Groceries Code Adjudicator Bill [Lords]

Ian Murray Excerpts

Monday 19th November 2012 Commons Chamber

[Jo Swinson]

I hope that the hon. Lady will understand that I am not going to give an exhaustive list. If the groceries code adjudicator felt that the remedies were not sufficient and were not being adhered to and if there were repeated breaches or if the recommendations made by the adjudicator were not being followed up on, those things would weigh heavily in the balance.

There has been a lot of lobbying on this issue, not least from hon. Members. As I am discovering, ministerial life brings with it a variety of interesting experiences, one of which happened last month, when I accepted a petition from a giant dog.

[Ian Murray (Edinburgh South) (Lab)]

Was it an actual dog?

[Jo Swinson]

It was a man in a dog suit, rather than an actual dog. The event was organised by Traidcraft, ActionAid and War on Want to highlight their message that they want the groceries code adjudicator to be a watchdog with teeth. To further press the point, they left me with my own watchdog, which has brightened up by ministerial office. I assure the House that I have declared the gift appropriately. I appreciate that the decision not to have immediate fines will be disappointing to some supplier and campaign groups, but the dog remains on my office shelf as a reminder that, should we find that stronger sanctions are needed, the Secretary of State will be able to bring in fines quickly. I assure the House that we will have no hesitation in doing so if they are needed.

--- Later in debate ---

[Ian Murray (Edinburgh South) (Lab)]

I did not realise that we could bring toys to the Dispatch Box. If I had known, I might have brought my bear, Frosty, which I have had since I was a child, for everyone to see. Perhaps we can do that next time, or maybe a Scalextric for the Table would be exciting.

I pay tribute to those in the other place who have diligently gone through the Bill and sent it here. It is a significant measure, but it has been a long time coming. Labour Members can rightly claim some ownership of it. As Lord Grantchester said, the Bill

“has Labour’s fingerprints all over it.”—[Official Report, House of Lords, 22 May 2012; Vol. 737, c. 728.]

In government, we gained cross-party support for a supermarket ombudsman to ensure a fair deal for farmers and food producers from the major retailers, and to monitor and enforce the code of practice in the form of the groceries code. We were therefore pleased that the Bill was included in the coalition agreement in the heady days of May 2010.

However, the Government have dragged their feet on creating the adjudicator, and on the powers to help food suppliers. As the hon. Member for St Ives (Andrew George) said,

“we look as though we don’t understand the urgency of this matter. Every week the Government fails to act, farmers are finding themselves in more difficulty.”

[Andrew George]

Of course, I also used those words when Labour was in power because, as the hon. Gentleman knows, the Competition Commission reported in April 2008, and for two years there were excuses and consultations, and a variety of reasons were given for the Government’s inability to go ahead at the time, despite the excellent private Member’s Bill that the hon. Member for Ynys Môn (Albert Owen), who is in his place, introduced.

[Ian Murray]

I am delighted with that intervention because we introduced the code, on which the adjudicator will now adjudicate. We are two and half years into the coalition Government, and the right hon. Member for Arundel and South Downs (Nick Herbert) said when he was a shadow environment Minister at an Oxford farming conference just before the 2010 election that,

“Conservatives are clear: we will introduce an ombudsman to curb abuses of power which undermine our farmers and act against the long-term interests of consumers”.

However, we are on the cusp of 2013, and the Bill has just been introduced.

[Andrew George]

I do not want the debate to degenerate into a party political spat, but to put the record straight, the Competition Commission had the power to introduce the code, and it, not the Labour Government, introduced it.

[Ian Murray]

The code is there for everyone to see, and was introduced before the general election. The next paragraph in my speech pays tribute to the hon. Member for St Ives for all his work. If I had my pen handy, I might cross that out, but I would not be so churlish. I therefore pay tribute to the hon. Gentleman, who chairs the Grocery Market Action Group. He has harnessed the support of organisations such as the Rural Shops Alliance, the Association of Convenience Stores, the National Farmers Union, the Farmers Union of Wales, the National Farmers Union of Scotland, the British Independent Fruit Growers Association, the British Brands Group, Traidcraft, ActionAid UK, Banana Link and many others in pushing the agenda from the early days of the Competition Commission inquiry, which he mentioned, in 2006 through to the establishment of the new groceries supply code of practice. He deserves great credit for continuing the fight, and I hope that he will support the Opposition in wanting to create a robust adjudicator.

