Baroness Wilcox
Main Page: Baroness Wilcox (Conservative - Life peer)Groceries Code Adjudicator Bill [HL]
Baroness Wilcox Excerpts
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
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.
Viscount Eccles
My Lords, my noble friend starts from a zero base. If we read her words carefully in Hansard, we will find that it is as if we have no idea whether supermarkets are behaving in a fair-dealing way and we have to have in the locker a threat. Yet we have had a code of practice, which was thought not to be satisfactory and has been beefed up. I have heard nobody in this Committee say that the new code is unsatisfactory—I have heard the noble Lord, Lord Knight, suggest that it should be extended but I do not think that anybody has quarrelled with it. It has been in force for two years. All the 10 supermarkets have appointed compliance officers and all of them report publicly—with the exception of a German-owned supermarket that does not report publicly in this country—to the Office of Fair Trading. To say that we need the Bill to ensure compliance with the code is just wrong. We have all the evidence that we need to know whether the code is being complied with. Where other things are not being reported which either come under the code or could be thought to do so, I absolutely accept the need for their inclusion. It was for a list of those things that I was looking.
My noble friend’s taking on large orders for smoked fish with no written contract is beyond comment. She was obviously taking excessive risk, but it was not being passed on by the supermarkets, which no doubt would have been perfectly willing to enter into a written contract. She was undertaking that risk on her own account and I do not see what an adjudicator could do about that, except give some good advice.
Unfortunately, I am unsatisfied with the Minister’s reply and intend to raise the matter at the next stage of the Bill. Meanwhile, I beg leave to withdraw the amendment.
Baroness Wilcox
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.
Lord Browne of Ladyton
I am grateful to the Minister for giving way; I have no desire to prolong proceedings this afternoon. In anticipating that the noble Lord, Lord Howard of Rising, might accept the invitation to discuss these matters further, I would welcome being a party to those discussions.
Will the Minister ask those advising her to take into account the interaction of Clause 8(3) with the expectation that review will be conducted by way of judicial review? That has the potential to create a multiplicity of actions that are entirely unnecessary. She indicated that there was effectively no enforcement mechanism in relation to naming and shaming. But there is such a mechanism, by way of injunction or specific performance, in Scotland. I can see a judge in the Court of Session in Scotland or in the High Court in England having an application before them and saying, “I cannot go into the merits of this case. They are for another forum”. A judicial review will be raised at the same time and the interaction between the two will have to be worked out by judges in the same courts involving enormous expense all because there is no appeal. That is inevitable.
Baroness Wilcox
I think that I may have an answer for the noble Lord now, but as we will be discussing this further we will come back to it. The requirement to publish needs an enforcement mechanism. We should not oust the rights to judicial review and therefore we need both. That is the answer that I am giving now. We shall take it into consideration with everything else. I want at least to be sure that I am giving an explanation that is clear. In the mean time, I ask my noble friend to withdraw the amendment.
Lord Howard of Rising
I thank noble Lords for their support, which is something that I am not really used to but is nevertheless very welcome. The essential difference is between financial penalties and naming and shaming. Those of us who are old enough to remember a certain gentleman referring to his jewellery being cheaper and not quite as good as a Marks and Spencer sandwich will know that that was the end of his business. It was finished. The businesses that we are talking about are very susceptible to reputation. They work on very thin margins and do not need many people to move for those to be affected. I am very grateful to the Minister for agreeing to look at the issue. When she does so, she will need to look at two or three ancillary points as they all tie in together. In the mean time, I beg leave to withdraw the amendment.
Lord Knight of Weymouth
My Lords, I will not add to the excellent case made by my noble friend Lord Browne, but he has my support.
Baroness Wilcox
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
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
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.
Lord Browne of Ladyton
My Lords, I am extremely grateful to the right reverend Prelate the Bishop of Wakefield, my noble friend Lord Borrie, and the noble Baroness, Lady Byford, for their support. The noble Lord, Lord Borrie, is a very wise and knowledgeable man. At least, today he has displayed that; I am not sure if he was so consistent the other day. I am very grateful for his support, and I must at least be fairly near the right answer on this occasion.
The Minister’s response disappoints but does not surprise me, because there has been a consistent recommendation that the adjudicator should have the power to escalate right throughout all of the consultation process on the Bill. Indeed, the Business, Innovation and Skills Select Committee, at the end of its deliberations, supported escalation. I know that the Government’s position was not to support it.
Let me respond to the Minister in this way, as I am sure we will debate this again: in the first instance, if there is a recommendation, that means the retailer has—in the view of the adjudicator—broken the groceries code. We are starting from the point that the adjudicator is dealing with someone in breach of the code. The powers of enforcement following investigations cannot be imposed unless the adjudicator is satisfied that a large retailer has broken the groceries code.
