Groceries Code Adjudicator Bill [Lords]

David Heath Excerpts

Tuesday 26th February 2013 Commons Chamber

[Ian Murray]

Thank you, Mr Deputy Speaker.

We know the origins of the code came from the Competition Commission report in 2008; we have already discussed the excessive risks to suppliers, particularly overseas ones. The practices behind that would have had the potential to harm those producers overseas who are the most vulnerable and to be an obstacle to progress on the pay and conditions of, and innovation by, farmers and farm workers in developing countries. UK shoppers rightly enjoy the widest range of choice, via large retailers. The outstanding quality of produce cannot be in doubt, but the Bill has the opportunity to ensure that there is protection for all territories and to make a large contribution to the development of other countries. Amendment 30 asks for the code to be extended to other territories and asks the adjudicator to look at this matter when making recommendations to the OFT.

The subsidiaries issue is also worth exploring, as it shows clearly that the large retailers have different arrangements in place. That has to be taken into account, which is what the amendment seeks to achieve. It would be good to get clarity from the Minister on what the process would be if difficulties were identified with regard to the code in these subsidiaries or other territories. The relationship of the code in the complex matrix of buying and production is from the large retailer to the immediate supplier. As the Bill stands, that means that the large retailer is able to set up subsidiaries to buy apples from X Ltd rather than directly from the supplier.

Amendment 34 stands in my name and that of my hon. Friend the Member for Ogmore (Huw Irranca-Davies), and it goes to the heart of some of the main issues that have been discussed in the House over the past few months. Our amendment calls on the Government to ensure that the GSCOP, which the adjudicator referees, covers the issue of commercial pressures that can be put on suppliers and that drive down quality and safety, creating possible food scandals, such as the recent revelations around horsemeat in beef products.

The amendment would explicitly enable the adjudicator to include in its annual report details of any incidents where it had become aware that commercial pressure had been applied to suppliers to drive down costs, standards and health and safety, resulting in a drop in food standards or authenticity. To answer some of the criticisms that will probably come from the hon. Member for Shipley and his like, I should say that the amendment is directly related to clause 14 and the annual report to the OFT, not necessarily in the sense of the issues arising where someone takes a case to the adjudicator to deal with in terms of the code.

Amendment 35 would require the adjudicator to send its annual report to the Food Standards Agency. That would create an important link between the adjudicator and the FSA in terms of some of the issues related to the horsemeat scandal that we have seen in recent weeks. As has been reported, the UK’s National Beef Association has blamed what it called the “bullying culture” that retail buyers have used for decades for the presence of horsemeat in beef products. Its national director, Chris Mallon, has said the public and retailers were paying the price for

“short-sighted, price-led purchasing tactics”.

He said that buyers had

“adopted a bullying culture aimed exclusively at securing as much farm food as possible, for as little cost as possible, and the result is tortured supply chains that add so much unnecessary cost that short cuts on quality and traceability, and even cheating by some suppliers, was inevitable.”

That quote shows how important it might be to include the amendment in the Bill.

Consumers must have confidence that the food they buy is correctly labelled, legal and safe, but over recent weeks that confidence has been hit hard. Many of the problems in this particular scandal have been outright criminal, and, of course, the criminal courts will deal with those, but Ministers have been slow to act, as has been shown in our debates in this House. The Food Safety Authority of Ireland has been ahead of the UK every step of the way. By having an annual reporting requirement on food safety and hygiene through the adjudicator, some of the issues that have been raised eloquently by the national director of the UK NBA could be dealt with.

The amendment has another link with the Food Standards Agency, as its budget has been cut from £143 million to £132 million. Although we should not get into a debate today about budgets of particular Government agencies or Departments, it would be an important step to say that the adjudicator, in its report to the OFT, could refer some of these cases. That might help to soften the blow caused by the reduction in resources.

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

It would be helpful if the hon. Gentleman made clear his belief, which is certainly my belief, that no matter what commercial pressures there are, it does not excuse criminal behaviour on the part of producers, processors or retailers.

[Ian Murray]

I agree 100% with the Minister. We hope that by having the adjudicator reporting annually to the OFT on those issues, steps would be taken before any criminal activity had taken place. That might be dealt with at a much earlier stage in the process, because the adjudicator may come across instances where it feels the costs have been driven down so low as to compromise food safety. Our approach would allow a supplier to take such issues to the adjudicator, and they may be included in the adjudicator’s annual report. That might help to stop things reaching the stage we have seen in the past few weeks. The amendment could play an important part in tackling future abuses that could occur—that goes to the heart of what the Minister has just said. Does the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for East Dunbartonshire (Jo Swinson), who is going to reply, agree that it is crucial that the adjudicator is alert to these issues? Will she therefore support our amendment to allow the adjudicator to report any abuses it sees occurring on food hygiene and food safety issues directly to the OFT? My hon. Friend the Member for Ogmore might want to expand on some of those points.