I also take the opportunity to put on record thanks to my hon. Friend the Member for Ynys Môn (Albert Owen), who is in his place and has long championed the establishment of an adjudicator. It is now more than two years since his private Member’s Bill—the Grocery Market Ombudsman Bill. In the debate on Second Reading of that measure, he made it clear that the concept of a grocery ombudsman or adjudicator was not about being pro or anti any particular interest group, but about fairness, and the Opposition echo that sentiment. Nevertheless we are here now and, in a sense of cross-party support, we wish the Bill a swift passage on to the statute book. It is important, however, to get the legislation right, and although the Opposition are generally pleased with the current Bill, we will seek to strengthen it so that the adjudicator has the powers it needs to be effective from day one.

As the House will be aware, competition authorities have held two major inquiries into the grocery market. The first, by the Office of Fair Trading in 2000, led to the creation of the code of practice to regulate the relationship between the largest supermarkets and their suppliers. In 2006, the Office of Fair Trading referred the market to the Competition Commission, which completed a second inquiry in 2008. At the time, the commission said that,

“the transfer of excessive risk and unexpected costs by grocery retailers to their suppliers through various supply chain practices if unchecked will have an adverse effect on investment and innovation in the supply chain, and ultimately on consumers.”

It recommended a strengthened and revised code of practice to be enforced by an independent ombudsman—an unambiguous case for an adjudicator. As a result, in February 2010 the Labour Government brought in the groceries supply code of practice—GSCOP—to replace the supermarket code of practice, with the intention of putting the adjudicator on a firm statutory basis.

I am sure Members across the House will appreciate the work of the Business, Innovation and Skills Committee, which is brilliantly chaired by my hon. Friend the Member for West Bromwich West (Mr Bailey) who I see is in his place. He did a diligent job on the Bill during pre-legislative scrutiny—I should perhaps declare an interest as I was on that Committee at the time and have probably just patted myself on the back a little.

In its report, the Committee raised two concerns about the way the adjudicator’s office would operate. First, it was anticipated that the office would be able to launch investigations based only on evidence supplied by retailer or suppliers. The Committee argued that third parties such as trade associations or whistleblowers should be able to submit complaints about retailers. I am pleased that the Government made changes in that respect prior to Second Reading in the other place. They are to be commended on that alteration which the Opposition consider key to ensuring that individuals have the confidence to come forward with complaints under the cover of an industry group to protect anonymity and secrecy.

Secondly, the draft Bill allowed the adjudicator to impose fines on retailers that had breached the code, but only if the Secretary of State made provision for that by order. The Committee rightly argued that the adjudicator should be allowed to impose fines from day one—I shall return shortly to that crucial point.

There is little doubt that this legislation is necessary, and it is important to emphasise that supermarkets and retailers support the adjudicator in principle. One such retailer wrote to me privately earlier this week and stated:

“The groceries code adjudicator will encourage fair and robust regulation of supplier-retailer relationships.”

That speaks volumes.

We will scrutinise the Bill to ensure that it delivers on three key tests—that it promotes innovation and investment in the supply chain; ensures a fair deal for farmers and producers; and delivers better outcomes for consumers in terms of prices, quality and service.

[Michael Connarty]

As my hon. Friend will have heard in my earlier intervention, having read through the code it seems there is absolutely nothing in it to protect the labour factor in the supply chain. Will my hon. Friend take on board the need to raise that issue in Committee and table amendments so that people who use gangmasters cannot hide behind them if those gangmasters then use crooks, as recently happened in the Noble/Freedom Food eggs case, which I believe is now going to court?

[Ian Murray]

I know that my hon. Friend has worked on the Gangmasters Licensing Authority, and we will take that debate forward to Committee. The Gangmasters Licensing Authority has been downgraded under this Government—indeed, the Beecroft review recommended that it be scrapped. We must be vigilant and ensure that the great work done by that authority in saving lives and stopping exploitation continues, and we can debate that in Committee. If I look towards the Whips, perhaps my hon. Friend will join us on that Committee to make those points—his name is being jotted down as we speak.