Of course, failure to follow a recommendation is not evidence that a large retailer is continuing to break the groceries code. There may be any number of reasons why a large retailer may refuse to accept, carry out or respond to, a recommendation. I agree with the Minister in that regard. However, in her argument she said that the Government have granted the adjudicator the power, in those circumstances, to consider as part of the follow-up a yet further investigation, because a refusal to accept a recommendation will in some circumstances imply a continued breach of the code. Those are the only circumstances that I can see in the Bill where the adjudicator can initiate an investigation where he has no reasonable grounds to believe. It is the failure to follow a recommendation that gives him the power to institute the new investigation.
Baroness Wilcox
Before the noble Lord withdraws his amendment, to which he will no doubt return on Report, it might be useful for me to comment. It is possible for a retailer to have breached the code and the adjudicator to decide that a recommendation is enough. The adjudicator will not know for sure whether a failure to follow a recommendation is also a breach of the code. That will need to be further investigated to be fair to the retailer.
Lord Browne of Ladyton
I am very grateful to the noble Baroness who is utterly generous in responding to every point that is made in these debates. It is very helpful in understanding how this complicated system will work. Essentially, this is a plea to make this legislation less complicated. If it is occupying so much of our time in trying to work out what it all means, perhaps it is just too complicated and we are trying to be too clever. I beg leave to withdraw the amendment.
Baroness Wilcox
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
I am grateful to the Minister. She uses the word “swift”. How long does she think it would take?
Lord Knight of Weymouth
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
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
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
How do the Government plan to streamline the process of introducing the fines? Is that what the noble Lord is asking? I cannot give a definitive answer now as we need to discuss it in more detail before the next stage of the Bill. That would be the right way to do it, if the noble Lord does not mind. I can give one more answer, which I think is to the question asked by the noble Lord, Lord Browne. The Delegated Powers and Regulatory Reform Committee ruled that the procedures were appropriate and the Secretary of State can regularly be held to account at departmental Questions if he does not introduce the fines when Parliament considers them necessary. That partly answers the noble Lord’s question. If the noble Lord, Lord Knight, can wait until we consider Schedule 3, all will be revealed. I ask the noble Baroness to withdraw the amendment.
Baroness Randerson
My Lords, I thank the Minister for her detailed response. I also thank noble Lords who have spoken in this short debate in support of the amendments. I especially thank my noble friend Lady Byford for her very similar amendment aimed at the same thing. However, I am afraid that I am not reassured so far. Perhaps the answer will come when we get the definition of “swift” in the context of Schedule 3. I am not so far reassured that this process is not cumbersome. I retain the view that fines will have an important deterrent effect and that that effect will be sharpened if the fines are ready to be levied rather than subject to the approval of the Secretary of State.
The noble Lord, Lord Browne, made an important point. He said that the Bill does not give Parliament a role if the Secretary of State holds the view that there should not be financial penalties, although Parliament’s will is that there should be financial penalties—in other words, if the adjudicator’s report shows that the provision is not working as the Government optimistically believe that it will. The noble Lord, Lord Knight, pointed out that the practical implication of Schedule 3 is that fines will be levied in 2015 at the earliest. The Minister may well contradict that, but I would be very concerned if that were the case.
The Lord Bishop of Wakefield
No. It depends on what you mean by “coercion”, which can mean something very unpleasant indeed. It does mean that people will not necessarily change the way that they operate simply because we ask them to be nicer. That is the point. We know that, otherwise we would not have produced the sort of legislation that we are debating today. Even if we do not go down some of the roads that we have been debating, the whole Bill seems imply that the adjudicator must have some powers by which the present situation is changed. How you want to use the word “coercion” is another matter. I would not want it to be overpressed. After all, the worst form of coercion always leads to war and that is not what we are talking about—we are talking about precisely the opposite—but it will need firmness and robustness.
Baroness Wilcox
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
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
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
I hope that my answer satisfies the noble Lord, Lord Grantchester. I ask him, therefore, to withdraw his amendment.
Lord Grantchester
I thank the noble Baroness for her words and I will read very carefully through Hansard. We will confer and no doubt bring the amendment back, perhaps by exploring it in another way, because the supply chain is rather keen that such an opportunity is made available. I beg leave to withdraw the amendment.
Viscount Eccles
I fully agree with that. What industry needs is certainty. What it cannot live with is uncertainty. It needs to have as many of the factors that are going to influence what it does and the way it does it as settled as possible. Uncertainty is the enemy of good business.
Baroness Wilcox
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
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.
Baroness Wilcox
Baroness Wilcox
My Lords, I shall set out the reasoning behind the amendment. As well as moving Amendment 54, I shall speak to government Amendments 91, 109, 113, 115 to 117, 119, 120 and 123 as well, as they are all establishing the same principle.
