these items included. For some an all-inclusive price may be the most satisfactory way forward. That opportunity is now available from a significant number of major manufacturers.

Lord Geddes: My Lords, are motor car manufacturers in any way obliged to justify the level of their delivery charges?

Lord Fraser of Carmyllie: No, my Lords. As I said, it is a matter for their commercial judgment. However, I have no doubt that if they continue to raise the level of the charge they will find that people cease to purchase their motor vehicles.

Baroness O'Cathain: My Lords, will the Minister confirm that the delivery charges are not calculated by the manufacturers but by the delivery companies?

Lord Fraser of Carmyllie: My Lords, I am not entirely sure just exactly how they are arrived at, but they are certainly calculated by those who deliver the cars. What is of irritation to some people is the fact that if one lives in Wick or if one lives just to the north of London one will probably pay exactly the

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same delivery charge. I can understand why that is irritating to the consumer but, as I indicated, that again seems to me to be a matter upon which individuals can reach a view as to whether or not they are prepared to pay. If they are not prepared to pay for that separate item, they can look for a car which will be sold to them on an all-inclusive basis.

Lord Strathcarron: My Lords, is my noble and learned friend aware that the actual delivery charge is approximately £110 per car and nowhere near £450? Is he further aware that the original high charge for delivery was a way of getting round the purchase tax regulations at the time, so no one thought of reducing the charges?

Lord Fraser of Carmyllie: My Lords, I am grateful to my noble friend for that historical explanation of how we arrived at these charges. I may have referred to a delivery charge but I should have said that the £450 charge is the average extent of all the other charges that are sometimes added. All I can say to my noble friend--as he will doubtless recall--is that in 1992 the MMC reported on this matter and concluded that the charges were justified; indeed, it recommended no major changes to the United Kingdom car distribution system. I am bound to say to my noble friend that my department is not aware that there is any significant concern about a lack of transparency in car prices.

Lord Mowbray and Stourton: My Lords, I do not have a foreign car but I refer to a certain well known German manufacturer which charges something like £495 normal delivery charge in this country. However, if one collects the car I think I am right in saying that the company provides three days' entertainment showing one round its factories, which helps to reduce the burden and gives one a bit of a holiday.

Lord Fraser of Carmyllie: My Lords, I can only say to my noble friend that if he is thinking of buying a car in Bavaria he might consider going to Munich in October.

Audit (Miscellaneous Provisions) Bill

3.7 p.m.

Read a third time, and passed.

Rating (Caravans and Boats) Bill

Lord Strathclyde: My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Rating (Caravans and Boats) Bill, has consented to place her prerogatives and interests, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

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Read a third time, and passed, and returned to the Commons with amendments.

Sexual Offences (Conspiracy and Incitement) Bill

Brought from the Commons; read a first time, and to be printed.

Housing Grants, Construction and Regeneration Bill [H.L.]

3.8 p.m.

Lord Lucas: My Lords, on behalf of my noble friend Lord Ferrers I beg to move that the Bill be now further considered on Report.

Moved, That the Bill be further considered on Report.--(Lord Lucas.)

On Question, Motion agreed to.

Clause 102 [Construction contracts]:

Lord Williams of Elvel moved Amendment No. 111:


Page 58, line 14, at end insert ("the extent and nature of which shall be specified in the agreement.").

The noble Lord said: My Lords, this amendment stands in my name and that of my noble friend Lord Dubs. It may be for the convenience of the House if I also speak to Amendments Nos. 122, 123, 124 and 140. The words on the Marshalled List are designed to provide an escape clause--if I may say so--for the Government, who are in some disarray about the process engineering industry.

