Groceries Code Adjudicator Bill [Lords]
(11 years, 5 months ago)
Commons ChamberRead Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson)
I beg to move, That the Bill be now read a Second time.
I am delighted to bring the Groceries Code Adjudicator Bill from the other place to this House. Its purpose is to establish a groceries code adjudicator. The adjudicator will oversee the large supermarkets’ compliance with the groceries supply code of practice and will have the power to impose sanctions against retailers that do not treat their suppliers lawfully and fairly as required by the code.
I have been encouraged by the Bill’s passage through the other place. All parties showed a real common purpose and commitment to improve market conditions. We are pleased to have accepted amendments that have made the Bill stronger, in particular on allowing a fairer allocation of the levy so supermarkets that behave badly will pay more. We have also accepted changes to ensure that financial penalties can be brought in more swiftly.
Jo Swinson
I will, as I am aware that I am now addressing one of the main topics of debate.
Mr Sheerman
The Minister will be aware that many constituents have written to their Members of Parliament about the size of the fines imposed on supermarkets that do not co-operate, and how quickly they can be levied. Did she get the general impression from the debate in the other place that this is a weak instrument with which to take on some of the most well-organised, monopolistic organisations in the country?
Jo Swinson
I do not agree with that characterisation. I think the adjudicator will be able to make a real difference. We have put a range of tools at its disposal, which, particularly given the importance that supermarkets attach to their brand reputation, I believe will have a real effect. I will discuss this issue in more detail later, but it is worth bearing in mind that the Business, Innovation and Skills Committee looked at this and recognised that the arguments are finely balanced. I acknowledge that Members will, perhaps, come at the issue from different sides of the argument, but I am confident that the Government’s position is the right one. I intend to give a brief overview of the Bill and the role of the adjudicator, and I will then set out in detail why we believe financial penalties should initially be a reserve power.
The Bill is important on two counts. It promotes growth and a competitive food and groceries sector, and it helps to ensure a fair deal for suppliers. In the current economic climate, it is more essential than ever that our groceries sector is allowed to grow and thrive. Therefore, Government, suppliers and retailers need to work together to ensure that the marketplace between supermarkets and suppliers is fair, open and competitive.
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)
I greatly welcome this Bill and I hope it makes good progress through the House. The Minister emphasises that it will help suppliers, but it is important to get across the fact that it will also help consumers by ensuring that a range of suppliers stays in the market and that there is variety and good security of supply.
Jo Swinson
My hon. Friend is absolutely right. We are introducing the adjudicator because of the benefits it will bring in dealing with potential issues of consumer detriment, as identified in the Competition Commission report.
I believe that our large supermarkets can be a very good thing for consumers, for employment and for our economy. In the vast majority of cases, they treat their suppliers lawfully and fairly. Unfortunately, as the House will be aware, the Competition Commission’s 2008 report on the supply of groceries showed that in some cases large supermarkets were transferring excessive risks and costs to their suppliers. That included practices such as the retrospective varying of supply agreements to force suppliers to take on unexpected extra costs, which is why the Groceries (Supply Chain Practices) Market Investigation Order 2009 came into force in 2010. The order contains the groceries supply code of practice and requires the 10 largest retailers with an annual turnover of over £1 billion to incorporate the code in all their supply agreements. The code sets out a general principle that retailers must treat their suppliers lawfully and fairly and also contains more specific requirements on how retailers should deal with their suppliers.
Chris Bryant (Rhondda) (Lab)
Sometimes these commercial operators try to crowd out competitors using pretty dodgy means. When they are caught, they try to cover it up, which is why it is very important that schedule 2 is strengthened. The adjudicator may well ask for information from commercial operators, but I fear that the powers in the measure are nowhere near strong enough to be able to force operators to provide that information. They are not as strong, for instance, as the civil provisions under Norwich Pharmacal arrangements.
Jo Swinson
If information is not provided to the groceries code adjudicator, that will constitute an offence, which is a strong power for the adjudicator. We can discuss the details in Committee, but we do have the power that is required in the Bill and its schedules.
Chris Bryant
But one problem is that big corporations quite deliberately hide things from adjudicators. Unless an adjudicator knows precisely what to ask for, corporations may end up not handing it over, which is why it is vital that a full disclosure requirement, if necessary, is available to the adjudicator. Will the Minister consider that?
Jo Swinson
The hon. Gentleman is making a distinct bid to be on the Bill Committee, and the usual channels will have taken note. I am sure he would like nothing more than to consider this measure and the schedules in intricate detail. I believe that the power available to the adjudicator is sufficient, and we will make sure that the right individual is in that position with a good understanding of the markets with which they are dealing. That person is therefore unlikely to have the wool pulled over their eyes, and will know the right questions to ask.
Jo Swinson
I should like to make a little progress, but I will then give way to hon. Members. My hon. Friend the Member for St Ives (Andrew George), in particular, has a strong track record on this issue.
To make it clear to the House, the code can be privately enforced by suppliers as a matter of contract, but the Competition Commission considered that that the code would also require public enforcement by an ombudsman or adjudicator. The Government agree that businesses on both sides need to be confident that breaches of the code will be fairly investigated and that, if necessary, appropriate enforcement action can be taken against a retailer who breaches the code.
Suppliers must be able to come forward without fear of retribution from supermarkets, and retailers need to be confident that they will be treated fairly in any resulting investigation by the adjudicator as a public authority. The Bill will establish an independent groceries code adjudicator as a statutory office holder to help to ensure that retailers comply with the code, and accordingly treat their suppliers lawfully and fairly.
Jo Swinson
I shall give way to my hon. Friend the Member for St Ives, who has worked on this issue for many years.
Andrew George (St Ives) (LD)
I very much welcome the measure, and I am content that it has the investigatory powers to address the issue raised a moment ago. Nevertheless, the code has been in place since 4 February 2010, so the question inevitably arises of whether the adjudicator has the power to take evidence on the period between 4 February 2010 and the establishment of that post.
Jo Swinson
The adjudicator will be in place and, as has been outlined, the code is already legally binding. The adjudicator can look at the evidence submitted, and will undertake more investigations. It is up to them to gather evidence on the basis of suggestions that things are not working as they should, and require supermarkets to comply with their legal responsibility.
Jo Swinson
I shall give way to my hon. Friend the Member for Westmorland and Lonsdale (Tim Farron), and then to my hon. Friend the Member for Mid Norfolk (George Freeman).
Tim Farron (Westmorland and Lonsdale) (LD)
Those of us who are concerned about fair trade for farmers greatly welcome the Bill. It attempts to correct an imbalance in the marketplace, but it is surely not the only way in which we need to do that, as I am sure my hon. Friend will agree. In particular, is it not just as important to strengthen farmers’ hands through a greater export market and through more research and development so that they can punch at an equal weight with supermarkets?
Jo Swinson
My hon. Friend makes a couple of important points and I know that he is an assiduous campaigner on behalf of farmers in his constituency. He will be delighted that our hon. Friend the Minister of State, Department for Environment, Food and Rural Affairs, who is responsible for farming, will sum up the debate tonight. He will be able to outline some of the actions the Government are taking to ensure that farmers are empowered.
The other point made by my hon. Friend the Member for Westmorland and Lonsdale, which is important, is that we must be clear about expectations. The groceries code adjudicator will, I think, be widely welcomed by the various parties in this House, but is not in itself a panacea. It is being introduced for a specific purpose on which there is much agreement, but there are obviously many issues that it does not cover and that will need to be addressed through other means. The Government are committed to taking those actions.
George Freeman (Mid Norfolk) (Con)
I strongly welcome the measure and commend my hon. Friend and those on the Government Front Bench. I encourage them to get the Bill through this House as quickly as possible, because it will be a huge relief to many farmers in my constituency, particularly in the dairy sector. As someone who used to work for the National Farmers Union, I know how long many of us have campaigned for this measure. However, as the measure is in fact a schedule relating to an order under the Enterprise Act 2002 rather than a statute, will she assure us that the code is mandatory and will be entirely legally enforceable by the adjudicator?
Jo Swinson
I thank my hon. Friend for his intervention and for his support for the Bill. The code is already legally enforceable by suppliers should they take legal action, but yes, it will also be legally enforceable by the adjudicator, who will make recommendations to supermarkets, which will recognise that they have a legal duty to comply with the code as it is. If the adjudicator thinks that they are not complying with the code, I suspect that that will be taken as a clear sign that they need to change their behaviour.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
Will the hon. Lady give way?
Jo Swinson
I will certainly give way to the Chair of the Business, Skills and Innovation Committee.
Mr Bailey
I thank the hon. Lady; I recognise that she has given way several times already. I delayed my intervention to see whether she would give the answer I was looking for in response to somebody else.
One of the recommendations of the Select Committee on Business, Innovation and Skills was that evidence be allowable from trade associations and other third parties. In the other place, the Minister gave that specific assurance and we welcomed that as a Committee. However, I cannot find anything in the Bill that spells it out. All I can find is clause 15(10), which gives the Secretary of State the right to insert after clause 4 proposed new section 4A, which under subsection (2) will enable the adjudicator to consider any appropriate information. Is that the legal base that underlines the right of the adjudicator to take evidence from a third party? If so, can the adjudicator do that before the two-yearly review specified as the basis for the Secretary of State’s introduction of it?
Jo Swinson
I will happily confirm the reference in that clause:
“When carrying out an investigation the Adjudicator may consider any information that it seems appropriate to consider and is not limited to considering the information mentioned in subsection (1)”—
subsection (1), of course, lists a range of places from which information could be provided. The point of that phrasing is to ensure that the adjudicator has flexibility in considering information from whatever source. That includes, but is not limited to, information from trade associations, as the Chair of the Select Committee mentions, from a whistleblower, or others who might have concerns or evidence of malpractice about compliance with the code. We do have—
Jo Swinson
I am still responding to the earlier question, but if the hon. Gentleman will have a little patience I will come to his intervention shortly.
On the other point raised by the hon. Member for West Bromwich West (Mr Bailey), there will obviously be a regular review of the adjudicator. That is appropriate in ensuring that it functions as it should and that any necessary changes can be made, but we will not prevent the adjudicator from properly considering information before the initial review is produced. I want to make a little progress and then I will take an intervention from my hon. Friend the Member for Sherwood (Mr Spencer).
The adjudicator will be funded by a levy from the 10 largest retailers and will have the power to investigate breaches and to impose sanctions against supermarkets found to have breached the code. Some Members have previously criticised the Bill as being anti-business. What is anti-business about ensuring that the grocery market works as well as it can, without being distorted by anti-competitive and unfair practices?
Jo Swinson
I will make a little progress, and then I will give way.
The direct or indirect suppliers who are among the potential beneficiaries of the Bill include fresh food intermediaries and food and drink manufacturers. That is why the Bill is supported by major business groups, including the Food and Drink Federation, the British Brands Group, the Association of Convenience Stores and the National Farmers Union. A fair market is one in which suppliers and supermarkets are free to innovate, expand and offer the widest possible choice to the consumer without fear of being disadvantaged by unfair dealings elsewhere.
Mr Spencer
The Minister refers to blacklisting, when suppliers will be disadvantaged by coming forward. Can she reassure the House about how she will achieve that when, for example, the number of suppliers in the east midlands for a specific vegetable will be limited, and it will be quite easy to identify which one is supplying that product to a particular supermarket?
Jo Swinson
Clause 18 provides that there is a duty on the adjudicator to protect confidentiality. That goes beyond not allowing publication of the name of the individual or supplier making the complaint. As my hon. Friend rightly says, there are circumstances where an investigation could, in effect, give away who had made the complaint. In that circumstance it would be possible for the adjudicator to undertake a slightly wider investigation in terms of geographic scope or the types of vegetable being investigated, so that it would not be possible to identify which individual or supplier had come forward and made a complaint.
Peter Luff
This welcome legislation, like that which introduced the Gangmasters Licensing Authority some years ago, proves that effective and targeted regulation can help consumers and all those who work in supplying the food industry, but I am sure the Cabinet Office will have thought about deregulatory measures as well, as a quid pro quo for this regulatory measure. In that spirit, will the Minister tell us what progress is being made on the abolition of the Agricultural Wages Board, which would also help consumers and those who supply the industry?
Jo Swinson
Consultation is taking place on that measure. My hon. Friend the Minister of State who is summing up the debate as the Minister with responsibility for farming will, I am sure, be able to enlighten the House further on that point.
What will the adjudicator do? The adjudicator’s role is to investigate large retailers and hold them to account if they have broken the groceries code. He or she will also be able to act as an arbitrator to resolve private disputes between suppliers and large supermarkets, as the groceries supply order envisages. Aside from these main roles, the adjudicator will have a number of other functions. These are to publish guidance on when and how investigations will proceed and how enforcement powers will be used, to advise large retailers and suppliers on the groceries code, to recommend changes to the groceries code to the Office of Fair Trading, to arbitrate individual disputes between large retailers and the direct suppliers, as mentioned, or to appoint another person to do so, and to report annually on his or her work, which will be laid before Parliament.
Ian Paisley (North Antrim) (DUP)
The Minister knows that the adjudicator cannot do any of those things until they have published the guidance under clause 12. The adjudicator can take up to six months before publishing the guidance. Have the Government any intention of bringing that date forward so that the adjudicator can get down to this important business as soon as possible?
Jo Swinson
The hon. Gentleman expresses an understandable desire to make sure that the role of adjudicator can be up and running as soon as possible. We all share that desire. I am sure, however, that he would not want the publication of the guidance to be rushed. Although I would be happy if the adjudicator, once in place, decides that the full six months is not needed and the guidance can be published earlier, it would not be wise to force a faster timetable if that was not felt to be possible.
Mr Mark Williams (Ceredigion) (LD)
My hon. Friend mentioned recommendations on possible changes that the adjudicator could make to the code’s remit. Will she say a little more about the extent of those changes because, as she will be aware, many primary producers across the country are really anxious?
Jo Swinson
It is not envisaged that such changes would necessarily be wide-ranging, because the role of adjudicator is based on the original Competition Commission reports and the findings of detriment to consumers resulting from excessive risks and costs being passed on to suppliers. If there are related issues that the groceries code adjudicator feels warrant a slight change to the code, he or she can make that recommendation, but that is the remit for what such changes would be. I hope that is helpful to my hon. Friend.
To add to a point raised earlier, there will be no restrictions on who can complain to the adjudicator, and the complainant’s identity will be kept in strict confidence. That means the adjudicator can receive information from any source, including direct and indirect suppliers, famers, whistleblowers within large retailers, and trade associations representing their members. That change was very much welcomed in the other place because it is important, and there is a genuine concern about a climate of fear among some suppliers. The change that has been made deals with that concern.
If the adjudicator, as a result of the evidence they have been provided with, has reasonable grounds to suspect that the code has been breached, they will be able to start an investigation and gather more information from relevant retailers and others. If the investigation finds that a retailer has broken the code, the adjudicator will have tough sanctions, for example the so-called “name and shame” powers to require retailers to publish information about a breach in the trade or national press. We think that those sanctions are powerful enough to uphold the code. However, if that proves not to be the case, the Bill allows the Secretary of State to grant the adjudicator a power to impose financial penalties as well.
Stephen Timms (East Ham) (Lab)
I declare an interest as chair of the trustees of the Traidcraft Foundation, which represents producers from developing countries, who welcome and are very much in favour of this measure. I do not understand why fines will not be available from the start. There is quite a wide sense that, if the measure is to be effective, fines should be available from the start, not at some undetermined future date.
Jo Swinson
I understand the right hon. Gentleman’s point, which organisations such as Traidcraft have put forward forcefully. Of course, in my duties as Minister I have met Traidcraft and other organisations to discuss the matter, but I am not persuaded that it is necessary to have the fining powers from the start, and I will outline why. I think that the sanctions that are in place and that will be available immediately are robust and will be sufficient to achieve the change we require. The adjudicator will be able to take one or more of three possible measures, two of them from the beginning: first, to make recommendations; secondly, to require large retailers to publish information, the “name and shame” power; and thirdly, if we do not think that the other remedies are working sufficiently well, to impose financial penalties.
That range of measures will mean that the adjudicator can tailor his or her action to the nature of the breach in order to enforce the groceries code most effectively. For example, in the case of a minor or unintentional breach, the adjudicator might decide that a recommendation to change behaviour might be sufficient to bring the retailer back into compliance. In the event of a severe breach that had caused serious harm to suppliers, the retailer could also be required to publish details of its breach prominently in the trade or national press. If it is deemed necessary, they could then incur financial penalties, if the Secretary of State has granted that power to the adjudicator. It is also important to remember that the Bill allows the adjudicator to take more than one measure if that is appropriate in a particular case.
Andrew George
Although I appreciate that the adjudicator will have the power to recover their investigatory costs, fining is very much the issue for debate, as the Minister has already identified. If either the adjudicator or the Secretary of State recommends that a fine should be applied, how many months would it take to implement such powers?
Jo Swinson
I thank my hon. Friend for his question. If the Secretary of State decides that an order needs to be made to allow financial penalties, it is important to know that that would grant the power generally, not on a case-by-case basis, and, as a result of the amendment accepted in the other place, we believe that that could be done within six months. It would be fairly rapid if it was determined that things were not working.
I know as a result of interventions and, indeed, correspondence with the Department that some stakeholders and Members feel that financial penalties should be available immediately. What I would say is that the supermarkets operate in a fiercely competitive marketplace, so major supermarkets are, rightly, very careful about their reputations. As an illustration, in 2010 the four biggest supermarkets—Tesco, Asda, Sainsbury’s and Morrisons—spent £385 million on advertising, which is an indication of the importance that they attach to their brands and what they have to invest to promote them. They are fiercely protective of them and I think that they are likely to take very seriously the impact on their reputation of having to publish their breaches or take out an advert in the trade or national press.
Kerry McCarthy (Bristol East) (Lab)
Is it not the case that the Competition Commission inquiry back in 2008 found that more than a decade of adverse media reports on supermarket supply chains had done little to prevent them from engaging in unethical practices? The media are already reporting the abuses, so I do not see how naming and shaming would make much difference.
Jo Swinson
It is important to bear in mind that this will be an independent adjudicator who will conduct an investigation that will consider all the evidence before coming to a conclusion about specific supermarkets and what they have or have not done. General concerns about the supermarket supply chain have not left consumers in quite the same position of being able to take action, unless, for example, they decide to stop shopping at supermarkets altogether. The Bill is likely to drive change. Consumers have been involved in a variety of movements whereby their concerns about certain issues have driven change in the behaviour of suppliers. Indeed, that was the case with milk prices this summer. Drawing on my personal experience, before I was a Minister I took complaints about misleading advertisements to the Advertising Standards Authority, so I know very well the power of a negative finding, the publicity that goes with it and how companies take it seriously and are very keen to avoid such an occurrence.
Michael Connarty (Linlithgow and East Falkirk) (Lab)
Does the Minister not realise that the code makes absolutely no reference to the need to address the supply chains of the major supermarkets in order to prevent modern-day slavery, such as that in the Noble/Freedom Food eggs case? I have written to her about the need to incorporate into this Bill the principle in my private Member’s Bill, the Transparency in UK Company Supply Chains (Eradication of Slavery) Bill. Nothing in this code addresses supply chains, but surely one of the ways to get a level playing field is to prevent major supermarkets from exploiting labour brought into the country as a result of human trafficking to undercut the competition.
Jo Swinson
The hon. Gentleman raises serious issues, not least that of legality and human trafficking. If there is evidence of law-breaking, it should be taken to the appropriate authorities so that it can be followed up. I appreciate his concern, but the adjudicator’s role and the groceries code have been developed in response to the Competition Commission report of 2008. Notwithstanding the serious issues that he raises, the way to proceed is to focus tightly on the report, which provides the clear basis for addressing the problem and consumer detriment that we are trying to solve. Although I have explained to the House that the code is not a panacea that will solve every possible problem, it does mean that we can continue with a strong degree of consensus and cross-party support.
Peter Luff
I reassure the hon. Lady that the Gangmasters Licensing Authority is doing a first-rate job at addressing the concerns of the hon. Member for Linlithgow and East Falkirk (Michael Connarty). If he has evidence of such abuse, he should take it to the authority urgently and it will be addressed effectively and well. That is a tribute to the previous Government’s action on this important question.
Jo Swinson
I thank my hon. Friend for his contribution. He makes his point forcefully.
I believe that the threat to supermarkets of recommendations and requirements to publish details will be enough to drive cultural change. Hon. Members should note that imposing a financial penalty would confer a full merits right of appeal, which would potentially be costly and time-intensive for all parties. It is important that the adjudicator is able to focus on investigations, rather than being distracted by appeals. I am sure that all constituency Members recognise that where there are appeals procedures, such as in planning, they tend to be used. We do not want the groceries code adjudicator to be tied up in appeal after appeal, but want them to be able to get on with their investigations. That is why we think that it is helpful to proceed with the range of sanctions in the Bill.
Roger Williams (Brecon and Radnorshire) (LD)
I welcome the Bill’s focus on the role of the adjudicator in enforcing the groceries code. If the adjudicator, in carrying out that work, came across evidence of serious criminal offences, for example in the field of competition or human trafficking, it would surely be up to them to refer that evidence to the appropriate authorities.
Jo Swinson
Absolutely. Morally, it is incumbent on anyone who comes across evidence of appalling crimes, such as human trafficking, to ensure that it is presented to the appropriate authorities so that they can take action.
Even without fines, there are financial consequences for retailers who breach the code. There may be internal costs of complying with an investigation, such as the cost of sending senior executives to give evidence to the adjudicator. The adjudicator will have the ability to make a retailer who has breached the code pay the costs of the investigation. It is also our intention that the retailers who cause the adjudicator the most trouble should pay a greater share of the levy. Taken together, those factors will reward good behaviour and discourage non-compliance.
Jo Swinson
If the hon. Gentleman will forgive me, I will make a little progress, because he has already intervened.
It benefits no one to reach straight for fines before we have exhausted the other options. We seek to impose a proportionate and effective solution. A move straight to fines would risk creating an unnecessarily adversarial environment, which would ultimately detract from our key objective of achieving long-lasting change in the culture of retailers.
Jo Swinson
I will give way to the hon. Lady, although I am aware that other Members wish to speak.
Nia Griffith
Under what circumstances would the Secretary of State consider bringing in the power to raise fines?
Jo Swinson
I hope that the hon. Lady will understand that I am not going to give an exhaustive list. If the groceries code adjudicator felt that the remedies were not sufficient and were not being adhered to and if there were repeated breaches or if the recommendations made by the adjudicator were not being followed up on, those things would weigh heavily in the balance.
There has been a lot of lobbying on this issue, not least from hon. Members. As I am discovering, ministerial life brings with it a variety of interesting experiences, one of which happened last month, when I accepted a petition from a giant dog.
Jo Swinson
It was a man in a dog suit, rather than an actual dog. The event was organised by Traidcraft, ActionAid and War on Want to highlight their message that they want the groceries code adjudicator to be a watchdog with teeth. To further press the point, they left me with my own watchdog, which has brightened up by ministerial office. I assure the House that I have declared the gift appropriately. I appreciate that the decision not to have immediate fines will be disappointing to some supplier and campaign groups, but the dog remains on my office shelf as a reminder that, should we find that stronger sanctions are needed, the Secretary of State will be able to bring in fines quickly. I assure the House that we will have no hesitation in doing so if they are needed.
Jo Swinson
I am coming to a conclusion, so I hope the hon. Gentleman will understand it if I do not give way.
I greatly value the role that campaigners up and down the country have played to ensure that pressure was kept up to deliver a groceries code adjudicator. I particularly acknowledge the work of my hon. Friend the Member for St Ives and the Grocery Market Action Group and that of many Members of all parties in championing the issue.
We ultimately want the same thing: for the adjudicator to be as effective as possible. The Bill helps deliver a grocery sector in which suppliers and retailers can deal fairly and openly with one another to provide real benefits for consumers, business and the UK economy. I commend it to the House.
Ian Murray (Edinburgh South) (Lab)
I did not realise that we could bring toys to the Dispatch Box. If I had known, I might have brought my bear, Frosty, which I have had since I was a child, for everyone to see. Perhaps we can do that next time, or maybe a Scalextric for the Table would be exciting.
I pay tribute to those in the other place who have diligently gone through the Bill and sent it here. It is a significant measure, but it has been a long time coming. Labour Members can rightly claim some ownership of it. As Lord Grantchester said, the Bill
“has Labour’s fingerprints all over it.”—[Official Report, House of Lords, 22 May 2012; Vol. 737, c. 728.]
In government, we gained cross-party support for a supermarket ombudsman to ensure a fair deal for farmers and food producers from the major retailers, and to monitor and enforce the code of practice in the form of the groceries code. We were therefore pleased that the Bill was included in the coalition agreement in the heady days of May 2010.
However, the Government have dragged their feet on creating the adjudicator, and on the powers to help food suppliers. As the hon. Member for St Ives (Andrew George) said,
“we look as though we don’t understand the urgency of this matter. Every week the Government fails to act, farmers are finding themselves in more difficulty.”
Andrew George
Of course, I also used those words when Labour was in power because, as the hon. Gentleman knows, the Competition Commission reported in April 2008, and for two years there were excuses and consultations, and a variety of reasons were given for the Government’s inability to go ahead at the time, despite the excellent private Member’s Bill that the hon. Member for Ynys Môn (Albert Owen), who is in his place, introduced.
Ian Murray
I am delighted with that intervention because we introduced the code, on which the adjudicator will now adjudicate. We are two and half years into the coalition Government, and the right hon. Member for Arundel and South Downs (Nick Herbert) said when he was a shadow environment Minister at an Oxford farming conference just before the 2010 election that,
“Conservatives are clear: we will introduce an ombudsman to curb abuses of power which undermine our farmers and act against the long-term interests of consumers”.
However, we are on the cusp of 2013, and the Bill has just been introduced.
Andrew George
I do not want the debate to degenerate into a party political spat, but to put the record straight, the Competition Commission had the power to introduce the code, and it, not the Labour Government, introduced it.
