Groceries Code Adjudicator Bill [Lords]

Fiona O'Donnell Excerpts

Monday 19th November 2012 Commons Chamber

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

I first declare an interest. I am a Labour and Co-operative Member of Parliament for West Bromwich West, and the Co-operative party is financed by and linked to the co-operative retail movement, which is both a major retailer and a major farmer, so it is involved in both sides of the argument.

I pay tribute to the many Members who have worked on the issue over the years and brought it to this point. As Chair of the Business, Innovation and Skills Committee, which played a significant role in making the recommendation that is being adopted today, I cannot but reflect on the irony that I, a Member who represents one of the most industrialised manufacturing constituencies in the country, have suggested proposals that are so significant to the farming and rural community. Perhaps that is a reflection of one of the strengths of our democracy.

I welcome the Bill. In paying tribute to those who have worked on the issue, I mention my hon. Friend the Member for Ynys Môn (Albert Owen), who promoted a private Member’s Bill, the Grocery Market Ombudsman Bill. It is also appropriate to mention the hon. Member for St Ives (Andrew George), notwithstanding anything he might say in response to my comments. The Chair of the Environment, Food and Rural Affairs Committee was also kind enough to do some work and feed it into our deliberations. I have also read the debate held in the other place, and its Members explored the issues thoroughly.

A lot has been said about the delay. I do not want to get involved in a party political argument, but the previous Labour Government were castigated by members of the current Government for deeming it reasonable to see how the grocery code would work in practice before legislating. Last year, the BIS Committee was invited, as a matter of urgency, to undertake its pre-legislative scrutiny, which we completed by the recess, and the delay in implementation since then has caused some bodies to raise concerns about the Government’s commitment to the measure. I am satisfied that they are committed to it, but they still need to examine some flaws closely; otherwise, those concerns may continue to prevail in some sectors of the industry.

On the Bill’s proposals, I am pleased to say that the Government have accepted about 80% of the amendments suggested by the Committee as a result of its pre-legislative scrutiny. It would be churlish not to recognise the Government’s willingness to listen to arguments and to take our proposals on board. I think that both industries will be strengthened as a result of the Bill. It is important to recognise that we are talking about two of our most successful industries. Our retailing industry is phenomenally successful and a model to be copied the world over. Similarly, our farming is among the most highly productive anywhere in the world.

It is undoubtedly true, however, that there has been an imbalance of power, and examples of the abuse of that power have been to the detriment of the producers, particularly the farming industry. Unless addressed, that in itself will have implications for the ability of that industry to introduce new products and innovate. By addressing the issue and redressing the balance, we will strengthen the supply to our retailing industry in the long term, and that will be to the benefit of both industries.

Many hon. Members have already highlighted the main area of disagreement between the Committee and the Government, namely whether the Bill should include the power to fine. The Minister said that the Committee had acknowledged that the arguments for and against that power were fairly even, but what she did not say was that we came down on the side of advocating fines. Some of the arguments in favour of fines have already been made. I think the Government’s approach has been to assume that the publication of evidence that could damage a supermarket’s brand in a highly competitive market could mean that supermarkets risked losing trade and profitability.

It is difficult to work out what the precise implications of the publication of evidence of a breach of the groceries code would be. It might be published in a press release, in the retailer’s annual report or on the retailer’s website. However, I have the gut feeling that relatively few consumers, particularly in these hard-pressed times, will change their shopping habits as a result of a retailer breaching the groceries code. That just does not ring true.

[Fiona O’Donnell (East Lothian) (Lab)]

In many constituencies, such as mine, which is predominantly rural, people only have a choice between two of the major supermarkets.

[Mr Bailey]

My hon. Friend makes an important point, which I was going to come on to. An individual’s shopping habits are determined by all sorts of factors. I do not know what evidence there is, but I would guess that the perception of value for money at different retailers is an important criterion. Other factors are accessibility and personal habits and traditions. I do not see that the publication of an adverse report by the groceries code adjudicator about a particular retailer would affect many people’s shopping habits and, therefore, the bottom line of that retailer.