Ministers have placed much reliance on statements made by a group known as the Process Industries Latham Group (PILG). If I use the acronym PILG, noble Lords will understand what I am talking about. PILG has argued that process industries do not suffer the same problems as the construction industry. It states that statistics concerning the number of requests for appointment of arbitrators is evidence of that. PILG speaks for a small number of clients but appears to miss the point as to who carries out the construction and installation work. As with the construction industry, the majority of work is sublet and carried out by specialist contractors. The principal contractors carry out a management role but the installation work is carried out by the same specialists who work in the construction industry, often on the same commercial and contractual terms which, the Government and we accept after the Latham Report, are unsatisfactory.

The functions carried out by those specialist contractors are the same as those carried out within construction. They include electrical work, pipework, ventilation, structural steelwork and provision of basic building and civil engineering infrastructure.

PILG argues that its industry does not suffer from litigation and claims attitudes. However, members of PILG come from what I call the demand rather than the

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producing side of the industry. The procurement systems and contract documents used do not ensure that the same standards exist in contractual relationships downstream where subcontractors and specialist contractors are appointed.

The question of whether the provisions of the Bill apply to the process industries should be assessed against whether the requisite protection is provided to all parties operating in those industries. The criterion is not that one part of that sector, the demand side represented by PILG, should see itself excluded, but whether those within the sector have the basic protections described in the Bill. If so, the Bill need not apply; if not, clearly the Bill must apply.

An examination of the conditions of contract and subcontract normally used in process plant work will provide a demonstration of that point. The most commonly used conditions are the Institution of Chemical Engineers' Model Forms of Conditions of Contract for Process Plant, often known as the Red Book.

At main contract level, the Institution of Chemical Engineers' conditions provide a form of adjudication on a limited number of issues, although the parties may agree to refer other matters to the experts. At subcontract level, a totally different picture exists. There is no requirement at subcontract level to use the Institution of Chemical Engineers' subcontract conditions. That creates exactly the same free-for-all as bedevils the construction industry--the point that your Lordships address today. Without a mandatory subcontract, there is nothing to prevent any ad hoc conditions being used where pay-when-paid conditions abound, payment terms are frequently vague, and other rights such as adjudication or suspension are in most instances non-existent.

The conclusion is that the case for the whole of the process industries being excluded from the Bill has not been made by the Government. The PILG solution, which the Government have adopted, denies access to the safeguards of the Bill from the supply side of industry and restricts the ability of parties to contract freely within the safeguarded provisions of the Bill.

The Government can take their pick of the amendments moved by myself and by my noble friend Lord Dubs; they will be spoken to by my noble friend Lord Berkeley. We offer a possible solution to the problem. The parties to a contract may agree to contract out of the provisions of Part II of the Bill when the type of work falls under the definition of "process industries". If one contracting party does not wish to contract out of the provisions of Part II of the Bill, the parties will no doubt wish to agree contract terms which comply with the provisions of Part II of the Bill, notwithstanding that the whole process may be within the context of process industries. Furthermore, if the parties fail to agree on acceptable terms which comply with the provisions of Part II of the Bill, then the relevant sections of this scheme of construction contracts, which we shall discuss later, will apply.

We believe that this is an honourable compromise between the construction industry and PILG: that those who wish to contract out can do so by contract; and

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those who wish to contract in can do so by contract; but every point in any agreement should be limited by the definition that is either within or without Part II of the Bill.

Having explained the purpose of Amendment No. 111--Amendment No. 122 is consequential--I do not wish to talk about the amendment which will be spoken to by my noble friend Lord Berkeley. It has the same thrust as my amendment. I believe that my noble friend has drafted it rather more expertly. Nevertheless, the principle is there. Process industries, in particular subcontractors, have a large component of matters relating to Part II of the Bill. It seems to us only right that those who wish by contract to participate in or participate out (if I may use that rather inelegant expression) should be allowed the choice. The important point is that anyone engaged in this business, in particular subcontractors to process engineers, should be protected by Part II of the Bill.

It is an important matter. We discussed the issue in Committee but I do not believe that we focused on the proper terms of subcontractors to the process engineering industry. I hope that the Government have recognised the problem and are prepared to accept the amendment. I beg to move.


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