All Debates between Lord Knight of Weymouth and Baroness Wilcox

Mon 27th October 2014
6 interactions (1,164 words)
Mon 16th July 2012
27 interactions (4,720 words)
Thu 28th June 2012
33 interactions (5,241 words)
Tue 26th June 2012
29 interactions (5,052 words)
Tue 22nd May 2012
2 interactions (2,691 words)

Consumer Rights Bill

Debate between Lord Knight of Weymouth and Baroness Wilcox
Monday 27th October 2014

(6 years, 6 months ago)

Grand Committee

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Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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My Lords, I strongly support this amendment. There are many good reasons to want to extend access to data for consumers of both private and public services. When Tim Berners-Lee famously invented the world wide web, he as famously said, “This is for everyone”. The use of digital products and services is something on which consumers are demanding movement, given that they observe a concentration of power over the internet in five companies globally, and have an increasing concern over the privacy of their data.

To give those consumers access to their personal data, as a starting point, is a way of giving more public reassurance about how their data are being collected and stored. It is also important in respect of innovation in the delivering of services. We have seen in public service delivery terms some of the innovation around the use of personal budgets. The ability to bring together services is an aspect that the use of personal budgets has demonstrated. That in turn can be significantly enabled by the use of personal data.

The register shows that I am the chair of the Tinder Foundation. It is nothing to do with the dating app, more to do with the organisation that runs all of the UK online centres. It is the main digital inclusion delivery organisation here in the UK. I am aware of the issues around exclusion by dint of access to technology and access to age; but I am also aware of some of the extraordinary stories of how people using data and using technology are able to join services together and improve their own personal outcomes.

I am also deputy chair of the Nominet Trust, which is a trust funded by Nominet, which registers domain names, to invest in social innovation, and I see some of the extraordinary innovation that is starting to come through from, largely, the voluntary sector, but also the private sector and just occasionally the public sector. It is that innovation that I am particularly keen to see. So I am delighted to see in this new schedule a section around access to information on public services.

If, for example, I had a chronic health condition and I went to see my GP, it would be great if the GP could say, “License to me just for five minutes, so I can put them through this digital tool, your shopping data from, say, Tesco, along with some of your health data, and some of your housing data”. The GP could see my lifestyle through the temporary licensing of personal data and then be able to give a much more accurate diagnosis of what was going on, how I might make some lifestyle changes and perhaps reduce my reliance on prescription drugs because some other behavioural changes can have a better outcome than use of those drugs. Similarly, I can see how advisers working for Jobcentre Plus could join up data on a temporary basis and provide a much more personalised service for people. Also, when I look at the GOV.UK site for its explanation of midata, it gives the important reason of improving buying choices for consumers as one of the reasons why it has set up midata.

This amendment is exceptionally modest in what it asks the Government to do. It is asking the Government merely to report. It is not really asking the Government to do very much except tell us what is going on. In that respect it is highly flexible; it accepts that there may implicitly be some burdens on small and medium-sized enterprises and that the Government will need to tell us which regulated persons should provide consumer data—so it is perfectly reasonable in the way that it has been drafted. It is the natural next step on from the Data Protection Act to the Enterprise and Regulatory Reform Act of last year that we should be pushing further on this. These digital services are moving extremely quickly, and it is important that this Parliament shows the same agility that is being shown in the outside world. I strongly support these amendments.

Baroness Wilcox Portrait Baroness Wilcox (Con)
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I found it quite frightening listening to what the noble Lord was saying there. That sounded like the beginning of a great fire that he was putting his foot into. I go to my doctor and give him permission to find out data from me: where I shop, where I do this, where I do that. It is a simple thing to say, but where does it move next? I go to my moneylender and he says, “Well, tell me about this, give me permission to see that”. This sounds terribly frightening to me.

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Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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The noble Baronesses articulate concerns that I know are active, and they do a great job in doing so. I am not suggesting that doctors should have rights to any of that data but that it would be up to the individual patient as to whether they temporarily license that data, to assist—

Baroness Wilcox Portrait Baroness Wilcox
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A patient who has gone to a doctor is more than likely not feeling well and is frightened and looking for any help they can get. It is so easy to say yes and to open up that can. It is such a dangerous subject to put in as a lightweight amendment to a Bill like this.

Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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My Lords, I was using an example that I thought was perfectly realistic. We have seen with the furore around how care data have been handled or mishandled by the Government that the subject of health data is very sensitive, so perhaps I should have used a different example. However, personally, I am of the view that there are times when I want people who are advising me and the professionals assisting me to have rich sources of information about me and my condition, and that is a decision that I can make.

We need all to ensure that we are properly informed as consumers—and this legislation is trying to do that. To me, data are not a scary thing as long as we have proper individual rights over them. What scares me is that I cannot see what data people have about me and I cannot see how other people are using them. I may have some rights through the Data Protection Act but that does not give me any rights to see digital data. It gives me rights to see things on paper. Tesco can come and deliver in a pantechnicon all the data that it has about me, but I cannot then manipulate the data, which is in the end what I would really like—the ability to see them, manipulate them and then decide what I want. There are examples where you might want to use some of your data and license them on a temporary basis to people who then advise you so that they can better personalise their services. But that is a debate that this House should and I am sure will have.

Groceries Code Adjudicator Bill [HL]

Debate between Lord Knight of Weymouth and Baroness Wilcox
Monday 16th July 2012

(8 years, 10 months ago)

Lords Chamber

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Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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My Lords, this side is entirely supportive of my noble friend’s amendment. I simply ask the Minister if she could briefly update us on her conversations with the noble Lord, Lord True, and his concerns about plain English and the sense of the preambles in the Bill, which were raised in the last moments in Committee.

Baroness Wilcox Portrait The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
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My Lords, the issue of plain English was raised at Second Reading. It was revisited at some length in Committee. The Government have considered this further. Noble Lords will recall that we discussed the possibility of saying, “There will be an adjudicator” or “There shall be an adjudicator”. I am glad to say that the proposal in the amendment in the name of the noble Lord, Lord Browne, is consistent with previous Bills and, I hope, clearer for those reading the Bill. In the spirit of this, and having heard the positions of several noble Lords in Committee, I would be happy to accept the amendment in the name of the noble Lord, Lord Browne.

As to an update on my conversations with the noble Lord, Lord True, I have a fulsome response for him later in the proceedings. Perhaps the noble Lord, Lord Knight of Weymouth, will kindly leave it until then for me to respond.

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Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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I am struggling with the Minister’s argument that the amendment in my name and the names of other noble Lords jeopardises the independence of the decision-making. All we are seeking to do in Amendment 2 is have a review by the Office of Fair Trading. There is no presumption about what the outcome of the review would be; we are just suggesting that there should be a review. And in Amendment 26 all that is being suggested is a slight change in emphasis. I respectfully suggest to the noble Baroness that it ought to be a happy compromise for the adjudicator to report annually on the effectiveness of the code. If the adjudicator independently thinks that the code is working fine, he or she should say so. If he or she thinks that there is a problem, he or she should say so, every year.

Baroness Wilcox Portrait Baroness Wilcox
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I hope that I have not been too wordy in my response. It is just that there was a real point of principle here. I felt it was worth going over the ground to make sure I had made it clear that we did not feel that these amendments were relevant at this time. I repeat that responsibility for oversight of the code lies with the Office of Fair Trading under Section 162 of the Enterprise Act, not with the adjudicator, as Amendment 26 would have it, nor with the Secretary of State or Parliament, as Amendment 2 seems to set out. Equally, it is for the competition authorities to decide whether to amend the code, not the Secretary of State, as the noble Lord, Lord Whitty, proposed. I hope that I have clarified the Government’s position.

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Baroness Wilcox Portrait Baroness Wilcox
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My Lords, before I get any further I would like to thank the noble Lord, Lord Cameron, for supporting me, and I will of course respond to the noble Lord, Lord Knight, as well. First, however, I would like to respond to the noble Lord, Lord Borrie, by saying that the role he mentioned is much more significant to the economy as a whole; whereas this role, as he acknowledges, is much more specific, and as such we do not feel that the same type of scrutiny is required. I say to the noble Lord, Lord Knight, that I still feel that it would be inappropriate to lay down in primary legislation a requirement for Select Committee oversight. The procedure for pre-appointment scrutiny was clearly set out in the document published at the time of the previous Government and involves discussion between the Secretary of State and the chair of the relevant Select Committee, not primary legislation. As for whether the adjudicator is a significant enough office to warrant pre-appointment scrutiny, I consider that, despite its importance to the groceries sector, it is not significant enough according to the criteria set out by this Government. However, as any scrutiny would ultimately take place through a committee in the other place, I am sure that if the other place feels strongly enough on this topic then there will be further discussion on the issue at a future stage there. For the moment, I ask the noble Lord to withdraw his amendment.

Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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My Lords, the noble Lord, Lord Cameron, clearly has a relatively low opinion of MPs, which may be shared by others. I would not wish to test that for one moment. The Minister is probably right that it is up to the other place to try to assert the reputation of Members of Parliament, perhaps by shifting on this issue. The noble Baroness said that it is not general practice to set out Select Committee oversight in primary legislation. I am comfortable enough with that. If her ministerial colleague Norman Lamb is happy, when the Bill reaches the other place, to stand up and say, “Let’s please not put this in primary legislation, but we will refer it to the relevant Select Committees for confirmation”, that will do me. If the noble Baroness does not want this to be in primary legislation, that is fine. On the basis that the proposal lives to fight another day elsewhere, I beg leave to withdraw my amendment.

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Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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My Lords, I was ready to give an impassioned speech to try to persuade the noble Lord, Lord Howard of Rising, that he was wrong, but I think we have heard enough really good arguments from all sides of the House, so I will not delay the House by doing so. I will simply use the opportunity to thank the National Farmers’ Union, the Food and Drink Federation and the Federation of Small Businesses for their robust position on this, in saying that we should oppose these amendments.

Baroness Wilcox Portrait Baroness Wilcox
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My Lords, the question of who should be able to complain to the adjudicator has been discussed extensively: in consultation, at pre-legislative scrutiny, at Second Reading and in Committee. Along with most noble Lords who have spoken on this issue, the Government consider that the adjudicator should be able to consider evidence from any relevant source when deciding whether to commence an investigation.

The ability of the adjudicator to consider evidence from any source has been described by supplier groups as essential to the adjudicator’s operation. Furthermore, it simply makes sense. If the adjudicator has reasonable grounds to suspect a breach of the code, he or she should be able to initiate an investigation, no matter where the information came from.

