Lord Knight of Weymouth
Main Page: Lord Knight of Weymouth (Labour - Life peer)Groceries Code Adjudicator Bill [HL]
Lord Knight of Weymouth Excerpts
Lord Knight of Weymouth
My Lords, with all respect to the noble Viscount, we have amendments coming up later regarding the powers to fine. All that we on this side want to do at this stage is say that he will not be surprised that we disagree with him, and that we will explore at greater length the reason why. Suffice to say that the Federation of Small Businesses, the National Farmers’ Union and the Country Land and Business Association, to name but three of the submissions that I have had, think that we should go further on the powers to fine than the Bill does. We have support from across the House; the noble Lords, Lord Razzall and Lord Teverson, my noble friends Lord Borrie and Lord Grantchester, and the noble Baronesses, Lady Randerson and Lady Byford, have all put their names to amendments that say that we should go further. We think that the status quo is the minimum. The Select Committees of BIS and Defra are also supportive of the powers to fine. I am happy to leave it to the Minister to persuade her noble friend that he should withdraw his amendment.
Lord Knight of Weymouth
My Lords, I rise in support of my noble friend Lord Browne’s position, which he articulated very well. The noble Lord, Lord Howard of Rising, has raised an interesting issue. The Competition Appeal Tribunal came into force in 2003 in order, as its website says:
“To hear appeals on the merits in respect of decisions made under the Competition Act … by the Office of Fair Trading … and the regulators in the telecommunications, electricity, gas, water, railways and air traffic services sectors”.
It does a few other things as well. The noble Lord is asking the Government a reasonable question about whether there should be an alternative to the court in respect of appeals. As my noble friend has said, this is about the merits of the decision as well as the process by which the decision has been made. I look forward to what the Minister has to say.
Baroness Byford
Yes, but perhaps my noble friend was in a better position than that supplier; there was clearly a problem there.
I welcome the amendment and am glad that we have a chance to debate it. I hope that when we come to later amendments concerning fines, we will be able to strengthen the provisions. I do not know whether that will make this amendment unnecessary—I seek clarification on that, because I do not know the Minister’s point of view. If we fail later to strengthen the whole section on fines, the amendment will be extremely important.
Lord Knight of Weymouth
My Lords, I will not add to the excellent case made by my noble friend Lord Browne, but he has my support.
Baroness Wilcox
My Lords, the point raised by the noble Lord, Lord Browne of Ladyton, is important and the Government have considered it carefully. It was also raised by the Business Select Committee in pre-legislative scrutiny, as the noble Lord mentioned, and the Government amended the Bill in response. I take the opportunity to respond to the noble Lord, Lord Borrie, who asked whether the Bill already allows such escalation. That is not our intention. In Clause 6, subsections (a), (b) and (c) are not intended to be sequential. One or more measures would be imposed at the same time following one investigation. I hope that that is helpful.
The question is: what should be the adjudicator’s options if a retailer does not follow a recommendation? Before answering this question, I emphasise two things. First, recommendations are not mandatory. If they were, that would give too much power to the adjudicator: he or she could essentially tell retailers how to run their business. Recommendations are meant to be the lightest touch form of sanction, not the most severe. Secondly, there may be good reasons why a retailer has not followed a recommendation. For example, a retailer might decide that it can more effectively comply with the code using a different method than that recommended by the adjudicator.
Having said that, there must be some way in which the adjudicator can follow up recommendations. After considering the BIS Select Committee’s report, the Government chose to provide for this in three ways. First, Clause 7(2) requires the adjudicator to monitor whether a recommendation has been followed. Next, Schedule 2, paragraph 1(2) provides the adjudicator with powers to require information from a retailer for the purpose of monitoring whether a recommendation has been followed. Thirdly, Clause 4(1)(b) allows the adjudicator to begin a further investigation if there are reasonable grounds to suspect that a retailer has failed to follow a recommendation. It is possible that a failure to comply with a recommendation could indicate that a retailer was continuing to breach the code, but a new sanction could be imposed only if a further investigation found that this was the case. Taken together, these clauses provide an effective means for the adjudicator to follow up a recommendation while still being fair to the retailer in question.
My concern about the amendment in the name of the noble Lord, Lord Browne, is that to impose a new sanction without a second investigation could be unfair and damaging to the retailer. After all, just because it has not followed a recommendation does not mean that it has actually broken the code.
I hope that noble Lords will agree that the Bill as it stands already encapsulates the principle embodied by Amendment 40.