I was talking about the huge impact and value that supermarkets bring to our economy. The groceries market was worth nearly £157 billion in 2011, and it provides significant choice and good value for customers, which is vital. A number of supermarkets in my constituency do a tremendous job through investment in our high streets, job creation, and supporting community projects, and I am grateful to them for that positive role. I also place on record my thanks to Sainsbury’s at Cameron Toll in my constituency for its continued support for my schools Christmas card competition. Likewise, farmers and small suppliers play a critical part in achieving economic growth. It is an incredibly difficult time to be a farmer or small supplier in the UK—there have been increases in feed prices, not to mention the difficulties that many small and medium-sized enterprises have experienced in accessing finance. We should set retailer abuses against that backdrop.

We should acknowledge that retailers have done much to clean up their supply chains, but we know that abuses by retailers against suppliers still occur, and that evidence supports the need for a groceries code adjudicator more than ever. FoodDrinkEurope, the European federation, surveyed businesses from around Europe anonymously. It asked whether businesses had been confronted by various situations, and the survey gives us a picture of the situation in the UK. Seventy-seven per cent. of businesses said they had experienced non-respective contractual terms; 75% said they had experienced de-listing threats to obtain unjustified advantages; and 60% said they had experienced unilateral deductions to invoices. Only a very small number of the businesses interviewed—3%—said that they had done something other than discuss the situation with their customers. When asked why, more than half said they did not believe in the effectiveness of the remedies by public or legal authorities, and 44% said they were afraid of commercial sanctions. In one case of which I am aware, the supplier—a salad grower based in Yorkshire—said:

“The retailer has reneged on a commitment to cover the costs of packaging should they terminate dealings with me at short notice—despite this being confirmed”

on numerous occasions in e-mails.

[Ian Paisley]

Given those statistics, does the hon. Gentleman believe that food producers will feel emboldened to come forward and make their complaints if no financial penalty is front and centre in the Bill?

[Ian Murray]

The hon. Gentleman is absolutely right. We need proper sanctions—we need to take the carrot-and-stick approach. Without proper fines in the Bill, the adjudicator could, as the Minister said, be a toothless dog or tiger. I will come to that shortly.

There are times when a market needs intervention to make competition work well, particularly if players in that market become too powerful. Roughly 3.6 million people are employed in food production in this country, and making competition in that market function more fairly through the introduction of the adjudicator is ultimately good for growth and for those jobs. It will undoubtedly also be good for consumers in the long term. Because the choice of products is supported, small suppliers and products will not be driven from the market by anti-competitive practices, which hon. Members have mentioned. The choice of retailers will also be supported, because small retailers will not be driven from the market by the disparity in buying terms, which can be exacerbated by anti-competitive practices. Suppliers will be better able to plan their businesses, yielding efficiencies. Critically, they will be able to invest in innovation, new products and product quality. Finally, more competition will hopefully bring down prices.

The benefits of a strong adjudicator are clear, but fundamentally the Opposition’s major concern is that the adjudicator will be toothless. The adjudicator must have teeth to tackle the breaches of which all hon. Members are aware.

[Glyn Davies (Montgomeryshire) (Con)]

The only contention between the Government and Opposition is whether fines should be available at the beginning or whether they should be introduced at the behest of the Secretary of State. Does the hon. Gentleman agree that to supermarkets, which are massive businesses, reputation and name are the most important things of all? Naming and shaming and reputational damage will therefore probably have more force in pressurising them. If that fails, even in the medium term, new primary legislation would not be necessary, because we could introduce fines.

[Ian Murray]

The hon. Gentleman brings a great deal of experience of the sector to the House. I am not convinced that the public will be surprised if a major retailer engages in a particular practice and is named and shamed in a national newspaper or trade magazine. If the adjudicator does their job properly, we would hope there would be no one to name and shame. It will help the system to operate properly if we can use the stick and say that retailers could be hit with financial penalties. If they can be hit with such penalties, naming and shaming become almost irrelevant.