My noble friend Lord Howard of Rising has explained that his concerns are motivated in part by the possibility of vexatious or malicious complaints and that is the issue behind Amendments 19 and 20. The Government certainly have some sympathy with this concern. No one wants to see the adjudicator’s time wasted or businesses put under a burden due to vexatious complaints. However, it is important that in the wording used we take into account what is customary as well as the need not to scare off legitimate complainants. As I said in Committee, this is intended to be a strong test directed at irresponsible complaints rather than simply erroneous or weak ones. I note also that the discretionary power to recover costs currently applies to the recovery of costs from both retailers and complainants. There seem to be few grounds for strengthening the requirement on one side without similarly strengthening it on the other. In either case the Government consider that the discretion provided by the word “may” allows the adjudicator to treat each case on its merits. The Government therefore consider that the Bill as it stands provides a necessary deterrent against vexatious complaints. The adjudicator can consider imposing costs on a complainant whose complaint is vexatious or wholly without merit but we do not think it should be mandatory or near-mandatory.

Regarding the amendment to produce an additional annual report, that would be an unnecessarily burdensome piece of bureaucracy. In paragraph 15 of Schedule 1 the adjudicator is already required to keep proper accounts and prepare a statement of accounts each year. These accounts would need to include any costs recovered from retailers or complainants. The application of the power to recover costs could be included in the annual report prepared under Clause 14. I therefore ask the noble Lord to consider withdrawing his amendment.

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Baroness Wilcox Portrait Baroness Wilcox
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My Lords, I do not want anyone to think we are lukewarm. We introduced this Bill as a priority and did so as soon as possible in this Session. Ever since we started discussing the establishment of an adjudicator, people have been concerned to know whether the adjudicator will have teeth. Central to that discussion has been financial penalties: should they be available at all, should they be a reserve power and how easy should they be to introduce? We are discussing now whether they should be introduced from the beginning. These are of course important questions.

We have carefully considered the sanctions available to the adjudicator and are convinced that this is indeed a Bill with teeth. The wide information-gathering powers, the ability to recover costs from retailers and the ability to raise a levy in a way that causes offenders to pay more all mean that no retailer will want to risk breaching the code. These aspects all ensure that those who breach the code will face a real cost.

However, more important is the sanction of “name and shame”, or the requirement to publish information as it is more properly known. I can assure you, as someone who has worked in this sector directly supplying supermarkets, that this will be an important deterrent, for reputation is extremely important to our biggest retailers. My noble friend Lord Howard of Rising has just spoken from his own experience in support of this. No retailer will want to be publicly named and shamed as having breached the code or having been found against for an action that does not appear to be fair or right. Every customer who goes into that shop will know that this has happened. Furthermore, every retailer will know that financial penalties are in reserve and that, with the amendments the Government tabled last week, they can be brought in very swiftly. Clearly, all retailers will want to avoid this.

I have shown that the adjudicator has teeth. I have shown that the existing powers and sanctions are sufficient to hold retailers to account and give them a clear incentive to obey the code. However, that is not enough. It is not sufficient to show that introducing fines from the outset is not necessary, since people could justly say that we might as well give the adjudicator the power just in case. However, if the power to impose financial penalties is granted, it is very likely to be used. Obviously, each case will be treated on its facts but enforcement authorities will tend, over time, to use the full range of sanctions available to them. That is why I would like to set out why the Government believe that introducing financial penalties from the outset is not only unnecessary but actively undesirable. The reasons for this are twofold. The first concerns proportionality and the second concerns culture.

We must remember that this is a very difficult time for business and our economy is going through a troubled period. Although regulation is sometimes necessary, we must strive to ensure that it is proportionate, so as not to impose unnecessary costs on business. We must also remember that the large supermarkets do a great deal of good for our country, as was confirmed by the Competition Commission in its report. As well as providing employment, their fierce competition has provided unprecedented choice for consumers and driven down food prices in recent years. Currently, with many ordinary families feeling the pinch of both wage freezes and inflation, the big supermarkets’ contribution to keeping prices down is particularly important. The fact that they have to compete with each other publicly, for us all to see, is equally important and another reason why being named and shamed in the middle of all this is not going to please any supermarket group.

Of course, the Competition Commission also found problems in the use of buyer power with respect to suppliers—that is why we are introducing this Bill. However, this is a sector that is fundamentally working well, and that is why we should strive to regulate it in as moderate a way as possible, unless and until it is shown that this is not effective. If compliance with the code can be achieved through “naming and shaming”, that will be far better than imposing fines, the cost of which might ultimately be borne by the consumer anyway.

The second reason for preferring a regime without fines concerns the culture that we are trying to create. The issue of culture was discussed very helpfully in Committee by the right reverend prelate the Bishop of Wakefield and is something I would like to return to. The goal of this Bill, and of the great majority of us in this Chamber, is to encourage retailers to comply with the code. It is not to punish them—that helps no one. It is to make sure they treat their suppliers fairly. The question is how best to encourage that culture of compliance.

The Government believe that the best way is through a proportionate, regulatory regime, focusing on advice, guidance, investigations and name and shame, backed by the threat of financial penalties in reserve. In such a way, the retailers will be encouraged to comply with the code. A punitive, adversarial culture, such as that which would be created by financial penalties, could also work—but much more slowly and at a much higher cost.

I ask noble Lords whether they would prefer that the adjudicator carries out four investigations a year, in each one identifying breaches of the code and correcting them, or that he or she carries out just one, imposes a financial penalty and then gets bogged down by a lengthy court battle as the retailers fight appeal after appeal? Make no mistake, if fines are needed, they will be brought in. The Government are very clear on this. The amendments I have tabled, which noble Lords will be discussing shortly, demonstrate our intent. By removing the double layer of consultation and by allowing the adjudicator to publish guidance on fining prior to being given the power to impose fines, we have ensured that fines can be brought in swiftly if necessary. However, we should first give the more moderate regime a chance.

One might expect the suppliers would push for the retailers to face the maximum penalty. That is their right. However, they have also acknowledged the need to be proportionate. I cite the briefing of the British Brands Group, which has said that fines are “not essential” and of the NFU, which has said that it will not be arguing for the Bill to be amended to allow fines from the outset, provided the Government’s amendments to streamline the process are accepted. If the suppliers are being so measured, should not the Government and Parliament also take a proportionate approach and decide on the most proportionate remedy that will be best for both the country and the economy as a whole?

This is already a Bill with teeth. I therefore ask the noble Lord to withdraw his amendment.

Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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My Lords, there we have it. The Minister started off by saying she was not lukewarm but then spoke with passion as to why the supermarkets should not be fined right now. That was lukewarm about fining supermarkets if ever I heard it. I am grateful to noble Lords who have spoken in this debate, all of whom, with the notable exception of the noble Lord, Lord Howard of Rising, supported fining in principle. I would urge the noble Baroness, Lady Randerson, and her party to vote with their principles rather than with the lame excuses that they have been given. I say to the right reverend prelate the Bishop of Newcastle that the Bill itself sets out how the powers to fine would be introduced, and it is perfectly clear that allowing the powers to fine from day one would not delay the passage of the Bill and the establishment of the adjudicator. However, if we do not pass this amendment, the adjudicator will begin without the powers that he wants and without the teeth that we need as the threat to make sure that people abide by this code. I would like to test the opinion of the House.

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Baroness Wilcox Portrait Baroness Wilcox
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My Lords, the question of financial penalties has been central to our deliberations on the Bill. It is, as we have heard today, an important question. The Government have consistently stated their view that financial penalties should be a reserve power, but that it should be possible to bring them in quickly if they prove to be necessary. At Second Reading and in Committee a number of noble Lords, including the noble Lords, Lord Knight, Lord Grantchester, Lord Razzall and Lord Teverson, and the noble Baronesses, Lady Byford and Lady Randerson, and others, expressed the view that the Bill as drafted did not achieve this. Noble Lords indicated that the process for introducing fines was unnecessarily slow and bureaucratic and that it should be simplified. After careful consideration, I agree that noble Lords were right that the process was too slow. The Government have therefore decided to bring forward these amendments.

The amendments draw on the inspiration of the noble Lords, Lord Knight and Lord Grantchester, in that they allow the adjudicator to publish guidance on how it would use financial penalties in advance of the Secretary of State making the order that would confer that power. This means that if the power is granted it can be used straight away, without the need for further consultation, provided that the adjudicator has already published the necessary guidance under Clause 12. To accompany the amendment to Clause 12, we have deleted paragraphs 4 and 5 of Schedule 3.

I would also like to touch on the need for the Secretary of State to consult before introducing financial penalties, an issue which the noble Lords, Lord Razzall and Lord Teverson, raised in Committee. We think that this provision needs to be retained as it would be inappropriate to introduce such a significant change with no consultation. However, my officials have examined the Bill and advised that this consultation could, if desired, take place simultaneously with a triennial review by the Secretary of State. That would further streamline the process if the introduction of fines were being considered at a similar time to a triennial review, although I remind noble Lords that an order under Clause 9 and Schedule 3 does not have to await a triennial review.

We have, as I say, also deleted paragraphs 4 and 5 of Schedule 3 to accompany the amendments to Clause 12. This means that fines could be introduced within six months of the need being identified. All it will require is a three-month consultation and an affirmative order. These amendments have been supported by three of the major supplier organisations: the NFU, the Food and Drink Federation and the British Brands Group. I hope that noble Lords agree that these amendments will significantly streamline the introduction of fines and that they are able to give them their support. I beg to move.

Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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My Lords, I am grateful to the noble Baroness for the concession which results from our debate in Committee. I would also like to take this opportunity to ask again the question that her noble friend Lord Plumb asked in the previous debate. Assuming that the adjudicator has consulted on the guidance around using the powers to fine, how long will it take, once the Secretary of State has made the decision, for these powers to be introduced?

Baroness Wilcox Portrait Baroness Wilcox
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I am delighted to answer the noble Lord’s question. Fines can be introduced within six months or so of the need being identified. I thought that I had just said that but I am very happy to repeat it.

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Baroness Wilcox Portrait Baroness Wilcox
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My Lords, I would like to propose government Amendment 28. I am sure that noble Lords will agree, whatever their perspective on the adjudicator, that it would be appropriate and helpful for a copy of his or her annual report to be laid before Parliament. This should improve scrutiny of the adjudicator both here and in the other place. I hope that noble Lords will welcome this, whether they look forward to taking the opportunity of the report being laid to bury the adjudicator or to praise him. I therefore beg to move.

Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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My Lords, I am going to mark this one down as a victory for us as we moved a very similar amendment in Committee. I would not want my noble friend Lord Browne to think that he had got two and I had not got any at all, so I am very grateful to the Minister.

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Baroness Wilcox Portrait Baroness Wilcox
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My Lords, I fully understand the sentiments behind these amendments. All three parties have expressed their agreement that an adjudicator is needed, and the Government have no wish to enable the abolition of the adjudicator without proper parliamentary scrutiny. I remind noble Lords that the intention of Clause 16 is to bring the Bill into line with the broader policy on sunsetting and review, and the need to ensure that regulations and regulators can be removed once there is no longer a need for them. It does not indicate intent to abolish the adjudicator or transfer their functions, but is simply standard practice.