Ian Murray
The code is there for everyone to see, and was introduced before the general election. The next paragraph in my speech pays tribute to the hon. Member for St Ives for all his work. If I had my pen handy, I might cross that out, but I would not be so churlish. I therefore pay tribute to the hon. Gentleman, who chairs the Grocery Market Action Group. He has harnessed the support of organisations such as the Rural Shops Alliance, the Association of Convenience Stores, the National Farmers Union, the Farmers Union of Wales, the National Farmers Union of Scotland, the British Independent Fruit Growers Association, the British Brands Group, Traidcraft, ActionAid UK, Banana Link and many others in pushing the agenda from the early days of the Competition Commission inquiry, which he mentioned, in 2006 through to the establishment of the new groceries supply code of practice. He deserves great credit for continuing the fight, and I hope that he will support the Opposition in wanting to create a robust adjudicator.
I also take the opportunity to put on record thanks to my hon. Friend the Member for Ynys Môn (Albert Owen), who is in his place and has long championed the establishment of an adjudicator. It is now more than two years since his private Member’s Bill—the Grocery Market Ombudsman Bill. In the debate on Second Reading of that measure, he made it clear that the concept of a grocery ombudsman or adjudicator was not about being pro or anti any particular interest group, but about fairness, and the Opposition echo that sentiment. Nevertheless we are here now and, in a sense of cross-party support, we wish the Bill a swift passage on to the statute book. It is important, however, to get the legislation right, and although the Opposition are generally pleased with the current Bill, we will seek to strengthen it so that the adjudicator has the powers it needs to be effective from day one.
As the House will be aware, competition authorities have held two major inquiries into the grocery market. The first, by the Office of Fair Trading in 2000, led to the creation of the code of practice to regulate the relationship between the largest supermarkets and their suppliers. In 2006, the Office of Fair Trading referred the market to the Competition Commission, which completed a second inquiry in 2008. At the time, the commission said that,
“the transfer of excessive risk and unexpected costs by grocery retailers to their suppliers through various supply chain practices if unchecked will have an adverse effect on investment and innovation in the supply chain, and ultimately on consumers.”
It recommended a strengthened and revised code of practice to be enforced by an independent ombudsman—an unambiguous case for an adjudicator. As a result, in February 2010 the Labour Government brought in the groceries supply code of practice—GSCOP—to replace the supermarket code of practice, with the intention of putting the adjudicator on a firm statutory basis.
I am sure Members across the House will appreciate the work of the Business, Innovation and Skills Committee, which is brilliantly chaired by my hon. Friend the Member for West Bromwich West (Mr Bailey) who I see is in his place. He did a diligent job on the Bill during pre-legislative scrutiny—I should perhaps declare an interest as I was on that Committee at the time and have probably just patted myself on the back a little.
In its report, the Committee raised two concerns about the way the adjudicator’s office would operate. First, it was anticipated that the office would be able to launch investigations based only on evidence supplied by retailer or suppliers. The Committee argued that third parties such as trade associations or whistleblowers should be able to submit complaints about retailers. I am pleased that the Government made changes in that respect prior to Second Reading in the other place. They are to be commended on that alteration which the Opposition consider key to ensuring that individuals have the confidence to come forward with complaints under the cover of an industry group to protect anonymity and secrecy.
Secondly, the draft Bill allowed the adjudicator to impose fines on retailers that had breached the code, but only if the Secretary of State made provision for that by order. The Committee rightly argued that the adjudicator should be allowed to impose fines from day one—I shall return shortly to that crucial point.
There is little doubt that this legislation is necessary, and it is important to emphasise that supermarkets and retailers support the adjudicator in principle. One such retailer wrote to me privately earlier this week and stated:
“The groceries code adjudicator will encourage fair and robust regulation of supplier-retailer relationships.”
That speaks volumes.
We will scrutinise the Bill to ensure that it delivers on three key tests—that it promotes innovation and investment in the supply chain; ensures a fair deal for farmers and producers; and delivers better outcomes for consumers in terms of prices, quality and service.
Michael Connarty
As my hon. Friend will have heard in my earlier intervention, having read through the code it seems there is absolutely nothing in it to protect the labour factor in the supply chain. Will my hon. Friend take on board the need to raise that issue in Committee and table amendments so that people who use gangmasters cannot hide behind them if those gangmasters then use crooks, as recently happened in the Noble/Freedom Food eggs case, which I believe is now going to court?
Ian Murray
I know that my hon. Friend has worked on the Gangmasters Licensing Authority, and we will take that debate forward to Committee. The Gangmasters Licensing Authority has been downgraded under this Government—indeed, the Beecroft review recommended that it be scrapped. We must be vigilant and ensure that the great work done by that authority in saving lives and stopping exploitation continues, and we can debate that in Committee. If I look towards the Whips, perhaps my hon. Friend will join us on that Committee to make those points—his name is being jotted down as we speak.
I was talking about the huge impact and value that supermarkets bring to our economy. The groceries market was worth nearly £157 billion in 2011, and it provides significant choice and good value for customers, which is vital. A number of supermarkets in my constituency do a tremendous job through investment in our high streets, job creation, and supporting community projects, and I am grateful to them for that positive role. I also place on record my thanks to Sainsbury’s at Cameron Toll in my constituency for its continued support for my schools Christmas card competition. Likewise, farmers and small suppliers play a critical part in achieving economic growth. It is an incredibly difficult time to be a farmer or small supplier in the UK—there have been increases in feed prices, not to mention the difficulties that many small and medium-sized enterprises have experienced in accessing finance. We should set retailer abuses against that backdrop.
We should acknowledge that retailers have done much to clean up their supply chains, but we know that abuses by retailers against suppliers still occur, and that evidence supports the need for a groceries code adjudicator more than ever. FoodDrinkEurope, the European federation, surveyed businesses from around Europe anonymously. It asked whether businesses had been confronted by various situations, and the survey gives us a picture of the situation in the UK. Seventy-seven per cent. of businesses said they had experienced non-respective contractual terms; 75% said they had experienced de-listing threats to obtain unjustified advantages; and 60% said they had experienced unilateral deductions to invoices. Only a very small number of the businesses interviewed—3%—said that they had done something other than discuss the situation with their customers. When asked why, more than half said they did not believe in the effectiveness of the remedies by public or legal authorities, and 44% said they were afraid of commercial sanctions. In one case of which I am aware, the supplier—a salad grower based in Yorkshire—said:
“The retailer has reneged on a commitment to cover the costs of packaging should they terminate dealings with me at short notice—despite this being confirmed”
on numerous occasions in e-mails.
Ian Paisley
Given those statistics, does the hon. Gentleman believe that food producers will feel emboldened to come forward and make their complaints if no financial penalty is front and centre in the Bill?
Ian Murray
The hon. Gentleman is absolutely right. We need proper sanctions—we need to take the carrot-and-stick approach. Without proper fines in the Bill, the adjudicator could, as the Minister said, be a toothless dog or tiger. I will come to that shortly.
There are times when a market needs intervention to make competition work well, particularly if players in that market become too powerful. Roughly 3.6 million people are employed in food production in this country, and making competition in that market function more fairly through the introduction of the adjudicator is ultimately good for growth and for those jobs. It will undoubtedly also be good for consumers in the long term. Because the choice of products is supported, small suppliers and products will not be driven from the market by anti-competitive practices, which hon. Members have mentioned. The choice of retailers will also be supported, because small retailers will not be driven from the market by the disparity in buying terms, which can be exacerbated by anti-competitive practices. Suppliers will be better able to plan their businesses, yielding efficiencies. Critically, they will be able to invest in innovation, new products and product quality. Finally, more competition will hopefully bring down prices.
The benefits of a strong adjudicator are clear, but fundamentally the Opposition’s major concern is that the adjudicator will be toothless. The adjudicator must have teeth to tackle the breaches of which all hon. Members are aware.
Glyn Davies (Montgomeryshire) (Con)
The only contention between the Government and Opposition is whether fines should be available at the beginning or whether they should be introduced at the behest of the Secretary of State. Does the hon. Gentleman agree that to supermarkets, which are massive businesses, reputation and name are the most important things of all? Naming and shaming and reputational damage will therefore probably have more force in pressurising them. If that fails, even in the medium term, new primary legislation would not be necessary, because we could introduce fines.
Ian Murray
The hon. Gentleman brings a great deal of experience of the sector to the House. I am not convinced that the public will be surprised if a major retailer engages in a particular practice and is named and shamed in a national newspaper or trade magazine. If the adjudicator does their job properly, we would hope there would be no one to name and shame. It will help the system to operate properly if we can use the stick and say that retailers could be hit with financial penalties. If they can be hit with such penalties, naming and shaming become almost irrelevant.
Daniel Kawczynski (Shrewsbury and Atcham) (Con)
Certainly, when I have spoken with supermarket chief executives I have challenged them. They sometimes take out full-page newspaper adverts to highlight fair trade for third-world growers. Does he agree that we want to get to the stage where supermarkets are highlighting the fair trade they are doing with British suppliers?
Ian Murray
Absolutely. The hon. Gentleman makes a critical point, but the point is the full plethora of sanctions in the Bill. All we are talking about is what is in the Bill; we are not saying that fines could not exist in the short to medium term at the behest of the Secretary of State, but if he thinks that fines might be required in the future, why not just put them in the Bill?
The Minister of State, Department for Environment, Food and Rural Affairs (Mr David Heath)
Just so we know the terms of debate, will the hon. Gentleman outline how big a fine he thinks would be appropriate to deter inappropriate behaviour on the part of, say, Mr Tesco?
Ian Murray
That should be in the hands of the adjudicator. We are asking the adjudicator to do a job to assess whether someone has breached the code. The adjudicator should therefore be given the power to determine the sanction. If the sanction is to seek recommendations, then that is the sanction. If the sanction is to name and shame, then that is the sanction. If the sanction is a fine, we should leave that in the hands of the adjudicator to determine. That could be a debating point in Committee. The Minister is chuntering from a sedentary position, but the argument is whether financial penalties should be in the Bill. If they are, the Secretary of State could then propose that fines be within certain parameters, or up to the adjudicator, or a proportion or a multiple of the loss achieved by a particular supplier. There are a plethora of ways for an adjudicator to determine a financial penalty. [Interruption.] The Minister says, “I don’t know,” but the Government have not told us what they would propose. Yes, we do not know how much the fine should be. That would be up to the adjudicator, within parameters applied in respect of the Secretary of State, to determine how much a fine should be, and that should be in the Bill.
Mr Spencer
Does the hon. Gentleman agree that those charged with the responsibility for spreading the message of the naming and shaming will be the same publications taking the advertising revenue? I wonder how much enthusiasm to naming and shaming there will be from those publications, when that might put their own advertising revenue in jeopardy.
Ian Murray
That is a wonderful point, and I think we now have our second candidate for the Committee—or given that helpful comment, perhaps not. The hon. Gentleman is right: there is a conflict of interest. The hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) mentioned the large full-page adverts that supermarkets produce relating to fair trade. Indeed, if it is about advertising revenues, there will be a conflict of interest, and I hope that the adjudicator would take that into account. If fines were included in the Bill, an adjudicator could balance up what would be the best punishment for a particular crime and deal with it in that way. By hamstringing the adjudicator from day one on fines, we are merely pushing down some of those routes by which questions would have to be answered.
Let me run through some of the issues relating to the adjudicator potentially being toothless, which is why we are calling for fines to be available to the adjudicator from day one. We are not the only people who are calling for that. In January 2009, the hon. Member for Somerton and Frome (Mr Heath)—the current Minister with responsibility for agriculture and food, who has been chuntering on about fines for the past few minutes—said, when he was an Opposition spokesperson all those many months ago, that there must be “an ombudsman with teeth” to ensure that farmers get a fair deal. I wonder whether he and his colleagues will support our amendments in Committee to give the adjudicator such powers, because they did not support them in the other place. He is not the only one. The hon. Member for Tiverton and Honiton (Neil Parish) said last year:
“I agree with my hon. Friend and other Members that the adjudicator must have real teeth so that they can take action to stop abuses.”—[Official Report, 5 April 2011; Vol. 526, c. 240WH.]
Just this weekend, a host of stakeholders wrote an open letter to The Sunday Telegraph. It is worth my quoting from it, because it touches on the crucial part of the Bill:
“Sir, Having got the Groceries Code Adjudicator Bill this far, the government will be scoring an own goal if it denies the supermarket watchdog the one tool that will make it effective: the power to levy fines from the outset. The evidence of supermarkets’ unfair treatment of suppliers—which includes farmers both here and in developing countries—is all too clear. Watering down the bill so that penalties only go as far as ‘naming and shaming’ will not be a sufficient deterrent and the Adjudicator risks failing in its job to hold supermarkets to account.”
That letter was signed by ActionAid UK, the National Farmers Union, the Federation of Small Businesses, the Campaign to Protect Rural England, the National Federation of Women’s Institutes, Traidcraft, the Tenant Farmers Association, the Country Land and Business Association, the Independent Fruit Growers Association, the Catholic Agency for Overseas Development, Friends of the Earth, War on Want, RedOrange and Great Glemham Farms. Clearly, then, there is a great movement to provide for fines in the Bill, and I cannot understand why the Government have not listened to the letter.
We are in danger of creating this toothless tiger—I have “tiger”, but it could be a dog, I suppose. Let us imagine an old-fashioned circus act. Where is the fear in a circus clown putting his head into a tiger’s mouth, only to have his neck viced by the tiger’s gums? There is no way we can put fear into the hearts of the supermarkets with an adjudicator that does not have the power to fine. Providing for fines in the Bill does not mean that fines should be imposed on retailers randomly—I hope there would never have been sufficiently serious breaches to require the invoking of the power—but allowing the adjudicator to have the power easily to hand might influence the retailers’ actions and go some way in preventing serious breeches of the code.
Clause 9 gives the adjudicator the power to fine retailers, subject to permission from the Secretary of State. Even if the adjudicator decided that the power to fine was necessary, several considerable hurdles would have to be jumped. First, the adjudicator, who would be best placed to decide whether fines were appropriate, would have to publish guidance in deciding the amount of financial penalty—a point that goes back to the Minister’s intervention. Secondly, once that had been given to the Secretary of State, he would have to consult stakeholders on the guidance. Finally, a statutory instrument would have to be presented to Parliament and passed by affirmative resolution. This hugely drawn-out process will do nothing to instil much-needed confidence in farmers and small businesses that might have been severely affected by a breach of the code by a retailer that the adjudicator thinks merits a fine.
We must trust the adjudicator to issue remedies fairly. By not providing in the Bill for the power to fine, the Government are in danger of scoring an own gaol, as said in The Sunday Telegraph letter from ActionAid. Indeed—if I may continue with the footballing analogy—a red card could be issued. It would be available to the adjudicator in the case of a penalty, but it would not be in its breast pocket, where it could be issued fast and effectively against the offender if necessary. Essentially, we are saying in the Bill that if the referee wants to issue a red card, he will have to ask the Football Association, after which the FA will consult on its use and then pass a new law to allow it to be used. I much suspect that the match would have finished many months before the decision is made.
The Business, Innovation and Skills Committee and the Environment, Food and Rural Affairs Committee have also said that the power to fine should be provided for in the Bill. Furthermore, in a recent joint statement, the Grocery Market Action Group, ably chaired by the hon. Member for St Ives and made up of 23 organisations from across the farming, international development, environmental and small business lobbies, called on the Government to give the adjudicator the power to levy fines. I ask the Minister, again, why she is not listening to the entire industry when it comes to fines.
I turn to the intermediaries. At the bottom of all this lies the nagging doubt that many of the alleged abuses will not be resolved even by the presence of a perfectly functioning adjudicator, because the problem is in the code itself, not its implementation. Central to this idea is the code’s limited scope—this point has been raised by voices across the sector—as much of the bad practice occurs at the level of intermediaries not covered by the code and therefore the adjudicator. For example, let us imagine that a supermarket has a ready meal supplier, but decides it wants fewer carrots in the ready meal and goes through the proper GSCOP processes to remove carrots. The supermarket can do that legitimately under the code, and that is only right. However, the ready meal supplier will buy those carrots from a carrot supplier, and could therefore dismiss one of its suppliers of carrots or change the terms of the contract without any recall to the groceries code. In that example, nothing would have gone wrong according to the groceries code, so we could see suppliers further down the chain being harmed quite considerably by the decision of an intermediary.
Equally, that binary view of the market seems inappropriate when the supplier is a huge manufacturer of branded goods, such as Unilever, Kraft, Nestlé or Coca-Cola, whose turnover may exceed that of even the retailer. We are protecting the relationship rather than the carrot producer further down the chain. The adjudicator will be required to recommend changes to the code to the Office of Fair Trading, yet the British Retail Consortium claims that the OFT has taken no action to offer feedback on the annual reports that its members have already submitted under GSCOP on their implementation of the code or even to publish them.
Many farmers and growers are currently not covered by the code, as they do not directly supply the 10 largest retailers. Nevertheless, they are often the ultimate victims of unfair behaviour and the transfer of risks and costs. We hope that ensuring that retailers comply with the code will resolve those issues. If, despite the adjudicator’s best efforts, those problems persist, primary producers will continue to struggle to make a fair return for their enterprises and consumers will continue to suffer from the subsequent lack of investment. That is why it is critical that the adjudicator should have the power in the Bill to keep the code live, to enable such issues to be dealt with if the adjudicator deems that to be necessary. May I ask the Minister what consideration she has given to those concerns and whether she will come back to us in Committee with an assessment of the issues affecting intermediaries?
Finally—
Daniel Kawczynski
The hon. Gentleman, who appears to be moving towards the end of his speech, mentioned carrots. The British carrot industry is actually doing quite well, but I very much hope that he has spent some time thinking about how the adjudicator will help our British dairy industry, which is on its knees, with many farmers going out of business every month. In the last Parliament I set up the all-party group on dairy farmers in order to fight for them. Our main report suggested that we should have a grocery adjudicator Bill. Will he spend a few moments talking about our dairy farmers?
Ian Murray
The hon. Gentleman raises a critical point, because naming and shaming did not work for the dairy farmers. What worked were blockades and sanctions in getting their points across to the Government. I will perhaps highlight the dairy industry and how the groceries code adjudicator should be able to help, but he makes a critical point about how the Bill could be seen as toothless, because the dairy industry had to blockade and withhold its services to get any action on how the supply chain worked. It neatly follows that the debate needs to be on where the code sits in the legislative framework.
Glyn Davies
It concerns me that the hon. Gentleman has just said that the improvement in the dairy farmers’ returns was based on just direct action. There was a serious debate in this House and a serious debate in central London, and the normal processes of politics had a great influence. It is not just direct action and blockading properties that are needed to have an influence on businesses.
Ian Murray
I take the hon. Gentleman’s point. The point I am making—I think his hon. Friend the Member for Shrewsbury and Atcham was making it too—is merely that we can draw a parallel between the code in the Bill and how it could work in the example I gave involving carrots in a ready meal, and what happened with the dairy industry. We are merely drawing parallels. I am not denying the actualities of what the hon. Gentleman has said; I am saying that having an adjudicator without teeth—one without the power to deal with the issue—could lead to exactly the same examples with many other industries.
To finish, my noble Friend Lord Knight—I pay tribute to the work he did on the Bill in the other place—speaking on behalf of the Opposition on Second Reading in the Lords, said:
“It is fundamentally odd that while Parliament is entitled to debate and scrutinise the function and powers of the referee, we are denied the opportunity to give the same scrutiny to the rulebook itself.”—[Official Report, House of Lords, 26 June 2012; Vol. 738, c. GC80.]
I appreciate that the Minister said that the code has a footing, in that the adjudicator can use it to compel supermarkets and retailers to comply, but there is a question whether it should be put on a statutory footing in this House to allow that to occur, rather than be dealt with through executive order.
The code must be a living document that is open to continual improvement in order to ensure that the framework is responsive, and that it ultimately works in the best interests of all businesses as well as consumers. The National Farmers Union has raised concerns about the status and enforceability of the code, because it is contained in a schedule to an order under the Enterprise Act 2002, rather than in a statute of its own. We would consider going further, and we will explore the ways in which the code could be a matter for Parliament to consider on the basis of recommendations from the adjudicator, who is best placed to evaluate the code. The code needs to be capable of responding to changing market forces, and to be as durable as the adjudicator who will referee it.
I mentioned extending the scope of the code to intermediaries, and hon. Members have already raised the recent issues surrounding the dairy industry. Cuts to farm gate prices mean that dairy farmers are being paid less for milk than it costs them to produce it. That is not a sustainable model. We welcome the news that there is agreement on the terms of an industry code of practice that will lay the foundations of a new deal between farmers and retailers. For too long, dairy farmers have put up with wholly unbalanced terms and have been struggling to cope in an increasingly unworkable financial situation. It cannot be right that supermarkets use milk as a loss leader while farmers are being paid less for the milk than it costs them to produce it.
Ministers need either to ensure that the voluntary code on dairy contracts works for farmers, or to bring in regulation to fix the dysfunctional supply chain in that marketplace. I believe that the adjudicator could fit that role if necessary, and I would be interested to hear the Minister’s thoughts on whether their role could be extended into areas such as the dairy industry when problems arise. That would be part of keeping the code as a living document.
Stephen Timms
Traidcraft and others have raised a point relating to the confidentiality of those who report their concerns. The Minister referred to that matter in her speech. Is my hon. Friend satisfied that the Bill will provide enough protection for those reporting breaches of the code?
Ian Murray
We will have to explore that matter in detail in Committee, because there is confusion in the industry and among trade bodies. They are uncomfortable with the current requirements, and I hope that the adjudicator will offer recommendations on the level of evidence that will be required to set up an investigation. A balance will have to be struck involving anonymity and confidentiality. That could be difficult in the circumstances in which a product could be uniquely indentified as coming from a particular supplier, and care would have to be taken to ensure that that supplier’s identity was not disclosed in the course of the proceedings.
This is a good Bill, but it could be a great Bill. The situation was best summed up by the hon. Member for South Staffordshire (Gavin Williamson), who said in the House in April 2011:
“None of us wants a weak, ineffectual, pointless adjudicator which will cost everyone something but achieve nothing.”—[Official Report, 5 April 2011; Vol. 526, c. 236WH.]
The adjudicator could and should be strengthened through the various proposals that we have heard this afternoon, and we will seek to achieve that in Committee. I give the Minister a commitment today that the Opposition will work constructively with her. Similarly, I hope that she will be open to giving due consideration to the amendments that we will table in the weeks ahead. I also hope that Hon. Members on the Government Benches who recognise that the Bill does not quite fulfil its potential will look at our proposals in detail in Committee. We look forward to playing our part with the Government in establishing an effective adjudicator as soon as possible.
Mr Deputy Speaker (Mr Nigel Evans)
Order. We will start with a time limit of 15 minutes on Back-Bench speeches, with the usual injury time for up to two interventions. Clearly, hon. Members do not have to take the full 15 minutes, however. There will be no penalties if they do not speak for that long. Stranger things have happened.
Miss Anne McIntosh (Thirsk and Malton) (Con)
It is a great pleasure to follow the hon. Member for Edinburgh South (Ian Murray). I should like to congratulate the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for East Dunbartonshire (Jo Swinson), on starting this Second Reading debate so eloquently. I want to make some comments as the representative of growers and farmers in Thirsk, Malton and Filey, and I want to share with the House the evidence that the Environment, Food and Rural Affairs Select Committee has heard on these matters.
I welcome the Bill’s Second Reading. I have some common ground with the hon. Member for Edinburgh South on these issues, but probably more with my hon. Friend the Minister. I also have common ground and differences with the hon. Member for West Bromwich West (Mr Bailey), who chairs the Business, Innovation and Skills Select Committee.
We should perhaps pause for a moment to consider the marketplace in which some of the growers we hope will benefit from the Bill are operating. They tend to be very small producers of each vegetable or form of produce, and they are often small in number. There is absolutely no comparison with the size, volume and financial weight of supermarkets.
I welcome the fact that we have reached Second Reading and I welcome the useful amendments made in the other place, but there has been a long gestation period from the Competition Commission report of 2008. I would like to record the thanks of the DEFRA Committee to those who gave written evidence and, more specifically, oral evidence in the context of our brief inquiry. We shared our conclusions with the Business, Innovation and Skills Committee. Some of the points we made have been adopted, but it is worth repeating them today.
We welcome the fact that an adjudicator is going to be established, and we believe that the adjudicator should have the power to accept complaints from indirect as well as direct suppliers. Will the Minister confirm that suppliers will have the ability to make anonymous complaints, which we believe will be fundamental to the success of the groceries code adjudicator?
In a limited market—in Lincolnshire, for example, and other parts of the country—where there are very few leek growers, if one of them wished to make a complaint against a particular supermarket, it would be too easy for the supermarket to identify that particular grower. It is therefore vital that the grower has the safety of knowing that an anonymous complaint can be made to the adjudicator—either directly or, as forcefully expressed by our Committee, through an indirect route via the National Farmers Union, the Country Land and Business Association or the Tenant Farmers Association. They are membership organisations that will represent the individual grower, who will then be able to make a case, safe from persecution and safe from the possibility of having the contract terminated at an early stage.
Ian Paisley
The hon. Lady makes a vital point. If a potato processor or person producing potatoes in Northern Ireland were to make that sort of complaint, it would in effect be one of three people, so a middle way of getting the complaint through must be found.
Miss McIntosh
The hon. Gentleman reaffirms my point very eloquently. He would probably share my view—and I hope that Ministers and shadow Ministers will grasp it—that the security of tenure of some of these growers is absolutely shocking. That is in stark contrast to—albeit another woeful situation—what happens in the dairy industry. A cheese producer in my area contacted me to say that some of the milk supplies for cheese production—a liquid production that we are so good at in this country—are being threatened. The growers that I believe will benefit more directly and more specifically than dairy farmers and others sometimes have only three months’ security of tenure or certainty of contract—not even a year. I do not know—perhaps the Minister can help me—whether the Bill will address this disparity between producers of, for example, milk and potatoes, and others. With the groceries code adjudicator, will these producers and growers gain greater security of contract than the three months or less than a year that they have at present?
