Groceries Code Adjudicator Bill [Lords]

Debate between Ian Murray and Daniel Kawczynski

Monday 19th November 2012 Commons Chamber

[Ian Murray]

The hon. Gentleman brings a great deal of experience of the sector to the House. I am not convinced that the public will be surprised if a major retailer engages in a particular practice and is named and shamed in a national newspaper or trade magazine. If the adjudicator does their job properly, we would hope there would be no one to name and shame. It will help the system to operate properly if we can use the stick and say that retailers could be hit with financial penalties. If they can be hit with such penalties, naming and shaming become almost irrelevant.

[Daniel Kawczynski (Shrewsbury and Atcham) (Con)]

Certainly, when I have spoken with supermarket chief executives I have challenged them. They sometimes take out full-page newspaper adverts to highlight fair trade for third-world growers. Does he agree that we want to get to the stage where supermarkets are highlighting the fair trade they are doing with British suppliers?

[Ian Murray]

Absolutely. The hon. Gentleman makes a critical point, but the point is the full plethora of sanctions in the Bill. All we are talking about is what is in the Bill; we are not saying that fines could not exist in the short to medium term at the behest of the Secretary of State, but if he thinks that fines might be required in the future, why not just put them in the Bill?

--- Later in debate ---

[Ian Murray]

That is a wonderful point, and I think we now have our second candidate for the Committee—or given that helpful comment, perhaps not. The hon. Gentleman is right: there is a conflict of interest. The hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) mentioned the large full-page adverts that supermarkets produce relating to fair trade. Indeed, if it is about advertising revenues, there will be a conflict of interest, and I hope that the adjudicator would take that into account. If fines were included in the Bill, an adjudicator could balance up what would be the best punishment for a particular crime and deal with it in that way. By hamstringing the adjudicator from day one on fines, we are merely pushing down some of those routes by which questions would have to be answered.

Let me run through some of the issues relating to the adjudicator potentially being toothless, which is why we are calling for fines to be available to the adjudicator from day one. We are not the only people who are calling for that. In January 2009, the hon. Member for Somerton and Frome (Mr Heath)—the current Minister with responsibility for agriculture and food, who has been chuntering on about fines for the past few minutes—said, when he was an Opposition spokesperson all those many months ago, that there must be “an ombudsman with teeth” to ensure that farmers get a fair deal. I wonder whether he and his colleagues will support our amendments in Committee to give the adjudicator such powers, because they did not support them in the other place. He is not the only one. The hon. Member for Tiverton and Honiton (Neil Parish) said last year:

“I agree with my hon. Friend and other Members that the adjudicator must have real teeth so that they can take action to stop abuses.”—[Official Report, 5 April 2011; Vol. 526, c. 240WH.]

Just this weekend, a host of stakeholders wrote an open letter to The Sunday Telegraph. It is worth my quoting from it, because it touches on the crucial part of the Bill:

“Sir, Having got the Groceries Code Adjudicator Bill this far, the government will be scoring an own goal if it denies the supermarket watchdog the one tool that will make it effective: the power to levy fines from the outset. The evidence of supermarkets’ unfair treatment of suppliers—which includes farmers both here and in developing countries—is all too clear. Watering down the bill so that penalties only go as far as ‘naming and shaming’ will not be a sufficient deterrent and the Adjudicator risks failing in its job to hold supermarkets to account.”

That letter was signed by ActionAid UK, the National Farmers Union, the Federation of Small Businesses, the Campaign to Protect Rural England, the National Federation of Women’s Institutes, Traidcraft, the Tenant Farmers Association, the Country Land and Business Association, the Independent Fruit Growers Association, the Catholic Agency for Overseas Development, Friends of the Earth, War on Want, RedOrange and Great Glemham Farms. Clearly, then, there is a great movement to provide for fines in the Bill, and I cannot understand why the Government have not listened to the letter.

We are in danger of creating this toothless tiger—I have “tiger”, but it could be a dog, I suppose. Let us imagine an old-fashioned circus act. Where is the fear in a circus clown putting his head into a tiger’s mouth, only to have his neck viced by the tiger’s gums? There is no way we can put fear into the hearts of the supermarkets with an adjudicator that does not have the power to fine. Providing for fines in the Bill does not mean that fines should be imposed on retailers randomly—I hope there would never have been sufficiently serious breaches to require the invoking of the power—but allowing the adjudicator to have the power easily to hand might influence the retailers’ actions and go some way in preventing serious breeches of the code.

