Westminster Hall
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Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
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Groceries Code Adjudicator
(3 days, 20 hours ago)
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Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Sir John Hayes (South Holland and The Deepings) (Con)
I beg to move,
That this House has considered the powers of the Groceries Code Adjudicator.
It is a delight to be here and to speak on this subject, which is of great importance to my constituents, both consumers and producers. A free economy works best when those who buy and those who sell can do so in a multiplicity of places. Nowhere is that more important than in the field of food, for food is the most basic of all commodities; we all, after all, need to eat. That variety prevailed for most of time. Indeed, if one thinks of the earliest civilisations, the way we mark them is by their trading capacity, such as those in the Levant who traded food produced there in markets between 7,000 and 10,000 years ago.
Yet in my lifetime—in all our lifetimes—the provision of food in this country has changed. It was Napoleon who described Britain as a “nation of shopkeepers”. If only that were still true. In my boyhood, my mother could shop at a variety of places to obtain the food products and other household items that she needed. What has happened during my lifetime is that a monopoly supply, or near-monopoly supply, of food provision has emerged, in the form of the great behemoths, the huge supermarkets, the corporate interests that now dominate the provision of food.
That has broken the food chain. Let us be in no doubt about where we are as a nation in respect of the provision and consumption of foodstuffs. The food chain is broken, and Governments of all colours have been reluctant to face that reality. Indeed, there has been a defence of the fact that most people now are obliged—I emphasise that: obliged—to buy their food from a handful of places, with little or no choice as to whether they do so, because, as I said, everyone has to buy and consume food. The defence offered is that it has driven prices down; but I will contest, in this short debate, that that is not really so.
Bulk buying of food, which is now the norm—most people buy their food on a weekly basis; they fill their trolley with any number of goods—does three things. First, it disguises the relationship between cost and value. In the days when people bought as they needed, they had a pretty good idea of what things cost and whether they were providing value for money. When people fill a basket, those details are lost in bulk purchase. That allows supermarkets to produce what they call loss leaders, which are cheaper products that draw people in.
Rachel Gilmour (Tiverton and Minehead) (LD)
The Groceries Code Adjudicator is of course vital, but my party and I believe that its remit is too narrow. Does my right hon. Friend agree with me that it is time for a new groceries code regulatory authority, with powers to introduce price floors and ceilings, ensuring fair prices for suppliers and consumers?
Sir John Hayes
I am delighted to accept the hon. Lady’s advice on that. She is not, in parliamentary technical terms, my hon. Friend, but she is a friend none the less, and she is right in her assertion, which I shall move to after I entertain the House a little further with my preparation for making exactly that argument. The essence of my call today is that this Government need to take action to deal with the near-monopolistic supply of foodstuffs that our constituents are obliged—I use the word again—to endure. The best way of doing that is through a more regulated market, and she is right to say so; but let me set the scene a little more before I come to the point at which I will call for exactly what she has suggested.
As well as the loss leaders that I mentioned, which have the seductive effect on consumers of encouraging them to buy many other things, secondly, that kind of provision of food has led to a great deal of waste. From studies that have been done, we know that these days much of what people buy—as much as 20%, or perhaps a little more—is never consumed. That would have been unthinkable a couple of generations ago. People would not have believed it was possible to stock the pantry or fridge with all kinds of things that ended up on the scrapheap.
Sir John Hayes
I give way to the Select Committee Chairman, to whom I pay tribute on this subject for bravely making the case that I will make today, with less expertise than his.
Mr Carmichael
The right hon. Gentleman flatters to deceive, I fear. He is right about the way grocery supermarkets go about their business, but much of the problem is the way they choose to go about it. I recently heard from a livestock farmer who bought in potatoes to feed stock. He expected to find them green, bruised or damaged, but when they arrived they were perfect; they just were not conformed to the particular specification that the supermarket demanded. That demand does not come from consumers, but directly from supermarkets. If he looks around Europe and elsewhere, the right hon. Gentleman will find that supermarkets there behave very differently.
Sir John Hayes
The right hon. Gentleman is right. That is why, when he and I were in Government together, we introduced the Groceries Code Adjudicator. He will remember that I worked closely with his colleague Vince Cable, then Secretary of State, and was involved in that decision. He is also right to focus on the producers. I have spoken so far about consumers, but I want to go on to talk, thirdly, about the distortion in respect of producers.
I began my speech by speaking about how both producers and consumers need a multiplicity of places to buy and sell. In the model that I set out, the one that prevailed for aeons, people who made and grew food, primary and secondary producers, were able to sell to a variety of places. In our lifetimes—I might be overestimating the age of some hon. Members present, but certainly in many of our lifetimes—markets existed where farmers would take their produce to auction. Indeed, there was a livestock market in Spalding in the streets until the 1930s and a covered market until the 1990s, where livestock was brought to be traded and auctioned very openly.
Producers have also been affected by this distortion. As the food chain breaks, it is not only consumers who struggle, able to go to only one or two places to get not just what they want, but what they need, because, as I said, foodstuffs are fundamental.
Jim Shannon (Strangford) (DUP)
I thank the right hon. Gentleman for bringing forward this debate on an incredibly important topic. Those of us here will express that shortly. Does he welcome, as we all should, the commitment shown by these examples? Tesco, Asda and Lidl in my constituency have an arrangement on Fridays and Saturdays to give those goods that are coming to the end of their shelf life but are still consumable to local community groups, which in turn filter them out to those who need help, the families below the poverty level. We are sometimes hard on the superstores for what they do, but we should recognise that there are occasions when they play their part.
Sir John Hayes
The hon. Gentleman is right. His endless good will, known in this House for some time, encourages him to emphasise that supermarkets do deal with their waste products, but inevitably, as well as the waste products that over-consumption produces, supermarkets throw away many of the things on their shelves because of sell-by dates. It is hard to get a handle on, because quite a lot of it is disguised, but supermarkets themselves are actually contributing immense amounts of food waste.
It is true that some communities have found settlements for that, in the way that the hon. Gentleman described. Some supermarkets have at least paid lip service—I say at least, because it is occasionally more than that—to redistributing some of the waste food from their shelves into communities, but we should not be gulled by that. Burke said that tyrants seldom need a pretext; this is a kind of economic tyranny. To have a circumstance in which a near cartel of supermarkets can determine the price of products and then foist them on to a consumer base that has little other option is, in commercial terms, about as tyrannical as can be imagined.
You can tell from all that, Dr Allin-Khan, that I am not a great admirer of the large retailers, and not just for the reasons I have given. I doubt, for example, that supermarkets are particularly careful—by that, I mean they are careless—about the circumstances of their customers and employees. I am not confident that a supermarket chain has quite the sensitivity to a locality, to a community or to a group of people who become their customers and employees that a small family business has. Happily, I still have some of those small family businesses selling food in my constituency, and thank goodness for that, but their number has shrunk. The nation of shopkeepers is now a nation of very large shops, and those are corporate entities rather than the kind of shops that I imagine Napoleon had in mind. This huge problem has affected our high streets, where supermarkets have become more ubiquitous and the only grocers one can spot is a Tesco or a Sainsbury’s—or perhaps an Aldi or a Lidl—rather than the variety once seen up and down our constituencies.
It has also affected producers, as I will come on to in the second part of my speech, because my constituency is disproportionately responsible for the production of UK food. Lincolnshire grows 30% of the UK’s vegetables, 20% of the sugar beet, 18% of the poultry, 20% of the potatoes, and it processes 70% of the kingdom’s fish. In total, my county produces 12% of all the food that fills the shops and shelves, pantries and fridges of our country. Given that, one can understand the particular concerns that farmers and growers in my constituency have about the way those big retailers treat them.
The picture I painted, of an open economy where people can sell in a variety of places, has long gone. Most of my primary producers have very few options, and therefore often have a gun put to their head by their customers, the supermarkets. That might affect their terms of trade and the prices they are offered, which is why the relationship between farm-gate prices and retail prices is, again, distorted in this broken food chain. It often involves sharper practice still, where supermarkets cancel orders quickly; even when a farmer is tooled up ready to provide goods, they will find that in the next season they no longer have a contract to do so.
In the past, supermarkets have lumped all kinds of other costs on to the supplier, such as marketing and transport costs. That is unacceptable, and it is ultimately unsustainable, as those businesses make too little profit to reinvest and therefore become less competitive. We might say, “Well, surely the supermarkets need to obtain their goods to sell them,” but we know where they then go; they import goods from countries that produce those goods at standards we cannot imagine in this country, thereby putting even more pressure on domestic producers. Do we really want that, or do we want a country that cares about food security and becomes more economically resilient because more of what we consume is made here?
A Labour Prime Minister once spoke of British jobs for British workers. He was right. We indeed want British jobs for British workers and we want British goods for British consumers, too. We need to recognise that the provision of food as locally as possible provides economic security, cements and secures communities, and shortens supply lines and therefore, apart from anything else, has immense environmental benefits by cutting food miles. That is the kind of economy that we can have, because there is nothing inevitable or pre-ordained about fewer and fewer food suppliers dominating the food chain.
I have spoken about the impact on consumers of reduced choice and the impact on producers of not being able to trade their goods fairly and freely. Now, I shall talk about the changes we could make. In addition to the decline in income that all types of farm have suffered in the last several years—figures from the Department for Environment, Food and Rural Affairs suggest a sharp decline between 2023 and 2024—there is an issue with the GCA itself.
I am proud to have played a part in setting up the Groceries Code Adjudicator in 2013, but since then the GCA has conducted only two major investigations—into Tesco in 2015 and the Co-op in 2018. The GCA’s power to fine retailers came into force in 2015 and applies only to breaches that occurred after that date, so it did not apply to the first of those investigations. Then, in 2018, the adjudicator said that it did not consider
“the nature and seriousness of the breaches by Co-op to merit a financial penalty.”
So although the GCA has had the power to investigate and punish retailers who breach the groceries code, for that is what the GCA oversees, it has not done so. Why is that? Where is this reluctance rooted? What has been the reason for it?
The reason is partly that those detrimentally affected by the broken food chain are reluctant to report their problems to the adjudicator. They fear they will be identified and later punished—after all, these economic tyrants have little mercy. Those affected can go nowhere else to sell their produce, so what would they do then? They literally have nowhere to go. It is also partly that the adjudicator’s powers are insufficient, and that is the reason for and purpose of this debate.
I am pleased by the reports that the adjudicator is now taking a look at Amazon. As a matter of record, I have never bought anything on Amazon and never will; let me establish that before we go any further. I like to buy my goods in small shops, face to face, and meet real people. I do not want to live in the virtual world—why would we? I want to live in the real world. That investigation is good news, but I fear that, rather like the two previous investigations, it may come to nothing, merely raising false hopes of action that will not in the end be taken.
By the way, I hold in high regard the Chairman of the Select Committee, the right hon. Member for Orkney and Shetland (Mr Carmichael), with whom I worked in government. Not all Liberals are as bad as they are painted—at least, not as bad as they are painted by me, that is for sure. I know, too, that the Under-Secretary of State for Business and Trade, the hon. Member for Ellesmere Port and Bromborough (Justin Madders), is a good and responsible Minister, who will be listening to this debate with care. I implore him and the shadow Minister, my hon. Friend the Member for Keighley and Ilkley (Robbie Moore)—because the previous Government’s record on this is not great either—to step up to the mark, because the present position is unsustainable and cannot continue, for we cannot perpetuate a situation where a handful of corporate giants wield disproportionate power over the provision of food, and by so doing, dictate the food security of this country. If they continue to import food at the rate they are without care, how can we be food secure?
Let me deal with the particular measures we would like to see. We need to extend the role of the adjudicator to include more retailers and food service providers, including food manufacturing businesses, because at the moment the scope is narrow. We need to find a better way of guaranteeing the anonymity of those who bring their complaints to the adjudicator. Efforts have been made in that respect, and even at the time we set up the system we were mindful of that issue and tried to create some degree of protection for people going to the adjudicator with complaints, but I am not sure that has bedded in as well as it might have done. I know from speaking to farmers and growers in my constituency, whom I meet weekly, that that remains a fear. That is a barrier to the effective application of the adjudicator’s powers.
We also need to expand the adjudicator’s remit to include the ornamental sector, which is important in my constituency. Lincolnshire, particularly South Holland and The Deepings, has a thriving ornamental sector, employing a large number of people in many smaller, often family-run, businesses. They are currently outside the adjudicator’s scope and should be included.
We need the adjudicator to have a role in initiating inquiries and studies, rather than simply waiting for complaints. It would be perfectly reasonable for the adjudicator, on the basis of his or her expertise to initiate inquiries into particular aspects of food provision and retailer behaviour. We want a more proactive role. When the role of Groceries Code Adjudicator was established, it was dubbed the “food ombudsman”. That was never the official title, but perhaps it ought to be. Rather than simply having a narrow remit to enforce the groceries supply code of practice, perhaps the adjudicator could have a slightly broader remit to look at the whole issue of the provision of food and its relationship with food security.
When people such as the right hon. Member for Orkney and Shetland and I began speaking about food security donkey’s years ago, it was regarded as a rather arcane subject and we were seen as mildly eccentric for worrying about such things. Now, food security is a salient issue and at the top of many nations’ political agenda. More than that, it has become critical to national wellbeing. What a good time this is to think more laterally about the role of the food ombudsman and how it might reinforce the Government’s commitment to food security. It would be a way of delivering the objectives that the Government have set out. They said that they are keen to reinforce food security, so why not use the GCA as the means of doing so?
Doing that would allow the adjudicator to develop a strategy and to roll out a set of co-ordinated actions against unfair practices. I would include prices in that because, while all of the techniques I have briefly outlined are used to distort the relationship between buyers and sellers, prices are an issue. How can we ensure that farm-gate and retail prices are brought into closer union?
Just before Christmas last year, we had the obscene spectacle of one or two retailers bagging a series of vegetables in a plastic bag and saying, “These can be bought for 12p.” I had farmers and growers in my constituency telling me, “We have toiled hard to produce high-quality produce, only to see it being sold at a price far below the cost of production. Is it any wonder that the consumer does not appreciate the hard work that goes into making food and the quality of food grown in this country?” There has to be some means of reuniting value and cost by looking closely at the price farmers are paid and the price consumers subsequently pay. That is not to encourage food inflation, but simply to ensure that everyone gets a fair share of a bigger cake, rather than see their share be eaten up in the profits of these corporate behemoths.
By and large, I favour a capitalist economy, although I am not an unbridled admirer of capitalism. How could I be? I am a Conservative, after all. But on balance, I think it is perhaps the best of a series of faulty options. As I said at the outset, capitalism works when people can buy and sell in a multiplicity of places—circumstances that do not prevail in the UK food sector. By empowering the Groceries Code Adjudicator, which henceforth will be known as the food ombudsman, I think, we may be able to rebalance the provision of food and join again the food chain, which is so badly broken.
Dr Rosena Allin-Khan (in the Chair)
I remind Members that they should bob if they wish to be called in the debate.
Rebecca Long Bailey (Salford) (Lab)
It is a pleasure to serve under your chairmanship, Dr Allin-Khan. I thank the right hon. Member for South Holland and The Deepings (Sir John Hayes) for securing today’s debate and for his impassioned and articulate speech, which I very much associate myself with. I am quite staggered at how regularly our minds meet on the crisis of capitalism, although we do have different answers to it from time to time. I place on record my role as the chair of the Bakers, Food and Allied Workers Union parliamentary group, and thank them for their extensive work on this issue over the years.
As we have heard from the right hon. Gentleman, the groceries supply code of practice and the adjudicator, despite being well intentioned, miss the mark by quite a large margin in terms of protecting those whom they were designed to protect. The code applies only to designated grocery retailers whose annual turnover is more than £1 billion. It does not apply to indirect suppliers, cover pricing or consider the protection of workers throughout the grocery supply chain; and even with its limited powers, it has not issued a single fine.
Sustain, the alliance for better food and farming, agrees with the right hon. Gentleman that as a result of those deficiencies, the UK’s food system is on a precarious footing. It says that most suppliers producing and processing the food that ends up on our supermarket shelves are vulnerable to unfair purchasing practices, which can send competent businesses into bankruptcy, undermine competition and lead to a worse deal for consumers. As the bakers union says, there is a limit to suppliers’ ability to keep prices down through productivity increases from automation or sourcing cheaper inputs—a key factor in the horsemeat scandal. As a result, there is relentless downward pressure on labour costs, leading to attacks on the pay and conditions of workers employed in and across supply chains.
In the four weeks to 18 May, grocery price inflation has jumped to 4.1%—its highest level since February last year. Of course, the reasons for that are complex, ranging from wholesale costs, to energy and ecological issues, all the way through to problems with the supply chain, but that does not mean that the Groceries Code Adjudicator can continue to ignore the important issue of excessive pricing. Sometimes there is a reasonable cause, beyond the control of the supermarket or supplier, but sadly, sometimes it is a result of aggressive cost cutting, asset stripping, and unsustainable leveraging strategies.
There are long-running accusations that some of the big retailers and manufacturers have been using reduced competition and market leverage to set prices and, in turn, make excessive profits. For example, in 2023 wholesale food prices started to fall, with the World Bank saying they were expected to drop by 8% by the end of the year; but those falls were not reflected on supermarket shelves for some considerable time, which led to accusations of “greedflation”. Even the Tesco chairman suggested that suppliers might be at fault, telling the BBC at the time that it was “entirely possible” they were using high inflation as an excuse to raise prices unnecessarily. Of course, the major retailers and suppliers refute that, and the Competition and Markets Authority said there was nothing to find—nothing to hang their hats on—but large profits and record executive pay and shareholder payouts were juxtaposed against a backdrop of high food inflation and food insecurity.
Most people were perplexed, and rightly so. The Competition and Markets Authority might not have found widespread market abuse per se, but there remained a fundamental issue of fairness. Is it right to report bumper executive pay and shareholder dividends at times when consumers and the wider supply chain are struggling?
Last November, interestingly, the Competition and Markets Authority’s second report on pricing suggested that manufacturers had been raising the cost of first infant formula milk higher than was necessary to cover inflationary costs. It was not the Groceries Code Adjudicator that instigated action. Some supermarkets themselves responded by slashing the cost of formula, but the fact is that the Groceries Code Adjudicator should have had the powers to intervene earlier and to regularly monitor price fluctuations to identify emerging issues. It should not have taken a one-off CMA investigation to uncover that unscrupulous price hike.
If the Groceries Code Adjudicator cannot investigate and robustly intervene to protect suppliers, producers or consumers when it is clear that the pricing structure of a supermarket or a major supplier pricing structure is putting the short-term interests of shareholders above the wider public interest, and if it cannot respond to emerging issues, outline measures to help families facing hunger and protect the sustainability of the UK grocery supply chain, what is the point of the Groceries Code Adjudicator?
There are a few recommendations that I have made to the Minister on which I would like an update. I hope he will take these points on board. First, a new groceries regulator authority with beefed-up powers should be established with a wider responsibility to protect the sustainability of UK suppliers and the interests of consumers. It must apply to the whole sector, not just to those with a turnover of more than £1 billion. The new regulator should be given the power to introduce price floors and ceilings to protect suppliers and consumers from aggressive pricing tactics and exploitative price gouging. There must be an investigation across DEFRA, the Department for Business and Trade and the Competition and Markets Authority into the impact of private equity acquisitions of UK groceries retailers and manufacturers on the security and sustainability of the UK food supply chain. We must restore and extend sectoral collective bargaining for workers employed in the UK food supply chain. Finally, we must introduce a statutory right to food in UK legislation and address the root causes of insecurity.
As the right hon. Member for South Holland and The Deepings rightly set out, consumers should not be forced to buy their goods from major retailers if they are the only retailers in town. We have to provide an economic framework that supports suppliers and producers and ensures that people enjoy a diversity of shopping experiences and diversity in pricing so that we have a sustainable UK food sector.
Several hon. Members rose—
Dr Rosena Allin-Khan (in the Chair)
Order. I will now impose an informal four-minute limit. If we run short of time, I will have to impose it formally or reduce it.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
It is a pleasure to see you in the Chair, Dr Allin-Khan. I congratulate the right hon. Member for South Holland and The Deepings (Sir John Hayes) on securing time for this debate from the Backbench Business Committee. I find myself in the curious position of being in violent agreement not only with him, but with the hon. Member for Salford (Rebecca Long Bailey). That is a moment worth reflecting on.
In advance of this debate, we have received some very useful briefings from the National Farmers Union and the Bakers, Food and Allied Workers’ Union about food insecurity and workers’ rights; the hon. Lady has just touched on those issues. Curiously, the one organisation from which we have not heard a peep is the Groceries Code Adjudicator itself. That is quite significant, because this is not the first time that the House has debated the work of the adjudicator: my hon. Friend the Member for Brecon, Radnor and Cwm Tawe (David Chadwick) secured a debate on it in February, I myself presented a ten-minute rule Bill on it in March, and now we have this debate today. If the adjudicator had a good story to tell, we would expect to have heard something from it by now, given the criticism that has been levelled at it. But not a peep: it has maintained an omertà that would put the Mafia to shame.
I do feel slightly conflicted. The adjudicator has a tiny office and, I think, a staff of seven or eight. Given its inability to process complaints at the moment, I do not know that I want it to spend that much time talking to MPs and policymakers. But if it has a story to tell, it needs to come out and tell it. Otherwise, we will be entitled to assume that there is not much that it can say.
The right hon. Member for South Holland and The Deepings spoke about the need for reform and the way in which that reform might take shape. I disagree with very little of what he said. What we need, as the hon. Member for Salford says, is a single regulator from the farm gate to the supermarket shelves. At the moment, too many unfairnesses are hardwired into the system, there are too many players in the market and it is just too easy for outcomes to fall between the gaps. Those who suffer are always the consumers, who are left with higher food prices, or the primary producers. At the moment, it is principally the primary producers who are losing out. The supermarkets are entering into a price war as they try to push down food price inflation. As a primary food producer myself, I declare a registered interest.
There are wider issues around the behaviour of supermarkets. There has been widespread and justifiable outrage in the past few days about Asda selling Uruguayan beef. The way it is often done is instructive. The labelling on the top looks lovely. It says that the beef is 30-day matured rib-eye steak of “heritage breed origin”, whatever that means. A shopper has to turn it over and see the small print on the back or underside of the tray to find out that it is beef produced in Uruguay from cattle slaughtered in Uruguay. Even if we park for a moment the concern about animal welfare standards, the carbon consequences of shipping beef around the world in this way are utter madness, even though ironically it would help us to meet the targets set for us by the Climate Change Committee.
That example illustrates that amid growing competition among supermarkets on price, if we continue to reduce our levels of livestock in this country the resulting gap will be filled by cheaper imports. That surely renders any definition of food security utterly meaningless. Once we lose our own producers, we will not get them back.
Jim Shannon (Strangford) (DUP)
It is a real pleasure to serve under your chairship, Dr Allin-Khan. I thank the right hon. Member for South Holland and The Deepings (Sir John Hayes), as we all do, for leading the debate and setting the scene incredibly well.
The Groceries Code Adjudicator is imperative in setting out standards for fair trading between large stores and their suppliers. The right hon. Gentleman referred to doing his shopping locally. I am the same, but I know that for the generation after me—my son, my daughter-in-law and all their family—Amazon is probably their first contact. Life is changing, and it seems cheaper to do it that way.
People are becoming more interested in the food that they are eating and where it is sourced. I have been a member of the all-party parliamentary group for eggs, pigs and poultry for most of my time in Parliament. I am of a generation for whom there is no better way to start a day than with two boiled eggs. I remember the ’60s—that is how old I am—when the advertisements on TV said, “Go to work on an egg.” Well, I could go to work on two eggs and finish the day with two eggs as well. I am probably keeping the egg industry going just with my own purchases.
I understand the importance of the issue for the livelihoods of farmers in my constituency. The GCA’s jurisdiction extends across the entire United Kingdom of Great Britain and Northern Ireland: it regulates designated retailers with an annual groceries turnover exceeding £1 billion. In Northern Ireland, the GCA’s role is particularly significant. The Ulster Farmers Union— I declare an interest as a member—has highlighted the GCA’s importance in maintaining fair trade practices amid ever more challenging economic conditions. It believes that
“the GCA performs an essential role in a modern, sustainable and competitive grocery market in the UK.”
There is no doubt that reducing or weakening the powers of the GCA will put suppliers and consumers at risk. In my constituency of Strangford, large chains such as Tesco, Asda and SPAR have contracts with numerous suppliers, and their contributions keep the sector going. I have a great relationship with many local suppliers in my constituency, including the likes of Mash Direct and Willowbrook Foods, which provide fresh potato and vegetable dishes. One example is a local farmer, Roy Lyttle—a small farmer, but a decent enough producer—who has just developed a new salad product, Lyttle Leaves. I believe it will take off.
