Groceries Code Adjudicator Bill [HL]

Lord Plumb Excerpts

Tuesday 22nd May 2012 Lords Chamber

[Lord Plumb]

My Lords, I declare my interest as a farmer and a member of several producer organisations. It is good to follow the right reverend Prelate and to know that the church is as keen to see fair play in the market as any one of us who is actually involved in it.

I congratulate the Minister on her opening statement. She led us well and answered many of the questions that we have in mind, but undoubtedly, as amendments are put before us, we shall debate some of these issues more fully. The noble Lord, Lord Grantchester, raised a number of points that obviously qualify for amendment and will therefore be interesting to discuss and to debate.

At a time when we are pressing for the removal of red tape and market regulations, it may seem rather strange to be calling for a groceries code adjudicator and possibly more controls, but as the Minister has said, the road towards the appointment of someone has proved for more than a decade to be essential. Yes, the fingerprints of the party opposite have been all over it, but now we need to put our footprint on it and clear it for some considerable time, one hopes.

The supply of groceries was referred to the Competition Commission in 1999. The supermarket code of practice was established in 2006 and the Office of Fair Trading referred the supply of groceries back to the Competition Commission. All, of course, moving round, backwards and forwards, and getting nowhere. It recommended an independent ombudsman then to police a new, strengthened Groceries Supply Code of Practice, having failed to get any voluntary agreement.

We now, therefore, have the opportunity, which I hope we will take advantage of, to create a supply code with teeth—teeth that can control some of these issues. The dairy industry has been referred to several times as one in need of recognition, in order to make sure that there is real fair play between the producer price and what the consumer has to pay. It will, we hope, take over from the supply code which has been in force for the past few years and which, as the president of the NFU, Peter Kendall, has said, is,

“essentially a rule book without a referee”.

It is surprising that many retailers have raised objections to the introduction of an adjudicator, since many have been taking steps to build stronger relationships through contracts with suppliers, but short-term financial performance can lead to abuse in the market power at the expense of the farmer and the grower. If supermarkets are operating fairly, surely they have nothing to fear from an adjudicator.

Let us not forget that there are something like 80,000 suppliers and 10 buyers. That speaks volumes, because it means that the farmers and growers have to co-operate and be stronger themselves in order to determine a fair return for their investment.

I hope the Minister will answer some of the questions that will be put. She has already answered some but I should like confirmation in particular on the adjudicator’s initiative investigations, which will be based on evidence from third parties. It is a crucial point that needs finally to be clarified. Will retailers be fined—and fined immediately—if they breach the code? Without these powers, the effectiveness and efficiency of the service will be seriously hindered.

Of course, we do not want an appointment that leads to all talk and no substance, and another year of bureaucracy without action. I like to think that the correct action can lead to fair market practice and the stimulation of longer-term collaborative relationships in the whole of the food chain. It was interesting that the editor of Farmers Weekly observed:

“As gatekeepers of the food system, supermarkets are in a powerful position to create a greener”,

and fairer way forward for all. That may be so but, sadly, too many ride roughshod over guarantees of supply and prefer to take decisions driven by short-term commercial goals.

As we all know only too well, food production is, by its very nature, a long-term and risky business. In this House, we talked of the drought not long ago; a week later we witnessed floods. Disease and uncertainty are always with us. Therefore, producers cannot rely on the adjudicator alone. We need strengthening among co-operatives and co-operation between farmers to improve their bargaining power. I have to say that that has been a theme of mine for the past 50 years. There have been improvements but there is a lot of room for greater collaboration.

Therefore, I congratulate the Minister on many of the issues that she has put forward, including amending the Government’s initial proposals in last year’s Bill. The current Bill states in Clause 4 that the adjudicator can launch an investigation where there are “reasonable grounds to suspect” a breach of the code. The trade should welcome the crucial element in safeguarding the adjudicator’s duty to protect the identity of complainants.

As we develop the debate on this extremely important issue, we shall hear many of the myths that come forward. For instance, it is already said by retailers that a supermarket adjudicator will just add to retailers’ costs and push up shop prices for customers. It is estimated that the cost will be around £200,000 a year. The cost of the adjudicator to retailers will be a minuscule proportion of the turnover of the 10 largest supermarkets involved. Only those supermarkets with a turnover in excess of £1 billion are covered by the adjudicator, meaning that the cost will represent 0.02% of turnover at most and usually much less.

Another myth is that both famers and the Government argue for less regulation, whereas an adjudicator simply adds red tape to business—the point that I made in my opening remarks. However, some regulation is necessary. Indeed, some is desirable to ensure that markets function fairly. It is worth remembering that the Competition Commission recommended the establishment of a statutory adjudicator only when it became clear that no voluntary solution was forthcoming. The retail sector was given the opportunity to provide its own solution to monitoring and enforcing the code of practice but was unable to do so. Regulation is being brought forward now because we see it as the only solution after all other avenues have failed.

I support the legislation coming forward. It is a unique situation, since all parties agree in principle. Therefore, I hope that we will not spend too much time in Committee arguing between ourselves. Let us have some action and get on with the job.