Let me explain what I believe to be the sticking point. I hope I heard the hon. Member for Edinburgh South correctly as I think he said he would favour the power to have proactive investigations. I believe that that is vital. I should declare my interest—I know that what I say here will not go further than this Chamber, but I also know that if someone wants to tell a secret, this is the best place in which to share it. I served for six months—in 1978, I am afraid to say—in what is now called DG Competition but was then the Directorate General for Competition, dealing with investigations of complaints brought directly to the European Commission. I understand that the Competition Commission is based on the same philosophy, as it were, as DG Competition.
I should like to know what good reason the Government could have for not introducing a power for the groceries code adjudicator to launch a proactive investigation. It could be based on evidence received by word of mouth, or on material in trade journals. Journalists working in the specialist press often hear things at conferences to which others are not privy.
Jo Swinson
Clause 4 makes it clear that the adjudicator can conduct an investigation
“if the Adjudicator has reasonable grounds to suspect that…the retailer has broken the Code”.
Obviously that could result from a specific complaint made by a supplier, but the adjudicator might become aware of the existence of reasonable grounds through, for instance, press articles or investigatory television programmes. Proactive investigations will indeed be possible as long as such grounds exist.
Miss McIntosh
That is most welcome, although obviously, under the new powers that Select Committees have, we shall analyse the Bill very carefully to establish whether it can be improved. Perhaps the Minister will be good enough also to confirm that anonymous complaints can be made, that indirect as well as direct complaints can be made and that third parties such as trade organisations will be able to make complaints, and will tell us whether the Bill contains provisions relating to the recovery of investigation costs.
We are anxious for the adjudicator to have the power to levy financial penalties without the need for an order by the Secretary of State. That has been mentioned a number of times already in interventions. Having waited since 2008, when the Competition Commission first reported, we would find it unacceptable for the adjudicator not to be fleet of foot and able to levy such penalties without the need for an order. I believe that the Bill allows that in some circumstances, but perhaps the Minister could give us a nod.
Clause 16 refers to the transfer of adjudicator functions to a public body, and states:
“The Secretary of State may by order abolish the Adjudicator”.
Even a cursory reading sets alarm bells ringing. Does that mean that within two or three years of the establishment of the adjudicator, his functions could be abandoned? Would they simply pass to another public body, or would the whole process grind to a halt? Some clarification would be helpful.
Obviously we were briefed by outside bodies before the debate. I should like the Minister who responds to the debate to comment on the views of the National Farmers Union, which is keen for the adjudicator to be able to impose fines as swiftly as possible without waiting for an order from the Secretary of State. Also, can the Minister say whether there will be an ongoing review of the effectiveness of the groceries code itself? There would be some merit in having an independent body look at the effectiveness of the code after some cases have been addressed by the adjudicator, and I am sure my Committee—or, indeed, the Business, Innovation and Skills Committee—would stand ready to do so. Do the Government plan to follow that course of action?
The National Farmers Union has said it would welcome an assurance from the Government that compliance with the code will be mandatory for the retailers it covers. I ask the Minister to set out precisely which retailers it will cover. Will the Minister also state whether the code will be legally enforceable by the adjudicator?
We on the Environment, Food and Rural Affairs Committee are keen to ensure that the new adjudicator will adequately protect farmers and food producers from large retailers. We see this as a good opportunity to restore the balance between the mighty supermarkets and the considerably less powerful growers, who provide the food we eat. I hope we can continue to move towards self-sufficiency in their products.
There has been a climate of fear in the grocery supply chain for many years. We therefore welcome the provisions to allow the adjudicator to receive anonymous complaints —that has, I think, been confirmed. We wish the Bill safe passage today, but, in the light of opinions and evidence heard by us and the Business, Innovation and Skills Committee, we reserve the right to continue to examine it closely as it progresses, with a view to improving it if we believe that is necessary.
Susan Elan Jones (Clwyd South) (Lab)
I am delighted to follow the hon. Member for Thirsk and Malton (Miss McIntosh), who, as ever, speaks with great authority and expertise in this area.
I welcome the Bill. The creation of the groceries code adjudicator is an important step, and it is vital that we get the best adjudicator possible. This issue is not about urban and rural communities; it is fundamentally about supporting producers who produce food in our rural areas. If we do not have that, there will be no locally grown food for markets in our country.
This Bill is about the creation of a level playing field for farmers, small retailers, supermarkets, and the hard-pressed consumer. I heard what the Minister—in consultation with the dog on her shelf—had to say about naming and shaming, and I understand some of the points she makes. However, she also suggested that under the groceries code adjudicator major retailers will probably end up paying different amounts of money proportionately and that she does not think that could incur the threat of legal action, so I find it difficult to understand why she has not considered the importance of fining. Let us have that power to fine now—not through order of the Secretary of State and following publication of guidance. We should listen to the Business, Innovation and Skills Committee, which recommends that the power to fine should be stated in the Bill and the adjudicator should be given the power to escalate penalties if code breaches continue. Surely that is sensible. It is not saying that every breach will result in a fine, but that the adjudicator should be able to use that power if he or she considers it necessary.
A lady from Llangollen in my constituency made the point very well. She said that she shopped at supermarkets but also bought fresh produce and meat locally at shops and markets, and that she was increasingly concerned about issues relating to the developing world. This is not about purism or being against supermarkets and the like; it is about being aware that if we do not support food production in this country, more and more food producers will go out of business, which will ultimately lead to a rise in the cost of food for the consumer. That will mean the end of much of our home-grown food industry, which is why the strongest possible action is essential.
I pay tribute to my hon. Friend the Member for Ynys Môn (Albert Owen), a pioneer who has championed this issue, because he knows how much it matters to the rural community in areas such as north Wales. Without family farms in north Wales we will see the end of rural communities. There would be a massive impact, too, on Welsh language and culture, which my hon. Friends the Members for Ynys Môn and for Llanelli (Nia Griffith), many other Members and I care about, and which are vital in this debate.
We have to think about the needs of our producers and consumers and, more widely, of local economies. I urge the Government to reconsider the issue of fining. It does not mean that if we have the carrot we cannot have the stick, or the other way round. We urge the Government to consider what groups such as farming unions, the Labour party, Select Committees and many others have said. The role of the adjudicator matters far beyond one type of constituency, one party and one part of the country. If we are to have serious, long-term, sustainable food production, we have to get this matter right. I urge the Government to listen to those diverse processes and include the right to fine in the Bill.
George Eustice (Camborne and Redruth) (Con)
I welcome this Bill’s Second Reading. As Conservatives, we believe in free and fair markets, but we rigorously oppose the abuse of dominant market power, which is why the Bill is essential.
Before entering politics, I worked in the farming industry for 10 years. We were a major supplier of strawberries to a number of supermarkets, and I experienced first-hand some of the sharp practices that the Bill is designed to deal with. They ranged from forcing suppliers to use third party contractors, for things such as packaging and haulage, who would then charge suppliers more than the market rate. I experienced the retrospective clawing back of costs resulting from wastage on the shelf. Supermarkets would claw back not just what they paid, but the margin that they expected from a product. Growers were frequently forced to participate, often unwillingly, in supermarket promotions, and were expected to sell their produce for below the market rate.
I saw many instances of supermarkets rejecting stock when they had simply made an error in orders. That was a particular problem with the strawberry industry, because a supermarket buyer would place an order for a batch of strawberries, unaware that it would begin to pour with rain the following day. When it pours with rain, strawberry sales collapse and supermarkets are reluctant to take the orders that they have placed, so they do all that they can to find an excuse to reject batches of fruit that have been supplied to them.
I have been out of the industry for 10 years, and I thought that perhaps things had changed, but other practices have crept in. Only last year, I was talking to a supplier who explained that he was required to show his annual financial accounts to the supermarket as a condition of supply. Ostensibly, that is to check that the business is financially secure, but we all know that in reality it is to see what its profit margin is, and how much further supermarkets can drive it down into the ground without killing it altogether.
Andrew Bingham (High Peak) (Con)
The problem, as my hon. Friend sets out, is very serious—it is almost commercial bullying. Does he agree that that is why it is so important that the adjudicator can now receive referrals from third parties, such as trade associations and so on, to protect anonymity and stop future bullying?
George Eustice
I absolutely agree. One of the big improvements made to the Bill in the Lords was the extension of its scope so that that could happen—so that anonymous complaints could be made and so that whistleblowers and third party trade organisations could be involved in the process. The evidence we heard in the Environment, Food and Rural Affairs Committee made it very clear that many suppliers are incredibly fearful of the supermarkets they supply. They are conscious that it is easy for suppliers to be identified as there will sometimes be only a handful of them for a particular product line to a given supermarket. It is therefore very important that the Bill has that extra scope.
I also recently spoke to another supplier who told me about a problem that he had encountered with supermarkets putting him under huge pressure to fulfil the terms written into a contract and supply the volumes that he was no longer able to source due to bad weather or a crop failure. In negotiations, he was put under huge pressure by a supermarket to buy the product from abroad and sell it at a massive loss so that he could fulfil his contract. That is unacceptable behaviour. When prices change, supermarkets should also change their prices.
Mark Tami (Alyn and Deeside) (Lab)
Does the hon. Gentleman accept that it also happens the other way? I have come across cases in which supermarkets have turned around and said that they do not want an order any more at very short notice. The supermarkets have the power to say to smaller suppliers, “Take it or leave it, because we can go elsewhere and you cannot.”
George Eustice
I absolutely agree, and that is why the Bill is so important. Over the past 20 years, there has been huge growth in the power of a handful of very powerful retailers who have huge market clout and have, frankly, abused their power. If we want proper market conditions back, in which people are paid a fair market price for their goods, the Bill and the groceries code adjudicator will be vital.
Let me move on to the issue of the financial penalties, which have featured heavily in the debate so far. As my hon. Friend the Member for Thirsk and Malton (Miss McIntosh), the Chair of the Environment, Food and Rural Affairs Committee, has said, our Committee concluded that there was a case for making those fines available to the groceries code adjudicator from the start rather than waiting for it to become necessary for another order to be introduced by the Secretary of State.
The question of fines is important and I agree with the Minister that naming and shaming might be adequate for some minor breaches, but I take issue with the claim that naming and shaming might be a more powerful deterrent than a fine. The British Retail Consortium might say that we should name and shame, because that is more powerful than a fine, but that is a bit of a clue. When the retailers say that what really scares them is naming and shaming, even though they do not want fines, the Minister ought to be a little more suspicious than she has been.
It is important to have an escalating scale of penalties. Why remove an important tool from the box? It would be possible for the Government to craft guidance on when a fine would be appropriate and what size that fine should be. It could stress that fines should be used sparingly and that other sanctions, such as naming and shaming, should be the preferred route. I think it is wrong, however, to rule fines out at this stage because of the question of what should happen if there is one persistent offender out of the 10 supermarkets caught by the groceries code adjudicator. What if that one offender, however many times they are named and shamed, sticks up two fingers to the adjudicator and says, “We really don’t care.”? That is unfair on the remaining nine, who might be abiding by the code, and it risks making the whole initiative unstable.
The groceries code adjudicator is more likely to succeed if the power to fine is there from the beginning and more likely to fail if it is not. For the adjudicator to work, we need to ensure that its introduction will change the behaviour of the supermarkets. It is not just about having investigations all over the place—we need people to be fearful of a fine, so that they moderate their behaviour.
There is a real problem in the serious mismatch between what a Minister might be told by the public affairs officers who work for the supermarkets and what she would experience if she was a carrot grower supplying supermarkets and dealing with buyers daily. The truth is that public affairs officers for the supermarkets will often strike a paternalistic pose and say, “It is not in our interest to upset our suppliers. We want happy suppliers,” and they will have pictures in their supermarkets of happy farmers’ children working out in the fields. It all sounds great, but the buyers have very different incentives that focus on margins, profit and exercising control over their suppliers. The Minister said that the market for supermarkets was fiercely competitive, and she is right. That is why my fear is that when Parliament’s back is turned, the incentives that motivate the buyers will prevail because it is ultimately their profit margins that they will seek to protect.
The possibility of third party complaints has been raised and is an important power. The industry has a part to play in this. Although it says that we need anonymity and that it is important for complaints to be made without the complainant being identified, the industry has to play its part in helping the supermarket adjudicator identify bad practices. One of the proposals that I have made to the NFU, which keeps telling me that it is under consideration, though I have not heard that it has been taken up fully yet, is the idea of what I have termed a farm-fair index. That would be based on a panel of 500 farmers and suppliers across a range of sectors. Each quarter they would be given a questionnaire asking a series of questions that measured the adherence of each of the 10 supermarkets to the groceries code. There would be a league table of the 10 supermarkets and they would be scored according to which of them abided by the code the most and which departed from it the most. If a particular supermarket was at the bottom of that league table for two consecutive quarters, an automatic investigation by the groceries code adjudicator would be triggered. That would be a good way of ensuring that vexatious complaints were filtered out. A broad panel—the same 500 farmers and suppliers each quarter—who could score the adherence of the supermarkets to their own code would provide an important tool to help the adjudicator identify bad practice.
In conclusion, I welcome the Bill. It is a positive step forward and will improve relations between farmers and their supermarket customers, but I wish the Government would take another look at the issue of financial penalties.
Ian Paisley (North Antrim) (DUP)
The production of food is our most important industry. Let us pause and think about that for one moment. The production of food is our most important industry, not just for what it earns for our economy and what it achieves, but because of what it says about us as a nation and what we are prepared to promote to our people to eat.
Consumers are becoming more and more aware of food traceability and of the importance of our nation’s ability to produce good quality, tasty, traceable food with as little intervention as possible of chemicals, and a clear process chain for the production of that food so that we understand food stability, food security, and what real agricultural sustainability is all about. The Bill before the House is so important because it is about understanding the mechanisms and the balances that make up our most important industry.
I do not fear to predict that the production of food over the next few years will become the most important topic in our nation during this century. I say that because of the threat posed by huge cartels and their interests to the production of good quality, tasty food. Handling and protecting our most important industry and doing all we can to ensure that we continue to produce the best quality, tasty, traceable food that our people have come to enjoy and expect should be a key priority not just for the Government, but for everyone in the House.
When I made my maiden speech, the hon. Member for Ynys Môn (Albert Owen) spoke to me afterwards because I had focused on agriculture and the subject of creating a food ombudsman. I was delighted to learn from the hon. Gentleman about the pioneering work that he had tried to do under the previous Government, and it is a huge tribute to him that we have got so far that the House is on the verge of legislating on something so critical to our food security and our food interests. I congratulate him.
I say all this in the knowledge that if we introduce a food ombudsman or a supermarkets adjudicator, there will be certain consequences. One is that we as a nation must educate our people that food can no longer be regarded as a cheap commodity. If we want good quality, traceable, digestible, beneficial food produced in a sustainable way that continues to employ people on a living wage, that will not be done cheaply. We must therefore ensure that the food chain is transparent and that people understand why a certain price must be paid.
Those who would undermine that by marketeering cheap food to our people and bringing cheap food in vast quantities from overseas undermine our ability to produce quality food, ruin the industry and hasten the day when we will have limited choice as a nation and be forced to pay the highest of high prices for food. That is why we must protect the primary and key producers of food in our nation.
The Bill is a good Bill but, as the Opposition Front-Bench spokesman, the hon. Member for Edinburgh South (Ian Murray) said, some improvements could be made to make it a brilliant Bill, and we should strive to do that. The Bill is not intended, for example, to deal with commercial issues such as the producer price differential which exists between Northern Ireland and Great Britain. That is particularly important for me in Northern Ireland because of two things. The first is water —17 miles of it between my island and your island, which adds to the price of food and food production, and the demands put on a primary producer in my country when he wishes to supply one of the 10 great supermarkets here on the mainland. The second is climate and the fact that it is considerably colder where I come from, which has a detrimental effect. I see that the hon. Member for Midlothian (Mr Hamilton) seems to think that it is colder where he comes from. Well, he can keep that cold, as far as I am concerned.
We could improve the Bill if we address those issues through the powers of the adjudicator. We should also deal with some of the practices of processors and other intermediaries in the processing of food. That is another critical area left out of the Bill, but it is an area that we should at least try to address. The inability to impose fines at the outset is another flaw that needs to be addressed. I was brought up in a political school which said, “If you want to deter someone, let that person know that if they get into a fight with you, you’re going to kick them where it hurts. That usually deters a person from having a fight with you, but if that person is so unfortunate that they still want to have a fight with you, then kick them where it hurts and they probably won’t fight with you again.” That just happens to be the school of political brawl I was brought up in. It usually works, and with some effect.
The president of the Ulster Farmers Union, Mr Harry Sinclair, wrote to all Northern Ireland MPs at the weekend, stating that
“we firmly believe that the ‘teeth’ necessary to secure compliance needs to be much stronger”
and that fining should therefore be set out in the Bill. I believe that the Government should listen to those words and deter the supermarkets.
I agree with a huge amount of what the Minister said, especially when she said that the supermarkets like to spend a lot of money on advertising. I was once told that 50% of all money spent on advertising works and 50% is completely wasted. The problem for the supermarkets is that they do not know which 50% is which, so they would spend less if they knew what advertising actually works. I believe that some of the supermarkets would not necessarily wear the publicity they got as a badge of shame, but they might feel honoured to wear it. We really need to move away from the nonsensical idea that bad publicity in itself will be sufficient deterrent for the supermarkets, because it will not be enough. We must let the supermarkets know that if they price-fix, because they are a cartel, they will be kicked where it hurts, and that will have an effect.
We must also ensure that we bring about a new relationship that rebalances the primary producers’ impact on the market with that of the supermarkets. The only way to do that is by ensuring that we reward the farmer for the sweat and toil that he or she puts into the land to make the best quality, most traceable and tastiest food we can get. I believe that the only way we can do that is by establishing a new relationship, not one in which the farmer is king, but one in which he is at least treated equally and feels that his sweat will be rewarded with a fair price. He should be able to encourage his children to aspire to be farmers, rather than having to tell them, “Go somewhere else, because there is no reward in this and you won’t be able to make a living, raise a family or spend money on the things you want.”
Therefore, we must establish a new relationship that at least treats farmers as equals and allows them to be regarded as such. Otherwise, over the next 20 years our agricultural sector will continue to be dashed and to fall and we will find ourselves held in the grip of outside interests beyond the shores of this nation that will sell us what they want, which will not necessarily be good, clean, traceable or tasty, and they will sell it at their price. Therefore, we have to get this right and get it right now, because, as I said at the beginning of my comments, it is our most important industry. It is about what we tell our people they should eat and what is good for them.
Although the adjudicator is an important part of the process of getting to that stage, I believe that it is only one part of a cocktail of necessary measures. We must have price transparency—having the adjudicator is, of course, one way of providing price transparency—so that the consumer knows why they have paid a certain amount for steak, poultry, pork or other products, what it has cost the farmer to produce, what it has cost the processor to process and make good for them and what it has cost the supermarket to retail. They must know each cost along the supply chain, because otherwise they are being robbed of a vital thing: knowledge about what they are being shown they should eat.
We should also have clear food labelling and ensure that we know whether a product has been made in the United Kingdom or was brought in from elsewhere. In many instances there is nothing wrong with food brought in from elsewhere, but we should at least have clear labelling so that we know where it is from. We should also ensure not only that we encourage our products to be sold here in the United Kingdom, through good procurement policies in our schools and hospitals, but that it is marketed abroad. All these issues can ensure that those involved in the most important industry in our land are encouraged to continue to produce the best, cleanest, tastiest and most traceable food possible.
Simon Hart (Carmarthen West and South Pembrokeshire) (Con)
This is an eagerly awaited moment, and it is a very welcome one for Members from all parties. I suppose I should declare an interest, as some of my relations will benefit from this proposal. Certainly, many of friends will benefit, and most importantly, so will many of my constituents. The shadow Minister was perhaps a little unkind when he criticised the Government for a lack of progress, because progress has been pretty swift and there is a momentum behind the process, as has been recognised and is respected by all those who will, in due course, be on the receiving end of its impact, be that negative or positive.
I want to take a few moments to make two points. First, on the plus side, there has been some discussion of the confidentiality element, whose importance I do not think should be understated. It has concerned many people across different parts of the supply chain, but particularly in farming, where there is some nervousness, not necessarily about the content of the contract, but about its length, as was touched on in the most important contribution made by my hon. Friend the Member for Camborne and Redruth (George Eustice).
Confidentiality is very important, particularly in agriculture, where there is a large debate about long-term investment. There is real concern, particularly in the dairy industry, about entering into investment arrangements that will take, in some cases, 20, 30 or 40 years to reap the necessary rewards. Any degree of confidentiality that can be guaranteed for those producers will in turn secure a better contractual relationship with the retailers and enable them to invest properly in agriculture, which we constantly refer to in this House.
Secondly, I want to touch on the argument that has been made, albeit fairly weakly so far, about whether the proposal constitutes yet more regulation that our agricultural industry will have to put up with. Regulation is frequently misquoted in this House, particularly regulation relating to farming. No farmer I know is opposed to regulation; what farmers are opposed to is unnecessary regulation, poor regulation or regulation that fails to achieve its original objectives. I suggest that the proposal is a form of regulation that does exactly what it says on the tin. It is desired by the agricultural community and so provided that it migrates into law broadly in the manner currently proposed, it should give great reassurance. Therefore, I do not think that we should dwell too long alongside those who dismiss it simply as some kind of intrusive regulation, because it is not. It will make the business of farming and making a living in the countryside all the more secure.
Reference has also been made to the contrast between naming and shaming as a means of deterrent and fining. I must say that I think I am in step with everyone other than the Government when it comes to the view that naming and shaming alone will not be sufficient. If it was, why have I received only one piece of correspondence from any of the 10 supermarkets that might be affected? Waitrose is the only company that has bothered to write to me at all about today’s debate. I do not detect that those in the higher echelons of the so-called big 10 are quaking in their boots. The idea that naming and shaming a supermarket on some website or trade magazine will deter purchasers from going into their stores is, frankly, an exaggeration. If the proposal could provide the adjudicator, rather than just the Secretary of State, with a power to fine more urgently, that would undoubtedly chime with the evidence and submissions that have been provided to us all from countless individuals and organisations.
I hope that the Government will not fall into the trap —I am sure they will not, because this is a good proposal —of believing that they have a monopoly of wisdom on this particular point. I cannot believe that all the trade organisations, individuals, farming businesses and other observers of the process who have written to us are wrong and the Government right. Perhaps I am missing the point. If there is a clever reason why we should not go down this route, will the Minister who responds to the debate explain it in their winding-up speech? It seems to have bypassed not only me, but everybody else with an interest in the issue.
I also hope that we will be careful in managing expectations, particularly those of the agricultural industry. The original idea was for a supermarket ombudsman and it looked like they would have all sorts of powers that the adjudicator will not have. Some thought that that would be a means by which price could be manipulated or guaranteed, so I hope that we can continue to make it clear that this is not a mechanism, nor should it be, that will guarantee a particular price for a product. The measure has been announced in various manifestos and, over time, that red herring has been allowed to stick.
I hope that the Minister will refer to smaller suppliers who might suffer at the hands of retailers that do not fall under the top 10, or big 10, category. Plenty of the producers who are watching our progress with great interest do not supply the big 10, but they might supply the next big 10, so they hope that the measures may rub off in that regard.
Finally—I said that my contribution would be brief—I hope that further attention will be given to the funding model. Rather than continuing with the current model, which is a one-size-fits-all, across-the-board flat fee, a model that more accurately reflects the scale of offences that might be committed by the retailers might be a fairer way of securing the confidence of not only the producer, but the customer. As we all know, the brand is probably the most vital part of the big 10 retailers’ business, but the bottom line is also important, so the question is: what comes first—the brand or the bottom line? This debate has been helpful, particularly, as I have said, the contribution of my hon. Friend the Member for Camborne and Redruth, which I hope the big 10 retailers will take a long, hard and close look at when Hansard is published tomorrow.
In summation, this is a great moment. It proves that some of the things that we write in our manifestos resonate with the wider public. The issue addressed by the Bill certainly does. It was mentioned in the run-up to the last election and I am delighted that we have got on with it as quickly as we have. Its basis seems to attract widespread support throughout the House and, more importantly, among retailers throughout the UK, particularly in Wales, where this activity is being scrutinised. I hope that we will be able to deliver a result that will please the constituents of that country.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
I first declare an interest. I am a Labour and Co-operative Member of Parliament for West Bromwich West, and the Co-operative party is financed by and linked to the co-operative retail movement, which is both a major retailer and a major farmer, so it is involved in both sides of the argument.
I pay tribute to the many Members who have worked on the issue over the years and brought it to this point. As Chair of the Business, Innovation and Skills Committee, which played a significant role in making the recommendation that is being adopted today, I cannot but reflect on the irony that I, a Member who represents one of the most industrialised manufacturing constituencies in the country, have suggested proposals that are so significant to the farming and rural community. Perhaps that is a reflection of one of the strengths of our democracy.
I welcome the Bill. In paying tribute to those who have worked on the issue, I mention my hon. Friend the Member for Ynys Môn (Albert Owen), who promoted a private Member’s Bill, the Grocery Market Ombudsman Bill. It is also appropriate to mention the hon. Member for St Ives (Andrew George), notwithstanding anything he might say in response to my comments. The Chair of the Environment, Food and Rural Affairs Committee was also kind enough to do some work and feed it into our deliberations. I have also read the debate held in the other place, and its Members explored the issues thoroughly.
A lot has been said about the delay. I do not want to get involved in a party political argument, but the previous Labour Government were castigated by members of the current Government for deeming it reasonable to see how the grocery code would work in practice before legislating. Last year, the BIS Committee was invited, as a matter of urgency, to undertake its pre-legislative scrutiny, which we completed by the recess, and the delay in implementation since then has caused some bodies to raise concerns about the Government’s commitment to the measure. I am satisfied that they are committed to it, but they still need to examine some flaws closely; otherwise, those concerns may continue to prevail in some sectors of the industry.
On the Bill’s proposals, I am pleased to say that the Government have accepted about 80% of the amendments suggested by the Committee as a result of its pre-legislative scrutiny. It would be churlish not to recognise the Government’s willingness to listen to arguments and to take our proposals on board. I think that both industries will be strengthened as a result of the Bill. It is important to recognise that we are talking about two of our most successful industries. Our retailing industry is phenomenally successful and a model to be copied the world over. Similarly, our farming is among the most highly productive anywhere in the world.
