Lord Razzall
Main Page: Lord Razzall (Liberal Democrat - Life peer)Groceries Code Adjudicator Bill [HL]
Lord Razzall Excerpts
Lord Razzall
My Lords, notwithstanding the fact that there are 19 speakers in this debate, I am quite certain that the Bill has overwhelming support in your Lordships’ House. Indeed, having listened to the words of the noble Baroness and the noble Lord, Lord Grantchester, it rather reminds me of the scene in “Spartacus”. I think most people in your Lordships’ House are old enough to remember “Spartacus” and that wonderful scene when Kirk Douglas, playing the slave, was about to be arrested by the Romans and every one of the slaves stood up and said, “I’m Spartacus”. The debate reminds me that all three political parties will claim to be Spartacus and that this was their idea. However, I am sure that that will nevertheless produce significant support for the Bill.
The noble Lord, Lord Grantchester, made a number of valid points, many of which I share his view on, and I shall touch briefly on some of them. Clearly the significant change that the coalition has made is to widen the groups of people from whom the adjudicator can take evidence, particularly the trade associations. As the noble Lord, Lord Grantchester, pointed out, there has been concern that people can go on fishing expeditions. However, the remedy proposed in the Bill is fairly blunt because, were it to be found that that had been the case, we would revert to the provision in the previous Bill under which those powers are removed. In responding, the Government ought to indicate whether there should be more flexibility here. I am not entirely sure why a trade association which has not been involved in fishing expeditions, and has not been proved to be defective in the way it has approached this matter, should be excluded under the all-or-nothing nature of Clause 15(10).
The second point that the noble Lord, Lord Grantchester, made, which I entirely agree with, is on the penalties. The procedure for introducing penalties seems to be extremely cumbersome. Perhaps the Government, when we get to Committee or Report, could look at whether that process should be streamlined to make the ability to introduce penalties more effective and speedy?
I am not sure whether the noble Lord referred to the question of anonymity, which is a concern here. Clearly, with the power of the 10 leading supermarkets, people complaining to the adjudicator must have anonymity, but there are circumstances under Clause 18(3) under which disclosure of information by the adjudicator may be authorised. The Government need to look at this to explain to farmers, suppliers and the trade association under exactly what circumstances they envisage that those anonymity rules would be breached.
I entirely agree with the noble Lord’s point that the Government should perhaps look at where the fines should go, notwithstanding the current economic difficulties. At the moment all fines, if there are any, will go into the Consolidated Fund. As the noble Lord has indicated, it would be worth while seeing if we can be a little more creative about the use to which those fines are put.
Then, of course, there is the question of the abolition of the adjudicator. It seems surprising that the adjudicator under Clause 16(2) can be abolished with a fairly simple procedure, and I wonder if the Government could look again at whether there should be a right for more serious consultation.
We have all been lobbied by the leading supermarkets, and nine of them think that the fee proposals will make a serious dent in their profits. I am delighted to say, as a regular shopper there, that Waitrose does not take that view, and it has a structure that the rest of the corporate world should emulate. Waitrose makes the point that there is likely to be an average cost per retailer of £200,000 a year, which for most of the major retailers is equivalent to 0.02% of their profits, so I do not think that the complaints made by the major supermarkets really stand up. However, I agree with the point made by the noble Lord, Lord Grantchester, which is a Waitrose point, when he asked whether it was fair that everybody should pay the same flat fee, and would it not be possible to have an annual review after which the people against whom there had been the largest number of complaints should pay more and the good boys could pay less? I very much support this Spartacus Bill.
Lord Myners
My Lords, I declare an interest as a former chairman of Marks & Spencer. Unlike many other Members of the House, I have not been lobbied on this Bill. That may well be because I never open my parliamentary e-mail box and therefore do not read the e-mails that other noble Lords have been receiving. Perhaps I am in error in doing that.