[Daniel Kawczynski (Shrewsbury and Atcham) (Con)]

Certainly, when I have spoken with supermarket chief executives I have challenged them. They sometimes take out full-page newspaper adverts to highlight fair trade for third-world growers. Does he agree that we want to get to the stage where supermarkets are highlighting the fair trade they are doing with British suppliers?

[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.

[Mr Spencer]

Does the hon. Gentleman agree that those charged with the responsibility for spreading the message of the naming and shaming will be the same publications taking the advertising revenue? I wonder how much enthusiasm to naming and shaming there will be from those publications, when that might put their own advertising revenue in jeopardy.

[Ian Murray]

That is a wonderful point, and I think we now have our second candidate for the Committee—or given that helpful comment, perhaps not. The hon. Gentleman is right: there is a conflict of interest. The hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) mentioned the large full-page adverts that supermarkets produce relating to fair trade. Indeed, if it is about advertising revenues, there will be a conflict of interest, and I hope that the adjudicator would take that into account. If fines were included in the Bill, an adjudicator could balance up what would be the best punishment for a particular crime and deal with it in that way. By hamstringing the adjudicator from day one on fines, we are merely pushing down some of those routes by which questions would have to be answered.

Let me run through some of the issues relating to the adjudicator potentially being toothless, which is why we are calling for fines to be available to the adjudicator from day one. We are not the only people who are calling for that. In January 2009, the hon. Member for Somerton and Frome (Mr Heath)—the current Minister with responsibility for agriculture and food, who has been chuntering on about fines for the past few minutes—said, when he was an Opposition spokesperson all those many months ago, that there must be “an ombudsman with teeth” to ensure that farmers get a fair deal. I wonder whether he and his colleagues will support our amendments in Committee to give the adjudicator such powers, because they did not support them in the other place. He is not the only one. The hon. Member for Tiverton and Honiton (Neil Parish) said last year:

“I agree with my hon. Friend and other Members that the adjudicator must have real teeth so that they can take action to stop abuses.”—[Official Report, 5 April 2011; Vol. 526, c. 240WH.]

Just this weekend, a host of stakeholders wrote an open letter to The Sunday Telegraph. It is worth my quoting from it, because it touches on the crucial part of the Bill:

“Sir, Having got the Groceries Code Adjudicator Bill this far, the government will be scoring an own goal if it denies the supermarket watchdog the one tool that will make it effective: the power to levy fines from the outset. The evidence of supermarkets’ unfair treatment of suppliers—which includes farmers both here and in developing countries—is all too clear. Watering down the bill so that penalties only go as far as ‘naming and shaming’ will not be a sufficient deterrent and the Adjudicator risks failing in its job to hold supermarkets to account.”

That letter was signed by ActionAid UK, the National Farmers Union, the Federation of Small Businesses, the Campaign to Protect Rural England, the National Federation of Women’s Institutes, Traidcraft, the Tenant Farmers Association, the Country Land and Business Association, the Independent Fruit Growers Association, the Catholic Agency for Overseas Development, Friends of the Earth, War on Want, RedOrange and Great Glemham Farms. Clearly, then, there is a great movement to provide for fines in the Bill, and I cannot understand why the Government have not listened to the letter.

We are in danger of creating this toothless tiger—I have “tiger”, but it could be a dog, I suppose. Let us imagine an old-fashioned circus act. Where is the fear in a circus clown putting his head into a tiger’s mouth, only to have his neck viced by the tiger’s gums? There is no way we can put fear into the hearts of the supermarkets with an adjudicator that does not have the power to fine. Providing for fines in the Bill does not mean that fines should be imposed on retailers randomly—I hope there would never have been sufficiently serious breaches to require the invoking of the power—but allowing the adjudicator to have the power easily to hand might influence the retailers’ actions and go some way in preventing serious breeches of the code.