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[Mr Mark Spencer (Sherwood) (Con)]

Let me first draw attention to my entry in the Register of Members’ Financial Interests. As a farmer, I am in the fortunate position of not supplying one of the major supermarkets, but I do, of course, know plenty of people in that position, including many of my constituents.

I broadly welcome the Bill. It is fantastic, it is timely, and the Government should be congratulated on the way in which they are addressing the current problem. It was with some frustration that I listened to the criticism from the Opposition Benches that it had taken two and a half years for legislation to be presented, given that, when in government, they presided over the rise of the supermarkets and the power that they gained.

[Fiona O’Donnell]

Rather than referring to “criticisms”, perhaps, in this new atmosphere, we could refer to suggestions for improvements—which, in all fairness, have come not just from Opposition Members but from Government Members.

[Mr Spencer]

I shall be talking about possible improvements. I think that there is a fair amount of cross-party agreement on the way in which the Bill can be improved. However, I also want to talk about some of the good practice that we see out there. We have heard a great deal of criticism of supermarkets and the way in which things work, but there are plenty of examples of supermarkets and farmers working closely together to improve the supply chain, add wealth to both businesses, and bring employment to rural areas. I think we should recognise that there is more to be celebrated than there is to be criticised, although we need to ensure that when things go wrong, there is a way of stepping in to sort them out.

When I embarked on my business career, my grandfather told me that the definition of a good deal was “a bit for me, a bit for you, and then another deal”. I think that we have reached a stage at which the supermarket sometimes wields too much power in the relationship, to the extent that I almost feel obliged to make it absolutely clear that some of the practices that I intend to highlight bear no resemblance to the activities of any of my constituents. There is a genuine fear out there of blacklisting and being removed from the stocking lists of supermarkets, such is their power.

I think it worth examining the practices that have gone on in the agriculture industry and its relationship with supermarkets. The first that springs to mind, which no one has mentioned so far today, is the operation of payment terms, which the supermarkets have stretched to a point at which big business is being financed by little business. That applies not only to agriculture, but to many other UK industries in which little suppliers are delivering products to big suppliers. The big suppliers do not pay for more than 90 days, and the smaller producers are forced to borrow from their banks in order —in effect—to lend the money to them.

One of the most shocking practices, to which other Members have referred, is the practice of rejecting loads of products when the price of the market goes through the roof, when there is over-supply, or when the weather changes, as in the case of the strawberry industry. There is real abuse of the system when supermarkets are able to reject a load that is perishable and cannot be returned without giving any recompense to the primary producer.

I am told that when a contract is being negotiated with a supermarket, the first line of the negotiation relates not to the retail price, the production price or even the wholesale price, but to the margin that returns to the supermarket. The primary producer must guarantee that margin. That cannot possibly apply to any other relationship between supply and retail. Whether the product is cauliflowers, carrots, plimsolls or widgets, if the supermarket decides to arrange a promotion and reduce its retail value, the primary producer will lose out while the margin of the supermarket will be protected and never squeezed.

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[Fiona O'Donnell (East Lothian) (Lab)]

I am pleased to have the opportunity to speak in the debate and, in particular, to follow the hon. Member for Brecon and Radnorshire (Roger Williams). For Jenny-come-latelies like me, it is particularly valuable to hear about the journey the Bill has travelled before bringing us here today.

It is also not only a pleasurable experience but a unique one for me, as this is the first time my constituents have urged me to speak up in the Chamber in favour of something the Government are doing. I do not know whether that says more about my constituents or the Government. I hope that we are seeing a coming of age moment for this Government. Let me take my first opportunity to welcome the new Under-Secretary of State for Business, Innovation and Skills, the hon. Member for East Dunbartonshire (Jo Swinson), to her position. I hope that this is a coming of age moment when the Government realise that the market when left to its own devices does not always work in a way that allows them to sit back and turn a blind eye.

