Fair Dealing Obligations (Milk) Regulations 2024

Baroness Hayman of Ullock Excerpts

Monday 25th March 2024 Lords Chamber

[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, I thank the Minister for his introduction to this SI and for his time and that of his officials in providing a briefing for this long-awaited statutory instrument. Other noble Lords have made positive comments on supporting dairy farmers, and the detail of this statutory instrument. I am grateful to the NFU for its briefing.

Since the voluntary code of practice for dairy contracts was introduced in 2012, nearly 12 years ago, purchasers have been able to change contract terms and pricing mechanisms, even, in some instances, introducing retro-spective penalties and price cuts without negotiation. The Covid-19 crisis saw this happen many times: farmers were hit with price cuts at no notice, and there was a lack of transparency over pricing and delayed payments, resulting in significant pressures on producers. Farmers got a very poor deal.

This SI will introduce mandatory minimum terms for dairy contracts which must be adhered to. As the noble Lord has said, these contracts will cover price, cooling-off periods, notice periods, variations, exclusivity and farmer representation. All these should make a huge difference to how farmers are treated and ensure that they get a fair price for their milk, which is essential for the survival of the dairy-farming industry. It will also bring a level of transparency into milk contracts not previously present.

I fully support this SI and have a point to raise. The Government conducted a call for evidence at the end of 2016 on the remit of the Groceries Code Adjudicator and whether it should cover all primary producers. This concluded that it would be better for primary producers in the dairy industry not to be covered by the GCA. That was eight years ago. Similarly, the consultation on the issue took place between June and September 2020, nearly four years ago. It would seem that the Government, although concerned about an unfair pricing system for farmers, were not in a hurry to do anything about it.

There are large parts of the instrument around termination of contracts, including where the business purchaser becomes insolvent and where there are disputes and enforcement. I welcome these sections, as they give farmers access to redress when things go wrong.

I understand that the debate on this SI in the other place was very short indeed, and I have no wish to prolong the debate here this evening. This legislation, while long in the making, is a positive step forward in addressing the imbalances that we have seen for too long in the dairy supply chain. I also hope that it will lead to support for farmers going forward, as they look to create the right structures to make the best use of the issues in this legislation.

Finally, I place on record my thanks, and I am sure the thanks of many others—the noble Lord, Lord Grantchester, referred to this—to Michael Oakes, who has been the chair of the NFU Dairy Board for eight years. Without his tenacious work over the past decade on this issue, I doubt that we would be debating it this evening. It seems that, without an advocate continually pushing, progress can be painfully slow. Let us hope that progress now speeds up considerably, and that this SI becomes law and is enacted without further delay.

[Baroness Hayman of Ullock (Lab)]

My Lords, I start by thanking the Minister for his introduction and saying how impressed I was to watch him pouring a glass of water at the same time: he is clearly channelling his feminine side by doing two things at once.

These draft regulations, as we have heard, propose to introduce minimum standards for the contracts that businesses use when purchasing milk from dairy farmers. We fully support the aim to improve fairness and transparency in the UK dairy sector, which, according to Defra, is characterised by small, fragmented dairy producers. We have heard a lot about the unfair commercial terms on which farmers have had to go into contracts, so we very much support this SI. Like other noble Lords, I thank the NFU for its work on this issue. The NFU has made it clear that it strongly supports the regulations, as unfair milk contracts have unfortunately been an area of concern for many years. The right reverend Prelate the Bishop of Hereford talked about the voluntary code of practice for dairy contracts, which came in in 2012. This has clearly not been working, so we very much welcome the regulations in front of us today.

While I have said we very much support the regulations, I have a number of questions for the Minister. The proposed requirements include that all contracts should be made in writing and contain clear pricing terms, through either a fixed or variable price, setting out how the price to be paid is generated and establishing a means for producers to challenge variable price calculations. We are very pleased that unilateral changes to contract terms will be prohibited and that the Secretary of State is going to be able to impose fines. The Minister said in his introduction that this is only the first and that further legislation will cover other agricultural sectors. The noble Baroness, Lady Bakewell, mentioned how long the regulations have taken. It has dragged on. Can the Minister say why it has taken so long? It is four years since the Agriculture Act was passed. Although he mentioned pigs in his introduction, does he have any idea when we are likely to see the SIs for the other areas we are expecting—pigs, eggs and fresh produce?

The agricultural supply chain adjudicator and the Groceries Code Adjudicator have been mentioned. Transform Trade sent an interesting briefing expressing its concerns around departmental fragmentation and the sectoral siloed approach that it feels the Government are taking by addressing the problems in only four sectors, and only at the farming stage. Its concerns include the fact that risks and costs will continue to be passed on to all supply chains; and that while the adjudicator may be able to address farmers’ experience of unfair trading practices, where the cause of that unfair trading practice originated with the food retailers, the retailers will continue to get away with passing unfair trading practices. I would be interested to have reassurances from the Minister on this concern.

Of course, not all farmers work in the four sectors that are covered. How does Defra intend to keep an eye on what is happening in the other sectors that are not protected? Will the adjudicator appointed to enforce the milk codes be able to share information relevant to the GCA’s ability to assess whether the 14 largest UK food retailers they cover have breached the Groceries Supply Code of Practice purchasing code? We need to be sure that this is working effectively.

The noble Lord, Lord Curry, asked about the scope of the GCA. This is a really important question. When I was in the other place, we did a lot of work on the GCA when it was established, and it really needs to be seen to be working effectively, including within this new regime.

My noble friend Lord Grantchester talked about food waste. He mentioned that there is little waste within the dairy sector, but the design of regulations under these powers is potentially a missed opportunity to implement the Government’s stated policy of using them to reduce farm-level food waste, as was said during the passage of the Agriculture Act. As we are expecting further SIs to come forward in a similar way, I would be interested to hear why the Government’s consultation on using the powers did not make explicit reference to, or explicitly invite evidence on, how the powers could be used to reduce food waste. Food waste prevention may well be on the Government’s radar, but it is not clear from the consultations that were carried out, so my final comment is that further elaboration and confirmation around that would be very welcome.