Clause 9 gives the adjudicator the power to fine retailers, subject to permission from the Secretary of State. Even if the adjudicator decided that the power to fine was necessary, several considerable hurdles would have to be jumped. First, the adjudicator, who would be best placed to decide whether fines were appropriate, would have to publish guidance in deciding the amount of financial penalty—a point that goes back to the Minister’s intervention. Secondly, once that had been given to the Secretary of State, he would have to consult stakeholders on the guidance. Finally, a statutory instrument would have to be presented to Parliament and passed by affirmative resolution. This hugely drawn-out process will do nothing to instil much-needed confidence in farmers and small businesses that might have been severely affected by a breach of the code by a retailer that the adjudicator thinks merits a fine.

We must trust the adjudicator to issue remedies fairly. By not providing in the Bill for the power to fine, the Government are in danger of scoring an own gaol, as said in The Sunday Telegraph letter from ActionAid. Indeed—if I may continue with the footballing analogy—a red card could be issued. It would be available to the adjudicator in the case of a penalty, but it would not be in its breast pocket, where it could be issued fast and effectively against the offender if necessary. Essentially, we are saying in the Bill that if the referee wants to issue a red card, he will have to ask the Football Association, after which the FA will consult on its use and then pass a new law to allow it to be used. I much suspect that the match would have finished many months before the decision is made.

The Business, Innovation and Skills Committee and the Environment, Food and Rural Affairs Committee have also said that the power to fine should be provided for in the Bill. Furthermore, in a recent joint statement, the Grocery Market Action Group, ably chaired by the hon. Member for St Ives and made up of 23 organisations from across the farming, international development, environmental and small business lobbies, called on the Government to give the adjudicator the power to levy fines. I ask the Minister, again, why she is not listening to the entire industry when it comes to fines.

I turn to the intermediaries. At the bottom of all this lies the nagging doubt that many of the alleged abuses will not be resolved even by the presence of a perfectly functioning adjudicator, because the problem is in the code itself, not its implementation. Central to this idea is the code’s limited scope—this point has been raised by voices across the sector—as much of the bad practice occurs at the level of intermediaries not covered by the code and therefore the adjudicator. For example, let us imagine that a supermarket has a ready meal supplier, but decides it wants fewer carrots in the ready meal and goes through the proper GSCOP processes to remove carrots. The supermarket can do that legitimately under the code, and that is only right. However, the ready meal supplier will buy those carrots from a carrot supplier, and could therefore dismiss one of its suppliers of carrots or change the terms of the contract without any recall to the groceries code. In that example, nothing would have gone wrong according to the groceries code, so we could see suppliers further down the chain being harmed quite considerably by the decision of an intermediary.

Equally, that binary view of the market seems inappropriate when the supplier is a huge manufacturer of branded goods, such as Unilever, Kraft, Nestlé or Coca-Cola, whose turnover may exceed that of even the retailer. We are protecting the relationship rather than the carrot producer further down the chain. The adjudicator will be required to recommend changes to the code to the Office of Fair Trading, yet the British Retail Consortium claims that the OFT has taken no action to offer feedback on the annual reports that its members have already submitted under GSCOP on their implementation of the code or even to publish them.

Many farmers and growers are currently not covered by the code, as they do not directly supply the 10 largest retailers. Nevertheless, they are often the ultimate victims of unfair behaviour and the transfer of risks and costs. We hope that ensuring that retailers comply with the code will resolve those issues. If, despite the adjudicator’s best efforts, those problems persist, primary producers will continue to struggle to make a fair return for their enterprises and consumers will continue to suffer from the subsequent lack of investment. That is why it is critical that the adjudicator should have the power in the Bill to keep the code live, to enable such issues to be dealt with if the adjudicator deems that to be necessary. May I ask the Minister what consideration she has given to those concerns and whether she will come back to us in Committee with an assessment of the issues affecting intermediaries?

Finally—

[Daniel Kawczynski]

The hon. Gentleman, who appears to be moving towards the end of his speech, mentioned carrots. The British carrot industry is actually doing quite well, but I very much hope that he has spent some time thinking about how the adjudicator will help our British dairy industry, which is on its knees, with many farmers going out of business every month. In the last Parliament I set up the all-party group on dairy farmers in order to fight for them. Our main report suggested that we should have a grocery adjudicator Bill. Will he spend a few moments talking about our dairy farmers?