The noble Lord, Lord Knight, suggested that the Government intended to set a precedent for the abolition of new public bodies by affirmative order. It may be the case that it is appropriate to require the abolition of some public bodies by super-affirmative order, but one must consider this on a case-by-case basis, depending on the nature of the body or office. In the case of the adjudicator, first, the adjudicator will not be a “body” in the usual sense of the word but an officeholder, with only a small number of staff who will be seconded rather than directly employed. The adjudicator’s powers will extend to only one area of the economy: the groceries sector. Furthermore, he or she will have a tightly defined role: to enforce the groceries code.

Furthermore, as I said in Committee, the Delegated Powers and Regulatory Reform Committee scrutinised the Bill carefully. The committee is dedicated to the inspection of the procedures for delegated powers, and the Government take its recommendations very seriously. Given the purpose of the Bill and its specificity regarding the functions of the adjudicator, the committee decided that the affirmative procedure would be satisfactory and proportionate in this case.

I thank noble Lords for drawing our attention to the important issue of parliamentary scrutiny. However, one must also consider the issues of parliamentary time and efficiency. The investment of resources required for the super-affirmative procedure would not be proportionate to the functions of the adjudicator. In accordance with the recommendations of the Delegated Powers and Regulatory Reform Committee, we are satisfied that the affirmative procedure is the most appropriate.

The noble Lord, Lord Cameron, asked about the Secretary of State’s review. It is referred to in Clause 15 and would require full consultation with retailers, suppliers and other stakeholders. Finally, the noble Lord, Lord Knight, indicated the importance of listening to committees of the House during the passage of the Public Bodies Bill. We are listening to the relevant committees on this Bill. Given these explanations, I hope that noble Lords will feel satisfied and will not press their amendments.

Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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My Lords, that was a brief but interesting debate. I am most grateful to the noble Lord, Lord Cameron, for his support. The comments of the Minister are now on the record—another demonstration of a somewhat lukewarm view of this body. I do regard it as a body rather than an officeholder. The super-affirmative procedure was used in respect of the Commission for Rural Communities, which was largely an office of the rural advocate. This is one of the many examples in the Bill of where the super-affirmative procedure is used.

This will be a very powerful body—much more powerful than some of the bodies that are being abolished using the super-affirmative procedure. The Minister talked on some occasions about the power of name and shame. On others, when it was convenient, naming and shaming was described as a less powerful ability. I disagree with her. However, given the oddity of the Bill—as my noble friend Lord Browne set out, the Government could get rid of the code without even coming to Parliament—I will not press this, because if they chose to do that without even the “by your leave” of Parliament, we would have a referee without any rules and it would be a straightforward matter to get rid of the post. I am happy to withdraw my amendment.

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Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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My Lords, I am supportive of all the amendments in this group. I suspect that a concession is coming the way of the Liberal Democrat Benches. While I have disagreed with virtually everything that the noble Lord, Lord Howard of Rising, has said on this Bill, he has made a valuable contribution to it and I think that he has got a point here. A graceful concession from the Minister on this one, too, would be wonderful.

Baroness Wilcox Portrait Baroness Wilcox
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My Lords, the amendments tabled by my noble friends Lord Howard of Rising and Lord Eccles are ones that we have discussed before. As I said in Committee, the Government’s intention to fund the adjudicator via a levy is clearly set out in the Bill and in previous policy statements, so I see no need to require an order to be made first.

Regarding the suggestion of consultation on any increase of the levy, my worry is that this would add unnecessary bureaucracy and inflexibility. The adjudicator’s workload will vary depending on the number of complaints received. In some years, it may have very few, in which case the levy needed would be small. In other years, it may carry out major investigations requiring considerable resources, and I remain convinced that the safeguard of requiring the Secretary of State’s approval is the best way to balance flexibility and accountability.

On the subject of flexibility, my noble friends have also tabled an amendment regarding the returning of any unused funds to the retailers. While I believe that “may” adds helpful flexibility, I can assure them that any unused funds would certainly be taken into account when calculating the size of the next levy, so that no more was raised from the retailers than was absolutely necessary. I would therefore ask the noble Lords to withdraw those amendments.

With regards to the amendments tabled by the noble Lords, Lord Razzall and Lord Teverson, and the noble Baroness, Lady Randerson, in Committee, I indicated that the Government were sympathetic to an amendment along these lines. The Government have always stated that the intention should be that as soon as he or she has sufficient experience, the adjudicator should move to a differential levy. After consideration, it therefore seemed unnecessarily bureaucratic to require an order to be passed before this could be done and I am grateful to the noble Lords for bringing forward this amendment.

The fact that individual levies would still need to be approved by the Secretary of State will provide an adequate safeguard against abuse. Furthermore, the ways in which the levy can be raised are clearly specified. The levy must be the same for each retailer or else based on criteria broadly intended to reflect the expense and time the adjudicator expects to spend in dealing with matters relating to each retailer. It could not, for example, be proportional to turnover as that would not fit these specifications.

Noble Lords have said that they wish to see a system in which those who behave badly pay more. The Government concur with this sentiment and I am therefore happy to accept this amendment.

Groceries Code Adjudicator Bill [HL]

Debate between Lord Knight of Weymouth and Baroness Wilcox
Thursday 28th June 2012

(8 years, 10 months ago)

Grand Committee

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Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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My Lords, with all respect to the noble Viscount, we have amendments coming up later regarding the powers to fine. All that we on this side want to do at this stage is say that he will not be surprised that we disagree with him, and that we will explore at greater length the reason why. Suffice to say that the Federation of Small Businesses, the National Farmers’ Union and the Country Land and Business Association, to name but three of the submissions that I have had, think that we should go further on the powers to fine than the Bill does. We have support from across the House; the noble Lords, Lord Razzall and Lord Teverson, my noble friends Lord Borrie and Lord Grantchester, and the noble Baronesses, Lady Randerson and Lady Byford, have all put their names to amendments that say that we should go further. We think that the status quo is the minimum. The Select Committees of BIS and Defra are also supportive of the powers to fine. I am happy to leave it to the Minister to persuade her noble friend that he should withdraw his amendment.

Baroness Wilcox Portrait The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
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There is a challenge to start the day on. Our discussion on my noble friend Lord Eccles’s amendment is the first discussion today on financial penalties although I know that we have more to come, as the noble Lord, Lord Knight, has just said. As I said at Second Reading, the Government believe that the enforcement methods of recommendations and requirements to publish—so-called “name and shame”—are likely to be sufficient to ensure a higher level of compliance with the code. However, should those powers be insufficient, it is important to have the reserve power of allowing the adjudicator to impose financial penalties.

Before I continue, I say to my noble friend that here he has someone who understands supermarkets and these large companies and how they work. I have said before and will say again that I was a supplier to six of the largest supermarket groups. I ran a successful and happy business during that time, but of course I did it in the 1980s and in those days there was no written contract for chilled food at all. I had no written contract, so every time I filled a lorry with £50,000-worth of smoked salmon or smoked mackerel I could not even get insurance on it because I did not have a contract that I could show anyone. I took a risk in making those journeys every day but it was advantageous to me to do so. I am fully aware, as are the Government, that there is a relationship between the supermarkets and their suppliers and, ultimately and inevitably, to the consumer.

The Secretary of State would not activate this power lightly. The process by which he could do so is set out in detail in Schedule 3, but key aspects include the fact that the Secretary of State may make such an order only if he or she thinks that the adjudicator’s other powers are inadequate, and that before making such an order the Secretary of State must consult a range of parties, including the large retailers and the representatives of suppliers and consumers. The Bill provides sufficient checks to ensure that the power is introduced only if it is genuinely needed.

Maintaining the possibility of imposing financial penalties is essential if we are to be confident that the adjudicator will have the necessary powers to enforce the groceries code. The noble Viscount, Lord Eccles, was worried about the reasons for not prescribing the maximum fine in the Bill. It is more appropriate that such a maximum be informed by experience; for example, of how much retailers might be gaining from non-compliance. This experience can be gained only once the adjudicator is operational. Should the Secretary of State make an order to introduce fines, the order must specify the maximum penalty that may be imposed or how the maximum penalty is to be calculated.

The very existence of the reserve power will contribute strongly to ensuring compliance with the groceries code. Large retailers will be conscious that there is the prospect of a swift introduction of financial penalties if there is evidence of significant non-compliance with the groceries code and the existing regime seems not to be sufficiently effective. Clearly, all large retailers will prefer to avoid this situation arising.

The Bill’s provisions on financial penalties both encourage compliance with the initial enforcement regime and provide an important reserve power should stronger methods of enforcement be necessary. I therefore propose that the provision stand part of the Bill and ask my noble friend to withdraw his amendment.

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Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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My Lords, I rise in support of my noble friend Lord Browne’s position, which he articulated very well. The noble Lord, Lord Howard of Rising, has raised an interesting issue. The Competition Appeal Tribunal came into force in 2003 in order, as its website says:

“To hear appeals on the merits in respect of decisions made under the Competition Act … by the Office of Fair Trading … and the regulators in the telecommunications, electricity, gas, water, railways and air traffic services sectors”.

It does a few other things as well. The noble Lord is asking the Government a reasonable question about whether there should be an alternative to the court in respect of appeals. As my noble friend has said, this is about the merits of the decision as well as the process by which the decision has been made. I look forward to what the Minister has to say.

Baroness Wilcox Portrait Baroness Wilcox
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My Lords, much of the debate about sanctions today has focused on financial penalties. However, I value the opportunity to discuss the rationale behind the other enforcement powers available to the adjudicator. The noble Lord, Lord Howard of Rising, has brought forward two amendments which would together extend the right to a full merits appeal so that it applied to all the enforcement methods and would be to the Competition Appeal Tribunal. The Bill already provides for a full merits appeal to the court against financial penalties, if these are introduced. In the case of recommendations or the requirement to publish information, the Government believe that judicial review is more appropriate.

In the case of recommendations, it must be emphasised that these are non-binding on retailers. There is no consequence which follows if the retailer does not comply, other than the possibility of a further investigation, which could lead to the imposition of a further sanction only if a further breach of the code were found. We therefore believe that, in this case, a full merits appeal would be clearly inappropriate.

The Government acknowledge that for the requirement to publish information the arguments are more finely balanced. However, having considered this in depth, we believe that judicial review remains the most appropriate form of appeal. The reasons for this were set out in the Government’s response to the BIS Select Committee’s report. They include the independence and impartiality of the adjudicator and the breadth of matters that an investigation is likely to consider. The critical difference between the requirement to publish and a financial penalty is that in the latter case there is a very direct and immediate consequence for the retailer, whereas a publication of information is rather different. It should be remembered here that this information will not in itself determine that a retailer has any obligation to a particular supplier. The supplier would still need to bring his case to arbitration to seek damages or any other remedy.

