Groceries Code Adjudicator Bill [HL]

Lord Grantchester Excerpts

Thursday 28th June 2012 Grand Committee

Moved by

[Lord Grantchester]

48: Clause 9, page 3, line 33, leave out “the Consolidated Fund” and insert “a fund, the proceeds of which are to be used to support innovation in the grocery market supply chain”

[Lord Grantchester]

My Lords, the issue of proceeds of fines has become prominent since last year, when the Office of Fair Trading fined certain supermarkets for raising their prices in 2003 in response to a concerted push-up on prices from dairy suppliers through their processors. Dairy farmers were responding to very low returns. The supply chain was being receptive and wished to respond without disturbing the competitive status quo. The supermarkets wanted a sustainable supply chain but the Office of Fair Trading, with its primary concern focused on prices to the consumer, fined the supermarkets, with the proceeds going to the Exchequer. That took further resources out of the supply chain, which brought it great alarm, and many in the dairy industry thought that this was unfair and counterproductive.

I will not comment further, as I understand that this case may yet be unresolved. However, the proceeds of fines levied on supermarkets for anti-competitive behaviour in a supply chain can be seen, in many regards, as different from those for most other wrong-doing. The Consolidated Fund helps taxpayers, not consumers. The complainants insist on anonymity. Rather than take money out of the grocery trade, surely we could be more imaginative.

We have doubts about whether the Government ever intend the adjudicator to levy a fine. If, on reflection, the Government find their nerve and agree that the adjudicator’s powers need to have teeth, the industry may be looking at significant sums of money if the level of fines is to have some meaning to supermarkets with multi-million pound turnovers. The proportionality of fines to the offence should also be taken into account. Have the Government done any thinking on this? Our amendment offers scope to undertake more positive action.

In early February, the House debated the report of Sub-Committee D of the European Union Committee, Innovation in EU Agriculture. The report’s main conclusion was that the UK must show leadership within the EU in order to develop a strategic approach to food production. The CAP budget should be rebalanced to increase allocation to research and innovation. All sides of the House, including the Government, welcomed the report. We have a wonderful opportunity to increase innovation in our groceries supply chain with proceeds from fines. “Innovation” includes all aspects of development in farming and the supply chain, technological development, product development, and marketing. The amendment at this stage does not seek to name a specific recipient, but rather to seek agreement to this idea.

Much of the innovation in farming originates in the supply industries that provide farming inputs: genetics of crops and animals, plant protection, animal health products and treatments, plant and machinery, and a range of expert services for financial, technical, environmental and marketing purposes. The BBSRC—Biotechnology and Biological Sciences Research Council—and the Technology Strategy Board urgently need to reposition UK agriculture at the forefront of technological advance. As an alternative, we have the Agricultural and Horticultural Development Board, as well as sector centres of excellence such as the dairy innovation centre.

The noble Lord, Lord Knight, received only today a letter from the Minister, dated 29 May, following our debate at Second Reading. In the letter, which the noble Lord has shared with me, the Minister mentions where money should go. I quote:

“There is … a risk that if the funds were earmarked for funding groceries supply chain initiatives this could lead to lobbying or even litigation over who the most suitable recipient was”.

I am not sure whether we need at this stage to specify in the Bill where precisely the money should go—the area is surely sufficient. Could that not be included as an amendment to secondary legislation under Schedule 3? Other examples do not seem to have caused a problem. For example, the regional growth fund is quite able to make awards without challenge. We have mentioned this idea to stakeholders in the industry and have received encouragement to explore this option with the Minister.

The Groceries Supply Code of Practice was needed precisely because anti-competitive behaviour stifled innovation. What better way to promote innovation in the supply chain than by using the money raised in fines from such behaviour to undertake this work? It would be the best way to provide redress to suppliers, who must be assured of confidentiality if they are to come forward without fear of reprisal. It is a pro-growth measure; pro-supplier and pro-consumer: a win-win-win. I beg to move.

[Lord Teverson]

My Lords, I shall speak to my Amendment 49. There is an opportunity here, as the noble Lord, Lord Grantchester has said, to be a little more innovative. I have certainly put down one suggestion in my own amendment, though I am not saying that it is exactly the right way to go. At this stage, we are talking about the principle.

I know that the Government are often concerned about what they would see as creeping hypothecation, and that fines should generally go into the Consolidated Fund. However, I was interested to read the Statement today from my right honourable friend the Chancellor of the Exchequer about the Barclays crisis, where he stated that fines paid to the FSA are used to reduce the annual levy on other financial institutions. We have an example there of where such fines do not go into the Consolidated Fund, as pointed out very conveniently by the Chancellor. If anyone knows about these Treasury issues, it is probably him—we hope, at least.

The Chancellor goes on to say that he wants to change that, and that proceeds of fines should go back into the Consolidated Fund. The reason that he is iffy about that system is that the money goes back to the financial sector. Here, we are not suggesting that it should go back to the rest of the retail sector; we are suggesting it should go to the people whom this Bill is trying to protect and promote—that is, the supply chain. There is an opportunity here for innovation, for goodwill and for common sense. I do not think that it will be the end of the Treasury trying to meet its targets in reducing the public debt. It will not be that significant, but it will be important to the industry.

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[Baroness Wilcox]

I hope that my answer satisfies the noble Lord, Lord Grantchester. I ask him, therefore, to withdraw his amendment.

[Lord Grantchester]

I thank the noble Baroness for her words and I will read very carefully through Hansard. We will confer and no doubt bring the amendment back, perhaps by exploring it in another way, because the supply chain is rather keen that such an opportunity is made available. I beg leave to withdraw the amendment.

Amendment 48 withdrawn.