Groceries Code Adjudicator Bill [Lords]

Huw Irranca-Davies Excerpts

Monday 19th November 2012 Commons Chamber

[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.

[Huw Irranca-Davies (Ogmore) (Lab)]

Does the hon. Gentleman agree that those margins are seen not only in the direct relationship between producers and major retailers, perhaps on contract terms, but throughout the supply chain? Sometimes a retailer will say “Well, it’s nothing to do with us, guv”, but somewhere along the line an intermediary will be saying, “We want those margins.”

[Mr Spencer]

That is a valuable point. There have been a number of references to the dairy industry, and to small dairy farmers all over the United Kingdom. It should be borne in mind that very few small dairy farmers deal directly with the supermarkets. They nearly always negotiate through a dairy producer, someone who is making cheese or yoghurt, or even a bottling plant. The hon. Gentleman has made an important point, and we shall probably need to consider it once we have sorted out the Bill.

Another important topic is that of promotions. Many consumers will no doubt think that “buy one, get one free” offers and other promotions show supermarkets’ generosity, as they must be shrinking their margins. The truth, however, is that it is the primary producers who pick up the tab for the reduced price of the product, and they are often also asked to increase the supply of that product.

Earlier in the year a series of adverts ran on TV promoting asparagus at half price. The weather had been so shocking that I do not think there can have been a single blade of English asparagus on the market at that time. I almost shuddered for our asparagus producers. Many of them had obviously signed a contract to supply a supermarket, and an advertising spot had been booked six months in advance, without regard to the weather. When that time slot in the calendar came, the adverts rolled out and asparagus producers were probably having to buy asparagus from Mexico or Spain to meet their contracts to supply that promotion. There is no flexibility in the system, or common sense from some supermarket buyers.

The worst practice, however, is backdating. A primary producer can supply a supermarket for two years, let us say, and then the supermarket can suddenly say to that producer, “By the way, we’re backdating the price of all that product you’ve supplied to us for the last 12 months, and you owe us £50,000.” That primary producer is then faced with the prospect of either finding that money from somewhere—borrowing it or taking it out of their bank account—or reneging on the contract and never being dealt with again. That truly is an abuse of power. I hope the grocery ombudsman will be able to stop such practices.

Key issues are what tools will be available to the ombudsman and how he will make sure the code of practice is adhered to. That brings us to schedule 3 and the subject that has been dominating the debate: if the adjudicator cannot fine supermarkets, will he have sharp enough teeth to ensure that the code is adhered to? I do not ask the Minister to commit to anything in his winding-up speech, but I ask him to assure us that he will have an open mind and will consider the Committee’s deliberations, and be willing to make an amendment if he feels that that is the right thing to do.

I reiterate that there is much more good than bad in this Bill and it represents a great step forward. With the will of the House and a fair wind, I think we can get to the right place for the primary producers, and also for our consumers, who want good quality food in our supermarkets at the right price, and, crucially, at a price that is sustainable.

Small dairy farmers begin the process of producing milk by choosing an animal to breed. They then breed that cow, which takes nine months, bring that heifer to full production, which takes two years, and then, finally, they get milk from that animal. It takes four years of hard work and investment to get to the point of supplying any milk, therefore. In that time, supermarkets can change their contract on an hourly basis. The whole of the risk is with the primary producer, and at present there are occasions when the whole of the reward is with the retailer. I sincerely hope that we can start to redress the balance in that relationship, to the benefit of supermarkets, primary producers and consumers.

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[Huw Irranca-Davies (Ogmore) (Lab)]

It is a great pleasure to follow my hon. Friend the Member for Hayes and Harlington (John McDonnell) and his appeal for listening, for unanimity and for constructive work in Committee. This very good debate has revealed common themes and shared aims on both sides of the House. It has also shown that there is a real will, which we share, to get the Bill on to the statute book as soon as possible in a form that is fit and proper and that will enable it to do the job that we and Ministers want it to do. We do not want to miss this golden opportunity to get this absolutely right.

I have a radical suggestion. Perhaps we should dispense with the need to find names for a Committee, and simply keep on sitting here now until we have put the Bill to bed. With such high levels of experience in the Chamber today, and such clarity on what is required of the Bill, we ought to strike while the iron is hot. I am not sure whether all right hon. and hon. Members would welcome my suggestion, but I shall go on to pull out some of the themes that have been raised in the debate. We often struggle to discern any themes coming out of a debate, as Members put forward different—sometimes very different—viewpoints, and it can be impossible to pull any sort of consensus out of the morass. Today, however, there has been utter clarity, complete consistency and even—dare I say it?—a striking degree of unanimity.