Local farmers and butchers, such as Carnduff butchers and Colin McKee’s, are incredibly popular throughout my constituency. The issue is that grocery inflation has risen to 4.1%, the highest in 15 months, and there is always a possibility that it will continue to rise. That highlights the financial pressure on suppliers and manufacturers to provide products at a competitive rate and ensure that they can make a profit with their wonderful produce.
Carla Lockhart (Upper Bann) (DUP)
My hon. Friend will know that farmers in Northern Ireland feed more than 10 million people across the United Kingdom every year. Does he agree that our farmers are treated as shock absorbers? They carry all the risk and receive the least reward. They are still being relentlessly squeezed by powerful retailers and processors. Does he therefore agree that the GCA’s role needs to go further in protecting our farmers from unjust and unbalanced practices?
Jim Shannon
I wholeheartedly agree. My hon. Friend’s words are on record, the Minister is here, and hopefully he will respond in a positive way.
Workers have reported feeling lonely, stressed and isolated. They find it hard to connect with others; they often work alone or as part of a small workforce. They are the ones who produce the food on our farms, and they must be properly rewarded for their actions to ensure that supermarkets always have produce to sell. Unfortunately, with inflation rates, people are working harder and under more pressure, with little recognition.
The scope of the problem is highlighted by a 2025 BFAWU survey that shows that nearly 60% of food workers are not earning enough to meet all their basic needs such as rent, heating, electricity and food. Some 86% say that they have had to reduce their heating to save money. It is important in this debate to give the perspective of workers, because they are the ones doing all the real graft.
I will conclude with this point: we must look at the sustainability of the UK food supply chain and ensure that suppliers have access to large food suppliers at a decent price that reflects their work. There are calls for DEFRA here and the Department of Agriculture, Environment and Rural Affairs back home to work together, as the GCA applies to the whole United Kingdom. We must do more to protect the collective UK food supply. I hope that the Groceries Code Adjudicator will commit to doing so in Northern Ireland. I thank the adjudicator for doing his bit to protect the farmers and suppliers of Strangford.
Dave Robertson (Lichfield) (Lab)
It is a pleasure to take part in this debate with you in the Chair, Dr Allin-Khan. I thank the right hon. Member for South Holland and The Deepings (Sir John Hayes) for securing this important debate. He and I discussed the matter in this very room quite recently, and I am proud to be here again to represent the people of Lichfield, Burntwood and, crucially, the farming villages of my constituency.
The Groceries Code Adjudicator regulates supermarkets and other businesses to ensure fairness in our food supply, but it does not go far enough down the supply chain—I almost said “food chain,” but I am avoiding the pun. It regulates only a small number of businesses, about a dozen. While it tries to keep prices as low as reasonably possible and aims to ensure that food profits get shared fairly across the supply chain, it simply is not reaching the most important layer of the supply chain—the producers and farmers.
In almost all cases, farming is a pretty weird yet fundamental part of the UK economy, as it is the part we need to keep the country fed. Despite its importance, the sector does not always follow the economic patterns we would expect. The general rule of thumb in any free market economy is that those taking greater risks should see a greater return. They should see the value when things work well, as it is on their shoulders when things do not work well in difficult times. However, that is not always how farming works in the UK.
Farmers across the country are very much at risk of flooding, disease and drought. A huge number of potatoes are grown in my Lichfield constituency every year, and I know many farmers who were happy to see the heavens open a couple of weeks ago. Farming is a risky business. Factors well beyond a farmer’s control can have a profound impact on the yield from a particular field, on the quality of what is grown, or on a hundred other things that most people will never even think about. Usually that would mean bumper profits when things go well, to reflect the need for rain, sunshine or frost at the right time, but that is not how it is currently working in the UK. Most farms are simply not making enough money.
I make it clear that I am not saying that we have had it too good for too long, and I am not arguing for higher food prices—we have just had a cost of living crisis, and I hope it is a very long time until we see another—but there is enough profit in our groceries system to make sure that everyone gets fair prices, a fair day’s pay and a fair day’s return.
I am sure everyone in this room believes, as I do, in a free market economy that delivers fairness for everyone, but the free market is failing farming, food producers and our groceries system. It is therefore right that legislators should step in, and it is important for the GCA to take a more active role. It is important to farmers, and especially to dairy farmers on my patch—we need to look much more closely at dairy farming.
The dairy farmers I speak to openly say that the very best contract they can reasonably expect for their milk is a “cost of production” contract, which all but guarantees that there can never be any profit in their farming business. Some salaries will be included in the costs, but no line for profit. The result is a perverse situation in which the processors to which the milk is sold—the customers for much of my farmers’ produce—demand to see the farmers’ financials and will then tell them what it costs to produce milk. That is the antithesis of how a free market should work. There can be no situation more perverse than that.
This is really important to farmers in my constituency, who deserve a market that works in their interest; it is important to retailers, large and small, that want to do the right thing by their customers; it is important to my constituents who work in farming communities; and it is important to people living in more urban areas of my constituency, as they are also very interested in making sure that people get a fair shot in a fair economy. We need the GCA to stand up and play its role in making sure that we have a fair system for everyone.
Sadik Al-Hassan (North Somerset) (Lab)
A recurring theme of my conversations with farmers across North Somerset is that they have little interest in Government handouts. They want to stand on their own feet without relying on state subsidies to stay afloat. However, it seems that this aspiration can be realised only if we address that pressing issue of supermarket pricing and the power imbalance between suppliers and retailers in contract negotiations. Does my hon. Friend agree that we must revisit the groceries supply code of practice, and the Groceries Code Adjudicator that enforces it, to ensure that farmers producing high-quality British produce are paid the fair price they deserve?
Dave Robertson
My hon. Friend is absolutely right to raise that point. We do not need the Government to try to run everything. We need a free market, but one that is regulated properly to deliver for producers and consumers—to deliver for everybody.
Several hon. Members rose—
Dr Rosena Allin-Khan (in the Chair)
I am setting an official time limit of three minutes each.
David Chadwick (Brecon, Radnor and Cwm Tawe) (LD)
It is a pleasure to serve under your chairship, Dr Allin-Khan. I thank the right hon. Member for South Holland and The Deepings (Sir John Hayes) for securing this debate—he is right to describe the supermarkets as an “economic tyranny.” We Liberal Democrats are also concerned about concentrations of power, and there is currently no greater concentration of power in our food chain than that held by the supermarkets.
Welsh farmers face pressures on all fronts. Nineteen per cent of British sheep are in Powys. However, despite the current bout of food inflation, farm incomes are still falling. One of the biggest challenges is the simple fight for fair treatment within the agricultural supply chain. Farmers deserve to be treated fairly, which is why the Liberal Democrats championed, during the coalition years, the creation of the Groceries Code Adjudicator to tackle unacceptable practices by supermarkets that, time and again, used their size and power to squeeze local producers.
The GCA has helped to improve the situation since its launch in 2014, but farmers are still coming forward with stories of unfair treatment such as last-minute order changes, delayed payments and punitive delisting. These are David versus Goliath situations in which small producers are left shouldering huge losses, while the big retailers rack up billions in profits. Just last year, Tesco posted £2.3 billion in profit, while Asda brought in more than £1 billion, but many farmers, particularly in Wales, are barely breaking even. Studies back this up: nearly half of UK farms fear they could go out of business, and three quarters say that supermarket behaviour is a major concern.
The GCA needs more teeth. It must be able to launch its own investigations, rather than waiting for complaints. Too many farmers are scared to come forward, as they are worried about being blacklisted or dropped. The GCA’s scope also needs to be widened. Many food suppliers, such as processors and packagers, are not covered, despite playing significant roles in the supply chain. Retailers such as Amazon were added only recently, and Amazon scores extremely low on compliance. With an increasing market share of smaller, online and non-traditional grocery retailers, many of which do not come close to hitting the £1 billion a year turnover threshold to be covered by the GCA, major players are falling through the cracks.
Better funding, more staff, greater transparency and anonymous reporting tools would all make the GCA more effective. It has achieved real progress in the last decade, but if we want to protect our farmers, our food supply and the rural communities they support, the GCA must be given the power, the scope and the resources to help secure a fairer agricultural supply chain.
Sarah Dyke (Glastonbury and Somerton) (LD)
It is a pleasure to serve under your chairship, Dr Allin-Khan. I congratulate the right hon. Member for South Holland and The Deepings (Sir John Hayes) on securing this important debate.
The number of English farms has fallen by nearly a quarter in 20 years, with dairy farms, which are highly prominent in Somerset, hit particularly badly. We all know that British farmers have faced a long list of challenges, such as the impact of Brexit, sky-high energy prices, terrible Tory trade deals, botched transitions from the basic payment scheme to the environmental land management scheme, the shattering blow of the family farm tax and the no-notice cancellation of sustainable farming incentive grants. Now the Government seem set to make significant cuts to the nature-friendly farming budget in their upcoming spending review.
On top of all that, farmers earn tiny profits and are regularly exposed to industrial-scale exploitation by supermarkets that are focused on delivering cheap food and meeting their just-in-time supply model. Many households are living in food insecurity as a result of our unbalanced food system, and food poverty is on the rise. Food security is vital for national security, but farmers are increasingly being forced out of business as they cannot afford to make a living growing food for our tables.
I cannot stress enough how important our farmers are to national security. As Professor Tim Lang’s recent report on the UK civil food resilience gap highlights, we must act now to ensure the UK’s food resilience and preparedness. We are living in a volatile and unpredictable world, and we must be ready for international shocks to food supply chains, so I urge the Minister to talk to his DEFRA colleagues, to look carefully at the damage being caused to the UK agricultural sector, and to support a system that empowers and rewards British farmers to produce high-quality food while protecting nature.
Of course, we must also address the power imbalance that farmers face on their route to market. The UK groceries sector is dominated by a handful of supermarkets, with around 95% of food sales controlled by just 10 retailers. That concentration means that supermarkets wield significant power over farmers, leaving them with very little negotiating leverage. Unethical practices from large supermarkets can lead to contracts being altered at the last minute, and supermarkets often use loss leader strategies, selling some products at a loss to attract more customers. That practice squeezes suppliers, which are often forced to accept lower prices, and if they do not meet their quotas, they will be punished.
In large part, that reflects the limited scope of the Groceries Code Adjudicator, which covers too few retailers. Many farmers and suppliers fear retaliation if they report unfair practices, while two thirds of farmers report feeling fearful of being delisted if they speak out of turn about supermarket behaviour. That leaves them underpaid and vulnerable. The Liberal Democrats are calling for a change in the Groceries Code Adjudicator. It needs teeth, and it needs to be strengthened.
Steff Aquarone (North Norfolk) (LD)
Farmers in North Norfolk are facing a litany of struggles. They feel let down by the previous Government for selling them down the river with dodgy trade deals and years of cuts to the farming budget. They feel let down by the current Government’s continued pursuit of the damaging family farm tax.
Farmers’ major struggle, however, is the continued decline in the profitability of farming. That is deeply worrying not just for farmers, but for the supply chains, businesses and communities that they support. Of course, it is not just about supermarkets: larger food manufacturing suppliers, most of which have indulged in record profits throughout the cost of living crisis, have allowed shrinkflation to surge and are engaged in their own race to the bottom on many prices for British-grown ingredients.
In North Norfolk, we grow huge amounts—almost 2,000 hectares—of sugar beet. In 2023, when the National Farmers Union and British Sugar were at loggerheads on the agreement for purchasing beet, British Sugar contacted the individual farmers who would be affected by the agreement to share the terms to which it wanted them to agree. That bypassed the NFU’s negotiating team, who exist to ensure that farmers are protected and get a good deal from the only buyer of sugar beet. The NFU was rightly outraged, as were many of the farmers I have spoken to. That is exactly the kind of bad behaviour by monopolistic multinationals that we need a strong regulator with teeth to protect farmers from.
I, too, want to see the adjudicator go further and act tougher. In future, I also hope that it will get involved in actively pursuing policy goals that I am sure we would all support, such as directing the market to incentivise healthier food alternatives, encouraging the consumption of whole foods, and tackling the swelling amount of ultra-processed food on our supermarket shelves, which is a cause of growing public concern. Market shaping, along with selective legal measures such as the sugar tax, is surely preferable to the nanny state telling us what we can and cannot eat.
The Groceries Code Adjudicator is an important protector to get the best deals for farmers and consumers. I am pleased that it continues in its role, but I hope it can step up in the years to come by using its powers to encourage measures so that our shelves are more fairly stocked with products that are better for our health, our farmers and our planet.
Andrew George (St Ives) (LD)
It is a pleasure to serve under your chairmanship, Dr Allin-Khan. I warmly congratulate the right hon. Member for South Holland and The Deepings (Sir John Hayes) on the manner in which he introduced the issues and perambulated around the full range of factors that are clearly having a significant impact on this country’s extremely and continually marginal food production base. He went back almost to the prehistory of food production and highlighted the collective near-monopoly held by supermarkets, and the restricted opportunities for small independent food retailers in that infrastructure.
The right hon. Gentleman was perhaps echoing the words of Lord Heseltine who, when he was President of the Board of Trade, memorably said that he was prepared to intervene before breakfast, lunch and dinner—or dinner and tea, to my way of thinking. The right hon. Gentleman is of that wing of the Conservative party that believes in free markets but recognises that they need to be regulated when they go in the wrong direction, as has clearly happened in this case.
A number of interventions and comments touched on the potential of going back to retail price maintenance, which was introduced before the second world war to regulate the final price. I do not think any political party proposes that the GCA or regulation should morph into finished retail price maintenance, although it was interesting that the spectre of final prices was reflected on in the debate.
The hon. Member for Salford (Rebecca Long Bailey) outlined the limitations of the GCA and the implied lack of teeth, a point that was echoed by many others. She called for its powers to be beefed up. My right hon. Friend the Member for Orkney and Shetland (Mr Carmichael), the Chair of the EFRA Committee, made a telling point that, amid all the briefings, the GCA seems remarkably silent in offering any advice on the many debates that we have had on this issue. He also highlighted that the GCA and the groceries code do not look at primary producers but the ultimate supplier to the supermarket, because that is how the code was written.
Perhaps I need to go into some of the pre-history, and not because I am concerned that I have been airbrushed out of the history of the creation of the GCA. The late Colin Breed, the former Liberal Democrat MP for South East Cornwall, produced a report called “Checking Out the Supermarkets” in 2000, following an investigation, which resulted in a Competition Commission inquiry. I took on his work and chaired the Grocery Market Action Group, which had members of the NFU, the Country Land and Business Association and Friends of the Earth all sitting in the same room, along with Traidcraft—I see Fiona Gooch from Traidcraft in the Public Gallery—and other organisations not normally expected to work together, because they saw a fundamental injustice in the grocery supply system. We must work together.
Further inquiries undertaken by the Competition Commission produced a report in 2007 that identified excessive risk and unexpected cost passed on from supermarkets because of their overwhelming power in the supply chain, and the impact that had on suppliers. That needed to be regulated and, hence, the groceries code was created. We campaigned and argued for the creation of the GCA as a means of policing the code. It could not simply sit on the shelf without anyone observing how the code operated.
That code was never intended to be the finished product. It was simply a framework for the Government to commence a review of how the process should operate, so the GCA should not be held in aspic for all time. I understand the Government are undertaking an inquiry covering 2022 to March 2025. I hope that review will reflect on the comments of hon. Members, the impact on primary producers and the current limitations.
The hon. Member for Strangford (Jim Shannon) emphasised the marginal status created for many farmers. The hon. Member for Lichfield (Dave Robertson) described the challenge of maintaining both a low retail price and a profitable supply chain. It is very difficult to get that right, but if there is fairness in the supply chain, then both can be achieved. All Members recognise that. My hon. Friend the Member for Brecon, Radnor and Cwm Tawe (David Chadwick) has already ably led a debate on this issue, so he is well practised. He understands these issues and brought the Welsh perspective. My hon. Friend the Member for Glastonbury and Somerton (Sarah Dyke) proposed changes to protect whistleblowers and made particular reference to those affected by the bully-boy tactics of supermarket buyers. Let us say it: that is effectively what is going on in the sector. My hon. Friend the Member for North Norfolk (Steff Aquarone) emphasised similar issues affecting his area.
It is really important that the Government look carefully at areas of the GCA where improvements can be made. The framework is there; what the Liberal Democrats are asking for is that the GCA be able to instigate its own investigations. That may well be on the basis of market intelligence or whatever it may be, but it is important that it is able to instigate its own investigations, while at the same time being aware of time-wasting fishing expeditions. Nevertheless, the balance can be struck. The pressure points in the supply chain are pretty clear. That freedom must be there.
The reach of the adjudicator is far too limited. Only the ultimate supplier is reviewed according to the code. They need to be seen in the context of the full supply chain. Very often the people who are actually catching the cold and suffering the most are the primary producers, but they are not the final supplier. That needs to be reviewed, and I hope the Government will allow that change.
A number of Members mentioned the lack of resources. Whether there are seven or 10 entirely seconded members of staff, this is a really shameful situation. The adjudicator has to control very large supermarkets, and the cost of a single investigation is greater than the GCA’s annual budget on many occasions. From 2013 to 2024, there were only 13 arbitrations and only two formal investigations. The GCA is rightly highly regarded and seen as efficient and effective, but with more resources will come more clout. The GCA is currently funded by a £2 million levy on the 14 supermarkets. Split 14 ways, that is only £142,857. Supermarket profits are in the hundreds of millions—indeed, billions—so it is really important that the Government review that. The Government should also be looking at sectors other than food, perhaps including the garments sector.
Robbie Moore (Keighley and Ilkley) (Con)
It is a pleasure to serve under your chairmanship, Dr Allin-Khan. I congratulate my right hon. Friend the Member for South Holland and The Deepings (Sir John Hayes) on securing this important debate. Who better to open this debate than a Lincolnshire representative from a county that I know very well and which produces 30% of our vegetables, 20% of our sugar beet and, collectively, 12% of all of the food that we find on our shelves?
We have heard contributions from Members from all four nations of the United Kingdom—Northern Ireland, Scotland, Wales and England. I represent the constituency of Keighley and Ilkley in God’s own county of Yorkshire, and we also have many producers and growers who have a relationship with supermarkets, and have been expressing their concern to me in advance of this debate.
The Groceries Code Adjudicator is hugely important in addressing some of the systematic issues within our food supply chain that have been referenced in the debate. It was set up under the coalition Government, which my right hon. Friend the Member for South Holland and The Deepings noted. It manages only 14 retailers, which cover a vast swathe of the food market, but that does not go far enough. Competition puts huge pressures on our suppliers and growers further down the chain, which is why it is vital that the Groceries Code Adjudicator addresses unfair practices. The questions that have been raised in this debate are those of power, funding and resource.
In 2024, a survey run by the GCA reported a reduction in the number of groceries code issues and an increase in supplier satisfaction with retailers, where issues were raised. I question that report. All Members speaking in this debate have picked up on the fear among growers and producers of being blacklisted if concerns are raised, and a reluctance to even report, because of the huge pressure that can be put on them by the retailers.
The 14 retailers included in the scope of the GCA and the code of practice cover a significant proportion of the UK market. However, it misses a number of smaller but significant retailers. That is the point I want to build on, as mentioned by other Members today. Has the Minister considered reducing the £1 billion turnover threshold that marks the point where businesses must be compliant? If that threshold were removed, many more retailers would be brought into the fold of the GCA. Members have advocated for that in today’s debate.
The work of the GCA is important in maintaining the health of our supply chains. An unfair contract between a retailer and a producer or grower can be devastating. We have heard the points made in the debate—the challenges are huge. That can result in growers and producers being locked into unfair contracts. Orders can be cancelled unnecessarily. The Chair of the EFRA Committee, the right hon. Member for Orkney and Shetland (Mr Carmichael), made a point early on in the debate about potatoes—they were of sufficient quality for any consumer to eat, and yet, because they did not meet the exact specification from the retailer, the order was not taken.
Sir John Hayes
I forgot to say what a pleasure it is to see you in the Chair, Dr Allin-Khan. My hon. Friend identifies a fundamental issue. In commercial transactions, there is always risk, and that risk needs to be balanced. At the moment, all the risk is taken by the farmer or grower and none of the risk is absorbed by the retailer. We need to adjust that balance to ensure fairness, in the way that has been articulated by so many Members across the Chamber.
Robbie Moore
My right hon. Friend makes a valid point. At the moment, the risk is all sitting on the shoulders of the growers and producers. That is unfair, because there is a certain expectation of the food they are preparing, whether in quantity or quality, but some of the risk factors are completely out of their control, as the hon. Member for Lichfield (Dave Robertson) noted. Those factors include weather conditions, which impact many of our farmers and growers. The lack of flexibility in the contracts is another.
That is why the GCA must have the teeth that many have talked about in this debate, because these issues go beyond the impacts of the unfair contract. At a time when pressures on our agricultural sector are mounting, additional budgetary pressures were announced by the Government in last year’s Budget. The hike in employer’s national insurance, the family farm tax, which has created a huge amount of uncertainty, the cuts to the sustainable farming incentives, and the drastic reduction in the delinked payments to a cap of £7,200 are all additional cash-flow pressures, exposing our farmers and growers to long-term uncertainty, beyond the challenges associated with the contracts they are entering into with retailers.
While the GCA has made hugely important steps, many producers and growers are still unaware of its role and powers. There is absolutely more work to be done within the industry to build awareness and trust of the GCA and its powers, and that is exactly what the nub of this debate is about. We know that pressures are mounting on the agricultural supply chains that run right the way through the system, from farm to fork. One of the shortcomings of the GCA in its current set-up is that it only handles the relationship between the retailer, the supplier and some farmers and growers, missing out many farmers, growers and other intermediaries in the supply chain. That has to be addressed, as has been referenced by many Members in their contributions.
That has to be addressed if we want to restore a level of trust in the system, and work to do so has been started. The Fair Dealing Obligations (Milk) Regulations 2024 were introduced recently, which have a specific focus on milk, and regulations for other products are on their way. But I ask the Minister: what are we doing to address this disjointed approach? It seems that multiple regulators are managing different elements of the supply chain, which is creating more friction and uncertainty for businesses.
The experience of the last decade shows the growing case for better lines of communication between the GCA, DEFRA and the Agricultural Supply Chain Adjudicator. What conversations has the Minister, in his role representing the Department, had with DEFRA and the GCA? That was a point made by the Chair of the EFRA Committee, the right hon. Member for Orkney and Shetland; I congratulate him on the work he did in introducing his ten-minute rule Bill, which had the support of the Opposition.
Going forward, I hope that the Government will be able to pick up where the last Government left off and not only expand on the fair dealing regulations, but tie in the GCA and its operation to the Agricultural Supply Chain Adjudicator, providing a joined-up approach to the full supply chain. Although I welcome the increasing scope of regulatory framework on the agricultural supply chain, does the Minister plan to include other products, such as ornamentals, as part of an expanded GCA remit? Ornamentals, like food, are perishable and suffer with the same challenges that many Members have outlined in this debate.
What are the Government’s intentions when it comes to increasing the GCA’s powers, funding, resource and people power, so that it has the ability to enact the requests of both sides of this House? I reiterate that trust absolutely needs to be restored into the system, which can only be done by re-establishing better supply chain relationships throughout the system. That relies on giving the GCA more power, more finance and better lines of communication with DEFRA and the Agricultural Supply Chain Adjudicator.
The Parliamentary Under-Secretary of State for Business and Trade (Justin Madders)
It is a pleasure to see you in the Chair, Dr Allin-Khan. I congratulate the right hon. Member for South Holland and The Deepings (Sir John Hayes) on securing this important debate, and on the sweeping historical nature of his opening comments, which gave us a broad view of the importance of agriculture and food in the development of civilisation. Of course, we are talking about more contemporary issues, which he went on to address, and I will respond to some of his comments in my remarks.
This is an appropriate time for the House to discuss the powers of the Groceries Code Adjudicator because, as Members will be aware, we are currently undertaking the fourth review of the GCA’s effectiveness, as required by the Groceries Code Adjudicator Act 2013. The statutory review will consider how the GCA’s powers have been exercised and how effective the GCA has been in enforcing the groceries supply code of practice. It will also consider whether the existing permitted maximum financial penalty for non-compliance following an investigation is appropriate and whether there should be any restriction on the information that the GCA may consider when deciding whether to investigate.