[Ian Murray]

The hon. Gentleman raises a critical point, because naming and shaming did not work for the dairy farmers. What worked were blockades and sanctions in getting their points across to the Government. I will perhaps highlight the dairy industry and how the groceries code adjudicator should be able to help, but he makes a critical point about how the Bill could be seen as toothless, because the dairy industry had to blockade and withhold its services to get any action on how the supply chain worked. It neatly follows that the debate needs to be on where the code sits in the legislative framework.

[Glyn Davies]

It concerns me that the hon. Gentleman has just said that the improvement in the dairy farmers’ returns was based on just direct action. There was a serious debate in this House and a serious debate in central London, and the normal processes of politics had a great influence. It is not just direct action and blockading properties that are needed to have an influence on businesses.

[Ian Murray]

I take the hon. Gentleman’s point. The point I am making—I think his hon. Friend the Member for Shrewsbury and Atcham was making it too—is merely that we can draw a parallel between the code in the Bill and how it could work in the example I gave involving carrots in a ready meal, and what happened with the dairy industry. We are merely drawing parallels. I am not denying the actualities of what the hon. Gentleman has said; I am saying that having an adjudicator without teeth—one without the power to deal with the issue—could lead to exactly the same examples with many other industries.

To finish, my noble Friend Lord Knight—I pay tribute to the work he did on the Bill in the other place—speaking on behalf of the Opposition on Second Reading in the Lords, said:

“It is fundamentally odd that while Parliament is entitled to debate and scrutinise the function and powers of the referee, we are denied the opportunity to give the same scrutiny to the rulebook itself.”—[Official Report, House of Lords, 26 June 2012; Vol. 738, c. GC80.]

I appreciate that the Minister said that the code has a footing, in that the adjudicator can use it to compel supermarkets and retailers to comply, but there is a question whether it should be put on a statutory footing in this House to allow that to occur, rather than be dealt with through executive order.

The code must be a living document that is open to continual improvement in order to ensure that the framework is responsive, and that it ultimately works in the best interests of all businesses as well as consumers. The National Farmers Union has raised concerns about the status and enforceability of the code, because it is contained in a schedule to an order under the Enterprise Act 2002, rather than in a statute of its own. We would consider going further, and we will explore the ways in which the code could be a matter for Parliament to consider on the basis of recommendations from the adjudicator, who is best placed to evaluate the code. The code needs to be capable of responding to changing market forces, and to be as durable as the adjudicator who will referee it.

I mentioned extending the scope of the code to intermediaries, and hon. Members have already raised the recent issues surrounding the dairy industry. Cuts to farm gate prices mean that dairy farmers are being paid less for milk than it costs them to produce it. That is not a sustainable model. We welcome the news that there is agreement on the terms of an industry code of practice that will lay the foundations of a new deal between farmers and retailers. For too long, dairy farmers have put up with wholly unbalanced terms and have been struggling to cope in an increasingly unworkable financial situation. It cannot be right that supermarkets use milk as a loss leader while farmers are being paid less for the milk than it costs them to produce it.

Ministers need either to ensure that the voluntary code on dairy contracts works for farmers, or to bring in regulation to fix the dysfunctional supply chain in that marketplace. I believe that the adjudicator could fit that role if necessary, and I would be interested to hear the Minister’s thoughts on whether their role could be extended into areas such as the dairy industry when problems arise. That would be part of keeping the code as a living document.

[Stephen Timms]

Traidcraft and others have raised a point relating to the confidentiality of those who report their concerns. The Minister referred to that matter in her speech. Is my hon. Friend satisfied that the Bill will provide enough protection for those reporting breaches of the code?

[Ian Murray]

We will have to explore that matter in detail in Committee, because there is confusion in the industry and among trade bodies. They are uncomfortable with the current requirements, and I hope that the adjudicator will offer recommendations on the level of evidence that will be required to set up an investigation. A balance will have to be struck involving anonymity and confidentiality. That could be difficult in the circumstances in which a product could be uniquely indentified as coming from a particular supplier, and care would have to be taken to ensure that that supplier’s identity was not disclosed in the course of the proceedings.

