Groceries Code Adjudicator Bill [Lords]

Peter Bone Excerpts

Tuesday 26th February 2013 Commons Chamber

[Philip Davies]

I am grateful to the hon. Gentleman, because he seems to have indicated—I will take it as such—that he will support my new clause 1 or new clause 2. He gets to the nub of the point, although I suspect he has not even bothered to read the new clauses, because if he had he would not have led with his chin in the way that he just has.

I wish to make it clear at this point that, with your permission, Mr Speaker, I would prefer to press new clause 2 to a Division than new clause 1, but I will be guided by you later on that.

[Mr Peter Bone (Wellingborough) (Con)]

I am grateful to my hon. Friend for giving way. He has been exceptionally generous throughout his speech.

I have been looking at new clauses 1 and 2, and they seem to be the same except for the level of turnover specified in them. Is that the case, and will my hon. Friend go into some detail on that?

[Philip Davies]

As ever, my hon. Friend is eagle-eyed. The amendments are the same, but the purpose of tabling two was to give the House a choice, because as it happened, I envisaged the interventions that the hon. Member for Alyn and Deeside (Mark Tami) has made.

At Asda, we found huge reluctance on the part of suppliers to stop special offers. They lobbied Asda for ever to do more and more of them to promote their brands, and an everyday low price did not offer them the same marketing opportunity.

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[Philip Davies]

I am grateful, Mr Speaker, but people ought to be aware that the Bill leaves great scope for the adjudicator to decide what to do. People should not have too much faith. The Bill deliberately gives it massive power and freedom.

[Mr Bone]

We have very limited time, because the House agreed to the programme motion, so perhaps we could speed things up. I notice that the Minister has been deep in conversation and looking at the new clauses. I wonder if she might intervene and accept new clause 2, because then we could move on.

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My hon. Friend the Member for Sherwood (Mr Spencer) has made the point that if supermarkets stick to their agreement, there would be nothing for the adjudicator to do. We would be paying her a huge salary to do nothing, which seems a bizarre situation, but there we go. On the other hand, there might be lots of complaints and everything could be working fantastically with everyone thinking that the Bill has been a great triumph, with even small suppliers thinking that it has been great, and all the rest of it. Well, in seven years’ time, we can let the Bill expire and decide for ourselves whether it was a good thing or a bad thing. We can also decide whether the threshold I favour is worth putting back in again if we agree to it today or worth inserting if we do not. We will be able to see how it works in practice. If all my fears turn out not to be a problem, it can all be resolved when the Bill is looked at again in seven years’ time. If my fears are proved to be correct and people accept that some of my concerns were true, it could equally be dealt with at that particular point. Why box ourselves into something that is a complete waste of time? Let us have a sunset clause, so that we can deal with any anomalies and the Government can start from scratch with a future Bill that is more fit for purpose.

[Mr Bone]

I am considering whether to support new clause 3. Am I right in understanding that if, in seven years’ time, the post of adjudicator turns out to have been superfluous, it would just fade away, whereas if it has been a good measure, Prime Minister Cameron would, in his 21st year or whatever, be able to reintroduce it?

[Philip Davies]

My hon. Friend is right. He knows as well as I do that if such a sunset clause is not introduced, and if the Bill is shown to be a completely unnecessary waste of time and an expensive bit of bureaucracy that we could well have done without, it will carry on endlessly. Nobody will have the guts to do anything about it. The provision will provide a mechanism for getting rid of the legislation if it is seen to be unnecessary. If it were seen to be necessary—who knows, I do not think it will, but it might—people could bring it back and would be anxious to get the legislation in place again. My new clause 3 will stop some ridiculous white elephant carrying on in perpetuity, when it is seen to be unnecessary. I say in passing that it would be sensible if more Bills had sunset clauses included in them, so that we can analyse whether they have been worthwhile and have done what was said on the tin.

My intention in this group of amendments has been to focus on new clauses 1 and 2. With your permission, Mr Deputy Speaker, I would like to divide the House on new clause 2, which would put the same £1 billion threshold on suppliers as applies in the Bill for the retailers themselves. There seems no good reason to me why the same figure should not apply to both sides of the equation. A Division will enable us all to see who has gone into the Lobby to look after the interests of big multinational suppliers and who effectively wants their constituents to pay more for their shopping to benefit the bottom line of those companies.

I do not believe I was sent to Parliament to boost the profits of Heinz, Mars or Nestlé, who are perfectly capable of looking after their own interests. I want my constituents to pay the lowest price necessary for the products they buy in the supermarket. They are already struggling with the cost of living. How ridiculous it would be if we were to put legislation in place that made them pay more than they would otherwise need to pay for their shopping. I hope that the Government will see sense and realise that the same equation should apply on both sides of the supply chain—to retailers and suppliers. I hope they will think about that and listen to reason. If they do not, I hope the House will force them to do so.

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[Sir James Paice]

My hon. Friend is entirely right.

[Mr Bone]

I have been listening to my right hon. Friend’s speech very carefully, as it serves to balance the debate. I am very attracted to new clause 2. The Bill is designed to look after the small guy and not the big guy. How would accepting new clause 2 present a problem?

