Groceries Code Adjudicator Bill [HL]

Baroness Randerson Excerpts

Thursday 28th June 2012 Grand Committee

Moved by

[Baroness Randerson]

45: Clause 9, page 3, line 17, leave out subsection (1)

[Baroness Randerson]

My Lords, Amendments 45 and 47 in my name relate to the ability to impose fines, which has been referred to and anticipated by several speakers today. Under the Bill, it is assumed that naming and shaming will be sufficient to bring errant retailers into line, which requires a specific second-stage decision by the Secretary of State for the adjudicator to be able to levy fines. I believe that this is a cumbersome process which will lead to delays, including, possibly, changing the behaviour of supermarkets. It would undermine the freedom and independence with which the adjudicator should be able to act.

The amendments in my name and those of my noble friends would remove references to the Secretary of State and would therefore allow the adjudicator to impose fines from the outset. Of course, the adjudicator does not have to impose a fine if he or she finds a breach of the code. He could simply admonish the retailer concerned and make recommendations. I fully accept that the loss of reputation for retailers would be the key punishment. A reputation takes years to build and can be lost in a day. Therefore, the loss of reputation will matter to them considerably. For some retailers, it may be that breaches are sufficiently frequent to justify fines. I believe that having to wait for the Secretary of State to make the decision to ensure that fines can be levied is lengthy, cumbersome and unnecessary.

The history of this legislation is rather tortuous. I say that with absolutely no criticism of my noble friend the Minister or this Government. I make no criticism of the previous Government. I am simply pointing out that it has taken years to get to this stage. We are now moving to a legislative basis. Let us not put any further hurdles in the way of a fully effective system.

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[Baroness Wilcox]

How do the Government plan to streamline the process of introducing the fines? Is that what the noble Lord is asking? I cannot give a definitive answer now as we need to discuss it in more detail before the next stage of the Bill. That would be the right way to do it, if the noble Lord does not mind. I can give one more answer, which I think is to the question asked by the noble Lord, Lord Browne. The Delegated Powers and Regulatory Reform Committee ruled that the procedures were appropriate and the Secretary of State can regularly be held to account at departmental Questions if he does not introduce the fines when Parliament considers them necessary. That partly answers the noble Lord’s question. If the noble Lord, Lord Knight, can wait until we consider Schedule 3, all will be revealed. I ask the noble Baroness to withdraw the amendment.

[Baroness Randerson]

My Lords, I thank the Minister for her detailed response. I also thank noble Lords who have spoken in this short debate in support of the amendments. I especially thank my noble friend Lady Byford for her very similar amendment aimed at the same thing. However, I am afraid that I am not reassured so far. Perhaps the answer will come when we get the definition of “swift” in the context of Schedule 3. I am not so far reassured that this process is not cumbersome. I retain the view that fines will have an important deterrent effect and that that effect will be sharpened if the fines are ready to be levied rather than subject to the approval of the Secretary of State.

The noble Lord, Lord Browne, made an important point. He said that the Bill does not give Parliament a role if the Secretary of State holds the view that there should not be financial penalties, although Parliament’s will is that there should be financial penalties—in other words, if the adjudicator’s report shows that the provision is not working as the Government optimistically believe that it will. The noble Lord, Lord Knight, pointed out that the practical implication of Schedule 3 is that fines will be levied in 2015 at the earliest. The Minister may well contradict that, but I would be very concerned if that were the case.

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[Lord Knight of Weymouth]

My Lords, if I am following correctly where we have got to, I am moving Amendment 50, which is in my name, and speaking to Amendments 51, 63 and 64. These are all amendments to Schedule 3 or Clause 12 and are to try to streamline the process, should we be unsuccessful in persuading the Government to have powers to fine from day one. In the exchange that we had on earlier amendments I got the impression from the Minister that she may be minded to concede a little on this, so I will be extremely brief to give her maximum time to elucidate on whatever concession she may or may not have available.

I remind the Committee that my understanding of how things stand is that the adjudicator would be established and would operate without fines. They would then perhaps do some investigations and find that they are not really having much of an effect with naming and shaming, so would recommend to the Secretary of State that the powers to fine would be useful to him or her. The Secretary of State would then make an order under Clause 9 but would have to consult a variety of people on whether to make such an order, as set out in paragraph 6 of Schedule 3. The order would then be published and we would have the time taken by Parliament to consider it. Eventually, it would be passed—at which point, the adjudicator has to issue guidance as to how he or she would then use the financial penalties and consult on that guidance. At the end of all that, the adjudicator would be able to use those powers to fine. In my judgment, that would take at least a couple of years, probably more, which is why I mentioned 2015 earlier. I am delighted, however, that the Minister is about to tell us that it is going to be a lot better.

[Baroness Randerson]

My Lords, I want to refer to Amendment 52 in my name. I will also be brief, as I am sure noble Lords will be relieved to hear. My amendment would simply remove paragraph 6 from Schedule 3. It fits neatly with my previous amendment, to which I spoke, because it removes the cumbersome nature of the consultation. Regarding the list of people to be consulted, in my experience with legislation the moment that you start being as precise as this is, the very next year it is out of date. Then you have to change the list by secondary legislation or amendments, and so on. It is also a strange list because it starts by being very precise and then goes on in very general terms:

“one or more persons appearing to the Secretary of State to represent the interests of suppliers”.

There is the same in relation to consumers and then, finally,

“(g) any other person the Secretary of State thinks appropriate”.