Lord Knight of Weymouth
With respect, I do not think that the Minister has properly addressed the notion that at some point, reluctant as the Government may be, they may agree to the adjudicator having the power to fine. If naming and shaming has not worked, then surely it is reasonable for the adjudicator to escalate to impose fines without having to reinvestigate, with all of the delay consequential to that, before using the power to fine. Is this just an indication that in reality the Government do not ever want to offer the adjudicator the power to fine?
Baroness Wilcox
That cannot be the case, because we have made an arrangement that fines can be imposed, though it will be the Secretary of State who allows that. Yes, if there is a continuing breach—not just a failure to follow a recommendation—obviously that would be the response.
Lord Knight of Weymouth
My Lords, we were very pleased to put our names to the amendment in the name of the noble Baroness, Lady Byford, and support the noble Baroness, Lady Randerson, as well. Should the Minister, with her charm and grace, agree to these amendments, then Schedule 3 will be unnecessary, so this is the stand part debate as well. As we have heard, the adjudicator has the power to fine retailers, subject to permission—I think that my noble friend Lord Browne made good points in respect of that. We will go on to talk about the cumbersome number of hurdles that must be breached in Schedule 3 in a later debate. Schedule 3 sets out a hugely drawn-out process, which will do nothing to instil much-needed confidence in those farmers and small businesses that may have been severely affected by retailers that breached the code. We are grateful to the right reverend Prelate the Bishop of Wakefield for giving us some more examples. We need those people to have confidence in the adjudicator. The noble Lord, Lord Teverson, is right to say that giving that adjudicator the power to fine from day one would give a strong indication that Parliament and government are serious about this adjudicator being able to take on these extremely powerful retailers. As it stands, however, it is likely that fines for anti-competitive practices are even further away than 2015, given the hurdles that would have to be gone through based on Schedule 3.
Baroness Wilcox
My Lords, the question of financial penalties has been one of the most hotly debated throughout the development of this policy. As the BIS Select Committee acknowledged at pre-legislative scrutiny, the point is finely balanced. The Government believe that the remedies already provided—to recommend changes and compel the offending retailer to publish information about the breach of the code—will be sufficient and will provide a more proportionate means of enforcement. In a highly competitive market, these powers, in particular the ability to name and shame large supermarkets, will be effective in enforcing the code. If naming and shaming had ceased to be news there would be a good argument that it was inadequate, but it is news. Big supermarkets competing with each other will not wish to see themselves named and shamed in front of their competitors, who would be only too delighted.
Furthermore, as I mentioned earlier, the very existence of the reserve power to fine will contribute strongly to ensuring compliance with the groceries code. Large retailers will be conscious that there is the prospect of the swift introduction of financial penalties if there is evidence of significant non-compliance with the groceries code and the existing regime seems not to be sufficiently effective.
Lord Knight of Weymouth
I am grateful to the Minister. She uses the word “swift”. How long does she think it would take?
Baroness Wilcox
I am so sorry. Did you say that I was speaking too swiftly?
Lord Knight of Weymouth
The Minister used the word “swift” in her response just now. I would be grateful if she could indicate how long she thinks it will take.
Baroness Wilcox
It is a very good question but I am not sure that I have an answer—but I will come to it.
As I was saying, the very existence of the reserve power to fine will contribute strongly to ensuring compliance with the groceries code. Large retailers will be conscious that there is the prospect of the swift introduction of financial penalties if there is evidence of significant non-compliance with the groceries code and the existing regime seems not to be sufficiently effective. Clearly all large retailers will prefer to avoid such penalties being introduced. In answer to a question asked by my noble friend Lady Byford, we already have a strong right of appeal to the court on the merits against financial penalties.
One of the final points concerned culture and the Bill’s intention. The right reverend Prelate the Bishop of Wakefield mentioned the word “culture” and I was very pleased to hear it because that is really what much of this is all about. We do not want to punish retailers, as that does not really help suppliers or consumers. We want to bring about a culture change to ensure that the code is consistently followed. An adjudicator exercising proportionate powers provided that the strong fining powers are there in reserve has the best chance of achieving this change of culture. On the other hand, the introduction of fines from the outset would be far more likely to bring about an antagonistic relationship with heavy penalties imposed and retailers appealing every decision.
The noble Lord, Lord Browne, asked whether it is right to hand all the cards to the adjudicator now without the benefit of experience as to whether they are all needed. I respect that there are strongly held views on this issue. However, I believe that introducing the Bill as it stands will bring about the best result for suppliers. If fines prove necessary they can be quickly introduced, and I will be happy to discuss the mechanisms for doing so in a future grouping when we consider Schedule 3. I do not think that it would benefit the Committee to deal with those questions now. I therefore simply ask the noble Baroness to withdraw the amendment.