That unanimity centres on two specific issues. First, real congratulations have been offered to the Ministers on bringing forward the Bill, and I offer the ministerial team my own congratulations as well. There has been some criticism over delays, some of which has been knocked back to us for causing delays while we were in government, but the fact is that we are now here and we need to get this right. That is one area of consensus: we all want to see the Bill reach the statute book as soon as possible.

The second area on which there is consensus is that the Bill is not yet fully formed. It is not far off, but it is not fully formed. To extend the metaphor that many others have used today, it is something of a pup that is showing great potential, but it is not yet a watchdog. It is all bark—in the naming and shaming—but there is little bite. As the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for East Dunbartonshire (Jo Swinson) suggested earlier, it is something of a fluffy and likeable little toy, rather than a trusty hound that can bare its teeth when needed and give the occasional nasty nip to the sensitive parts of a miscreant.

Let me turn to the one matter on which I have heard not one dissenting voice throughout the whole debate from any Member in any party, except during the opening remarks. I hope that the Ministers will be open to what they have heard about fines, because there was a remarkable level of consistency and agreement around the Chamber on that point. The Under-Secretary opened the debate with some well-balanced comments, saying that the arguments were finely balanced. She went on to say that financial penalties should initially be a reserve power. I do not think that the arguments are that finely balanced; I believe that there is compelling evidence to the contrary, and I shall say more about that in a moment. If they are so finely balanced, however, I would urge her to listen to the voices that we have heard in the House today. One after another, Labour, Conservative, Liberal Democrat and Unionist colleagues from across the water have stood up to say, “Put those fines on the face of the Bill.” Putting them somewhere else in the back pocket or leaving them at home to get them when they are needed means that the message going out to major retailers will be quite different.

Quite honestly—my hon. Friend the Member for Edinburgh South (Ian Murray) and I have discussed this—should we ever soon be back in government, we would not want to have to go to look for the tools that have been carefully hidden somewhere; we would want them to be right in our hands so that we can use them if they are required—not as a first resort and perhaps not at all, but we want them there as an option. That brings me to the first point about the question being finely balanced. We need all the tools in the toolbox from the off—not one tool left at home or not even yet purchased from the shop, because a reserve power is one that risks not being used.

Secondly, naming and shaming can indeed be powerful on occasions, but it is not always the most appropriate tool for the job. If it is the only tool available, I guarantee to Ministers that it will fail. One after the other, Members of all parties have raised instances where name and shame has been completely ineffective. Name and shame was not a rip-roaring success this spring and summer in respect of the dairy crisis. [Interruption.] The Minister says it was, but no; I can tell him that it played a part, but it was not effective. There was plenty of naming and shaming from February, March and April onwards. It was in the newspapers and in our postbags—day in, day out—so we knew who was being named and shamed, but they did not move, adjust or go backwards. What made the difference was not the pure act of naming and shaming, but protests—protests that were painful and unwanted, such as blockading dairies. Thousands of farmers confronted a Minister across the road from here. He was doing his job by facing up to it, but he was confronted by angry farmers demanding action. The Minister then went away and banged heads together. It was not naming and shaming in the local papers or even naming and shaming every day on the front pages of The Daily Telegraph or the Daily Mail that made a difference. What worked was farmers coming together to say, “This is not working; we have got to do more”. We should not have to resort to that, which is why I say in all honesty to Ministers, “Please do not rely on the single tool of naming and shaming. The message going out to the retailers is that you are not serious. You must have the tool in the back pocket ready to use in case it is needed.”

The third aspect is the need to put the power to fine on the face of the Bill. This is supported not only by Members on both sides of the House, as we have said, and by many in the other place who debated the issue and argued strongly for it. I shall not read them all out, but the need for the power to fine is also supported by War on Want, Traidcraft, the world development unit, the Country Land and Business Association, the National Farmers Union, NFU Scotland, the Farmers Union of Wales, the Ulster Farmers Union, the Association of Convenience Stores—the voice of local shops—Fair Deal Food, Action Aid, Banana Link, CAFOD—the Catholic Agency for Overseas Development—the Campaign to Protect Rural England, the Church of England and the Women’s Institute. For goodness’ sake, work with us on this one. We will help Ministers to become heroes if they listen to those voices, as they cannot all be wrong, even if I am. Those organisations represent people right across the supply chain. They include the Federation of Small Businesses for goodness’ sake; it is everybody.

I will not read out the early-day motion that the Minister signed once upon a time. [Hon. Members: “Go on!”] No, I will not; it would be unfair. I know, however, that in his heart of hearts, the Minister believes that this is the right course of action, as we have had this discussion before in debating chambers. When we talk about teeth, it does not mean the beast in front of us at the moment. It means having those penalties on the face of the Bill.