This is a good Bill, but it could be a great Bill. The situation was best summed up by the hon. Member for South Staffordshire (Gavin Williamson), who said in the House in April 2011:

“None of us wants a weak, ineffectual, pointless adjudicator which will cost everyone something but achieve nothing.”—[Official Report, 5 April 2011; Vol. 526, c. 236WH.]

The adjudicator could and should be strengthened through the various proposals that we have heard this afternoon, and we will seek to achieve that in Committee. I give the Minister a commitment today that the Opposition will work constructively with her. Similarly, I hope that she will be open to giving due consideration to the amendments that we will table in the weeks ahead. I also hope that Hon. Members on the Government Benches who recognise that the Bill does not quite fulfil its potential will look at our proposals in detail in Committee. We look forward to playing our part with the Government in establishing an effective adjudicator as soon as possible.

[Several hon. Members]

rose—

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[John McDonnell (Hayes and Harlington) (Lab)]

I chair the Bakers, Food and Allied Workers Union parliamentary group. The group supports the Bill, because we hope that it will address the issue, mentioned by my hon. Friend the Member for Glasgow North East (Mr Bain), of below-cost selling. We have been campaigning on this issue for a number of years by tabling parliamentary questions and early-day motions, and meeting Ministers, yet the problem continues. As my hon. Friend said, below-cost selling is when a retailer sells an item for less than its input cost—what is described as being sold with a negative gross margin. When the Competition Commission conducted an inquiry into items of known value, it identified that bread was a particular issue, as he said. It was not just one supermarket selling white sliced loaves for 7p—many others were selling bread at extremely low prices and low margins. As he said, other countries addressed the issue at the same time by introducing legislation to prevent the resale of goods at a loss. This area is regulated in several European countries.

My hon. Friend also quoted the Competition Commission. In the passage that he quoted, however, the commission went on to say that if the practice went unchecked,

“we conclude that this will ultimately have a detrimental effect on consumers, by leading to low-quality goods, less choice of goods, or less product innovation.”

That is exactly what has happened to the supply of bread. The loss of bread quality should worry all concerned—in many instances, it is now little more than water—and is contributing to the nation’s unhealthy diet. Price pressures are also having an impact on the working processes, so we are concerned about health and safety, particularly in relation to the preponderance of Baker’s asthma among workers producing bread for supermarket chains. As has been said elsewhere, the price pressures obviously result in firms closing, the loss of jobs and pressure on overall pay and conditions.

I want to refer to the three main points raised so far. The first concerns fines. The Bakers, Food and Allied Workers Union has been involved in campaigns to name and shame. As I mentioned earlier, however, not only have they not worked but they have had the contradictory result of giving publicity to companies providing products at extremely low prices. In some ways, naming and shaming actually boosts supermarkets’ sales, as we saw with the Competition Commission’s inquiry into the 7p loaf. Our experience is thus not only that large conglomerates can ride out a naming and shaming campaign but that some actually benefit from it.

From my reading of the Bill, it looks as though the fines order will be brought into play only on a case-by-case basis. [Interruption.] No, the Minister says it will be on a general basis. If that is so, it will still be left to the Secretary of State to designate in the order the size of the fine to be levied. I would welcome more information. Will a tariff system be established? Will the recommendation on a tariff system come from the adjudicator? The House could usefully discuss whether a tariff system would prove effective and have an impact on companies’ practices.

The second issue concerns third party reporting. We have all welcomed that provision and put on record the fact that it will include trade unions. That is incredibly useful, and I congratulate the Government. Having said that, trade unions are anxious that companies might take retaliatory measures against a union or individual members. That is a concern, given past victimisation and blacklisting, so I would welcome the Government’s revisiting the blacklisting regulations to ensure adequate protection for trade unions, trade unionists and individual workers who blow the whistle on some of the practices of the supermarkets, as they put pressure on individual companies.

