Groceries Code Adjudicator Bill [HL]

Lord Knight of Weymouth Excerpts

Tuesday 22nd May 2012 Lords Chamber

[Lord Knight of Weymouth]

My Lords, we have had a largely good-natured debate until just now about this important issue for consumers, producers and retailers. As my noble friend Lord Grantchester said, we have a sense of ownership of this Bill since we first advocated it and since the adjudicator refereeing the code was brought in by us in 2009. On that basis we are keen now, as the Opposition, to work with the Government as the Bill goes through Parliament to make sure that the adjudicator has the best possible chance of success and perhaps prove my noble friend Lord Myners wrong in respect of its chances. As has been said, we brought in the code following the 2008 report by the Competition Commission which talked about the “climate of fear” among suppliers in relation to disputes using the code in force at the time. The commission recommended using a new code and an adjudicator to give it teeth.

I was delighted when I met representatives of the large retailers through the British Retail Consortium last week. They told me that they were not opposing the principle of establishing the adjudicator in this Bill. Given that it was in all three party manifestos, they are bowing to the inevitable. This was reinforced by the e-mail from Waitrose, which claims to have supported this move from this outset. This attitude from the large retailers is positive and constructive and reflects what will I am sure be helpful engagement from all stakeholders as the Bill goes through its legislative journey.

On that constructive basis, I hope that we can get this Bill on the statute book as soon as possible so that the adjudicator can get on with this important job and offer suppliers the comfort that not only is the playing field a little more level, thanks to the code, but—to borrow the phrase that the noble Lord, Lord Plumb, attributed to Peter Kendall—there is now a referee to ensure that the game is played according to the rules. However, my noble friend Lady Sherlock is right to look for a statutory purpose. I was amused by the noble Lord, Lord Teverson, raising the possibility of schedules to the Bible. I bet Michael Gove is volunteering to write them.

Before I move to a more wholly constructive mode, I make one criticism of the Government in this regard. Why has it taken them two years? Back at the beginning of 2010, the shadow Environment Minister Nick Herbert went to the Oxford farming conference and said:

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

At the same time, Labour MP Albert Owen introduced a Private Member’s Bill on the same issue in the other place. Clearly, the policy was worked out and work was going on in legislation. In Opposition, the Minister’s party was ready to go with this measure. So why did we have to wait for two years? Is it the fault of their coalition partners being lukewarm? From what we have heard, that is not the case. Was it her Secretary of State not managing to make the case for the Bill in the legislative timetable? Or was it that Defra, the real policy lead, was not being listened to by anyone and farmers were being taken for granted by the coalition? We shall see—but I am glad to get that off my chest, and I can now be more positive.

The Bill has enjoyed support across the House, with the notable exceptions of the noble Lord, Lord Howard of Rising, the noble Viscount, Lord Eccles, and the noble Lord, Lord Myners. I very much respect their purity of free-market thinking, but I disagree, as there are times when markets need regulating when agreements are not entered into as freely as some think. The noble Viscount, Lord Eccles, and to some extent the noble Lord, Lord Myners, asked what the public would think. I do not know if noble Lords tweet, but I do, and when I have asked Twitter and Facebook about this, the overwhelming response is, “about time”. Even though they are like me all customers in supermarkets, they believe that at times they overuse their power.

My noble friend Lord Grantchester set out the tests that we will use in opposition as to whether the adjudicator will be effective. First, is it good for growth? I was delighted to go to the briefing for parliamentarians last Monday, which the Minister and her ministerial colleague Norman Lamb MP kindly offered. I was even more delighted when Norman described the Bill as a growth measure. My delight knows no bounds when the Minister in her peroration confirmed that this Bill to establish a quango and a regulator is good for growth. This feels somewhat discordant with the rhetoric we hear from the Prime Minister about deregulation being the key driver for growth. But maybe on this, as on Beecroft, the Minister’s Secretary of State has won the argument. Perhaps she could pass on our regards to Vince Cable, because of course there are times when a market needs intervention to make competition work well, if players in that market become overmighty. I note that my noble friend Lord Myners wanted a similar arrangement in this Bill to apply to banks. I am sure that he is making the same point to our friend Ed Balls—and I wonder whether Vince agrees.

Agriculture and food processing, worth more than £80 billion to our economy, are our largest manufacturing sector. Some 3.6 million people are employed in food production in this country, and to make competition in that market function more fairly is ultimately good for growth and for those jobs in the food sector. Then it can also be good for consumers if it is working well. As the noble Baroness, Lady Randerson, told us, a healthy market will allow new entrants in and innovation in the supply chain; it will offer choice and competition and will thereby push up quality and push down prices.