Let me move on to the excellent contributions to the debate, as I think the case for having financial penalties is overwhelming, clear, compelling and unarguable. We began with the contribution by my shadow ministerial colleague, my hon. Friend the Member for Edinburgh South (Ian Murray). It was an excellent opening to the debate. In welcoming the Bill, he was consensual, but his speech was also challenging where it needed to be, which is what we as the Opposition should do.

The hon. Member for Thirsk and Malton (Miss McIntosh), the Chair of the Environment, Food and Rural Affairs Committee, delivered a powerful and, as usual, forensic analysis of the Bill. Like all of us she welcomed it, but she also drew attention to shortcomings which I hope we shall be able to explore in detail in Committee.

My hon. Friend the Member for Clwyd South (Susan Elan Jones) pointed out that if we got the Bill right, it would be good for consumers. The Minister will agree with her observation that it would promote best practice and fairness throughout the management of the supply chain, would allow for investment in the boosting of productivity and innovation, and, in so doing, would provide an opportunity to reduce costs for both producers and consumers.

We heard an excellent speech from the hon. Member for Camborne and Redruth (George Eustice), who has spoken about this and similar issues in other debates. Today, he spoke eloquently and with great experience about the need for the Bill to be strengthened. He has made that point consistently, not least when interviewed by the Daily Mail for an article published on 16 November. I commend him on that, although the Daily Mail is not my regularly reading material.

The headline above that article was

“Supermarkets that bully small suppliers will NOT face fines after ministers cave in to pressure”,

but I do not believe that Ministers are caving in to pressure. I believe that they want to do the right thing, and to listen to what the hon. Gentleman and others have said today. I hope that they are open to his argument, and that the Government Whips will enable him to serve on the Committee, where his experience and insight will be welcomed. I loved his observation that naming and shaming was the preferred stand-alone option of the British Retail Consortium. He wondered, as we did, why that might be.

The hon. Member for North Antrim (Ian Paisley) spoke powerfully—as he always does—for food production and processing industries throughout Northern Ireland. He called for the payment of a living wage in agriculture, and we thoroughly agree with him about that, as we do about much else that he said. He noted the strong support of the Ulster Farmers Union, and the individual support of its president, Harry Sinclair, for a significant strengthening of the Bill. He said that if the price-fixing by major supermarkets was occurring because they were a cartel, they should be—I think that these were his words—kicked where it hurts, which I am sure, in his mind, is right in the adjudicator’s office.

The hon. Member for Carmarthen West and South Pembrokeshire (Simon Hart) said that the position of Government Members on regulation was often misquoted, and that they were not against regulation but in favour of better regulation. That, he said, was exactly what was required in this instance. Poor regulation was the problem, he said, but the Bill represented good regulation and—again—should be strengthened. The ability to make a living in the countryside must be preserved, and that included the living made by the small farmers in his area. He said that he had received only one piece of correspondence saying no to fines, but dozens expressing the opposite view, so why should fines not be levied?

My hon. Friend the Member for West Bromwich West (Mr Bailey), the Chair of the Business, Innovation and Skills Committee, welcomed the Bill and the fact that the Government had adopted about 80% of the Committee’s recommendations. However, he focused on the shortcomings of the Bill and the need for it to be strengthened further. He clearly felt that naming and shaming on its own, without additional penalties in the Bill, would be insufficient.

The hon. Member for St Ives (Andrew George), who has done so much in supporting the Bill’s progress and in marshalling a grand coalition of partner organisations throughout the supply chain both in the United Kingdom and internationally, rightly acknowledged those organisations in a roll of honour, but also acknowledged the many parliamentarians in all parts of the House who have brought us to this point. I think that that consensus-led approach should continue in Committee, but that we should aim not simply to let the Bill roll forward and accept whatever is presented, but to improve it so that we get it right this time.

My hon. Friend the Member for Ynys Môn (Albert Owen) had a private Member’s Bill that tried to introduce precisely this position, and he reminded us that his preference, as expressed in his Bill, is for the term “ombudsman” rather than “adjudicator”. He welcomed the Bill, but bemoaned the delay. He alleges that was fashioned by Government Whips; I am sure that is not true. He called for penalties to be stated in the Bill and for Ministers to name and shame those who have lobbied against strengthening its provisions. The Minister who opened the debate declined to try out the excellent mechanism of naming and shaming, however. The Minister who will conclude the debate can take the opportunity to try that out, and we will then see tomorrow morning whether it has any effect. Who is against strengthening the Bill? What are the names of those who oppose strengthening it? I would like to know, as I am not getting any letters to that effect. Instead, I am receiving calls from a wide coalition of people, including Members of this House, for us to work together and strengthen the provisions. I am convinced the Minister who will conclude the debate wants that as well, and I am trying to help him. Indeed, I am trying to help both Ministers.