Finally, we have also taken into account the implications that a full right of appeal against a mere requirement to publish could have for the effectiveness of the adjudicator. A full right of appeal, requiring the repetition of a detailed fact-finding exercise, could seriously delay the requirement to publish and so substantially diminish its impact. Taking these matters into account, the Government consider that a full right of appeal is needed only against financial penalties and that otherwise the possibility of judicial review by the court will be sufficient.

In addition, the noble Lord seeks to replace the principle of appeal to, or review by, the High Court or Court of Session with appeal to, or review by, the Competition Appeal Tribunal. While the adjudicator is being introduced on competition grounds, the details of the practices addressed by the groceries code are not the same as anti-trust cases or the other issues dealt with by the Competition Appeal Tribunal. The High Court or Court of Session in Scotland is therefore an appropriate place for such appeals to be heard.

However, I have listened to your Lordships today who support what the noble Lord, Lord Howard, has said or want to question this issue further. Therefore, I am willing to consider this point and will invite the noble Lord, Lord Howard, to a meeting, as well as any other noble Lords who spoke, including the noble Lords, Lord Borrie and Lord Browne, the noble Baroness, Lady Byford, and the noble Viscount, Lord Eccles.

I turn to the amendment proposed by the noble Viscount, Lord Eccles. The Bill contains clear requirements for the adjudicator as to what they must specify to the retailer if they require a retailer to publish information. The noble Lord has suggested that these be removed. I believe that it is important that if a retailer is being asked to publish information, it should be told what information it must publish, how the information should be published and the time by which it must be published. Otherwise, the instruction will be unclear or it could leave too much discretion to the retailer concerned. Given that this is a means of enforcement to be used following a breach of the code, I also believe that it is reasonable for the adjudicator to be able to specify what information is to be published, as well as when and where it is to be published.

Accepting this amendment would make the Bill less clear and would weaken one of the adjudicator’s means of enforcement. In asking the noble Lord, Lord Howard, to withdraw his amendment, I repeat my offer to him to meet me and my officials.

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Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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My Lords, I will not add to the excellent case made by my noble friend Lord Browne, but he has my support.

Baroness Wilcox Portrait Baroness Wilcox
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My Lords, the point raised by the noble Lord, Lord Browne of Ladyton, is important and the Government have considered it carefully. It was also raised by the Business Select Committee in pre-legislative scrutiny, as the noble Lord mentioned, and the Government amended the Bill in response. I take the opportunity to respond to the noble Lord, Lord Borrie, who asked whether the Bill already allows such escalation. That is not our intention. In Clause 6, subsections (a), (b) and (c) are not intended to be sequential. One or more measures would be imposed at the same time following one investigation. I hope that that is helpful.

The question is: what should be the adjudicator’s options if a retailer does not follow a recommendation? Before answering this question, I emphasise two things. First, recommendations are not mandatory. If they were, that would give too much power to the adjudicator: he or she could essentially tell retailers how to run their business. Recommendations are meant to be the lightest touch form of sanction, not the most severe. Secondly, there may be good reasons why a retailer has not followed a recommendation. For example, a retailer might decide that it can more effectively comply with the code using a different method than that recommended by the adjudicator.

Having said that, there must be some way in which the adjudicator can follow up recommendations. After considering the BIS Select Committee’s report, the Government chose to provide for this in three ways. First, Clause 7(2) requires the adjudicator to monitor whether a recommendation has been followed. Next, Schedule 2, paragraph 1(2) provides the adjudicator with powers to require information from a retailer for the purpose of monitoring whether a recommendation has been followed. Thirdly, Clause 4(1)(b) allows the adjudicator to begin a further investigation if there are reasonable grounds to suspect that a retailer has failed to follow a recommendation. It is possible that a failure to comply with a recommendation could indicate that a retailer was continuing to breach the code, but a new sanction could be imposed only if a further investigation found that this was the case. Taken together, these clauses provide an effective means for the adjudicator to follow up a recommendation while still being fair to the retailer in question.

My concern about the amendment in the name of the noble Lord, Lord Browne, is that to impose a new sanction without a second investigation could be unfair and damaging to the retailer. After all, just because it has not followed a recommendation does not mean that it has actually broken the code.

I hope that noble Lords will agree that the Bill as it stands already encapsulates the principle embodied by Amendment 40.

Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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With respect, I do not think that the Minister has properly addressed the notion that at some point, reluctant as the Government may be, they may agree to the adjudicator having the power to fine. If naming and shaming has not worked, then surely it is reasonable for the adjudicator to escalate to impose fines without having to reinvestigate, with all of the delay consequential to that, before using the power to fine. Is this just an indication that in reality the Government do not ever want to offer the adjudicator the power to fine?

Baroness Wilcox Portrait Baroness Wilcox
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That cannot be the case, because we have made an arrangement that fines can be imposed, though it will be the Secretary of State who allows that. Yes, if there is a continuing breach—not just a failure to follow a recommendation—obviously that would be the response.

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Baroness Wilcox Portrait Baroness Wilcox
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My Lords, the question of financial penalties has been one of the most hotly debated throughout the development of this policy. As the BIS Select Committee acknowledged at pre-legislative scrutiny, the point is finely balanced. The Government believe that the remedies already provided—to recommend changes and compel the offending retailer to publish information about the breach of the code—will be sufficient and will provide a more proportionate means of enforcement. In a highly competitive market, these powers, in particular the ability to name and shame large supermarkets, will be effective in enforcing the code. If naming and shaming had ceased to be news there would be a good argument that it was inadequate, but it is news. Big supermarkets competing with each other will not wish to see themselves named and shamed in front of their competitors, who would be only too delighted.

Furthermore, as I mentioned earlier, the very existence of the reserve power to fine will contribute strongly to ensuring compliance with the groceries code. Large retailers will be conscious that there is the prospect of the swift introduction of financial penalties if there is evidence of significant non-compliance with the groceries code and the existing regime seems not to be sufficiently effective.

Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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I am grateful to the Minister. She uses the word “swift”. How long does she think it would take?

Baroness Wilcox Portrait Baroness Wilcox
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I am so sorry. Did you say that I was speaking too swiftly?

Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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The Minister used the word “swift” in her response just now. I would be grateful if she could indicate how long she thinks it will take.

Baroness Wilcox Portrait Baroness Wilcox
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It is a very good question but I am not sure that I have an answer—but I will come to it.

As I was saying, the very existence of the reserve power to fine will contribute strongly to ensuring compliance with the groceries code. Large retailers will be conscious that there is the prospect of the swift introduction of financial penalties if there is evidence of significant non-compliance with the groceries code and the existing regime seems not to be sufficiently effective. Clearly all large retailers will prefer to avoid such penalties being introduced. In answer to a question asked by my noble friend Lady Byford, we already have a strong right of appeal to the court on the merits against financial penalties.

One of the final points concerned culture and the Bill’s intention. The right reverend Prelate the Bishop of Wakefield mentioned the word “culture” and I was very pleased to hear it because that is really what much of this is all about. We do not want to punish retailers, as that does not really help suppliers or consumers. We want to bring about a culture change to ensure that the code is consistently followed. An adjudicator exercising proportionate powers provided that the strong fining powers are there in reserve has the best chance of achieving this change of culture. On the other hand, the introduction of fines from the outset would be far more likely to bring about an antagonistic relationship with heavy penalties imposed and retailers appealing every decision.

The noble Lord, Lord Browne, asked whether it is right to hand all the cards to the adjudicator now without the benefit of experience as to whether they are all needed. I respect that there are strongly held views on this issue. However, I believe that introducing the Bill as it stands will bring about the best result for suppliers. If fines prove necessary they can be quickly introduced, and I will be happy to discuss the mechanisms for doing so in a future grouping when we consider Schedule 3. I do not think that it would benefit the Committee to deal with those questions now. I therefore simply ask the noble Baroness to withdraw the amendment.

Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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I am grateful to the Minister. With respect, although I understand that we will come on to discuss Amendments 50 and 51 to Schedule 3, when the terms will be quickly and swiftly explained, perhaps the Minister could say—just to help us in the context of this debate—how many months she thinks it will take to go through the processes in Schedule 3.

Baroness Wilcox Portrait Baroness Wilcox
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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.

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Baroness Wilcox Portrait Baroness Wilcox
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My Lords, the amendments being discussed here are very interesting. However, in considering them it is important to remember the purpose of the financial penalties. The financial penalties in this context, if they are imposed, are supposed to be punitive rather than restitutory or to fund any particular activity.

The amendments of my noble friends Lord Teverson and Lord Razzall raise two difficulties with regard to paying any of the proceeds to a supplier. First and most fundamentally, an investigation does not determine the liability of a retailer with respect to any individual supplier. Given this fact, it would be inappropriate to pay all or part of the fine to the supplier. Any supplier who did wish to reclaim damages from a retailer would be able to do so using the arbitration provision in Clause 2.

The second reason is linked to the climate of fear. One of the key drivers of this Bill is the need to address this problem. One of the principal reasons for investigations, as they are set out in the Bill, is to allow suppliers to complain in confidence to the adjudicator, who can then carry out an independent investigation. If an adjudicator began making payments to individual suppliers, it would become obvious who had complained and open up those suppliers to potential retribution from a retailer.

I turn to the amendments of the noble Lords, Lord Knight of Weymouth and Lord Grantchester. Given that financial penalties are a civil sanction, it would be inappropriate for financial penalties to be paid to a supplier or to a third party which did work that supported the groceries sector. In accordance with the standard principles of managing public money, financial penalties are therefore to be paid to the Consolidated Fund.

Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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I have a quick question. If the proceeds of funds were transferred, let us say, to the regional growth fund for it to distribute, would that be in order?

Baroness Wilcox Portrait Baroness Wilcox
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I think not; I shall go back again. Given that financial penalties are a civil sanction, it would be inappropriate for financial penalties to be paid to a supplier or to a third party which did work that supported the groceries sector. I must refer back to the standard procedures for managing public money. Standard practice for such penalties is that they are paid into the Consolidated Fund. This is in accordance with common practice elsewhere in competition regulation. Fines imposed by the Office of Fair Trading are also paid into the Consolidated Fund.

Baroness Wilcox Portrait Baroness Wilcox
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I hope that my answer satisfies the noble Lord, Lord Grantchester. I ask him, therefore, to withdraw his amendment.

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Baroness Wilcox Portrait Baroness Wilcox
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My Lords, as has been mentioned, I listened very carefully at Second Reading when the subject of Schedule 3 was discussed. I know that many noble Lords feel that the process set out there is too clunky—I think that was the word that was used—and bureaucratic, and that it should be simpler and quicker. I assure the Committee that it was not the intention of the Government to introduce a clunky process, so this is something we are willing to look at, and if it is clunky we will need to amend it.

