Groceries Code Adjudicator Bill [Lords]

David Heath Excerpts

Monday 19th November 2012 Commons Chamber

[Ian Murray]

Absolutely. The hon. Gentleman makes a critical point, but the point is the full plethora of sanctions in the Bill. All we are talking about is what is in the Bill; we are not saying that fines could not exist in the short to medium term at the behest of the Secretary of State, but if he thinks that fines might be required in the future, why not just put them in the Bill?

[The Minister of State, Department for Environment, Food and Rural Affairs (Mr David Heath)]

Just so we know the terms of debate, will the hon. Gentleman outline how big a fine he thinks would be appropriate to deter inappropriate behaviour on the part of, say, Mr Tesco?

[Ian Murray]

That should be in the hands of the adjudicator. We are asking the adjudicator to do a job to assess whether someone has breached the code. The adjudicator should therefore be given the power to determine the sanction. If the sanction is to seek recommendations, then that is the sanction. If the sanction is to name and shame, then that is the sanction. If the sanction is a fine, we should leave that in the hands of the adjudicator to determine. That could be a debating point in Committee. The Minister is chuntering from a sedentary position, but the argument is whether financial penalties should be in the Bill. If they are, the Secretary of State could then propose that fines be within certain parameters, or up to the adjudicator, or a proportion or a multiple of the loss achieved by a particular supplier. There are a plethora of ways for an adjudicator to determine a financial penalty. [Interruption.] The Minister says, “I don’t know,” but the Government have not told us what they would propose. Yes, we do not know how much the fine should be. That would be up to the adjudicator, within parameters applied in respect of the Secretary of State, to determine how much a fine should be, and that should be in the Bill.

--- Later in debate ---

[The Minister of State, Department for Environment, Food and Rural Affairs (Mr David Heath)]

It is a pleasant and, for me, unprecedented experience to speak at the Dispatch Box on a Bill that has received a welcome from Members from all parts of the House without exception, and I am very pleased that that is the case. I think it is because they share, to paraphrase the hon. Member for Tiverton and Honiton (Neil Parish), a desire to see a system in the supply chain that is fair to the producer, fair to the processor, fair to the retailer, and fair to the consumer. That is what we are trying to achieve in the legislation.

There is ample evidence, not least in the Competition Commission report that, in some ways, provides the origins of the legislation, of an imperfect market in the grocery trade. The hon. Member for Edinburgh South (Ian Murray) said that that there was a monopoly position for the big supermarkets. Strictly speaking, it is not a monopoly. Classical economics requires us to call it an oligopsony, but that term is not used very often. There are powerful players in the retail sector: there are a few buyers and many sellers, which produces an imbalance in the terms of trade. That is why I am pleased to introduce the Bill with the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for East Dunbartonshire (Jo Swinson), from our sister Department. It is wonderful to have two Departments thinking and acting as one in government in introducing legislation of this kind, not least, as the hon. Members for Ogmore (Huw Irranca-Davies) and for Bristol East (Kerry McCarthy), and many others said, because I campaigned personally for the provision for a long time. Other Members who have spoken have been equally assiduous, or more so, in arguing that case, particularly my hon. Friend the Member for St Ives (Andrew George), who has worked very hard on the issue, and the hon. Member for Ynys Môn (Albert Owen). I loved his contribution: it was amusing, and most of what he said was well founded.

The measure has united—this, too, is unprecedented—the Chairs of the Select Committees on Business, Innovation and Skills and on Environment, Food and Rural Affairs. Select Committees do not always agree on absolutely everything, but both those Committees have had an opportunity to look at the measure in pre-legislative scrutiny. The hon. Member for West Bromwich West (Mr Bailey) kindly said that the Government listened to what his Committee said, and that they accepted 80% of its suggestions to improve the measure. That is how it should be; that is the whole point of pre-legislative scrutiny.

Let me make one point to those who have criticised the timing of the Bill. As far as this Administration are concerned, I reject that accusation. The Bill was introduced as a draft Bill in the first Session of this Parliament, as we promised, and it was introduced as a substantive Bill as the very first Bill after the Queen’s Speech in this second Session of Parliament. I find it difficult to understand how we could have been more urgent in our approach. There was fair criticism of the time it took for nothing to appear under the previous Government, but I do not want to be partisan in my approach. It is important to maintain the coalition of interests on both sides of the House in support of the Bill.