My hon. Friend the Member for Ynys Môn highlighted the possibility of the entire supply chain being open to investigation and possible sanctions, and asked how we would handle that. Will the Bill result in that happening? After all, these issues involve not only the relationship between the big retailers and the individual producers, but a wide and complex distribution network across the supply chain.

I chatted briefly at the side of the Chamber with my hon. Friend about this evening’s very disappointing breaking news about Vion, and another hon. Member has raised that, too. It is a major employer and economic force in many constituencies, including that of my hon. Friend. I hope the Minister will be able to give us some assurances as to what role the Government can play in trying to protect these jobs at Vion and the economic benefits they bring to many constituencies.

The hon. Member for Carlisle (John Stevenson) chairs the all-party group on food and drink manufacturing. He saw the Bill as a positive encouragement for the supply chain, recognising good practice—of which there is, indeed, a lot. He made a forensic contribution. Interestingly, I noted that he supported the proposal that penalties should be stated in the Bill, and he agreed that the adjudicator should report on its success in respect of the code and whether changes to its scope and remit might be needed. I hope the hon. Gentleman finds himself serving on the Committee—although I do not know whether he shares that aspiration.

My hon. Friend the Member for Bristol East (Kerry McCarthy) reminded us about the new farming Minister’s previous stalwart support for an adjudicator with real teeth. The farming Minister, who will conclude this debate, was right then, as I have told him before, and he can help us strengthen the Bill to get the right policy now as well. My hon. Friend also talked about the important issues of food waste and food poverty, and explained how those topics tie in with the Bill. She made a worthy contribution.

The hon. Member for York Outer (Julian Sturdy) said the Bill would be undermined if the adjudicator lacked the teeth it needed, and he described it as a referee without a whistle or a red card in his—or, I should point out, her—pocket. He is absolutely right. He said an adjudicator will have little impact without the metaphorical red card in its metaphorical pocket, and he rightly raised the spectre of the dairy crisis. He encouraged Ministers to show strength and to strengthen the Bill.

The hon. Member for South Down (Ms Ritchie) said that the Bill needed to produce lasting reform, and that it must redress the imbalance in the supply chain so that there is long-term sustainability and a real economic boost throughout the supply chain. She called for statutory teeth as being a necessity. She spoke, too, of the need for robust powers of investigation and enforcement, and the ability to receive representations without fear of reprisal. Indeed, the issue of anonymity and people being able to come forward without fear of reprisal was another common theme. The hon. Lady also commended the idea of fines for serious breaches of the code. She said naming and shaming alone was not good enough because it was not strong enough. She called for an emboldened Government who will strengthen the Bill.

The hon. Member for Ceredigion (Mr Williams) has great experience in one of the great farming areas of Wales, and he raised the Ceredigion test, asking whether the Bill was robust enough. His answer was, “We like the fact the Bill is here, but it doesn’t yet pass the Ceredigion test.” I suggest to him that if we work together, we can make it pass that test. He cited the Women’s Institute’s support for strengthening the Bill; it is about not just jam and Jerusalem, but adjudication.

The hon. Gentleman made a good point about accessibility and the adjudicator’s remit, and I look forward to amendments being tabled on the subject in Committee. He called for “Chwarae Teg”—fair play. My hon. Friend the Member for Llanelli (Nia Griffith) said that supermarkets had nothing to fear from a levelling of the playing field, and she rightly criticised the retrospective varying of supply agreements. What is that all about? It is the idea that a retailer or an intermediary can go back to a producer and say, “I’m sorry, you have to find some cost-cutting measures after the event.”

The hon. Members for Sherwood (Mr Spencer) and for Banff and Buchan (Dr Whiteford) are particularly affected by the Vion decision, and I hope that the Minister will respond on that. I am afraid that I do not have time to respond to all the comments that were made. The hon. Member for Tiverton and Honiton (Neil Parish) welcomed the Bill, as did my hon. Friend the Member for Glasgow North East (Mr Bain). My hon. Friend the Member for Hayes and Harlington (John McDonnell) spoke up for people working in these sectors. The common theme that emerged time and time again was a welcome for the Bill but the fact that it would not be quite right until we strengthened it.

The Bill is good, but it is not yet quite good enough. It has cross-party support to get it on the statute book as soon as possible but, as we have heard, it needs cross-party support to go further and give it real teeth. It was rightly noted in the other place that Labour’s fingerprints are all over the Bill, but so are the fingerprints of hon. Members who serve on the Select Committees on Business, Innovation and Skills and on Environment, Food and Rural Affairs, as well as the fingerprints of Back-Bench champions such as the hon. Member for St Ives, my hon. Friend the Member for Ynys Môn and many others. I say to Ministers and to all hon. Members, not least those who might serve on the Bill Committee, let us take the opportunity to make this not just a good Bill but a great Bill, and work together to make it so.

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[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.