However, while the Government are willing to consider amendments in this area, I feel that those that have been laid today go a bit too far. In particular, the Government believe that financial penalties should be available only if the other powers are inadequate. After all, if the other powers are adequate, why do we need fines? We should not seek to punish the supermarkets for the sake of it, given the strong contribution that they make to the UK economy and to employment.

Similarly, I feel that stripping out consultation altogether is not appropriate for a significant measure. Evidence is important and consultation takes only three months. I believe it would be more appropriate to look to streamline and simplify that consultation process rather than eliminating it altogether.

The noble Lords, Lord Knight and Lord Grantchester, have put forward two amendments, both requiring draft guidance on financial penalties to be published within a year of the adjudicator being introduced. These amendments are identical except that one requires consultation and one does not. I will therefore address the principle of both together.

The publication of guidance is intended to ensure that those dealing with the adjudicator have a proper understanding of how it will act and of what is expected of them. Draft guidance on a power that the adjudicator does not have would not provide such clarity. Rather, we need to find a way to streamline the production of guidance if it is necessary, rather than producing it in advance.

I can answer two questions. To the noble Viscount, Lord Eccles, yes, the consultation will be carried out in the usual way. I hope that that is reassuring. To the noble Lord, Lord Browne, the reason for not prescribing the maximum fine in the Bill is that it is more appropriate that such a maximum be informed by experience—for example, how much retailers may be gaining from non-compliance. That experience can be gained only once the adjudicator is operational. Should the Secretary of State make an order to introduce fines, that order must specify the maximum penalty that may be imposed or how it is to be calculated.

I would like to discuss those points in more detail with the noble Lords who proposed the amendments before the next stage of the Bill, and the Government will carefully consider whether we want to bring back an amendment on the subject. With that, I ask the noble Lord to withdraw his amendment.

Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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I am most grateful to the noble Baroness for that commitment to discuss and the potential commitment—if a potential commitment is possible—to a government amendment. Although I am disappointed by some things that she said, I will not pick up on those but quit while I am ahead, even if it is only by a nose. I look forward to exploring with her how to make this a swift process, in common with her speaking note earlier. I therefore beg leave to withdraw the amendment.

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Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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My Lords, while the Minister assesses whether there is a speaking note for the stand part debate on Schedule 3, and in addition to what we have already said, the other aspect of the schedule that I would like her to think about as she ruminates on it is that at the moment it is entirely with the Secretary of State as to whether the Secretary of State thinks that the adjudicator’s other powers are inadequate. Select Committees and other parliamentarians should have some voice within that. That is something else that she might want to think about.

Baroness Wilcox Portrait Baroness Wilcox
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We have already discussed the introduction of fines in detail and I made a commitment to discuss that in more detail.

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Baroness Wilcox Portrait Baroness Wilcox
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My Lords, regarding the amendments tabled by the noble Lords, Lord Knight of Weymouth and Lord Grantchester, the purpose of the annual report is to provide and publish a factual description of the adjudicator’s activities. This increases the adjudicator’s transparency to scrutiny and helps suppliers, retailers and other interested parties to understand the adjudicator’s role and functions. The noble Lords have suggested that the report should include an assessment of how well the code is functioning. I understand from previous debates and discussions that they are enthusiastic to ensure we have what they are calling a living code. However, this amendment is not a suitable way to provide for it. As I said before, the annual report as it stands is a simple description of the adjudicator’s activities. Amendment 78 would make the writing of the annual report a much greater strain on the adjudicator’s resources. More fundamentally, the adjudicator does not have responsibility for keeping the code under review. That is a matter for the Office of Fair Trading, although the adjudicator has a statutory duty to recommend changes to the authorities where she or he considers such changes appropriate.

With regard to the amendments tabled by the noble Lord, Lord Borrie, I fully agree that it is important that in this review the Secretary of State should consider any factors that have prevented the adjudicator from effectively enforcing the code, and that the purpose of the groceries code is to prevent the transfer of excessive risks and unexpected costs to suppliers. However, I do not agree that it is necessary to set this out explicitly in the Bill. I believe that the existing provision, that the Secretary of State must,

“assess how effective the Adjudicator has been in enforcing the … Code”,

provides the Secretary of State with the appropriate remit to carry out a thorough triennial review. This can include an assessment of any factors that have hindered the effectiveness of the adjudicator.

My noble friend Lady Randerson proposed another amendment requiring the Secretary of State to consider the funding of the adjudicator and, in particular, the manner in which the levy is calculated. As the Secretary of State must give consent to any levy, an explicit requirement to consider this would be unnecessary. I will be happy to discuss my noble friend’s amendment further when we address levy funding in the 30th group of amendments. In general we should avoid specifying areas for the Secretary of State to consider in his review of the adjudicator, unless setting them out in statute is clearly necessary. A long list of issues to consider in the review is more likely to be treated as exhaustive, whereas the current drafting makes it clear that the Secretary of State is considering the adjudicator in broadly defined terms.

Finally, my noble friends Lady Randerson, Lord Razzall and Lord Teverson have tabled two amendments, which together would mean that the adjudicator was reviewed after each year. We of course believe that the adjudicator should face proper scrutiny from the Government and Parliament. However, this must be balanced with both the need for the adjudicator to be independent and the practicalities of such frequent reviews. The adjudicator is expected to undertake only a few reviews a year and to report on their work once each year. This does not provide a very broad basis for the Secretary of State to consider how much the adjudicator’s powers have been exercised and how effective the adjudicator has been in enforcing the code. Therefore, it would be unlikely that each review could make very clear or authoritative judgements. Allowing three years will, we feel, provide a broader range of evidence to be considered.

Annual review would also mean consultation in each year of the adjudicator, the Competition Commission, the Office of Fair Trading, all 10 large retailers, one or more supplier representatives, one or more consumer representatives and any other appropriate person. As well as providing a burden on them to respond, this would be likely to reduce the quality of each of these consultation responses, further weakening the scrutiny of the adjudicator. It is not customary to undertake reviews of independent office-holders so regularly, and introducing annual reviews in this case might bring into question the adjudicator’s independence from the Government.

One further amendment has been proposed by the noble Lords, Lord Knight of Weymouth and Lord Grantchester, to the effect that a copy of the adjudicator’s annual report should be sent to Parliament. I set out in an earlier response to the noble Lord, Lord Browne, why I did not believe it would be appropriate to send a copy of the report to the devolved Governments, as this is not a devolved matter. A copy going to Parliament, however, could have merit. I emphasise that the adjudicator will already publish the report, so this would not be a question of making additional information available to Parliament but would simply emphasise that the adjudicator’s work should be open to parliamentary scrutiny.

I would like to give this matter further consideration, both on the principle and, if this is appropriate, on how precisely it is delivered—for instance, whether it should be a matter of simply sending a copy to Parliament or if it would be more suitable to place a copy in the House Libraries or lay it before Parliament. I am therefore happy to discuss this matter further with the noble Lords concerned before the next stage of the Bill. I hope that has gone some way towards answering the questions in the amendments that were put down, and I ask noble Lords to withdraw them.

Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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I am relatively satisfied with that response and am happy to beg leave to withdraw the amendment.

Groceries Code Adjudicator Bill [HL]

Debate between Lord Knight of Weymouth and Baroness Wilcox
Tuesday 26th June 2012

(8 years, 10 months ago)

Grand Committee

Read Full debate Read Hansard Text
Department for Transport
Baroness Wilcox Portrait The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
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My Lords, we are off to a marvellous start. This is a great level to start at—whether we are doing something in plain English or not. I was in on the beginning of the Plain English Campaign, as, I think, was the Office of Fair Trading and the noble Lord, Lord Borrie. I was rather hoping we would get a crystal award for how we have written this Bill in plain English, but I can see I am going to have to work very hard during this Committee stage to reassure everyone that we are trying to be as clear as possible.

I fully appreciate the sentiment behind this amendment. The Government have committed to writing the Bill in plain English, and we strive to apply this principle to all communication as the Bill goes forward. However, in this case the amendment would change the meaning of the clause. “There will be” is a prediction, whereas “There is to be” indicates that the Bill establishes the Groceries Code Adjudicator. I hope that that clarifies the point for the noble Lord.

I will answer the second question when we come to the appropriate amendment, if that is okay. I thank the noble Earl for giving me notice.

Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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Would “shall be” make a difference?

Baroness Wilcox Portrait Baroness Wilcox
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It might. I wonder if the noble Lord, Lord Browne, would be kind enough to let me take this away and return. I ask him to withdraw his amendment.

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Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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It is very helpful to have the contribution of the noble Lord, Lord Howard, because he has a particular view that we can leave this all to the market, which is operating perfectly. I disagree. I remember from my economics A-level that you can have perfect markets but you can also have imperfect ones and powerful players within markets who abuse their market position. I believe—as did the Competition Commission in its analysis—that that is the case here. That is where the noble Lord and I will differ as we debate these things. In the end, those suppliers will struggle to find another market. Often, they have worked with a supermarket and built up a relationship where they have been persuaded that it is worth investing in, for example, growing a product. That needs at least a 12-month timeline. The supplier or grower of that product takes on a huge risk because they have invested 12 months in advance but the contract will only give them at best three months’ notice of cancellation. They can just be cancelled on and that happens all the time. That is a difficult aspect of that market relationship.

I give another example: I know of an innovator of a new chocolate product using pomegranate dust from Afghanistan. That innovator had to invest significantly in developing the product. It is a fine product but the innovator has to recoup the cost of that investment and needs to get the product out in volumes that are only achievable using large supermarkets. The response from the supermarkets is, “Yes, we like the product. If you want us to stock it then you need to pay us to take it on. If you want a decent shelf position, you need to pay us some more money. If you want point-of-sale merchandising, you need to pay us for that as well”. That individual needs to acquire a huge amount of investment to be able to innovate. In the end, a healthy market allows new players to come into it, to innovate and introduce new supply. That is not happening very easily in this particular market because of that power relationship and the structure of how it is set up. I strongly urge the noble Viscount to withdraw his amendment and strongly urge the Committee to support proceeding with the establishment of the adjudicator.

Baroness Wilcox Portrait Baroness Wilcox
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My Lords, this group of amendments goes to the very heart of the Bill. It concerns whether or not there should even be a groceries code adjudicator, or whether oversight of the code should continue to rest with the Office of Fair Trading. It is therefore only fitting that we should debate it early on, and I thank the noble Viscount, Lord Eccles, for raising it. I also thank him for allowing us to discuss all these amendments in one go. I also thank the noble Lords, Lord Borrie, Lord Razzall, Lord Curry, Lord Knight and Lord Howard, for their contributions to this debate.