Lord Knight of Weymouth
I am grateful to the Minister. With respect, although I understand that we will come on to discuss Amendments 50 and 51 to Schedule 3, when the terms will be quickly and swiftly explained, perhaps the Minister could say—just to help us in the context of this debate—how many months she thinks it will take to go through the processes in Schedule 3.
Baroness Wilcox
How do the Government plan to streamline the process of introducing the fines? Is that what the noble Lord is asking? I cannot give a definitive answer now as we need to discuss it in more detail before the next stage of the Bill. That would be the right way to do it, if the noble Lord does not mind. I can give one more answer, which I think is to the question asked by the noble Lord, Lord Browne. The Delegated Powers and Regulatory Reform Committee ruled that the procedures were appropriate and the Secretary of State can regularly be held to account at departmental Questions if he does not introduce the fines when Parliament considers them necessary. That partly answers the noble Lord’s question. If the noble Lord, Lord Knight, can wait until we consider Schedule 3, all will be revealed. I ask the noble Baroness to withdraw the amendment.
Baroness Wilcox
My Lords, the amendments being discussed here are very interesting. However, in considering them it is important to remember the purpose of the financial penalties. The financial penalties in this context, if they are imposed, are supposed to be punitive rather than restitutory or to fund any particular activity.
The amendments of my noble friends Lord Teverson and Lord Razzall raise two difficulties with regard to paying any of the proceeds to a supplier. First and most fundamentally, an investigation does not determine the liability of a retailer with respect to any individual supplier. Given this fact, it would be inappropriate to pay all or part of the fine to the supplier. Any supplier who did wish to reclaim damages from a retailer would be able to do so using the arbitration provision in Clause 2.
The second reason is linked to the climate of fear. One of the key drivers of this Bill is the need to address this problem. One of the principal reasons for investigations, as they are set out in the Bill, is to allow suppliers to complain in confidence to the adjudicator, who can then carry out an independent investigation. If an adjudicator began making payments to individual suppliers, it would become obvious who had complained and open up those suppliers to potential retribution from a retailer.
I turn to the amendments of the noble Lords, Lord Knight of Weymouth and Lord Grantchester. Given that financial penalties are a civil sanction, it would be inappropriate for financial penalties to be paid to a supplier or to a third party which did work that supported the groceries sector. In accordance with the standard principles of managing public money, financial penalties are therefore to be paid to the Consolidated Fund.
Lord Knight of Weymouth
I have a quick question. If the proceeds of funds were transferred, let us say, to the regional growth fund for it to distribute, would that be in order?
Baroness Wilcox
I think not; I shall go back again. Given that financial penalties are a civil sanction, it would be inappropriate for financial penalties to be paid to a supplier or to a third party which did work that supported the groceries sector. I must refer back to the standard procedures for managing public money. Standard practice for such penalties is that they are paid into the Consolidated Fund. This is in accordance with common practice elsewhere in competition regulation. Fines imposed by the Office of Fair Trading are also paid into the Consolidated Fund.
Baroness Wilcox
I hope that my answer satisfies the noble Lord, Lord Grantchester. I ask him, therefore, to withdraw his amendment.
Lord Knight of Weymouth
My Lords, if I am following correctly where we have got to, I am moving Amendment 50, which is in my name, and speaking to Amendments 51, 63 and 64. These are all amendments to Schedule 3 or Clause 12 and are to try to streamline the process, should we be unsuccessful in persuading the Government to have powers to fine from day one. In the exchange that we had on earlier amendments I got the impression from the Minister that she may be minded to concede a little on this, so I will be extremely brief to give her maximum time to elucidate on whatever concession she may or may not have available.
I remind the Committee that my understanding of how things stand is that the adjudicator would be established and would operate without fines. They would then perhaps do some investigations and find that they are not really having much of an effect with naming and shaming, so would recommend to the Secretary of State that the powers to fine would be useful to him or her. The Secretary of State would then make an order under Clause 9 but would have to consult a variety of people on whether to make such an order, as set out in paragraph 6 of Schedule 3. The order would then be published and we would have the time taken by Parliament to consider it. Eventually, it would be passed—at which point, the adjudicator has to issue guidance as to how he or she would then use the financial penalties and consult on that guidance. At the end of all that, the adjudicator would be able to use those powers to fine. In my judgment, that would take at least a couple of years, probably more, which is why I mentioned 2015 earlier. I am delighted, however, that the Minister is about to tell us that it is going to be a lot better.