The adjudicator is intended to uphold the groceries code, which applies to those retailers specifically named in the groceries supply order. The code also applies to their subsidiaries, as Article 4(4) of the groceries supply order provides that each designated retailer will procure that its subsidiaries comply with the order. That means in particular that subsidiaries that deal with suppliers should incorporate the code into their supply agreements and then comply with it.
The Government’s policy has always been that that the adjudicator’s functions should apply to whichever companies in the retailer groups enter supply agreements and are bound by the code. However, since the Bill’s publication, we have realised that it is drafted in a way that technically would not allow the adjudicator to investigate subsidiaries or deal with any breaches of the code by subsidiaries. The amendment will correct that anomaly.
The main change is simply to include subsidiaries in the definition of “large retailer” in Clause 22. The other changes are to ensure that a more limited definition—that is, parent companies only—still applies in certain clauses. In particular, when specifying which companies have to pay the levy and which would have to be consulted, it would not make sense to include subsidiaries. I hope that noble Lords will agree that this amendment is technical, intended to deliver the policy as originally envisaged rather than to extend it, and will be able to give it their support. I beg to move.
Lord Knight of Weymouth
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
We have already discussed the introduction of fines in detail and I made a commitment to discuss that in more detail.
Baroness Byford
I am very grateful to the Minister for that reply. In those circumstances, I withdraw my opposition.
Lord Browne of Ladyton
I am grateful to the noble Lord and I think he has got my point. It seems to me that we ought to front-load the assessment of vexatiousness and not leave this bit at the end, as if somehow it balances everything and makes it appear much better than it is. We should give the adjudicator the power to say to people who bring complaints that are vexatious or without merit—and that will be revealed very quickly—“I am not taking these any further and that’s it”. People have to have confidence in this. The decisions that we want the adjudicator to make in relation to this issue will be decisions of moment and will have to be serious and important points. We do not want an adjudicator running around doing lots of small investigations. We want one or two key investigations that go to the heart of the inequities in this market, which people want the Government and Parliament to address. The previous Government started to do that. I am uncomfortable with this particular clause for a number of reasons but am grateful to it because it exposes the false logic of a lot of the rest of the provisions of this Bill.
Baroness Wilcox
My Lords, I understand my noble friend Lord Eccles’s reluctance to see individual retailers or complainants having to pay the costs of investigations. However, I think this is justified in both cases and take this opportunity to explain why this clause should stand part of the Bill.
In the case of retailers, they can be required to pay the costs of investigations only if the adjudicator is satisfied that they have broken the code. In this situation, the need for investigation and enforcement follows from their actions. It would seem unfair on retailers who have not breached the code to incur additional costs through a general levy when there is a party who clearly bears responsibility for the costs being incurred. I know from our debate at Second Reading that many noble Lords feel strongly that the costs should fall on those who breach the code rather than those who do not, wherever possible.
This is not a financial penalty or a blank cheque; it simply ensures that if a retailer breaches the code, the cost of the investigation can be borne by them, not by the other nine retailers. In the case of costs being borne by complainants, the Bill is clear that they can be expected to pay the costs of an investigation only if the adjudicator is satisfied that their complaint was vexatious or wholly without merit. That is a strong test directed at clearly irresponsible complainants rather than simply erroneous or weak ones. Without such a power, individuals might be motivated to make complaints that they know to be false or completely unjustified, wasting the adjudicator’s resources and placing unfair burdens on the retailers it investigates. Of course, the adjudicator should not pursue a case that he or she knows to be vexatious, but that may not be clear at the outset. That is simply a safeguard in case an investigation turns out to have been based on vexatious complaints.
Finally, I note that in each case, the clause says that the adjudicator may require a party to pay the costs of investigation. That is strictly discretionary. For instance, if a breach was found in a retailer but it was understood to be a matter of simple error, the adjudicator might decide that it would be disproportionate to require it to pay all of the costs. I hope that helps the noble Lord, and I support the Question that the clause stand part of the Bill.
Viscount Eccles
My Lords, I start with a technical question about the wording of the clause to which I am not looking for an immediate answer. It states that the adjudicator may,
“require a large retailer to pay some or all of the costs of an investigation”.
It is not self-evident that that means only the adjudicator’s costs. Of course, a lot of the cost will fall on third parties, including the retailer, and there are bound to be a lot of costs. My proposal that suspicion should be replaced with belief would go a long way to create more certainty about the adjudicator’s ability to turn down not just vexatious complaints but complaints for which there is too little evidence. It is my perception that when the Bill becomes law, a lot of cases will be brought for which the evidence will be sketchy, and the adjudicator will have to use his or her best judgment.