I will not repeat all that I said at Second Reading. I know that the majority of us here support this Bill. Suffice it to say that, in its 2008 report on the supply of groceries, the Competition Commission found that the buying power of large supermarkets was potentially a cause for concern. It found that retailers were transferring excessive risks or unexpected costs to their suppliers, a practice that was likely to lessen suppliers’ incentives to invest and innovate, and that this would operate to the long-term detriment of consumers.

The Competition Commission therefore made an order that required large retailers to incorporate the Groceries Supply Code of Practice into their contracts with suppliers. It also recommended that an independent groceries code adjudicator be established to enforce the code and ensure that it was effective.

The adverse effect on consumers is not something expected to follow immediately and directly from a specific action by a retailer. Rather, the transfer of excessive risk or unexpected costs lessens incentives for innovation and investment, and the reduction in innovation and investment is what causes consumers harm.

This is a long-term effect and not one that can easily be measured—and not one that we should stop to measure before we have even implemented the measures recommended by the Competition Commission. I ask noble Lords to note that in the pre-legislative scrutiny the BIS Select Committee explicitly considered whether another review should be carried out, but concluded that we should instead implement the recommendations of the Competition Commission as swiftly as possible.

On the point from the noble Viscount, Lord Eccles, about the report from the Office of Fair Trading, I will pass his concerns to the OFT. I remind noble Lords that the OFT operates independently of Ministers, but I will pass that on and see if we can get some result for the noble Viscount. He has referred to the fact that the members of the Competition Commission were not unanimous in their view that an independent adjudicator should be established. He cited passages from the report which set out that minority opinion. He is right that one member of the panel did not agree with the rest, and I recognise that not everyone thinks the adjudicator is necessary. However, five out of six of the members did consider that an independent adjudicator should be set up. They concluded that an adjudicator is essential for the effective monitoring and enforcement of the GSCOP. That is why the Government are committed to establishing an independent adjudicator.

The amendments in the name of the noble Viscount, Lord Eccles, would give the powers in this Bill to the Office of Fair Trading, not to an independent adjudicator. However, the Competition Commission recommended an independent adjudicator. There are clear advantages to establishing an independent, dedicated office with industry expertise, which can build working relationships with supplier trade associations and retailers, monitor compliance and promote best practice. The Office of Fair Trading has told us that it fully supports the argument that the GCA should be an independent body, separate from the OFT or any other organisation. Furthermore, on a practical point, it would not be appropriate to give these powers to the OFT while the broader competition regime is undergoing so much reform.

The Government believe that the best way to address the issues in the groceries market identified by the Competition Commission is to establish an independent groceries code adjudicator to enforce the groceries code, not to give more powers to the Office of Fair Trading. This is also the view of the BIS and EFRA Select Committees, of the Office of Fair Trading and of five out of the six panel members of the Competition Commission investigation.

I have listened to all the views that have been expressed and I thank in particular the noble Viscount, Lord Eccles, for taking the time and trouble to explain his differences so clearly. However, at this stage, I would ask him to withdraw his amendment.

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Baroness Wilcox Portrait Baroness Wilcox
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The noble Lord, Lord Knight, has brought us an interesting amendment, supported by his colleague, the noble Lord, Lord Grantchester. It is perhaps not fully aligned with the subject of the Bill, which is the creation of a groceries code adjudicator. I reassure noble Lords that the groceries code, contained within the Groceries Supply Code of Practice Order 2010, already has full statutory force and the requirement to incorporate it in their supply agreements is binding upon all large supermarket retailers. There is therefore no need for the Secretary of State to establish it by statutory instrument.

Furthermore, the review of the groceries code is the responsibility of the Office of Fair Trading not the Secretary of State. If the OFT considers that a change in the code or the order is needed, it can advise the Competition Commission accordingly. As the code concerns the remedying of practices that are concerned with competition, it is right that oversight of the code rests with the independent competition authorities, which have the necessary expertise and can make decisions based on objective economic criteria.

The noble Lord, Lord Knight, also asked whether it is right that the Competition Commission can make such orders without recourse to Parliament. Noble Lords who wish to discuss the powers of the competition authorities will have to wait until the Enterprise and Regulatory Reform Bill enters this House. However, the Government consider it entirely appropriate for the Competition Commission to make remedies based on the findings of its investigations.

Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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I am grateful to the noble Baroness on that matter but I am struggling a little. Fundamental to the amendment is whether or not Parliament should have a role in scrutinising the Groceries Supply Code of Practice, which the adjudicator will referee. If the noble Baroness is saying that we will have to wait before we find out how Parliament will then scrutinise the code, we are in a difficult position to legislate. Have I misunderstood?

Baroness Wilcox Portrait Baroness Wilcox
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No, I do not suppose for one minute that the noble Lord has misunderstood, because I spoke quite slowly and clearly. As to whether it is a question I can answer now, I do not know. Obviously, the noble Lord may feel that the Bill is going to stop at this very moment if I do not answer that question, but perhaps I may have a conversation with him on this matter before we come back on Thursday. As I understand it, the powers of the competition authorities are going to be debated under the Enterprise and Regulatory Reform Bill when it enters this House. Perhaps I may leave it at that for the moment.

I move on to another question on whether the code will apply further up the supply chain. I should emphasise that government amendments that we will discuss later do not extend the code to intermediaries. The amendments ensure that only subsidiaries of the 10 retailers are covered, as they are in the code. I hope that that is clear when noble Lords read it tomorrow in Hansard. It might be a little more cogent. I have no more help from behind me, so perhaps I may ask the noble Lord to withdraw his amendment at this stage.

Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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I am kind of grateful to the Minister for that. The noble Viscount, Lord Eccles, was in many ways right to say that I sought to go beyond where the Competition Commission had reached and was looking for an opportunity to debate this issue. We are establishing the adjudicator who will referee the code. Plenty of people who have debated the Bill want to ensure that the code is a living code and is regularly reviewed so that changes in market conditions can be accounted for. There are concerns about intermediaries and we are looking for ways in which we might think about whether the code could be extended to cover them. That is worthy of consideration. In response to what the Minister said, I am sure that if the Secretary of State were to ask the Competition Commission or the Office of Fair Trading to have a look at the operation of the whole supply chain, they would do so. I am sure that if the Secretary of State were to then ask them, as a result of that review, to consider whether or not the code should be updated, they would be happy to do so. That is the way things work in government. If the Secretary of State asks these people to do things, there is a very good chance that they will give that serious consideration and try and meet the Minister’s wishes.

I understand what the noble Baroness was saying regarding the Enterprise and Regulatory Reform Bill. In the end, I understand that there is nothing technically wrong with the code as it is written. The powers that were used properly to set it up remain until they are changed, subject to Parliament, by the Enterprise and Regulatory Reform Bill. I understand that they are not going to know how that works. For now, I am content for this Bill to be debated in the context of the current environment rather than some speculative future environment that may or may not come about, subject to parliamentary process. We can probably park that convoluted little debate in which we managed to find ourselves.

The fundamental thing remains: if this is not the right mechanism for keeping the code as a living code and something that Parliament can scrutinise, I am relaxed about that but would love for the Government to come back with a way for this Committee and your Lordships’ House to amend the Bill so that we can keep it a living code and, at points, consider whether or not it is up to date. With that, I beg leave to withdraw the amendment.

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Baroness Wilcox Portrait Baroness Wilcox
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My Lords, I fully recognise the importance of ensuring that the adjudicator has the powers necessary to adequately carry out its functions. However, the powers listed in this amendment are already provided for in the Bill. I refer in particular to paragraph 16 of Schedule 1, which provides:

“The Adjudicator may do anything that is calculated to facilitate the carrying out of the Adjudicator’s functions or is conducive or incidental to the carrying out of those functions”.

It is clear that sub-paragraphs (a) and (d) of the amendment are covered by this. The adjudicator could, for example, use this to enter into contracts or to obtain and pay for legal advice. Similarly, it must be the case that the adjudicator has the power to enter into a lease, which is an interest in land. With regards to borrowing, I draw the noble Lord’s attention to, for example, provisions such as paragraph 20 of Schedule 2 to the Human Tissue Act 2004. That is exactly like our paragraph 16, except that it ends with the words,

“but may not borrow money”.

That implies that a general power includes a power to borrow unless it is specifically excluded. I hope that that is helpful.

Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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My noble friend raises an interesting point and I thought that I would wait to hear whether the noble Baroness prayed in aid paragraph 16. I worry about the very broad nature of the power that the adjudicator gets in paragraph 16 to do whatever he or she thinks is appropriate to perform the functions. It seems sensible enough, but I am mindful of what the large retailers are saying to us in respect of them having to pay a levy to fund the operation of the adjudicator and there being very little protection for them as to how much that would cost. Paragraph 16 as it stands seems to give a very wide power that leaves them vulnerable to some considerable costs. I wonder if the Minister needs to reflect on whether there is a way to give some protection to the levy payers to make sure that, were this interpreted by a frivolous adjudicator who thought there were some incidental things to the carrying out of functions, they could not go slightly berserk and incur quite a large cost on those levy payers.

Baroness Wilcox Portrait Baroness Wilcox
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The noble Lord, Lord Knight, will be pleased to know that we are ahead of him on this. The adjudicator will be able to carry out these acts only if it is to facilitate the carrying out of the adjudicator’s functions or if it is conducive or incidental to the carrying out of those functions. This will ensure that the adjudicator’s powers are used responsibly and are not abused. For example, it would not be possible for the adjudicator to make investments in land. I hope that that may be of some help. I was about to say that we might add things like, “should not go to Ascot” or this, that and the other, but I am being frivolous. I think that that is broad enough to cover any difficulties there.

Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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I am grateful to the noble Baroness. It is the “incidental” that would worry me the most were I a levy payer. I will leave it at that because I do not want to labour the point. We need to think about this a little. I know that we may have an amendment later that looks at whether the annual reports should explicitly include the cost of administration so that that is transparent and clear to levy payers as a way of ensuring that these “incidental” expenses are not excessive. I think that the point has been made.

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Baroness Wilcox Portrait Baroness Wilcox
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My Lords, on the amendments tabled by the noble Lord, Lord Browne of Ladyton, I recognise that in due course the references to the Competition Commission and the Office of Fair Trading will most likely need to be changed to refer to the Competition and Markets Authority. My ministerial colleagues in BIS are currently working hard to ensure that the Enterprise and Regulatory Reform Bill, which will bring about these changes, makes a successful passage through the other Chamber. However, the Government believe that it would be presumptuous of us to take the will of Parliament for granted by making a reference to the Competition and Markets Authority when the Enterprise and Regulatory Reform Bill has not yet received its Third Reading in the other place, so we propose to consider the amendments tabled by the noble Lord, Lord Browne of Ladyton, at a later stage of this Bill’s passage through Parliament—namely, when the other Bill is more advanced.