It is undoubtedly true, however, that there has been an imbalance of power, and examples of the abuse of that power have been to the detriment of the producers, particularly the farming industry. Unless addressed, that in itself will have implications for the ability of that industry to introduce new products and innovate. By addressing the issue and redressing the balance, we will strengthen the supply to our retailing industry in the long term, and that will be to the benefit of both industries.
Many hon. Members have already highlighted the main area of disagreement between the Committee and the Government, namely whether the Bill should include the power to fine. The Minister said that the Committee had acknowledged that the arguments for and against that power were fairly even, but what she did not say was that we came down on the side of advocating fines. Some of the arguments in favour of fines have already been made. I think the Government’s approach has been to assume that the publication of evidence that could damage a supermarket’s brand in a highly competitive market could mean that supermarkets risked losing trade and profitability.
It is difficult to work out what the precise implications of the publication of evidence of a breach of the groceries code would be. It might be published in a press release, in the retailer’s annual report or on the retailer’s website. However, I have the gut feeling that relatively few consumers, particularly in these hard-pressed times, will change their shopping habits as a result of a retailer breaching the groceries code. That just does not ring true.
Fiona O’Donnell (East Lothian) (Lab)
In many constituencies, such as mine, which is predominantly rural, people only have a choice between two of the major supermarkets.
Mr Bailey
My hon. Friend makes an important point, which I was going to come on to. An individual’s shopping habits are determined by all sorts of factors. I do not know what evidence there is, but I would guess that the perception of value for money at different retailers is an important criterion. Other factors are accessibility and personal habits and traditions. I do not see that the publication of an adverse report by the groceries code adjudicator about a particular retailer would affect many people’s shopping habits and, therefore, the bottom line of that retailer.
Mr Spencer
Does the hon. Gentleman recognise that the opposite might be true, in that a supermarket whose brand is built around price point might gain kudos from squeezing its supply base so tight that it can deliver the lowest prices to the consumer?
Mr Bailey
The hon. Gentleman makes an interesting point. I am sure that one could develop an argument along those lines. I hesitate to do so because I have an innate faith in good will and do not believe that a supermarket would be so unscrupulous as to do that. Perhaps he does not share my innate faith in the good will of supermarkets.
John McDonnell (Hayes and Harlington) (Lab)
The best example of that is that when the Competition Commission found that a supermarket was reducing the price of bread to 7p, which was below cost price, that supermarket gained a boost in sales.
Mr Bailey
That is a form of advertising that could, in certain situations, benefit a retailer.
It is simplistic to believe that the possibility that the Secretary of State will implement fines will be a sufficient deterrent. Even if the Secretary of State feels that it is appropriate to levy fines, the process for arriving at that point is slow and cumbersome. Under schedule 3, before the Secretary of State can make such an order, he must consult six bodies, plus any other body that he feels it appropriate to consult. That is a time-consuming and possibly self-defeating process. It is a slow and ineffective way to implement the deterrent on the retailer, which could be exploited considerably.
I also find the Government’s approach rather strange in respect of the escalation of penalties. The adjudicator can take notice of the failure of a supermarket to respond to highlighted breaches of the code, but seems to have no enforcement powers to do anything about it. There is no express sanction for non-compliance with a recommendation, but it may be taken into account when further arbitration is carried out. That is hugely time-consuming and amounts to an invitation to ignore the adjudicator. I cannot help but reflect on the danger identified by Murray Worthy of War on Want:
“A watchdog that is all bark and no bite won’t be able to stop supermarkets bullying their suppliers.”
I will move on briefly to a couple of other issues. The Business, Innovation and Skills Committee reflected on intermediaries at some length. We said that third parties, such as trade associations, should be able to give evidence to initiate an inquiry. The Ministers seem to have accepted that point and my intervention earlier elicited the sort of response that I wanted. I emphasise that this issue is extremely important and that there should be no delay in the adjudicator being able to implement such provisions.
Lastly, I have a request. Given the importance of the adjudicator, I hope that the Government will allow the Business, Innovation and Skills Committee to hold a pre-appointment hearing with the proposed adjudicator. Given that the Select Committee was entrusted with the pre-legislative scrutiny and given the concerns that have been echoed in all parts of the House, I feel that it is important for the Select Committee to have the chance to question the adjudicator to ascertain whether we feel that they will apply the rigour and forensic examination that are needed to deliver what everybody in the House wants.
There is a huge groundswell of support from all parties for the Government to consider fines. Although I recognise that the Bill is very significant as it stands, I hope that the Government will listen to the voices from all parts of the House and table an amendment at a subsequent stage to ensure that there is a power to levy fines. That would make a good Bill into a very good Bill indeed.
Andrew George (St Ives) (LD)
It is a pleasure to follow the Chair of the Business, Innovation and Skills Committee, the hon. Member for West Bromwich West (Mr Bailey). It was interesting that in his introduction he declared an interest as a Labour and Co-operative party Member. It has been my privilege over many years to chair the Grocery Market Action Group, which has been mentioned in this debate. Reflecting on the discussion about naming and shaming, I should perhaps name and fame the stores that indicated that they would support the measures proposed in the Competition Commission’s report of April 2008 when we wrote to the stores that would be affected. Marks and Spencer, Waitrose and Aldi were the three stores that indicated that they would support the measures, with some reasonable conditions. In spite of my efforts to talk to the Co-op, I was surprised that it was not prepared to sign up at that stage. However, the regulation has been in place since February 2010, and there are opportunities now for all those stores to reflect on that.
Like others, I want to commend many people who have been the architects of this extremely welcome measure. The hon. Member for Ynys Môn (Albert Owen) has already been mentioned—indeed, I mentioned him in an intervention. His private Member’s Bill did a great deal to pave the way for the measure. Former Members, too, made significant contributions. In 1998, Colin Breed, the former Member for South East Cornwall, made a valiant effort to put the matter on the agenda. He undertook an inquiry, which stimulated a further inquiry by the Competition Commission, entitled, “Checking out the Supermarkets”. He stimulated much activity, which is reaping the appropriate reward today on the Floor of the House. The former Member for Stroud, David Drew, was also a significant contributor to the debate, as was the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski), who is not in his place, but was present earlier. I have had many conversations with the hon. Member for Tiverton and Honiton (Neil Parish), who has been a strong supporter of the proposal for a long time. I also commend the Minister for an excellent exposition of the purpose of the measure, and the Government’s strong support for what is now Government primary legislation, even though its origins were a private Member’s Bill under a previous Government.
I do not need to repeat much of the background to what we hope will be legislation in perhaps weeks—certainly not many months. It is worth reflecting on the fact that, when I was originally involved, and certainly when the former Member for South East Cornwall engaged in the work, there was no party political support for regulation, even among Liberal Democrats, who subsequently adopted the proposal in their 2005 manifesto. In those days, the proposal that there should be any regulation was advanced only against all the odds. Even the National Farmers Union proposed a buyer’s charter and set its face against regulation, even though I and others had proposed it. It has therefore taken many years and a glacial pace to achieve progress. To be in the position whereby the proposal had all-party support at the last general election was remarkable. The larger parties clambered on board at the last minute, only months before the election. However, we had almost created a “who blinks first” scenario as we went into the general election, and all parties came on board and supported the proposal.
Significant commendation should be given to Peter Freeman, chairman of the Competition Commission, and the whole commission, for an excellent inquiry, which commenced in 2006 and concluded in 2008. It considered all the evidence that many of us had been encouraging the competition authorities to scrutinise for many years. It reached the telling conclusion that, in some cases, as the Minister said, the supermarkets were guilty of transferring excessive risk and unexpected costs to suppliers, with the consequent detrimental knock-on effect on not only suppliers and their capacity to continue trading, but consumers and, indeed, innovation in the retail sector.
I do not approach the matter from the position that supermarkets are wicked. Their activities are entirely rational. Had all of us been in the same position, and we had not maximised all our market muscle to advance the interests of our company, and we had therefore lost market share in a cut-and-thrust market, we would have failed in our duties. However, the question is, “When does effective, clever and successful use of power become abuse?” The Competition Commission rightly identified that we have long passed the point at which that use of power has become abuse, as the many examples that have been given today show.
The previous Government rightly supported changes to the common agricultural policy, which forced farming to become much more market facing. Price support policies were done away with, the protections that farming was so used to in this country were no longer in place, and the industry needed to live or die by the marketplace. However, how could farmers and growers succeed or survive in that climate? I appreciate that many growers, pig farmers and others struggled to survive long before those changes. Nevertheless, leaving that aside, how could farmers survive when, as Prime Minister Tony Blair said, the supermarkets had got them in an arm lock? One could argue that they had got them in an even more painful position at times. The supermarkets were able to control market conditions, which was a conclusion of the previous Competition Commission report.
What are we trying to achieve? It has always been my view that if supermarkets have nothing to hide, they have nothing to fear from embracing the Bill. I have said to the supermarkets that, if they are clever, they should embrace the proposal and see it as something good. The hon. Member for Camborne and Redruth (George Eustice) suggested that there should be a panel to review the supermarkets’ success in applying the code. My view is that, if the supermarkets are prepared to embrace and invest in the proposal, there would be a fair trade regulator, which could give a mark to each supermarket to show whether it was a fair trader and grade it accordingly. Supermarkets could then perceive the code as a promotional tool rather than a stick with which to beat them.
Fining has predominated today’s discussions and will doubtless do so in Committee. After all these years, I do not want to risk any further delay in implementing the proposal. I would not like any amendment to the Bill to cause such delay. Will the fear of reputational damage be sufficient to persuade supermarkets to apply the code effectively and not to engage in the sort of practices that got us into the current position? Of course, I am on the side of those who want fining on the face of the Bill, but I believe that reputational damage has an impact. I remember the days when genetically modified technology was introduced and available to the supermarkets. Non-governmental organisations undertook a lot of campaigning, which dissuaded the supermarkets from putting GM products on their shelves. If there were adverse reports, the campaigning bodies—if they were doing their job—would draw the attention of customers and the public to the failure of those supermarkets.
Mr Spencer
On that point, there cannot be a more passionately felt issue than animal welfare. Does the hon. Gentleman acknowledge that the British pork industry had much higher standards of animal welfare than its counterparts in Europe, but that that made no difference to whether consumers bought British or foreign pork?
Andrew George
There is evidence and evidence to counter it on all sides, and that takes us to a point that the hon. Member for North Antrim (Ian Paisley) made earlier. Providing that customers who are buying British are reassured that it genuinely is British and not some kind of subterfuge, the point about animal welfare is relevant. Customers understand that significantly higher animal welfare standards have been in place in the UK for many years, particularly in the pig industry, and that is one of those reassuring messages. I agree, however, that it does not always work, particularly when the message becomes confused.
When I intervened on the Minister, I said that there was likely to be a lot of evidence of contraventions of the code from the time it was first put in place on 4 February 2010. My concern is that the position of adjudicator will be such that they will operate for only one day a week from the Department for Business, Innovation and Skills, and when they are fully operational, they will work three days a week with three or four members of staff. I also understand that the Gangmasters Licensing Authority already wants to present 1,000 pieces of evidence to the adjudicator, and I am concerned about whether sufficient resources will be in place to deal with all the work, cases and evidence that may be brought forward.
Jo Swinson
Let me clarify to the House that the adjudicator will look at breaches of the code from when it comes into force. It may investigate evidence of problems that have been ongoing, but if a breach stopped before the adjudicator was established, it would not be able to impose sanctions. Because the code is already legally binding, other legal routes are open to suppliers that fall into that category. The Government want to ensure that this measure is successful, and we have outlined what we think will be its initial budget. We will, of course, keep that under review and work closely with the groceries code adjudicator when it is established.
Andrew George
I am grateful to the Minister for that clarification, although I am also disappointed. A lot of people—certainly suppliers—want to ensure that we have an adjudicator that can look at breaches of the code that have taken place from the introduction of that code, not from the point at which the adjudicator is established. I hope that we can explore that a little further in Committee. We want to ensure that the adjudicator has the time and resources to investigate matters properly.
Clause 10 of the Bill concerns the power of the adjudicator to apportion investigation costs. I hope that will reassure supermarkets that the adjudicator can also apportion costs against those who make vexatious complaints or claims that are without merit. To a certain extent, that answers the point made earlier by the hon. Member for Camborne and Redruth—such powers already exist. I would be concerned about my hon. Friend the Minister’s proposal because the Bill is quite clear that such matters should be at the discretion of the adjudicator, and not at that of a self-appointed panel that might produce a survey report by which the adjudicator would then be bound.
Overall, the Bill is extremely welcome and not before time. I would not wish to get involved in a discussion with the hon. Member for Edinburgh South (Ian Murray), whom I thank for his kind words earlier. There is no point in looking to the past for an explanation of why it has taken so long for the Bill to proceed. We must now ensure that it is implemented effectively and properly as quickly as possible, so that suppliers get the protection that they richly deserve.
Albert Owen (Ynys Môn) (Lab)
It is a genuine pleasure to follow the hon. Member for St Ives (Andrew George) on this issue. As many Members have rightly said, he has been a long and steadfast campaigner for a supermarket ombudsman—I will call it an ombudsman in my remarks, because I think that would have been the correct title.
I also pay tribute to Members of the previous Parliament who sponsored and helped me with my private Member’s Bill. The legislation that I put through Second Reading and Committee was supported by Members not only from the larger parties, but from some of the smaller parties and across the United Kingdom. Support came from the Social Democratic and Labour party and the Unionist parties in Northern Ireland, and from the SNP, Plaid Cymru and Members from the larger parties. The Bill had cross-UK as well as cross-party support, which was important when taking it forward. I know, Mr Deputy Speaker, that you took an interest in that Bill—I will refer to that shortly when you are not being disturbed. You may recall, however, that you actually sat on the Bill’s one Committee sitting. I do not know whether it was a record, but I managed to get that private Member’s Bill through in one Committee sitting with almost total agreement.
As right hon. and hon. Members will know, private Member’s Bills are an important vehicle and people become extremely popular when they are drawn in the top 10 in the ballot. As my hon. Friend the Member for Hayes and Harlington (John McDonnell) will testify, one receives hundreds if not thousands of letters and e-mails—he has done it twice so he will speak from experience. People probably become more popular than if they go out to the jungles of Australia, so Members should persevere and get into the ballot for a private Member’s Bill if at all possible.
I welcome the Bill—it would be churlish not to, having promoted a private Member’s Bill the main tenets of which are still contained in the Bill under discussion. However, as the hon. Member for St Ives said, there was not a lot of enthusiasm for this measure when I successfully won that ballot. In fact, I was popular not just with outside organisations that wanted me to take legislation forward, but with those in the Whips Office who had a number of Bills they wanted me to promote. As you know, Mr Deputy Speaker, I have never done anything the conventional way in this House—or, indeed, in my life—so I resisted the charm of the Whips Office at the time, and pursued this legislation because I thought it was the right thing to do. It brought together a broad coalition of farmers, suppliers, non-governmental organisations and many farming unions, and I pay tribute to the Farmers Union of Wales and the National Farmers Union in Scotland and England for their work. It has been difficult for any party to ignore this issue, and each of the larger parties put this legislation in their manifestos.
This Bill has been a long time coming. I remember gathering support from other parties when I was pursuing this legislation through Parliament, and there was a division in each party between spokespeople from the Department for Environment, Food and Rural Affairs who were keen for the Bill to proceed, and those from the Department for Business, Innovation and Skills who were less keen to get it through—that is a nice way of putting it. When we were able to get all parties to concentrate their efforts on the Bill, they started to bid for who would take the legislation through Parliament the quickest once there was an election. I remember Conservative agriculture spokespersons of the time going to fairs, which all hon. Members go to in their constituencies, and saying that a supermarket ombudsman would be a priority for the next Conservative Government. I know they are in coalition, but I see no reason why the Bill was not introduced much sooner—all parties agree and there is a broad coalition of support.
The Minister of State, Department for Environment, Food and Rural Affairs, was a very good supporter of my private Member’s Bill and he is now a supporter of the Bill. If he were less conventional than he is, and if he, like me, was not a Minister, he would probably say, “I agree the Bill needs more teeth. I agree we need fines in the Bill.” He will not say that now—possibly for good reasons—but I see no good reason for not including fines in the Bill.
That is the argument I want to develop. Many groups have lobbied for fines to be included. Had the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for East Dunbartonshire (Jo Swinson), taken an intervention, I would have had the opportunity not only to congratulate her on her promotion and new post, but to ask her to come clean and name the individuals and groups who have lobbied against including fines. It would be difficult for her to name any apart from those inside the British Retail Consortium. It is wrong that the Government have capitulated—they have not struck the balance—and not included fines in the Bill.
I do not believe that naming and shaming will be an adequate deterrent, for the reasons that hon. Members have given. A fine would appear on a company’s financial accounts, to which shareholders’ and ordinary members’ attention is drawn at annual general meetings. The large supermarkets might still make large profits, but shareholders’ attention would be drawn to a fine on those accounts, even if it is insignificant compared with the profits. That would be enough for many of the shareholders to say, “We need to do things better, and to work with the adjudicator.” In that way, the supermarket would not just sit back and wonder whether the news that day would mean that they would be named and shamed in a newspaper headline, or a retail magazine, which not everybody reads. I should like to concentrate the Government’s mind on that—the suggestion comes not just from Opposition Front Benchers
Although my hon. Friend the Member for Edinburgh South (Ian Murray) made a good, detailed speech on the measures in the Bill that the Opposition support, he also spoke about the differences between the Government and the Opposition. He did not do so for the sake of having differences, but so that we get the measures right at the first opportunity and legislate properly. We want a fair Bill, and we want an adjudicator, referee or ombudsman who has the tools from day one to do their job. They should not have to come cap in hand to Parliament for another measure.
The reserving of fines is nonsense. As the Minister said, they could take up to six months to set up, in which time there might be other priorities, as there have obviously been in the two and a half years when the Bill was not introduced, or there could be a lack of will on the Government’s part. The House has the opportunity to table an amendment in Committee. After the pressure of this debate, the Government may introduce a measure to give the adjudicator the ability to fine.
Roger Williams
The hon. Gentleman has a proud record. He condemns the Government for being slow to introduce the Bill, but does he agree that Governments are very often criticised for not having pre-legislative scrutiny? In this case, that has taken place, probably to the benefit of the Bill.
Albert Owen
The hon. Gentleman is a supporter of pre-legislative scrutiny, but he does not believe it delays Bills for two and a half years. The Government have not had a heavy work load on Bills. If we compare the number of legislative days in the House with the number in other Parliaments, we see that the Government have had a lot of time to introduce the Bill. With respect to the hon. Gentleman, I want to move on to whether we should have a fine or naming and shaming.
The only difference between the Government and the Opposition is on whether we have adequate sanctions for the big 10 supermarkets. Has the Minister or the Government considered not only the big 10, but the major suppliers in the chain, which are as big as the supermarkets? Will the adjudicator have the ability to name and shame them? That is important. Some of the major suppliers are multinational organisations, and put a lot of pressure on our growers and farmers. Will the Minister respond on that? I would have pushed for such a measure in my private Member’s Bill, because I want fairness right through the supply chain, and not just among the top 10 supermarkets, which have the ability to self-finance the measure so that all are treated equally. The supermarkets should also have the ability to complain to the adjudicator or ombudsman. That is important if we are to have a fully open system of recourse through naming and shaming. The supermarkets should be able to put their side of the argument if the boot is on the other foot, although that would not happen often. I should like the Government to take that on board.
The measure has popular support, not just in the House, but in the country. As I have said, it has brought together non-governmental organisations, lobby groups, and farmers and growers throughout the UK, because there has been an injustice in how the grocery market has operated. The Government and the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for East Dunbartonshire, who is the third to take up the role in less than three years, have an opportunity. Her predecessor but one, the right hon. Member for Kingston and Surbiton (Mr Davey), who is now Secretary of State for Energy and Climate Change, said only last week at the Dispatch Box that it was essential to use sanctions to fine energy companies, which are alleged to be ripping off their customers. We must have consistency. The same should apply to large supermarkets that are alleged to be ripping off suppliers and consumers—at the end of the day, consumers pay the higher prices that filter through.
Rather than naming and shaming, we need fines in the Bill, and a real commitment to fairness in the system. The Bill will help, and I support it, but I hope that hon. Members on both sides of the House will vote for including fines in the Bill rather than just make speeches about it. The eyes of the consensus that the Bill has gathered will be on us, and we should show that we speak with one voice. Although the Under- Secretary would not take an intervention from me, I will take one from her if she wants to say who has lobbied her and why we should not include fines in the Bill. She has tried to make the case, but she does not want to take the opportunity I am offering her. Many of the supermarkets I have spoken to would not be that bothered if fines were included in the Bill, which has also achieved consensus among all the bodies I have named. As the hon. Member for St Ives has said, two or three supermarkets have come out in favour of the Bill. It will not be long before there is consensus among the top 10 supermarkets.
Jo Swinson
One key point the supermarkets have put to me was that there were no appeal powers for them in the Bill. Not going ahead with fines from day one means that we avoid the problem of miring the groceries code adjudicator in appeal processes. That is one reason why seeing whether naming and shaming is effective is a good way to proceed. The hon. Gentleman said that himself—he said he does not believe the supermarkets will be particularly bothered about fines, but they certainly were bothered about appeals.
Albert Owen
The Minister tells the House that we need to build in a proper appeals procedure, but hon. Members will work together to ensure that that happens.
Jo Swinson
The retailers argued for a proper appeals process. The challenge I outlined was that the adjudicator could end up running around in circles dealing with appeal after appeal rather than getting on with the important job of carrying out more investigations, which is what we want. Without the power to fine, we are convinced that a full merits appeals process is not required. That is one advantage of the Government’s approach.
Albert Owen
If, further down the line, serious breaches are identified by the adjudicator and the reserve power is used, we will be in that position anyway.
Albert Owen
If. I am hopeful that if that situation arises the Government will bring forward their reserve powers, so we are only delaying the inevitable.
John McDonnell
If there is an adjudication that affects the trade of an individual company, it will resort to law anyway.
Albert Owen
Absolutely. The House could come together, as it has on this measure, to find a way of short-circuiting some of the appeals procedures, if we felt that companies were dragging their feet. That is one of the powers we need to give to the adjudicator. Yes, the law currently allows them the opportunity to appeal, but there is a consensus here and I feel that we can do it. If the Government seriously want the Bill to have the proper teeth—the farming Minister and I have often argued for it—then we can work together and do it. Where there is political will, there is a way of resolving this matter.
This is a good Bill. It has many merits and it can be improved quickly and easily. Those on the Government Front Bench have got the message tonight, not just from Opposition Members but from all parts of the House and from the wider country, that the Bill needs to have the teeth to do the job. The adjudicator or ombudsman—or ombudswoman—who takes over the role will have the support of Parliament to ensure that the grocery market is a success. The Minister has the opportunity to go down in grocery folklore as the Minister who took a robust stand against the supermarkets. She will get my backing, and, I am sure, the backing of hon. Members across the Floor.
John Stevenson (Carlisle) (Con)
Much comment has been made about the farming perspective. I appreciate and understand fully that farmers welcome the Bill, but other groups are supportive of the Bill too. For the record, I chair the all-party group on food and drink manufacturing. Our group and the food and drink sector are interested in the progress of the Bill. The sector is the largest manufacturing sector in the country, with a turnover of approximately £75 billion. It employs 400,000 people and is a key part of our economy. Critically, the sector contains a lot of small and medium-sized enterprises dispersed across the country, whose commercial power is therefore greatly weakened.
The Bill should be seen in the right way—as a positive, and not a stick to beat the retailers with. It can be used to help relationships between suppliers and retailers, and help to rebalance the commercial power between the two groups. Our large retailers come in for a considerable amount of stick and criticism at times, but we should recognise that they have achieved a lot for the country and for the consumer. They are highly efficient organisations, with strong leadership, strong management and powerful brands. They pay their taxes in this country and make a valuable contribution to our economy. Up and down the country, they employ thousands of people, providing a livelihood for many families. They provide career opportunities for many and, in many cases, quality training. The consumer has seen a massive increase in choice. I look back to when I was a child and the choice that my parents had when they went to the shops compared with what we have today. There has also been a huge improvement in quality. I often wonder whether it should cause us some concern that kids wonder why we get carrots that are bent, rather than always straight. Finally, there is competitive pricing—food is remarkably cheap compared with many years ago, and we should recognise that the supermarkets have helped to contribute to that.
To a certain extent, however, we have become victims of our own success and so have the supermarkets. There are increasing, and legitimate, concerns about the market dominance of the supermarkets, the commercial power of the retailers, and the effect that that has on suppliers. The impact on the supply chain, on innovation and, potentially, on investment should concern us all. I do not believe that the appointment of an adjudicator will solve all these issues—far from it—but it will undoubtedly go some way to help. It should complement the groceries code and give it more bite. Therefore, I welcome the creation of the adjudicator.
I want to touch on a few points relating specifically to the Bill. Clause 2 deals with arbitration. Arbitration is a cost-effective, practical way of resolving issues. I therefore welcome the fact that the adjudicator will be involved in any matters of arbitration between suppliers and retailers.
Clause 4 is the most central to the Bill, which deals with the power to investigate and request information. I welcome that, and particularly welcome allowing trade organisations to be involved. As I mentioned, the food and drink manufacturing sector is made up of a lot of SMEs. They will be concerned about their position when they are in negotiations with retailers. That is why having a trade organisation to represent them can be beneficial.
Clause 4 is linked with clause 18 and the duty of confidentiality. That must also be welcomed as it is clearly needed, particularly to protect smaller suppliers and organisations that would be concerned about the difference between their commercial strength and that of the retailer. Retailers should not be over-concerned; I do not believe there will be frivolous and unwelcome applications. Quite simply, the power of the adjudicator to award costs will be an incentive for those bringing forward issues and complaints to do so in a justified and proper manner.