If those considerations can be given some thought and we can have a more—I criticise myself here—coherent and consensual discussion at the next stage, I withdraw my objection to the Question.
Baroness Wilcox
My Lords, providing advice and guidance will be important in the adjudicator’s role of promoting compliance with the groceries code. I understand, therefore, why my noble friend Lord Howard of Rising wishes to see a requirement on the adjudicator to provide advice and why the noble Lord, Lord Browne of Ladyton, wishes such advice to be available to the public as well as to retailers and suppliers. I agree with the noble Lord, so it is important that the adjudicator clarifies certain issues around how he or she will work and indeed, how the public as well as suppliers and retailers will have an interest in this.
However, under Clause 12 the adjudicator has a duty to provide guidance on how he or she will investigate and has powers to provide further guidance on any issue related to the code. This guidance will be published and available to all. It is therefore the most suitable format for any obligatory communication by the adjudicator and is the best way for the adjudicator to deal with the public. Conversely, advice is more likely to be given on an individual basis to clarify specific issues with retailers and suppliers. It is likely to be given where the adjudicator notices that certain retailers or suppliers do not have a clear understanding of the code. It is also likely to be given to retailers or suppliers who are not sure whether a specific practice that is relevant to them is within the code. Advice is therefore suited to individual, potentially technical discussions of the code with those to whom the code is more directly relevant—suppliers and retailers. Any statements of general principles can be made through the power in Clause 12 to provide guidance, and those statements will be available to the public.
On whether the provision of advice should be mandatory, the adjudicator would normally be expected to provide advice when it is requested. However, the adjudicator will have a limited budget and will need to prioritise their work accordingly. It is therefore appropriate that they should have the freedom to choose whether in a particular instance giving advice is the best way of encouraging retailers to comply with the code. There could also be circumstances when giving advice would be inappropriate; for example, due to a conflict of interest. I ask noble Lords not to press their amendments.
Lord Browne of Ladyton
Perhaps I may ask the Minister a relatively simple question. If a member of the public thinks that he or she is in possession of knowledge that should support a complaint to the adjudicator, are they entitled to phone the adjudicator’s office and ask for advice as to whether that is appropriate? If not, is it common sense?
Baroness Wilcox
I do not imagine that the adjudicator will put up a barrier to people telephoning and asking questions. I imagine that they will have with them a group of people who will be able to assist anyone who comes. Looking at the adjudicator’s incidental powers, they may do anything that is calculated to facilitate the carrying-out of their functions, or is conducive or incidental to it. It is not for Ministers to interfere at this stage with how the adjudicator decides to work. I think that that covers the noble Lord’s question.
Lord Browne of Ladyton
It does indeed, and I am very grateful to the Minister for her immediate response, but she may want to compare that response with the one that she gave to my attempt to add the public to those who can get advice. It seems that the answer now is not that there are two types of communication, one appropriate to retailers or suppliers and another, which we are supposed to find in Clause 12, appropriate to the public. The answer is actually that the way in which the Bill has been drafted allows the adjudicator to give advice to the public if he or she wishes to do so. It would therefore appear that my amendment is unnecessary and that all the other responses I have just received, suggesting that it was inappropriate, are not correct.
Lord True
My Lords, having listened with great interest to nearly two days of discussion on the Bill, it does not look as if I am going to be able to trouble the scorers during the rest of the day. I should declare that I have no interest to declare in these matters. However, I feel that the point made by my noble friend Lord Howard of Rising and supported by the noble Lord, Lord Browne, is compelling. As the leader of a local authority, if I published a parking order and then did not publish guidance about what people had to do to comply with it, or if the authority did not put up notices or signs approved by the Department for Transport, the authority would be taken to court very quickly and would be acting improperly and unfairly. Concerning Clause 12(3)(b) in particular, not to require the adjudicator to give guidance on,
“steps that large retailers need to take … to comply with the … Code”,
seems an offence against natural justice. I apologise for breaking my long silence but of the many things we have discussed, this is the one where I hope that my noble friend will listen to my noble friends Lord Howard of Rising and Lord Eccles and the noble Lord, Lord Browne, who is opposite.
Baroness Wilcox
My Lords, the guidance provided by the adjudicator will help to ensure that all interested parties have a proper understanding of what they can expect of the adjudicator. Several noble Lords have brought forward amendments on what should be included in the guidance or on how that guidance should be produced.
With regard to the amendment moved by my noble friend Lord Eccles, the adjudicator will already have to publish guidance on how he or she will decide which enforcement powers, if any, to use. The adjudicator will also have powers to provide more specific guidance on how exactly he or she will go about requiring a retailer in breach of the code to publish information. However, I do not believe that the adjudicator should have to publish guidance on how he or she will approach the publication of information before such investigations can be started, especially as the approach to publication might be dependent on what breach is discovered. We must balance the need for retailers and suppliers to be informed of the principles under which the adjudicator is working with the need for the adjudicator to be able to start working promptly.