The Chair of the Environment, Food and Rural Affairs Committee, the hon. Member for Thirsk and Malton (Miss McIntosh), mentioned a few significant points, some of which were picked up by others. The most important initially was the business of indirect complaints and the capacity for anyone to bring forward a complaint. Let me make it absolutely clear that the Bill provides for any party to complain. It does not have to be the producer who is involved; it could be trade organisations or non-governmental organisations. Anybody who has information to put before the adjudicator should do so. Those complaints will be treated with anonymity, because it is part of the job of the adjudicator to ensure that that is the case. Yes, the adjudicator can take forward proactive investigations. If there is good reason to believe that an abuse of the code is going on, the adjudicator can take forward a proactive investigation.

The hon. Lady also asked about the recovery of costs and clause 10 makes that clear. She asked a perfectly proper question about the provisions for the transfer of functions or abolition, which she thought were slightly peculiar, but they are part of the Government’s normal process of inserting sunset clauses so that bodies do not persist simply because they were set up in primary legislation with no opportunity to repeal it at some stage in the future. There might need to be a significant change, a renaming, a merging of functions or any of the many other things considered as part of the Public Bodies Act 2011, so that is a perfectly proper provision.

The hon. Lady asked what the list of designated retailers was and it might be helpful to the House if I simply say who the 10 are. They are Asda Stores Ltd, the Co-operative Group Ltd, Marks and Spencer plc, Wm Morrison Supermarkets plc, J Sainsbury plc, Tesco plc, Waitrose Ltd, Aldi Stores Ltd, Iceland Foods Ltd and Lidl UK—[Interruption.] I cannot quite catch what the hon. Member for Ogmore is saying from a sedentary position, but I thought it was helpful to give the list of retailers included in the proposals.

I thought that the hon. Member for North Antrim (Ian Paisley) made a very thoughtful speech.

[Miss McIntosh]

Now that peace and unanimity is breaking out, will my hon. Friend return to the vexed issue of fines being imposed? We are a little envious that the Business, Innovation and Skills Committee has had its amendments incorporated and we would like 80% of our amendments to be incorporated at the same time.

[Mr Heath]

I will inevitably return to that point a little later, as it was raised by so many Members. Let me first, however, cover the other specific points mentioned in the debate.

The hon. Member for Carmarthen West and South Pembrokeshire (Simon Hart) asked about companies outside the big 10. He is absolutely right that they are not specifically included in the Bill as levy payers, but let us recognise that the big 10 represents 95% of the grocery trade. If we are successful in the application of the adjudicator in improving standards of contract compliance, that will feed through to the rest of the sector by competition alone, if nothing else. The hon. Gentleman also mentioned length of contracts. That is not specific to the code of conduct, but the matter can be properly investigated in the context of an abusive relationship. Where such a relationship exists, that will be laid bare by the process.

The hon. Member for Bristol East made some good points about food waste. She knows that we have engaged with her on that issue and will continue to do so. I think I have a meeting with her in the near future to talk about that.

A number of Members spoke with a great deal of experience of the sector from having worked on the producer side. The hon. Members for Camborne and Redruth (George Eustice), for York Outer (Julian Sturdy) and for Sherwood (Mr Spencer), my hon. Friend the Member for Brecon and Radnorshire (Roger Williams), and the hon. Member for Tiverton and Honiton all have direct experience of working in agriculture and could tell us about the sort of downward pressures that they know suppliers regularly experience. The hon. Member for South Down (Ms Ritchie) spoke about trade associations. I hope I have been able to put her mind at rest about that.

My hon. Friend the Member for Ceredigion (Mr Williams) raised a number of important points. He spoke about access to the code and, as I said, I hope I have given him some reassurance on that. He talked about changes to the code. That is an important point. According to the process set out in the Bill, the adjudicator can put forward for consideration changes to the code, but that proposal goes back to the Competition Commission for consideration before being put before the House. It is important that we maintain that linkage because fundamental to the Bill is the abuse that the Competition Commission identified between major retailers and their suppliers. It would be a great mistake for the House to substitute our opinion for the evidence adduced by the Competition Commission.

My hon. Friend also mentioned retrospectivity. Let me underline the point again. If an abuse is continuing at the time that the adjudicator is appointed, it is proper that he or she should investigate that abuse, but we have a strong principle in British legislation that we do not apply retrospectivity to something that occurred before the date that a particular statute comes into effect. Therefore it would not be entirely proper for the adjudicator to look at complaints within the terms of the code that pre-dated that appointment if they no longer continue.