This takes us to another of our tests. Will the adjudicator be able to act on the right things? The question is about updating the code. Much of what we have heard today concerns issues for the code and not always issues for the adjudication of the code. My noble friend Lord Grantchester and the noble Earl, Lord Sandwich, talked about recent worries in the dairy industry. The noble Baroness, Lady Parminter, talked about the fruit industry. Some of the remedies for these problems depend on renewing the code and potentially extending its reach. While the code is out of scope for the Bill, the role of the adjudicator in reviewing the operation of the code is not. We think that it is in the interest of all stakeholders that the code is kept a living document and that it should be reviewed regularly and updated by Parliament accordingly. We will therefore explore in Committee whether the adjudicator should include in the annual report any recommendations on improving the code so that it is an act of consideration rather than—as the Bill stands—a passive one.

I will also be seeking a commitment from the Government to commission a serious look at the whole supply chain to the large retailers. It is worth noting that when the Competition Commission reported in 2008, it had only been asked to look at the immediate suppliers to supermarkets. Some of these, such as Kraft and Coca-Cola, are bigger businesses than some of the supermarkets they supply. We need to look at their suppliers and the whole chain to see if this process will create a fair deal for small producers. In winding up, will the Minister give an indication of what consideration the Government are giving to looking at this so that a better code can be developed? I note that, in her opening speech, she hinted that she might view it as overregulation. Is she willing to ask the Competition Commission to research and test that view?

Our next test is whether suppliers will risk using the adjudicator. I applaud the Government for listening to stakeholders and the two Select Committees who did some excellent work in pre-legislative scrutiny of the Bill. It is much improved around anonymity, which we support. It also allows third parties to make complaints, as we have heard, which is also welcome. I will, however, want to explore whether the Bill needs a halfway house if third parties do not work consistently when the operation of this system is reviewed.

Finally, is this measure strong enough to force change where needed and will it be seen to be fair on all parties? This leads to the three key issues to debate as the Bill progresses: appeal, independence and fining. Before talking about these, it would have been helpful to have an impact assessment. Is there one beyond that for the draft Bill? If not, why not? Is it not a requirement these days to have one? Currently, there is no appeal for retailers. If financial penalties are subsequently brought in, the Bill specifies the courts as the means of appeal. In the interests of fairness, we may want to debate whether the potential damage of naming and shaming is serious enough for retailers to have a straightforward appeals process. Although the informed opposition to this from my noble friend Lord Borrie has probably persuaded me, we may need a quick debate to be sure.

We will also explore the independence of the adjudicator, an issue raised by my noble friend Lord Myners. The adjudicator will be appointed by and accountable to the Secretary of State. We will explore whether it is better to have the independence and transparency of accountability to Parliament. I know from contact with Members from the other place who serve on the BIS Select Committee that they would like a say in the appointment of the adjudicator. Equally, there is merit in an annual report to Parliament, including reporting on the operation of the code and the operating costs of the adjudicator. The latter would provide some comfort to retailers who will be funding the operation through the levy which they regard as something of a blank cheque.

Then there is the biggest issue of them all, mentioned by most of the speakers in this debate today—that of fining. Within this, there are two issues to debate. There is the principle of whether the adjudicator should have this power from day one and, if not, whether the process for introducing fining is, as the noble Lord, Lord Razzall, described it, cumbersome. I will certainly draw on the experience of my noble friend Lord Haskel when bringing forward amendments in Committee to Schedule 3 to deal with the latter. However, first, I will try to win the argument on the principle of fining. Like the right reverend Prelate the Bishop of St Edmundsbury and Ipswich, I think that the adjudicator should have teeth from day one. His comments were echoed by many other speakers. The referee should have the red card to help enforce the rules. I hope that there will never be sufficiently serious breaches to invoke the use of these powers, but just having the powers there and ready to go may prevent such serious breaches.

This raises the question of what success for the adjudicator looks like. I hope that the Minister will not abolish the measure by order in a few years’ time if it has been used to instigate not much more than low-level arbitration and investigation. As a football fan, I do not like it if the ref keeps stopping play, but I would always want one there to enforce the rules of the game. I also think that the power to abolish this new quango should replicate the new processes that we are starting to get used to in the Public Bodies Act and not follow the simple negative procedure in the Bill. Like others, I am keen for the proceeds of fines to be used in an imaginative way, ideally in investing in innovation in the supply chain. Unlike the noble Baroness, Lady Byford, I like the clarity conferred by questions punctuating the Bill’s wording, however homely it may seem to her. Unlike the noble Lord, Lord Palmer, I like the name of the adjudicator. I understand why the Minister might not want to call it the regulator given the sensitivities around that issue.

This is broadly a good Bill and has been warmly welcomed by most speakers this afternoon. My promise to noble Lords is to engage openly and constructively across the House to improve the Bill as it goes through its journey. I am sure that the Minister will do the same. We look forward to helping her get an effective adjudicator up and running as soon as possible.