Amendment 3, tabled by my hon. Friend the Member for Hayes and Harlington (John McDonnell), is critical as it would require the Office of Fair Trading explicitly to respond to the recommendations that the adjudicator publishes. If the adjudicator were to include a food hygiene or food safety issue in their annual report to the OFT, it is only fair that the OFT should have to respond to those recommendations. That should be considered in how the GSCOP and the adjudicator are set up.

As the Bill stands, the adjudicator can make recommendations to the OFT should it determine that changes should be made to the groceries code. Of course, only the OFT can change the code, but, critically, nothing in the Bill binds it merely to respond to the recommendations. We are not saying that a binding clause in the Bill should ensure that the OFT acts on every recommendation, but the OFT should at least be bound to respond to the recommendations so that the industry has some transparency on the issues raised in the report. We made that point in Committee on a number of occasions. The Minister responded that if the OFT continued to ignore the recommendations, the Government would step in and do something about it. Indeed, she suggested that there could be some review of the OFT’s processes. That is all well and good, and I appreciate the fact that she gave that reassurance, but we are looking for a two-way dialogue between the adjudicator’s office and the OFT. My hon. Friend the Member for Ogmore and I have put our names to the amendment and we will certainly support my hon. Friend the Member for Hayes and Harlington if he wishes to press it to a Division.

Let me turn briefly to some of the issues raised by the hon. Member for Shipley. Sometimes we need regulation to allow the free market to work properly. Indeed, the whole purpose of the groceries code and the groceries code adjudicator is to ensure that those markets work properly without a damaging imbalance in the power of the various factors concerned. The large companies listed by the hon. Gentleman can look after themselves, and he is right to raise that issue, but they will not go to the adjudicator. The adjudicator has been set up to consider supplier imbalances in market power, as considered by the Competition Commission. I am sure that the adjudicator would not wish to consider an imbalance in the other direction just because she is not mandated to do so.

As for the sunset clause, the hon. Member for Shipley cannot have it both ways. He says that the adjudicator will have nothing to do, but also says that the adjudicator will look after the interests of the very large organisations. If the adjudicator will have lots to do, we will not want a sunset clause after seven years. The adjudicator will therefore carry on. New clause 3 is unnecessary as we must show our confidence that the adjudicator will do a good job.

I do not think that I need to deal directly with the amendments tabled by the hon. Member for Christchurch (Mr Chope), given that we have already dealt through amendment 30 with whether the ActionAid and Traidcraft issues of international territorial extent can be dealt with. I have some sympathy with amendment 27, as one of the big arguments in Committee was that the adjudicator could not come in on day one after Royal Assent—I think the hon. Member for St Ives (Andrew George) also mentioned that in one of his amendments—to consider the issues happening now as well as to collect evidence on what has happened since the groceries code came into effect. The amendment would be very sensible; the quicker the adjudicator gets up and running the better as she will have to deal with either lots of issues or, if the hon. Member for Shipley is correct, none.

I will wish to test the view of the House on amendment 34, which is, of course, consequential on amendment 35. We would also like to support my hon. Friend the Member for Hayes and Harlington if he wishes to press amendment 3.

--- Later in debate ---

I have read the advice in full. Far from scaremongering, I have quoted the advice from those who advise the Government—

[Mr Heath]

It is important that people understand what that advice is and what the data suggest. It has been set out very clearly by the chief medical officer, and I do not want anyone to go away from this debate believing that one in 20,000 people are subject to serious medical consequences from consuming bute. It is clear that the highest level that could be found in food products is, by a factor of thousands—by a factor of 10³—lower than that shown to have any adverse consequences for human health. Moreover, those adverse consequences affect only a very small proportion of people receiving pharmaceutical doses of the drug. It is very important that we understand the risk factors, and I am sure that the hon. Gentleman does not wish to misrepresent them.

[Huw Irranca-Davies]

rose—

--- Later in debate ---

[Mr Heath]

I beg to move, That the Bill be now read the Third time.

Before I go any further, I wish to thank hon. Members on both sides of the House for their help in shaping this Bill, which is important to my Department and to the Department for Business, Innovation and Skills, where my hon. Friend the Member for East Dunbartonshire (Jo Swinson) is Under-Secretary. It is something of a cliché on these occasions to say that the Bill has been improved by debate, but I genuinely feel that that has been the case with this Bill. It has also been helped by the sense of common purpose in the House for making progress on it.

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

Will the Minister give way?

[Mr Heath]

Of course I will. I was going to say something nice about the hon. Gentleman later, but he may prevent my doing that now—I hope not.

[Mr Bailey]

I hope that my remarks will not preclude that. In my capacity as Chair of the Select Committee on Business, Innovation and Skills I often need to berate Ministers for not doing what the Committee’s in-depth research has demonstrated to be necessary. On this occasion, although the Under-Secretary had concerns about some of our recommendations, on reflection she pretty much adopted whatever the Committee said was appropriate. Just as I berate Ministers on occasion, I want publicly to thank the Under-Secretary for her flexibility and reasonableness.