On the question of financial penalties, the right hon. Member for South Holland and The Deepings referred to two investigations where no fines were issued. However, it is worth stating for the record that, following the Tesco investigation, it was charged £1 million by the GCA for the cost of that investigation, and the Co-op investigation led to a charge by the GCA of £1.3 million for the cost of it, plus compensation to suppliers of £650,000. But it is noted that the GCA has not been issuing fines. I think that is part of its overall approach to try to get compliance rather than issuing fines, but that is something that Members can respond to as part of the review.
Mr Carmichael
The difficulty is that the review of a limited regulator is always going to bring up a limited answer. What we need is something much more holistic. Just to take one small example, the number of small abattoirs in the country is now down to the hundreds, from 2,500 some time ago. That is a direct consequence of the way in which the supermarkets bring pressure to bear in other parts of the supply chain, so what we need is something that looks at the whole process, from farm gate to supermarket shelf.
Justin Madders
I thank the right hon. Member for his question. Of course, the review is dictated by the legislation that his party was, in government, involved in introducing, so part of the problem is where we are with the statutory framework, but I do take his wider point that clearly there are a number of different developments in how we deal with the overall agricultural food supply market; the GCA is just one part of it. The other developments, which Members have talked about, particularly in terms of ASCA, probably need to be looked at more holistically than is the case at the moment.
Sir John Hayes
I am grateful to the Minister for that remark, but the right hon. Member for Orkney and Shetland (Mr Carmichael) is right: the important thing is co-ordination. The previous Government did a good job in establishing the basis for the “fair dealing” obligations, but it is really important that the work being done—outside the Minister’s Department in some cases—is co-ordinated, and the Groceries Code Adjudicator, in exactly the way that the right hon. Member for Orkney and Shetland suggested, has a purview that extends across the whole process. I hope the Minister will give a commitment to that now.
Justin Madders
I acknowledge the wider points that have been made. Members have raised today a number of issues that are beyond the scope of the Groceries Code Adjudicator and clearly are within the bailiwick of the Department for Environment, Food and Rural Affairs, which clearly I need to work with on developing a more holistic approach. That is one of the challenges we face, because the code regulates only designated retailers’ dealings with their direct suppliers and currently applies to the 14 largest grocery retailers in the UK, each with an annual turnover of £1 billion or more.
A number of Members referred to the threshold and questioned whether that is currently appropriate. It is worth pointing out that, according to the marketing data company Kantar, the 10 largest retailers covered by the groceries code amount to 97% of the grocery retail market, although the adjudicator has said that he is happy to hear views on whether the threshold should change and about suppliers’ experiences of dealing with retailers not currently covered by the code. The adjudicator has also said that he will pass on any relevant information to the CMA to inform future decisions on retailer designations under the code. There is therefore an opportunity for Members to feed in if they feel there are particular retailers under the current threshold that should be included.
A number of Members talked about the issue of price. The code does not regulate the prices agreed between retailers and suppliers. It does, however, require these negotiations to be conducted fairly and transparently, and the GCA is keen to ensure that negotiations around cost price pressures do not lead to non-compliance with the code. In 2022, the GCA published the seven golden rules to remind retailers of best practice when agreeing to prices.
Justin Madders
I have quite a bit to get through, so if the hon. Lady does not mind, I will carry on.
The statutory review is focused on the powers and duties of the GCA as set out in the 2013 Act and the 2015 order. These powers include providing arbitration between suppliers and retailers, conducting investigations into retailers suspected of breaching the code, and enforcement powers where the adjudicator is satisfied that a retailer has broken the code. Enforcement can take the form of the adjudicator making recommendations against the retailer, requiring retailers to publish details of the breach, or imposing financial penalties of up to 1% of the retailer’s turnover. The adjudicator also publishes advice, guidance and best practice statements, and can make recommendations to the CMA about suggested changes to the groceries code.
Contrary to a common misconception, which I am afraid has been repeated by a number of Members today, the adjudicator does not need to wait for a complaint to be made before launching an investigation. What the Act requires is that the adjudicator has reasonable grounds to suspect that a retailer designated under the code has broken it or failed to follow a recommendation following a previous investigation. It is for the adjudicator to determine how to use those powers, but it is absolutely possible for it to pursue investigations without a formal complaint being made.
I heard a number of Members making reference to concerns about reprisals—that was also raised in the previous debate. As part of the review, I am keen to hear how we ensure that the system is robust enough, so that people in the chain covered by the code feel confident that they can raise complaints. Clearly, there will always be an element of concern when someone raises their head above the parapet, but it is possible to raise concerns confidentially. Indeed, the survey undertaken by the adjudicator is done on a confidential basis. The shadow Minister, the hon. Member for Keighley and Ilkley (Robbie Moore), referenced his scepticism about the high level of satisfaction in that. I note his comments, but it is the case that the survey is taken confidentially. The right hon. Member for South Holland and The Deepings also raised the question of anonymity. I am genuinely interested to hear from Members how we can find a way ahead so as to ensure that people can raise complaints confidentially and with confidence.
In general, the adjudicator has ensured a collaborative approach with suppliers, which has helped to prevent problems from escalating and reduced the need for time-consuming and expensive formal dispute resolution. A number of Members raised the question of resourcing, but it is for the adjudicator to set the level of the levy that is applied. That is always a matter of discussion, but I am sure that if the adjudicator wished to increase the levy, it would be able to do so within the powers it already has.
I am conscious that I need to give the right hon. Member for South Holland and The Deepings an opportunity to respond. I have not addressed all the points that Members raised in the debate, but where I am able to provide a further response, I will write to those Members. I would encourage all Members to engage with the review. It is important that a number of the issues that we have heard about today are fed into it.
Sir John Hayes
With that pledge that I can continue to communicate with the Minister, I am delighted to thank all colleagues who contributed to this debate. It is perfectly possible to feed the nation at a fair price without fuelling the excessive profits of greedy plutocrats. To do that, we need to extend the power of the adjudicator in the way that has been set out by a considerable number of Members from across the House. It is vitally important the food chain is relinked, to make sure that all those involved in the production, distribution and sale of food can act in a way that is commercially viable but fair. It is not fair now.
Motion lapsed (Standing Order No. 10(6)).
Leasehold Reform
(3 days, 20 hours ago)
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Dr Rosena Allin-Khan (in the Chair)
I will call Ruth Cadbury to move the motion and then call the Minister to respond. I remind other Members that they may make a speech only with prior permission from the Member in charge of the debate and the Minister. There will not be an opportunity for the Member in charge to wind up, as is the convention for 30-minute debates.
Ruth Cadbury (Brentford and Isleworth) (Lab)
I beg to move,
That this House has considered leasehold reform.
It is a pleasure to serve under your chairship, Dr Allin-Khan. This is a well-subscribed debate, but as it is only half an hour I have said that just a couple of hon. Members can intervene, and hon. Members understand that we are not accepting any speeches apart from mine and the Minister’s.
It is a pleasure to lead this debate on leasehold reform in England and Wales, one of many that I have already spoken in during this Parliament. I want to start by thanking the dozens of constituents who have written to me in the last week to let me know about the problems they have faced: high service charges, rising building insurance, safety problems, unclear management contracts and a wall of silence from their management companies and freeholders. Most of those issues have been raised with me by leaseholders in my constituency since I was first elected to this place 10 years ago.
The common theme, as hon. Members know, is a lack of control. Many leaseholders assume, when they sign their contracts, that they are moving into a home. They have to pay a service charge, but they expect that to mean that communal problems will be fixed and they will be able to get on with their lives. Sadly, that is not the case.
Many leaseholders are trapped in a complex, legalistic maze. I want to cover three things today: the situation for my constituents, how we got here, and how the Government are working to fix it.
Jim Shannon (Strangford) (DUP)
I thank the hon. Lady for securing this debate, which I spoke to her about beforehand. Does she agree that issues with developers and management company rates can stem from the fact that the new homebuyers are often not informed about the nature of the leasehold agreements and the additional costs that come off the back of that for labour and materials? Does she therefore agree that estate agents and solicitors must have a duty of care to ensure that prospective owners are under no illusions as to how management companies and associated fees will be dealt with annually?
Ruth Cadbury
I am grateful to the hon. Member, because I was going to come on to that and to the insidious links between those selling the flats, particularly the developers, and the solicitors who they recommend to the buyers—often first-time buyers who are unaware of the challenges.
On how we got here, the answer, to be blunt, is greed. Hedge funds, investors, solicitors and developers—many based overseas—started meeting up at conferences about 15 or so years ago to learn how to use the weaknesses in English freehold law to fatten the golden goose. Members can see my rant on this subject on the Leasehold Knowledge Partnership website. Leasehold blocks of flats, often in urban areas, were valuable properties that guaranteed an extremely high return.
In one current case a freeholder called Oakdene, which is refusing to pay to fix fire safety faults, sent me a letter from a solicitor at a rather high-priced legal firm—the letter alone probably cost hundreds.
Sarah Dyke (Glastonbury and Somerton) (LD)
I have been working with some residents in Cavalier Way in Wincanton. They contributed £40,000 annually to Plymouth Block Management, their previous leasehold management company, which did not complete any repairs and deposited no reserves as it was transferred to the new company. The residents now have a 500% increase in their charges. Does the hon. Member agree that companies must be accountable to residents and mandated to hold annual general meetings to ensure financial transparency?
Ruth Cadbury
A lack of transparency is a theme that comes up again and again, particularly for the people who are effectively the victims. I will press on because I want to get to the end of my speech if I can.
The complex state of leasehold means that many different parties have realised that they can fatten the goose with ease, and often without scrutiny and enforcement as the hon. Member has said. First, that was often done through ground rent. Properties would often charge a ground rent of between £250 and £1,000 a year in London. I would call it money for old rope, but that would insult old rope.
That tactic was later replaced as more buyers and solicitors became aware of it, particularly around the sale of flats, so we then saw service charges being used as the new cash cow. A typical building in my constituency, which is often a flat built since 2000, has a service charge of £6,000, but some have charges as high as £7,000 or £8,000 without anything like that value of service being delivered.
For too long, it has been possible to raise service charges without limit—often vastly above inflation and with no clear breakdown. Leaseholders will buy a property and think that the service charge is paying for services such as—to take examples from my constituency—the post room, receptionist, home cinema, car park and security. In fact, they find that the post room and the home cinema are closed, the receptionist is not full time, the car park gets flooded and the security is non-existent.
If a person bought such a product on the open market, trading standards would have a field day—but leasehold is not a fair market. If we invented this market system now with its wide cast of cowboys and profit strippers, it would appear like something out of a Victorian novel. Ted Heath called it the “unacceptable face of capitalism”, but that is how we have got here.
I will not regale the House with the efforts to tame and reform leasehold over the past decade. As a member of the all-party parliamentary group on leasehold and commonhold reform, I know that many hon. Members have been working on it. The previous Government’s changes were welcome, and MPs from both sides of the House have stood up, spoken and acted, particularly thanks to the support of the APPG and the work of the Leasehold Knowledge Partnership and the National Leasehold Campaign. I know that the Minister gets this issue and knows it inside out too.
I want to talk about my constituents’ experiences. For many people in west London, the high cost of property means that buying a house is out of reach, but people on good salaries can, just about, afford a flat for upwards of £500,000.
Mr Richard Holden (Basildon and Billericay) (Con)
I thank the hon. Lady for securing this incredibly important debate. One of the issues in my constituency, which is very similar to hers, is that people are buying new flats or houses under the freehold system, but with so many covenants involved that they are also being charged the sort of service charges that she has mentioned. Does she agree that whatever the Government do— I welcome the good approaches in this place—they must also cover some of the covenant issues around freehold?
Ruth Cadbury
I agree with the right hon. Member. There are so many issues that the Government have been looking at, and are going to have to look at, particularly to ensure against unintended consequences.
With prices of upwards of half a million, even with the help of the bank of mum and dad, many of my constituents have no choice but to buy a leasehold flat, even when they have a good income and perhaps help with the deposit. That means that a whole generation in London risks getting trapped as leaseholders.
The key problem is that at first the terms can seem straightforward. A person pays their mortgage and then they pay their service charge and ground rent, and for the first year, it might be okay. They might notice some problems in the communal area, but the real kicker comes when they get the first increase in their service charge. I have seen constituents whose service charge has increased by 50% or even 100%.
Will Stone (Swindon North) (Lab)
Does my hon. Friend agree that when we talk about leasehold we have to include fleecehold as well? In Priory Vale and St Andrews in my constituency, residents pay astronomical fees without receiving the services that they should receive for such fleecehold charges.
Ruth Cadbury
My hon. Friend is absolutely right. Again and again, bills for service charges come in that are not properly itemised. There are items that do not actually exist, such as landscaping maintenance, and there is a refusal to open up. Some leaseholders are even getting charged by solicitors for what should be a right.
Peter Prinsley (Bury St Edmunds and Stowmarket) (Lab)
Does my hon. Friend agree that such service charges are an outrage? There should be some form of guarantee associated with what services are in fact provided. I, too, have had many constituents complain to me about the complete lack of services that they pay for. As she says, if those services were something that was being paid for on the open market, trading standards officers would be involved.
Ruth Cadbury
My hon. Friend is absolutely right. I am sure that the Minister is noting these points and will address how we can ensure transparency and a minimum quality of standards in the billing of service charges and the other activities of management companies.
I now want to get to the end of my speech. Given the popularity—sadly—of this debate, I hope that there will be many more debates on it in this place where everybody will be able to make a strong speech about these issues that are so important to many of our constituents.
I will give some examples from constituents. In one case, a constituent was rightly concerned about the costs they faced and asked for a breakdown of them, but was refused. They issued the necessary legal action to get the breakdown, but six months later they are still waiting for it. There is also the specific problem that many constituents are frankly outgunned when they get into legal disputes. Another constituent faces a legal bill in the thousands because they have to represent themselves.
One Hounslow resident who lives in a badly converted office block summarises the issue well:
“Our building’s service charges and insurance costs average just over £2,000 per flat annually”—
which sounds all right—
“yet the quality of service is alarmingly poor. We have regular incidents of theft, with leaseholders having to rely on personal security measures”.
They say that is because the management company are not interested. They continue:
“The service charges increase each year with little transparency, covering inflated management fees, audit fees, and security charges, with no consultation with leaseholders on providers or costs. This imbalance of control leaves us vulnerable to arbitrary charges without accountability.”
On top of ever-rising service charges, many people have also faced sky-high building insurance costs since the Grenfell tragedy. In one case, council leaseholders saw an increase in their costs of more than 500%. People who get the right to manage by setting up resident management organisations have the right to hire and fire managing agents, and to get rid of companies such as FirstPort, but that has not always been plain sailing. I hope that the Minister will address the issue of minimum standards for managing agents when he responds to this debate.
When my constituents try to sell their flats, they often find out the major problems with leasehold: either the asking price has decreased due to the ground rent or service charges or—even worse—banks will not lend on their flats. When one of my constituents inherited a property, they found out that there was only 40 years left on the lease. They can extend the lease, but they have been told that doing so would cost a six-figure sum. They told me that
“the only future I can see is that of a bleak one.”
Another constituent wrote to tell me how, despite paying a record-high service charge, their lift is constantly broken down. At one point, excrement fell from a broken pipe through the lift shaft for a rather long time. I will leave Members to picture that scene.
Another problem was raised by the resident of the converted office block who I quoted earlier. They said that
“we have faced significant distress from ongoing attempts by our building’s freeholder to add two additional floors to our development. While Hounslow Council initially rejected the application due to objections raised by the leaseholders,”
the decision was overturned on appeal. That was on the basis that the project was
“aligning with wider housing targets, but disregarding the wellbeing and concerns of existing leaseholders. This decision now leaves us anticipating extensive disruption, with no realistic recourse or meaningful consultation. Put a little more colloquially, imagine if some UK millionaire had the right to build two additional storeys above your home!”
Many local residents are trapped and unable to sell their homes because of the web that leasehold has left them in. I hope the Minister can address that, as I know that the Government are working on it. Whether it is capping ground rent, reforming service charges or making lease extensions easier and cheaper, we need to fix the blockage for those trying to sell.
There are also problems for those who bought via Help to Buy. I have heard that the single provider that runs the service is still very slow in responding about valuations and about the other hoops that those who used Help to Buy have to go through when selling their property.
Finally, I will move on to the Government reforms. I am proud that it is a Labour Government who have promised to end leasehold. However, I know that it cannot be done overnight. How is the Minister’s Department ensuring that fire safety reforms and leasehold issues go hand in hand? Constituents tell me that fire safety remediation work at developers’ cost via the developers’ building safety pledge is being done only to the mortgage lenders’ B1 standard, rather than the A standards delivered when using the Government’s building safety fund. The former not only pay high higher insurance charges but, if selling, do so at a massive discount, thus creating one of the two-tier splits in leasehold housing.
That touches on another two-tier system that many leaseholders are worried about. The Government rightly plan to end new leasehold ownership, but what will happen to the 5 million existing leaseholders when that change happens? Will they get any retrospective benefit? In London, the gap between house and flat prices is already increasing rapidly, and I fear that we risk leaving many of my constituents with an asset that they cannot sell.
The Government rightly have an ambitious housing target, and I want us to build more affordable homes. I am, however, worried that in London we will see more homes being built that are purely shared ownership, where the tenant-leaseholder part rents and part owns the flat but is liable for 100% of the costs. I am extremely sceptical of that business model as I have seen example after example where shared ownership looks attractive, but the service charge rockets, the rents surge and, when people try to staircase up or even sell, they face many problems. Shared ownership has a role, although I suggest that the name is a tad misleading. Can the Minister outline how the Government will ensure that the new homes being built do not simply create a new generation of trapped leaseholders?
In conclusion, our leasehold system is an antique relic. It has left 5 million people trapped and now they are unsure of their future.
The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Alex Norris)
It is a pleasure to serve with you in the Chair, Dr Allin-Khan. I congratulate my hon. Friend the Member for Brentford and Isleworth (Ruth Cadbury) on securing this debate, on the case that she made and on the passion with which she spoke. This degree of turnout is uncommon for a half-hour debate, which shows the strength of feeling on this matter across the UK. Anybody writing legal letters to my hon. Friend with the idea that it might stop her using her platform to advocate for her constituents is likely to be deeply disappointed. Nevertheless, the debate has reinforced the case for major reform of the leasehold system. My hon. Friend highlighted the broad range of issues faced by leaseholders every day. We are committed as a Government to honouring the commitments made in our manifesto and to doing what is necessary to bring the feudal leasehold system to an end.
I will cover the legislation as it is, how we are going to commence those provisions, legislation that we committed to in the King’s Speech and, hopefully, some other elements at the end. We heard from my hon. Friend and other colleagues that there are unfair and unreasonable practices that require urgent relief. As my hon. Friend said, the Leasehold and Freehold Reform Act 2024, with the cross-party support that it garnered, provides scope for some of that relief. In November, the Minister for Housing and Planning, my hon. Friend the Member for Greenwich and Woolwich (Matthew Pennycook), made a statement on the next steps for leasehold and commonhold reform that set out our intended sequencing for bringing those provisions of the Act into force, including an extensive programme of secondary legislation and consultation.
The parts of the Act that can be implemented quickly have been implemented. A number of provisions relating to rent charge arrears, building safety legal costs and the work of professional insolvency practitioners came into force in July 2024. In October, we commenced further building safety measures. In January, we commenced provisions to remove the two-year qualifying rule in relation to enfranchisement and leasehold extensions. In March, we switched on the right-to-manage provisions, which allow for expanding access, reforming costs and voting rights. Some things in the Act require secondary legislation, and we have been able to turn them on.
Alistair Strathern (Hitchin) (Lab)
I welcome the early pace that the Government have shown on this, but given the urgency of the issues that the leasehold scandal is causing for my constituents and those of many hon. Members, does the Minister agree that we need to bring forward further, more substantive solutions at pace, including answers for existing leaseholders, to ensure that we are doing justice to the urgency of this moment?
Alex Norris
I do. I appreciate that there is frustration about consultation, but some of the challenges within the Act show why it is important that we get this right, and that we have a process that delivers the relief that people are so desperately waiting for. One such consultation that has now concluded is around insurance commissions, which relates to service charges. We are consulting on how to replace that with a fairer and more transparent permitted insurance fee.
This year, we will also start the consultation on relevant measures related to service charges and litigation costs more generally. On new consumer protection provisions, as my hon. Friend the Member for Swindon North (Will Stone) mentioned, for the up to 1.75 million homes on private and mixed-tenure housing estates that are subject to estate charges, we will bring the measures into force as soon as possible once we have the correct model.
Chris McDonald (Stockton North) (Lab)
I thank the Minister for the interest that he has shown in the issues we have in Stockton North at Queensgate, Willow Sage Court and Wynyard. I am pleased to provide the update to the Minister that, following my intervention, in Queensgate we now have 98% of the roads completed. Does he agree that the issue here is a lack of consumer choice? There is a market failure; in local areas such as Stockton, people who want to buy a house have very limited opportunity to do so without entering into one of these agreements.
Alex Norris
I commend my hon. Friend for his work there; it will be of great succour to a number of his constituents. However, he is right, because this is a confluence a failure to build enough houses and a system that has been left to govern itself and act in the ways that my hon. Friend the Member for Brentford and Isleworth set out, leaving people with no choice but to enter into arrangements that lead to them having to live with these long-term consequences. That is why we must build more houses and address those behaviours.
Noah Law (St Austell and Newquay) (Lab)
Does the Minister agree that part of ensuring that we can take more control and offer more choice to residents is allowing residents to take greater control for themselves and, in the process, ensure better value for the services that they need on their estates?
Alex Norris
I absolutely agree, and I will turn to that in a second.
We will also be consulting on the valuation rates used to calculate the cost of enfranchisement premiums, and would welcome hon. and right hon. Members’ views on that. However, there are some deficiencies in the Act that need to be rectified in primary legislation, so we do need to legislate. That gives us the opportunity to bring forward, in line with what hon. Members have said, a new era of commonhold being the default tenure for new flats.
That is why we committed in the King’s Speech to a leasehold and commonhold reform Bill. It is part of our commitment to bring the feudal leasehold system to an end. We have committed to publishing draft legislation on this in the second half of the year. It will make commonhold the default, and it began with the publication of the White Paper in March. Alongside that, in response to the question from my hon. Friend the Member for Brentford and Isleworth about the 5 million leaseholders, we want to make the conversion process easier. Once commonhold comes back into public prominence as a model, I think it will be more popular, but we want it to be easier as well.
We want to reform the existing system by legislating to tackle unregulated and unaffordable ground rents, as was mentioned, to remove the disproportionate and draconian threat of forfeiture, to act to protect leasehold from poor service from managing agents, as many have said, and to enact the remaining Law Commission recommendations on enfranchisement and the right to manage. We will address private estate management in that.
Darren Paffey (Southampton Itchen) (Lab)
I thank the Minister for his work for my constituents. I am sure that he will sympathise with the latest victim to have been in touch with me. He said that with an unsellable and unmortgageable flat, due to the charges that the Minister has mentioned, he is now on the verge of bankruptcy. Does the Minister agree that real change for leaseholders is now beyond urgent, and can he assure us that this year, residents will see not only legislation but real change?
Alex Norris
I absolutely can. My hon. Friend is a doughty campaigner for buildings in Southampton. We are meeting later to discuss one of them. I assure him, and those residents, that we know that they need change and relief now. That is why we have made the changes that we have been able to make so far. We want to get the changes right so that when the relief comes, it sticks, does not get mired and has the right impact. However, we appreciate the urgency with which my hon. Friend speaks.
Several hon. Members have mentioned service charges and managing agents. Service charges have become a particular pinch point, highlighted by the cost of living pressures in recent years. The LAFRA gives us measures to increase transparency and to remove barriers that prevent leaseholders from challenging them, including more standardised information. However, this year, we will consult on the Act’s provisions on service charges and litigation costs so that we can bring them into force as quickly as possible.
We will also consult on reforms to the section 20 major works procedure, which landlords must follow when leaseholders receive big bills for large works, as has been mentioned in the debate. There is much more to do in that area.
On the subject of managing agents, I reassure my hon. Friend the Member for Brentford and Isleworth that we have heard her call about minimum standards.
Tom Hayes (Bournemouth East) (Lab)
My constituents have been defrauded by Initiative Property Management, are suffering at the hands of Scanlans Limited, and have had to deal with the Residential Management Group, representatives of which I am meeting later today. I welcome this Labour Government’s action to hold companies such as those accountable, to challenge unfair charges and hidden fees, and to end leasehold. What is the Government’s message to rogue management companies? I ask so that when I meet the Residential Management Group, I can convey the will of the Government.