Many hon. Members have talked about enforcement. The power to make recommendations is very sensible and clearly everybody would support that. On the power to require information to be published—effectively naming and shaming—many hon. Members have already commented that supermarkets would be nervous about that. They have powerful brands. They are, within themselves, in a competitive market and they will be concerned. However, I accept fully and acknowledge that ultimately some might ride roughshod over that or be quite happy to take the criticism that comes their way. Therefore, the ability to impose financial penalties is critical and must be supported. I think I am with most people in the House in believing that the power to do that should be given to the adjudicator, and that it should be included the Bill rather than given to the Secretary of State to introduce at a later date. I will be interested to see whether the Ministers go away and reflect on the views of the House when they consider amendments in Committee.
Finally, I welcome the review by the adjudicator of the groceries code set out in clause 13. Indeed, the adjudicator should take a proactive role. Arguably, the clause should be strengthened so that the adjudicator has a duty to report and comment on the success of the groceries code. Overall, however, I give a strong welcome to the Bill. I think it will help in a small way to rebalance the relationship between large retailers and suppliers, and ensure that we have a competitive and, most importantly, fair market.
Kerry McCarthy (Bristol East) (Lab)
As has been said, it has taken a long time for the Bill to come before the House. It has recently been through extensive scrutiny in the other place and, before that, by the Select Committee on Business, Innovation and Skills and the Select Committee on Environment, Food and Rural Affairs. I am glad that we are now finally in the position to debate the Bill properly in this place. I have received many postcards on this issue going back as far as before the general election, during the time of the previous Labour Government. I remember the Minister of State, Department for Environment, Food and Rural Affairs, the hon. Member for Somerton and Frome (Mr Heath), in his previous role in the Liberal Democrats, urging the then Government to make great haste with the Bill, and perhaps criticising us for being a little bit tardy. I accept that we are where we are now, and I am grateful that we have finally got here, even if it has been rather slow.
As has also been mentioned, the Bill received considerable support from organisations such as the Fairtrade Foundation, Traidcraft, ActionAid, Friends of the Earth and even the National Farmers Union, which perhaps does not always sit in partnership with those other organisations. So there is a lot of public support.
In 2008, when the food and farming Minister, the hon. Member for Somerton and Frome, was official spokesperson for the Liberal Democrats, he called for an ombudsman with teeth. I share colleagues’ concern, however, that the Bill might not meet that test, particularly regarding the reserve powers provision giving the adjudicator the power to issue fines. Under the Bill, the adjudicator will not immediately have that power. It will be subject to future review. I agree with colleagues in the other place that in this respect the Bill is clunky, over-bureaucratic and drawn out. We do not want to wait several years for the adjudicator to have the power to issue fines. We have waited long enough. The evidence of compliance with the groceries code suggests that firm action—or at least the threat of firm action—against major retailers will be a useful weapon for the adjudicator to wield, so the Bill must enable the adjudicator to issue fines from the outset.
The Under-Secretary of State for Business, Innovation and Skills, the hon. Member for East Dunbartonshire (Jo Swinson), talked about the power to name and shame, and seemed to place great faith in the power of negative findings to persuade supermarkets to change their behaviour. The competition inquiry in 2008, however, showed that more than a decade of adverse media reports on how supermarkets dealt with their supply chains and their relationship with farmers had done little to change their business practices or prevent them from engaging in what many would regard as unethical practices.
The Minister referred to consumer pressure, arguing that if a retailer was named and shamed, consumers might take their business elsewhere. I think that consumer pressure is incredibly powerful, as we have seen in the recent debate about whether companies such as Starbucks pay tax in the UK—it puts pressure on companies, makes them rethink their policies and sends their public relations machines into overdrive—but I am not convinced that a supermarket having a certain contractual relationship with its suppliers would be enough to send shoppers elsewhere, and certainly not in significant enough numbers to affect supermarkets’ business practices. I am unconvinced, therefore, that consumer pressure will play a major role.
The power to fine ought to be reserved now, rather than invoked later. I might be wrong, but I think that the Department for Business, Innovation and Skills has accepted that compliance with the groceries supply code of practice would be less in the absence of fines, which are a standard measure in most regulated industries, and would be used only as a last resort and only with strong evidence. The argument, then, that fines would pass significant costs on to consumers or lead to a raft of long and burdensome appeals is greatly overstated.
I want to focus on the vital contribution the Bill can make to reducing food waste across the supply chain. As some Members will know, I introduced a Food Waste Bill earlier this year dealing with the other end of the supply chain—with consumers not wasting food and supermarkets making food available for donation and to organisations such as FoodCycle, FairShare and the many food banks that sadly have grown up around the country, rather than letting it go to landfill. Obviously, the Bill deals with the other end of the supply chain. None the less, this is a useful opportunity to flag up some of these issues again.
Retailers and manufacturers waste a staggering 3.6 million tonnes of food per annum. Some of that can be directly attributed to how supermarkets do business with their suppliers. The Competition Commission’s 2008 report concluded that supermarkets were guilty of transferring unnecessary risks and excessive costs on to their suppliers. One practice is when supermarkets agree a price for a product with their supplier but, when sales are less than predicted and prices need to be reduced, require the supplier to share the burden of reduced revenue.
Then there are the notorious take-back agreements, under which supermarkets return to the manufacturer or farmer produce they fail to sell, including when the former have made forecasting errors. When I was looking into the issue of food waste, I found that forecasting errors by supermarkets were a major factor. If supermarkets have supplies ordered from farmers sitting in their distribution centres, but the same produce is not selling in their stores, the produce ordered goes to landfill or, at best, is used in anaerobic digestion. A supermarket might tell a manufacturer a week in advance that it needs 100,000 sandwiches or however many pounds or kilos of potatoes, but if, on the day, it decides it does not need them because it does not expect to sell as much as it predicted, that leaves the supplier with a pallet-load of sandwiches or sacks of potatoes that it cannot sell.
Worse still, many of these products will already have been produced with the supermarket’s own brand. Supermarkets often forbid the manufacturers from selling on the food, insisting that it be sold to them exclusively. Neither do they allow them to give such food to charity, because of erroneous concerns that they might end up on market stalls, for example, which they think could damage the prestige of the brand. That is particularly an issue with premium products. All that pushes up suppliers’ costs
I want to touch on a matter that, as far as I am aware, the Bill does not deal with. The hon. Member for South Thanet (Laura Sandys) talked about “ugly food”. Supermarkets demand perfect vegetables and produce from farmers these days. This is an issue. It is entirely up to Tesco or Sainsbury’s whether they want to sell perfect apples, but the fact that farmers are not allowed to sell the remaining produce to other people—it is still a practice, I think—needs to be addressed. It is true that the groceries code prohibits some of these practices—for example, large retailers are not now allowed to vary supply agreements retrospectively, except in specific circumstances, or to make suppliers pay compensation for wastage or forecasting errors—but there is no specific duty on large retailers to comply. That is why we need a groceries code adjudicator to enforce the code. Otherwise, the only mechanism for redress is for an individual to bring a complaint under the dispute resolution procedure or to bring a case before the courts under contract law. As the British Brands Group concludes in its briefing on the Bill, which has been sent to most MPs:
“This simply will not happen in most cases, due to the prevailing ‘culture of fear’ and the high level of dependency of supplier on each of the large retailers”.
That is why the Bill is necessary and why it is important that third parties are able to report breaches under the anonymity provisions, which I am glad are now included in the Bill.
I want to touch briefly on low pay in supermarkets. A report this year from the Fair Pay Network has shown that the big four supermarkets—Sainsbury’s, Asda, Morrisons and Tesco—which collectively are the second-largest employer in the UK after the NHS, are paying their staff poverty wages, while making huge profits and raising executive salaries. Only one in seven supermarket workers earn the living wage, yet supermarkets award their chief executive officers between £3.2 million and £6.9 million a year. Given that differences are made up through in-work benefits, such as tax credits, supermarkets again find themselves in the morally hazardous situation of not having to take responsibility for their actions, which would otherwise have resulted in reduced spend in their supermarkets and would have hit their profits.
I appreciate that that issue needs to be taken up in another arena, but I wanted to raise it anyway. Nearly two thirds of children in poverty live in working families where the parents earn less than the living wage, and, as we have heard, many families who are in work still have to resort to food banks because of rising food prices. These issues are all interconnected. So, although I welcome the Bill, I consider it only a small part of tackling the issues around food production in this country. I shall not venture into the territory of the common agricultural policy—I am sure that the Minister and everyone else will be glad to hear that—but it is obviously another factor.
It is great that we have had the opportunity to discuss the matter and to put these issues on the agenda, but we have a long way to go and many more problems to address before we really tackle the issue of food production in the UK.
Julian Sturdy (York Outer) (Con)
I am grateful for the opportunity to speak in this debate. As a Member representing a series of villages linking the city of York to the distinct rural north and east Yorkshire countryside, I am always keen to speak in debates touching on the agriculture industry. Before my election to Parliament, I, too, was a farmer, and as such I have first-hand knowledge of some of the pressures facing many of the UK’s independent producers. I must therefore draw Members’ attention to my declaration of interests.
Like many Members from both sides of the House, I congratulate the Government on introducing this Bill. Like many Members, I have long called for some form of adjudicator or ombudsman to ensure that our major supermarkets and retailers operate fairly throughout the industry’s supply chain. This is about treating farmers and suppliers fairly and lawfully. My representations have followed on from first-hand experience of dealing with constituents’ cases in many parts of York Outer, where small independent farmers or producers feel unfairly treated by the tactics of some national supermarket chains. However, it would be wrong to view this Bill simply as a reflection of a fundamental battle between big supermarkets and small producers. On the whole, our national supermarkets should be a source of great pride. They are massive job and wealth creators in our country, which is something the Minister touched on in her opening remarks. Many supermarkets undertake superb community work whenever they open a store. I am sure that, like me, Members from across the House will have first-hand experience of the community work that supermarkets do in their patch.
Nevertheless, as in all areas of industry, it is right that accountability, transparency and an independent watchdog should encourage and ensure fair practice for all involved. That is what a groceries code adjudicator will do. As such, I am pleased that the general principles behind the Bill seem to be attracting cross-party support, allowing today’s debate to focus on the powers and responsibilities that the adjudicator will have. Introducing a groceries code adjudicator represents a common-sense step in the right direction, but that will be undermined if the body lacks the teeth it needs to operate effectively.
It is worth mentioning that we have had a groceries supply code of practice in force for a few years now. As the president of the National Farmers Union, Peter Kendall, has said, it is
“essentially a rulebook without a referee.”
I would go one step further and suggest that without adequate teeth, the groceries code adjudicator would be like a referee without a whistle—or, as the hon. Member for Edinburgh South (Ian Murray) said, one without a red card in his top pocket. As a Leeds United supporter, I would not mind a referee at our next match without a red card in his top pocket, but we need a groceries code adjudicator with the ability to take action. The fear with all new regulatory bodies is that they are set up too cautiously, becoming ineffective talking shops, unable to gain influence or authority in the sector. To me, the idea of setting up an adjudicator now, before adding powers at a later stage, is frankly flawed. If we are going to do this, we must do it properly and equip the adjudicator with the necessary powers from day one.
In my view, the necessary powers should at least include the ability to fine retailers for major—I stress the word “major”—breaches of the groceries supply code of practice. Without that power, I fear that the adjudicator will have limited impact. One example of where a properly empowered adjudicator would make a real difference in the supply chain is the current plight of the dairy industry. Over the past few years, many dairy farmers have been unfairly penalised by what can only be described as unfair, inflexible contracts that have sought to take advantage of the product’s perishable nature. There is hope on the horizon, following the agreement of a voluntary code of practice for milk supplier contracts between UK dairy farmers and processing firms. However, getting the voluntary code agreed required substantial political pressure and lengthy negotiations, with dairy farmers sadly going to the wall in the meantime. This is a perfect example of where a strong groceries code adjudicator could make a difference, intervening in such disputes with authority at an early stage.
In conclusion, this Bill is welcomed across the country by the independent suppliers who need the reassurance and support of an independent watchdog. Moreover, a strong groceries code adjudicator would encourage strong links between all parties in the supply chain, benefiting those at each level and ultimately the consumer too. It has to be in the interests of consumers that we have a thriving agricultural sector in this country supplying high quality products, while at the same time reducing our reliance on imports, at a time when food security will undoubtedly become one of the big issues of the future. However, the Government have grasped the nettle on a groceries code adjudicator, and they should be applauded for doing so. This is a good Bill, but the question throughout its legislative journey will be about its strength. I encourage Ministers to show strength by adding the powers required to make the groceries code adjudicator a real success.
Ms Margaret Ritchie (South Down) (SDLP)
I will be supporting this long-awaited Bill, and I am in favour of the primary motivation behind it: to create a dedicated and impartial adjudicator. However, we must ensure that this does not become a missed opportunity to introduce lasting reform of the regulation of the relationship between producers, suppliers and consumers.
The broad coalition of signatories to the letter in The Sunday Telegraph yesterday, which included the NFU, ActionAid and the Federation of Small Businesses, is testament to the depth of feeling on this issue. I represent a rural constituency in Northern Ireland, where farming, fishing and tourism are the main economic drivers, and there is a growing need to sustain the current economic base at a time of low economic growth. Producers of food and consumers are facing daily economic and financial challenges. If handled properly, this Bill affords an opportunity to redress the balance in the supply chain.
I do not want to paint an entirely negative portrait of the relationship between suppliers and the large supermarkets. I know that often they work together extremely well—I know that is true of Sainsbury’s—and many examples of good practice can be found that are central to the development of a sustainable supply chain. However, it must be acknowledged that the regime for dealing with bad practice is not even close to what it could be. To provide that stability and protection to farmers and producers, we need to introduce a groceries code adjudicator that possesses the necessary statutory and legislative teeth to correct unfair practices that have been apparent for some time in the food market chain. There is broad support in the farming community for this Bill and the implementation of its provisions without delay following Royal Assent. Farmers and their respective representative bodies have argued for years for action to prevent retailers from treating their suppliers, particularly smaller producers, unfairly. The establishment of the ombudsman or adjudicator to monitor and enforce a code of practice has been the central part of the campaign in recent years, and to this end the Bill is welcome.
Having accepted that such an adjudicator is necessary, it is vital that it should be adequately empowered and not become a paper tiger. The adjudicator must have robust powers of investigation and enforcement to hold to account the organisations engaged in bad practice. A primary concern is that we should endow the adjudicator with the capacity to accept representations, appeals and complaints from a range of interested parties, including trade associations. Not doing so in this Bill is a missed opportunity, which we will be looking to address through amendments at later stages. Empowering the adjudicator to receive representations from trade associations would create a much needed buffer between suppliers and supermarkets. Too often, suppliers fear that making complaints will prejudice their future business with large, dominant retailers and are hesitant to initiate complaints under the existing dispute resolution mechanism. A buffer could enable a more harmonious relationship between suppliers and supermarkets. Furthermore, the involvement of trade associations or representative bodies would allow a wider scope of analysis that could take in a wider picture of market practices, in contrast to cases that just focus on one supplier and one retailer.
I also support the Competition Commission’s call for the adjudicator to have the capacity to implement fines in cases of serious breach or malpractice. A naming and shaming system will simply not be strong enough to hold retailers to account. Large retailers would be delighted if the adjudicator did not have the power to levy fines. I appreciate that the Government could introduce a fining system at a later stage through secondary legislation if the watered-down approach were to prove inadequate, but I strongly contend that the adjudicator must be able to fine retailers from the outset if the code is breached. No doubt the Minister will address that point when he winds up the debate. We must have learnt by now, whether in relation to energy market regulation or banking regulation, that a regulator must have real teeth and real power if it is to have any influence or impact. Let us not make the same mistake again with the groceries code adjudicator. I want to see an emboldened Government here tonight saying that they will ensure that the adjudicator has real teeth.
From a devolved perspective, it is regrettable that the adjudicator will not be tasked with addressing the producer price differential that exists between Northern Ireland and Britain, or with overseeing the practices of processors or intermediaries. Many of the food producers in Northern Ireland feel that there is a dysfunctional food supply chain, and that what the consumer pays for food produce bears no resemblance to what the farmers receive for the product from the processors or retailers.
The Minister will recall that I raised this issue with him when we met several weeks ago. It needs to be addressed, to ensure that the primary food producers in Northern Ireland are protected. I suppose that that might fall outside the scope of the Bill, but I will take the matter up with the devolved Minister and with DEFRA. It is important that this dysfunctional relationship should be investigated and that measures should be put in place to remedy the situation. The hon. Member for North Antrim (Ian Paisley) has already raised the matter today. The Ulster Farmers Union has been lobbying us to a significant degree, although my approach to the question is slightly different from his, in that I believe that we need a partnership rather than a fight. Fighting will not resolve the situation.
It is clear that the Bill offers the potential for real, lasting reform of the groceries market. If we set up a weak adjudicator, however, we will have undermined the new regime before it has been in operation for even a day. If we do not grant the adjudicator the necessary powers, on a statutory basis, to fine and to investigate without prejudice, we will have missed a golden opportunity to rebalance the supermarket supply chain and provide support to our farmers and producers. It is in everyone’s interest—the supplier, the farmer and the consumer—that we create a sustainable food supply chain that is profitable for all, and not just for the dominant players.
As the Bill makes its passage through its Committee and Report stages, I hope that the Government will table amendments to ensure that it is made stronger through greater enforcement measures and a greater capacity to impose fines. I hope that it will be suitably amended to provide remedies that will further protect the primary producer and the consumer.
Mr Mark Williams (Ceredigion) (LD)
It is a privilege to follow the hon. Member for South Down (Ms Ritchie). Like her, I represent a rural constituency, and I can testify to the great passion that many people there, including those in the Farmers Union of Wales and the National Farmers Union, attach to this issue. I can think of no meeting that I have held in the past 12 years or so as I have fought elections in Ceredigion at which the issues of an ombudsman, an adjudicator and the overwhelming power of the supermarkets have not arisen.
There has been consensus in the House today. We have resisted some of the partisan points made in the earlier stage of the debate. Reference was made to a quote from the noble Lord Grantchester in the other place about the fingerprints of the previous Labour Government being all over the Bill. The fingerprints of this Government are all over it as well, in the form of those of the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for East Dunbartonshire (Jo Swinson), the Minister of State, Department for Environment, Food and Rural Affairs, my hon. Friend the Member for Somerton and Frome (Mr Heath) and, critically, my hon. Friend the Member for St Ives (Andrew George), who has done so much work on this subject. Also, my hon. Friend the Member for Ynys Môn (Albert Owen) put a huge amount of effort into his private Member’s Bill, to which I was privileged to be a co-signatory, towards the end of the previous Labour Government.
We are where we are, and we need to be clear about what the Bill will achieve—which I think will be commendable —as well as what I hope that it should achieve. I share the concerns that have been raised here today and by the Business, Innovation and Skills Committee and the Environment, Food and Rural Affairs Committee. Before I address those concerns, however, I want to add another test, which I shall call the Ceredigion test. The test asks how the Bill will impact on the large number of small family farms across my constituency in west Wales. The truth is that, as the Bill stands, it might not have as robust an impact as it should, but I am sure that we will have an opportunity to table amendments to it as it continues its passage.
We have heard today about toothless dogs sitting on ministerial ledges waiting to be dusted down if necessary. We have heard about tigers with a proliferation of gums but no teeth. The hon. Member for North Antrim (Ian Paisley) talked about kicking supermarkets where it hurts. An important theme in today’s debate has been the power to impose fines. We have also heard about a lengthy list of signatories to a letter from the interest groups that have urged the Government to think again about fines. They include the Farmers Union of Wales, the National Farmers Union, ActionAid UK, the British Independent Fruit Growers Association, the Campaign to Protect Rural England, the Church of England, the Country Land and Business Association, the Federation of Small Businesses, the Forum of Private Business, the Tenant Farmers Association, Unite the union, the World Society for the Protection of Animals, the Worldwide Fund for Nature and the National Federation of Women’s Institutes. We ignore the Women’s Institute at our peril, as others have found out in the past.
So long has been the gestation period of the legislation that expectations are running very high indeed. As the Bill stands, however, fines could be enforced only if an order by the Secretary of State under schedule 3 was in force. The Government have stated that such an order could be made, if it were deemed necessary, and that the power to fine could be enacted in six months. It must be said in the Government’s defence that that represents an advance, which was the result of deliberations in the House of Lords. That was a step in the right direction, and I hope that we can have further such discussions during the Bill’s passage through the House of Commons. On Second Reading in another place, we heard complaints that the proposed process was too cumbersome and laborious. I agreed with that at the time, and I would hazard a guess that six months will still prove lengthy and cumbersome, given the enormity of the complaints that are sometimes made against our supermarkets.
The Government have argued that naming and shaming is disincentive enough for retailers, and that having the ability to fine from the outset could create hostility in the industry. I agree that naming and shaming can influence consumers on where to buy. Had the Minister of State’s predecessor—my right hon. Friend the Member for South East Cambridgeshire (Sir James Paice)—not brokered a deal in the dairy sector, an elaborate and effective campaign against certain supermarkets would have been launched. We must be realistic about how far this can go, however, and I question whether naming and shaming is disincentive enough in comparison with having the capacity to levy those fines from the outset.
I know the Minister is aware of these concerns—as will be his colleagues in BIS after this debate. At the very least, I would like to hear a response from the Minister to the question posed by the Chair of the DEFRA Committee about the circumstances in which an order in the Bill should or should not apply.
I wish to raise some points about the accessibility of the adjudicator to everyone in the industry. Two weeks ago, the Welsh Affairs Committee, of which the hon. Member for Llanelli (Nia Griffith) and I are members, visited my constituency and took evidence on the status of the dairy farming industry in Wales. We took evidence from the Farmers Union of Wales and the National Farmers Union, as well as from the Welsh Assembly’s Rural Affairs Minister, Mr Alun Davies. There was a consensus from all groups that the adjudicator must be accessible to everyone throughout the chain. As the FUW argued, the adjudicator should not be just about the relationship between two parties—the 10 supermarkets and their suppliers—because in a Welsh context, the majority of farmers operate on a much smaller scale and are not in direct supply contracts with those 10 supermarkets.
The argument is that the adjudicator must be able to intervene throughout the entire chain. It needs to be easy to lodge a complaint, but this is not helped by the fact that the supply chain is not transparent, so it would be unreasonable for a producer to be able to lodge a claim that requires a lot of evidentiary support. The adjudicator needs to be accessible for all producers, including the small family farms in rural Wales. This is impeded, of course, by a code that is laudable but by nature defines the relationship between 10 large supermarkets and their suppliers.
Does the Minister accept that there is a case for the powers of the adjudicator to be extended to cover all powerful companies—big and small—within the supply chains or at least that the adjudicator can be charged with gathering evidence relating to any abuses? I concur with what the NFU said in its briefing, suggesting that the adjudicator should be able to recommend changes to the code, which is the foundation of what we are discussing today. Is the adjudicator able to recommend changes to the code? I also ask the Minister to clarify the extent of the changes that could be recommended. If the plight of primary producers continues to be problematic, the adjudicator may be the best person to make a request to extend the code and possibly extend its remit to others in the supply chain, should they receive complaints of this nature.
I have two final points. First, I welcome what the Government have said about the anonymity of complainants. This has been a prevailing theme through all these deliberations over the last few years—the constraint that the fear factor has placed on a number of potential complainants.
Secondly, to raise a point touched on by my hon. Friend the Member for St Ives, what resources will be available to the adjudicator? Will he be able to look at issues arising since the origins of the code, which are immense, and will sufficient resources be available for him to do so?
The Food and Drink Federation has said that
“abuses of retail power by retailers damage suppliers’ confidence, and their ability to invest and innovate”.
This has led to a reduction in choice and availability, and it increases costs for consumers.
This Bill is designed to protect suppliers from unfair breaches of contract, but as we have heard, it does not address all the issues of fair pricing to farmers and producers. In the context of the dairy industry, we look to the voluntary code to help us in that respect. Sometimes, as I have found in going to agricultural meetings across my constituency, this has been characterised as the panacea or great solution to all the problems and challenges that the farming industry faces. Somebody—in government or, implicitly, there is a responsibility on all of us—has to talk earnestly and honestly to constituents and remind them that this is not the only way in which we are going to assist and support a vibrant agricultural sector. The Bill is one important part of the process, but it will not achieve everything. It is a critical step towards fair treatment for all producers and it has the potential to do much more. In Welsh there is the phrase “Chwarae Teg”, which means “fair play”. That is what I believe this Bill is out to achieve. With further consideration and further amendment, too, I hope it can achieve that.
Nia Griffith (Llanelli) (Lab)
I am delighted that, at long last, we have reached the Second Reading of the Groceries Code Adjudicator Bill. Its gestation period seems to have been longer than that of an elephant. Before I proceed any further, I pay tribute to my hon. Friend the Member for Ynys Môn (Albert Owen), who brought forward a private Member’s Bill with a rather long title—the Grocery Market Ombudsman Bill—back in 2010. He has since worked hard to lobby for a grocery adjudicator—or, as he much prefers to call it, a supermarket ombudsman. I pay tribute, too, to the hon. Member for St Ives (Andrew George), who chaired the Grocery Market Action Group and was active in pushing forward the agenda from the early days of the Competition Commission inquiry in 2006.
I have already put on record my support for a grocery supermarket adjudicator, so I shall confine my comments to the areas where I feel that the Bill could be improved. It is, above all, about fairness—about ensuring that the groceries supply code of practice is properly adhered to. That code came into force in February 2010, but without an adjudicator it is very difficult for any individual supplier to challenge a retailer who breaches the code. A complaint has to be brought under the dispute resolution procedure or go to court.
Having an adjudicator is about ensuring fair play, having a referee and ensuring that everyone plays by the rules. It is important to stress that the Bill is not an anti-supermarket measure. Any retailer who respects the groceries supply code of practice has nothing to fear from the establishment of the adjudicator’s office. It is about creating a level playing field and tackling any attempts to breach the code which, if left unchecked, can damage suppliers, rival retailers and ultimately customers.
We should not underestimate the intimidation and difficulties that suppliers face if they are being badly treated by retailers. It is frightening to hear from the Farmers Union of Wales and the NFU about some of the sharp practices to which suppliers are subjected—varying supply agreements and decreasing the price paid for milk retrospectively. There is no doubt that this type of treatment can have a devastating effect on farms, particularly small family farms, and the driving down of prices by these retailers is certainly threatening to put some farmers out of business. We have already lost many farms from the dairy industry, and this type of driving down of prices, particularly when there is little flexibility from the banks, is threatening to put even more farmers out of business.