Baroness Randerson
My Lords, I want to refer to Amendment 52 in my name. I will also be brief, as I am sure noble Lords will be relieved to hear. My amendment would simply remove paragraph 6 from Schedule 3. It fits neatly with my previous amendment, to which I spoke, because it removes the cumbersome nature of the consultation. Regarding the list of people to be consulted, in my experience with legislation the moment that you start being as precise as this is, the very next year it is out of date. Then you have to change the list by secondary legislation or amendments, and so on. It is also a strange list because it starts by being very precise and then goes on in very general terms:
“one or more persons appearing to the Secretary of State to represent the interests of suppliers”.
There is the same in relation to consumers and then, finally,
“(g) any other person the Secretary of State thinks appropriate”.
Why not just have general consultation and leave who is consulted to the common sense of the Secretary of State? Why not move to a much swifter process than this cumbersome list indicates? I urge the Minister to take this opportunity to think again about this aspect of the Bill.
Lord Knight of Weymouth
I apologise to the Committee. I should have set out what we are proposing as the streamlining. In essence, we are suggesting in Amendments 63 and 64 that the adjudicator could publish straight away the draft guidance about how they might use the financial penalties, so that we at least remove that stage in the process. I am looking forward to hearing what is said.
Viscount Eccles
Will the Minister make clear whether the consultation would necessarily include a 12-week period in which anyone who wanted to put in representations could do so? That is ordinary practice for the processing of a statutory instrument.
Baroness Wilcox
My Lords, as has been mentioned, I listened very carefully at Second Reading when the subject of Schedule 3 was discussed. I know that many noble Lords feel that the process set out there is too clunky—I think that was the word that was used—and bureaucratic, and that it should be simpler and quicker. I assure the Committee that it was not the intention of the Government to introduce a clunky process, so this is something we are willing to look at, and if it is clunky we will need to amend it.
However, while the Government are willing to consider amendments in this area, I feel that those that have been laid today go a bit too far. In particular, the Government believe that financial penalties should be available only if the other powers are inadequate. After all, if the other powers are adequate, why do we need fines? We should not seek to punish the supermarkets for the sake of it, given the strong contribution that they make to the UK economy and to employment.
Similarly, I feel that stripping out consultation altogether is not appropriate for a significant measure. Evidence is important and consultation takes only three months. I believe it would be more appropriate to look to streamline and simplify that consultation process rather than eliminating it altogether.
The noble Lords, Lord Knight and Lord Grantchester, have put forward two amendments, both requiring draft guidance on financial penalties to be published within a year of the adjudicator being introduced. These amendments are identical except that one requires consultation and one does not. I will therefore address the principle of both together.
The publication of guidance is intended to ensure that those dealing with the adjudicator have a proper understanding of how it will act and of what is expected of them. Draft guidance on a power that the adjudicator does not have would not provide such clarity. Rather, we need to find a way to streamline the production of guidance if it is necessary, rather than producing it in advance.
I can answer two questions. To the noble Viscount, Lord Eccles, yes, the consultation will be carried out in the usual way. I hope that that is reassuring. To the noble Lord, Lord Browne, the reason for not prescribing the maximum fine in the Bill is that it is more appropriate that such a maximum be informed by experience—for example, how much retailers may be gaining from non-compliance. That experience can be gained only once the adjudicator is operational. Should the Secretary of State make an order to introduce fines, that order must specify the maximum penalty that may be imposed or how it is to be calculated.
I would like to discuss those points in more detail with the noble Lords who proposed the amendments before the next stage of the Bill, and the Government will carefully consider whether we want to bring back an amendment on the subject. With that, I ask the noble Lord to withdraw his amendment.
Lord Knight of Weymouth
I am most grateful to the noble Baroness for that commitment to discuss and the potential commitment—if a potential commitment is possible—to a government amendment. Although I am disappointed by some things that she said, I will not pick up on those but quit while I am ahead, even if it is only by a nose. I look forward to exploring with her how to make this a swift process, in common with her speaking note earlier. I therefore beg leave to withdraw the amendment.
Lord Knight of Weymouth
My Lords, while the Minister assesses whether there is a speaking note for the stand part debate on Schedule 3, and in addition to what we have already said, the other aspect of the schedule that I would like her to think about as she ruminates on it is that at the moment it is entirely with the Secretary of State as to whether the Secretary of State thinks that the adjudicator’s other powers are inadequate. Select Committees and other parliamentarians should have some voice within that. That is something else that she might want to think about.
Baroness Wilcox
We have already discussed the introduction of fines in detail and I made a commitment to discuss that in more detail.