With regard to the amendments tabled by the noble Lords, Lord Knight of Weymouth and Lord Grantchester, we all agree that when granting delegated powers, the appropriate degree of parliamentary scrutiny should be provided. Too weak a procedure could lead to a lack of scrutiny and the weakening of parliamentary authority. However, too stringent a procedure would not only be cumbersome, wasting Parliament’s valuable time, but could act as a barrier to timely action. The noble Lord, Lord Knight, asked why there are abolition provisions in the Bill. Abolition and review provisions are included in accordance with the broader policy on sunset and review that we are pursuing. It does not indicate an intent to abolish the body or transfer its functions.

The Public Bodies Act has been mentioned as a precedent. However, there is a big difference between that Act and this measure. The Public Bodies Act confers powers to abolish, reform and modify a wide range of public bodies, and confers a range of ancillary powers such as the power to amend primary legislation. However, this Bill is a limited measure to establish a new adjudicator in a single, specific area of the economy, the grocery sector. It is quite a different thing.

I remind noble Lords that the Delegated Powers and Regulatory Reform Committee examined the Bill. Its report is available to any Member who wishes to read it. The committee carefully considered whether the procedures provided by the Bill were appropriate, and specifically considered whether some measures should be delegated at all. However, it concluded that the procedures were appropriate and did not recommend the replacement of the affirmative procedure with the super-affirmative procedure at any point.

Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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The noble Baroness is of course right to refer to the first report of the Delegated Powers and Regulatory Reform Committee. When it considered abolition, in paragraphs 6 and 7 of the report, and Clause 16(2), it stated:

“This provision illustrates the unusual nature of this Bill”.

It then goes back to its opening paragraph, which states:

“If the Competition Commission revoked the Order containing the groceries code, the Act would serve no purpose so it could be repealed. There would be no great point of principle involved in its repeal, for the Act is wholly dependent on the Order”.

The committee’s view was very much informed by the weirdness—which I referred to earlier—of setting up in primary legislation a quasi-referee to govern a code that Parliament has no power to scrutinise.

It is entirely appropriate and comparable with the Public Bodies Bill, which was about the bonfire of the quangos and the Government having the power in secondary legislation to get rid of quangos that they had set up in primary legislation. In this primary legislation we are setting up a quango. In Clause 16 the Government are seeking to use just the affirmative procedure if they want to abolish it. It is entirely consistent with the Public Bodies Act to argue for the super-affirmative procedure.

Baroness Wilcox Portrait Baroness Wilcox
- Hansard - - Excerpts

Perhaps if I go back and continue for two paragraphs, we might find something a bit more helpful. I will go back again to say that the Delegated Powers and Regulatory Reform Committee examined the Bill. It carefully considered whether the procedures provided by the Bill were appropriate, and explicitly considered whether some measures should be delegated at all. The committee concluded that the procedures were appropriate and did not recommend the replacement of the affirmative procedure with the super-affirmative procedure at any point.

On the abolition of the adjudicator, the committee stated:

“We considered whether this goes far enough and whether the policy and repeal of the Act in these circumstances should be effected by another Bill. But we are satisfied that the affirmative procedure is appropriate given the overall purpose of the Bill”.

On transfer of functions, the committee said:

“An order under clause 16(1) can transfer all or some of the Adjudicator’s functions to another public body (undefined). The power is balanced by the affirmative procedure; and the Adjudicator’s functions are specific under the Bill. We are satisfied with this approach”.

Abolition and transfer of functions are major steps that should be subject to the super-affirmative procedure. The Secretary of State can abolish the adjudicator only for being ineffective or unnecessary, under the clauses referred to by noble Lords, following one of the triennial reviews. These reviews require full consultation. Transfer of functions can be done only after consideration of whether it will increase efficiency, effectiveness and economy, while ensuring appropriate accountability to Ministers.

This Committee’s job is to carefully scrutinise delegated powers and to ensure that the appropriate procedures are chosen. If the committee had recommended changes to the Bill, we would have considered them extremely carefully, but it said that the procedures were satisfactory.

As I said at the beginning, one must ensure that the degree of scrutiny is proportionate to the powers involved. That is why it would be absolutely wrong, for example, for the negative procedure to be used in these cases. Equally, the super-affirmative procedure is a step too far. With that explanation, I invite the noble Lord to meet me after today and talk this through further. I would be delighted to do so, rather than taking up any more of the Committee’s time at this stage. Therefore I ask the noble Lord to withdraw his amendment.

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Lord Knight of Weymouth Portrait Lord Knight of Weymouth
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My Lords, I am interested in the noble Baroness’s amendment. I shall not comment on it at length, but I understand the problem she raises here. I want only to ask the Minister whether, under paragraph 16 of Schedule 1, which we discussed earlier in respect of incidental powers, it would be better to offer the adjudicator some flexibility under this wonderful paragraph and thus allow him to use his judgment on what would be a reasonable level of travel expenses.

Baroness Wilcox Portrait Baroness Wilcox
- Hansard - - Excerpts

My Lords, I can understand why my noble friend is asking this question because she lives in the countryside. I live in Cornwall and I know about buses in rural areas, and can understand the principle behind the amendment. From a practical point of view, a simple distance criterion will be much easier for the adjudicator to apply than one based on the time taken to use public transport. It says here that it is more straightforward and harder to dispute to decide whether someone has travelled more than 10 miles than to calculate whether it would have been possible to make that journey within half an hour on public transport.

However, my instinct is similar to that of the noble Lord, Lord Knight, and I feel that somehow or other the adjudicator should at least be able to have some thoughts on this matter. Although I shall ask my noble friend to withdraw the amendment, I can say that we will go back and look at this issue to see what the answer may be. I do not know whether there can be some discretion, and I may be treading on all sorts of impossible ground, but when we discussed this matter previously, and my team asked why we should consider this, I said, “I think you will find that this is a rural question”. There is obviously sympathy in the Committee for my noble friend’s question. I therefore ask her to withdraw her amendment. However, I will take it away and see if there is anything else that we can come back with.

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Baroness Wilcox Portrait Baroness Wilcox
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My Lords, the reports that the adjudicator must publish at the end of each investigation are a vital part of his or her accountability and an important way of keeping retailers, suppliers and consumers informed of his or her work. It is therefore right that we should carefully examine what is contained within them. To take each of the amendments in turn, I find the amendment in the name of the noble Lord, Lord Browne of Ladyton, interesting and he has made his case eloquently. It is indeed reasonable that the report should give the reasons for the decisions reached, as well as the decisions themselves. I would be happy to speak with him further about this amendment before the next stage of the Bill.

I am less sure of Amendment 33, which is proposed by my noble friend Lord Eccles. I think that it is reasonable to say that the adjudicator’s report need not always identify the retailer concerned. This is because there may be cases where the adjudicator considers that the matter can more appropriately be dealt with privately. For example, if there were no breach of the code, the adjudicator might conclude that it would be unfair to name the retailer that had been investigated, due to the possible reputational damage.

Lord Knight of Weymouth Portrait Lord Knight of Weymouth
- Hansard -

I am most grateful to the noble Baroness for giving way. In what way will the Freedom of Information Act apply to the adjudicator? If a report was published that did not identify a retailer and someone wanted to find out who the retailer was, would it apply? I think that that is pertinent to the noble Viscount’s amendment.

Baroness Wilcox Portrait Baroness Wilcox
- Hansard - - Excerpts

Will scrutiny from freedom of information or the parliamentary commissioner not undermine the principle of confidentiality? The duty to maintain confidentiality is very strong and the Bill is explicit that it can only be overruled in certain defined circumstances. Those would not include a freedom of information request and that position is a result of Section 44 of the Freedom of Information Act, which is engaged by Clause 18. Generally, freedom of information will apply to the adjudicator with the exception of Clause 18 overriding it. I am sorry that that was a slightly disjointed answer. Was it of help?

Lord Knight of Weymouth Portrait Lord Knight of Weymouth
- Hansard -

I am grateful to the Minister for giving me another chance to seek clarification. It seemed clear and then the second piece of in-flight refuelling to the Minister made it less so. She essentially said that there is a confidentiality get-out on FOI for the adjudicator. Normally, freedom of information would apply to the work of the adjudicator unless there were good reasons for confidentiality such as protecting the interests of a retailer who would otherwise be damaged. Is that the case? If the Minister or her in-flight refuelling were able to give us some examples, that would be quite helpful.

Baroness Wilcox Portrait Baroness Wilcox
- Hansard - - Excerpts

My view—and that of the advisers behind me—is that at this stage I need say only one thing: I will write to the noble Lord. That will be easier and fairer. We will make sure that everyone else receives a copy of that, too. I apologise for not being able to be clearer at this stage. Maybe it is getting late. Furthermore, regarding the deletion of subsection (4), it is only fair that if a retailer is identified in a report they are given a reasonable opportunity to comment on a draft of that report before publication.

That brings us on to my noble friend Lady Byford’s amendment, which would require the retailer’s comments to be published as an annex to the report. Although I understand the thinking behind that, on balance it is unnecessary. Although the retailer may comment, the adjudicator is not obliged to include any of these comments and the final report is fully the adjudicator’s. Furthermore, if a retailer knew that any comments they made would be published, it could impair free and frank discussions. I hope that that clarifies the position a little. Apart from the fact that I will write to everyone to clarify the point about freedom of information, I ask noble Lords to withdraw their amendments.

Groceries Code Adjudicator Bill [HL]

Debate between Lord Knight of Weymouth and Baroness Wilcox
Tuesday 22nd May 2012

(8 years, 12 months ago)

Lords Chamber

Read Full debate Read Hansard Text
Lord Knight of Weymouth Portrait Lord Knight of Weymouth
- Hansard -

My Lords, we have had a largely good-natured debate until just now about this important issue for consumers, producers and retailers. As my noble friend Lord Grantchester said, we have a sense of ownership of this Bill since we first advocated it and since the adjudicator refereeing the code was brought in by us in 2009. On that basis we are keen now, as the Opposition, to work with the Government as the Bill goes through Parliament to make sure that the adjudicator has the best possible chance of success and perhaps prove my noble friend Lord Myners wrong in respect of its chances. As has been said, we brought in the code following the 2008 report by the Competition Commission which talked about the “climate of fear” among suppliers in relation to disputes using the code in force at the time. The commission recommended using a new code and an adjudicator to give it teeth.

I was delighted when I met representatives of the large retailers through the British Retail Consortium last week. They told me that they were not opposing the principle of establishing the adjudicator in this Bill. Given that it was in all three party manifestos, they are bowing to the inevitable. This was reinforced by the e-mail from Waitrose, which claims to have supported this move from this outset. This attitude from the large retailers is positive and constructive and reflects what will I am sure be helpful engagement from all stakeholders as the Bill goes through its legislative journey.

