Public Bodies Bill [HL]

Debate between Earl of Sandwich and Lord Bishop of Exeter

Wednesday 9th March 2011 Lords Chamber

[The Earl of Sandwich]

My Lords, I can promise the Minister that we will move more swiftly on this amendment, which obviously has a much lower standing in the House. In moving Amendment 85A, I shall speak also to Amendments 174A and 174B in the names of the noble Lord, Lord Borrie, and the right reverend Prelate the Bishop of Wakefield, although I welcome the right reverend Prelate the Bishop of Exeter to this debate. I look forward very much to their contributions.

This is intended to be a helpful amendment, which is the first concerning the Office of Fair Trading in Clause 5 and Schedules 5 and 7, which I will come to later. It could be said to be a Cross-Bench amendment, since the proposal already has the approva1 of all political parties. It is simply a question of when and how the Government intend to act on this matter.

The background is as follows—I will be as brief as I can. A decade ago, in 2001, following a report by the Competition Commission, the four largest supermarkets signed up to a voluntary supermarket code of practice designed to encourage smaller suppliers and growers to enter the groceries market and to remove some of the obstacles in their way. However, those suppliers were unwilling to make formal complaints because of their effect on their relationship with the supermarkets and there was no means of enforcing the code. The Competition Commission was therefore asked to investigate further and, as a result of its report published in April 2008, the code of practice was updated last year as the groceries supply code of practice. All three political parties agreed to appoint an ombudsman, the groceries code adjudicator, as he is known, to monitor and enforce the revised code.

The new body, although independent of the Office of Fair Trading, is due to be housed within the OFT. Some confusion as to how this can be achieved if the Office of Fair Trading is to be abolished has already been expressed. I understand that functions of the Competition Commission and the OFT are to be merged. This has been confirmed to me by the Consumer Minister, Edward Davey, in a letter of reassurance. When he announced the Government’s decision to go ahead with the legislation last August, he said:

“We want to make sure that large retailers can’t abuse their power by transferring excessive risks or unexpected costs onto their suppliers. These sorts of pressures are bad for producers and bad for consumers—ultimately they can lead to lower quality goods, less choice and less innovation”.

So it is clear that the Minister’s heart is in the right place.

This is precisely why so many people would like the Government to go ahead immediately with the legislation. It has the backing of many organisations, which I shall not name today. It is also in line with the Conservatives’ new philosophy of stronger trading links with other countries. The reason for my interest in this is that I have for more than 30 years supported the efforts of charities and others concerned with fair trade, whether with developing countries or with smaller producers and farmers in this country. I also speak as someone who was involved in a small business in a rural community.

Why cannot the Government move a little faster on this? Is there some hesitation because of the power of supermarkets, which of course will have to provide the funding for the new office? The British Retail Consortium has consistently opposed the idea, but I remind the Minister that three major supermarkets, Marks & Spencer, Aldi and Waitrose, have now accepted that there will have to be a degree of monitoring and enforcement. Another cause for delay, as I have mentioned, may be the siting of the new office within an organisation that is being dismantled.

It is more than a year since the new code of practice came into force; it did so on Thursday 4 February 2010. I realise that this amendment is not the appropriate vehicle for this important proposal, but it carries a message from a wide section of the business and farming community. I therefore suggest that today would be the right time for the Government to give an early indication of the timing of this legislation and, better still, to accept these amendments, which would establish a groceries code adjudicator. I beg to move.

[The Lord Bishop of Exeter]

My Lords, I am pleased to speak to this group of amendments. I do so in the absence of the right reverend Prelate the Bishop of Wakefield, who regrets being unable to be in his place today. Five years ago, after a debate in the General Synod of the Church of England in which wide-ranging concerns were raised about the problems being experienced by farmers as a result of the buying practices of supermarkets, the church’s Ethical Investment Advisory Group agreed to investigate. In 2007, it produced the report Fairtrade Begins at Home: Supermarkets and the Effect on British Farming Livelihoods. I declare an interest because I wrote the foreword.

The report identified damaging practices around labelling, promotions, payments and contracts as well as other areas of dysfunctionality within the market. It carefully documented the harm inflicted on farmers and agricultural businesses by supermarkets’ buying practices. Pressure on price was identified as a particular problem in the UK dairy industry, an issue that is still of primary importance today, with the cost of production of a wide range of agricultural and horticultural products remaining significantly above the price received.

The report was submitted as evidence to the Competition Commission inquiry on the operation of the groceries market and the EIAG called on the Competition Commission to mandate the creation of an ombudsman—the case for that appointment has continued to be made—while at the same time pressing the Government, the Opposition and supermarkets to address the wide range of issues raised in our report.

Since 2007, there has been continued and systematic engagement with the major supermarkets in an attempt to encourage better practice and a more imaginative response to proposed regulation. There have been some improvements, such as supermarkets paying a premium for milk, working collaboratively to improve the efficiency of farmers in the supply chain and developing local sourcing initiatives for small suppliers. However, there is much evidence that serious problems remain, with examples of barriers to new products coming to market, or to scaling up supply, such as prohibitive payments for listing. Squeezes on the profitability and viability of primary producers, who find it hard to get fair prices, remain a recurrent complaint. This is particularly relevant for the dairy sector, beef production and pigs—both pork and bacon—where the price paid is often below the cost of production.

When the Government announced in August 2010 that it would establish a new groceries complaints adjudicator, an ombudsman, in the Office of Fair Trading, to adjudicate complaints from suppliers of breaches by supermarkets of the new groceries supply code of practice, many in agriculture and the food supply industry were encouraged to hope. That hope was further strengthened when we were further told by the Department for Business, Innovation and Skills that a draft Bill would be published later in 2010; that the Bill would be introduced in the second Session of Parliament; and that it would have teeth, including allowing for the possibility of introducing financial penalties if the naming and shaming of supermarkets was not working.

As the noble Earl, Lord Sandwich, has said, we are still waiting for action. The groceries supply code of practice has been in force since February 2010 and there is still no enforcement mechanism for it. Contrary to the intentions announced last August, no Bill has yet been published to establish the GCA nor has parliamentary time this Session been allocated. The issue is slipping. The noble Lord, Lord Henley, will recall that when I asked a question about this on 7 February, he replied that,

“there is a good chance that it”—

a Bill to establish the GCA—

“will start in another place first some time this Session, but I cannot give any precise timing at this stage”.—[Official Report, 7/2/11; col. 4.]

I am aware that the Consumer Minister has since announced plans to release a draft Bill on the groceries complaints adjudicator before the Easter Recess begins on 6 April, yet it remains a fact that difficulties in the groceries supply chain, which were identified more than a decade ago, are still waiting to be addressed as a matter of urgency. These amendments offer an opportunity for the Government to commit themselves to action and to put real flesh on the bones of their promises and to do so now.

I fully expect the Minister to resist these amendments but, should he do so, I hope that at the same time he will be able to give very clearly to this House further details of the nature and scope of the legislation that the Government have in mind and a clear statement of the timescale to bring such legislation into practice.