With this it will be convenient to discuss the following:
New clause 2—Supplier turnover—
‘Suppliers are not allowed to refer cases to the Adjudicator and cannot have cases referred on their behalf if their turnover exceeds £1bn per annum.’.
New clause 3—Sunsetting—
‘This Bill will expire in seven years from the date it receives Royal Assent.’.
New clause 4—Supplier headquarters—
‘Suppliers are not allowed to refer cases to the Adjudicator and cannot have cases referred on their behalf if they have their principal headquarters outside the European Union.’.
New clause 5—Supply source—
‘The provisions of this Act shall not apply to any supplies which are produced, manufactured or processed, in whole or in part, outside the European Union.’.
Amendment 28, in clause 12, page 4, line 32, at end insert—
‘(a) the nature and type of arbitrations to be conducted under section 3 including:
(i) the law applicable to an arbitration; and
(ii) where the arbitration should be conducted.’.
Amendment 3, in clause 13, page 5, line 18, at end insert—
‘(2) The Office of Fair Trading shall be required to publish a response to the Adjudicator on the recommendations set out in subsection (1) explaining whether they will be acted upon or not.’.
Amendment 30, page 5, line 18, at end add—
‘(3) In assessing changes that could be made to the Code, the Adjudicator shall give due consideration to—
(a) the territorial extent of the Code, especially in relation to activities of large retailers outwith the UK, including work done by subsidiaries of large retailers;
(b) whether intermediaries in the supply chain should be covered; and
(c) whether commercial pressures or criminal activity pose risks to consumer interests by potentially compromising standards of food safety, hygiene and food authenticity.’.
Amendment 33, page 5, line 18, at end add—
‘(3) In assessing changes that could be made to the Code, the Adjudicator shall give due consideration to—
(a) the territorial extent of the Code, especially in relation to activities of large retailers outwith the UK, including work done by subsidiaries of large retailers;
(b) whether intermediaries in the supply chain should be covered.’.
Amendment 34, in clause 14, page 5, line 31, at end insert—
‘(4A) The report must include details of any incidents that have come to the Adjudicator’s attention during the reporting period in which breaches of the Groceries Code or commercial pressure on retailers have led or may have led to actual or potential cases of compromised—
(a) food safety;
(b) food hygiene; and
(c) food authenticity.’.
Amendment 35, page 5, line 34, at end add—
‘(c) the Food Standards Agency.’.
Amendment 27, in cause 25, page 11, leave out lines 7 to 12 and insert
‘This Act shall come into force two months after Royal Assent.’.
I do not want you to think, Mr Speaker, that my speech would be better suited to a debate on Second or Third Reading, but it is important that I give some context as to why new clauses 1, 2 and 3—which all stand in my name—are important.
I do not have any interest to declare, but I do have considerable experience that is relevant to the Bill. Before entering Parliament in 2005 I spent the previous 12 years working for Asda. I spent four years working in-store and eight years working at the head office in Leeds, so I have first-hand knowledge of how the supermarket industry works. To be perfectly honest, it works in a completely different way from they way in which people might be forgiven for thinking it works if they listened to previous debates on the matter. We have been given to believe that terrible, shocking, awful, nasty supermarkets care nothing about their suppliers, that their only role in life is to screw their suppliers into the ground and leave them destitute—bankrupt, if we are to believe previous debates—and that the only way to prevent that from happening is to have this ridiculous adjudicator, which is the Bill’s premise. That argument is complete and utter nonsense—that is not how it works at all.
I think that I have raised this point with the hon. Gentleman in the past, but the supermarkets’ power means that they are able to tell suppliers, “Provide this product at this price or do two-for-one offers at your cost, or we will go somewhere else.” Does the hon. Gentleman not accept that that is an unacceptable power in some cases?
I am afraid that the hon. Gentleman is highlighting the misconceptions. The Office of Fair Trading is already able to enforce a grocery code of practice. It is already in place. It is not being introduced by this Bill. The code of practice already exists under the auspices of the OFT. If the hon. Gentleman has any concerns about how supermarkets are operating with regard to their suppliers, he can take his complaint to the OFT and ask it to investigate it. The adjudicator is not supposed to introduce a new code of practice, although we fear that they might. The code of practice already exists. If the hon. Gentleman has evidence of supermarkets breaking the code of practice, I would be happy for him to come forward and tell me about it.
If anybody has evidence of supermarkets breaking the code of practice, let us hear about it today and we can all decide what the best course of action is. However, there is no evidence that the code of practice is being breached.
With all due respect, the hon. Gentleman fails to understand one of the fundamental points that was made in Committee, which is that many of the examples of abuse in the supply chain concern primary producers who are literally afraid of coming forward. That is why the anonymity and protection of those producers is built into the Bill.
I respect the consistent position that the hon. Gentleman takes on this matter. However, he cannot ignore the fact that in 2008, the Competition Commission concluded that supermarkets were transferring excessive risk and unexpected costs to suppliers, and that that was having a detrimental effect not only on the suppliers, but on consumers. It proposed the introduction of the code, but made it clear that on its own, the code would not be sufficient. A referee was needed to enforce it, otherwise no complaints would be brought forward. Simply saying that we have to find the evidence ignores the Competition Commission’s conclusions.
The hon. Gentleman, likewise, has taken a consistent view on these matters. In fact, he has been so consistent that he wanted an adjudicator before a new code of practice had even been introduced, let alone bedded down. He has always been in favour of this solution, even when there was no problem.