Viscount Eccles
My Lords, perhaps unsurprisingly, Clause 10 causes me quite a lot of concern. We are debating the anticompetitive effect of imposing unexpected costs on suppliers. Now, in this clause, we will impose unexpected costs on retailers, so Parliament is doing something that the Competition Commission considers to be anticompetitive. We are doing this because of a number of factors. As I understand it, it is not the intention that the adjudicator should mount an investigation when a supplier has lodged a complaint against a retailer. That matter will go its normal course under the code of practice. The complaints that trigger investigations come either anonymously or from a trade association. Of course, there are provisions in the Bill for people to agree that they can be named, but in general it might well be that they do not.
I have heard it said that one investigation that might take place and would be, as it were, between a dispute between a supplier and a retailer, and a full-scale Office of Fair Trading/Competition Commission inquiry, is an inquiry into pig meat. I am not quite sure where I heard that but it might have been at Second Reading or somewhere. I think that it was said at the time that if there were an investigation into some alleged breaches of the code of practice in relation to pig meat, then it might be sensible for the adjudicator to bring in other forms of meat—that might be lamb or beef. If that were to happen, the next question is how many suppliers and retailers he would bring into the investigation, and how far back up the supply chain he would go. My understanding is that the adjudicator is free to do whatever he or she considers is the best way to proceed. Eventually, a report will come out that, of course, respects anonymity. The adjudicator now sends out a series of bills, not necessarily just to an individual retailer, as the clause specifies, but possibly to three or even 10 of them, whatever the number may be. Those retailers are then responsible for meeting the costs.
There is a requirement to specify the grounds, how much is to be paid, and by when. The grounds must be quite tricky if anonymity in the supply chain is going to be preserved, so I do not think that they will be very detailed. Also, they might be quite historic in the sense that if a really thorough investigation is undertaken into pig meat and other types of meat, it could easily take around 18 months. There is an appeal process, which is absolutely as it should be, but it is quite difficult to appeal unless you are provided with information about how the costs were reached in the first place. I worry about this clause and I am looking for guidance.
I want to make one other point which is similar to something I said earlier. This kind of clause attempts to portray what is happening as if no one is suffering. The consumer is not paying, the taxpayer is not paying, but the supermarkets are paying—and of course they can afford to do so. It is a populist move. The trouble is that if the supermarkets pay and their net margins are, as is the case for the Co-op, 2.8%, they will pass the costs on by increasing their prices. They do not have much of an alternative because they need to make a return on capital in order to keep on refurbishing their stores and opening new ones, so they do not have many options. I would ask this: where is the right place for these costs to fall? My answer to that is that the less regressive place would be the taxpayer. I do not think that these costs should be passed on to the supermarkets—
Lord Knight of Weymouth
I promised myself that I would not intervene on the noble Viscount, but he has been speaking for about five minutes. Is he aware that Tesco, as the largest of the retailers in this country, will have made, in the time that he has been talking, a profit of around £22,500? Perhaps Tesco could afford to pay these costs out of some of its profits.
Viscount Eccles
It is certainly true that Tesco has a higher margin than the Co-op. Its net margin before tax is around 5%. It also just happens that its margin in the UK is slightly lower than its average margin because it achieves somewhat better margins abroad. The size of Tesco’s profits is, in my view, irrelevant. Tesco is running a business that needs to achieve a margin on which it pays taxes, and it needs to make a return on the capital employed, which of course is very large. The Tesco store around the corner from where I live has just been completely reconfigured, perhaps I may say, to the advantage of the consumer. There are now more goods in the store and there is not much room to move around. In fact, if you go there between 12 pm and 2 pm, you are mown down by members of the Civil Service buying sandwiches for lunch. Nevertheless, in its broadest sense, Tesco provides an extremely good service to the public. Quoting arbitrary sums of money does not recognise the reality of life. It is to take a mythological position to say that because people are making quite a lot of money, they can always afford to pay all the costs that are thrust upon them.
If Parliament wills that there should be an adjudicator, that he or she should sit in the Office of Fair Trading, conduct investigations, have a staff and cost money, then rather than having an endless argument about how it defends invoices it has sent for investigation costs, it would be much better if they were paid out of taxes—out of the combined OFT and adjudicator budget—and do not fall on the elderly ladies with their small shopping baskets whom I see in another supermarket, called Sainsbury’s, who cannot afford to pay more for what they are getting there. The taxpayer has broader shoulders than the consumer. I beg to move.
“( ) The report must include an evaluation by the Adjudicator of how well the code is working.”