The hon. Member for Banff and Buchan (Dr Whiteford) spoke about just how dysfunctional the relationship has become among the major supermarkets, the food producers and consumers, which means that it is time for the Government to act and intervene. The balance of power is so out of kilter that it is legitimate even for this Government to intervene to regulate. I hope that the new Minister—well, the relatively new Minister—will keep that feeling in her heart and consider it when it comes to the big energy suppliers and the payday loan companies. There is always a point at which her Government can say that enough is enough and that it is time for them to intervene.



East Lothian has some of the most beautiful and fertile agricultural land in the whole of this nation. The farmers in my constituency are facing a particularly difficult time after the bad summer that we had. Many of the crops will not yield what farmers had hoped for, and I hope for them that the Bill will offer some hope. We will judge the Bill on how it delivers for many of the hopes that we have. As well as a better future for farmers, I hope it will give them the opportunity to innovate, and that they will have the confidence to do that, now that they know there will be fairness in the supply chain.

The hon. Member for Banff and Buchan spoke about the importance for her farmers of having pillar 1 funding from the common agricultural policy. I hope farmers, especially smaller food producers, will see the Bill as an opportunity to plant for the future with some certainty. As farming is a major employer in my constituency, I hope this will lead to the creation of more jobs and improve the working conditions and pay of many of those who work in the agricultural sector and who, with the abolition of the Agricultural Wages Boards, have lost the security that they have enjoyed for decades as a result of the intervention of a previous Labour Government.

I pay tribute to the many Members who, over the years, have succeeded in building a consensus across the House. There is a very different feeling in the Chamber tonight. I was impressed, as I often am, by the words of the shadow Business, Innovation and Skills Minister, my hon. Friend the Member for Edinburgh South (Ian Murray), when he said that we have an opportunity to make a good Bill a better Bill. I very much hope that the Government will take that opportunity in Committee and that they will be open to opportunities to improve and strengthen the Bill. I stress to my hon. Friend that this is not a pitch to join him on the Public Bill Committee. One can have too much of a good thing. I previously sat with him on the Committee that considered the Enterprise and Regulatory Reform Bill, where the many valuable contributions that he brought to the debate in that forum were unfortunately spurned by the Government.

We have already seen attempts to improve the Bill, some of which the Government have responded to positively. I hope we continue to see that spirit. I spoke about how we are to judge the Bill. I wish that on Report in the Lords, the Government had accepted an amendment that would have built into the Bill a point at which the Government will review progress. I hope both Ministers were listening to the Chair of the Environment, Food and Rural Affairs Committee, the hon. Member for Thirsk and Malton (Miss McIntosh), when she said that her Committee believed that that would strengthen the Bill.

We have heard from various Select Committees and many organisations. I particularly thank ActionAid and Oxfam for the briefings that they have provided on the general debate about food security. I hope Ministers will realise that not just in this place, but out there in a variety of organisations, there is concern about the need to review the Bill and consider further powers for the groceries adjudicator.

I came this evening not to bury the big four supermarkets, but more to praise them. There have been real tensions in communities in my constituency. We are a constituency of small communities and the arrival of out-of-town supermarkets has threatened the future of the town high street and the marketplace. The community has responded positively by innovating, but it will be another test of the Bill if it brings further benefits to high streets that are struggling to compete with the big supermarkets. We have some wonderful specialty shops in East Lothian, in places such as Haddington, North Berwick and Dunbar—some up-market delicatessens where it is a pleasure to browse and shop. It is one of the strengths of East Lothian and why people visit it.

However, there is also a place for the supermarkets and I want to put on record my support for them. Many of my constituents need somewhere on their doorstep where they can buy a cheap school uniform and get the basic range of food and provisions. I do not deny that there is a role for supermarkets, but I want to see the balance maintained in my constituency. Many others in the House no doubt have a similar situation and want to see our town centres grow, thrive, innovate, contribute to the local economy and create jobs.

I welcome the fact that the Government have changed their mind and listened to the concerns about third-party evidence. Will the Minister give us a little more detail? Many producers fear for their future if word gets round. We see blacklisting in other professions. What is the meat of the Bill that will protect those food producers? A little more detail on that would be useful, as would any plans the Government have for improving clause 18.