Alex Norris
I am keen to say clearly from the Front Bench that we will legislate in this area to close the dark corners that unscrupulous managing agents use to maximise profits. However, they do not have to wait for that in order to do the right thing. They have a duty to residents. There are many great examples of managing agents and landlords doing the right things by their residents. That is good for them, their building and the individuals who live there. They can do that today. I know that my hon. Friend will continue his work until they do so.
That brings me to an important point that was raised both by my hon. Friend the Member for Bournemouth East and by my hon. Friend the Member for Brentford and Isleworth when she opened the debate, about the regulation of managing agents. They play an important role, particularly in multi-occupancy buildings, and that role is likely to increase in importance as commonhold becomes the default tenure. Many provide a good service, but there are too many examples like those mentioned by my hon. Friend the Member for Bournemouth East. I know that all hon. Members here could tell me about similar examples. In 2018, the previous Government committed to regulating the sector. The report came back from Lord Best and they did not respond to it. We are looking at it closely and we will set out our position in due course. However, we have said that as a minimum, we will include mandatory professional qualifications for managing agents, to ensure that they have the skills that they need to carry out their role to a high standard.
Finally, my hon. Friend the Member for Brentford and Isleworth mentioned building safety and fire, which are part of my brief. As a Government, we understand that as part of our remediation acceleration plan, we need to give clarity about what a remediated standard is. I have talked to insurers about it, including about what they are asking for. The cladding safety scandal is being addressed through remediation. That cannot lead to a half a dozen other issues for leaseholders. We are pushing industry in that area, but we have been asked for certainty and we will deliver it.
There has been a lot to consider in this debate, and it could easily go on for another hour, which I think would be important. However, I know that colleagues will not let the matter lie. The subject is frequently on Parliament’s agenda, and rightly so. There are people living under intolerable strain. We are committed, as a Government, to giving them relief as quickly as possible, and in a way that sticks. I will be working on it with my hon. Friend the Member for Brentford and Isleworth and colleagues over the coming weeks and months.
Question put and agreed to.
Animal Welfare in Farming
(3 days, 20 hours ago)
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Adrian Ramsay (Waveney Valley) (Green)
I beg to move,
That this House has considered animal welfare standards in farming.
It is a pleasure to serve under your chairmanship, Mr Vickers. I am grateful for the opportunity to hold this debate to give a voice to the voiceless here in Parliament.
The treatment of farm animals in the UK is a reflection of our values as a society, yet millions of animals endure lives of confinement, pain and neglect. I am proud to have convened this debate on an issue that has been very close to my heart since I was old enough to understand: animal welfare. The debate could not be more timely, with a number of grotesque infringements of legal and accepted norms exposed in recent undercover footage. From the mistreatment of piglets to the rampant impunity found in a few of Scotland’s salmon farms, shocking incidents have rightly caused public outrage.
However, we must be clear: these are sadly not isolated incidents, but a symptom of policy and enforcement failings in our food and farming systems. The way we treat farmed animals is not only the biggest animal protection issue we face here in the UK, but deeply entwined with the climate crisis, nature loss and the viability of our food systems. It speaks to a moral failing, a disconnection from the suffering hidden behind supermarket shelves. Ultimately, we need a food system that recognises the need to reduce demand, raise legal baselines and support better farming systems.
I am pleased to note that today’s debate has been linked to the petition titled “End the use of cages and crates for all farmed animals”, which has now surpassed 100,000 signatures and calls on the UK Government to
“ban all cages for laying hens as soon as possible”
and to extend the ban to all cages and crates “for all farmed animals”, including farrowing crates for sows, individual calf pens and cages for birds. Despite the ban on barren battery cages in 2012, about 10.6 million hens —28% of the UK laying flock—are still confined in so-called enriched cages, which severely restrict natural behaviours such as wing flapping, perching and dust bathing, and contribute to frustration, bone weakness and chronic protection issues.
I congratulate the petition sponsor, Dame Joanna Lumley, and commend her courage and compassion. Her lifelong dedication to humanitarian and environmental causes is matched in this case by her powerful advocacy for animals, who cannot speak for themselves. I also want to recognise the tireless work of the many non-governmental organisations, including Compassion in World Farming, the Humane League, World Animal Protection, FOUR PAWS and others, represented in the Chamber today, that have been campaigning for decades to end the cruelty of cages, crates and inhumane farming systems. Thanks to their persistence, these issues are finally being heard in Parliament with the seriousness they deserve.
However, accountability is woefully lacking. Prosecutions for animal welfare violations in farming are extremely rare. Between 2011 and 2021, only 28 such prosecutions were brought—fewer than three per year, despite tens of thousands of inspections and numerous breaches. The regulatory system is led by the Animal and Plant Health Agency, which is under-resourced and overly reliant on industry self-reporting. We need independent inspections and meaningful penalties for breaches.
Many people believe that labels such as “Red Tractor” or “RSPCA Assured” guarantee good welfare, and consumers want to trust that such schemes deliver in good faither. It is the Government’s job to ensure that those labels mean something. Sadly, far too often that is not the case, as we have seen from many investigations on certified farms that still use crates, cages and other cruel practices.
One such practice that must be urgently reviewed is the use of farrowing crates on pig farms. A recent poll commissioned by Humane World for Animals found that 73% of people in the UK had either never heard of farrowing crates or knew very little about them—a stark reminder of how this suffering is hidden from the public eye. Yet in the UK, approximately 50% of sows are confined in these small metal cages, which prevent them from turning around or expressing natural maternal behaviours. Compassion in World Farming describes farrowing as among the most extreme forms of confinement. Pigs are widely regarded to be highly sentient animals, but they are forced to give birth and nurse their young while virtually immobilised. The European Union has committed to phasing out cages for all farmed animals by 2027, but a recent letter from the National Pig Association suggested another 20 years of suffering to phase them out.
Sir Roger Gale (Herne Bay and Sandwich) (Con)
I am most grateful to the hon. Gentleman for giving way. I have already indicated this to you, Mr Vickers, but I apologise to colleagues now for the fact that I will have to leave before the end of the debate, which is why I will not make a speech—a constituent is coming to see me, and the votes in the House have screwed up the timing.
The hon. Gentleman will not be surprised to learn that I entirely share his view; I guess that probably everyone who will speak in this debate does. One of the supposed advantages of our leaving the European Union was that we would be able to control what came into the country in the form of food. It would be quite wrong, would it not, if, while seeking to drive up animal welfare standards in this country, we disadvantaged our own farmers and at the same time allowed into the country products from other countries where those standards are lower? Therefore, does he agree with me—I am the patron of the Conservative Animal Welfare Foundation—that we need to call upon the Minister to ensure that that does not happen, and that our farmers are not disadvantaged while we improve our standards?
Adrian Ramsay
I thank the right hon. Gentleman for his intervention. I always enjoy hearing his thoughtful remarks and strongly agree with his words today, which show the cross-party concerns on this issue; I will come on to the issue of international trade later on.
On the issue of farrowing crates, I urge the Minister to set out a clear and swift timetable for the banning of farrowing crates; I hope he will address that issue specifically in his remarks at the end of the debate.
We must also speak to the plight of broiler chickens, which are the animals most intensively farmed in the UK today. Around 90% of chickens reared for meat in the UK—nearly 1 billion animals per year—are fast-growing breeds, often referred to as “Frankenchickens”. These birds have been selectively bred to grow up to 400% faster than chickens did in the 1950s, reaching slaughter weight in just 35 to 40 days. To put that in perspective, if a human baby grew at the same rate, they would weigh nearly 300 kg—the size of a fully grown tiger—by the time they were two months old.
Such rapid growth causes immense suffering, including chronic lameness, organ failure, respiratory problems and open burns, as these chickens spend their final days lying in their own waste, often with broken bones, too heavy to stand. That cannot be right and I hope the Minister directly addresses that point as well. There are alternatives—slower-growing breeds, with significantly improved protection outcomes—but without Government leadership, market incentives will continue to favour the cheapest and cruellest options.
On the subject of pigs and chickens, many campaigners will have rejoiced at the rejection of a new mega-farm at Methwold in Norfolk; I know the hon. Member for South West Norfolk (Terry Jermy) was heavily involved in campaigning against it. The sheer scale of the Methwold proposal was staggering—up to 870,000 chickens and 14,000 pigs, confined in barren indoor sheds. Chickens would have been packed into high-intensity units, with barely any space to move, no access to daylight and no environmental enrichment. Animal protection groups raised serious concerns about the dangerously low staff-to-animal ratio, which would have made it almost impossible to monitor suffering or to intervene in time.
Methwold is not an isolated case. There are many applications around the country, including a growing number in my constituency, for new or expanded intensive livestock units. That is deeply worrying for constituents, who are concerned not only about animal protection, but about air and water pollution, odour, and the long-term impact on communities and our countryside. The proposed Cranswick farm at Methwold was rightly opposed by the local council because of its cumulative environmental risks and wider ecological impact.
We should not be pursuing this model of farming, yet World Wide Fund and AGtivist.agency report that the number of US-style megafarms in the UK has increased by 21% in about a decade. That is going in the wrong direction, and I look forward to hearing from the Minister about how the Government will address it.
Tony Vaughan (Folkestone and Hythe) (Lab)
Does the hon. Member agree that, through the Government’s programme of planning reform, we must not create any loopholes that could be exploited to facilitate the destructive, large-scale farming operations that he refers to?
Adrian Ramsay
I strongly agree. As we all closely scrutinise the Planning and Infrastructure Bill, we need to look carefully at whether loopholes are creeping in that will allow horrific developments such as more mega-farms to happen at a greater scale.
Mega-farms are bad for animals, bad for nature and bad for people, and not at all necessary for food security—that is a key point. The UK already meets 100% of its recommended protein needs, so these mega-farms are surely being developed with exports in mind. UK pigmeat exports have grown by 4% in the past year, driven by increased shipments to China. Methwold was a line in the sand, a signal that local communities will not accept industrial so-called farming that sacrifices everything for profit. To stop its unchecked proliferation, we need the Government to put their own line in the sand and say, clearly, that this must stop.
To pick up on the point made by the right hon. Member for Herne Bay and Sandwich (Sir Roger Gale), as we debate domestic welfare standards, we must also remain vigilant about how international trade could undermine them. Since leaving the European Union, the UK’s rating in the World Animal Protection index has been downgraded, reflecting growing concern that our historical leadership on animal protection is under threat. In upcoming trade deals with the US, India and the Gulf, there is a real risk that our markets will be opened to products produced in systems that would be illegal in the UK.
Ann Davies (Caerfyrddin) (PC)
Does the hon. Gentleman agree that the Government need to undertake a strategic review of UK border controls to ensure that UK food security is protected from the introduction of diseases such as foot and mouth, as we have had on the continent, or any other exotic disease?
Adrian Ramsay
I agree with the hon. Lady, who speaks with first-hand experience of the farming sector.
Around 6 million breeding sows in the US are confined in gestation crates, which are banned in the UK. More than 70% of laying hens are still kept in barren battery cages. US beef can be produced using growth-promoting hormones, and antibiotic use in livestock is up to five times higher than in the UK. Such practices not only cause immense suffering, but undermine our farmers and our food safety standards. That is why we must commit to banning imports produced to standards that would not comply with those in the UK. We must also defend the hard-won ban on live animal exports, a recent step forward that must not be weakened under trade pressure. Our values do not end at our borders, and neither should the protections that we afford to animals.
Let us not forget that cruelty is not limited to land-based farming. Investigations by Compassion in World Farming and others have exposed horrific conditions in offshore salmon farms. Our high-end salmon from romanticised Scottish fish farms often has deeply unpalatable origins: salmon are cramped into cages where they suffer from lice, disease and injury, mortality rates are shockingly high and immense pollution pours into once-pristine marine environments, threatening wild fish populations. The farms are intensive by design, prioritising scale and profit over animal protection and environmental sustainability. We need a moratorium on new intensive aquaculture permits and a rapid transition to higher-protection, lower-impact systems. I hope the Minister will address that point in his response.
That brings me to the last substantive area that I want to discuss before concluding: the less-visible consequence of industrial farming. Due to cramped and unhygienic conditions, disease outbreaks are controlled with routine antibiotics, but evidence shows that that fuels antimicrobial resistance in consumers and presents a dire global health risk. The World Health Organisation has warned that antibiotic resistance could become a bigger killer than cancer by 2050, and farming practices are fuelling that trajectory.
Animal protection in farming is not a niche concern, but a public health issue, a climate issue, a biodiversity issue and a moral issue. Polling consistently shows strong public support for ending cages, crates and other cruel practices, which are unnecessarily barbaric, tragically wasteful and entirely avoidable. The public are ahead of the Government on this issue: more than 80% support a ban on cages for laying hens. The number of Members here shows the force of support for legislation to catch up.
This debate is about system change, not demonising farmers. We must bring farmers with us through clarity, fair incentives and certainty about the direction of travel. They should be supported to make adjustments on their farms, which is another reason why I strongly defend the preservation of the environmental land management schemes’ animal protection grants, and I urge the Department for Environment, Food and Rural Affairs to commit to that being a core part of the sustainable farming incentive, not an add-on. The Welsh Government’s animal health and welfare framework sets out the admirably worthy ambition that all animals should have a good life, even if a short one.
As we look ahead, I urge the Minister to recognise that real leadership on animal protection requires action on multiple fronts, including banning farrowing crates and cages, mandating method of production labelling to inform consumers, and strengthening enforcement through higher penalties, independent inspections and proper resourcing. It means defending our domestic standards in international trade and ensuring that imports produced using sow stalls, barren battery cages or hormone-treated beef are not waved through in deals that betray British values. Above all, we must confront the fact that more than 70% of farmed animals in the UK are reared in intensive conditions. That is not sustainable, ethical or inevitable.
The Government should set procurement targets to reduce meat from industrial systems, promote more plant-rich diets and reward farmers who are working with, not against, nature. In aquaculture too, we need environmental impact assessments, legal protection at slaughter, mandatory CCTV and protection standards equal to those for land animals. Those are not radical demands; they are practical, evidence-based steps towards a kinder, fairer and more resilient system that reflects the compassion of the public, supports responsible farmers and enhances the UK’s position as a global leader in animal protection.
Martin Vickers (in the Chair)
I remind Members that they should bob if they wish to be called in the debate, which, due to the delayed start, will now conclude at 4.31 pm, subject to there being no further Divisions. We will start with a four-minute time limit on speeches, which may have to drop if there are many interventions.
Sam Carling (North West Cambridgeshire) (Lab)
It is a pleasure to serve under your chairmanship, Mr Vickers. I want to focus on import standards, which the hon. Member for Waveney Valley (Adrian Ramsay) began to talk about.
Farmers in my constituency of North West Cambridgeshire play by the rules and abide by the regulations. For example, since 1999 they have stopped using sow stalls because UK law rightly declared those cramped conditions cruel. But every day, when my constituents go to local supermarkets, the shelves are stocked with bacon from overseas farms that still use those banned methods. I think everyone agrees that that is unfair both for animal welfare and for our farmers.
The recent weeks have been historic for British trade. The Government secured groundbreaking agreements that will boost our economy while, crucially, remaining firm on our higher food standards. When we negotiated with the US, we held the line on hormone-treated beef, delivering on our manifesto promise to protect farmers and consumers alike. This is Labour in action, proving we can expand trade without compromising our values.
We now need to address the inconsistency still visible on supermarket shelves across Britain. Nearly 50% of pork imports come from countries where pregnant pigs remain confined in narrow sow stalls, unable even to turn around. Lamb imports from Australia, where farmers practise mulesing—cutting skin from live sheep without pain relief—have surged following the Conservatives’ flawed trade deal. Such practices were banned here because they do not align with British values or public opinion.
British farmers follow our welfare regulations—no battery cages, no sow stalls and humane transport conditions—yet we continue to allow imports that undermine those standards. Instead of preventing cruelty to farmed animals, the effect of many of our laws is to simply offshore that cruelty to other countries, sometimes those with standards far lower than our own. Imports should meet our domestic animal welfare standards. If certain practices are too cruel for our farms, they should also be too cruel for our borders.
We already have a precedent for this approach—for example, current UK legislation requires that all meat imports comply with our slaughter standards. We now need to extend that principle to how animals are kept throughout their lives, not just how they are killed. That would mean legislation requiring that imported animal products meet UK standards on key welfare issues, which means no eggs from barren battery cages, no pork from farms using sow stalls and no lamb from farms practising live lamb cutting.
The European Union is already moving in that direction, with proposals to end caged farming by 2027 and extend that rule to imports. Aligning our policies would improve our trade relationship with our largest partner, further benefiting British farmers. That change would directly improve animal welfare, aligning both with our values and with public demands. For our farmers, it would right a wrong, preventing grossly unfair competition from low-welfare imports and allowing British producers to uphold higher standards while remaining competitive. That would also complement the £5 billion support package we have already delivered in that space.
That is also what the British public want: recent polling has shown that around 84% of people, including a significant backing among rural communities, support applying our animal welfare standards to all imports. The policy is not controversial at all, and it is fair for farmers, animals and people. It builds on the trade successes that we have already achieved while closing a loophole that undermines our farmers and our values.
Alongside our trade successes, it is time to show that our approach to trade is both principled and practical. We can grow our economy while standing firm on the standards that matter to British people. I hope that the Government will consider some legislative interventions on this issue.
Jim Shannon (Strangford) (DUP)
It is a pleasure to serve under your chairmanship, Mr Vickers. I commend the hon. Member for Waveney Valley (Adrian Ramsay) for setting the scene so well. He mentioned some graphic things that get under many people’s skin. I declare an interest as a member of the Ulster Farmers’ Union, although we do not farm the land any more—the neighbours do that for us.
To illustrate the matter, I will say what my neighbours do in relation to it. The people I know who farm close to me—and many others too; it is not exclusive to where I live—love their animals. They have a commitment to their beef and dairy cattle and to their sheep. Last year, or perhaps the year before, they got a robotic dairy. For those who do not know what that means—I did not really know until I visited—the cattle are much calmer and they have access to food every time they want it.
Usually when you walk through a field of cattle, they scatter in all directions. I walked into those cattle along with the boys who own the farm and the cattle did not even budge out of the road. There was music going in the background as well—I cannot remember whether it was Tchaikovsky, Elvis Presley or whatever—and the cattle seemed incredibly calm. Was that their choice of music? I am not sure that they had any input into that, but they were the best looked-after cattle that I have seen for some time. The farmers that I see strive hard to do it right. I know the hon. Gentleman recognises that, but others do not, so it is important to say it.
I want to comment on the dreadful Windsor framework. Issues arose recently and the Ulster Farmers’ Union expressed serious concerns about the implications of the recently announced UK-US trade agreement. In other words: we keep the standards and do things right, but then they are going to produce some stuff in the USA where they do not have the same standards that we have. There will be a serious impact on our livestock and high standards. The Ulster Farmers’ Union president, William Irvine, said
“This is not a traditional free trade agreement and we recognise that it is an early-stage framework. But the fact remains—UK agriculture, including sensitive sectors like beef and cereals, is again being asked to shoulder the burden of securing trade wins for steel, aluminium and cars. That sets a worrying precedent.”
It also sets a worrying precedent for our standards, which I am very concerned about, but unfortunately I do not have the time that it needs to go into it.
US beef is produced on a scale and in a system that gives it a cost advantage. If the UK Government open the door further, we must be ready to protect our standards to ensure a level playing field. On the bioethanol element of the deal, Mr Irvine said that the Ulster Farmers’ Union will be seeking urgent clarity from the Government on the expected impact on Northern Ireland’s arable sector. In a conversation before the debate started, my hon. Friend the Member for Upper Bann (Carla Lockhart) referred to bovine TB.
Carla Lockhart (Upper Bann) (DUP)
Bovine TB across the UK is not just a farming issue, but an animal welfare one, and is causing a financial crisis. Thousands of healthy cattle are being culled and wildlife remains trapped in a vicious cycle of infection. The cost to the public purse in Northern Ireland is now sitting at £60 million a year. In England, there has been a science-led approach. Does my hon. Friend agree that the Northern Ireland Agriculture Minister needs to engage with England and do exactly as has been done here, with a wildlife intervention project that culls badgers, so that we improve animal health and protect our wildlife?
Jim Shannon
My hon. Friend is wise in her intervention. In fairness to the Minister, he regularly visits Northern Ireland. We have had been fortunate to have him twice at Colin McKee’s in my constituency, because he loves the scones and the coffee. He also loves seeing how a farmer can look after his animals better than others. My hon. Friend is right to highlight the issue of bovine TB, and perhaps the Minister could tell us if he has had engagements, correspondence and discussions with the relevant Minister in Northern Ireland.
The Ulster Farmers’ Union is calling for the UK Government to provide greater transparency about how sensitive sectors will be protected in future. It is important to get that right. Northern Ireland farmers are proud to produce food to world-leading high standards of animal welfare, traceability and environmental care, but those standards must be reflected in trade deals. We should not be held to an example of European overreach. The effect of the US trade deal may be another example of how the special circumstances in Northern Ireland are especially difficult rather than especially beneficial.
There must be standards in place for animal welfare, and we must remove the EU overreach and have UK-wide standards. I ask the Minister to take that back to the Cabinet. We must all do better to support farmers in the same way throughout the United Kingdom of Great Britain and Northern Ireland. I believe the Minister does that and I look forward to his response.
Josh Newbury (Cannock Chase) (Lab)
It is a pleasure to serve under your chairmanship, Mr Vickers. I thank the hon. Member for Waveney Valley (Adrian Ramsay) for enabling us to speak on this important topic.
I will start by sharing how valuable it was to spend a day of last week’s recess at Staffordshire’s county show. As always, I came away full of admiration for our farming community. I am a little biased, but Staffordshire is a shining example of some of the best of British farming, and everybody at the show seemed to agree. That is not just in terms of productivity and innovation but in the deep care many of our farmers have for animal welfare.
That brings me to the complex and often uncomfortable balance we are trying to strike in this debate between raising animal welfare standards and the environmental, financial and logistical realities of making that happen. When we talk about moving away from practices such as caged systems—a move that, for the record, I absolutely support—we are also talking about the need for more barn space, more land use and more infrastructure, all of which mean higher running costs for farmers and sometimes greater greenhouse gas emissions.
To be clear, those are not reasons for rejecting higher animal welfare standards, but they are reasons to approach the issue with farmers in mind. That must be our starting point, because farmers are not charities and, more than ever, they have to look at the bottom line, which all too often is dwindling. Let us be frank: supermarkets will always demand higher welfare, but they are not always willing to pay more for it. That is disingenuous to consumers and squeezes producers even further, pitting welfare against farm viability.
An area where we could make a real difference is animal welfare labelling, which is being looked at by the Environment, Food and Rural Affairs Committee, of which I am a member; I am glad that the Committee’s Chair is present. For the average shopper, labelling is a minefield. Information on nutrition and the country of origin has been simplified in the past decade, but in the animal welfare space we have statutory minimum standards and the “Red Tractor”, “RSPCA Assured”, EU organic and Soil Association organic labels, all representing different standards.
Consumers need to understand what labelling means in practical terms and how to interpret it when they shop. That will not be easy, but I believe that is a challenge that we can and should take on. However, in doing so, we must make sure producers have a say, alongside consumers and animal welfare organisations, so that they can realise the benefits of clearer labelling too. The lack of coherent and clear information on welfare on the shelf is a concern for farmers who are producing to higher standards because they do not have a clear way of differentiating their products for consumers. They therefore do not reap the rewards from the quality of their goods that should incentivise higher welfare standards. Research indicates that the current systems of farm assurance, regardless of the label, are not working as best as they could for farmers, consumers and, most importantly, animals.
Sir Roger Gale
I agree with the hon. Gentleman entirely. Does he also agree that there is a significant error in not properly labelling animals subjected to non-stunned slaughter?
Josh Newbury
I absolutely agree with the right hon. Gentleman. I think that that is a perfect example of where stronger, more consistent animal welfare labelling would give consumers that kind of information. In other countries, such as Germany, systems take that into account, and consumers should have access to that information.
On farm assurance, for example, the campaign group Animal Rising has uncovered failings in “RSPCA Assured” farms and abattoirs.
We also have to ensure that fairness for the farming sector is paramount. I raised that in Select Committee sessions and it has been raised today, but it bears repeating: we cannot ask our farmers to invest in higher standards and then leave them exposed to undercutting by imports. We are all in favour of better welfare. In fact, a 2022 poll revealed that 71% of the British public want the Government to pass more laws to improve animal welfare, but we cannot hold our farmers to a gold standard while turning a blind eye to imports that are produced to far lower standards. Trade deals without adequate safeguards will negatively impact the UK’s animal welfare standards for decades to come, undermining our farmers and the hard-won animal welfare improvements that we need to build on. That risks putting more farmers out of business, jeopardising our food security and offshoring animal cruelty.