Clause 9 gives the adjudicator the power to fine retailers, subject to permission from the Secretary of State. Even if the adjudicator decided that the power to fine was necessary, several considerable hurdles would have to be jumped. First, the adjudicator, who would be best placed to decide whether fines were appropriate, would have to publish guidance in deciding the amount of financial penalty—a point that goes back to the Minister’s intervention. Secondly, once that had been given to the Secretary of State, he would have to consult stakeholders on the guidance. Finally, a statutory instrument would have to be presented to Parliament and passed by affirmative resolution. This hugely drawn-out process will do nothing to instil much-needed confidence in farmers and small businesses that might have been severely affected by a breach of the code by a retailer that the adjudicator thinks merits a fine.

We must trust the adjudicator to issue remedies fairly. By not providing in the Bill for the power to fine, the Government are in danger of scoring an own gaol, as said in The Sunday Telegraph letter from ActionAid. Indeed—if I may continue with the footballing analogy—a red card could be issued. It would be available to the adjudicator in the case of a penalty, but it would not be in its breast pocket, where it could be issued fast and effectively against the offender if necessary. Essentially, we are saying in the Bill that if the referee wants to issue a red card, he will have to ask the Football Association, after which the FA will consult on its use and then pass a new law to allow it to be used. I much suspect that the match would have finished many months before the decision is made.

The Business, Innovation and Skills Committee and the Environment, Food and Rural Affairs Committee have also said that the power to fine should be provided for in the Bill. Furthermore, in a recent joint statement, the Grocery Market Action Group, ably chaired by the hon. Member for St Ives and made up of 23 organisations from across the farming, international development, environmental and small business lobbies, called on the Government to give the adjudicator the power to levy fines. I ask the Minister, again, why she is not listening to the entire industry when it comes to fines.

I turn to the intermediaries. At the bottom of all this lies the nagging doubt that many of the alleged abuses will not be resolved even by the presence of a perfectly functioning adjudicator, because the problem is in the code itself, not its implementation. Central to this idea is the code’s limited scope—this point has been raised by voices across the sector—as much of the bad practice occurs at the level of intermediaries not covered by the code and therefore the adjudicator. For example, let us imagine that a supermarket has a ready meal supplier, but decides it wants fewer carrots in the ready meal and goes through the proper GSCOP processes to remove carrots. The supermarket can do that legitimately under the code, and that is only right. However, the ready meal supplier will buy those carrots from a carrot supplier, and could therefore dismiss one of its suppliers of carrots or change the terms of the contract without any recall to the groceries code. In that example, nothing would have gone wrong according to the groceries code, so we could see suppliers further down the chain being harmed quite considerably by the decision of an intermediary.

Equally, that binary view of the market seems inappropriate when the supplier is a huge manufacturer of branded goods, such as Unilever, Kraft, Nestlé or Coca-Cola, whose turnover may exceed that of even the retailer. We are protecting the relationship rather than the carrot producer further down the chain. The adjudicator will be required to recommend changes to the code to the Office of Fair Trading, yet the British Retail Consortium claims that the OFT has taken no action to offer feedback on the annual reports that its members have already submitted under GSCOP on their implementation of the code or even to publish them.

Many farmers and growers are currently not covered by the code, as they do not directly supply the 10 largest retailers. Nevertheless, they are often the ultimate victims of unfair behaviour and the transfer of risks and costs. We hope that ensuring that retailers comply with the code will resolve those issues. If, despite the adjudicator’s best efforts, those problems persist, primary producers will continue to struggle to make a fair return for their enterprises and consumers will continue to suffer from the subsequent lack of investment. That is why it is critical that the adjudicator should have the power in the Bill to keep the code live, to enable such issues to be dealt with if the adjudicator deems that to be necessary. May I ask the Minister what consideration she has given to those concerns and whether she will come back to us in Committee with an assessment of the issues affecting intermediaries?

Finally—

[Daniel Kawczynski]

The hon. Gentleman, who appears to be moving towards the end of his speech, mentioned carrots. The British carrot industry is actually doing quite well, but I very much hope that he has spent some time thinking about how the adjudicator will help our British dairy industry, which is on its knees, with many farmers going out of business every month. In the last Parliament I set up the all-party group on dairy farmers in order to fight for them. Our main report suggested that we should have a grocery adjudicator Bill. Will he spend a few moments talking about our dairy farmers?

[Ian Murray]

The hon. Gentleman raises a critical point, because naming and shaming did not work for the dairy farmers. What worked were blockades and sanctions in getting their points across to the Government. I will perhaps highlight the dairy industry and how the groceries code adjudicator should be able to help, but he makes a critical point about how the Bill could be seen as toothless, because the dairy industry had to blockade and withhold its services to get any action on how the supply chain worked. It neatly follows that the debate needs to be on where the code sits in the legislative framework.