We have talked about trade associations and trade unions being able to provide evidence, but we have not yet heard whether campaigning bodies will be able to do so. It is very reassuring and I welcome all that, so I wonder why the Government bothered to include in the Bill the power to rescind that, a point made by my hon. Friend the Member for Llanelli (Nia Griffith)—I hope I have pronounced the name of her constituency correctly; the guttural Scots tongue comes in useful at times. The Government can send some important messages by setting out certain provisions in the Bill. What message do they send the big retailers if the Government are not sure whether or not to include that power? It is a bit of a hokey-cokey clause.

I also have concerns that I am sure Ministers will recognise. We have heard from Members on both sides of the House and from all parties about the effectiveness of naming and shaming. The Minister tried to press Opposition Front Benchers on the size of proposed fines, so I will now press for some detail on what form the naming and shaming will take. She spoke about the possibility of retailers having to place notices in the national press. Will the adjudicator be able to specify the size of those notices and what newspapers they should appear in? Will it just be national newspapers, or will it include local newspapers, which are struggling to raise revenue in the current economic climate? Also, local people often trust more what they read in their local press. It would be good to hear a little more detail about where the retailers will be named and shamed.

Furthermore, what evidence do the Government have that naming and shaming actually works, because we seem to see the opposite? One example is this House. We have come through the expenses scandal—I hope—although it does not always feel that way, but when we ask people on the street which party is worse when it comes to the abuse of MPs’ expenses, the reaction is pretty much this: “You’re all the same and all as bad as each other.” I wonder whether that could be consumers’ approach to the retailers. They might not distinguish between the supermarkets, all the information would simply be lost in a blur and there would be an overall perception that there is something rather fishy going on. I really do not think that consumers will use that power and information to hurt an individual major retailer where it hurts—in the pocket. If there is evidence to the contrary, it would be good to hear it.

The Minister spoke about where we have seen consumer power, but that has often been in relation to a single product range or an unethical issue. In the meantime, supermarkets have continued to enjoy large profits. In my constituency the choice is between only two major retailers. Because of the distance between the Asda store in Dunbar and the Tesco store in Haddington, consumers have to travel quite a journey to exercise that right. I will say at this point that Sainsbury’s is coming to Haddington. I am not plugging them so that they sponsor my Christmas card, like that of my hon. Friend the Member for Edinburgh South, but perhaps that is a negotiation I might enter into after the debate. Sainsbury’s has shown good practice in working locally to build a vision for Haddington town centre, so that conflicting concerns can be balanced and the livelihood and sustainability of a town centre can be preserved while the out-of-town option is there.

[Sheila Gilmore (Edinburgh East) (Lab)]

Given the clear balance in the speeches that have been made today across the House, would not it be good if Ministers, rather than just waiting for the Bill to go to Committee, said now that they would table the kinds of amendments that everyone seems to be asking for—for example to introduce fines at an early stage?

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[Fiona O'Donnell]

My hon. Friend, as ever, makes an excellent contribution. The Government have a track record in this regard. They accepted some of our amendments to the Health and Social Care Bill, but only after they had branded them as their own, so perhaps our suggestions will morph into Government amendments that will result in an improved Bill.

A message has to be sent. There is no more important issue on which we can send a message to the big retailers than that of fines, and I make that appeal to Ministers. The point has been made by hon. Members of all parties during this debate and by Select Committees and organisations outside this place that we need, at the outset, to give the groceries adjudicator the power to impose fines. That would set a strict limit. We do not want to be like a parent who tells their child, “I’m going to let you out, not give a curfew and see how it goes.” It would be better to set a benchmark at this stage—a line that the big retailers cannot cross—rather than let them see how far they can push us.

Some companies irritate many of us by constantly phoning to offer to represent us if we have been mis-sold payment protection plans that we did not know we had signed up to. The reality is that only now that they are beginning to be hurt in their wallets are some of those companies desisting from such practices.

In summary, I see hope for this Bill, but we have offered Ministers the opportunity to improve it. Although I do not expect that to happen this evening, I hope that they will take that opportunity in Committee so that the Bill can be all it can be.