To put it simply, if it is too cruel to produce here, it should be too cruel to import. If it is not good enough for our farms, it is not good enough for our shelves. Ultimately, we need to get the balance right by supporting our farmers to raise standards, making sure that consumers understand what they are buying and ensuring that the whole system—domestic or international—reflects our values as a nation of animal lovers.
Sadik Al-Hassan (North Somerset) (Lab)
It is a pleasure to serve under your chairship, Mr Vickers.
Britain has some of the highest animal welfare standards in the world. We should take real pride in that, but we must also protect it, both for the sake of the animals in our care and the farmers who work hard to uphold those standards every single day. Pride alone is not enough. If we want consumers, both at home and abroad, to understand and support the standards we have set, we must clearly communicate them. That is why I would strongly support the introduction of a standardised mandatory animal welfare labelling scheme on meat, eggs and dairy—not voluntary but mandatory. Such a scheme would allow shoppers to make informed choices about the products they buy and to support British farmers, who uphold some of the highest standards in the world. Data from the Labour Animal Welfare Society suggests such a scheme could boost profits for British farmers by over £40 million per year, and improve the welfare of up to 110 million chickens, 700,000 hens and half a million pigs annually. That is not a marginal improvement; it is transformational.
While we rightly lift our own standards, we must ensure farmers are not undercut by imports produced in inhumane conditions abroad that would be illegal here in the UK. Our farmers are proud to meet high standards, but they should not be punished for having to compete against cheap imports raised in low-cost, low-welfare conditions abroad. Phasing out low-welfare imports within five years and requiring all imported food to meet our domestic standards would level the playing field for British farmers and end the silent support of animal cruelty abroad, which I know many of our constituents have contacted us all about over the years. Humane slaughter rules already apply to meat imports—as we have heard—so why should welfare standards afforded to animals during their time on the farm be any different? That is not protectionism; it is moral leadership. As one of the world’s largest economies, and with a particularly large amount of our food imported, we must use our influence and privileged position to encourage others to rise to our standards.
Across the North sea, Denmark has already launched an animal welfare labelling scheme, and we have its eight years of experience to draw on. Under the slogan, “A hold on your heart”, that welfare labelling scheme has seen knowledge of animal welfare conditions skyrocket among the populace and has led to a profound change in shopping habits for the better, for consumers and animals alike.
Animal welfare is not a niche concern. According to a poll conducted by the Agriculture and Horticulture Development Board last year, 84% of shoppers think animal welfare is important, yet they are currently given little information about the standards involved in the products they buy.
Labour has pledged to boost animal welfare in a generation. Let us make good on that promise while shoring up the competitiveness of our struggling farmers. By introducing animal welfare labelling, we can reward those who work hard to treat animals well. We can empower consumers to reject low-welfare imports and encourage countries that wish to access our large and lucrative market to rise to our standards—a win for all.
Irene Campbell (North Ayrshire and Arran) (Lab)
It is a pleasure to serve under your chairmanship, Mr Vickers.
Much of what I was going to say has already been raised, so I will make just a few brief points, because I care deeply about this subject. First, I should declare an interest: right after the debate, I am hosting an event in the Jubilee Room with Humane World for Animals about ending the use of cruel mother pig cages. At the event, there will be a life-sized replica of a farrowing crate to show just how confined mother pigs are when they are kept in them for weeks and weeks. I encourage hon. Members to come along.
As we have heard, every year in the UK 200,000 sows are confined in farrowing crates. Those sows can spend almost a quarter of their adult lives in crates where they do not even have enough room to turn around. That is unacceptable. The vast majority of Scots care as deeply about this issue as I do. When polled earlier this year, 84% of Scots said that farrowing crates should be banned, either immediately or at least within the next five years. I know that the Government are looking carefully at the issue, alongside ending the use of enriched cages for hens, and I very much welcome that. It is important to be aware that around 8 million laying hens live their lives in tiny and cramped cages, in what must be a somewhat miserable existence followed by, ultimately, a sad death.
I think most of us here would agree that Britain is a nation of animal lovers, and that we should be proud of the many high animal welfare standards that we currently have. In fact, 95% of the UK’s 88 trading partners have lower animal welfare standards than our own domestic requirements, and we have heard quite a lot about that already. For example, over half of UK pork comes from countries that have sow stalls, which, as we have heard, have been banned in the UK since 1999. UK sheep production is at a 39-year low while Australian imports surge; we heard about that earlier.
Phasing out low animal welfare imports that do not meet our own animal welfare standards is urgently required. Additionally, mandatory animal welfare labelling —for example, of eggs, chicken and pork—could help consumers make more informed choices. We have heard about that already. DEFRA proposed a mandatory method of production welfare label in a public consultation that closed in March 2024, and I think the discussion so far today suggests people would like that to go ahead.
Another area that has not been raised yet is that of male chicks. In the UK, between 40 million and 45 million male chicks each year are culled in a process called “hatch and dispatch,” as they cannot lay eggs or be grown for meat. Sometimes chicks are crushed with rollers or minced with blades while they are fully conscious. However, in France and Germany, this practice is banned. In-ovo sexing technology allows the sex of the egg to be identified before the chick can feel pain and it is estimated that implementing this technology in the UK would add less than the cost of 1p per egg. That is definitely worth considering; there is a whole lot to consider today.
Finally, I would like to thank the hon. Member for Waveney Valley (Adrian Ramsay) for introducing the debate. I look forward to hearing the Minister’s comments on all the points and ideas that have been raised so far.
David Chadwick (Brecon, Radnor and Cwm Tawe) (LD)
It is a pleasure to serve under your chairship, Mr Vickers. I am grateful to the hon. Member for Waveney Valley (Adrian Ramsay) for securing this important debate. The Welsh Liberal Democrats have always championed the highest standards in animal welfare, not just because it is the right thing to do but because it reflects the compassion and integrity of our society.
Our Welsh farmers take pride in producing food to some of the highest welfare standards in the world. However, that proud tradition is under threat—not from our own farmers but from the last Conservative Government’s careless approach to trade. Take the UK-Australia free trade agreement: that deal, which was rushed through, without proper scrutiny, allowed tariff-free imports of beef and lamb from Australia, despite serious concerns about the farming practices there. In Australia, about 40% of beef cattle are reared in intensive feed lots in barren, crowded environments, where animals are fattened on grain, not pasture. Those conditions would be unthinkable here in the UK. Even worse, growth-promoting hormones are still used in Australian beef production, a practice banned in the UK for decades. Meanwhile, the painful mutilation of sheep through mulesing remains common; again, that is something we rightly prohibit here. Let us not also forget that Australian hens can still be confined to barren battery cages, which are long banned in the UK and across the EU.
Those double standards are indefensible. Our farmers are being undercut by products that would be illegal to produce here. That is not just unfair; it is a betrayal of Welsh farmers, of animal welfare and of the trust of the British public. Polling consistently shows that the British people support stronger laws on animal welfare and oppose low-welfare imports. In Wales, where our agricultural communities are close-knit and values-driven, the issue matters deeply. That is why the UK Government must act to ensure that if it is too cruel to produce in the UK, it is too cruel to import.
We are calling on the UK Government to ban cages and crates for farmed animals, to require all imported meat, eggs and dairy to meet UK welfare standards, and to introduce clear, mandatory labelling so that consumers can make informed, ethical choices. All new trade deals should be put to a vote in Parliament, and we should ensure that they are all subject to impact assessments across every nation and region of the UK. We have a moral duty to protect the welfare of our animals, and to ensure that our farmers are rewarded, not punished, for doing the right thing.
Terry Jermy (South West Norfolk) (Lab)
It is a pleasure to serve under your chairmanship, Mr Vickers. I thank the hon. Member for Waveney Valley (Adrian Ramsay), my constituency neighbour, for securing this much-needed and timely debate. It is one that I called for in the Chamber several weeks ago, so I am pleased to be here today.
There was recently outrage and shock about footage from a Lincolnshire farm, where the abuse of animals was caught on film. I was glad that supermarkets took a stand, suspended their trade with that farm and confirmed that they regard such abuse as unacceptable. However, it is particularly saddening and concerning that that was not a one-off case or an outlier. Sadly, we see such animal abuse time and again at various locations across the country, including in my own county of Norfolk.
It has been made clear today that animal welfare comes in various forms, from imports to labelling and intensive farming, a subject I am passionate about. It is clear that we need to rethink animal welfare policy, and intensive farming is a particular concern for me. Freedom of information requests that I have submitted to the Environment Agency have shown that in the past decade, industrial farms have breached regulations more than 7,000 times. That is 7,000 breaches of regulations in less than a decade. It is clear that the whole regulatory system is currently completely toothless. For example, one farm operated by a large corporation has been found to be stocking more than 400,000 animals, instead of the permitted 357,000. Evidence suggests that regulatory nonconformity is the norm, yet regulators are taking enforcement action only in a tiny minority of cases. Rather than feeling the pressure to comply, intensive livestock companies are being invited to wield significant influence over public policy.
Intensive farming practices are on the rise. Between 2016 and 2023, there was a 20% increase in the number of intensive livestock units in the UK. Now, about 80% of broiler chickens are reared in fully housed, intensive systems. A process of consolidation and industrialisation of farming has seen more than 100,000 livestock and poultry farms go out of business between 1990 and 2016. It is no wonder that so many small farms in my constituency are nervous about speaking out against the big boys.
The Minister might be pleased to know that I did not intend to mention the Methwold mega-farm today. However, seeing as it was mentioned by the hon. Member for Waveney Valley, I will bring it up. I am delighted that it was rejected due to what was very much a joint effort among local residents, charities and elected representatives, from councillors to myself, as an MP. It is true that it was rejected in part over animal welfare concerns, but importantly, the effect on the environment and climate played a role as well. In Norfolk, the environment is crucial to our economy. It is suggested that if I am against intensive farming I am anti-growth, but tourism is worth more to us in Norfolk than it is in Cornwall; it is crucial to local jobs. Intensive farming impacts jobs in our county—
Sir John Hayes (in the Chair)
As a result of the Division in the House, the debate’s revised end time is 4.44 pm. I will call the shadow Minister and the Minister to wind up at 4.06 pm. I know that we have two speakers to come and that Terry Jermy is coming to the conclusion of his speech.
Terry Jermy
Unfortunately, Sir John, you have missed the first 80% of my speech. I was coming on to how crucial the environment in Norfolk is to the local economy and the threat that intensive livestock farming poses to the environment. It is also a threat from a disease and an animal welfare point of view.
John Whitby (Derbyshire Dales) (Lab)
On the subject of disease, the 2023 national risk register states that the emergence of antimicrobial resistance and the presence of exotic diseases, such as foot and mouth disease, represent a threat to our food sustainability. Will my hon. Friend join me in welcoming calls from the National Farmers Union for the Treasury to fund a cross-Government plan to tackle such diseases?
Terry Jermy
I absolutely support that proposal. Intensive farming presents a significant risk from a disease point of view, so we need to heed such calls.
I will quickly conclude. Next year will be the 20th anniversary of the Animal Welfare Act 2006, introduced under the previous Labour Government. Last year, I was very proud to stand on a manifesto to further strengthen animal welfare legislation. As we have heard today, frankly, that cannot happen quickly enough.
In my constituency, farming is our lifeblood, as is the environment, and therefore we must have a serious conversation about what sort of farming we want in future. I sincerely hope that it is one that protects our communities, our agriculture and our nature, while also furthering our animal welfare standards.
Olivia Blake (Sheffield Hallam) (Lab)
It is a pleasure to serve under your chairship, Sir John, and I thank the hon. Member for Waveney Valley (Adrian Ramsay) for securing this debate.
Around one third of my constituency is agricultural land, so it is no surprise that animal welfare in farming is a big issue for many of my constituents, as it is for me. As the Minister and the Shadow Minister, the hon. Member for Epping Forest (Dr Hudson), no doubt remember, we had long debates in Committee in the previous Parliament on the Animal Welfare (Kept Animals) Bill. Although that Bill had its faults, it would have been a step in the right direction. Sadly, it was unceremoniously dropped by the last Government after the Committee stage, which stalled progress on these issues.
I know that the Minister has picked up on these issues since being re-elected, and I was proud to stand on a Labour manifesto that made clear commitments to improve animal welfare. These are not fringe concerns; they reflect the values of people across the country who want to see animals treated with decency and respect. Animal welfare must be at the heart of farming, not just because it is the right thing to do, but because people deserve to know where their food is produced and that it is produced to standards that they can trust.
We have photographs on cigarette packets that show the harms of smoking. If we had similar images that showed the harms caused to animals by the ways in which they are kept, I imagine that the sales of the products we are discussing today would fall through the floor. The reality is that many animals are still kept in conditions that fall far short of the general public’s expectations. Hens are confined to cages that, as we have heard, are barely larger than an A4 piece of paper, and pigs are kept in farrowing crates and are unable even to turn around. These are not isolated cases; they are widespread practices that cause real suffering.
Animals kept in such systems experience chronic stress, frustration and pain. That is not just outdated; it is indefensible. The science is clear and the public are clear that we must legislate to ban cages in farming, and without delay if possible. We also need to support farmers through that transition. Many farmers are already doing the right thing, often at financial cost. They deserve a system that rewards higher welfare standards, not one that pits them against cheaper, lower standard imports. I know the Minister will agree with that.
This issue is not about choosing between farming and welfare; it is about recognising that the two must go hand in hand. A fair and sustainable food system depends on both.
Alex Mayer (Dunstable and Leighton Buzzard) (Lab)
It is a pleasure to serve under your chairmanship, Sir John, and I congratulate the hon. Member for Waveney Valley (Adrian Ramsay) on securing this debate.
I last spoke about eggs in a debate just before Easter, but eggs are not just for Easter; they are for all year round. As other hon. Members have already said, we are still in a situation where the space that many hens have to live in is the same size as a piece of A4 paper. That is just not good enough. Such cages are known as “enriched cages”. The marketing people really earned their stripes that day, because I think that if we started calling them “confinement cages” we would go a long way towards stamping out this horrible practice.
I am very keen to hear from the Minister about the recent EU reset, because some of our European friends and neighbours already have better standards than us; indeed, some of them, for example Germany, are thinking of introducing even higher standards. Does that mean that there is now a real need for us to catch up? I would be keen to hear the Minister’s views.
I am also concerned about the welfare of lobsters—the first time that lobsters have got a mention today. I did a bit of googling last night and found out that it is possible to buy fresh lobsters on the open market. The advertisement that I saw said:
“Upon receipt of delivery, store your live lobsters in the fridge until ready to cook. Lobsters can be boiled, poached, grilled or barbecued.”
Imagine that referred to any other kind of animal. Imagine saying, “A live chicken or lamb will arrive; put it in the garden and then, as an amateur, smash its skull in and boil it alive.” Is that the kind of situation that we want to see, in a country that talks about being a nation of animal lovers? I would be keen to hear from the Minister whether that is something that he wants to get his claws into.
Sir John Hayes (in the Chair)
We are moving ahead with alacrity, and I am grateful to all hon. Members for allowing us to do so. Without more ado, I call Sarah Dyke, the Liberal Democrat spokesman.
Sarah Dyke (Glastonbury and Somerton) (LD)
It is a pleasure to serve with you in the Chair today, Sir John. I congratulate the hon. Member for Waveney Valley (Adrian Ramsay) on securing this important debate. It is also a pleasure to speak on behalf of the Liberal Democrats.
Glastonbury and Somerton is synonymous with farming. I have spoken many times about how Thomas Hardy described Blackmore vale, where I call home, as the “Vale of Little Dairies”. My connection with farming runs deep, so I know that farmers have a deep and complex bond with the animals they rear, shaped by the daily care, emotional attachment and professional responsibilities they have towards them. Farmers form concerned attachment for individual animals and feel empathy, even though the animals are part of their livelihood.
Hundreds of farming businesses in Glastonbury and Somerton take great pride in the high animal welfare standards they implement. Take the Slow Farming Company near Castle Cary, for example: it produces beef, pork and eggs to the highest welfare standards, as certified by A Greener World, and recognises the value of doing so not just for the animals that are reared, but for human health. This weekend, the Slow Farming Company is hosting an open farm weekend to celebrate Open Farm Sunday and showcase the concept of slow farming and slow food.
The Liberal Democrats are committed to improving standards of animal health and welfare in agriculture. We know not only that it is important to support British farmers to implement such measures, but that we must not punish farmers by importing animal products with low welfare standards from abroad. Given the Government’s flurry of recent trade deals, this is an opportune time to remember why we must continue to keep high animal welfare standards at home and must not allow the Government to offshore poor animal welfare practices.
The new report from Animal Policy International, Compassion in World Farming and the Royal Society for the Prevention of Cruelty to Animals notes that 95% of potential UK trading partners have lower animal welfare standards. The Liberal Democrats are aware of the threat that new trade deals could pose, and there is the ongoing risk that the deals will further undermine British farmers by allowing in animal products that simply would not be produced in the UK, such as foie gras and food produced with antibiotic growth promoters. We are clear that we must not allow that to happen. The Liberal Democrats want to ensure that all imported food meets UK standards for health and welfare, while introducing robust food labelling that is simple to understand. That is paramount, because maintaining high food standards supports environmental sustainability and public trust in farming practices.
Last month, the Government announced a trade deal with the US. The deal included £180 million-worth of beef, and UK tariff exemptions on US beef expanded from historical levels of 1,000 tonnes to 13,000 tonnes. At the time, many right hon. and hon. Members demanded reassurance that British farmers would not be undercut by the deal. Although the sanitary and phytosanitary aspect of the deal is in line with UK standards, animal welfare concerns remain because US beef is produced to lower standards.
Last week, I attended the Royal Bath and West show and spent a morning with the National Farmers Union, speaking to local farmers. We were all horrified to learn that Asda is now stocking Uruguayan beef under labelling that could be described, at best, as misleading. I am not suggesting that the meat is of a lower standard, but it calls into question the wonderful work that Asda is doing on sustainability in its beef supply chain and in supporting British farmers, including the work it does to make UK suppliers jump through various sustainability hoops.
World Animal Protection has given the US an animal protection index rating of E for protecting animals used in farming, highlighting the stark contrast between the UK and the US. Therefore, as further details of the agreement are finalised, it is critical that the Government ensure that US—or any—beef entering the UK has been produced not only to equivalent food safety standards, but to animal welfare standards. Not to do so would be a betrayal of British farmers and the British public. Some 84% of the British public support restricting or banning low-welfare imports that do not meet UK standards. As a country, we are proud to support our farmers, who produce food for our tables to the highest animal welfare standards in the world, so we must make sure we do not kowtow to foreign Governments who want us to open the floodgates and fill our supermarket shelves with low-welfare animal produce. We must not stand by and expect our farmers to compete on an unlevel playing field. The Liberal Democrats are clear: we must instead lead the way to raise standards around the world, while continuing to raise them at home.
The previous Conservative Government signed trade deals that undercut our farmers. The CPTPP agreement—the comprehensive and progressive agreement for trans-Pacific partnership—could allow Mexican farmers who use battery-cage production to export to Britain large numbers of eggs produced in a manner that would be illegal in the UK. A former Environment Secretary criticised the free trade agreement with Australia that he helped to secure, stating that the deal was not good for the UK and
“gave away far too much”.—[Official Report, 14 November 2022; Vol. 722, c. 424.]
We must not let that happen again.
The recent EU-UK agreement is a positive step in beginning to reverse the damage caused by the Conservatives’ deal with Europe and so was welcomed by the Liberal Democrats. We are committed to deepening our trading relationship with the EU and called for a comprehensive veterinary and sanitary and phytosanitary agreement. However, half the pork sold in the UK comes from countries that permit sow stalls—a practice that we banned, as we have heard, in 1999. Most comes from EU countries, such as the Netherlands, Germany, Spain and Poland. The requirement in the common understanding that exceptions to dynamic alignment must not
“negatively affect European Union animals and goods”
could prevent welfare-based restrictions on those imports. The fear is that that provision could systematically prevent the UK from applying its higher standards across the market. The UK must preserve its sovereign right to maintain and enhance domestic animal welfare standards for all products entering the market. The Government’s trade strategy is expected soon, and it is clear that that must ensure that animal welfare standards are not undermined by the Government’s approach to trade.
The Liberal Democrats also recognise the need to work on standards domestically. That is why we want to introduce a new comprehensive animal welfare Bill that would ensure the highest standards possible. In the UK, 11 million egg-laying hens, representing 18% of the egg-laying industry, are kept in “enriched” cages; and, although we banned sow stalls in 1999, farrowing crates are still legal and used for up to 60% of sows in the UK. Therefore we still have further to go if we are to continue proudly leading the world in animal welfare.
The Liberal Democrats have urged the Government to launch a consultation on the use of farrowing crates for pigs, and to end the use of cages for farm animals. However, I worry that some recent policy decisions might limit farmers’ ability to make progress. DEFRA transferred support for farmers looking to convert to organic out of the countryside stewardship scheme and into the sustainable farming incentive months before its abrupt closure, meaning that for the first time in 30 years no Government funding is available for farmers looking to convert to organic farming. Cuts to the nature-friendly farming budget, expected to be outlined in the forthcoming spending review, will limit farmers’ ability to improve animal welfare standards further. The Liberal Democrats are concerned about the impact that these measures will have on farmers across the country. Farmers have a huge role in hitting the Government’s environmental and climate change aims, but short-sighted decisions will make those aims impossible. The Liberal Democrats instead have pledged to add an additional £1 billion a year to the farming budget, which will help farmers to keep standards high while producing food for the country.
We must improve the UK’s food labelling with regard to animal welfare. Under the last Conservative Government, DEFRA, to its credit, undertook a consultation on introducing mandatory methods of product labelling. The assessment for that found that food labelling could improve animal welfare standards. It found that the policy would improve the welfare of 110 million meat chickens, 510,000 pigs, 250,000 beef cattle, 180,000 dairy cattle and 1 million sheep, while also financially benefiting farmers by around £40 million a year. The Liberal Democrats have called for labelling that includes the locality that the animal was reared in, the conditions they were kept in, the methods of slaughter and the environmental impact of the product. We can improve the lives of farmed animals while helping farmers increase their profitability.
The future of animal welfare standards in farming and farming businesses are intertwined. As a country, we are proud of our standards, but we can and should go further. This must come with a firm commitment not to undercut British farmers through trade deals, and I look forward to hearing the Minister’s comments.
Dr Neil Hudson (Epping Forest) (Con)
It is a great pleasure to serve under your chairmanship, Sir John. I congratulate the hon. Member for Waveney Valley (Adrian Ramsay) on securing the debate and providing the opportunity to discuss this critical matter further. We have heard powerful contributions from right across the House. I declare a strong professional and personal interest in animal health and welfare as a veterinary surgeon and a fellow of the Royal College of Veterinary Surgeons.
In the United Kingdom we have brilliant farmers, who farm to the highest animal welfare standards, and we should be proud of that fact. In that regard, we have heard today that we can be a beacon to the rest of the world. I am extremely proud of the previous Conservative Government’s record on improving animal welfare standards in farming and right across the board. That includes the Animal Welfare (Livestock Exports) Act 2024, which banned the export from Great Britain of live animals, including cattle, sheep, pigs and horses, for slaughter and fattening; the Animal Welfare (Sentencing) Act 2021, which increased the maximum prison sentence for animal cruelty from six months to five years; the Animal Welfare (Sentience) Act 2022, which enshrined animal sentience into UK law and established the Animal Sentience Committee so that any new legislation must pay due regard to animal welfare; and the Animals (Penalty Notices) Act 2022, which created new financial penalties for those who commit offences affecting the health and welfare of farmed animals, zoo animals and pets.
Furthermore, in 2023, the Conservative Government launched the animal health and welfare pathway—a partnership between farmers, vets, the wider industry and the supply chain that supports continual improvement in farm animal health and welfare. It includes access through funded vet visits to testing for priority diseases and to advice, to continually improve the health, welfare and productivity of farmed animals.
His Majesty’s official Opposition support banning cages or close-confinement systems if there is clear scientific evidence that they are detrimental to animal or bird health and welfare. For example, the keeping of calves in veal crates was banned in 1990, the keeping of sows in close-confinement stalls was, as we have heard today, banned in 1999 and the use of battery cages for laying hens was banned in 2012.