Lord Knight of Weymouth
My Lords, in moving Amendment 78, in order to ease time a little, I shall speak to Amendment 82 in the next group, and in support of Amendment 87C tabled by the noble Baroness, Lady Randerson, which I support very much. They are all in connection with the annual report in Clause 14. Amendment 78 proposes that instead of reporting only when it occurs to the adjudicator that there is an issue on the code, he should have to report every year on the code’s effectiveness. That would be a more active stance and follows our concern that it should be a living code that is thought about regularly to make sure that it is always fit for purpose.
Amendment 82 reflects our wish that Parliament should have more of a role in respect of the adjudicator. Although we appreciate that the annual report, once given to the Secretary of State, would then be published and that Parliament would get a copy, it would be more satisfactory for Parliament to be listed as one of the organisations to which the annual report would be submitted.
Finally, in support of Amendment 87C, we think that the people who pay the levy to fund the adjudicator should be able to see clearly what are the operating costs. Whether they are paying a reasonable sum for the running of the adjudicator should be transparent. If Amendment 87C is accepted, so that the manner in which the levy is calculated by the adjudicator is regularly reviewed, that will provide the transparency that ensures that the adjudicator is not operating in a frivolous fashion. On that basis, I hope that the Minister is listening, as ever, and I beg to move.
Baroness Randerson
My Lords, I shall speak to the three amendments tabled in my name in this group, Amendments 85A, 85B and 87C. I shall take Amendments 85A and 85B first. As the Bill stands, the Secretary of State will review the adjudicator’s performance initially after two years and then every three years. The amendments provide that that review should take place initially within a year and then annually. We believe that the proposed two-year review period is too long before we hear anything about the achievements of and progress made by the adjudicator, and that a period of three years between reviews is too long.
If the adjudicator is doing well, retailers will change their culture and behaviour, and three years is a long time with no judgment on how the adjudicator is working. As I said earlier, it has taken a long time to get to this stage. It has taken six or seven years to get this far, so we need to know how the new system is working sooner than two years after the adjudicator has been established. I point out to noble Lords that, under the groceries code, retailers have to submit compliance reports to the OFT within 10 weeks of the end of every working year, so why should the adjudicator not report to the Secretary of State or be reviewed by him every year?
I turn briefly to Amendment 87C. Clause 15(4) sets out the detail of what the review must cover. This amendment would add a new paragraph (c) that would ensure that the Secretary of State considered both the funding for the adjudicator and how the levy was calculated. This introduces what is in many ways a different issue. It concerns the equity of a levy that is to be established on the basis that it will be set at a flat rate. This amendment introduces the concept that the levy might vary according to the amount of work done by the adjudicator in respect of each of the supermarket chains. In other words, those retailers who trouble the adjudicator a great deal by generating a lot of work—because there are a lot of complaints about them—will pay more than those retailers who generate hardly any complaints. Further, a flat-rate levy would not reflect the relative size of the different supermarket chains.
We do not have time to do so today but it would be interesting to look at the relative size of the 10 large retailers. Although they are the 10 largest, the biggest is significantly larger than the smallest of them. The flat-rate levy does not seem to reflect that. It will nurture a sense of unfairness among the retailers if there is no movement from a flat rate to a levy that reflects the amount of business that they have brought to the adjudicator—if I could put it that way. The Minister may give us some words of reassurance on this but, as a probing amendment, it is important to raise the issue this afternoon.
Baroness Wilcox
My Lords, regarding the amendments tabled by the noble Lords, Lord Knight of Weymouth and Lord Grantchester, the purpose of the annual report is to provide and publish a factual description of the adjudicator’s activities. This increases the adjudicator’s transparency to scrutiny and helps suppliers, retailers and other interested parties to understand the adjudicator’s role and functions. The noble Lords have suggested that the report should include an assessment of how well the code is functioning. I understand from previous debates and discussions that they are enthusiastic to ensure we have what they are calling a living code. However, this amendment is not a suitable way to provide for it. As I said before, the annual report as it stands is a simple description of the adjudicator’s activities. Amendment 78 would make the writing of the annual report a much greater strain on the adjudicator’s resources. More fundamentally, the adjudicator does not have responsibility for keeping the code under review. That is a matter for the Office of Fair Trading, although the adjudicator has a statutory duty to recommend changes to the authorities where she or he considers such changes appropriate.
With regard to the amendments tabled by the noble Lord, Lord Borrie, I fully agree that it is important that in this review the Secretary of State should consider any factors that have prevented the adjudicator from effectively enforcing the code, and that the purpose of the groceries code is to prevent the transfer of excessive risks and unexpected costs to suppliers. However, I do not agree that it is necessary to set this out explicitly in the Bill. I believe that the existing provision, that the Secretary of State must,
“assess how effective the Adjudicator has been in enforcing the … Code”,
provides the Secretary of State with the appropriate remit to carry out a thorough triennial review. This can include an assessment of any factors that have hindered the effectiveness of the adjudicator.
