RealGlobalNews Profiles of UK Companies: Tesco

It's difficult to know where to start in profiling the possible pitfalls that lie ahead for Tesco. The supermarket chain that dominates Britain and which is now launching in the United States is so powerful it can afford to sell and slash the price in its own stores of a new book outlining a critique of the company. Its closeness to competition regulators have guaranteed it gets away with monopoly practices.

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What is not in dispute is that the company has a third of the grocery sector and that it makes around ten thousand dollars a minute.

Environmental activists pick on Tesco's power over suppliers such as farmers and its reliance on road transport and its emphasis on selling produce that isn't local to the area a particular store is located. It has the poorest record on sourcing apples, for instance.

Even though Tesco is responsible for so many new buildings in the UK, their shops are among the most energy inefficient of all new buildings, with one of their superstores equivalent to 60 small shops when it comes to carbon footprint.

But aside from the surveys from Action Aid and Banana Link, correlating Tesco profits to atrocious working conditions in Africa - the company makes 1.6 billion dollars a week from Bananas, importing them from countries where workers rights are brutally repressed - criticism of Tesco in this film focuses on one aspect.

The fact that Tesco doesn't really make much money at all. Not when one takes into account the hidden subsidy given by the British government to the company. And it isn't just the 90 million dollar tax loophole it enjoys and which its close ties to the British government mean will not change. It's not even the quarter of a million pounds it asks customers to stump up so just one computer can be given to a lucky local school

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Tesco's ten thousand dollars a minute come from three main sources:

The British taxpayer paying its workforce, the british taxpayer paying for Tesco's distribution structure and the taxpayer paying for what it sells.

Firstly, the workforce.

Low wages for Tesco staff are supplemented by tax credits paid by the government - thus customers of Tesco - through their taxes - are subsidizing the supermarket. The supermarket is Britain's biggest private sector employer, paying many too little for employees to pay National Insurance contributions. Over two thirds of retail workers are part-time, the majoriy women. A recent campaign about Christmas Crackers attempted to stop Tesco paying homeworkers 23 pence an hour. So powerful is Tesco that it has partnered with the trade union USDAW and successfully removed sick pay rights.

Secondly distribution and specifically, Road infrastructure. Though most of Tesco's floorspace is now overseas as it expands into countries run by dictators, the British government estimates that transportation for food shopping is subsidised by around 7 billion dollars. As small shops have gone out of business, Tesco has benefitted by huge increases in subsidy to manage more cars, more roads and more emissions. Tesco's shareholding in Greenenergy Biofuels means it particpates in a scheme to increase the use of biofuels which whilst being responsible for widespread destruction of rainforest are also subsidised by the taxpayer.

And thirdly…the food itself. Farmers' organizations complain about the power Tesco has to switch suppliers at a moment's notice but the farmers who have to do Tesco's bidding to survive, themselves, are being subsidized by the taxpayer. Tesco, in effect, has complete power over businesses that owe their existence to subsidy.

OECD governments subsidise farming to the tune of 362 billion dollars with 71 billion going on fossil fuels and 1.1 trillion on road transport. Worldwide, governments pay companies 25 billion a year to destroy the earth's fisheries and 14 billion dollars to destroy forests.

Whilst Tesco assures its customers that its clothing ranges are not produced in sweat shop conditions, it deliberately sources its clothes in countries such as China where auditors believe code of conduct records are routinely forged. ActionAid has produced reports on human rights abuses at suppliers which act as Tesco subsidiaries.

There have been numerous campaigns - one by Polish workers in Ireland - and wildcat strikes at Tesco distribution centres but Tesco has so far benefitted from close ties to governments.
In the late 1990s, Tesco executives features on six UK government task forces, more than for any other company. Chief Executive, Terry Leahy was on the Competitive Advisory Group, Michael Wemms Tesco's retail director was on the New Deal Task Force, John Longworth was on the Packaging Waste and Rescycling Committee as well as the Health and Safety Commission.

Tony Blair has used Tesco stores for government announcements and Tesco has successfully lobbied against taxes on car parks in what was described as a quid pro quo deal for its support of the London Millennium Dome. More on the close ties between Tesco management and those that regulate taxes and other regulations in Britain can be found at Corporate Watch's website.

Whether a company that owes its existence to government subsidy and which pays its chief excecutives millions of pounds a year whilst those who work for it suffer human rights abuses will change, now depends on regulatory frameworks and tax dodge changes managed by the British government under Gordon Brown.