The market itself has also been trying to drive the move towards alternative systems for laying hens—primarily towards free range and barn—and away from the use of cages. That transition to non-cage egg production has been accelerated in recent years by the major supermarkets that pledged to stop selling shell eggs from hens kept in colony cages by 2025. Some supermarkets extended that to products containing liquid or powdered eggs.
Egg producers and consumers should rightly take pride in the quality of British eggs, with around 75% coming from free-range, barn and organic production systems. I hope the Government will continue to work with our farmers, supermarkets and other retailers to help ensure that that figure increases in the years to come.
Positive action taken by the previous Conservative Government is ensuring that animals are slaughtered domestically in high-welfare UK slaughterhouses, which have been fitted with CCTV since 2018. However, Members will be aware of the challenges facing the small abattoir sector, including a shortage of skilled workers, primarily because the jobs are relatively low paid and many people do not consider it an attractive industry to work in.
In 2007, the UK was home to almost 100 small abattoirs. Now it is estimated that only 49 small red meat abattoirs remain in England, Wales and Scotland. If closures continue at the current rate, it is estimated that none will be operating by 2030. It is important to mention that small abattoirs make a significant contribution to supporting the rural economy, enabling farmers to sell their meat locally in farm shops. Importantly—this goes to the point of this animal welfare debate—that maintains good animal health and welfare by reducing journey times to slaughter. The last Government launched the £4 million smaller abattoir fund to support small abattoirs. I would be grateful if the Minister could outline what action the Labour Government will take to ensure the long-term viability of the small abattoir sector so that we can reduce journey times for animals to slaughter.
Following our departure from the European Union, the last Government prioritised ensuring that we had some of the highest animal welfare standards in the world. We must ensure that we do not row back on those standards. Can the Minister assure us that this Government will not weaken any of our high animal welfare standards as part of any shift towards dynamic alignment? Where we have higher standards than the EU—for example, with our ban on live animal exports for slaughter and fattening—does the Minister agree that we should use our influence to encourage the EU to adopt those higher standards?
Furthermore, the Genetic Technology (Precision Breeding) Act 2023 laid the foundations for breeding animals and birds that are protected from contracting harmful diseases. That could, for example, mean that birds are resistant to avian influenza, and we have seen the scourge of avian influenza across our country in recent years, devastating some of our poultry flocks. It could also mean developing pigs that are protected from porcine reproductive and respiratory syndrome. This technology can be a win for animal and bird health and welfare, in addition to protecting the environment and public health and—as we have heard today—mitigating antimicrobial resistance by reducing the usage of medicines. Can the Minister therefore assure us that the Government intend to lay the secondary legislation that will enable precision breeding in animals and birds, as they recently did—with cross-party support—for plants and crops? Can he also confirm that, as a result of the recent UK-EU summit, vital legislation on precision breeding will not be repealed or derogated?
We have heard a lot today about negotiating trade agreements, and it is important that within those agreements we uphold our high animal welfare standards. The last Government secured vital animal welfare chapters in both the Australian and the New Zealand trade deals. The UK Government must establish clear red lines in any trade deal with the USA and other countries, ensuring that products such as chlorine-washed poultry, hormone-treated beef and ractopamine-fed pork, or products in which antibiotics have been used as growth promoters, are not permitted to enter the UK market.
Just last year, when the Leader of the Opposition, my right hon. Friend the Member for North West Essex (Mrs Badenoch), served as Secretary of State for Business and Trade, she suspended trade negotiations with Canada due to its insistence on including hormone-treated beef in the agreement. That decisive action sent a strong message that the UK will not compromise on its ban on hormone-treated beef, ractopamine-treated pork and chlorine-washed chicken products, which are illegal in this country. Standing firm on those standards demonstrates our commitment to animal welfare and signals to the world that if other countries want to trade with us, they must meet our values and our standards. I hope that the current Government continue to follow that Conservative example.
To have and maintain high animal welfare standards on farms, and to ensure the viability and resilience of the sector, the Government must prioritise biosecurity—I have deep affection and respect for the Minister, and he knows where I am going with this. The official Opposition recently supported the statutory instrument, which we laid the foundations for, that removed the 16-week derogation period. As a result, free-range egg producers and packers can label and market eggs as free-range for the duration of a mandatory housing measure, as called for by the chief veterinary officer in response to avian influenza, however long that may last.
We have heard a lot today about labelling. The last Government ran a consultation on food labelling, which considered proposals to introduce clearer labelling requirements on the country of origin and the method of production for certain foods. Those proposals sought to improve transparency and consistency around food labelling, making it easier for consumers to make informed decisions when purchasing food and allowing them to choose products that align with their values. The current Government are yet to respond to that consultation, so I would be grateful if the Minister can update us on where they are with that.
In addition, will the Minister please clarify when the Government will close the loophole in the Government buying standards for public procurement, whereby public bodies can deviate from high animal welfare standards on the grounds of cost? To set an example to the world, we must get our own house in order, so I would be grateful if the Minister can update us on that.
To have high animal welfare standards, we need healthy animals, and for that we need strong biosecurity. I have long called on the Government to rapidly redevelop the Animal and Plant Health Agency headquarters is in Weybridge, in Surrey. We are extremely grateful for all that it does to keep us safe and for its vigilance in terms of disease surveillance and management on the frontline. It is pivotal in protecting against devastating diseases such as foot and mouth disease, seen this year in Germany, Hungary and Slovakia, and African swine fever, which is advancing up the continent of Europe. Will the Government finish the work the Conservatives started when we committed £1.2 billion in 2020 to redevelop the APHA headquarters? Labour has repeatedly reannounced £208 million. That is a start, but when will it commit the further £1.4 billion for that critical national infrastructure, for the sake of UK agriculture and our national security?
I pay tribute to all our farmers, growers and producers and to everyone else involved in producing food in our country. Food security is paramount for us, and we must uphold high animal welfare. We owe the people working on the frontline a debt of gratitude; thanks to them, we in this country enjoy a wide range of high-quality meat, poultry and dairy products that have been produced in high welfare standard conditions.
Sadly, farmers face an array of challenges because of the Labour Government’s punitive decisions, from the family farm tax to the closure of the sustainable farming incentive scheme. For the sake of our food, national security, animal health and welfare, and rural mental health, I strongly urge the Minister to consider the consequences of those policies and to stand up for farmers and animals in this country.
Sir John Hayes (in the Chair)
Before I call the Minister, I ask him to leave a little time for the mover of the motion to sum up the debate.
The Minister for Food Security and Rural Affairs (Daniel Zeichner)
It is a pleasure to serve with you in the Chair, Sir John. I congratulate the hon. Member for Waveney Valley (Adrian Ramsay) on securing this important debate. I also congratulate all those who have contributed to what has been a thoughtful debate.
We are a nation of animal lovers, as has been made very clear to me since I became an Environment Minister. As Members would expect, animal welfare issues consistently form a significant proportion of the correspondence that comes across my desk. I want to start by saying a bit about people, because I have “food security” in my job title, and I take it very seriously. I am very proud of the people across our country who, at this very moment, whether on land or at sea, are producing the food that we absolutely expect to be available. It is an extraordinarily complicated and sophisticated system; of course it can be improved, and we have heard suggestions for improvement, but it is important that we register just how extraordinary the food system already is. When there are transgressions—it occasionally happens that people in this place transgress—we should not see people as guilty by association. We should celebrate the success of the system, as well as the challenges.
We are rightly proud that this country’s animal welfare standards are very high; in fact, they are one of the selling points of our agricultural sector. They are greatly valued by consumers at home and are part of our sales pitch to people abroad. We want to build on and maintain our world-leading record on animal health and welfare, and we are absolutely committed to ensuring that animals receive the care, respect and protection they deserve.
The Labour party has a proud history of improving animal welfare. Next year will mark 20 years since the previous Labour Government introduced the landmark Animal Welfare Act 2006, which still represents the most fundamental change to our animal welfare law in nearly a century.
All farm animals are protected by comprehensive and robust animal health and welfare legislation. The Animal Welfare Act makes it an offence to either cause any captive animal unnecessary suffering or to fail to provide for the welfare needs of the animal. The Welfare of Farmed Animals (England) Regulations 2007 set down detailed requirements on how farmed livestock should be kept. There is also legislation that sets out specific conditions that need to be met for permitted procedures, such as tail docking, to be performed on certain species of animals.
In addition to farm animal welfare legislation, my Department has a series of statutory species-specific welfare codes, such as the code of practice for the welfare of meat chickens, which farmers are required by law to have access to and be familiar with. That encourages high standards of husbandry. As we have heard, we want to do better, and I absolutely understand that the keeping of farm animals in cages and close confinement systems is a topic that has exercised many of us over many years in this place. It is one that I absolutely assure hon. Members is currently receiving my very careful attention.
I am well aware of recent and long-running campaigns that have urged the Government to publish consultations on phasing out the use of enriched colony cages for laying hens and farrowing crates for pigs. Many Members have spoken passionately about that. I am sure Members are aware that the Petitions Committee has selected a recent e-petition on the use of cages and crates for debate, and many of us will be back here in a couple of weeks’ time to discuss those issues.
My hon. Friend the Member for North Ayrshire and Arran (Irene Campbell) raised a series of points around those issues. She also raised the culling of male chickens. I followed that subject very closely. Clearly, the technology, as she rightly pointed out, now allows chicks to be sexed within the egg. We very much welcome the UK egg industry’s interest in the development of day zero sexing technology. This is one of the areas on which we can move forward.
I also want to address the points on trade, because that has been one of the key themes in this debate. It is very topical and there is a lot going on in the world. Ending the use of these systems is an issue that our European trading partners are also carefully considering. We heard a number of interventions, including from my hon. Friend the Member for Sheffield Hallam (Olivia Blake)—she and I have debated these issues on many occasions over the years.
I was also delighted to hear from my hon. Friend the Member for Dunstable and Leighton Buzzard (Alex Mayer), who is a genuine friend. She raised a particular issue around decapod culling. My Department is talking to both the industry and relevant animal welfare non-governmental organisations on potential non-statutory guidance on which methods of killing decapods are or are not in line with the existing welfare at time of killing legal requirements. I hope she will find that encouraging.
As a number of Members have pointed out, with any change to our farming systems we need to evaluate the implications for trade. When considering welfare standards at home, it is crucial that we consider the potential for unintentionally replacing UK production with lower welfare production overseas—that point was well made by my near neighbour, my hon. Friend the Member for North West Cambridgeshire (Sam Carling). Replacing a UK egg with an imported caged egg would be not only bad for the consumer and bad for the producers, but bad for animal welfare as well.
These are complicated questions. I am not going to go into the fine detail of all the trade points, but I will make a few observations. We have been absolutely clear as a Government that we will use our trade strategy to promote the highest food production standards. We are determined to prevent farmers from being undercut by low welfare and low standards in trade deals. The hon. Member for Strangford (Jim Shannon), the Liberal Democrat spokesperson, the hon. Member for Glastonbury and Somerton (Sarah Dyke) and the Opposition spokesperson, the hon. Member for Epping Forest (Dr Hudson) all raised those points. I will say a little about some of the recent trade deals with the United States, India and, of course, the European Union, which I think are to be celebrated, frankly.
The United States deal does not change our own sanitary and phytosanitary regime. This—and any future agreement—only concerns US food products that have existing access to the UK market. We are absolutely committed to our high welfare standards and high consumer standards. I assure colleagues that chlorinated chicken and hormone-treated beef will remain illegal in the United Kingdom.
On the EU agreement, the European Union has accepted that there will need to be a number of areas where we need to retain our own rules. It is still subject to negotiation, but we have been absolutely clear about the importance of being able to set high animal welfare standards, support public health and use innovative technologies. The shadow Minister raised the issue of precision breeding. We have clearly been closely involved in that debate over a long time. I am determined to ensure that we protect our position.
On factory farming in general, I do not agree with some of the comments about large-scale production. The key issue is not size but ensuring that every farm complies with comprehensive UK law on animal health and welfare, planning, veterinary medicines and environmental legislation. Stockmanship and high husbandry standards are the key to ensuring appropriate welfare standards for all farmed animals. I appreciate the nervousness about large farms, but I have seen less than wonderful standards of biosecurity on smaller farms—although that has not always been the fault of the people involved. I do not think the issue is size; it is quality, and the ability of that business to carry out its work in a correct and safe way.
On the animal health and welfare pathway, I pay tribute to the work of the hon. Member for Epping Forest and his colleagues in the previous Parliament on this important point. Improving animal health underpins the welfare of farmed animals, reduces greenhouse gas emissions, slows the rise of antimicrobial resistance, better protects farmers and the public against the economic impact of disease, and helps to demonstrate a commitment to rising standards of animal health and welfare to our current and future trading partners across the world. It is really important, and we are good at it—we should be proud and celebrate it.
The pathway aims to promote the production of healthier, higher-welfare animals at a level beyond compliance with regulations, and to deliver sustained improvements over time, which address the challenges of the future as well as those of today.
Carla Lockhart
The Minister will be aware that access to veterinary medicines is key for animal welfare. He will know that Northern Ireland continues to face a cliff edge with regards to access to veterinary medicines. Will he commit to update hon. Members interested in this issue quickly, given its impact on the industry?
Daniel Zeichner
I assure the hon. Lady that we are very aware of that issue. I can also assure her in passing that I have regular dialogue with Minister Muir on the issues she raised.
I would like to say something about the funding that has been made available to help farmers. In early 2025, we announced £16.7 million of funding for a new round of animal health and welfare grants delivered through the farming equipment and technology fund. Applications are currently open, with livestock farmers able to apply for funding towards the cost of equipment and technology that delivers benefits for animal health and welfare.
On the poor behaviour that has been referenced, like all of us I have been shocked by some of the things we have seen. I listened closely to my near neighbour, my hon. Friend the Member for South West Norfolk (Terry Jermy). He is absolutely right that such unacceptable behaviour must be taken extremely seriously. It is imperative that any suspicion of animal cruelty is reported to DEFRA’s Animal and Plant Health Agency as quickly as possible, so that timely investigations can take place and the welfare of animals safeguarded. I am told that there can be a gap between some of these incidents and the reporting, which makes it difficult to move forward.
More generally on enforcement, the Animal and Plant Health Agency inspectors and local authorities conduct inspections on farms to check that animal welfare standards are being met. The vast majority of owners and keepers both comply with their duty of care and follow the law, but there are occasions when some fail to do so. It is absolutely the responsibility of enforcement authorities to use appropriate enforcement tools to ensure that the law is upheld, to protect animals and people and to encourage animal keepers to be compliant now and in future. To ensure that we have a transparent enforcement regime, we are actively working with enforcement authorities to reform the way they collect and publish data of on-farm enforcement activities and the actions they take to support compliance and act on non-compliance.
I am aware of your strictures on time, Sir John, so I will finish by saying a little about the important points made by a number of hon. Members about labelling: my hon. Friends the Members for Cannock Chase (Josh Newbury) and for North Somerset (Sadik Al-Hassan), and the shadow spokesperson, the hon. Member for Epping Forest. We are looking at labelling extremely closely. There are so many things that people want to know about, and I am talking to a whole range of stakeholders about how we can get the issue right and take it forward. The points that have been made are very important. There is a real opportunity to improve the welfare side, but there are many other things we can do with it as well.
I am also mindful of the points made about some of the farm assurance schemes. I think they are an extremely important tool and lever, but they are, of course, independent—and that is part of their strength and importance. We need to make sure that we can achieve, with them, the kind of improvements that we wish to see. I reassure the shadow spokesperson that £208 million has been made available to the National Biosecurity Centre; I am sure he would join me in being pleased to hear that. I also assure him that we are working very hard to ensure that the future is secure.
Let me conclude by saying that the Government were elected on a mandate to introduce the most ambitious plans in a generation to improve animal welfare, and that is exactly what we are going to do. Our farm animal welfare policy is backed by robust science and evidence, and supported and shaped by input from expert advice groups, including the Animal Welfare Committee, as well as funded research and development. The Department for Environment, Food and Rural Affairs is currently undertaking a series of meetings with key stakeholders as part of developing an overarching approach to animal welfare. I very much look forward to coming back to talk to hon. Members in more detail about that in due course.
Adrian Ramsay
Sir John, I believe that I have two and a half minutes, under the updated timings for this afternoon.
Adrian Ramsay
Thank you Sir John, Mr Vickers, and everybody who has contributed this afternoon on this important topic. We have seen how much interest there is across the House in driving up the animal welfare standards and I very much appreciate the Minister’s response, which set out the plans he already has in train.
I want to respond briefly to some of those points. On the Minister’s plans to review farrowing crates and cages, I look forward to seeing the outcome of that—I think everyone here today does—and I hope there are some big steps forward as a result. I was pleased to hear the answer in relation to maintaining standards in trade, but I did not quite hear the Minister go so far as to say that the Government will not allow imports of products that do not meet UK standards. I would invite him to do that. On enforcement, I did not quite hear the Minister address the need for higher penalties, independent inspections and proper resourcing of agencies for when standards of welfare are breached. That is critical.
Lastly, on size: I take the Minister’s point that it is not the only factor, but look at the size of the Methwold application—it would have involved 870,000 chickens and 14,000 pigs. How could welfare be maintained at that size, with a tiny handful of staff and a huge impact on sewage and pollution? Given the proliferation of mega-farms, those issues must be tackled.
Question put and agreed to.
Resolved,
That this House has considered animal welfare standards in farming.
Inheritance Tax: Family-owned Businesses
(3 days, 20 hours ago)
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Sir John Hayes (in the Chair)
I will call Susan Murray to move the motion, and then the Minister to respond. I remind other Members that they may make a speech only with permission from the Member in charge of the debate and the Minister.
Susan Murray (Mid Dunbartonshire) (LD)
I beg to move,
That this House has considered the impact of Inheritance Tax on family-owned businesses.
It is a pleasure to serve under your chairship, Sir John, and a privilege to lead this debate on a matter of real consequence to our economy. I begin by paying tribute to the extraordinary contributions that family-owned businesses make across the country, not least in my own Mid Dunbartonshire constituency. They are not just economic actors; they are part of the fabric of our communities. They offer good local jobs and apprenticeships, sponsor local sports teams, support local charitable activities, and keep our high streets and industrial parks alive with character, energy and local pride.
According to the Fraser of Allander Institute, in 2025 family-owned businesses are in turbulent and uncertain times. They are facing national insurance increases, with many scaling back plans for workforce expansion and recruitment as a result. The latest quarterly economic indicator from the Scottish Chambers of Commerce network presents a stark picture, as businesses face pressure that threatens to derail growth, investment and competitiveness. Taxation is now the No. 1 concern facing Scottish businesses.
Jim Shannon (Strangford) (DUP)
I commend the hon. Lady on securing this debate. She is absolutely right to highlight the issue of taxation. Does she agree that taxing businesses at 20% based on their value at the time of the owner’s death cannot possibly take into account the owner’s personal input into the business, and leaves a situation that can run a successful business into the ground? There is only so much that one person can be taxed before the burden is too great, and the taxation the Government are pushing is definitely going to destroy the farming sector.
Susan Murray
I thank the hon. Gentleman for raising that issue; I completely agree.
The Centre for Economics and Business Research found that nine out of every 10 privately owned businesses in the UK are family owned, and that they provide employment for nearly 16 million people and contribute more than £200 billion in taxes annually.
Dame Harriett Baldwin (West Worcestershire) (Con)
The hon. Lady is making an excellent speech and I congratulate her on securing this important debate. Did she see the research published yesterday by Family Business UK, which points to the disastrous impact of the inheritance tax reforms on family-owned businesses? In my West Worcestershire constituency alone, the changes will lead to a reduction of £18 million of gross value added and of 286 full-time equivalent jobs.
Susan Murray
I thank the hon. Member for raising that issue. I have seen the research and will refer to it later in my speech. That was a timely publication.
Graham Stringer (Blackley and Middleton South) (Lab)
I am grateful to the hon. Lady for being generous on this important issue. When she spoke about the contribution that family businesses make, she could have been talking about J. W. Lees, a brewery in my constituency that has a nearly 200-year history of making contributions to the local community and brewing very good beer, or to Joseph Holt, which is on the edge of my constituency. The Confederation of British Industry estimates that the proposed changes to business property relief will lose the Government nearly £1.9 billion. Does the hon. Lady agree that before the Government go through with the changes, they should have a consultation that looks at the impact on tax and local family businesses?
Susan Murray
I completely agree: it appears that there are many factors the Government have not taken into account.
The situation was brought home to me by a local company in my constituency: Archibald Young Ltd Founders and Engineers, a family-run foundry that has been operating in Kirkintilloch since 1959—not quite as long as the business mentioned by the hon. Member for Blackley and Middleton South (Graham Stringer). I thank Ian Young for sharing his company’s position and highlighting the vital role that it plays in defence by producing high-precision critical components. Since it was established, the company has grown steadily over three generations. At one time, Scotland had over 260 foundries; it now has 12, of which 11 are family-owned, and all are third generation.
Sir Edward Leigh (Gainsborough) (Con)
The hon. Lady is making an excellent speech. Will she make the point that we do not really understand where the Government are coming from? I understand why they want to claw back money from big estates, or from people who buy farms just to avoid inheritance tax—not Jeremy Clarkson of course; he is a fantastic chap—but I cannot understand why they are focusing on family farms. Will the hon. Lady make the point that the National Farmers Union has offered various compromises, and the Minister should meet the NFU in a positive way to ensure that we keep our family farms run by families?
Susan Murray
I agree; it is important we understand that these businesses and family farms exist in their own right and are not simply personal property, even though they are family owned.
Today, under Andrew Young, Young’s foundry continues to provide skilled and specialist manufacturing from its bases in Kirkintilloch, Motherwell and the north of England. Like so many of the family-run firms we are here to talk about, its success has been built over decades of hard work and reinvestment in its business and workforce, yet recent Government policies are putting that at risk.
Clearly, family-owned businesses can cope with challenges in the economic and business environment, which they have navigated over generations, but when Government policies are hostile to their success and survival, their ability to create jobs and grow the economy is eroded and their future is uncertain. Whether it is rising energy and employment costs, burdensome business rates or disproportionate regulatory hurdles, these enterprises face challenges that their multinational competitors are often better equipped to absorb, or that they do not face at all.
The reforms to business property relief and agricultural relief announced in the 2024 autumn Budget have dealt family businesses a blow that risks undermining the very principle of intergenerational succession that has been at the heart of their success. They must retain profits to reinvest in business assets, to enhance business competitiveness and invest in product development.
Prior to the reforms, the shares held in private family-owned businesses could be passed on upon death to the next family generation, free of inheritance tax. This was enabled by the shares qualifying for 100% business property relief. The 2024 Budget introduced a new £1 million relief cap beyond which inheritance tax is due, with business property relief of 50%, resulting in an inheritance tax charge of 20% being applied to such transfers upon death. This sudden change means that family financial planning opportunities are much more limited. Under the new rules any lifetime transfer of business property relief or agricultural property relief assets made on or after 30 October 2024 will be subject to the new relief limits if the donor dies on or after 6 April 2026.
GAP Holdings Ltd is another family-owned business based in my constituency. I thank Mark Anderson of GAP for allowing me to share his company’s position in this debate. He has also met the Secretary of State for Business and Trade and colleagues. Founded in 1969, GAP’s tool-hire business has grown dramatically. By reinvesting in its assets over the past 10 years, it has tripled its turnover and now employs over 2,000 people across the UK. GAP’s annual profit to March was £44 million, and its earnings before interest, taxes, depreciation and amortisation were £132 million. For GAP, the potential inheritance tax charge arising upon the death of the second generation would amount to tens of millions of pounds. The proposed £1 million relief cap would make no meaningful difference to the size of the problem. Three months ago, GAP exceeded the £1 million mark in its total donations to charitable causes. That is the kind of benefit that these businesses bring to the community.
The inheritance tax changes would require the independent valuation of companies. Will the Minister clarify whether there is a consistent and defined methodology for that activity? When a family business owner dies and leaves shares to the next generation, there is no cash available to pay inheritance tax liability and no windfall to successors. In practical terms, it is business as usual, and the business continues to use its assets to trade and contribute economically to the local community. It is not the same as selling a business; however, it may force the company to be sold completely to pay the liability.
Will the Minister confirm that it is not the Government’s intention that a family-owned business that has been passed down through the generations is forced to be sold as a result of the change, or forced into failure by having to take on unsustainable levels of debt?
Graeme Downie (Dunfermline and Dollar) (Lab)
I congratulate the hon. Lady on securing this debate on a very important issue. Like herself, I have spoken to GAP, as well as other family businesses in my constituency. Does she agree that although the Government are absolutely right to ensure that we have enough funding to pay for public services through tax changes, one option might be to allow businesses to pay inheritance tax in the way proposed if that business is passed on to another family member, so that the tax liability is still met, but in a way that does not impact on future generations and allows the businesses to succeed and thrive?