My noble friend Lady Randerson proposed another amendment requiring the Secretary of State to consider the funding of the adjudicator and, in particular, the manner in which the levy is calculated. As the Secretary of State must give consent to any levy, an explicit requirement to consider this would be unnecessary. I will be happy to discuss my noble friend’s amendment further when we address levy funding in the 30th group of amendments. In general we should avoid specifying areas for the Secretary of State to consider in his review of the adjudicator, unless setting them out in statute is clearly necessary. A long list of issues to consider in the review is more likely to be treated as exhaustive, whereas the current drafting makes it clear that the Secretary of State is considering the adjudicator in broadly defined terms.
Finally, my noble friends Lady Randerson, Lord Razzall and Lord Teverson have tabled two amendments, which together would mean that the adjudicator was reviewed after each year. We of course believe that the adjudicator should face proper scrutiny from the Government and Parliament. However, this must be balanced with both the need for the adjudicator to be independent and the practicalities of such frequent reviews. The adjudicator is expected to undertake only a few reviews a year and to report on their work once each year. This does not provide a very broad basis for the Secretary of State to consider how much the adjudicator’s powers have been exercised and how effective the adjudicator has been in enforcing the code. Therefore, it would be unlikely that each review could make very clear or authoritative judgements. Allowing three years will, we feel, provide a broader range of evidence to be considered.
Annual review would also mean consultation in each year of the adjudicator, the Competition Commission, the Office of Fair Trading, all 10 large retailers, one or more supplier representatives, one or more consumer representatives and any other appropriate person. As well as providing a burden on them to respond, this would be likely to reduce the quality of each of these consultation responses, further weakening the scrutiny of the adjudicator. It is not customary to undertake reviews of independent office-holders so regularly, and introducing annual reviews in this case might bring into question the adjudicator’s independence from the Government.
One further amendment has been proposed by the noble Lords, Lord Knight of Weymouth and Lord Grantchester, to the effect that a copy of the adjudicator’s annual report should be sent to Parliament. I set out in an earlier response to the noble Lord, Lord Browne, why I did not believe it would be appropriate to send a copy of the report to the devolved Governments, as this is not a devolved matter. A copy going to Parliament, however, could have merit. I emphasise that the adjudicator will already publish the report, so this would not be a question of making additional information available to Parliament but would simply emphasise that the adjudicator’s work should be open to parliamentary scrutiny.
I would like to give this matter further consideration, both on the principle and, if this is appropriate, on how precisely it is delivered—for instance, whether it should be a matter of simply sending a copy to Parliament or if it would be more suitable to place a copy in the House Libraries or lay it before Parliament. I am therefore happy to discuss this matter further with the noble Lords concerned before the next stage of the Bill. I hope that has gone some way towards answering the questions in the amendments that were put down, and I ask noble Lords to withdraw them.
Lord Knight of Weymouth
I am relatively satisfied with that response and am happy to beg leave to withdraw the amendment.
Lord Knight of Weymouth
My Lords, I shall speak to my Amendments 95 and 123A. The issue we are raising is that, as the Bill is currently written, it would appear that when the workings of the adjudicator are reviewed—this is specifically in relation to the ability of third parties such as trade associations to make representations and complaints to the adjudicator—and if the review decides that the arrangement is not working well and wants to change it, all that the Bill currently allows the Secretary of State to do is to completely remove the ability of third parties to complain to the adjudicator. It is a very black and white position: either all third parties can complain or all third parties cannot complain.
These amendments seek to give the Secretary of State the ability by order to list specific third parties who would still be allowed to submit information to the adjudicator. Should irresponsible third parties abuse the right that the legislation gives them to submit information to the adjudicator, the Secretary of State could restrict the number of third parties to those that behave responsibly. This would be a pragmatic way for the Secretary of State to operate should the review disclose something that he is unhappy about.
Amendment 123A simply seeks that the affirmative resolution rather than the negative resolution is used in order to give Parliament extra scrutiny if the Secretary of State wants to limit the number of individuals permitted to submit information to the adjudicator. I beg to move.
Lord Teverson
My Lords, Amendment 94 is quite straightforward: it seeks to insert a new paragraph in proposed new Section 4A(1) which allows for the adjudicator to consider,
“information provided by a trade association”.
