Groceries Code Adjudicator Bill [HL]

Lord Bishop of St Edmundsbury and Ipswich Excerpts

Tuesday 22nd May 2012 Lords Chamber

[The Lord Bishop of St Edmundsbury and Ipswich]

My Lords, my colleague the right reverend Prelate the Bishop of Wakefield was very much hoping to speak in this debate but is unavoidably detained elsewhere. I know he will hope to speak at later stages. However, as I come from a rural diocese I found only too familiar the stories that he told me about the situation in the part of Yorkshire covered by his diocese and his concerns, which go back to 2004 when, on a very cold January night, he picketed the Arla dairy complex near Wakefield. Since then other noble Lords, particular the noble Earl, Lord Sandwich, have raised this matter in this House on a number of occasions.

As we have already heard, the impact of unfair prices has been particularly severe in the dairy industry. Before I went to East Anglia, I had seven years in Cheshire, a part of the country that had been noted for its dairy produce, and saw the effect of unfair prices. I am sure noble Lords are all too familiar with all the disturbing stories about retailers and suppliers.

The Church of England is delighted with the speed with which this Bill has been brought to this House following the gracious Speech. Detailed work within the Church of England on this issue began following a question to the 2005 General Synod; that sounds as if I am claiming that the Church of England had a Spartacus moment about seven years ago. The ethical investment advisory group conducted a detailed study into the practices of supermarkets in relation to their farmer suppliers. The ecumenical network of locally based agricultural chaplains and rural officers interviewed farmers in Yorkshire and the south-west and north-west of England. Such was the fear of some farmers that they would recount their experiences only to the church because they trusted it not to betray their confidence or reveal their identities. Such levels of fear should not be part of ethical or efficient business practice.

Fairtrade Begins at Home, which was published in 2007, was submitted as evidence to the Competition Commission inquiry in 2008. It identified practices such as: flexible payment terms, which seldom work to the advantage of the farmer; contracts subject to arbitrary change; retrospective variations to supply agreements; deductions from invoices without clear reason; and evidence that facilitation payments were required from suppliers—one such demand was £500,000.

There have been many positive developments in the relationships between farmers and supermarkets in the intervening years. However, sufficient problems remain for a groceries code adjudicator to be necessary, despite the introduction of the groceries supply code of practice two years ago. It is therefore important that the powers outlined here are implemented rapidly.

An important and valuable component of the Bill is the proposal to allow complaints from direct and indirect suppliers, as well as from whistleblowers within retailers and third parties. This is an essential part of addressing the climate of fear pervading business with some of the large retailers. It protects the anonymity of complainants and adds credibility to the office of the adjudicator. In the current financial climate, co-operatives and collaborative producer groups remain essential for the development of farming businesses, especially for livestock farmers. As indirect suppliers, it is important that co-operatives and producer groups operating on behalf of individual farmers will be able to make a complaint where the groceries code has been broken.

The decision to include enforcement through recommendations on how a retailer applies the groceries code and the requirement to publish information on breaches are positive. The adjudicator must be able to guide and encourage as well as have the means to take action. Nevertheless, like others who have spoken, the Church of England is extremely disappointed that financial penalties as currently proposed will not accompany the Bill when it comes into force. Provisions for the imposition of financial penalties are contained in the Bill, as we have heard, but they seem to create unnecessary delay. This will result in limitations in the immediate effective working of the adjudicator. As we have heard, large retailers have deployed the argument that financial penalties will lead to an increase in food prices but, as their turnover is several billion pounds, the Church of England does not believe that that argument stacks up. The British Institute of International and Comparative Law reiterated the importance of teeth—financial penalties—for effective enforcement of fair commercial relationships in food supply chains.

Given that only two years have elapsed since the introduction of the groceries code and that a full report on its functioning is yet to be forthcoming, we urge that the adjudicator role be given three years, if not longer, rather than the two years that it has been given, to establish itself before it is reviewed. Regular review of any function of governance is important, but only after a proper period of time has elapsed can an accurate assessment be made.

The first annual report of the Groceries Supply Code of Practice, when it comes, should contain information which will be useful guidance as to how the adjudicator will work and how long it might be wise to wait before a review is conducted. I welcome the Minister’s implication that a wider view of the information that can be considered has been taken by the Government and we certainly support the widest possible access to sources of information for the adjudicator.

It is, of course, to be hoped that where disputes arise, they will be primarily resolved through the existing Groceries Supply Code of Practice, but inevitably circumstances will arise when an anonymous direct complaint to the adjudicator is the only suitable avenue of recourse open. After years of hard work by many people, organisations and others, it would be unfortunate if we were to fail at the final hurdle by not providing the groceries code adjudicator with the budget, staff and financial enforcement mechanism needed to do the job properly.