Susan Murray
It is important to look at all ways to make sure we have a system that does not cause the demise of family-owned businesses.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
I could be wrong, but I am pretty sure that the guidance from His Majesty’s Revenue and Customs states that, at present, where there is 100% relief, valuations for BPR are done on the basis of the book value, which is, as my hon. Friend will know, often very different from an asset’s actual value. That being the case, I wonder how easy it would be for the Government to have reached any reasonable understanding of the actual value of the assets that they now seek to tax.
Susan Murray
That was the point I was making when I asked the Minister whether there is an established methodology to make sure that the valuation of companies reflects the current situation.
This change does not target the ultra-wealthy or global conglomerates. In many parts of the UK even modest enterprises, especially those with land and equipment, which are often the biggest local employers, exceed the £1 million relief cap. Unlike large corporations, family businesses cannot just offshore ownership structures or use complex tax arbitrage to avoid the costs.
I am sure that every Member present, including the Minister, agrees that preserving the businesses at the heart of our communities should be the Government’s priority, not erecting barriers that create an environment too toxic for family businesses to survive. Will the Minister consider raising the relief cap to £2 million, as requested by the Scottish Chambers of Commerce network? That would make more family businesses exempt from this dangerous inheritance tax, thereby protecting jobs and local businesses.
The reality is that the Government have not undertaken an impact assessment, and according to estimates by the Office for Budget Responsibility, the changes to business property relief and agricultural property relief will raise only around £1.8 billion over a four-year period. That amount comes with a high uncertainty rating, because behaviour change might alter it significantly, and it cannot be compared with the £27 billion of VAT, late PAYE and national insurance that HMRC is yet to collect.
Forcing family businesses to reduce investment, withdraw capital, dispose of assets or sell or shut their business entirely to release cash to fund inheritance tax liability will weaken the competitiveness of not only the businesses themselves, but the wider UK economy. The changes may be well-intentioned, but they are misdirected in their execution. They risk treating genuine business owners in the same way as passive investors, and in doing so they ignore the fact that these reliefs were originally designed to protect the continuity of real working businesses in real communities.
In conclusion, will the Minister consider amending the proposed legislation to ensure that the changes do not weaken genuine family businesses—
Carla Lockhart (Upper Bann) (DUP)
The hon. Member is making a very powerful speech. Before she closes, it is important for us just to home in on the figures. A Family Business UK report shows that in my constituency the changes to business property relief and agricultural property relief will result in a £23.63 million reduction in gross value added and the loss of 381 full-time equivalent jobs, as well as being the end of many family farms. Multiplying those figures out across the United Kingdom means the loss of 208,000 jobs, a £14.8 billion reduction in GVA and a net fiscal loss to the Government of £1.9 billion. Does she agree that the death tax is immoral and should be scrapped?
Susan Murray
I certainly agree that we need to protect our family-owned businesses and do everything we can to help them to thrive, rather than putting them in a position whereby the economy is at risk of losing both jobs and growth.
I will finish the question that I was putting to the Minister. Will he consider amending the proposed legislation to ensure that the changes do not weaken genuine family businesses, and make the transfer of shares in a family business to the next generation exempt from inheritance tax for seven years, provided that the business is not sold in that period? If it is sold within that period, inheritance tax would become payable, along with the capital gains tax, both of which could be funded from the proceeds of the sale.
This Government have stated that growing the UK economy is essential, but attacking the backbone of the economy—the family businesses that have proved they can adapt and change rapidly to meet changing market needs and conditions, and that support supply chains and local jobs—must not happen. Family businesses should be supported, not raided for a relatively de minimis gain to the Exchequer.
Sir John Hayes (in the Chair)
Before I call the Minister, I hope he will leave me a couple of moments at the end of the debate to put the question.
The Exchequer Secretary to the Treasury (James Murray)
It is a pleasure, Sir John, to speak in this debate with you as Chair, and I congratulate the hon. Member for Mid Dunbartonshire (Susan Murray) on securing it—I notice that the debate is being opened and closed by a Murray.
I know that some Members are very concerned about the impact of forthcoming reforms to inheritance tax reliefs on businesses in their constituencies, and I understand that people feel very strongly about inheritance tax. I should be clear that the Government believe that our reforms to business property relief and agricultural property relief get the balance right between supporting farms and businesses and fixing the public finances in a fair way. The reforms reduce the inheritance tax advantages available to owners of agricultural and business assets, but still mean that those assets will be taxed at a much lower effective rate than most other assets.
Let me make clear that, much like the hon. Lady set out, the Government recognise and greatly value the huge contribution that small and family-owned businesses make to their communities and the economy. Businesses large and small, including family businesses, will create jobs and wealth and be the engines of growth in the economy. Those businesses and their workforces are the backbone of our economy, and they are fundamental to kickstarting economic growth, which is the Government’s No. 1 mission. Those businesses need a Government who will take the right decisions in the national interest, including when they are difficult, to support our security and prosperity.
People who own, run and work in businesses of all sizes will remember the economic context that we inherited last year. They know how important responsible financial management is within their own businesses and how the success of businesses and their workforces depends on economic stability and public services that function well. I believe that many of them will understand that, since taking office, the Government have taken a number of difficult but necessary decisions on tax, welfare and spending to restore economic stability, fix the public finances and support public services. None of these decisions, including the decision to reform agricultural property relief and business property relief, was taken lightly, but those tough decisions were left to us by the previous Administration, and no responsible Government could have let things carry on as they were.
Alongside our work to stabilise the economy and restore discipline to the public finances, the Government are determined to do everything we can to support businesses to grow. We are overhauling the UK’s regulatory system to reduce burdens on businesses by 25% by the end of this Parliament. We have secured trade deals that will slash the cost of doing business abroad, reduce border checks, cut tariffs and axe red tape. Those trade deals will support jobs and create opportunities for Great British businesses in our biggest current markets and in one of the world’s biggest future markets, too.
The Government expect to publish an SME strategy later this year. It will set out the Government’s vision for SMEs, from encouraging entrepreneurship to boosting scale-ups across key policy areas, such as creating thriving high streets, making it easier to access finance, opening up overseas and domestic markets, building business capabilities and providing a strong business environment.
Despite the tough fiscal inheritance at the election last year, we have also taken decisions to continue supporting small businesses through the tax system. We have chosen to increase the employment allowance to £10,500 to take many small businesses out of paying national insurance contributions altogether. We froze the small business rates multiplier to protect small properties from inflationary bill increases, and we will introduce permanently lower business tax rates for small retail, hospitality and leisure businesses from 2026.
Anna Gelderd (South East Cornwall) (Lab)
In rural and coastal communities such as South East Cornwall, family-run businesses and farms are the backbone of the local economy. Does the Minister agree that any changes to inheritance tax must be carefully shaped to support our local businesses and farms to plan for their future so that they can pass on their hard-earned success?
James Murray
My hon. Friend is a great champion of businesses and farmers in her constituency. When we were deciding how to reform agricultural property relief and business property relief, we made sure that generous tax reliefs still existed in the tax system precisely because we want to continue to support small and family-owned farms and businesses in particular. I will come to those in a moment.
I am conscious that you asked me to give you a few moments at the end, Sir John. Do you mean at the end of my remarks?
Sir John Hayes (in the Chair)
I need about 15 seconds at the very end of your remarks.
James Murray
Got it. To conclude my remarks on the wider support that we are giving to businesses, I also draw hon. Members’ attention to the fact that we committed in the “Corporate Tax Roadmap”, which was published at the autumn Budget, to maintain the small profits rates and marginal relief at their current rates and thresholds, as well as the £1 million annual investment allowance.
I know that many Members are concerned about the reforms to inheritance tax that are the subject of the debate, so I will now turn to them. The reality is that the full, unlimited relief introduced in 1992 has become unfair and unsustainable, particularly in the economic context that we inherited. Under the current system, the 100% relief on business and agricultural assets is heavily skewed towards the wealthiest estates, which is clear from the latest HMRC data from 2021-22. More than 50% of business property relief was claimed by just 4% of estates making claims. That means that the wealthiest few per cent of estates claimed £558 million in tax relief. That contributes to the very largest estates paying a lower average effective inheritance tax rate than smaller estates. It is neither fair nor sustainable to maintain such a large tax break for such a small number of claimants, given the wider pressures on the public finances. It is for that reason that the Government are changing how we target agricultural property relief and business property relief.
Under the reformed system, estates will still benefit from 100% relief for the first £1 million of combined assets from April 2026, and on top of that there will be an uncapped 50% relief on further assets. That means that inheritance tax will be paid at a reduced effective rate of up to 20%, rather than the standard 40%. Those reliefs sit on top of the standard nil-rate bands and other exemptions, such as transfers between spouses and civil partners.
Susan Murray
Why do the Government not consider taxing large digital multinational corporations trading in this country in order to raise the extra revenue that is being raised from this measure, which effectively punishes the businesses that run the supply chains that export to those markets? Those businesses have relationships with specialist suppliers and are being put at risk.
James Murray
I believe that the hon. Lady is asking about the taxation of large multinational firms operating in the digital space. I am sure that she is aware of the digital services tax, which is currently in operation. The Government are committed to maintaining that until the pillar 1 international solution is implemented, and I am sure that she is familiar with pillar 2 of the OECD deal on a global minimum corporate tax rate. Large multinational firms are well dealt with on the international level, which is why, in opposition and in government, we have supported the OECD’s two-pillar solution.
I do not want to be distracted from the design of the reforms that we are talking about today. Where inheritance tax is due, those liable for a charge can pay any liability on the relevant assets over 10 annual interest-free instalments. That benefit is not seen anywhere else in the inheritance tax system.
There has been a lot of discussion of the impact of this policy, so let me set out the numbers, based on HMRC claims data. It is expected that, under these reforms, about 1,500 estates claiming only business property relief will pay more inheritance tax in 2026-27. Two thirds of those estates—about 1,000—are expected to only hold shares designated as not listed on the markets of recognised stock exchanges, such as the alternative investment market. Under these reforms, about three quarters of estates claiming business property relief in 2026-27, excluding estates only holding shares designated as not listed, will not pay any more inheritance tax in 2026-27.
The reforms to relief have generated a lot of commentary about the wider impacts, but hon. Members should take care when relying on analysis based on self-selecting surveys from members of representative groups campaigning against the reforms. Indeed, the independent Office for Budget Responsibility is clear that it does not expect this measure to have any significant macroeconomic impacts, and it certified the costing at autumn Budget 2024. It said that the reforms to agricultural property relief and business property relief are forecast to raise a combined £520 million in 2029-30.
Richard Baker (Glenrothes and Mid Fife) (Lab)
I recognise the need for the Government to raise funds, given the economic context that they inherited, but, as my hon. Friend the Member for Dunfermline and Dollar (Graeme Downie) said, a number of family businesses have come forward with alternative proposals that would raise the funds in a different way. Would the Minister and his team be prepared to meet and consult with family businesses to ensure that they have input into the plans? That would enable those businesses to inform them of their experiences and raise alternative proposals that might raise funds differently.
James Murray
I reassure my hon. Friend that I, and the wider team of officials, have had a number of meetings with representatives of family businesses and the agricultural and farming sector. We have listened to ideas raised by a number of people we have met, as well as ideas raised in debates in the Commons and in meetings in the Treasury and elsewhere. We have listened, but we remain confident that our approach is a fair way to balance supporting farms and businesses with fixing the public finances, so we stand by our reforms.
I should probably conclude. I thank all hon. Members, particularly the hon. Member for Mid Dunbartonshire, for their contributions to the debate.
Question put and agreed to.
Serious Fraud Office
(3 days, 20 hours ago)
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David Pinto-Duschinsky (Hendon) (Lab)
I beg to move,
That this House has considered the Serious Fraud Office and tackling fraud and economic crime.
It is a pleasure to serve under your chairmanship, Sir John. Economic crime affects us all. The fraud, money laundering, grand corruption and bribery that the Serious Fraud Office was established to address can threaten the integrity of our markets, the functioning of our economy, the security of our nation and even the very fabric of our democracy, and fuel misery and corruption around the world.
Confronting the challenge posed by serious economic crime is crucial, but sometimes lost in this conversation is its link to a second kind of economic crime: the fraud that affects our constituents directly and touches millions of lives every year in our country. All too often, those two strands of economic crime are talked about separately. Although I have only a few minutes today, and cannot touch on every facet of economic crime, I will take this opportunity to talk about the two strands together; as economic crime evolves, they are becoming increasingly entwined and, if we are to tackle the corrosive impact of economic crime, we must address both.
I want to start by telling the House about a constituent of mine; let us call him Brian. Brian is a hard-working, community-spirited man who has spent his life playing by the rules. He is not naive—he has decades of experience and a sharp eye for detail—but last year, he was caught out by a sophisticated scam. Within hours, Brian lost more than £40,000—his entire life savings. The impact has been devastating, not only financially, but emotionally. His trust, confidence and sense of security have been shattered. Sadly, that is far from an isolated incident. Virtually every MP I speak to has similar stories of constituents who have suffered.
Deirdre Costigan (Ealing Southall) (Lab)
I congratulate my hon. Friend on securing this important debate. He mentions constituents: two of my constituents in Ealing Southall were victims of the collapse of JVIP Group, a complicated network of 100 companies. Although some victims were compensated by their banks, the collapse of the company was not properly investigated by police or the Serious Fraud Office. Does he agree that it is important to take a consistent approach to allegations of complex corporate crime and that the Serious Fraud Office should look at these issues seriously?
David Pinto-Duschinsky
I am sorry to hear about what has happened to my hon. Friend’s constituents. She is of course right that these kinds of crimes must be investigated—we must see consistent and robust investigation, a point I will touch on later in my speech.
The figures are stark. Under the last Conservative Government, fraud surged at every level. Between 2010 and 2024, reported fraud cases in the UK more than doubled, making it the single most prevalent crime type in the country. According to the crime survey for England and Wales, fraud now accounts for more than 40% of all crime. That is more than 4.1 million incidents in 2024 alone—or, put another way, one incident every 10 seconds.
It is a sign of how ubiquitous fraud has become that we have almost stopped noticing the fraud attempts we all face every day—the dodgy emails and texts, the suspicious phone calls, the fake listings on online marketplaces. Many of us now just accept the regular attempts to defraud us as part of the weft and weave of modern life.
The economic impact has been enormous. UK Finance estimates that more than £1.1 billion was stolen by fraudsters last year, including nearly £460 million in authorised push payment scams. The public purse has also come under attack, with up to £55 billion in public money lost to benefit and procurement fraud and other types of economic crime. But it is not just about the economic cost: the human cost has been enormous too, paid in the currency of suffering and lives turned upside down. It is hard to overstate how shattering fraud is for its victims.
This explosion in scams, great and small, has been driven by increasingly sophisticated, increasingly transnational and increasingly organised criminality, and sharpened by rapid innovation and technological evolution. Some 67% of all fraud in the UK is now cyber-enabled. Fraud is no longer just about opportunistic criminals and simple phishing emails; criminals have become highly sophisticated, harnessing the power of technology in alarming ways.
The use of artificial technology and deepfake technology is now commonplace, not just in social media, but in the execution of daring scams against major companies. For example, in February last year, a company lost more than £20 million as a result of a chief executive officer scam, where AI was used to fool executives into thinking that they were dealing with their boss. Meanwhile, sophisticated fraud-as-a-service websites such as Russian Coms have helped domestic criminals to use advanced technology to defraud the public. Our institutions are caught in a never-ending arms race against ever more adept and advanced criminality.
All too often, the growth of fraud has also been enabled by the inaction of some players across the ecosystem. Banks and financial institutions have generally stepped up their efforts to limit retail fraud, and last year stopped more than £1.4 billion of fraudulent payments, as well as paying out £1.2 billion in compensation. Unfortunately, the same cannot be said for major tech companies. They have often failed to take sufficient steps to combat the fraud propagated on or through their platforms and have not put in sufficiently robust “know your customer” and transaction monitoring controls, or even used the systems they already have. Their failure to act has left the social media and online commerce landscape vulnerable and has exacted a large price on others.
Law enforcement has also struggled to keep up with the threat. Under the last Government, despite its accounting for almost half of all crime, fraud received only between 1% and 2% of police budgets, and enforcement was often hamstrung by poor infrastructure and limited collaboration between forces.
The story on major fraud, bribery and economic crime shows strong parallels. The threat has grown significantly and is increasingly transnational in scope. Just as the authorities have historically struggled against the evolving fraud we see in our daily lives, so the institutions focusing on major fraud and the enforcement of our anti-bribery laws, in particular the SFO, have often struggled as well. I need not rehearse here some of the challenges the SFO has faced with failed prosecutions, insufficient powers, questions over leadership and a lack of resources.
However, in recent times under the current Government, we are beginning to see real change. The Government are driving a strategy to tackle the fraud challenge. There is renewed focus on tackling the frauds that affect us all. The police and the National Crime Agency are seeking to invest in increased capacity and strengthen inter-force collaboration to tackle cross-country and transnational threats.
Central Government are also strengthening the tools available to combat fraud in the benefit and procurement systems with, for example, the measures in the Public Authorities (Fraud, Error and Recovery) Bill, which had its Third Reading in the Commons recently. After years of the previous Government failing to update the powers that Departments such as the Department for Work and Pensions had, leaving them with 20th-century powers to fight a 21st-century problem, this Government are finally getting the modern, anti-fraud tools they need.
Critically, the SFO is undergoing positive change. Under new leadership, the organisation has published a five-year strategy focused on upgrading its capabilities, making smarter use of intelligence and driving co-ordinated enforcement. There are more reforms on the table aimed at further improving its reach and effectiveness, from enhancing international co-operation to bringing in financial incentives for whistleblowers. There is of course further to go, but the Serious Fraud Office is evidently becoming more effective, and has recently achieved some notable successes.
However, if we are to tackle fraud and economic crime at all levels, these welcome improvements in policy and institutional effectiveness will need to be matched by changes across the whole anti-financial crime landscape. We will need to see stronger partnerships and collaboration, including among the police, better implementation and some actors, especially the big tech firms, stepping up to the plate. Online platforms should, for example, implement effective identity verification for commerce, enhance their monitoring and takedown procedures and, crucially, contribute to compensation when fraud occurs.
I am sure that, over the course of the debate, we will hear discussion of many facets of this problem, and I am conscious that I have not had the opportunity in my remarks to touch on issues ranging from the policing of money laundering to making progress on issues such as ultimate beneficial ownership. However, all these points ultimately have in common the essential nature of this fight.
This is a national challenge. The human cost of economic crime is devastating. We cannot afford to treat small fraud as trivial, or grand fraud and economic crime as inevitable. Both are corrosive; both must be tackled, and that must be done across Government and in banks, big tech and law enforcement. It is a necessary fight that this Government are already taking on, and a fight we can ill afford to lose.
Sir John Hayes (in the Chair)
I remind Members that they should bob if they wish to be called in the debate; I can see that some have already taken that advice.
Joe Powell (Kensington and Bayswater) (Lab)
It is a pleasure to serve under your chairship, Sir John. I congratulate my hon. Friend the Member for Hendon (David Pinto-Duschinsky) on securing this debate on the important work of the SFO in tackling economic crime. The all-party parliamentary group on anti-corruption and responsible tax recently met with the Serious Fraud Office team and its director. I have the pleasure of chairing that APPG, a role I inherited from our current anti-corruption champion Baroness Hodge. I thank the SFO’s staff and leadership for taking on incredibly complex cases in the national interest. It was clear that the SFO has an ambitious agenda to tackle serious economic crime, but it was equally clear that without sustained political and financial backing from Government, and cross-Government work to prevent economic crime and fraud, the agency will not be able to fulfil its potential.
I am therefore pleased that this Government have committed to a new cross-Government anti-corruption strategy, led by the joint anti-corruption unit at the Home Office. I hope that that strategy will include some of the policies that will help deter and prevent economic crime and fraud in the first place, and I will mention a couple of them before moving on to some recommendations for the SFO. The first, which has long been debated in this Chamber, is the role of UK overseas territories and Crown dependencies as facilitators of economic crime and fraud. We asked the SFO for an estimate on the volume of fraud and economic crime that has a connection to the UK overseas territories, and we are waiting for an answer.
However, needless to say, it is common practice to use shell companies in the overseas territories and Crown dependencies to launder the proceeds of crime to facilitate tax evasion and avoidance. I commend the Government of Gibraltar, who have taken an important step towards publishing a transparent register of company ownership. A few weeks ago, the right hon. Member for Sutton Coldfield (Sir Andrew Mitchell) and I met the Gibraltar premier. Our request is this: if Gibraltar can do it, why can the British Virgin Islands, Turks and Caicos, Cayman Islands and others not meet their obligations to Parliament on transparency over beneficial ownership? That will help us to follow the money, and it will help investigators in the SFO to bring successful cases.
The last deadline for the overseas territories was 30 April. That deadline was only set in the autumn, when we had the last joint council meeting, chaired by the Minister of State, Foreign, Commonwealth and Development Office, my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty). Only two overseas territories met that deadline for enabling legislation on publishing information on beneficial owners. What consequences will there be for those that have not met the deadline, and what support can be provided to get those registries up and running so that our investigators can follow the money?
The second area in which I think the public expect more co-ordination is the proliferation of economic crime and fraud on our high streets. In Kensington and Bayswater, a number of constituents have contacted me about our latest Harry Potter shop, souvenir shop, candy shop, barber shop, vape shop, nail bar and so on. Obviously legitimate businesses conduct those trades, but we know from the National Crime Agency’s recent Operation Machinize on barber shops across the country that there is a significant link between economic crime and fraud and serious organised crime. There are serious organised crime links on our high streets, but also VAT avoidance and business rate avoidance from companies that phoenix. We need co-ordination across the enforcement agencies, with His Majesty’s Revenue and Customs, the NCA and the SFO working together to enforce the law on our high streets. I think that a lot of our constituents would thank the Government for an additional push on that front.
I want to mention three areas where I think that the SFO could do with our support under its strong new leadership: first, on whistleblowing reform; secondly, on sustainable funding for disclosure; and thirdly, on enforcement on foreign bribery, which comes under the SFO.
First, I strongly welcome the SFO’s commitment to progressing a new incentivisation scheme on whistleblowing. In the United States, such schemes have unlocked more than $50 billion in recoveries, and significant numbers of UK whistleblowers have contributed tips to US authorities because the scheme incentivises them more than if they did so here. It is beyond time that the UK had a comparable mechanism, and I hope that the Government will look at ways to develop a properly resourced whistleblower reward scheme, subject to the outcome of the independent review by Jonathan Fisher KC on what exactly that would look like.
Secondly, despite recent progress, disclosure continues to consume a staggering portion of the SFO’s capacity at approximately 25% of its budget and 40% of its staff time. We know that the SFO can be one of the most effective agencies in tackling financial crime, but that means we must properly fund and support it, including, as my hon. Friend the Member for Hendon mentioned, with modern technology. Independent reviews have already shown that disclosure remains an Achilles heel for the justice system, particularly in the prosecution of complex economic crime. Support in this area would go a long way.
Thirdly, there is a lack of enforcement on foreign bribery, in particular by UK small and medium-sized enterprises in developing countries. According to recent analysis, there have been zero successful prosecutions of UK SMEs for such offences since 2016, when the NCA’s international corruption unit took over responsibility for pursuing that kind of bribery. That enforcement gap undermines the UK’s credibility and efforts to promote clean business globally, and we want to support our SMEs to go out and make those deals in a fair and transparent way. The SFO must therefore be properly resourced and supported to take the lead in this area. The Government should ensure that there is sufficient funding for the SFO to take a lead role in prosecuting all UK firms who commit bribery overseas, including SMEs.
To conclude, the SFO must be supported to improve outcomes, with additional resources for trained staff, modern technology and digital disclosure tools. The responsibility now lies with us—with this Labour Government, who have rightly put tackling economic crime at the heart of their agenda. The Foreign Secretary has said that we want to
“be the anti-corruption capital of the world”,
and I support that entirely.
Our APPG strongly supports the creation of an economic crime-fighting fund, which would allow enforcement proceeds to be reinvested into frontline agencies such as the SFO, which returned £3 to the taxpayer for every £1 invested. That is a sound investment for taxpayers and would help to ensure that the SFO is equipped to tackle some of the disclosure challenges that I mentioned, and to close the enforcement gaps on foreign bribery. I believe that the SFO is setting the right direction through its business plan and its newish leadership, and it is now for us to provide the funding and political backing to allow it to contribute to the UK’s leadership on economic crime.