Why not just have general consultation and leave who is consulted to the common sense of the Secretary of State? Why not move to a much swifter process than this cumbersome list indicates? I urge the Minister to take this opportunity to think again about this aspect of the Bill.

[Lord Knight of Weymouth]

I apologise to the Committee. I should have set out what we are proposing as the streamlining. In essence, we are suggesting in Amendments 63 and 64 that the adjudicator could publish straight away the draft guidance about how they might use the financial penalties, so that we at least remove that stage in the process. I am looking forward to hearing what is said.

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[Lord Knight of Weymouth]

My Lords, in moving Amendment 78, in order to ease time a little, I shall speak to Amendment 82 in the next group, and in support of Amendment 87C tabled by the noble Baroness, Lady Randerson, which I support very much. They are all in connection with the annual report in Clause 14. Amendment 78 proposes that instead of reporting only when it occurs to the adjudicator that there is an issue on the code, he should have to report every year on the code’s effectiveness. That would be a more active stance and follows our concern that it should be a living code that is thought about regularly to make sure that it is always fit for purpose.

Amendment 82 reflects our wish that Parliament should have more of a role in respect of the adjudicator. Although we appreciate that the annual report, once given to the Secretary of State, would then be published and that Parliament would get a copy, it would be more satisfactory for Parliament to be listed as one of the organisations to which the annual report would be submitted.

Finally, in support of Amendment 87C, we think that the people who pay the levy to fund the adjudicator should be able to see clearly what are the operating costs. Whether they are paying a reasonable sum for the running of the adjudicator should be transparent. If Amendment 87C is accepted, so that the manner in which the levy is calculated by the adjudicator is regularly reviewed, that will provide the transparency that ensures that the adjudicator is not operating in a frivolous fashion. On that basis, I hope that the Minister is listening, as ever, and I beg to move.

[Baroness Randerson]

My Lords, I shall speak to the three amendments tabled in my name in this group, Amendments 85A, 85B and 87C. I shall take Amendments 85A and 85B first. As the Bill stands, the Secretary of State will review the adjudicator’s performance initially after two years and then every three years. The amendments provide that that review should take place initially within a year and then annually. We believe that the proposed two-year review period is too long before we hear anything about the achievements of and progress made by the adjudicator, and that a period of three years between reviews is too long.

If the adjudicator is doing well, retailers will change their culture and behaviour, and three years is a long time with no judgment on how the adjudicator is working. As I said earlier, it has taken a long time to get to this stage. It has taken six or seven years to get this far, so we need to know how the new system is working sooner than two years after the adjudicator has been established. I point out to noble Lords that, under the groceries code, retailers have to submit compliance reports to the OFT within 10 weeks of the end of every working year, so why should the adjudicator not report to the Secretary of State or be reviewed by him every year?

I turn briefly to Amendment 87C. Clause 15(4) sets out the detail of what the review must cover. This amendment would add a new paragraph (c) that would ensure that the Secretary of State considered both the funding for the adjudicator and how the levy was calculated. This introduces what is in many ways a different issue. It concerns the equity of a levy that is to be established on the basis that it will be set at a flat rate. This amendment introduces the concept that the levy might vary according to the amount of work done by the adjudicator in respect of each of the supermarket chains. In other words, those retailers who trouble the adjudicator a great deal by generating a lot of work—because there are a lot of complaints about them—will pay more than those retailers who generate hardly any complaints. Further, a flat-rate levy would not reflect the relative size of the different supermarket chains.

We do not have time to do so today but it would be interesting to look at the relative size of the 10 large retailers. Although they are the 10 largest, the biggest is significantly larger than the smallest of them. The flat-rate levy does not seem to reflect that. It will nurture a sense of unfairness among the retailers if there is no movement from a flat rate to a levy that reflects the amount of business that they have brought to the adjudicator—if I could put it that way. The Minister may give us some words of reassurance on this but, as a probing amendment, it is important to raise the issue this afternoon.

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[Baroness Randerson]

My Lords, I shall speak to Amendment 111A, which would amend Clause 19 by removing subsection (5) and replacing it with a new subsection. This concerns the same issue of the flat-rate levy. Clause 19(5) specifies that it should be the same for all retailers unless the Secretary of State decides otherwise and makes an order that allows it to reflect expense and time. My amendment does away with the first phase of the flat-rate levy. It is on very much the same ground as other amendments in this group. Mine would enable the Secretary of State to decide the criteria that should be applied for a variable levy.

I repeat what I said on Amendment 87C, which referred to this issue. There is a basic problem in that a flat-rate levy will not change behaviour because there will be no reward to retailers for avoiding getting into trouble and behaving well. We need to start on a strong footing and, as the noble Lord, Lord Knight, has just said, on an equitable footing that reflects the size of the different retailers. I am conscious that the Minister has said that she will deal with this issue when she responds to this group of amendments.

[Lord Teverson]

My Lords, I shall speak to Amendment 114, which is very straightforward. Under Clause 19(5), the Secretary of State must make an order to allow the adjudicator to differentiate. My noble friend Lord Razzall and I believe that the adjudicator should have this direct ability. Again, we have this indirect method of making decisions through the Secretary of State. I am sure that the Secretary of State has far more important things to do than decide the specific division of the levy among the small population of large retailers. If we are to have a serious adjudicator, we should give that person the authority to undertake that task. If we feel that the adjudicator’s decisions are wrong, I am sure that other provisions in the Bill will ensure that that is communicated to him or her.