Groceries Code Adjudicator Bill [Lords]

William Bain Excerpts

Monday 19th November 2012 Commons Chamber

[Mr William Bain (Glasgow North East) (Lab)]

I seem to be falling into the rather pleasant habit, in both this Chamber and Westminster Hall, of following the hon. Member for Tiverton and Honiton (Neil Parish) in debates on food policy. That is agreeable because he speaks with a great deal of authority and good sense, and I broadly concur with his remarks.

I represent one of the most urban constituencies of all Members who have contributed to the debate so far. There is farm land in the northern tip of my constituency, along the boundary that I share with the Under-Secretary, but the contribution made by my constituency to the food industry comes primarily from the major fruit trading market in Blochairn, two major bakers and bread makers in Lambhill and Sighthill, two major supermarkets in Sighthill and Robroyston, and the hundreds of constituents who work in the food retail, manufacturing and processing industries on modest, if not relatively low, wages. They make a huge contribution to the food that ends up on our plates.

I was struck by a point made by the hon. Member for South Down (Ms Ritchie) who reminded the House that in the past, weak regulation and regulators with insufficient powers have created problems in the markets. She emphasised the problems that have emerged in the energy markets—we all hear from constituents who are struggling with soaring electricity and gas bills—and the same may prove true in the media sector. This debate has shown that parties across the House do not want the same thing to happen in the food production and retail sectors, and I hope that Ministers will pick up on the need for the groceries code adjudicator to have proper powers, including the power to fine. We have seen in the home of capitalism—the United States—that in markets where there has been price fixing, the primary sanction used to bring companies engaged in that to account has been the use and imposition of fines.

With rapidly rising food prices becoming one of the biggest pressures on the living standards of millions of people across the country, our consideration of this long-overdue Bill to introduce a groceries code adjudicator is not before time. It is important that we continue to bear down on anti-competitive practices within the large food retail sector and food supply chains, which were so clearly identified in the Competition Commission’s 2008 report.

The Bill matters because food is the largest part of the UK’s manufacturing sector. It has a turnover of £76 billion a year and accounts for 16% of all manufacturing output. However, the grocery market is dominated by four major retailers, the sales of which totalled 85% of the £143 billion industry turnover in 2009; Asda, Morrisons, Tesco and Sainsbury’s accounted for two thirds of the total.

As the hon. Member for Tiverton and Honiton and other hon. Members have said, the economics of sustainable food production will be crucial in resolving the problem of increasing food prices and ensuring that producers and consumers get a fairer deal. In 2008, the Competition Commission said that

“the transfer of excessive risk and unexpected costs by grocery retailers to their suppliers through various supply chain practices if unchecked will have an adverse effect on investment and innovation in the supply chain, and ultimately on consumers”.

I agree. On the impact that that has on food prices, Office for National Statistics data published last week show that, since 2005, the price of fruit has risen 28%; the price of vegetables is up by more than 40%; and the cost of fish has increased by 56%. Real wages are falling at around 4% a year, but food costs are going up by much more than the headline consumer prices index of inflation, so action to make supply chains more efficient to bear down on rapidly rising bills will be a key indicator of the success of the new adjudicator. Big supermarket chains have expanded into the convenience store market and compete directly with smaller chains and independent stores. It is important that the new adjudicator roots out any anti-competitive practices.

The purpose of the Bill is welcome. Its provisions owe a great deal to the work of my right hon. Friend the Member for Leeds Central (Hilary Benn) and his team from their period in government, and my hon. Friend the Member for Ynys Môn (Albert Owen), who spoke earlier in the debate. However, as has been said, both Back-Bench Members and Opposition Front Benchers have concerns about the details, which we believe should be amended in Committee. The major concern is the lack of an independent power for the adjudicator to fine from day one for serious breaches of the code—a step that was recommended by the Competition Commission in 2008. In its report of that year and in its 2000 report, the commission identified two major breaches of the code by large retailers, but the Bill permits the adjudicator to levy fines only with the consent of the Secretary of State following an order, and further consultation and review. As many hon. Members have noted, there might be a delay of a year or 18 months before the power to fine is activated. What other public official in the nature of an ombudsman, which the office of groceries code adjudicator surely is, has such weak powers of enforcement and such a lack of independence from Ministers?

The code of practice applies only to supply contracts between individual suppliers and major retailers with a turnover in excess of £1 billion a year. It does not deal with supply chain abuses at more intermediate levels, such as regional wholesalers and processors. The Bill should be amended to allow the adjudicator to monitor fair dealing throughout the supply chain, and ensure that suppliers are protected from the threat of retaliation if they produce evidence of unfair practices.

Hon. Members have referred in the debate to the practice of below-cost selling—my hon. Friend the Member for Hayes and Harlington (John McDonnell) referred to it in an intervention, and I suspect he might do so again in his speech proper. The practice involves a retailer selling an item for less than its input costs, as illustrated by the notorious example of supermarkets selling loaves of white sliced bread for 7p. The practice, which has been prohibited in France, Germany, Spain and Portugal, can force suppliers out of business, and has also caused huge pressures in other sectors, such as the dairy industry.

The Select Committee on Environment, Food and Rural Affairs and the Select Committee on Business, Innovation and Skills have called on the Government to increase the powers available to the adjudicator, to widen the range of those who can bring forward complaints, such as trade associations, trade unions and pressure groups—I welcome the clarification we have received on that point—and to put more detail in the Bill on the power to fine. Those are all reasonable and constructive suggestions by two influential Select Committees. I do not believe I have heard a single hon. Member from the Back Benches, or from the Opposition Front Bench, who has dissented from those views, so I hope that the Government will reflect on the unified outcome of the debate and announce that when the Bill goes to Committee today they will accept and table amendments that reflect the will of the House as expressed today.

Although clause 7 affords the adjudicator the power to recommend changes to retailers, there are no powers for the adjudicator to compel action by retailers who do not take remedial steps at first instance. Similarly, clause 11 permits, but does not require, the adjudicator to provide advice to suppliers and large retailers on matters relating to the code. It seems somewhat counter-productive for the adjudicator, as part of his or her statutory duties, not to be required to publish guidance on how retailers can best comply with the terms implicit within the code.

Providing sufficient protection of anonymity for those bringing complaints before the adjudicator will be crucial to enforceability. National Farmers Union Scotland has argued that the code has so far proven ineffective because of the fear that complainants may be identified. Its view, therefore, is that complaints should be capable of investigation on the basis of credible evidence, whatever its source. I hope the Ministers, in winding up, will respond to the views that NFU Scotland has put forward in its submissions on the Bill.

I hope the Bill will secure an improvement in the living standards of our dairy farmers, which have been under such pressure in recent years, particularly in Scotland. Although one of the major processors, Müller-Wiseman, has recently increased standard farm-gate milk prices to just over 30p per litre during this winter period, given the increased costs facing dairy farmers that is not far from the absolute minimum that farmers in Scotland need to make ends meet. I hope that the adjudicator, when set up with sufficient powers, will be able to deal with the pressures that cause significant hardship to dairy farmers in Scotland and, as we have heard, in every part of the United Kingdom.

This is a good Bill. As hon. Members have said, we wish it well in Committee. I hope, in conclusion, that Ministers will reflect on what has been a good-tempered and consensual debate, take the positive suggestions offered by the House and provide a system that allows abuses in the market to be tackled and rooted out at source. That leads to one conclusion: the ability of the adjudicator to fine, without an order from the Secretary of State—an ability that must be in the Bill.