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. Before the Minister answers that rather lengthy intervention, bordering on a speech, I remind the House that this business must be completed by 4.45 pm. If any interventions are to be made, can they be short, please?

[Mr Heath]

Thank you for that timely reminder, Mr Deputy Speaker. I shall be brief in my list of thanks.

I thank the hon. Member for West Bromwich West (Mr Bailey) for what he just said. I also thank his Committee and the Select Committee on Environment, Food and Rural Affairs for their work on improving the Bill.

I want to start with my hon. Friend the Under-Secretary who, as the hon. Gentleman says, has done a superb job of listening to people as the Bill has made progress. She took up a baton that was already well on its way thanks to her predecessor, now the Secretary of State for Energy and Climate Change, to the right hon. Member for Meriden (Mrs Spelman) as Secretary of State for Environment, Food and Rural Affairs, and to my immediate predecessor, the right hon. Member for South East Cambridgeshire (Sir James Paice). I can exclusively reveal that there was a conspiracy within government, of which I was part in my previous role as Deputy Leader of the House, to ensure that the Bill made progress whatever other priorities arose as we all felt that it was important.

I also want to mention the contribution of a few others who are not in government. It was a delight to find myself so often in the Lobby with my hon. Friend the Member for St Ives (Andrew George), and he has campaigned vigorously for the measure as chair of the grocery market action group. I stood shoulder to shoulder with him when we were in opposition to make it a reality and his efforts have been appreciated. I hope he feels that they have been rewarded as the Bill reaches the statute book.

The hon. Member for Ynys Môn (Albert Owen) has long pressed for the adjudicator, including in his private Member’s Bill. His pleas fell on deaf ears at the time, but now all is sweetness and light and the Opposition are united with us in taking the Bill forward. I should add, as I am trying to be as consensual as possible, that I know from what my hon. Friend the Under-Secretary has said that colleagues on the Opposition Front Bench made debates in Committee enjoyable and that they made a genuine contribution. As they know, we have listened to what they have had to say and have on occasion been able to agree with them. That goes for the hon. Member for Edinburgh South (Ian Murray) and the hon. Member for Ogmore (Huw Irranca-Davies), who often secretly agree with me but sometimes cannot express it openly—

[Ian Murray]

Give examples!

[Mr Heath]

I could not possibly; it would embarrass the hon. Member for Ogmore too much.

Now that I have awarded bouquets around the House, I want simply to say that the Bill establishes an adjudicator to enforce the groceries supply code of practice. As recommended by the Competition Commission’s market investigation in 2008, the adjudicator will ensure that large retailers treat their direct suppliers lawfully and fairly. The adjudicator will be able to receive anonymous complaints from any source and may decide to launch an investigation if it is felt that there are reasonable grounds to suspect that the code has been broken. We anticipate there will be around two to four investigations per year and if the adjudicator is satisfied that the code has been broken, a range of sanctions will be available. The adjudicator can make recommendations to a retailer, require it to publish details of the breach, and, in the most egregious cases, impose a financial penalty.

We also announced our preferred candidate for the adjudicator last month. Christine Tacon has a wide range of experience in the groceries sector, has held senior corporate roles in retailers and direct suppliers and spent 11 years as managing director of Co-operative Farms, the largest farming operation in the UK. Members will be pleased to note that she will undergo her pre-appointment hearing with the Business, Innovation and Skills Committee tomorrow, although Ministers retain the final decision on her appointment. We are confident, and we hope that the Committee agrees, that she will be an excellent adjudicator.

We are satisfied that we have given the adjudicator sufficient powers to enforce the code effectively and during pre-legislative scrutiny we broadened our drafting so that the adjudicator could receive information from any source, giving us a good Bill. At the urging of hon. Members on Second Reading, we tabled amendments in Committee to give her the powers to impose fines from the outset. On Report we proposed additional safeguards in relation to clause 15(11) to cover the Secretary of State’s powers to restrict the information on which the adjudicator can start an investigation.

At every step along the way we have improved the Bill, and we now have a Bill of which the House can be proud. The Government have listened to the concerns of hon. Members from all parties to ensure that we create the most effective adjudicator possible, and we believe that we have now achieved that goal. I am delighted to note that a press release from the grocery market action group on 8 February announced in large letters:

“Fair Trade campaigners say Supermarket Watchdog has teeth.”

My hon. Friend the Under-Secretary wanted a watchdog with teeth and even brought the visual aids to support that contention on Second Reading.

We have done our work. I believe that we have a good Bill. I commend it to the House. The sooner we get this adjudicator in place, the better it will be for our producers, consumers and retailers.

[Several hon. Members]

rose—