I very much welcome the fact that the Bill will now allow the adjudicator to accept complaints and evidence from third parties such as trade associations and trade unions. It can be extremely intimidating for any one supplier to bring a complaint, and trade associations and trade unions can offer help and support, and they are often in a position to see patterns of behaviour emerging—if, for example, there is a systematic breaking of the code.
The very fact that such organisations can bring issues to the attention of the adjudicator will in itself act as an incentive for retailers to abide by the code, but it worries me that clause 15(10) gives power to the Secretary of State completely to rescind that power. If we are serious about giving the opportunity to third parties such as trade unions and trade associations to bring issues to the adjudicator’s attention, why on earth do we have such a provision that would allow the list of the adjudicator’s powers to be deleted completely? As I say, that worries me considerably.
The question of the safeguarding of anonymity is extremely tricky. Several Members have given instances in which it would be easy to identify suppliers when their number is very small. That is one reason why the adjudicator’s power to undertake proactive investigations is so important. It might be possible for an adjudicator with both the power to work with trade associations and unions and the power to undertake proactive investigations to keep an ear to the ground, look out for examples of sharp practice, and take up complaints in a broader context. That could help to protect anonymity.
Like other Members, I am disappointed that the adjudicator will not have the power from day one to impose fines on those who breach the code. The Government propose that the adjudicator must make the case for such a power to the Secretary of State. That process would be very convoluted, and would involve further delay—the Minister herself spoke of a delay of at least six months—but, more important, it would convey the message that the adjudicator was powerless. It would make far more sense to give the adjudicator the power to levy fines from the outset, enabling him to exercise discretion and impose fines if that seemed appropriate.
Mr David Hamilton (Midlothian) (Lab)
If the adjudicator were given the power at the outset, would not companies be more likely to self-regulate, because they would know that action could be taken at a later stage?
Nia Griffith
As the hon. Member for North Antrim (Ian Paisley) pointed out, the stronger the adjudicator is from the outset, the more likely everyone will be to fall into line. If it is made clear that the adjudicator has powers that can be used immediately, there will be no need for us to faff around for six months trying to introduce some other piece of legislation that puts the power in the right place for the adjudicator.
It is crucial for the power to be there from the start. That would give everyone far more confidence in the role of the adjudicator, and would undoubtedly make the adjudicator much more effective. It would enhance the status of the adjudicator in the minds of the public, the supermarkets and the suppliers. We have already heard many Members and many organisations issue a plea for the adjudicator to have the power to fine from the outset, and I hope that the Government will listen to it.
Many Members have mentioned intimidation and suppliers’ fear of victimisation. The adjudicator should also have the power to fine retailers who discriminate against suppliers on the basis that, rightly or wrongly, they are suspected of providing evidence for the purpose of investigation. In other words, there should be some protection for the whistleblower. Otherwise, it will still be incredibly difficult for people to come forward and expose some of what is going on.
I warmly welcome the Bill and hope that it will make excellent progress in Committee, but I think that if we do not grab the opportunity to give the adjudicator the teeth that the office deserves, it will be a wasted opportunity.
Mr Mark Spencer (Sherwood) (Con)
Let me first draw attention to my entry in the Register of Members’ Financial Interests. As a farmer, I am in the fortunate position of not supplying one of the major supermarkets, but I do, of course, know plenty of people in that position, including many of my constituents.
I broadly welcome the Bill. It is fantastic, it is timely, and the Government should be congratulated on the way in which they are addressing the current problem. It was with some frustration that I listened to the criticism from the Opposition Benches that it had taken two and a half years for legislation to be presented, given that, when in government, they presided over the rise of the supermarkets and the power that they gained.
Fiona O’Donnell
Rather than referring to “criticisms”, perhaps, in this new atmosphere, we could refer to suggestions for improvements—which, in all fairness, have come not just from Opposition Members but from Government Members.
Mr Spencer
I shall be talking about possible improvements. I think that there is a fair amount of cross-party agreement on the way in which the Bill can be improved. However, I also want to talk about some of the good practice that we see out there. We have heard a great deal of criticism of supermarkets and the way in which things work, but there are plenty of examples of supermarkets and farmers working closely together to improve the supply chain, add wealth to both businesses, and bring employment to rural areas. I think we should recognise that there is more to be celebrated than there is to be criticised, although we need to ensure that when things go wrong, there is a way of stepping in to sort them out.
When I embarked on my business career, my grandfather told me that the definition of a good deal was “a bit for me, a bit for you, and then another deal”. I think that we have reached a stage at which the supermarket sometimes wields too much power in the relationship, to the extent that I almost feel obliged to make it absolutely clear that some of the practices that I intend to highlight bear no resemblance to the activities of any of my constituents. There is a genuine fear out there of blacklisting and being removed from the stocking lists of supermarkets, such is their power.
I think it worth examining the practices that have gone on in the agriculture industry and its relationship with supermarkets. The first that springs to mind, which no one has mentioned so far today, is the operation of payment terms, which the supermarkets have stretched to a point at which big business is being financed by little business. That applies not only to agriculture, but to many other UK industries in which little suppliers are delivering products to big suppliers. The big suppliers do not pay for more than 90 days, and the smaller producers are forced to borrow from their banks in order —in effect—to lend the money to them.
One of the most shocking practices, to which other Members have referred, is the practice of rejecting loads of products when the price of the market goes through the roof, when there is over-supply, or when the weather changes, as in the case of the strawberry industry. There is real abuse of the system when supermarkets are able to reject a load that is perishable and cannot be returned without giving any recompense to the primary producer.
I am told that when a contract is being negotiated with a supermarket, the first line of the negotiation relates not to the retail price, the production price or even the wholesale price, but to the margin that returns to the supermarket. The primary producer must guarantee that margin. That cannot possibly apply to any other relationship between supply and retail. Whether the product is cauliflowers, carrots, plimsolls or widgets, if the supermarket decides to arrange a promotion and reduce its retail value, the primary producer will lose out while the margin of the supermarket will be protected and never squeezed.
Huw Irranca-Davies (Ogmore) (Lab)
Does the hon. Gentleman agree that those margins are seen not only in the direct relationship between producers and major retailers, perhaps on contract terms, but throughout the supply chain? Sometimes a retailer will say “Well, it’s nothing to do with us, guv”, but somewhere along the line an intermediary will be saying, “We want those margins.”
Mr Spencer
That is a valuable point. There have been a number of references to the dairy industry, and to small dairy farmers all over the United Kingdom. It should be borne in mind that very few small dairy farmers deal directly with the supermarkets. They nearly always negotiate through a dairy producer, someone who is making cheese or yoghurt, or even a bottling plant. The hon. Gentleman has made an important point, and we shall probably need to consider it once we have sorted out the Bill.
Another important topic is that of promotions. Many consumers will no doubt think that “buy one, get one free” offers and other promotions show supermarkets’ generosity, as they must be shrinking their margins. The truth, however, is that it is the primary producers who pick up the tab for the reduced price of the product, and they are often also asked to increase the supply of that product.
Earlier in the year a series of adverts ran on TV promoting asparagus at half price. The weather had been so shocking that I do not think there can have been a single blade of English asparagus on the market at that time. I almost shuddered for our asparagus producers. Many of them had obviously signed a contract to supply a supermarket, and an advertising spot had been booked six months in advance, without regard to the weather. When that time slot in the calendar came, the adverts rolled out and asparagus producers were probably having to buy asparagus from Mexico or Spain to meet their contracts to supply that promotion. There is no flexibility in the system, or common sense from some supermarket buyers.
The worst practice, however, is backdating. A primary producer can supply a supermarket for two years, let us say, and then the supermarket can suddenly say to that producer, “By the way, we’re backdating the price of all that product you’ve supplied to us for the last 12 months, and you owe us £50,000.” That primary producer is then faced with the prospect of either finding that money from somewhere—borrowing it or taking it out of their bank account—or reneging on the contract and never being dealt with again. That truly is an abuse of power. I hope the grocery ombudsman will be able to stop such practices.
Key issues are what tools will be available to the ombudsman and how he will make sure the code of practice is adhered to. That brings us to schedule 3 and the subject that has been dominating the debate: if the adjudicator cannot fine supermarkets, will he have sharp enough teeth to ensure that the code is adhered to? I do not ask the Minister to commit to anything in his winding-up speech, but I ask him to assure us that he will have an open mind and will consider the Committee’s deliberations, and be willing to make an amendment if he feels that that is the right thing to do.
I reiterate that there is much more good than bad in this Bill and it represents a great step forward. With the will of the House and a fair wind, I think we can get to the right place for the primary producers, and also for our consumers, who want good quality food in our supermarkets at the right price, and, crucially, at a price that is sustainable.
Small dairy farmers begin the process of producing milk by choosing an animal to breed. They then breed that cow, which takes nine months, bring that heifer to full production, which takes two years, and then, finally, they get milk from that animal. It takes four years of hard work and investment to get to the point of supplying any milk, therefore. In that time, supermarkets can change their contract on an hourly basis. The whole of the risk is with the primary producer, and at present there are occasions when the whole of the reward is with the retailer. I sincerely hope that we can start to redress the balance in that relationship, to the benefit of supermarkets, primary producers and consumers.
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
I am very pleased to be able to contribute to this debate, and I commend the Government on introducing these measures and making such good progress with the Bill.
There is general agreement among Members that effective measures to protect producers in supermarket supply chains are long overdue, and that the groceries code adjudicator is a step in the right direction. The issues we have to grapple with now are whether the Government’s proposals will achieve what they set out to achieve and whether the adjudicator will have sufficiently sharp teeth to be an effective regulator.
If I have one overarching concern about the Bill it is that the establishment of a groceries code adjudicator will not serve to address the underlying problems of the concentration of power in groceries supply chains and the dominance of a handful of large supermarkets. Indeed, it is not designed to do that. The groceries code adjudicator will not tackle in any fundamental way the huge power imbalance in these supply chains between producers, processors and retailers, but it could, perhaps, tackle some of the symptoms of these underlying issues, and redress some of the worst imbalances, at least to some extent. The adjudicator will only be able to do so, however, if it has real sanctions at its disposal and the confidence of producers.
These are not new problems. Farmers and food producers have complained for years about the way in which supermarket supply chains operate. The specifics change, but the refrain has been the same for at least 20 years: smaller-scale producers, including some farmers in my constituency, secure a contract with a large supermarket and invest in creating jobs and new equipment, only to find that the goalposts shift very quickly. As the hon. Member for Sherwood (Mr Spencer) just recounted from his own experience, as time goes by an unsustainable squeeze is put on them, whether through the imposition of lower margins or changed specifications, or through late payments, demands for the producer to fund promotions or retrospective changes to the terms and conditions of their contract. In short, the risks and the costs are pushed down the supply chain. Those at the sharp end of primary production find they have little negotiating power in a supply chain in which a handful of large retailers and processors reap a disproportionate share of the profit.
I am glad that the proposals will tackle discretionary pricing and the shifting sands in supplier contracts, but the measures need to be enforceable. This evening’s debate has rightly focused on the efficacy and enforcement of the code of conduct and whether reputational risk will be a sufficient deterrent to curb the worst excesses of retailers’ behaviour towards suppliers. I appreciate that any new powers may have unintended consequences, and that we need to ensure that any new scheme does not backfire on consumers, but we must also acknowledge that this has been a long-standing problem. We must appreciate, too, that it is a structural problem. These imbalances have not arisen just in the last couple of years. They have existed for decades, and we must not miss this opportunity to tackle the problems in the supply chain.
We must recognise that these problems have already done considerable damage to our farming communities, and that they are continuing to do damage and are making our processing sector very vulnerable. If we are serious about food security and enabling our primary producers to continue to farm and produce the food we need, we must understand the pressures they face and take them a lot more seriously.
The disturbing and disappointing news breaking this evening that Vion is pulling out of the UK illustrates all too keenly the fragile nature of our food supply chains and the pressure our food producers and processors face in the current economic climate. Some 13,000 people across the UK work for Vion, including more than 130 in my constituency at Strath of Brydock. I know Members across the House will share my concern about the uncertainty facing the employees of Vion, and I ask the Minister to give us an assurance this evening that everything possible will be done to ensure continuity in those Vion plants across the UK, and that the Government will be working very hard to find buyers for the businesses.
The problems in the supply chain are one of the factors that give rise to the problems food processors face, and addressing them is one of the objectives of the Bill. This evening’s news about Vion is very unfortunate, but it should serve to concentrate our minds on why we so desperately need an effective groceries code adjudicator. This is not a debate about an abstract topic; real people’s jobs and lives are at stake.
We should not forget the negotiations on the common agricultural policy. Many farm businesses in my constituency would not be economically viable were it not for pillar one support. Many jobs in the processing sector would be completely unsustainable without that support. I gather from debates in recent weeks that the Government think that there is a case for reducing CAP support to our farmers. Unless we have effective measures to influence supply chains, that is not viable and it will put undue pressure on our rural communities and farmers who are going through difficult times, given the wider economic context in which they are trying to trade. An adjudicator needs proper powers if they are to be able to rise to the challenge of sustainable food production in the years ahead.
Many people say that the problem with voluntary codes is that they do not stand the test of time, and tend to be eroded or watered down once media attention disappears. As public attention wanes on issues such as the situation of dairy famers, reputational risks diminish for the retailers and it is back to business as usual. That is why reputational risk measures on their own will not be enough to enforce the role of the adjudicator, and we must look at more substantial financial sanctions. Dairy farmers’ success over the summer badly needs to be consolidated. Dairy farmers in my constituency cannot spend every Saturday afternoon on the high street at Drummer’s corner with petition boards. Young farmers do not want to have to dress up in cow outfits to get attention: they just want to be able to do their job. They cannot rely on being able to generate public sympathy all the time.
Without doubt, retailers value reputations and brands, but without sustained, concerted action by suppliers to keep public attention on their own product the story quickly dies. Retailers employ highly paid, very professional public relations executives, whereas working farmers do not necessarily have that public affairs expertise at their disposal, and do not have the money to pay for it. The loss of reputation for supermarkets does not necessarily translate into sufficiently meaningful change in consumer behaviour and consequently supermarket behaviour. Earlier in the summer, allegations of tax avoidance were levelled at a number of large corporations, including supermarkets such as Tesco and Asda, but that has not translated into a customer exodus, so I caution the Minister against relying too much on reputational damage to enforce the role of the groceries code adjudicator.
Supermarkets insist that price and quality are the key drivers of customer satisfaction, and my own view is that financial penalties are likely to be the most meaningful sanctions, and they should be available from the outset. Responsible retailers do not have anything to fear from that. Indeed, it might encourage them to develop better, more progressive and responsible supply chain models. To give credit where it is due, Morrisons supermarket has used a different supply chain model for its meat producers. It has a meat processing plant close to Turriff in my constituency, and farmers are much happier about that model than about previous models. There is a bit of learning still to do in the process, but there is a chance to incentivise good practice in the Bill, rather than simply hold a sword of Damocles over the supermarkets.
Another issue that has been debated this evening is accessibility and whether third parties, trade associations, non-governmental organisations and others should be able to provide evidence to spark an investigation. I am glad that the Government have recognised the valuable role that those third parties can play in the process. From my point of view, it is the veracity of the evidence that matters, regardless of its source. If there is credible evidence that the code has been breached, it should not matter where the evidence comes from. One of the main reasons why the effectiveness of voluntary codes has not been sustained is that suppliers, as has been said, are scared to put their head above the parapet and challenge manifestly unfair supply chain practices by the major retailers because they fear retaliation. They worry about losing their contract, and about getting a reputation as a troublemaker. That is one reason why others need to be able to raise concerns on their behalf.
As has been said, there is a global dimension to the Bill. The retailers who will be affected by the groceries code adjudicator all have extensive overseas supply chains, including in parts of the world where there is scant regard for labour rights, where pay is abysmal and exploitation is widespread. Pushing the costs and risks of production down the supply chain on to producers causes real hardship for our own farm businesses, food producers and processors, and other suppliers. At an international level, however, that squeeze is felt by some of the poorest people in the world, who have no social protection whatsoever. For the most part, they are not in a position to act as advocates for themselves, which is why it is important that others not only highlight the problems in the supply chain—ActionAid, Oxfam and others have done so for years—but can do so with a reasonable hope and expectation of securing meaningful change in practices.
I hear a lot of complaints from farmers in my constituency, but very few of them are willing to go public and put their head above the parapet. The hon. Member for Sherwood was careful not to identify any of his constituents for fear of the consequences. Anonymity and confidentiality are essential, but for suppliers who produce a unique product that no one else produces or a niche product that only a limited number of suppliers produce there is nowhere to hide, because they can be easily identified. I urge the Minister to respond and take on board the important role both of third parties and of the adjudicator in being able to initiate investigations.
I want to conclude by sharing with the House an advert that appeared in the Scottish press in the summer. Tesco, which posted UK profits of £2.5 billion this year, advertised for a buyer to operate in the Scottish islands among some of the most marginal farmers anywhere in the British isles. The job advert asked for candidates who would
“achieve…savings/income target through the 4 ways of buying: Buy for less; Someone Else Pays; Use less; Re-engineer”.
I find that quite shocking, as it is a naked admission from the retailer of what its supply chain model really is. Beneath all the hype and the glossy corporate responsibility literature, the supply chain model is to squeeze small, marginal producers as much as possible to maximise profits. That should be challenged, and when we debate the careful balance of these issues we must absolutely understand that those retailers have been ruthless with small farmers, and have made it increasingly non-viable for them to farm and to produce the food on which we all rely.
We have waited a long time for effective sanctions. Financial penalties will send a signal not just to the retailers but to farmers and producers that the Government are serious about helping them. It would improve confidence in the adjudicator as the post is established. We hear a lot that “Every little helps.” Perhaps it does, but we do not want just a little at this juncture. We want the measure to be a first step, and we want a robust Bill with solid sanctions. The Committees that have produced reports on the issue have said that the Bill needs to go further, and that proper financial sanctions are required. I hope that Ministers will listen and take that on board, and that we will see an effective groceries code adjudicator.
Roger Williams (Brecon and Radnorshire) (LD)
It is a great pleasure to follow the hon. Member for Banff and Buchan (Dr Whiteford), who speaks with great knowledge of and expertise in agriculture, and she knows the contents of the Bill. Her comments about pillar one were particularly well made. The subject has received poor press, but it is absolutely essential to the well-being of many farmers who farm on hill and other remote areas of these islands.
I declare an interest, as I am still responsible for an active farm that sends most of its products to a major supermarket via a slaughterhouse operated by Vion which, as we have heard, announced today that it was going to pull out of the UK. It employs nearly 1,000 people in the constituency next door to mine, and many of the farmers I represent use that facility to market their livestock. I hope that the Minister will take note of that, because it is a particular issue for us.
I commend and congratulate the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for East Dunbartonshire (Jo Swinson), on how she moved Second Reading. She did it with enthusiasm and panache. Not only is she able, but she is lucky, too. She was in the right place at the right time to pick up the Bill, which has support across the House and is one we have been waiting for for a very long time. She is not only able and lucky, but standing on the shoulders of giants who have taken the business forward in the past. Mention has already been made of Colin Breed, a former Member of this House, who was the first person to produce a report that put in print what many people believed—that is, that supermarkets, because of the way in which they had grown and now dominated the marketplace, were taking an unfair advantage. That led to the first Competition Commission report on the subject.
This is a failing market. Many of us believe that if markets are working properly they need light regulation, but this is certainly an example of a failing market in which the people making the purchasing decisions are so large and dominant in the market that they can adversely affect it to the detriment of the small producers. We need regulation, and I believe that the Bill is a fine piece of legislation that will contribute to resolving the problems.
Let me make a few suggestions about what we could consider in Committee when the individual clauses are debated. Mention has already been made of the ability of the adjudicator to implement fines. I certainly support that and would support a debate on the subject in Committee. It seems to me that just because an adjudicator could impose fines, fines would not necessarily be imposed or have to be imposed. The fact that the power was available to the adjudicator would make the job a lot easier and would put pressure on the supermarkets to take every opportunity to ensure that their dealings with their suppliers were fair.
Naming and shaming can have a big effect on supermarkets. I have been told that during the summer, when the dairy industry was in turmoil, the straw that broke the supermarkets’ backs, making them increase the prices they paid to farmers and enter into the voluntary code that a former Agriculture Minister was so instrumental in introducing, was the huge Twitter and Facebook campaign about the supermarkets that were the worst in abusing their suppliers. That was the turning point. Obviously, the farmers were protesting on the streets, but the campaign among consumers made a difference. Naming and shaming has a powerful impact on supermarkets, but the ability to impose a fine would give extra power to the adjudicator.
One question that has been asked is what role the adjudicator would have in the voluntary code that the supermarkets have entered into with their suppliers, which is something that the Minister should consider. I know that a number of people have written to the Department and not received an answer. Are we dealing just with the grocery code or with other codes that have been entered into voluntarily by the producers and the supermarkets?
Food chains are rather complex, and rarely does a farmer supply a supermarket directly. That does happen, but it is not the usual way in which food moves along the chain. Often, there are other people between the producer and the retailer. In the milk industry, farmers supply dairies that either bottle the milk and send it off in liquid form or produce dairy products such as cheese, yoghurt and so on. In the meat industry, the chain will often include slaughterhouses and meat processing plants. There are also other parts of the food chain, such as wholesalers and distributors. The systems are very complex, and I hope that the Bill will ensure that their complexity will be considered by the adjudicator and that the adjudicator will be able to intervene when he thinks the market is failing.
All in all, I believe the Bill addresses many of the problems that small producers have experienced over the past 20 years in dealing with massive purchasing organisations such as supermarkets. The Bill can be improved, and I ask the Minister to consider the ability to impose fines as well as whether the adjudicator will have a role to play in any codes that are entered into voluntarily between producers and supermarkets.
Fiona O'Donnell (East Lothian) (Lab)
I am pleased to have the opportunity to speak in the debate and, in particular, to follow the hon. Member for Brecon and Radnorshire (Roger Williams). For Jenny-come-latelies like me, it is particularly valuable to hear about the journey the Bill has travelled before bringing us here today.
It is also not only a pleasurable experience but a unique one for me, as this is the first time my constituents have urged me to speak up in the Chamber in favour of something the Government are doing. I do not know whether that says more about my constituents or the Government. I hope that we are seeing a coming of age moment for this Government. Let me take my first opportunity to welcome the new Under-Secretary of State for Business, Innovation and Skills, the hon. Member for East Dunbartonshire (Jo Swinson), to her position. I hope that this is a coming of age moment when the Government realise that the market when left to its own devices does not always work in a way that allows them to sit back and turn a blind eye.
The hon. Member for Banff and Buchan (Dr Whiteford) spoke about just how dysfunctional the relationship has become among the major supermarkets, the food producers and consumers, which means that it is time for the Government to act and intervene. The balance of power is so out of kilter that it is legitimate even for this Government to intervene to regulate. I hope that the new Minister—well, the relatively new Minister—will keep that feeling in her heart and consider it when it comes to the big energy suppliers and the payday loan companies. There is always a point at which her Government can say that enough is enough and that it is time for them to intervene.
East Lothian has some of the most beautiful and fertile agricultural land in the whole of this nation. The farmers in my constituency are facing a particularly difficult time after the bad summer that we had. Many of the crops will not yield what farmers had hoped for, and I hope for them that the Bill will offer some hope. We will judge the Bill on how it delivers for many of the hopes that we have. As well as a better future for farmers, I hope it will give them the opportunity to innovate, and that they will have the confidence to do that, now that they know there will be fairness in the supply chain.
The hon. Member for Banff and Buchan spoke about the importance for her farmers of having pillar 1 funding from the common agricultural policy. I hope farmers, especially smaller food producers, will see the Bill as an opportunity to plant for the future with some certainty. As farming is a major employer in my constituency, I hope this will lead to the creation of more jobs and improve the working conditions and pay of many of those who work in the agricultural sector and who, with the abolition of the Agricultural Wages Boards, have lost the security that they have enjoyed for decades as a result of the intervention of a previous Labour Government.
I pay tribute to the many Members who, over the years, have succeeded in building a consensus across the House. There is a very different feeling in the Chamber tonight. I was impressed, as I often am, by the words of the shadow Business, Innovation and Skills Minister, my hon. Friend the Member for Edinburgh South (Ian Murray), when he said that we have an opportunity to make a good Bill a better Bill. I very much hope that the Government will take that opportunity in Committee and that they will be open to opportunities to improve and strengthen the Bill. I stress to my hon. Friend that this is not a pitch to join him on the Public Bill Committee. One can have too much of a good thing. I previously sat with him on the Committee that considered the Enterprise and Regulatory Reform Bill, where the many valuable contributions that he brought to the debate in that forum were unfortunately spurned by the Government.
We have already seen attempts to improve the Bill, some of which the Government have responded to positively. I hope we continue to see that spirit. I spoke about how we are to judge the Bill. I wish that on Report in the Lords, the Government had accepted an amendment that would have built into the Bill a point at which the Government will review progress. I hope both Ministers were listening to the Chair of the Environment, Food and Rural Affairs Committee, the hon. Member for Thirsk and Malton (Miss McIntosh), when she said that her Committee believed that that would strengthen the Bill.
We have heard from various Select Committees and many organisations. I particularly thank ActionAid and Oxfam for the briefings that they have provided on the general debate about food security. I hope Ministers will realise that not just in this place, but out there in a variety of organisations, there is concern about the need to review the Bill and consider further powers for the groceries adjudicator.
I came this evening not to bury the big four supermarkets, but more to praise them. There have been real tensions in communities in my constituency. We are a constituency of small communities and the arrival of out-of-town supermarkets has threatened the future of the town high street and the marketplace. The community has responded positively by innovating, but it will be another test of the Bill if it brings further benefits to high streets that are struggling to compete with the big supermarkets. We have some wonderful specialty shops in East Lothian, in places such as Haddington, North Berwick and Dunbar—some up-market delicatessens where it is a pleasure to browse and shop. It is one of the strengths of East Lothian and why people visit it.