The noble Lord, Lord Howard of Rising, has tabled two amendments that I would like to address. The first is on the requirement for the adjudicator to publish guidance on a range of matters set out in Clause 12(3). Here I note that the requirement to publish guidance in Clause 12(1) is focused on specific issues, and under Clause 12(5) the requirement to publish information is given the context of a specific timetable. The adjudicator should be required to publish guidance, and he or she has to. Clause 12(1) states:
“The Adjudicator must publish guidance about —
(a) the criteria that the Adjudicator intends to adopt in deciding whether to carry out investigations;
(b) the practices and procedures that the Adjudicator intends to adopt in carrying out investigations; and
(c) the criteria that the Adjudicator intends to adopt in choosing whether to use the enforcement powers and which ones”.
While other guidance is valuable, it is not clear what would be achieved by a general requirement to publish guidance on broad topics such as the application of any provision of the code. Rather, these overarching topics are intended to indicate likely areas of guidance and ensure that the adjudicator can give guidance when the need arises.
Regarding my noble friend’s second amendment, guidance can relate to a wide range of the adjudicator’s activities and functions. It would be inappropriate to include a requirement to consult retailers without equivalent requirements to consult supplier representatives and other interested parties, which would create further bureaucracy, something that I am sure we would all try to avoid. This change is not necessary, given that the Bill already requires the adjudicator to consult any person whom he or she considers appropriate. I hope that that is helpful to noble Lords and I ask my noble friend to withdraw his amendment.
Viscount Eccles
My Lords, I am not quite sure how to put this, but I think the Committee is being let down. Once again we are being told that we are starting from a zero base, that nobody knows anything about the operation of the code and that the adjudicator will start with a blank sheet of paper. The code came into effect on 4 February 2010, having been published in 2009. All 10 supermarkets have gone through the procedures that it requires them to go through. They have included it in their conditions of purchase and sale; they have appointed compliance officers; and they have made two sets of annual reports to the Office of Fair Trading. Disputes have been running in the past 24 months and disputes have been settled.
To say that there is no base of information that the Government can rely on in drafting the details of this Bill and that before deciding how guidance should be given they have to wait for the adjudicator is indefensible. I will return to this on Report. I hope that before then there is some rethinking about the position under the code, instead of us being told time and time again that it is as if the code did not exist. I beg leave to withdraw the amendment.
Baroness Wilcox
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
I am relatively satisfied with that response and am happy to beg leave to withdraw the amendment.
Baroness Wilcox
Lord Teverson
My Lords, Amendment 94 is quite straightforward: it seeks to insert a new paragraph in proposed new Section 4A(1) which allows for the adjudicator to consider,
“information provided by a trade association”.
Trade associations are important and should be involved in the structure of the Bill, and the amendment would involve them in this part of the work delineated by the Bill. It is as straightforward as that.
Baroness Wilcox
My Lords, I am grateful to noble Lords who have raised the important issue of what any restrictions on the sources of information under Clause 15(10) should involve. The Government hope and believe that third parties such as trade associations will provide information to the adjudicator in a responsible and helpful way and that this clause will never need to be activated. Nevertheless, it is important that we give proper scrutiny to the details of how the clause can be activated and what it should include.
The clause as drafted provides the most suitable way to restrict information. The sources that would still be allowed to provide information are those identified as most suitable by the Government following their consideration of pre-legislative scrutiny by the Business, Innovation and Skills Select Committee. These have been carefully considered as sources that could provide useful information without the risk of the adjudicator being deluged with complex but essentially weak complaints.
My noble friend Lord Eccles suggested that retailers should be included in the list of sources of information. Clearly retailers will have relevant information about whether a breach has occurred and this will be central to investigations. However, the place for this to be heard is in investigations, where the adjudicator can seek relevant information without revealing details of complaints. The decision to start an investigation is based on complaints or other information giving reasonable grounds to suspect that the code has been breached, not on an attempt to weigh all the arguments.
My noble friends Lord Razzall and Lord Teverson suggest that trade associations should be added to the list. However, trade associations are the primary group that this power to limit the sources of information is intended to address. The power has been introduced in the light of concerns that trade associations might raise complex but unjustified complaints. This could put a strain on the adjudicator’s time and resources, as well as unnecessary burdens on the retailers.
The noble Lords, Lord Knight and Lord Grantchester, suggest that the Secretary of State should be able to specify sources through guidance. However, such an extension would be a more serious matter than is suited for guidance, which the adjudicator must “take account of” but which is not strictly binding.