On that constructive basis, I hope that we can get this Bill on the statute book as soon as possible so that the adjudicator can get on with this important job and offer suppliers the comfort that not only is the playing field a little more level, thanks to the code, but—to borrow the phrase that the noble Lord, Lord Plumb, attributed to Peter Kendall—there is now a referee to ensure that the game is played according to the rules. However, my noble friend Lady Sherlock is right to look for a statutory purpose. I was amused by the noble Lord, Lord Teverson, raising the possibility of schedules to the Bible. I bet Michael Gove is volunteering to write them.

Before I move to a more wholly constructive mode, I make one criticism of the Government in this regard. Why has it taken them two years? Back at the beginning of 2010, the shadow Environment Minister Nick Herbert went to the Oxford farming conference and said:

“While the government dithers the Conservatives are clear: we will introduce an ombudsman to curb abuses of power which undermine our farmers and act against the long-term interest of consumers”.

At the same time, Labour MP Albert Owen introduced a Private Member’s Bill on the same issue in the other place. Clearly, the policy was worked out and work was going on in legislation. In Opposition, the Minister’s party was ready to go with this measure. So why did we have to wait for two years? Is it the fault of their coalition partners being lukewarm? From what we have heard, that is not the case. Was it her Secretary of State not managing to make the case for the Bill in the legislative timetable? Or was it that Defra, the real policy lead, was not being listened to by anyone and farmers were being taken for granted by the coalition? We shall see—but I am glad to get that off my chest, and I can now be more positive.

The Bill has enjoyed support across the House, with the notable exceptions of the noble Lord, Lord Howard of Rising, the noble Viscount, Lord Eccles, and the noble Lord, Lord Myners. I very much respect their purity of free-market thinking, but I disagree, as there are times when markets need regulating when agreements are not entered into as freely as some think. The noble Viscount, Lord Eccles, and to some extent the noble Lord, Lord Myners, asked what the public would think. I do not know if noble Lords tweet, but I do, and when I have asked Twitter and Facebook about this, the overwhelming response is, “about time”. Even though they are like me all customers in supermarkets, they believe that at times they overuse their power.

My noble friend Lord Grantchester set out the tests that we will use in opposition as to whether the adjudicator will be effective. First, is it good for growth? I was delighted to go to the briefing for parliamentarians last Monday, which the Minister and her ministerial colleague Norman Lamb MP kindly offered. I was even more delighted when Norman described the Bill as a growth measure. My delight knows no bounds when the Minister in her peroration confirmed that this Bill to establish a quango and a regulator is good for growth. This feels somewhat discordant with the rhetoric we hear from the Prime Minister about deregulation being the key driver for growth. But maybe on this, as on Beecroft, the Minister’s Secretary of State has won the argument. Perhaps she could pass on our regards to Vince Cable, because of course there are times when a market needs intervention to make competition work well, if players in that market become overmighty. I note that my noble friend Lord Myners wanted a similar arrangement in this Bill to apply to banks. I am sure that he is making the same point to our friend Ed Balls—and I wonder whether Vince agrees.

Agriculture and food processing, worth more than £80 billion to our economy, are our largest manufacturing sector. Some 3.6 million people are employed in food production in this country, and to make competition in that market function more fairly is ultimately good for growth and for those jobs in the food sector. Then it can also be good for consumers if it is working well. As the noble Baroness, Lady Randerson, told us, a healthy market will allow new entrants in and innovation in the supply chain; it will offer choice and competition and will thereby push up quality and push down prices.

This takes us to another of our tests. Will the adjudicator be able to act on the right things? The question is about updating the code. Much of what we have heard today concerns issues for the code and not always issues for the adjudication of the code. My noble friend Lord Grantchester and the noble Earl, Lord Sandwich, talked about recent worries in the dairy industry. The noble Baroness, Lady Parminter, talked about the fruit industry. Some of the remedies for these problems depend on renewing the code and potentially extending its reach. While the code is out of scope for the Bill, the role of the adjudicator in reviewing the operation of the code is not. We think that it is in the interest of all stakeholders that the code is kept a living document and that it should be reviewed regularly and updated by Parliament accordingly. We will therefore explore in Committee whether the adjudicator should include in the annual report any recommendations on improving the code so that it is an act of consideration rather than—as the Bill stands—a passive one.

I will also be seeking a commitment from the Government to commission a serious look at the whole supply chain to the large retailers. It is worth noting that when the Competition Commission reported in 2008, it had only been asked to look at the immediate suppliers to supermarkets. Some of these, such as Kraft and Coca-Cola, are bigger businesses than some of the supermarkets they supply. We need to look at their suppliers and the whole chain to see if this process will create a fair deal for small producers. In winding up, will the Minister give an indication of what consideration the Government are giving to looking at this so that a better code can be developed? I note that, in her opening speech, she hinted that she might view it as overregulation. Is she willing to ask the Competition Commission to research and test that view?

Our next test is whether suppliers will risk using the adjudicator. I applaud the Government for listening to stakeholders and the two Select Committees who did some excellent work in pre-legislative scrutiny of the Bill. It is much improved around anonymity, which we support. It also allows third parties to make complaints, as we have heard, which is also welcome. I will, however, want to explore whether the Bill needs a halfway house if third parties do not work consistently when the operation of this system is reviewed.

Finally, is this measure strong enough to force change where needed and will it be seen to be fair on all parties? This leads to the three key issues to debate as the Bill progresses: appeal, independence and fining. Before talking about these, it would have been helpful to have an impact assessment. Is there one beyond that for the draft Bill? If not, why not? Is it not a requirement these days to have one? Currently, there is no appeal for retailers. If financial penalties are subsequently brought in, the Bill specifies the courts as the means of appeal. In the interests of fairness, we may want to debate whether the potential damage of naming and shaming is serious enough for retailers to have a straightforward appeals process. Although the informed opposition to this from my noble friend Lord Borrie has probably persuaded me, we may need a quick debate to be sure.

We will also explore the independence of the adjudicator, an issue raised by my noble friend Lord Myners. The adjudicator will be appointed by and accountable to the Secretary of State. We will explore whether it is better to have the independence and transparency of accountability to Parliament. I know from contact with Members from the other place who serve on the BIS Select Committee that they would like a say in the appointment of the adjudicator. Equally, there is merit in an annual report to Parliament, including reporting on the operation of the code and the operating costs of the adjudicator. The latter would provide some comfort to retailers who will be funding the operation through the levy which they regard as something of a blank cheque.

Then there is the biggest issue of them all, mentioned by most of the speakers in this debate today—that of fining. Within this, there are two issues to debate. There is the principle of whether the adjudicator should have this power from day one and, if not, whether the process for introducing fining is, as the noble Lord, Lord Razzall, described it, cumbersome. I will certainly draw on the experience of my noble friend Lord Haskel when bringing forward amendments in Committee to Schedule 3 to deal with the latter. However, first, I will try to win the argument on the principle of fining. Like the right reverend Prelate the Bishop of St Edmundsbury and Ipswich, I think that the adjudicator should have teeth from day one. His comments were echoed by many other speakers. The referee should have the red card to help enforce the rules. I hope that there will never be sufficiently serious breaches to invoke the use of these powers, but just having the powers there and ready to go may prevent such serious breaches.

This raises the question of what success for the adjudicator looks like. I hope that the Minister will not abolish the measure by order in a few years’ time if it has been used to instigate not much more than low-level arbitration and investigation. As a football fan, I do not like it if the ref keeps stopping play, but I would always want one there to enforce the rules of the game. I also think that the power to abolish this new quango should replicate the new processes that we are starting to get used to in the Public Bodies Act and not follow the simple negative procedure in the Bill. Like others, I am keen for the proceeds of fines to be used in an imaginative way, ideally in investing in innovation in the supply chain. Unlike the noble Baroness, Lady Byford, I like the clarity conferred by questions punctuating the Bill’s wording, however homely it may seem to her. Unlike the noble Lord, Lord Palmer, I like the name of the adjudicator. I understand why the Minister might not want to call it the regulator given the sensitivities around that issue.

This is broadly a good Bill and has been warmly welcomed by most speakers this afternoon. My promise to noble Lords is to engage openly and constructively across the House to improve the Bill as it goes through its journey. I am sure that the Minister will do the same. We look forward to helping her get an effective adjudicator up and running as soon as possible.

Baroness Wilcox Portrait Baroness Wilcox
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My Lords, today’s debate has cast a great deal of light on the important issues addressed in the Bill. I thank all noble Lords for their contributions. I recognise the strength of feeling and depth of experience that we have heard in the debate. I have been asked far more questions than I thought I would on a Bill on which we all seem to agree, with two or three exceptions. I will do my best to answer as many questions as I can.

The noble Lord, Lord Myners, seemed to ask me 100 questions. I am grateful to him for telling me that I can reply to him in writing as long as I copy the response to everyone else. As I said in my opening remarks, the Bill has undergone substantial consultation and pre-legislative scrutiny. Wherever possible, the Government have attempted to find approaches that ensure that the adjudicator’s powers will be adequate while also keeping them proportionate. We intend to keep the costs to business minimal while ensuring that the adjudicator is fully equipped to fulfil his or her role. However, I will, of course, reflect on the comments of the noble Baroness, Lady Randerson, the noble Lord, Lord Teverson, and others, who have expressed their concerns about both those statements. We think that we have allowed tough powers to name and shame from the outset. We have kept back the last resort of financial penalties as a reserve power. I note that many, including the noble Lord, Lord Knight, have questioned this. I have no doubt that we will debate these questions further in Committee.

The noble Lord, Lord Knight, commented on the impact assessment of the draft Bill. That remains valid; hence there is no requirement for an updated impact assessment. The noble Baroness, Lady Byford, did not approve of the Bill’s “folksy” drafting and noted that the style of writing was unusual. I reassure the House that this is not a mistake. The Bill is one of the pilot plain English Bills that are intended to be easier for everyone to understand. That is what it is intended to be. However, I am happy to write to the noble Baroness on her question about the changes in clause headings and on the consultation.

My noble friends Lord Howard of Rising and Lord Eccles, and the noble Lord, Lord Myners, said that the supermarkets are currently bound by the Groceries Supply Code of Practice and questioned whether an adjudicator was needed as well. The Competition Commission has found clear evidence that the excessive use of buyer power could lead to adverse effects on consumers. The code has the commission’s recommendation, when it first introduced the code, that an adjudicator be set up to uphold it. At pre-legislative scrutiny, the BIS Select Committees in the Commons also concluded that a groceries code adjudicator was necessary. The code allows only individual cases to be resolved and only if a supplier is prepared to raise the issue with the large retailer involved. The adjudicator will be able to investigate suspected breaches involving many suppliers, not just adjudicate individual cases.

The noble Lord, Lord Myners, wishes to intervene. He did make a promise, and I have a lot of questions to answer.