However, there is also a place for the supermarkets and I want to put on record my support for them. Many of my constituents need somewhere on their doorstep where they can buy a cheap school uniform and get the basic range of food and provisions. I do not deny that there is a role for supermarkets, but I want to see the balance maintained in my constituency. Many others in the House no doubt have a similar situation and want to see our town centres grow, thrive, innovate, contribute to the local economy and create jobs.
I welcome the fact that the Government have changed their mind and listened to the concerns about third-party evidence. Will the Minister give us a little more detail? Many producers fear for their future if word gets round. We see blacklisting in other professions. What is the meat of the Bill that will protect those food producers? A little more detail on that would be useful, as would any plans the Government have for improving clause 18.
We have talked about trade associations and trade unions being able to provide evidence, but we have not yet heard whether campaigning bodies will be able to do so. It is very reassuring and I welcome all that, so I wonder why the Government bothered to include in the Bill the power to rescind that, a point made by my hon. Friend the Member for Llanelli (Nia Griffith)—I hope I have pronounced the name of her constituency correctly; the guttural Scots tongue comes in useful at times. The Government can send some important messages by setting out certain provisions in the Bill. What message do they send the big retailers if the Government are not sure whether or not to include that power? It is a bit of a hokey-cokey clause.
I also have concerns that I am sure Ministers will recognise. We have heard from Members on both sides of the House and from all parties about the effectiveness of naming and shaming. The Minister tried to press Opposition Front Benchers on the size of proposed fines, so I will now press for some detail on what form the naming and shaming will take. She spoke about the possibility of retailers having to place notices in the national press. Will the adjudicator be able to specify the size of those notices and what newspapers they should appear in? Will it just be national newspapers, or will it include local newspapers, which are struggling to raise revenue in the current economic climate? Also, local people often trust more what they read in their local press. It would be good to hear a little more detail about where the retailers will be named and shamed.
Furthermore, what evidence do the Government have that naming and shaming actually works, because we seem to see the opposite? One example is this House. We have come through the expenses scandal—I hope—although it does not always feel that way, but when we ask people on the street which party is worse when it comes to the abuse of MPs’ expenses, the reaction is pretty much this: “You’re all the same and all as bad as each other.” I wonder whether that could be consumers’ approach to the retailers. They might not distinguish between the supermarkets, all the information would simply be lost in a blur and there would be an overall perception that there is something rather fishy going on. I really do not think that consumers will use that power and information to hurt an individual major retailer where it hurts—in the pocket. If there is evidence to the contrary, it would be good to hear it.
The Minister spoke about where we have seen consumer power, but that has often been in relation to a single product range or an unethical issue. In the meantime, supermarkets have continued to enjoy large profits. In my constituency the choice is between only two major retailers. Because of the distance between the Asda store in Dunbar and the Tesco store in Haddington, consumers have to travel quite a journey to exercise that right. I will say at this point that Sainsbury’s is coming to Haddington. I am not plugging them so that they sponsor my Christmas card, like that of my hon. Friend the Member for Edinburgh South, but perhaps that is a negotiation I might enter into after the debate. Sainsbury’s has shown good practice in working locally to build a vision for Haddington town centre, so that conflicting concerns can be balanced and the livelihood and sustainability of a town centre can be preserved while the out-of-town option is there.
Sheila Gilmore (Edinburgh East) (Lab)
Given the clear balance in the speeches that have been made today across the House, would not it be good if Ministers, rather than just waiting for the Bill to go to Committee, said now that they would table the kinds of amendments that everyone seems to be asking for—for example to introduce fines at an early stage?
Fiona O'Donnell
My hon. Friend, as ever, makes an excellent contribution. The Government have a track record in this regard. They accepted some of our amendments to the Health and Social Care Bill, but only after they had branded them as their own, so perhaps our suggestions will morph into Government amendments that will result in an improved Bill.
A message has to be sent. There is no more important issue on which we can send a message to the big retailers than that of fines, and I make that appeal to Ministers. The point has been made by hon. Members of all parties during this debate and by Select Committees and organisations outside this place that we need, at the outset, to give the groceries adjudicator the power to impose fines. That would set a strict limit. We do not want to be like a parent who tells their child, “I’m going to let you out, not give a curfew and see how it goes.” It would be better to set a benchmark at this stage—a line that the big retailers cannot cross—rather than let them see how far they can push us.
Some companies irritate many of us by constantly phoning to offer to represent us if we have been mis-sold payment protection plans that we did not know we had signed up to. The reality is that only now that they are beginning to be hurt in their wallets are some of those companies desisting from such practices.
In summary, I see hope for this Bill, but we have offered Ministers the opportunity to improve it. Although I do not expect that to happen this evening, I hope that they will take that opportunity in Committee so that the Bill can be all it can be.
Neil Parish (Tiverton and Honiton) (Con)
It is a great pleasure to speak in this debate and to follow the hon. Member for East Lothian (Fiona O'Donnell), whose remarks I echo. This has been a great cross-party debate and Members want to make sure that the Bill is good and right. I also welcome the fact that Ministers from the Departments for Business, Innovation and Skills and for Environment, Food and Rural Affairs are at one on this. Even the Select Committees are united. There is parliamentary unity on the Bill, so this must be one of the greatest moments of all time.
I say to the Ministers that the Bill will need to have real teeth, for the simple reason that one of this country’s retail traders has more than 30% of the trade, a larger turnover than many small countries, and huge powers. It is a great idea to name and shame retailers, but we need to have the powers to fine them and to keep fining them. If they do not adhere in the first instance, there must be real pain, by which I do not mean tuppence ha’penny from the billions of pounds of turnover; the fine has to mean business. We have to turn this situation around.
I am not here to slam the supermarkets—they do a great deal of good—but we have to make sure that enough money cascades from what the consumer pays for his or her product at the supermarket back down to both the producer and the grower.
Guy Opperman (Hexham) (Con)
I endorse what my hon. Friend is saying and I know that the growers and producers in Northumberland will support this Bill wholeheartedly. What robust measures does he think would genuinely hold the supermarkets to account?
Neil Parish
I would like to see fines incorporated into the Bill—I am sure that the Government will listen when it is debated in Committee—so that there is real pain. I believe that the threat of fines, as well as that of naming and shaming, will help make sure that not too many of the large retailers will have to go before the adjudicator. If they have nothing to hide and if their retail trade practices are right, they will have nothing whatsoever to fear, either from the Bill or from potential fines.
It is not only the producer who is at risk in these trades. Many of the direct contracts that the supermarkets have with farmers in the dairy and meat trades are excellent. However, supermarkets may decide to have a price war and to reduce their prices, perhaps by using these products as loss leaders. That is wonderful for consumers, provided that it is the supermarkets who pay for those loss leaders, and that they do not go back down the chain and squeeze not only the producer, but the processor.
Guy Opperman
I know that my hon. Friend is a champion of the dairy industry. The Minister who will respond to this debate is the Minister who responded to the dairy debate in Westminster Hall. Does my hon. Friend agree that the dairy industry is the biggest example that we can cite of a price compromise affecting the farmer and the producer such that they effectively go out of business?
Neil Parish
My hon. Friend makes an excellent point. Much work was done by the previous farming and food Minister, my right hon. Friend the Member for South East Cambridgeshire (Sir James Paice), to get voluntary dairy codes in place. The Minister of State, Department for Environment, Food and Rural Affairs, the hon. Member for Somerton and Frome (Mr Heath) is carrying on that good work. The hon. Member for Brecon and Radnorshire (Roger Williams) said that we need to be sure that the groceries code adjudicator will be able to look at the voluntary codes and contracts. I repeat that it is essential that a share of the money that the consumer pays for his or her product goes to the processor and the producer.
We are moving into a world of some 7 billion people. That world does not have oceans of cheap food. In many ways, that is a good thing, but it is also difficult for consumers across the world. There are people in this country who are struggling to buy food and it is essential that they get a good deal. However, in order to get a good deal, we must ensure that the producer, be it of milk, beef, lamb, carrots, potatoes or other vegetables, gets a return. If they get a return on their investment, they will produce more food and do so efficiently. That is the way to ensure that we can deliver products at a good price on the supermarket shelf.
Some of the ways in which large buyers and retailers have abused their position over the years have made food prices higher rather than lower. In the short term, when the supermarkets have a price war that drives prices down, it seems like the consumer is getting a good deal, but it drives many people out of business, meaning that there is less production than there was before.
Until now it has been possible to go around the world and bring in the extra product that is needed. However, to take the meat sector, where is the beef that is out there in the world? Forty years ago, the Chinese were eating 500,000 tonnes of beef a year. Now, they are eating 5 million tonnes of beef a year. The UK produces about 1 million tonnes of beef, so one can see that instead of eating half as much beef as we produce, China is now eating five times that amount. All the beef that used to be sloshing around in Brazil and Argentina, which could once be bought cheaply and used, dare I say it, to drive down the price of beef in this country, is no longer there. That is why it is important not only to get things right for the consumer and the trade, but to ensure that we will have reasonably priced food in the future.
In the summer, 3,000 dairy farmers protested outside Westminster, and we had a huge meeting. It was absolutely right for the farmers to protest. They had some of the worst weather that I have seen in my lifetime, and the cost of producing milk went up while the price went down. However, is it right that those farmers with family farms have to march up the hill every time and show how desperate they are to make a fair living? Is it right that we have to use social media to name and shame supermarkets? Again, the hon. Member for Brecon and Radnorshire made that point. It is not right. There is something wrong with the process of trade in this country, and that is why the groceries code adjudicator is so important.
We set much store by the Bill. Other hon. Members referred to the common agricultural policy and the single farm payments. All Members want farmers to get more money and more of their income. Farmers would much rather have more of their income from the market—from what they produce—than from what they receive in the single farm payment. They would thus not be so vulnerable to the politics of not only Britain, but the European Union.
The rising population, the need to produce more food from the same amount of land throughout the world, global warming, and the fact that northern Europe and Britain will need to produce much more food, mean that we should be able to get a good price for that food. However, if we have not got the market right, the price of food will not go back to the producer, and we will not produce the amount of food that we need.
There is a need for food security, and a moral issue about producing food. Some people in the world cannot afford to eat and it is therefore important that we produce more food—sustainably, and in an environmentally and animal-welfare friendly way. That is what our consumers want: to be sure that, when they go to a supermarket or a small retailer, they get they get a fair deal, and that that also applies to the producer and the grower, not only in this country, but in developing countries. Our supermarkets often do not give producers throughout the world a fair deal. Let us hope that the groceries code adjudicator can do that.
We have rightly talked a lot about the retailer and the producer today, but we must remember that nearly 500,000 people in this country are involved in food processing, and 80% of the food that they process is grown and produced in this country. The Bill is therefore good not only for the producer but for the processor and I believe that, in the end, it will be good for our supermarkets.
Much as one would perhaps enjoy a major war with the supermarkets and the big retailers, it is ultimately not a war that we want because where do 70%, 80% or even 90% of the population buy their food? They buy it in supermarkets—they want to shop there. We must be sure that, when they shop, the groceries code adjudicator will have enough teeth to ensure that the consumer, the producer and the processor—everyone in the food chain—get a fair deal.
Mr Spencer
Does my hon. Friend acknowledge that farmers need to bear some of the responsibility? Many dairy farmers, instead of selling to a co-operative, decided to trade direct. If they stuck together, they would be much stronger. Some farmers almost pay gate money to obtain those direct contracts, and steal contracts from other farmers, thereby contributing to their own downfall.
Neil Parish
I welcome my hon. Friend’s intervention. I often say that farmers’ great strength is their independence, although that can also be their great weakness. I welcome the deal between Milk Link and Arla Foods because this country now has a co-operative that controls some 25% of the milk, giving it real clout in the marketplace. It is right for farmers to come together and co-operate, and the Bill will help such co-operation within the farming, processing and retail sectors. As I said, no retailer has anything to fear from the groceries code adjudicator if they have the correct practices, and that is right. Finally, I say again that the Government welcome this Bill, but the Business, Innovation and Skills Committee and the Environment, Food and Rural Affairs Committee must look to put real fines in place so that those who abuse the grocery trade can be brought to book, and not only named and shamed, but properly fined.
Mr William Bain (Glasgow North East) (Lab)
I seem to be falling into the rather pleasant habit, in both this Chamber and Westminster Hall, of following the hon. Member for Tiverton and Honiton (Neil Parish) in debates on food policy. That is agreeable because he speaks with a great deal of authority and good sense, and I broadly concur with his remarks.
I represent one of the most urban constituencies of all Members who have contributed to the debate so far. There is farm land in the northern tip of my constituency, along the boundary that I share with the Under-Secretary, but the contribution made by my constituency to the food industry comes primarily from the major fruit trading market in Blochairn, two major bakers and bread makers in Lambhill and Sighthill, two major supermarkets in Sighthill and Robroyston, and the hundreds of constituents who work in the food retail, manufacturing and processing industries on modest, if not relatively low, wages. They make a huge contribution to the food that ends up on our plates.
I was struck by a point made by the hon. Member for South Down (Ms Ritchie) who reminded the House that in the past, weak regulation and regulators with insufficient powers have created problems in the markets. She emphasised the problems that have emerged in the energy markets—we all hear from constituents who are struggling with soaring electricity and gas bills—and the same may prove true in the media sector. This debate has shown that parties across the House do not want the same thing to happen in the food production and retail sectors, and I hope that Ministers will pick up on the need for the groceries code adjudicator to have proper powers, including the power to fine. We have seen in the home of capitalism—the United States—that in markets where there has been price fixing, the primary sanction used to bring companies engaged in that to account has been the use and imposition of fines.
With rapidly rising food prices becoming one of the biggest pressures on the living standards of millions of people across the country, our consideration of this long-overdue Bill to introduce a groceries code adjudicator is not before time. It is important that we continue to bear down on anti-competitive practices within the large food retail sector and food supply chains, which were so clearly identified in the Competition Commission’s 2008 report.
The Bill matters because food is the largest part of the UK’s manufacturing sector. It has a turnover of £76 billion a year and accounts for 16% of all manufacturing output. However, the grocery market is dominated by four major retailers, the sales of which totalled 85% of the £143 billion industry turnover in 2009; Asda, Morrisons, Tesco and Sainsbury’s accounted for two thirds of the total.
As the hon. Member for Tiverton and Honiton and other hon. Members have said, the economics of sustainable food production will be crucial in resolving the problem of increasing food prices and ensuring that producers and consumers get a fairer deal. In 2008, the Competition Commission said that
“the transfer of excessive risk and unexpected costs by grocery retailers to their suppliers through various supply chain practices if unchecked will have an adverse effect on investment and innovation in the supply chain, and ultimately on consumers”.
I agree. On the impact that that has on food prices, Office for National Statistics data published last week show that, since 2005, the price of fruit has risen 28%; the price of vegetables is up by more than 40%; and the cost of fish has increased by 56%. Real wages are falling at around 4% a year, but food costs are going up by much more than the headline consumer prices index of inflation, so action to make supply chains more efficient to bear down on rapidly rising bills will be a key indicator of the success of the new adjudicator. Big supermarket chains have expanded into the convenience store market and compete directly with smaller chains and independent stores. It is important that the new adjudicator roots out any anti-competitive practices.
The purpose of the Bill is welcome. Its provisions owe a great deal to the work of my right hon. Friend the Member for Leeds Central (Hilary Benn) and his team from their period in government, and my hon. Friend the Member for Ynys Môn (Albert Owen), who spoke earlier in the debate. However, as has been said, both Back-Bench Members and Opposition Front Benchers have concerns about the details, which we believe should be amended in Committee. The major concern is the lack of an independent power for the adjudicator to fine from day one for serious breaches of the code—a step that was recommended by the Competition Commission in 2008. In its report of that year and in its 2000 report, the commission identified two major breaches of the code by large retailers, but the Bill permits the adjudicator to levy fines only with the consent of the Secretary of State following an order, and further consultation and review. As many hon. Members have noted, there might be a delay of a year or 18 months before the power to fine is activated. What other public official in the nature of an ombudsman, which the office of groceries code adjudicator surely is, has such weak powers of enforcement and such a lack of independence from Ministers?
The code of practice applies only to supply contracts between individual suppliers and major retailers with a turnover in excess of £1 billion a year. It does not deal with supply chain abuses at more intermediate levels, such as regional wholesalers and processors. The Bill should be amended to allow the adjudicator to monitor fair dealing throughout the supply chain, and ensure that suppliers are protected from the threat of retaliation if they produce evidence of unfair practices.
Hon. Members have referred in the debate to the practice of below-cost selling—my hon. Friend the Member for Hayes and Harlington (John McDonnell) referred to it in an intervention, and I suspect he might do so again in his speech proper. The practice involves a retailer selling an item for less than its input costs, as illustrated by the notorious example of supermarkets selling loaves of white sliced bread for 7p. The practice, which has been prohibited in France, Germany, Spain and Portugal, can force suppliers out of business, and has also caused huge pressures in other sectors, such as the dairy industry.
The Select Committee on Environment, Food and Rural Affairs and the Select Committee on Business, Innovation and Skills have called on the Government to increase the powers available to the adjudicator, to widen the range of those who can bring forward complaints, such as trade associations, trade unions and pressure groups—I welcome the clarification we have received on that point—and to put more detail in the Bill on the power to fine. Those are all reasonable and constructive suggestions by two influential Select Committees. I do not believe I have heard a single hon. Member from the Back Benches, or from the Opposition Front Bench, who has dissented from those views, so I hope that the Government will reflect on the unified outcome of the debate and announce that when the Bill goes to Committee today they will accept and table amendments that reflect the will of the House as expressed today.
Although clause 7 affords the adjudicator the power to recommend changes to retailers, there are no powers for the adjudicator to compel action by retailers who do not take remedial steps at first instance. Similarly, clause 11 permits, but does not require, the adjudicator to provide advice to suppliers and large retailers on matters relating to the code. It seems somewhat counter-productive for the adjudicator, as part of his or her statutory duties, not to be required to publish guidance on how retailers can best comply with the terms implicit within the code.
Providing sufficient protection of anonymity for those bringing complaints before the adjudicator will be crucial to enforceability. National Farmers Union Scotland has argued that the code has so far proven ineffective because of the fear that complainants may be identified. Its view, therefore, is that complaints should be capable of investigation on the basis of credible evidence, whatever its source. I hope the Ministers, in winding up, will respond to the views that NFU Scotland has put forward in its submissions on the Bill.
I hope the Bill will secure an improvement in the living standards of our dairy farmers, which have been under such pressure in recent years, particularly in Scotland. Although one of the major processors, Müller-Wiseman, has recently increased standard farm-gate milk prices to just over 30p per litre during this winter period, given the increased costs facing dairy farmers that is not far from the absolute minimum that farmers in Scotland need to make ends meet. I hope that the adjudicator, when set up with sufficient powers, will be able to deal with the pressures that cause significant hardship to dairy farmers in Scotland and, as we have heard, in every part of the United Kingdom.
This is a good Bill. As hon. Members have said, we wish it well in Committee. I hope, in conclusion, that Ministers will reflect on what has been a good-tempered and consensual debate, take the positive suggestions offered by the House and provide a system that allows abuses in the market to be tackled and rooted out at source. That leads to one conclusion: the ability of the adjudicator to fine, without an order from the Secretary of State—an ability that must be in the Bill.
John McDonnell (Hayes and Harlington) (Lab)
I chair the Bakers, Food and Allied Workers Union parliamentary group. The group supports the Bill, because we hope that it will address the issue, mentioned by my hon. Friend the Member for Glasgow North East (Mr Bain), of below-cost selling. We have been campaigning on this issue for a number of years by tabling parliamentary questions and early-day motions, and meeting Ministers, yet the problem continues. As my hon. Friend said, below-cost selling is when a retailer sells an item for less than its input cost—what is described as being sold with a negative gross margin. When the Competition Commission conducted an inquiry into items of known value, it identified that bread was a particular issue, as he said. It was not just one supermarket selling white sliced loaves for 7p—many others were selling bread at extremely low prices and low margins. As he said, other countries addressed the issue at the same time by introducing legislation to prevent the resale of goods at a loss. This area is regulated in several European countries.
My hon. Friend also quoted the Competition Commission. In the passage that he quoted, however, the commission went on to say that if the practice went unchecked,
“we conclude that this will ultimately have a detrimental effect on consumers, by leading to low-quality goods, less choice of goods, or less product innovation.”
That is exactly what has happened to the supply of bread. The loss of bread quality should worry all concerned—in many instances, it is now little more than water—and is contributing to the nation’s unhealthy diet. Price pressures are also having an impact on the working processes, so we are concerned about health and safety, particularly in relation to the preponderance of Baker’s asthma among workers producing bread for supermarket chains. As has been said elsewhere, the price pressures obviously result in firms closing, the loss of jobs and pressure on overall pay and conditions.
I want to refer to the three main points raised so far. The first concerns fines. The Bakers, Food and Allied Workers Union has been involved in campaigns to name and shame. As I mentioned earlier, however, not only have they not worked but they have had the contradictory result of giving publicity to companies providing products at extremely low prices. In some ways, naming and shaming actually boosts supermarkets’ sales, as we saw with the Competition Commission’s inquiry into the 7p loaf. Our experience is thus not only that large conglomerates can ride out a naming and shaming campaign but that some actually benefit from it.
From my reading of the Bill, it looks as though the fines order will be brought into play only on a case-by-case basis. [Interruption.] No, the Minister says it will be on a general basis. If that is so, it will still be left to the Secretary of State to designate in the order the size of the fine to be levied. I would welcome more information. Will a tariff system be established? Will the recommendation on a tariff system come from the adjudicator? The House could usefully discuss whether a tariff system would prove effective and have an impact on companies’ practices.
The second issue concerns third party reporting. We have all welcomed that provision and put on record the fact that it will include trade unions. That is incredibly useful, and I congratulate the Government. Having said that, trade unions are anxious that companies might take retaliatory measures against a union or individual members. That is a concern, given past victimisation and blacklisting, so I would welcome the Government’s revisiting the blacklisting regulations to ensure adequate protection for trade unions, trade unionists and individual workers who blow the whistle on some of the practices of the supermarkets, as they put pressure on individual companies.
I am extremely worried by clause 15(10). I have seen clauses that allow for a review of the implementation of legislation, and for that review to bring forward recommendations that the House can discuss and on the basis of which we frame further legislation. That is the rational process. I have never before seen in legislation, however, the actual proposed new clause to be introduced. That flies in the face of the rational process of review, assessment and recommendation, after which the House comes to a view. It would help if we could hear why the Government feel they need the draft clause on the shelf, within the Bill itself, to introduce readily. It smacks of defeatism over the effectiveness of the legislation. May I also have some clarity on the process for the order? Will it be the affirmative process or the super-affirmative process—or whatever other process—that the Government recommend? There would need to be quite a heated exchange in this Chamber if we felt that the Government were reverting to type and removing those provisions from the Bill.
Thirdly, the appointment of the adjudicator is very important. I am therefore keen that the Government should concede that there ought to be some form of pre-appointment process via the relevant Select Committee, but I worry sometimes about the timidity of this House. Other Select Committees now have the right to approve appointments, so why not in this instance?
Ian Murray
My hon. Friend is making an incredibly powerful speech. As he is talking about giving this House some input in the appointment to an important post, does he agree that we should go down the route outlined in the Conservative party manifesto from the general election, which said that the Conservatives would
“give Select Committees the right to hold confirmation hearings for major public appointments, including the heads of quangos”?
John McDonnell
This point coincides with a private Member’s Bill in my name on the appointment of the Governor of the Bank of England. I can understand that the Government—or rather, the Chancellor of the Exchequer—might have some anxieties about that, but I cannot see why anybody should have any anxieties about the adjudicator being appointed with the approval of the relevant Select Committee. In fact, that is exactly what happened with the Office for Budget Responsibility. The appointment of the chair—in fact, the members were there too—was subject to the approval of the Treasury Committee. The post of adjudicator needs to be given sufficient authority, which often stems from the process of appointment. If the appointment was subject not only to pre-examination and review and so on, but to approval by the relevant Select Committee, that would send a message to the supermarkets and anybody else that the Government were serious about this job, and the individual concerned would have the full authority of this House to do as he or she saw fit in implementing the legislation. That is not an awful lot to concede, really.
It is rare to find such unanimity on the Back Benches across all parties. I genuinely do not understand why the issue of fines has arisen. In the old days, an influential figure in a sector of industry would phone No. 10 and the Prime Minister would drag in the Secretary of State and say, “We’re not having it, so you’d better amend it.” I hope none of that has gone on. I hope we will get a rational process in Committee, an acknowledgement of the unanimous view on the Back Benches and a Government amendment on fines that we can all agree on. If the Government strengthened the role of the new body—with the unanimous approval of this House, which they would get, because they have had it so far, apart from on this one issue—they could put down a marker to show that the Government mean business on this issue, and so do all legislators in this House.
In that way, the proposal will prove to be effective; otherwise, I make this prediction. There will be rows. The adjudicator will come forward, there will be publicity about a particular instance, the supermarket might pull back for a few months, or maybe a year, then it will return to its practices and we will end up going round the cycle yet again, most probably in two years’ time. We will be kicking ourselves and asking, “Why didn’t we give the adjudicator powers to fine?” Rather than waiting and revisiting the issue, why not do that now?
As for the order being in place and the choice being between fines in the Bill and fines in a statutory instrument that would take six months to introduce, there are people here with more experience than I, but getting a statutory instrument through this House can be quite difficult to say the least. If there is a civil servant out there or someone lobbying, the fastest I have seen it happen is 18 months to two years, so I have some scepticism about getting an SI through in that time. There will be lots of vying for parliamentary time in discussions with the Leader of the House and something could crop up that sends this issue to the back of the queue. It is not just a matter of saying, “Well, if it doesn’t work, we’ll bring forward an order in six months.” Instead, we could be waiting beyond the next Parliament. Some elements in the industry could play on and exploit that as part of their lobbying practices.
Ultimately, if the ability to fine were put in the Bill and a fine were imposed that the supermarkets, or whoever, were unhappy with, they would resort to a court of law anyway. If they felt that there was something wrong with the process, they could ask for a judicial review of the Government or the adjudicator. They have all the facilities to do that anyway, so I am not completely sure what the Government are arguing about on that point. I am hoping that we can have a rational process, and that the Government will see reason and table the appropriate amendments in Committee. I also hope that the work that has been done over the years by all those hon. Members who have been congratulated today will come to fruition in an effective piece of legislation.