I am extremely worried by clause 15(10). I have seen clauses that allow for a review of the implementation of legislation, and for that review to bring forward recommendations that the House can discuss and on the basis of which we frame further legislation. That is the rational process. I have never before seen in legislation, however, the actual proposed new clause to be introduced. That flies in the face of the rational process of review, assessment and recommendation, after which the House comes to a view. It would help if we could hear why the Government feel they need the draft clause on the shelf, within the Bill itself, to introduce readily. It smacks of defeatism over the effectiveness of the legislation. May I also have some clarity on the process for the order? Will it be the affirmative process or the super-affirmative process—or whatever other process—that the Government recommend? There would need to be quite a heated exchange in this Chamber if we felt that the Government were reverting to type and removing those provisions from the Bill.

Thirdly, the appointment of the adjudicator is very important. I am therefore keen that the Government should concede that there ought to be some form of pre-appointment process via the relevant Select Committee, but I worry sometimes about the timidity of this House. Other Select Committees now have the right to approve appointments, so why not in this instance?

[Ian Murray]

My hon. Friend is making an incredibly powerful speech. As he is talking about giving this House some input in the appointment to an important post, does he agree that we should go down the route outlined in the Conservative party manifesto from the general election, which said that the Conservatives would

“give Select Committees the right to hold confirmation hearings for major public appointments, including the heads of quangos”?

[John McDonnell]

This point coincides with a private Member’s Bill in my name on the appointment of the Governor of the Bank of England. I can understand that the Government—or rather, the Chancellor of the Exchequer—might have some anxieties about that, but I cannot see why anybody should have any anxieties about the adjudicator being appointed with the approval of the relevant Select Committee. In fact, that is exactly what happened with the Office for Budget Responsibility. The appointment of the chair—in fact, the members were there too—was subject to the approval of the Treasury Committee. The post of adjudicator needs to be given sufficient authority, which often stems from the process of appointment. If the appointment was subject not only to pre-examination and review and so on, but to approval by the relevant Select Committee, that would send a message to the supermarkets and anybody else that the Government were serious about this job, and the individual concerned would have the full authority of this House to do as he or she saw fit in implementing the legislation. That is not an awful lot to concede, really.

It is rare to find such unanimity on the Back Benches across all parties. I genuinely do not understand why the issue of fines has arisen. In the old days, an influential figure in a sector of industry would phone No. 10 and the Prime Minister would drag in the Secretary of State and say, “We’re not having it, so you’d better amend it.” I hope none of that has gone on. I hope we will get a rational process in Committee, an acknowledgement of the unanimous view on the Back Benches and a Government amendment on fines that we can all agree on. If the Government strengthened the role of the new body—with the unanimous approval of this House, which they would get, because they have had it so far, apart from on this one issue—they could put down a marker to show that the Government mean business on this issue, and so do all legislators in this House.

In that way, the proposal will prove to be effective; otherwise, I make this prediction. There will be rows. The adjudicator will come forward, there will be publicity about a particular instance, the supermarket might pull back for a few months, or maybe a year, then it will return to its practices and we will end up going round the cycle yet again, most probably in two years’ time. We will be kicking ourselves and asking, “Why didn’t we give the adjudicator powers to fine?” Rather than waiting and revisiting the issue, why not do that now?

As for the order being in place and the choice being between fines in the Bill and fines in a statutory instrument that would take six months to introduce, there are people here with more experience than I, but getting a statutory instrument through this House can be quite difficult to say the least. If there is a civil servant out there or someone lobbying, the fastest I have seen it happen is 18 months to two years, so I have some scepticism about getting an SI through in that time. There will be lots of vying for parliamentary time in discussions with the Leader of the House and something could crop up that sends this issue to the back of the queue. It is not just a matter of saying, “Well, if it doesn’t work, we’ll bring forward an order in six months.” Instead, we could be waiting beyond the next Parliament. Some elements in the industry could play on and exploit that as part of their lobbying practices.

Ultimately, if the ability to fine were put in the Bill and a fine were imposed that the supermarkets, or whoever, were unhappy with, they would resort to a court of law anyway. If they felt that there was something wrong with the process, they could ask for a judicial review of the Government or the adjudicator. They have all the facilities to do that anyway, so I am not completely sure what the Government are arguing about on that point. I am hoping that we can have a rational process, and that the Government will see reason and table the appropriate amendments in Committee. I also hope that the work that has been done over the years by all those hon. Members who have been congratulated today will come to fruition in an effective piece of legislation.