Trade associations are important and should be involved in the structure of the Bill, and the amendment would involve them in this part of the work delineated by the Bill. It is as straightforward as that.
Lord Borrie
My Lords, the origin of the Bill, as we all know, stems from a Competition Commission report that found fault with major supermarkets in ways that I shall not trouble to delineate now. It seems appropriate that the levy should be imposed on major supermarkets to pay for the financing of the groceries code adjudicator’s position and office. However, I prefer the wording of the amendment of my noble friend Lord Knight, so I will not push my amendment. I certainly will not push the point about not requiring the Secretary of State’s consent.
Lord Knight of Weymouth
My Lords, I shall speak to Amendments 108 and 112, and to Amendment 121, which refers to Clause 20, because it is related to the same point. For the sake of efficiency I will do it in that way. Indeed, I shall speak in relative support of the amendment of my noble friend Lord Borrie. I am relaxed about whether the wording is “must” or “shall”. I am sure that there are parliamentary draftsmen who have a very strong opinion on the most effective word as long as the meaning remains. For the sake of plain English we need to be clear about what we are doing here in Parliament. I believe that it is the Government’s intention that the adjudicator’s office should be fully funded by the levy on the major retailers and that the taxpayer should not fund it. If that is the Government’s intention they should say so and be clear in the Bill in the same way as they are about other bodies that are funded by levies. That clarity would help everybody and that is what the amendments would do.
Amendment 121 to Clause 20 would remove the option for the Secretary of State to make grants to the adjudicator so that, again, the office would be fully funded by the major retailers. That is all that that amendment would do. Amendment 112 would remove the provision for a flat rate levy from the 10 major retailers and replace it with a requirement for the levy to be calculated in proportion to annual turnover. As we have heard, there is a significant difference between the sizes of major retailers whose turnover is more than £1 billion. I think that it would be fairer, certainly initially, for the levy to reflect turnover. It may be that in time the levy would reflect those retailers that occupy the most time for the adjudicator and cause the highest number of substantiated complaints and investigations. However, for now, relative to turnover is a better solution. As I recall I think that that was what the Competition Commission recommended. I look forward to a willing Minister.
Lord Howard of Rising
I shall speak to Amendment 110A in this group, which seeks to impose some form of parliamentary discipline on the amounts of money that the adjudicator can charge. In effect, the adjudicator is imposing a tax. That is, he is compulsorily taking money from private organisations to fund his office. It would be unreasonable for such power not to be overseen. There is provision in the Bill for the Secretary of State to do so, but a parliamentary order—we all know that they are, in effect, rubber stamps—would at least give Parliament the benefit of being able to look at what is happening and comment on it. There will then be some form of external discipline over the adjudicator when he decides how much money—some call it a levy but I call it a tax—the retailers should pay.
Lord Knight of Weymouth
My Lords, I think that my noble friend Lord Borrie has already said that he will withdraw his amendment in favour of mine and I will be happy not to press mine. I am slightly disappointed in the Minister’s answer. Particularly if there are fines that are then paid to the Consolidated Fund, she is opening up the Secretary of State for considerable lobbying from the major retailers, who will say, “Well, you’ve just had a whole load of our money, so can we just waive the levy for the next year because you’ve already got the funds for the adjudicator?”. That would create some weird incentives and disincentives. It would be much more straightforward to be clear right from the outset. I know that she will reflect on that and I am happy to withdraw my amendment.
Lord Howard of Rising
Could I just point out to the Minister that this is as much a point of principle as it is of detail? The point of principle should be addressed, and that is not necessarily something that concerns only lawyers, but Members of this House and Members of Parliament in general.
Lord Knight of Weymouth
My Lords, my suggestion to the Minister is that it might be helpful for her to write to the Committee, and in particular to address the very valid point that the noble Lord, Lord True, has raised; namely, that Parliament cannot amend these words. I am happy with the words in this Bill, but if this is a pilot, it would be interesting to hear the views of those conducting the pilot as to whether any consideration has been given to us being able to amend those words.
Lord True
I thank my noble friend and other noble Lords, in particular the noble Lord, Lord Knight of Weymouth. It is reasonable for a parliamentarian to raise a point of principle in relation to law-making at the first opportunity that he has. I am grateful for the indulgence of the Committee. As I said, I do not necessarily think that some of these are clear-cut cases, but there is enough doubt and uncertainty raised by this procedure. A parliamentarian must place on record in Hansard for the attention of Members of both Houses something that potentially affects the way in which Parliament is able to deal with legislation. With those comments, I beg leave to withdraw my opposition to the clause and will not oppose the Question that Clause 21 stand part.