[Sir James Paice]

It is entirely for the Government to decide whether to accept new clause 2. It does not cause me a huge problem, but I believe it to be completely unnecessary for the reasons I have described. Nothing I have said could be deemed to suggest I am against it, but I just do not see any need for it. I certainly believe, however, that there is a very real problem that needs to be addressed, and this Bill seeks to do precisely that. That is not the basis on which my hon. Friend the Member for Shipley proposes his amendments, however; as he has said, he does not agree with the Bill at all. I do agree with it, and I would like its provisions to become law as soon as possible.

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[Mr Chope]

I support new clause 2. In most people’s eyes the Bill was designed essentially to protect the UK supplier, particularly of fresh produce, as my right hon. Friend the Member for South East Cambridgeshire (Sir James Paice) said. What the hon. Member for Ogmore (Huw Irranca-Davies) has just delivered is a scaremongering speech designed to undermine British suppliers of fresh meat and produce. That is extremely regrettable.

Last night I attended a speech given by the Minister of State, Department for Business, Innovation and Skills, my right hon. Friend the Member for Sevenoaks (Michael Fallon). His speech was entitled, “Deregulation for Growth”. I must admit to being slightly confused about what I have heard so far during this debate, because it seems to be about regulation. How, I ask the Minister, will the Bill be consistent with the Government’s growth agenda? Perhaps she will tell us when she responds.

The Minister last night said that there was a two-for-one principle—that for every £1 of additional burden imposed through regulation, £2 of savings of regulation had to be found. That brings me to new clauses 4 and 5, which are designed to highlight the fact that the Bill as drafted will embody the law of unintended consequences writ large. It will potentially benefit suppliers not only from elsewhere in Europe, but from right across the globe, when most people who support the Bill think they are doing so in order to help the farmer down the road in the United Kingdom. That is far from the case. What will happen is that the Bill will enable suppliers from overseas to exploit our system, at a time when our own suppliers and producers are not able to access overseas markets on an equivalent basis.

[Mr Bone]

I am sure my hon. Friend is going to explain new clause 4 in more detail. I am troubled by the way it is drafted, as it says

“if they have their principal headquarters outside the European Union.”

Why not outside the United Kingdom?

[Mr Chope]

My hon. Friend anticipates the argument that I am going to put. I was in discussion about whether an amendment referring only to “outside the United Kingdom” would be in order and selectable. On advice—obviously, I am responsible for deciding whether to act on advice—I decided that my new clause was much more likely to be selected if, instead of referring to the United Kingdom, I referred to the European Union. That is because of single market and European Union rules. Obviously, I wanted to ensure as far as possible that my new clause would be selectable, but my hon. Friend makes a good point. He is saying that the whole public debate is about why cannot we buy British—buy UK food and thereby avoid the risk associated—[Interruption.]

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[Mr Bone]

I shall be brief, because under the programme motion we have only half an hour left to discuss the whole of the remaining stages of the Bill. The programme motion has been proved to be hopeless, as we will not even get to the next group of amendments.

I refer the House to my entry in the register. I cannot quite relate to the supermarket industry, but I can relate to the travel industry, where the margins are similar and the competition levels are as great, and there are a number of big suppliers who put pressure on smaller suppliers. In my day, I was one of those smaller suppliers, but I did not come across the practices that have been described as happening in the supermarkets, where there have been nasty attempts to force the use of the hauliers demanded by the supermarkets. I did not come across such things, so I accept that this is a very different case.

The whole House supports the small producers, who are unfairly penalised by the actions of very large supermarkets. However, the House should not be united in giving support to companies that may be even greater than the supermarkets. I am attracted by and minded to support new clause 2, unless the Minister—and a very fine Minister she is, too—can persuade the House that there is some fundamental reason not to support it. It is possible that having listened to arguments from all parts of the House, she will say that the Government accept new clause 2.

That is the sort of thing that I would like to see more often in Parliament when reasoned cases are made which do not in any way affect what the Government want. In fact, new clause 2 enhances what the Government want. If big companies are excluded from being able to use the adjudicator, that will allow the adjudicator more time and allow the adjudicator to reach decisions more quickly on the small suppliers that matter. That is why I intervened on the former Minister, my right hon. Friend the Member for South East Cambridgeshire (Sir James Paice). I wanted to see whether there was a reason why we should not adopt new clause 2. I see no reason why we should not go ahead and accept it. I hope the Minister will do that, but if not, I am minded to support it in a Division.

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson)]

I thank all the hon. Members who have contributed to the debate on this series of amendments and for tabling the amendments, through which we have discussed and probed various issues.

It might be helpful to recap briefly on why we are here, which relates to the reasons why I may have to disappoint hon. Members and not be able to accept their amendments—that is, the purpose of the groceries code adjudicator and how we have come to the Bill before us. That relates to the Competition Commission report, which found that although the market was functioning effectively in delivering low prices to consumers, some practices by large retailers could have an anti-competitive effect.