As my noble friend Lord Grantchester said, the Bill has the fingers of the previous Labour Government all over it, although the right reverend Prelate the Bishop of St Edmundsbury and Ipswich also claimed some credit for the General Synod. The Bill was promised in the manifestos of the three main parties, but I am not persuaded of the need for it. I am certainly unpersuaded that the Bill as presently constructed will deliver the outcomes that the Government promise. In short, I believe that the Government are strong on assertion and light on evidence. The Bill shows a profound distrust of markets to produce good outcomes, which is extraordinary coming from a Minister who is a Member of the Conservative Party. The Government’s hesitancy in putting this Bill forward is evident in the fact that it has taken two years for it to appear. Its most effective sanctions are in reserve powers that are initially not going to be actioned. The Bill is quite explicit in creating an ease of repeal that suggests a half-hearted adoption of its central intention by the Government.
I propose to make half a dozen or so points. I think the voters of this country might reasonably ask whether this is a priority. The challenges facing our economy now are those of inadequate demand, a lack of available credit, both in amount and in cost and terms, and a loose monetary policy and consequent financial repression that is clearly not working.
There is no overarching coherence to the Bill as presented to your Lordships’ House today by the Minister. Grocers have delivered on customer expectation. We have a choice of goods now of a quality that would simply have been beyond the belief of the parents of most Members of this House. I remember when salmon was a luxury in our home, and my father was a fisherman. It came in a John West tin. Salmon and exotic fruits from hot climates are now available at incredibly attractive prices to the consumers of this nation. There is no evidence that voters or consumers have any sense that they are not getting choice, quality and value for money from a highly competitive retail industry and a highly efficient market as well.
I have a number of questions for the Minister. Perhaps the noble Baroness will answer the questions now. If she does not, I hope that she will answer them by writing to all Members of the House who speak in this debate and that we will receive that answer before the Bill goes to Committee.
I start by asking why we are focusing on groceries. Why, for instance, are we not asking the questions that the Bill asks about banking? This would surely be what voters would like us to do. They would like us to ask questions and to introduce an adjudicator to an industry that by any definition is highly concentrated, operates with cartel-like pricing and is generally typified by poor service and an absence of differentiation and a dearth of innovation. Surely these are the prima facie symptoms of poor competition, on which voters would expect the Government to be taking action. However, as we know, this Government have been supine in the face of the banks, with the failed Project Merlin now being followed by a policy known as credit easing, which does not actually benefit the end borrower at all; it benefits the banks by reducing their cost of borrowing.
I ask your Lordships’ House whether, if there is a case for a grocery industry adjudicator, there is not an even stronger case for a banking industry adjudicator. Is there not an equally strong case for an adjudicator of the energy industry, where people of this country again feel themselves at the wrong end of abusive industry practices by a very concentrated industry that is expert at absence of transparency in pricing and product differentiation?
The Minister, in her opening address, said that the need for financial penalties was unlikely because grocers would recognise the reputational risk of being found at fault by the adjudicator. This is a woefully optimistic assessment of how business operates, and it is certainly not borne out by the way in which the banking industry has responded to regular and constant criticism by various regulators and consumer bodies of its own behaviour. Indeed, if the House is invited to focus on an area in which there is a potential abuse of the weak by the strong—the supermarket suppliers by the supermarkets—how does the Minister reconcile that with Mr Adrian Beecroft’s proposals to allow employers to dismiss at will? On one hand we are reducing the legislative and regulatory protection for the weaker party in a market-based transaction. On the other, we are seeking to introduce even greater regulation.
The Bill cites no evidence that a regulator or adjudicator of the sort proposed has been successful or necessary in other countries. Nor are any arguments cited to suggest that there is something about the grocery trade in the United Kingdom, such as excessive concentration, that means that we need an adjudicator where other geographies do not. In comparison with most markets, we have a relatively fragmented grocery market, with very intense competition among the top 10 or so firms in the business. As the noble Viscount, Lord Eccles, said, if a supplier is not happy with one of the 10 firms to be covered by the adjudicator, there are nine other potential customers to whom they can turn for business.
The Minister also asserts that supermarket behaviour at the moment reduces the incentives and abilities of suppliers to innovate in new product lines and production processes. Where is the evidence for that assertion? How has the Minister concluded that markets do not lead to appropriate innovation and investment? The impact assessment says that the proposal “could ultimately”—in brackets, I would add, “Civil Service: most unlikely”—
“lead to improvements in quality and choice for consumers, as well as lower prices in the long run”.