Clause 15(10) has been deliberately written to restrict the sources of information to those that are most likely to have information regarding a breach of the code. This will ensure that trade associations and other third parties have a clear incentive to act responsibly. It would be invidious to put the Secretary of State in a position where he or she had to pick which third parties or classes of third party were responsible and which were not, and such an amendment could lead to the very lobbying and campaigning that we hope to avoid.
Finally, the noble Lords, Lord Knight and Lord Grantchester, have also proposed an amendment to Clause 23 that is relevant here. It would mean that Clause 15(10) required an affirmative resolution. Throughout the Bill we have striven to ensure that a suitable level of parliamentary scrutiny is provided for any orders.
The Government believe that the negative procedure is suitable here as the content of the order is very clearly defined in the Bill, and because an order can be made only as the result of a triennial review involving widespread consultation. The Delegated Powers Committee considered this order specifically and confirmed that it was satisfied with our reasons for this being a negative procedure.
I hope that these answers to the amendments have been helpful. I therefore ask the noble Lord to withdraw his amendment.
Lord Browne of Ladyton
My Lords, I do not think I shall detain the Committee for very long. I am hopeful that the Minister will have a simple answer to this particular problem.
The amendments are designed to do two things: they would extend the obligation of confidentiality beyond the adjudicator to his or her deputy and staff, and would provide a criminal sanction for a breach of the obligation of confidentiality. The arguments are comparatively simple. Clause 18, on a straightforward reading, limits the obligation of confidentiality to the adjudicator. If that reading is correct then this is far too narrow. The persons connected to the adjudicator should also be covered by the statutory provision, and these include, at the very least, the deputy adjudicator and the adjudicator’s staff.
The obligation of confidentiality in Clause 18, with the wording that has been adopted, can be argued to be discretionary rather than mandatory, and the amendment deleting the word “may” and inserting the word “must” clarifies that the obligation is mandatory. Amendments 102 and 103 are consequential amendments on those two provisions.
The obligation provided by Clause 18 must be enforceable, and in my view the provision of a statutory offence will ensure that the obligation is respected. I beg to move.
Baroness Wilcox
My Lords, the duty of the adjudicator to keep complainants’ identities confidential is central to this Bill. The initial market investigation, consultation and pre-legislative scrutiny all indicated that suppliers would be reluctant to complain if they thought that they would be identified, and noble Lords have made the same point in the House. The protection of the identity of parties to arbitration is likewise important. The proposed amendments on confidentiality therefore need careful consideration.
The noble Lord, Lord Browne of Ladyton, proposed a number of amendments with the clear aim of making the requirement on the adjudicator to maintain confidentiality as tough as possible. I agree that this needs to be a strong requirement. However, I believe that the Bill already achieves this.
Two of the amendments in the name of the noble Lord, Lord Browne of Ladyton, specify that the adjudicator “must not” rather than “may not” make unauthorised disclosures of information that might break confidentiality. I am confident that “may not” and “must not” have the same force here. The words “may not” are intended to be prohibitive: the adjudicator is in either instance required to refrain from making unauthorised disclosures.
Another two amendments in the name of the noble Lord, Lord Browne, specify that the duty to maintain confidentiality also applies to the deputy adjudicator and any staff. I agree completely with this as a matter of principle. However, the Government are confident that the deputy adjudicator and staff seconded to the adjudicator would already be bound by the duty of confidentiality as set out in the Bill and that therefore the amendment is unnecessary.
The noble Lord’s final amendment on this clause makes any knowing breach of confidentiality by the adjudicator or his or her staff an offence and introduces fines for anyone found guilty of such an offence. I do not believe that the threat of fines is necessary to make the adjudicator act responsibly. The adjudicator will be a public authority and will be bound to take the responsibilities under Clause 18 very seriously, as well as being bound to respect the human rights to privacy of the relevant parties. It is true that there is no sanction for breach expressed in Clause 18 but a breach would be a breach of statutory duty by the adjudicator and would in principle enable a person who suffered from a breach to claim damages from the adjudicator or to seek an injunction to prevent the disclosure if the person knew in advance.
I do not think that my noble friend Lord Eccles will be speaking to his amendments.
Baroness Wilcox
I therefore would ask the noble Lord, Lord Browne, to withdraw his amendment.
Lord Browne of Ladyton
My Lords, I am reassured by the noble Baroness’s comprehensive response, and now that her words are on the record, it will be very clear that the requirement of confidentiality applies not just to the adjudicator, as the Bill states, but to the deputy adjudicator and the staff. In making a plea for plain English, which is where we started our debate, I wonder why we do not just say what we mean in legislation, in order that we do not have to read Hansard to find out that it applies to other people. A few words here would not cost us that much. If “may not” can have as strong a construction as “must not” and the Government prefer “may not” when they mean “must not”, I am content with that as well. However, I still think that it would be better if we said what we meant rather than left it to what lawyers understand of these things.