The Competition Commission found that, through buyer power, the large retailers were engaging in practices that transferred excessive risk and unexpected costs to their suppliers, and that this in turn could reduce the incentive of suppliers to invest and innovate, which would act against the long-term interests of consumers. It is worth noting that all six members of the Competition Commission group who undertook the market investigation into groceries agreed that the transfer of excessive risks or unexpected costs by grocery retailers to their suppliers is likely to lessen suppliers’ incentives to invest in new capacity, products and production processes. If unchecked, those practices would ultimately have a detrimental effect on consumers. Paragraph 11.375 of the commission’s report states clearly that all but one member of the investigation panel considered the adjudicator essential for the monitoring and enforcement of the code and that the code on its own would not be enough. That relates to the points my hon. Friend the Member for Shipley (Philip Davies) raised earlier.

The Competition Commission’s report is absolutely key. It created the groceries supply order and the code is derived from it, and that is what needs to be enforced by the adjudicator. That is why the Government will resist the amendments that would encourage the adjudicator to deviate from the report.

It is worth mentioning that creating the adjudicator was in all three major parties’ manifestos. It has been endorsed by the Business, Innovation and Skills Committee in pre-legislative scrutiny. It is appropriate at this moment to report to the House that, following our discussions on Second Reading and in Committee and other representations, pre-appointment scrutiny by the Select Committee will now happen. I am delighted that the Government have been able to accommodate that request, because such scrutiny from a Select Committee is welcome, leads to better legislation and strengthens Parliament.

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[Mr Bone]

The Minister is quite wrong on that. I am not coming from that position; I came to that view after listening to the debate. Does she not fear that there is a danger that allowing large suppliers to go to the adjudicator will clog up the system so that it cannot look after small suppliers, which is what it is supposed to do?

[Jo Swinson]

I do not believe that is the case. The adjudicator will obviously be able to make their own assessments. The industry is confident that there will be very few complaints, and I wholeheartedly hope that will be the case, but if we find that there are many breaches of the code, and if the evidence comes from a variety of sources, the adjudicator will need to look at that and be empowered to make recommendations and requests, and they will need to be properly and adequately resourced in order to do so. Therefore, an arbitrary restriction on who can complain would actually make the adjudicator’s life harder and, indeed, could increase the risk of judicial review, so we will reject the new clause and encourage hon. Members to oppose it if it is pressed to a Division.

The hon. Member for Shipley seemed to suggest that the provision would cost consumers more money, but all the supermarkets that gave evidence on the matter said, when asked, that complying with the code had not caused them to raise prices, so his concerns are misplaced. This will not cost consumers. Indeed, surveys have shown that 84% of consumers support the adjudicator, and I am sure that hon. Members will be well aware from their mail bags that there is a great deal of public support for the adjudicator.

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[Jo Swinson]

I absolutely give that assurance. If a body such as the OFT receives information, particularly from a respected public servant, we would expect it to respond appropriately as part of its general duty, but we do not want to be overly prescriptive in how we set that out in legislation. I hope that that reassurance is helpful to the hon. Gentleman and I urge him not to press his amendment.

Amendment 28 would require the adjudicator to set out in guidance which laws will apply to arbitration and where it will be conducted. The amendment is superfluous, because it would duplicate information that is already in the groceries supply order. We discussed arbitration in Committee, as did the other place when it debated the Bill. Article 11 of the order sets out the rules that will apply and the fact that

“the seat or legal place of arbitration will be London…or such other city within the United Kingdom as the Supplier nominates.”

Of course, the adjudicator may choose to publish guidance on arbitration, but we do not believe that it is necessary to make that a requirement under the Bill.

[Mr Bone]

Is my hon. Friend at all contrite about the fact that we will not reach the second and third group of amendments?

[Jo Swinson]

No, I am not. We have had an interesting debate, although I suspect it could have been more concise; nevertheless, we are where we are.

The hon. Member for Christchurch (Mr Chope) tabled amendment 27 on commencement. I am happy to make a commitment that the Government intend commencement to take place two months after the Bill receives Royal Assent. It is, however, usual procedure not to set that out in legislation, but to allow the Secretary of State discretion to commence an Act by order.

Finally, I cannot accept, in fact or in spirit, new clause 3, which was tabled by the hon. Member for Shipley. I agree that we do not want statutory offices to continue when they are not needed, and the Government have been working according to that principle. Indeed, in accordance with our general policy on sunsetting, the Bill’s sunset clause—clause 15—means that the Secretary of State must review the adjudicator every three years and may decide, if appropriate, to abolish the office. However, proposing an arbitrary end to the Act is not appropriate. If, in seven years’ time, the problems with large retailers that have led to the creation of the Bill and the adjudicator persist, we would not want the Act to be repealed automatically. I reassure Members that the Secretary of State will be rigorous in reviewing this matter. I believe that that is a much better way to ensure that statutory offices do not continue unnecessarily.

I hope that hon. Members are satisfied with my assurances and explanations, and that they will not press their amendments. If that is not the case, I urge hon. Members to reject the amendments before us.