Sir John Hayes (in the Chair)
I intend to begin the winding-up speeches at 5.50 pm, and we have two more Back-Bench speakers, so it would be lovely if I could get you both in.
Gill German (Clwyd North) (Lab)
It is a pleasure to serve under your chairship, Sir John. I will start by thanking my hon. Friend the Member for Hendon (David Pinto-Duschinsky) for introducing this important debate on an issue that affects so many across the UK. I would like to focus on the real human impact, and the effect that the crime can have on individuals.
Fraud is the single commonest crime in England and Wales, making up 40% of all crimes against individuals last year. That includes authorised fraud, where the victim is tricked into paying money into an account controlled by the criminal. Fraud of any kind is traumatic, but authorised fraud is not just a financial crime; it can feel like an emotional and psychological assault. One of its most devastating and insidious forms is romance fraud. Those fraudsters exploit loneliness and trust by building fake relationships and then vanishing with a person’s savings, dignity and sense of security. Victims suffer a double hit: financial loss and emotional betrayal. The real damage is hard to measure, with 69% of fraud victims reporting a mental health impact, and more than a third saying that they have become less trusting of others.
Unlike victims of burglary or assault, many fraud victims do not see themselves as victims of crime. They blame themselves. They feel stupid. They are embarrassed. Lloyds bank found that 23% of people who lost money to fraud said that they were unsure whether what happened was even serious enough to report. That tells us something deeply troubling about how fraud is viewed and how society, including Government and enforcement, has downplayed it. It is not a clever ruse or a trick; it is exploitation, and the trauma it leaves behind is real.
That is why we must break the stigma around being scammed and take a victim-centred approach that recognises both financial and emotional harm, treating victims of fraud as what they truly are—survivors of an often life-altering crime. Our constituents are not just losing money; they are losing trust, and it is time we fought back, not just with systems, but with the empathy and urgency that will give this crime the attention it deserves.
Jim Shannon (Strangford) (DUP)
It is a pleasure to serve under your chairship, Sir John. I thank the hon. Member for Hendon (David Pinto-Duschinsky) for leading the debate.
Economic crime remains a significant issue across the United Kingdom of Great Britain and Northern Ireland. Worryingly, especially in the last few months, my office back home has heard almost every day about strange phone calls and strange texts, with people asking whether they are scams. If we get a phone call or a text message from a Nigerian general, we can be pretty sure it is a hoax, but most people are not being sent messages by a Nigerian general; they are receiving texts or phone calls asking what seem to be ordinary questions. More often than not, we are talking about vulnerable people—the very people that the hon. Member for Clwyd North (Gill German) mentioned—who feel under so much pressure. There is much work to be done on this wide issue.
It is important that I always give the facts from Northern Ireland. Fraud and economic crime are massive issues not only in my constituency, but across Northern Ireland. Between November 2023 and October 2024 there were more than 5,200 reports of fraud to the Police Service of Northern Ireland, with reported losses approaching £19 million. A mathematician could work it out, but £19 million divided by 5,200 is an excruciating amount of money.
Furthermore, in the 13 months leading up to January 2024, approximately £23.1 million was reported lost to fraud in 5,412 recorded incidents. We have a particular association with former paramilitary groups on either side of the divide in Northern Ireland, but they are really nothing better than just crime gangs—that is all they are. Their ideals went out of the window a long time ago.
Moneylending crops up all the time, as poverty levels are high and people are vulnerable. It is not unknown for some of the so-called “boys”, for want of a better description, to sit outside the food banks in my constituency waiting for vulnerable young women to come out with their children—those young women find themselves caught in a trap that they cannot get away from.
There are so many types of fraud, but I am increasingly seeing scam calls from illegitimate 07 numbers that most people assume are lawful and used with good intention. Most people are decent—99% of people are decent—so they assume those phone calls are genuine. If they are vulnerable and they are being offered help, they will be caught.
The hon. Member for Clwyd North mentioned romance scams; I know people back home who have fallen into that trap. In Northern Ireland specifically, there has been a dramatic increase in holiday scams. Fraudsters use holiday deals that would look appealing to anyone to try to get people’s money. In 2024, a massive loss of almost £106,000 to this type of scam was reported to the PSNI, with most of them being advertised on social media. I am not technically minded, thank the Lord—my staff are, so they deal with these things. My wife, my children and, I suspect, my grandchildren are, but this old boy has not learned how to do it just yet—and sometimes it is good not to be able to do it, because there are scams out there.
Benefit fraud is also a real problem in Northern Ireland, and I welcome the Government’s commitment to addressing it. The Department for Communities back home estimates that there were £240 million of overpayments in 2023-24—just think about that; it is massive—up from £174 million the previous year. I was shocked to see that statistic. Just think what good that money could do for our NHS, our Department of Health—the Department of Health, Social Services and Public Safety as it was—or our education system in Northern Ireland. That money should be spent doing good, but unfortunately it is increasingly lost to fraud.
There is much more work to be done on addressing overpayments in the benefits system. The Minister is not responsible for that, but I hope she will commit to interacting with my colleague Gordon Lyons in the Department for Communities back home on tackling this. It is time we worked better together. Those are conversations that we should be promoting with the Minister in the Northern Ireland Assembly, and I look forward to what the Minister can say on that.
Fraud poses a significant threat to the livelihoods and prosperity of people in the United Kingdom and Northern Ireland. Unfortunately, the statistics show that the situation is getting worse. The hon. Member for Hendon is right to outline the issue and to the state the facts, but the evidential base tells us that things are getting worse. If this is getting worse, it is time for a consistent and focused Government strategy to address it. I am always impressed in the House when we put questions to Ministers and they come back and say that all the regional Governments are working together. We need to work together on this one, because that is how we will address the issue.
Fraud accounts for some four in 10 offences against individuals. In addition to financial loss, fraud can cause emotional, psychological and health impacts, so more must be done. I look to the Minister for both her response and her commitment to raising awareness and protecting the financial livelihoods of the people who have worked hard for their money but find themselves in difficulties from fraud throughout this whole great United Kingdom of Great Britain and Northern Ireland.
Ben Maguire (North Cornwall) (LD)
It is a pleasure to serve under your chairmanship, Sir John. I thank the hon. Member for Hendon (David Pinto-Duschinsky) for securing this important debate. As the hon. Member for Strangford (Jim Shannon) just pointed out, last year alone fraud accounted for a staggering 40% of crimes against individuals in England and Wales. This is not a faceless crime; behind every one of those statistics is a victim, someone who has been left not only financially worse off, but emotionally distressed, fearful and often devastated. Whether it is a vulnerable pensioner scammed out of their life savings or a small business misled into paying false invoices, the human impact of fraud is real and growing.
We have already heard about the devastating impact of romantic fraud, as highlighted by the hon. Member for Clwyd North (Gill German), and the hon. Member for Strangford outlined the increase in fraudulent calls offering things such as fake holidays. I have heard from countless constituents in North Cornwall—hard-working people, whether they are pensioners or young adults saving for a first home—who have fallen victim to online fraud, authorised push payment scams and identity theft. They feel ignored, disempowered and unprotected. Far too often, they felt like the system just did not care. For them, justice feels out of reach, and that is because sadly, in most cases, it is.
Despite the enormous scale of this crime, only around 2% of recorded frauds are actually referred to local police forces for investigation. The vast majority of victims never see their cases taken forward, let alone justice done. That simply is not good enough. The Liberal Democrats believe that it is time to move beyond empty promises and underfunded initiatives and take bold, decisive action. We have set out in our manifesto a comprehensive plan to tackle fraud because we recognise it for what it is: a national emergency hiding in plain sight.
We would establish a dedicated online crime agency, a national body designed specifically to tackle online fraud, co-ordinate investigations across forces and employ the kind of digital expertise that is urgently needed to tackle cyber-enabled crimes. Right now, fraudsters exploit jurisdictional boundaries; they use fake identities, offshore servers and untraceable digital accounts. Victims in Cornwall, for example, might be targeted by criminals operating from London, Lagos or Luxembourg, and our existing systems are not designed to cope with that level of sophistication or scale. A specialist online crime agency could plug that gap.
The hon. Member for Hendon rightly pointed out how big banks need to seriously step up. We would name and shame banks with the worst records on preventing fraud and compensating victims. If we do not hold institutions accountable for allowing these scams to happen under their watch, nothing will change. In 2023 alone, criminals stole £1.2 billion from individuals through banking fraud and scams. While banks have improved reimbursement rates, nearly 40% of authorised payment fraud losses still go completely uncompensated.
While it is welcome news that, from October, payment providers will be required by law to reimburse victims of authorised push payment fraud, regulation alone will not be enough. We need pressure and transparency, so that banks feel real accountability to their customers. That is why we would launch a high-profile national fraud awareness campaign, giving people the tools to spot, report and avoid scams. The Government have a duty to act, but the public deserve to be better informed, supported and empowered.
Fraud prevention must be treated as seriously as fire safety, road safety or other forms of crime prevention. We should have national guidance for at-risk groups, and there should be a visible, accessible place to report crimes and get the help they need. Most importantly, we need to do more to support victims. The emotional harm caused by fraud, which has already been laid out by other hon. Members, is often overlooked, yet for many the betrayal, fear and shame of being scammed is as damaging as the financial loss suffered.
A constituent of mine who was the victim of such a devastating economic crime wrote to me of how it not only resulted in his farm business being “crippled”, but led to a detrimental impact on his livelihood, health and wellbeing, causing him worry, stress and severe depression. He ultimately required counselling, and has since been identified as at high risk of suicide, has become a recluse, and suffers from
“a host of health issues with heart and blood pressure problems, bowel cancer, severe migraines”.
Ultimately, it has taken a huge toll on his physical and mental health.
Let me be clear: we cannot continue to treat victims of fraud as if they are to blame for their misfortune, or expect individuals to prevent it. Fraud is a crime—not a mistake or bad luck. It is a deliberate act of deception, and the victims, whether they are small business owners, retirees or university students, to name a few, deserve justice and redress.
That brings me to the Public Authorities (Fraud, Error and Recovery) Bill, currently making its way through Parliament. On the surface, it offers important tools to recover public money lost to fraud, especially in the welfare system, and of course every pound stolen through fraud is a pound not going to our schools, hospitals or those genuinely in need. However, the Bill as drafted lacks a comprehensive impact assessment. Without that, we risk placing enormous emphasis on clawing back money from ordinary claimants, without matching it with investment in the prevention or prosecution of high-level economic fraud.
What about the billions lost through covid support schemes? Let us not forget that under the last Conservative Government, fraudsters were allowed to get away with billions of pounds of covid support funds. Meanwhile, revenue worth an estimated £38.9 billion a year goes uncollected due to tax evasion and criminal activities. We need a clear, cross-agency, strategic and well-resourced national effort to tackle economic crime and fraud, and the Serious Fraud Office has a central role to play in that. The hon. Member for Kensington and Bayswater (Joe Powell) has already called for a much more joined-up approach between the SFO, the NCA, HMRC and other agencies.
The SFO is the very agency tasked with investigating some of the most complex and serious frauds in the country, yet it remains under-resourced, underpowered, and far too often underperforming. We have seen well-publicised failures, with high-profile cases being dropped, poor conviction rates and concerns raised about its investigatory capacity. The SFO has been left to firefight with nowhere near the scale of investment it needs to pursue the most complex, high-value economic crimes.
If we are serious about tackling corporate fraud, money laundering and criminal networks exploiting our economy, we must give the SFO the independence and resources it so desperately needs. We need a Serious Fraud Office with teeth. That means increasing funding, improving oversight and ensuring that its leadership has the freedom to pursue complex cases without any interference. It also means ensuring that it works hand in hand with the National Crime Agency, local forces and international partners.
Fraud is not victimless. It targets the vulnerable and undermines trust in our financial systems. It is draining billions from our economy. I urge the Solicitor General and the Government to act—not just to reform the SFO but to lead a co-ordinated and compassionate national effort to protect our constituents from fraud and economic crimes. This Government and every Government have a moral duty to offer more than token support. We must build a justice system that investigates fraud robustly, prosecutes it swiftly and protects those most at risk of harm. The people of my constituency of North Cornwall, and communities across this country, expect and deserve nothing less.
Helen Grant (Maidstone and Malling) (Con)
It is a pleasure to serve under your chairmanship, Sir John. I congratulate the hon. Member for Hendon (David Pinto-Duschinsky) on securing such an important debate, on an issue that affects all our constituents.
In our time in government we took decisive action to combat fraud, including benefit fraud, and economic crime. Following Russia’s invasion of Ukraine, we introduced the Economic Crime (Transparency and Enforcement) Act 2022. That legislation enabled faster sanctions against oligarchs, and removed barriers to the use of unexplained wealth orders. In 2023, the Economic Crime and Corporate Transparency Act received Royal Assent. That legislation further enhanced the UK’s ability to target organised criminals and those seeking to abuse our open economy. New powers were given to Companies House to stop criminals using false names or registering companies with fictitious characters. The legislation was welcomed by many, including the Law Society and the Institute of Chartered Accountants.
In 2019, the Government published the economic crime plan 2019-2022. The plan represented a step change in our response to economic crime, and had 52 action points and seven strategic priorities. It was followed by the economic crime plan 2 in March 2023, which the hon. Member for Hendon assured me he has read in full. The second plan aimed to deliver real-world outcomes, and
“to cut crime, protect our national security, and support the UK’s legitimate economic growth”.
The Association of British Insurers called the plan
“a landmark in the fight against economic crime.”
In May 2023, the Government published a fraud strategy. It outlined the actions that the Government would take to further reduce fraud. It was especially welcomed by the Crown Prosecution Service and the City of London police for the additional investment it proposed. In February 2024, the Home Office announced that fraud had been reduced by 13% since the launch of the strategy.
Clearly, good progress was made by the Conservative Government during our time in office—but there is, of course, always more to do, so I have some questions for the Minister. I appreciate that she may not be able to answer them all today, given the time, so I would welcome her response in writing in due course.
What steps is the Minister taking to improve the number of prosecutions undertaken by the Serious Fraud Office and the speed at which those prosecutions progress? Is she confident that the SFO has the technical knowledge and digital technology for cryptoasset-related fraud? Does she agree that deferred prosecution agreements should be used more frequently to ensure swift justice and financial resolution for victims? What steps are the Government taking to ensure that the enhanced powers given to Companies House under the Economic Crime and Corporate Transparency Act are effectively implemented? Finally, will she assure the House that her Government will maintain the important momentum established by the Conservative-led economic crime plans?
Tackling fraud and economic crime is about safeguarding the livelihoods of our constituents and businesses across the UK. We remain absolutely committed to ensuring that the UK is a safe place to do business and we urge the Government to build on the robust foundations that we laid during our time in office. We will continue to hold the Government to account and push for stronger enforcement, greater transparency and more effective prosecution of economic crime.
Sir John Hayes (in the Chair)
Before I call the Minister, I ask her to leave a few moments for the Member in charge to wind up the debate and for me to put the Question.
The Solicitor General (Lucy Rigby)
It is a pleasure to serve under your chairmanship, Sir John. I congratulate my hon. Friend the Member for Hendon (David Pinto-Duschinsky) on securing this important debate on fraud and economic crime and the work of the Serious Fraud Office in combating those threats. The debate has been thoughtful and considered, covering different types of fraud and plenty of personal stories and experiences.
Fraud, bribery and corruption undermine economic security and prosperity, and undermine the very significant majority of people in this country who play by the rules. That is why the Government are so determined to stamp out such crimes and to support the SFO in its core mission. That is how we will protect our economic security and prosperity, as well as the reputation and integrity of the UK as a leading international financial centre. It is also how we will protect working people from the pernicious types of fraud that have been so aptly described today.
As my hon. Friend said, the economic crime landscape has been fundamentally transformed by rapid technological advancement. Criminals now exploit new and powerful tools, from cryptoassets that enable money laundering to AI-generated audio or images, that have fundamentally changed how we traditionally tackle fraud. Those new types of intricate scams acquire new victims, as he and my hon. Friend the Member for Clwyd North (Gill German) mentioned. As has been covered already, the human suffering is heartbreaking.
Those changes in technology also bring us great opportunities to fight such crimes, as well as tools to do so more quickly and effectively. The environment demands constant innovation and growth, and I see that exemplified by the Serious Fraud Office, with the organisation’s ambition to be bolder and more pragmatic as it continues and succeeds in tackling complex fraud, bribery and corruption.
As has rightly been acknowledged, the Serious Fraud Office is a highly specialist agency. It does crucial work to investigate and prosecute the most serious and complex cases of fraud, bribery and corruption, and it is the only agency in the country to follow criminal investigations from cradle to grave—police, prosecutor and proceeds of crime, all under one roof. The SFO has a complex and challenging caseload, reflecting both the highly specialised work it does and the difficulty of accessing meaningful intelligence on some of the world’s most sophisticated criminals. Its investigations are typically high profile and high risk, and they are invariably cross border, requiring sophisticated expertise and co-ordination.
Like my hon. Friends the Members for Hendon and for Kensington and Bayswater (Joe Powell), I am heartened to see a refreshed SFO that is taking significant positive steps forward under the strong leadership of the director, Nick Ephgrave. He is committed to a focus on using new tools, enhancing the SFO’s intelligence capacity, and working with domestic and international partners—all furthering the SFO’s ambition to be bolder and more pragmatic. During his tenure, the SFO has charged 16 defendants on 43 counts of fraud, bribery and corruption; announced 10 overt investigations; and arrested and questioned 22 individuals. Since 2020, the SFO has returned more than £1 billion to the UK taxpayer in penalties, demonstrating the impressive financial contribution it makes relative to its small running costs.
The organisation currently has 35 active criminal cases, in addition to civil cases, proceeds of crime cases and mutual legal assistance cases, which bring its total caseload to about 150. Earlier today we saw an example of the SFO’s crucial work as it announced an investigation into Rockfire Investment Finance plc, relating to an alleged £400 million fraud against Thurrock council between 2016 and 2020. I saw the SFO’s work at first hand when I accompanied it on an early morning raid as it searched five properties and made three arrests in relation to a new multimillion-pound international bribery investigation.
As I noted, recovering ill-gotten gains and returning money to victims and the taxpayer is a crucial part of the SFO’s role. It is highly skilled at recovering funds under the Proceeds of Crime Act 2002: it recovered £160 million between March 2021 and March 2024. In January, it successfully secured its first unexplained wealth order as it seeks to recover a Lake district property believed to have been purchased with the proceeds of a £100 million fraud—demonstrating that, wherever criminal assets have been hidden or dispersed, the SFO will explore new methods to recover funds for victims and the public purse.
It is vital that the SFO continues to adapt to the increasing pace of change and technological innovation. Part of that drive is being put into action with faster case progression, stricter case discipline, and the creation of capacity for more investigations through the SFO’s “sharper, faster casework” initiative, as demonstrated by the fact that charges were brought in the Axiom Ince case only 15 months after the investigation was launched.
My hon. Friend the Member for Kensington and Bayswater spoke about financially incentivising whistleblowers. It is absolutely right that, in this environment, the SFO examines new and potentially transformative tools in the fight against fraud and economic crime, including the financial incentivisation of whistleblowers. That is clearly a priority issue for the director, and I note that Jonathan Fisher KC will be considering such incentivisation as part of his independent review of fraud.
As has been widely covered, fraud does not stop at national borders, and it is therefore vital that enforcement activities do not either—that is to say that, when criminals do not observe national boundaries, nor will enforcement. That is why the SFO makes co-operation with international partners a priority. It recently launched a new international anti-corruption prosecutorial taskforce with Swiss and French partner agencies that will strengthen the existing ties with those countries and lead to greater joint working on cases, as well as a greater sharing of insights and expertise.
The SFO will continue to strengthen its key international partnerships to ensure continued, robust enforcement against international bribery and corruption, because it is firmly in our national interests to do so.
Joe Powell
Obviously, there has been some concern about the US Administration’s recent shift on the Foreign Corrupt Practices Act. Will the Minister assure us that the SFO is looking at the impact of that, where there is international bribery across jurisdictions? I am not expecting a political judgment about whether that is the right or wrong thing to do, but we must keep our eye on the impacts, particularly in developing countries.
The Solicitor General
My hon. Friend is absolutely right to highlight that key point, and I can confirm that the SFO is keeping a close eye on it in the context of its other international partnerships.
Hon. Members rightly highlighted disclosure, which is another key area in which the SFO is driving forward change. Managing increasing volumes of data and complying with disclosure obligations have become increasingly challenging in the data-heavy cases that the SFO handles. In 2023, 25% of the SFO’s operational budget was spent on delivering disclosure operations. The SFO is harnessing machine learning technology to enhance the efficiency of its disclosure exercises. Technology-assisted review has been successfully trialled on a live SFO case that is going through the courts, and it will be rolled out by operational divisions.
Given the importance of the SFO’s work, I was delighted that in October the Government were able to confirm additional funding of £9.3 million for it, giving it a strong foundation to push ahead with work to deliver organisational objectives. I have talked about the SFO’s role and performance in tackling fraud, bribery and corruption, but I also want to detail the action that the Government are taking more broadly to tackle the threats of fraud and economic crime. We of course take the threat of corruption, alongside illicit finance and kleptocracy, extremely seriously. As a nation with the utmost respect for the rule of law, and indeed for the importance of our security, the UK is leading the fight in addressing corruption.
That is precisely why the Home Secretary, the Foreign Secretary and the Chancellor announced that the Government will publish a new anti-corruption strategy this year, as my hon. Friend the Member for Kensington and Bayswater said. The Government are also developing an expanded fraud strategy, covering themes including enhanced data sharing, monitoring AI, tackling the impact of fraud on businesses and growth, and improving victim support and public awareness. We currently aim to publish that strategy, which is being developed by the Home Office, by the end of the year.
The Government have also published guidance to support organisations in understanding the new corporate criminal offence of failure to prevent fraud. The SFO is committed to making full use of the offence once it comes into force in September.
Lastly, I will make three very brief points in response to issues raised by Members during the debate. First, I will explicitly note the Government’s action to better protect taxpayers when it comes to public sector fraud in the form of the Public Authorities (Fraud, Error and Recovery) Bill, which it is estimated will save the taxpayer £1.5 billion over the next five years.
Secondly, with regard to the overseas territories, it is vital that we work closely with them to combat fraud, financial crime and money laundering, and on the enforcement of UK financial sanctions. We need to see greater transparency when it comes to company ownership, assets and real estate, which will be taken into account in the forthcoming anti-corruption strategy. Thirdly, I am more than happy to take forward the co-operation with Northern Ireland that was mentioned to deal with the very human side of fraud that the hon. Member for Strangford (Jim Shannon) raised.
In conclusion, it is clear that the world of fraud and economic crime continues to evolve rapidly, both in the UK and globally. It is vital that we adapt at the same pace to effectively crack down on this persistent threat to our economy and our prosperity, and that is something that the Government are 100% committed to doing.
David Pinto-Duschinsky
I thank you, Sir John, for chairing this debate and all hon. Members who have taken part in it for their thoughtful and stimulating contributions.
Given the time constraints, I will make just three observations about the points that have been covered today. First, this debate has thrown into sharp relief the appalling and devastating impact of fraud. I was struck by the points made by my hon. Friend the Member for Clwyd North (Gill German), who powerfully outlined the impact of fraud not just on individuals’ finances, but on their mental health. She articulated a crucial point, namely that fraud is not just a crime, but a form of exploitation. Her points were powerfully echoed by the hon. Member for Strangford (Jim Shannon), who, as ever, was a forceful advocate for his area. He brought home to us not just the impact on individuals—it was really striking that everyone who spoke in the debate talked about the depth of that impact—but the particular dynamics in Northern Ireland.
My second point is that this debate has focused on a few key potential solutions. A number of Members talked about the massive progress that the SFO has made, and it is important that that progress is acknowledged —indeed, it was really cheering to hear from the Minister about the progress being made across a broad front. Many speakers also emphasised the importance of co-ordination between agencies. My hon. Friend the Member for Kensington and Bayswater (Joe Powell) said how important it is that existing agreements are effectively enforced. I was also struck by the point that my hon. Friend the Member for Ealing Southall (Deirdre Costigan) made that we must ensure consistency of enforcement.
My third observation—the key one—is that there has been real consensus in this Chamber about the devastating impact of economic crime and the absolute necessity of tackling it. I hope that we can build on that consensus as we collectively confront the challenge that we face.
Question put and agreed to.
Resolved,
That this House has considered the Serious Fraud Office and tackling fraud and economic crime.