Huw Irranca-Davies (Ogmore) (Lab)
It is a great pleasure to follow my hon. Friend the Member for Hayes and Harlington (John McDonnell) and his appeal for listening, for unanimity and for constructive work in Committee. This very good debate has revealed common themes and shared aims on both sides of the House. It has also shown that there is a real will, which we share, to get the Bill on to the statute book as soon as possible in a form that is fit and proper and that will enable it to do the job that we and Ministers want it to do. We do not want to miss this golden opportunity to get this absolutely right.
I have a radical suggestion. Perhaps we should dispense with the need to find names for a Committee, and simply keep on sitting here now until we have put the Bill to bed. With such high levels of experience in the Chamber today, and such clarity on what is required of the Bill, we ought to strike while the iron is hot. I am not sure whether all right hon. and hon. Members would welcome my suggestion, but I shall go on to pull out some of the themes that have been raised in the debate. We often struggle to discern any themes coming out of a debate, as Members put forward different—sometimes very different—viewpoints, and it can be impossible to pull any sort of consensus out of the morass. Today, however, there has been utter clarity, complete consistency and even—dare I say it?—a striking degree of unanimity.
That unanimity centres on two specific issues. First, real congratulations have been offered to the Ministers on bringing forward the Bill, and I offer the ministerial team my own congratulations as well. There has been some criticism over delays, some of which has been knocked back to us for causing delays while we were in government, but the fact is that we are now here and we need to get this right. That is one area of consensus: we all want to see the Bill reach the statute book as soon as possible.
The second area on which there is consensus is that the Bill is not yet fully formed. It is not far off, but it is not fully formed. To extend the metaphor that many others have used today, it is something of a pup that is showing great potential, but it is not yet a watchdog. It is all bark—in the naming and shaming—but there is little bite. As the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for East Dunbartonshire (Jo Swinson) suggested earlier, it is something of a fluffy and likeable little toy, rather than a trusty hound that can bare its teeth when needed and give the occasional nasty nip to the sensitive parts of a miscreant.
Let me turn to the one matter on which I have heard not one dissenting voice throughout the whole debate from any Member in any party, except during the opening remarks. I hope that the Ministers will be open to what they have heard about fines, because there was a remarkable level of consistency and agreement around the Chamber on that point. The Under-Secretary opened the debate with some well-balanced comments, saying that the arguments were finely balanced. She went on to say that financial penalties should initially be a reserve power. I do not think that the arguments are that finely balanced; I believe that there is compelling evidence to the contrary, and I shall say more about that in a moment. If they are so finely balanced, however, I would urge her to listen to the voices that we have heard in the House today. One after another, Labour, Conservative, Liberal Democrat and Unionist colleagues from across the water have stood up to say, “Put those fines on the face of the Bill.” Putting them somewhere else in the back pocket or leaving them at home to get them when they are needed means that the message going out to major retailers will be quite different.
Quite honestly—my hon. Friend the Member for Edinburgh South (Ian Murray) and I have discussed this—should we ever soon be back in government, we would not want to have to go to look for the tools that have been carefully hidden somewhere; we would want them to be right in our hands so that we can use them if they are required—not as a first resort and perhaps not at all, but we want them there as an option. That brings me to the first point about the question being finely balanced. We need all the tools in the toolbox from the off—not one tool left at home or not even yet purchased from the shop, because a reserve power is one that risks not being used.
Secondly, naming and shaming can indeed be powerful on occasions, but it is not always the most appropriate tool for the job. If it is the only tool available, I guarantee to Ministers that it will fail. One after the other, Members of all parties have raised instances where name and shame has been completely ineffective. Name and shame was not a rip-roaring success this spring and summer in respect of the dairy crisis. [Interruption.] The Minister says it was, but no; I can tell him that it played a part, but it was not effective. There was plenty of naming and shaming from February, March and April onwards. It was in the newspapers and in our postbags—day in, day out—so we knew who was being named and shamed, but they did not move, adjust or go backwards. What made the difference was not the pure act of naming and shaming, but protests—protests that were painful and unwanted, such as blockading dairies. Thousands of farmers confronted a Minister across the road from here. He was doing his job by facing up to it, but he was confronted by angry farmers demanding action. The Minister then went away and banged heads together. It was not naming and shaming in the local papers or even naming and shaming every day on the front pages of The Daily Telegraph or the Daily Mail that made a difference. What worked was farmers coming together to say, “This is not working; we have got to do more”. We should not have to resort to that, which is why I say in all honesty to Ministers, “Please do not rely on the single tool of naming and shaming. The message going out to the retailers is that you are not serious. You must have the tool in the back pocket ready to use in case it is needed.”
The third aspect is the need to put the power to fine on the face of the Bill. This is supported not only by Members on both sides of the House, as we have said, and by many in the other place who debated the issue and argued strongly for it. I shall not read them all out, but the need for the power to fine is also supported by War on Want, Traidcraft, the world development unit, the Country Land and Business Association, the National Farmers Union, NFU Scotland, the Farmers Union of Wales, the Ulster Farmers Union, the Association of Convenience Stores—the voice of local shops—Fair Deal Food, Action Aid, Banana Link, CAFOD—the Catholic Agency for Overseas Development—the Campaign to Protect Rural England, the Church of England and the Women’s Institute. For goodness’ sake, work with us on this one. We will help Ministers to become heroes if they listen to those voices, as they cannot all be wrong, even if I am. Those organisations represent people right across the supply chain. They include the Federation of Small Businesses for goodness’ sake; it is everybody.
I will not read out the early-day motion that the Minister signed once upon a time. [Hon. Members: “Go on!”] No, I will not; it would be unfair. I know, however, that in his heart of hearts, the Minister believes that this is the right course of action, as we have had this discussion before in debating chambers. When we talk about teeth, it does not mean the beast in front of us at the moment. It means having those penalties on the face of the Bill.
Let me move on to the excellent contributions to the debate, as I think the case for having financial penalties is overwhelming, clear, compelling and unarguable. We began with the contribution by my shadow ministerial colleague, my hon. Friend the Member for Edinburgh South (Ian Murray). It was an excellent opening to the debate. In welcoming the Bill, he was consensual, but his speech was also challenging where it needed to be, which is what we as the Opposition should do.
The hon. Member for Thirsk and Malton (Miss McIntosh), the Chair of the Environment, Food and Rural Affairs Committee, delivered a powerful and, as usual, forensic analysis of the Bill. Like all of us she welcomed it, but she also drew attention to shortcomings which I hope we shall be able to explore in detail in Committee.
My hon. Friend the Member for Clwyd South (Susan Elan Jones) pointed out that if we got the Bill right, it would be good for consumers. The Minister will agree with her observation that it would promote best practice and fairness throughout the management of the supply chain, would allow for investment in the boosting of productivity and innovation, and, in so doing, would provide an opportunity to reduce costs for both producers and consumers.
We heard an excellent speech from the hon. Member for Camborne and Redruth (George Eustice), who has spoken about this and similar issues in other debates. Today, he spoke eloquently and with great experience about the need for the Bill to be strengthened. He has made that point consistently, not least when interviewed by the Daily Mail for an article published on 16 November. I commend him on that, although the Daily Mail is not my regularly reading material.
The headline above that article was
“Supermarkets that bully small suppliers will NOT face fines after ministers cave in to pressure”,
but I do not believe that Ministers are caving in to pressure. I believe that they want to do the right thing, and to listen to what the hon. Gentleman and others have said today. I hope that they are open to his argument, and that the Government Whips will enable him to serve on the Committee, where his experience and insight will be welcomed. I loved his observation that naming and shaming was the preferred stand-alone option of the British Retail Consortium. He wondered, as we did, why that might be.
The hon. Member for North Antrim (Ian Paisley) spoke powerfully—as he always does—for food production and processing industries throughout Northern Ireland. He called for the payment of a living wage in agriculture, and we thoroughly agree with him about that, as we do about much else that he said. He noted the strong support of the Ulster Farmers Union, and the individual support of its president, Harry Sinclair, for a significant strengthening of the Bill. He said that if the price-fixing by major supermarkets was occurring because they were a cartel, they should be—I think that these were his words—kicked where it hurts, which I am sure, in his mind, is right in the adjudicator’s office.
The hon. Member for Carmarthen West and South Pembrokeshire (Simon Hart) said that the position of Government Members on regulation was often misquoted, and that they were not against regulation but in favour of better regulation. That, he said, was exactly what was required in this instance. Poor regulation was the problem, he said, but the Bill represented good regulation and—again—should be strengthened. The ability to make a living in the countryside must be preserved, and that included the living made by the small farmers in his area. He said that he had received only one piece of correspondence saying no to fines, but dozens expressing the opposite view, so why should fines not be levied?
My hon. Friend the Member for West Bromwich West (Mr Bailey), the Chair of the Business, Innovation and Skills Committee, welcomed the Bill and the fact that the Government had adopted about 80% of the Committee’s recommendations. However, he focused on the shortcomings of the Bill and the need for it to be strengthened further. He clearly felt that naming and shaming on its own, without additional penalties in the Bill, would be insufficient.
The hon. Member for St Ives (Andrew George), who has done so much in supporting the Bill’s progress and in marshalling a grand coalition of partner organisations throughout the supply chain both in the United Kingdom and internationally, rightly acknowledged those organisations in a roll of honour, but also acknowledged the many parliamentarians in all parts of the House who have brought us to this point. I think that that consensus-led approach should continue in Committee, but that we should aim not simply to let the Bill roll forward and accept whatever is presented, but to improve it so that we get it right this time.
My hon. Friend the Member for Ynys Môn (Albert Owen) had a private Member’s Bill that tried to introduce precisely this position, and he reminded us that his preference, as expressed in his Bill, is for the term “ombudsman” rather than “adjudicator”. He welcomed the Bill, but bemoaned the delay. He alleges that was fashioned by Government Whips; I am sure that is not true. He called for penalties to be stated in the Bill and for Ministers to name and shame those who have lobbied against strengthening its provisions. The Minister who opened the debate declined to try out the excellent mechanism of naming and shaming, however. The Minister who will conclude the debate can take the opportunity to try that out, and we will then see tomorrow morning whether it has any effect. Who is against strengthening the Bill? What are the names of those who oppose strengthening it? I would like to know, as I am not getting any letters to that effect. Instead, I am receiving calls from a wide coalition of people, including Members of this House, for us to work together and strengthen the provisions. I am convinced the Minister who will conclude the debate wants that as well, and I am trying to help him. Indeed, I am trying to help both Ministers.
My hon. Friend the Member for Ynys Môn highlighted the possibility of the entire supply chain being open to investigation and possible sanctions, and asked how we would handle that. Will the Bill result in that happening? After all, these issues involve not only the relationship between the big retailers and the individual producers, but a wide and complex distribution network across the supply chain.
I chatted briefly at the side of the Chamber with my hon. Friend about this evening’s very disappointing breaking news about Vion, and another hon. Member has raised that, too. It is a major employer and economic force in many constituencies, including that of my hon. Friend. I hope the Minister will be able to give us some assurances as to what role the Government can play in trying to protect these jobs at Vion and the economic benefits they bring to many constituencies.
The hon. Member for Carlisle (John Stevenson) chairs the all-party group on food and drink manufacturing. He saw the Bill as a positive encouragement for the supply chain, recognising good practice—of which there is, indeed, a lot. He made a forensic contribution. Interestingly, I noted that he supported the proposal that penalties should be stated in the Bill, and he agreed that the adjudicator should report on its success in respect of the code and whether changes to its scope and remit might be needed. I hope the hon. Gentleman finds himself serving on the Committee—although I do not know whether he shares that aspiration.
My hon. Friend the Member for Bristol East (Kerry McCarthy) reminded us about the new farming Minister’s previous stalwart support for an adjudicator with real teeth. The farming Minister, who will conclude this debate, was right then, as I have told him before, and he can help us strengthen the Bill to get the right policy now as well. My hon. Friend also talked about the important issues of food waste and food poverty, and explained how those topics tie in with the Bill. She made a worthy contribution.
The hon. Member for York Outer (Julian Sturdy) said the Bill would be undermined if the adjudicator lacked the teeth it needed, and he described it as a referee without a whistle or a red card in his—or, I should point out, her—pocket. He is absolutely right. He said an adjudicator will have little impact without the metaphorical red card in its metaphorical pocket, and he rightly raised the spectre of the dairy crisis. He encouraged Ministers to show strength and to strengthen the Bill.
The hon. Member for South Down (Ms Ritchie) said that the Bill needed to produce lasting reform, and that it must redress the imbalance in the supply chain so that there is long-term sustainability and a real economic boost throughout the supply chain. She called for statutory teeth as being a necessity. She spoke, too, of the need for robust powers of investigation and enforcement, and the ability to receive representations without fear of reprisal. Indeed, the issue of anonymity and people being able to come forward without fear of reprisal was another common theme. The hon. Lady also commended the idea of fines for serious breaches of the code. She said naming and shaming alone was not good enough because it was not strong enough. She called for an emboldened Government who will strengthen the Bill.
The hon. Member for Ceredigion (Mr Williams) has great experience in one of the great farming areas of Wales, and he raised the Ceredigion test, asking whether the Bill was robust enough. His answer was, “We like the fact the Bill is here, but it doesn’t yet pass the Ceredigion test.” I suggest to him that if we work together, we can make it pass that test. He cited the Women’s Institute’s support for strengthening the Bill; it is about not just jam and Jerusalem, but adjudication.
The hon. Gentleman made a good point about accessibility and the adjudicator’s remit, and I look forward to amendments being tabled on the subject in Committee. He called for “Chwarae Teg”—fair play. My hon. Friend the Member for Llanelli (Nia Griffith) said that supermarkets had nothing to fear from a levelling of the playing field, and she rightly criticised the retrospective varying of supply agreements. What is that all about? It is the idea that a retailer or an intermediary can go back to a producer and say, “I’m sorry, you have to find some cost-cutting measures after the event.”
The hon. Members for Sherwood (Mr Spencer) and for Banff and Buchan (Dr Whiteford) are particularly affected by the Vion decision, and I hope that the Minister will respond on that. I am afraid that I do not have time to respond to all the comments that were made. The hon. Member for Tiverton and Honiton (Neil Parish) welcomed the Bill, as did my hon. Friend the Member for Glasgow North East (Mr Bain). My hon. Friend the Member for Hayes and Harlington (John McDonnell) spoke up for people working in these sectors. The common theme that emerged time and time again was a welcome for the Bill but the fact that it would not be quite right until we strengthened it.
The Bill is good, but it is not yet quite good enough. It has cross-party support to get it on the statute book as soon as possible but, as we have heard, it needs cross-party support to go further and give it real teeth. It was rightly noted in the other place that Labour’s fingerprints are all over the Bill, but so are the fingerprints of hon. Members who serve on the Select Committees on Business, Innovation and Skills and on Environment, Food and Rural Affairs, as well as the fingerprints of Back-Bench champions such as the hon. Member for St Ives, my hon. Friend the Member for Ynys Môn and many others. I say to Ministers and to all hon. Members, not least those who might serve on the Bill Committee, let us take the opportunity to make this not just a good Bill but a great Bill, and work together to make it so.
The Minister of State, Department for Environment, Food and Rural Affairs (Mr David Heath)
It is a pleasant and, for me, unprecedented experience to speak at the Dispatch Box on a Bill that has received a welcome from Members from all parts of the House without exception, and I am very pleased that that is the case. I think it is because they share, to paraphrase the hon. Member for Tiverton and Honiton (Neil Parish), a desire to see a system in the supply chain that is fair to the producer, fair to the processor, fair to the retailer, and fair to the consumer. That is what we are trying to achieve in the legislation.
There is ample evidence, not least in the Competition Commission report that, in some ways, provides the origins of the legislation, of an imperfect market in the grocery trade. The hon. Member for Edinburgh South (Ian Murray) said that that there was a monopoly position for the big supermarkets. Strictly speaking, it is not a monopoly. Classical economics requires us to call it an oligopsony, but that term is not used very often. There are powerful players in the retail sector: there are a few buyers and many sellers, which produces an imbalance in the terms of trade. That is why I am pleased to introduce the Bill with the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for East Dunbartonshire (Jo Swinson), from our sister Department. It is wonderful to have two Departments thinking and acting as one in government in introducing legislation of this kind, not least, as the hon. Members for Ogmore (Huw Irranca-Davies) and for Bristol East (Kerry McCarthy), and many others said, because I campaigned personally for the provision for a long time. Other Members who have spoken have been equally assiduous, or more so, in arguing that case, particularly my hon. Friend the Member for St Ives (Andrew George), who has worked very hard on the issue, and the hon. Member for Ynys Môn (Albert Owen). I loved his contribution: it was amusing, and most of what he said was well founded.
The measure has united—this, too, is unprecedented—the Chairs of the Select Committees on Business, Innovation and Skills and on Environment, Food and Rural Affairs. Select Committees do not always agree on absolutely everything, but both those Committees have had an opportunity to look at the measure in pre-legislative scrutiny. The hon. Member for West Bromwich West (Mr Bailey) kindly said that the Government listened to what his Committee said, and that they accepted 80% of its suggestions to improve the measure. That is how it should be; that is the whole point of pre-legislative scrutiny.
Let me make one point to those who have criticised the timing of the Bill. As far as this Administration are concerned, I reject that accusation. The Bill was introduced as a draft Bill in the first Session of this Parliament, as we promised, and it was introduced as a substantive Bill as the very first Bill after the Queen’s Speech in this second Session of Parliament. I find it difficult to understand how we could have been more urgent in our approach. There was fair criticism of the time it took for nothing to appear under the previous Government, but I do not want to be partisan in my approach. It is important to maintain the coalition of interests on both sides of the House in support of the Bill.
The Chair of the Environment, Food and Rural Affairs Committee, the hon. Member for Thirsk and Malton (Miss McIntosh), mentioned a few significant points, some of which were picked up by others. The most important initially was the business of indirect complaints and the capacity for anyone to bring forward a complaint. Let me make it absolutely clear that the Bill provides for any party to complain. It does not have to be the producer who is involved; it could be trade organisations or non-governmental organisations. Anybody who has information to put before the adjudicator should do so. Those complaints will be treated with anonymity, because it is part of the job of the adjudicator to ensure that that is the case. Yes, the adjudicator can take forward proactive investigations. If there is good reason to believe that an abuse of the code is going on, the adjudicator can take forward a proactive investigation.
The hon. Lady also asked about the recovery of costs and clause 10 makes that clear. She asked a perfectly proper question about the provisions for the transfer of functions or abolition, which she thought were slightly peculiar, but they are part of the Government’s normal process of inserting sunset clauses so that bodies do not persist simply because they were set up in primary legislation with no opportunity to repeal it at some stage in the future. There might need to be a significant change, a renaming, a merging of functions or any of the many other things considered as part of the Public Bodies Act 2011, so that is a perfectly proper provision.
The hon. Lady asked what the list of designated retailers was and it might be helpful to the House if I simply say who the 10 are. They are Asda Stores Ltd, the Co-operative Group Ltd, Marks and Spencer plc, Wm Morrison Supermarkets plc, J Sainsbury plc, Tesco plc, Waitrose Ltd, Aldi Stores Ltd, Iceland Foods Ltd and Lidl UK—[Interruption.] I cannot quite catch what the hon. Member for Ogmore is saying from a sedentary position, but I thought it was helpful to give the list of retailers included in the proposals.
I thought that the hon. Member for North Antrim (Ian Paisley) made a very thoughtful speech.
Miss McIntosh
Now that peace and unanimity is breaking out, will my hon. Friend return to the vexed issue of fines being imposed? We are a little envious that the Business, Innovation and Skills Committee has had its amendments incorporated and we would like 80% of our amendments to be incorporated at the same time.
Mr Heath
I will inevitably return to that point a little later, as it was raised by so many Members. Let me first, however, cover the other specific points mentioned in the debate.
The hon. Member for Carmarthen West and South Pembrokeshire (Simon Hart) asked about companies outside the big 10. He is absolutely right that they are not specifically included in the Bill as levy payers, but let us recognise that the big 10 represents 95% of the grocery trade. If we are successful in the application of the adjudicator in improving standards of contract compliance, that will feed through to the rest of the sector by competition alone, if nothing else. The hon. Gentleman also mentioned length of contracts. That is not specific to the code of conduct, but the matter can be properly investigated in the context of an abusive relationship. Where such a relationship exists, that will be laid bare by the process.
The hon. Member for Bristol East made some good points about food waste. She knows that we have engaged with her on that issue and will continue to do so. I think I have a meeting with her in the near future to talk about that.
A number of Members spoke with a great deal of experience of the sector from having worked on the producer side. The hon. Members for Camborne and Redruth (George Eustice), for York Outer (Julian Sturdy) and for Sherwood (Mr Spencer), my hon. Friend the Member for Brecon and Radnorshire (Roger Williams), and the hon. Member for Tiverton and Honiton all have direct experience of working in agriculture and could tell us about the sort of downward pressures that they know suppliers regularly experience. The hon. Member for South Down (Ms Ritchie) spoke about trade associations. I hope I have been able to put her mind at rest about that.
My hon. Friend the Member for Ceredigion (Mr Williams) raised a number of important points. He spoke about access to the code and, as I said, I hope I have given him some reassurance on that. He talked about changes to the code. That is an important point. According to the process set out in the Bill, the adjudicator can put forward for consideration changes to the code, but that proposal goes back to the Competition Commission for consideration before being put before the House. It is important that we maintain that linkage because fundamental to the Bill is the abuse that the Competition Commission identified between major retailers and their suppliers. It would be a great mistake for the House to substitute our opinion for the evidence adduced by the Competition Commission.
My hon. Friend also mentioned retrospectivity. Let me underline the point again. If an abuse is continuing at the time that the adjudicator is appointed, it is proper that he or she should investigate that abuse, but we have a strong principle in British legislation that we do not apply retrospectivity to something that occurred before the date that a particular statute comes into effect. Therefore it would not be entirely proper for the adjudicator to look at complaints within the terms of the code that pre-dated that appointment if they no longer continue.
Andrew George
My hon. Friend says that the code would not apply retrospectively, relative to the date of the statute. Of course, the statute came in on 4 February 2010. The Bill merely provides for the referee to enforce the code. Retrospectivity in respect of the statute therefore does not apply.
Mr Heath
I understand the point that my hon. Friend makes. If he would care to engage with Government lawyers on that point of law, I am sure we would be happy to engage with him. We can return to the subject in Committee or on Report.
The hon. Member for Llanelli (Nia Griffith) queried clause 15(10), and the hon. Member for Hayes and Harlington (John McDonnell) also thought it was a bit odd. Let us debate that in Committee. What is proposed there is a safeguard which we hope will not be used. It is designed to deal with the circumstances in which the adjudicator was swamped with spurious complaints which hindered him or her from doing their work. The adjudicator would be required to pare those complaints down to the categories set out there. It would not stop them taking information from any source, but it would stop them taking complaints from any source. As I have said, I do not envisage that that will be necessary and hope that it will not be, so it is a reserve power, but I completely understand the point made by the hon. Member for Hayes and Harlington that it is in some ways an unusual provision. It is certainly something we can discuss properly in Committee.
John McDonnell
The point I was trying to make is that if we have to amend the legislation in due course by statutory instrument, it would be better to design the new clause on the basis of the experience and recommendations of the review, rather than just reverting to type.
Mr Heath
I understand the hon. Gentleman’s point, and that is clearly something we can discuss.
The hon. Member for Banff and Buchan (Dr Whiteford) mentioned the very bad news about Vion UK, which I understand will affect not only her constituents in Strath of Brydock, but many others in Livingston, Portlethen and Broxburn, and my hon. Friend the Member for Brecon and Radnorshire mentioned the situation in St Merryn in Merthyr Tydfil. I can certainly give an assurance today that we will happily engage with colleagues in the devolved Administrations—most of those jobs are situated in Scotland or Wales—to see whether there is anything we can do to assist them in dealing with what will be a very significant event in the local economy. If there is anything we can do, I can give an assurance that we will do our best.
My hon. Friend the Member for Brecon and Radnorshire also talked about—
Huw Irranca-Davies
I would not want the hon. Gentleman to miss the opportunity to respond to the 20 Members who spoke in succession about strengthening the Bill by introducing fines, which was also referred to the hon. Member for Thirsk and Malton (Miss McIntosh), who chairs the Environment, Food and Rural Affairs Committee.
Mr Heath
No, I will not give way.
I want to talk very briefly about the voluntary code in the milk supply chain, which I think is an important development. It would not be policed directly by the adjudicator, and I do not want to give the impression that it would.
Let us talk about sanctions. This is clearly a serious conversation we need to have in Committee and on Report. My hon. Friend the Under-Secretary set out the Government’s position on naming and shaming. I do not entirely agree with the hon. Member for Ogmore, because I think that naming and shaming played a significant part in events over the summer relating to the dairy industry. I think that several of the large retailers were directly shamed by consumers into changing their tune about their intended reductions in the price of milk.
However, I accept that many Members have indicated that they would prefer to see fines from the start. There are arguments about why that should not be the case, including the fact that it would introduce a new legal process of appeal that would not be there if it was not introduced ab initio. I want to make it absolutely plain that only one thing has to be done by order, which is for the Secretary of State to bring in a tariff system on the advice of the adjudicator, so it is not a separate process for each infringement.
Mr Heath
I am sorry, but I really cannot give way at 9.58 pm.
Let us discuss what the effective sanctions are and make sure that we have got them right. The Government believe that we have got it right at the moment, but of course we will listen to what every Member has to say on the issue and ensure that we have legislation that is fit for purpose.
In closing, I think that we have had a very important debate. It means that we can go forward, perhaps not as heroes, as the hon. Member for Ogmore suggested, or as characters from grocery folklore, as the hon. Member for Ynys Môn said, but with something that will contribute to the well-being of our farming and retail industries. I believe that is right and commend the Bill to the House.
Question put and agreed to.
Bill accordingly read a Second time.