I am impressed by the Minister’s confidence that in future this confidentiality will be respected. I have had the privilege to hold some quite significant offices in government and I have discovered, sometimes to my frustration, that where one expects confidentiality most is where one least gets it. We have a media industry that substantially operates on the basis of leaks. These stories will be of interest to many people. They will sustain the front pages of newspapers that are competing with an internet that is utterly uncontrollable. I would not be surprised if very quickly we find that trying to stem leaks out of these investigations is a problem, and I believe that we will regret that we did not put down a criminal offence to discourage that. In the current circumstances, though, and at this time of day, I do not intend to insist on this any further. I beg leave to withdraw the amendment.
Lord Teverson
My Lords, I shall speak to Amendment 114, which is very straightforward. Under Clause 19(5), the Secretary of State must make an order to allow the adjudicator to differentiate. My noble friend Lord Razzall and I believe that the adjudicator should have this direct ability. Again, we have this indirect method of making decisions through the Secretary of State. I am sure that the Secretary of State has far more important things to do than decide the specific division of the levy among the small population of large retailers. If we are to have a serious adjudicator, we should give that person the authority to undertake that task. If we feel that the adjudicator’s decisions are wrong, I am sure that other provisions in the Bill will ensure that that is communicated to him or her.
Baroness Wilcox
My Lords, many noble Lords have given close consideration to how the levy to fund the adjudicator should be raised. The noble Lords, Lord Borrie, Lord Knight of Weymouth and Lord Grantchester, proposed similar amendments, respectively suggesting that the Bill should specify that the adjudicator “must” or “shall”, rather than “may”, levy funds from the retailers. I agree with the principle that the adjudicator should raise its funds from the retailers. This is intended as the adjudicator’s primary funding source. Other forms of income, such as payment for the cost of individual investigations or loans and grants from the Secretary of State, are intended to be secondary.
However, simply specifying that raising funds is obligatory would not have a clear outcome unless the Bill specified when the adjudicator must do so. The current drafting is intended to allow the adjudicator to levy funds whenever he or she deems it necessary, not to impose a schedule of when he or she may or must raise funds. I believe that we agree on the principle that the adjudicator should be funded by the retailers, but I also believe that the current drafting gives the adjudicator greater flexibility and is preferable.
The noble Lord, Lord Borrie, proposed a further amendment removing the need for the Secretary of State to give consent before a levy is raised. I am sympathetic to the principles of avoiding unnecessary hurdles and the need for independence for the adjudicator. However, this amendment would give the adjudicator a completely free hand to raise funds from the retailers without the oversight of Ministers. The Secretary of State needs only to give consent and may not direct the adjudicator to raise any levy, but some accountability is necessary.
The noble Lords, Lord Knight of Weymouth and Lord Grantchester, proposed that the levy should initially be divided according to the large retailers’ turnover. That possibility was considered during pre-legislative scrutiny, but the Government believe that it would be unfair to assume that a retailer’s size correlates with how much it breaches the code or with how much of the adjudicator’s resource it is likely to demand. The principle of fairly sharing the cost of the adjudicator is better served by the ability to vary the payments of retailers based on the estimated expense and time of dealing with them in the light of experience.
I turn to Amendment 110A, tabled by my noble friend Lord Howard of Rising. This would require an order to be made before a levy is imposed, and would mean that consultation must take place before imposing the levy and before any subsequent increase in the levy. I believe that unnecessary bureaucracy should be avoided wherever possible. The Government’s intention to fund this body via a levy has been clearly set out in previous consultations and policy documents; the mechanism for a levy and how it is to be imposed can be read from the Bill. I therefore see no need to require the imposition of an order, or for a further round of consultation, before imposing the levy, particularly when the levy is subject to the approval of the Secretary of State and not simply at the adjudicator’s discretion.
On my noble friend’s question about limiting the amount of the levy, a limit on how much can be raised could tie the hands of the adjudicator, particularly if there was a costly appeal for which funds were needed. The fact that the Secretary of State must approve each levy is an assurance that it will not be misused.
This brings me to Amendment 114, tabled by my noble friends Lord Razzall and Lord Teverson. This would remove the requirement for the Secretary of State to make an order before the adjudicator can vary the way the levy is made. Given the principles of avoiding bureaucracy that I have just set out, I am willing to look again at whether an order is necessary before a levy can be varied in the proportionate way set out in the latter part of subsection (5). The fact that individual levies would still need to be approved by the Secretary of State could provide an adequate safeguard, and I will happily discuss this issue further with my noble friends Lord Razzall and Lord Teverson before the next stage of the Bill. I hope that the noble Baroness, Lady Randerson, will also be happy to discuss this issue, as I believe that her amendment shares the same objective of avoiding bureaucratic delay. However, the Government feel that varying the levy should be a matter for the independent adjudicator and that the role of the Secretary of State should be simply to give consent.