No evidence is cited to support that conclusion. However, the impact assessment says that the Government will monitor improvements in investment and innovation. Am I correct to say that we will see civil servants opining on whether a competitive market has led to improvements in investment in innovation? If so, will the Minister tell us how civil servants will form that view and what experience they will bring to that task?
Next, there are some very woolly words in the detail of the proposed Bill. Setting aside for the moment the fact that the term “grocery” is not defined, there are terms such as “deal fairly” and,
“pay suppliers within a reasonable time”.
Will the Minister tell us how a market process does not lead to fair outcomes? Can she explain why reasonable times are not part of the agreement reached between the supplier and the supermarket, which is entered into openly and willingly by both parties? Which civil servants will agree on fairness as a judgment on market outcomes, or on the reasonableness of terms of payment?
On reasonable behaviour, am I not correct in my recollection that Sir Philip Green recommended, in his report on government procurement, that the Government should do many of the things that the supermarkets are being accused of doing here by applying pressure to suppliers? Sir Philip Green’s report was for the Department for Business, Innovation and Skills, so no doubt the Minister will be fully informed and able to explain how Sir Philip Green’s recommendations lead to acceptable behaviour while the behaviour of the supermarkets is not acceptable.
I do not expect the Minister to speak on defence matters, but I note that last week the right honourable Philip Hammond, the Secretary of State for Defence, also suggested that the Government would seek retrospectively to amend agreements with suppliers. My point is that there is a complete absence of consistency in the Government’s thinking. Why do the Government not have confidence in the market to produce the right outcomes?
The Bill also evidences a very poor understanding of the supply chain, particularly the activities and presence of intermediaries within it. This will need a lot of attention in Committee. I agree with the noble Viscount, Lord Eccles, that anonymity is almost certainly one issue about which we deceive ourselves. As for major suppliers, the specificity of the terms of a contract is such that, when an issue is raised with the adjudicator, the identity of the supplier will almost certainly become evident in a very short period, so it is hogwash for the Government to suggest that anonymity in some way gives this Bill some superior attraction.
There are many other areas that the Committee is going to need to spend a lot of time examining. The Bill as proposed suggests an adjudicator who definitely will not be independent of government. It is quite clear and is in the explanatory document that the intention is that the adjudicator’s department should be staffed by people from the Department for Business, Innovation and Skills and should be collocated with the OFT. As the noble Lord, Lord Razzall, said in his contribution, the process as described is inordinately cumbersome.
I also fail to understand, and perhaps the Minister can explain, why the penalties imposed by the adjudicator, if penalties are to be activated, should be paid to the consolidated funds while the penalties paid to the Financial Services Authority are paid to the FSA. Can the Minister explain why the Government appear not to have consistency?
Finally, the Explanatory Note to Clause 15 says:
“The Secretary of State”,
may,
“restrict the information the Adjudicator may consider to four specific classes of information, which are those that might be expected to be most useful in determining whether or not a breach of the Groceries Code had occurred”.
To be clear, the Minister will be setting the criteria and will set the criteria to four. Again, no reason or explanation is given as to why it should be four and how those would be narrowed or broadened; nor is any understanding given of the basis of expectation or the criteria of utility. What one can clearly see here, tucked away towards the end of the Bill, is that this adjudicator will have very little independence at all.
When we get to Committee we are going to have to look very closely at this Bill, because I do not think it is going to achieve the purpose that has been set out. If we have done our work in Committee and conclude that the Bill will never deliver the purposes intended, it should be withdrawn, otherwise we have a recipe for further bureaucracy and red tape, which is the last thing the country needs at the moment.
Lord Razzall
The noble Lord quite properly disclosed his interest in Marks & Spencer at the beginning of his remarks. Bearing in mind his attack on the coalition Government’s policy on the banks, would it not have been appropriate to disclose that he was a senior Minister between 2008 and 2010, with responsibility for banks?
Lord Myners
My Lords, I think the House is aware of that. The noble Lord, Lord Razzall, has often impressed me with his skill on the Floor of this House —his debating approach and his wit. Today he has fallen well short of the House’s expectation.