[Andrew George]

My hon. Friend says that the code would not apply retrospectively, relative to the date of the statute. Of course, the statute came in on 4 February 2010. The Bill merely provides for the referee to enforce the code. Retrospectivity in respect of the statute therefore does not apply.

[Mr Heath]

I understand the point that my hon. Friend makes. If he would care to engage with Government lawyers on that point of law, I am sure we would be happy to engage with him. We can return to the subject in Committee or on Report.

The hon. Member for Llanelli (Nia Griffith) queried clause 15(10), and the hon. Member for Hayes and Harlington (John McDonnell) also thought it was a bit odd. Let us debate that in Committee. What is proposed there is a safeguard which we hope will not be used. It is designed to deal with the circumstances in which the adjudicator was swamped with spurious complaints which hindered him or her from doing their work. The adjudicator would be required to pare those complaints down to the categories set out there. It would not stop them taking information from any source, but it would stop them taking complaints from any source. As I have said, I do not envisage that that will be necessary and hope that it will not be, so it is a reserve power, but I completely understand the point made by the hon. Member for Hayes and Harlington that it is in some ways an unusual provision. It is certainly something we can discuss properly in Committee.

[John McDonnell]

The point I was trying to make is that if we have to amend the legislation in due course by statutory instrument, it would be better to design the new clause on the basis of the experience and recommendations of the review, rather than just reverting to type.

[Mr Heath]

I understand the hon. Gentleman’s point, and that is clearly something we can discuss.

The hon. Member for Banff and Buchan (Dr Whiteford) mentioned the very bad news about Vion UK, which I understand will affect not only her constituents in Strath of Brydock, but many others in Livingston, Portlethen and Broxburn, and my hon. Friend the Member for Brecon and Radnorshire mentioned the situation in St Merryn in Merthyr Tydfil. I can certainly give an assurance today that we will happily engage with colleagues in the devolved Administrations—most of those jobs are situated in Scotland or Wales—to see whether there is anything we can do to assist them in dealing with what will be a very significant event in the local economy. If there is anything we can do, I can give an assurance that we will do our best.

My hon. Friend the Member for Brecon and Radnorshire also talked about—

[Huw Irranca-Davies]

I would not want the hon. Gentleman to miss the opportunity to respond to the 20 Members who spoke in succession about strengthening the Bill by introducing fines, which was also referred to the hon. Member for Thirsk and Malton (Miss McIntosh), who chairs the Environment, Food and Rural Affairs Committee.

[Mr Heath]

I was about to move on to that, and it is a great shame that the hon. Gentleman took up some of the time I was going to devote to it.

[Mr Bailey]

rose—

[Mr Heath]

No, I will not give way.

I want to talk very briefly about the voluntary code in the milk supply chain, which I think is an important development. It would not be policed directly by the adjudicator, and I do not want to give the impression that it would.

Let us talk about sanctions. This is clearly a serious conversation we need to have in Committee and on Report. My hon. Friend the Under-Secretary set out the Government’s position on naming and shaming. I do not entirely agree with the hon. Member for Ogmore, because I think that naming and shaming played a significant part in events over the summer relating to the dairy industry. I think that several of the large retailers were directly shamed by consumers into changing their tune about their intended reductions in the price of milk.

However, I accept that many Members have indicated that they would prefer to see fines from the start. There are arguments about why that should not be the case, including the fact that it would introduce a new legal process of appeal that would not be there if it was not introduced ab initio. I want to make it absolutely plain that only one thing has to be done by order, which is for the Secretary of State to bring in a tariff system on the advice of the adjudicator, so it is not a separate process for each infringement.

[Mr Bailey]

rose—

[Mr Heath]

I am sorry, but I really cannot give way at 9.58 pm.

Let us discuss what the effective sanctions are and make sure that we have got them right. The Government believe that we have got it right at the moment, but of course we will listen to what every Member has to say on the issue and ensure that we have legislation that is fit for purpose.

In closing, I think that we have had a very important debate. It means that we can go forward, perhaps not as heroes, as the hon. Member for Ogmore suggested, or as characters from grocery folklore, as the hon. Member for Ynys Môn said, but with something that will contribute to the well-being of our farming and retail industries. I believe that is right and commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time.