Baroness Wilcox
Baroness Wilcox
Baroness Wilcox
Lord Howard of Rising
I will not keep the Committee long as I am mindful of the 7 pm deadline. The idea that the adjudicator might have a surplus is a triumph of hope over experience, rather like divorcing and getting married again. However, if there is a reasonable surplus—there should probably be a minimum above which this does not have to operate—it should be returned to those people who have paid it or, the following year, they should have a corresponding reduction. I beg to move.
Baroness Wilcox
My Lords, the Government’s intention in giving the adjudicator discretion over whether to repay retailers at the end of the year is to avoid unnecessary bureaucracy where the adjudicator is required to repay retailers before then immediately raising further funds from them. I believe that noble Lords on all sides of the House are supportive of the adjudicator being able to carry on his or her work with as little bureaucratic burden as possible, especially as in this case the burden would fall on the retailers as well as the adjudicator. I therefore ask the noble Lord to withdraw his amendment, if he feels that this is a good explanation.
Lord Howard of Rising
I thank the noble Baroness. I suggest that if there is a large surplus, it should be deducted from the following year. That would save the bureaucracy. I beg leave to withdraw the amendment.
Baroness Wilcox
Lord True
My Lords, I hear what my noble friend says, and I am conscious that everybody needs to go. It is a great pity when a Member wishes to raise a point of substance on the way in which law is written—something that this House is here to deal with—he is very swiftly interrupted by a member of his Front Bench. I will try to accelerate my remarks, having been patient in this Committee.
I hear what the noble Lord, Lord Browne, says, but to answer his point, let us look at the heading on page 5, line 21:
“How is the Adjudicator supervised?”.
That smothers in obscurity the power to abolish the adjudicator in Clause 16. Only Clause 15 is about supervision, yet this Committee has been concerned about abolition. What value judgment is this, when the Bill highlights supervision and passes over abolition?
Above Clause 21, the heading reads:
“Will this law mean other changes to the law?”,
which I will now speak to. This is a nonsense, because when the Bill is commenced what is in Clause 21 will already be law, so that will just lie on the Bill as an otiose and rather foolish idea.
Finally, I will give one more example before I accept the strictures and sit down. However, I will, having been made to sit down, return to this matter on Report, and I will also listen very carefully to what my noble friend says. This matter is intended to help electronic access to legislation. If you look at the heading,
“How does the Adjudicator handle information?”,
the normal practice is that when you click on a heading on an electronic screen, the screen shows text starting from the point of the heading. Why, then, does this heading come above Clause 18 and not above Clause 17, which covers the Secretary of State’s right to require information from the adjudicator? Surely, anyone interested in how information is handled should be signposted to that new power for the Executive. Who decided to put the heading there and not above Clause 17, and why can Parliament have no say in the matter?
I will sit down now, but I submit that potentially significant issues are raised by this new practice, and I apologise, after eight and a half hours of proceedings on this, for venturing to speak for eight minutes.
Baroness Wilcox
My Lords, this is the first time that I have had occasion to respond to the noble Lord, Lord True. I know the noble Lord to be an elegant wordsmith with a passion for our beautiful language, so I would not, therefore, take lightly anything that he has said, even if he feels that he has had to be a little briefer than he would have wished.
Regarding the points that the noble Lord has raised, they are both interesting and technical. They are points on which I will seek legal advice, and I will make sure that when I return he is a happier person than he is today. I am happy to speak to him about this before the next stage of the Bill, and I therefore wonder if he would be prepared to withdraw his amendment.
Lord Howard of Rising
Could I just point out to the Minister that this is as much a point of principle as it is of detail? The point of principle should be addressed, and that is not necessarily something that concerns only lawyers, but Members of this House and Members of Parliament in general.
Baroness Wilcox
Baroness Wilcox
My Lords, the Government in general support the use of sunset clauses to avoid the risk of overregulation and to ensure that regulators remain in place only where they are strictly needed. However, the Bill already contains provision for sunset and review, in that the adjudicator must be reviewed every three years and can, following such a review, be abolished if the Secretary of State considers it appropriate. Many noble Lords have expressed their desire to ensure that any power of the Secretary of State to amend the adjudicator’s powers or functions should be subject to proper scrutiny, and the Government believe that the Bill provides for that. To remove the same scrutiny for the cessation of the Act would therefore be disproportionate.
The Bill is fully in line with the Government’s broader policy on sunset and review. Therefore, I think that the job is done and I ask the noble Lord to withdraw his amendment.