The Office of Fair Trading controls the groceries code of practice and is there to investigate any abuses of fair trade within the sector. If the hon. Gentleman has any evidence, he can take it to the Office of Fair Trading. It has all the powers that it needs to investigate any cases. The problem is that there are no such examples.
I am grateful to the hon. Gentleman for giving way again. The Grocery Market Action Group, which I am privileged to chair on behalf of a large number of organisations, gave evidence to the Competition Commission inquiry. That is one reason why it came forward with the clear and firm conclusions that are now being carried forward by the Government. That is the right thing to do.
The hon. Gentleman keeps making the same assertion. He should take the matter to the Office of Fair Trading. That is the body that oversees the groceries code of practice.
I am going to talk about something completely different. The Isle of Wight has three locations where ferries land. It was found that the ferry companies were not being reasonable. They could not find a solution and neither could anybody else. Exactly the same thing that Andrew George is describing with food is happening with ferries.
My hon. Friend is a fantastic representative of the people of the Isle of Wight. However, I would not want you to tell me that I am going off course, Mr Speaker, so if my hon. Friend will forgive me, I will avoid the ferry analogy and stick to the adjudicator and the groceries code.
Let me get to the point that I have been trying to make from the beginning. It is amazing that all the people who would have been happy to vote for the Government’s programme motion to restrict the debate are anxious to intervene as often as possible on my speech, thereby prolonging the debate. I am sure that there an irony in there somewhere.
The genesis of my new clauses is that the idea that supermarkets will flourish by making their suppliers bankrupt is the most ridiculous premise known to man. A supplier does not have much of an outlet for their goods if they are not bought by a supermarket. Equally, a supermarket does not have much of a shop if it has nothing on its shelves to sell. This is not a one-way street. The supermarket cannot manage without the supplier. The nature of the free market means that they have to work together on each other’s terms. If a supermarket upsets Heinz and has no Heinz beans on its shelves, it will not be a supermarket for very long.
The hon. Gentleman makes the point about the markets in which the supermarkets operate, but does he at least concede that the power imbalance between the supermarket and the supplier is often very unfair, and that supermarkets have consistently pushed the costs and risks of doing business on to the supplier at the end of the food chain?
No, I do not agree with that at all. I will come on to this point in a bit more detail soon, but the hon. Lady is forgetting something. The big supermarkets, without a shadow of a doubt, are massive companies that have hundreds of stores in their chains. By definition, a viable supplier to a supermarket chain has to be a very big company as well, otherwise it would not have the wherewithal to supply all the supermarket’s branches. When I get to the detail of my new clauses, I will talk about the thresholds that the Bill should apply. She will see that far from it being the case that vast supermarkets are being awful to very small suppliers, many of the suppliers are bigger than the supermarkets that they are supplying. She ought to bear that in mind.
My hon. Friend misunderstands the whole supply chain in the UK. There are organisations that provide hubs to supply supermarkets, but those hubs are supplied by very small primary producers such as family firms. Those firms are microscopic in comparison with the supermarkets.
My hon. Friend makes a good point. If he has a big problem with the middleman, so to speak, for example in the dairy industry, he should pursue his complaint with the middleman, rather than having a go at the supermarket.
Mark Tami made a point about special offers. There is a view that supermarkets have been forcing suppliers against their will to do special offers, such as buy one, get one free or buy three for two. Let me tell the House, as somebody who has worked in this environment, what happens in the real world, rather than in the invented world that people want to talk about.
My hon. Friend Mark Menzies is here and he will know what happens as well as I do because he worked for Asda at the same time as I did. He will recall that, before I left, Asda decided that it did not want to do special offers any more and that it would have no special offers in its stores. It did not want any buy one, get one frees or three for twos. It asked its suppliers instead to just sell it the product at an everyday low price and to put what they would have invested in a promotion into providing that price. It was not companies such as Asda that were forcing suppliers to do buy one, get one frees; suppliers were falling over themselves to do special offers in the supermarkets and to get their products in the promotional areas.
Some of those firms have massive marketing budgets. They have marketing budgets that supermarkets would love to have. They use that budget to do offers such as buy one get one free or three for the price of two. They are trying to persuade people who buy Daz for their washing, for example, to move to Persil. To persuade people to do so, they give them a buy-one-get-one-free offer.
I will in a second, because it was the hon. Gentleman who started me off in discussing this misconception in the first place, so I will happily let him come back in.
A special offer such as “Buy one, get one free” on Persil is intended to encourage people to buy Persil in the hope that by the time the special offer ends, they will stick to that brand. It is a way of promoting a brand, and it has absolutely nothing to do with the supermarket.
The hon. Gentleman is talking about very large companies, but does he accept that some smaller companies are almost totally reliant on the supermarkets for their business, and whatever the supermarket says goes? Does he also accept that one thing that we have to recognise from the horsemeat scandal is that if we keep driving prices down, some suppliers will look to cut costs by whatever means they can in order to survive?
I am grateful to the hon. Gentleman, because he seems to have indicated—I will take it as such—that he will support my new clause 1 or new clause 2. He gets to the nub of the point, although I suspect he has not even bothered to read the new clauses, because if he had he would not have led with his chin in the way that he just has.
I am grateful to my hon. Friend for giving way. He has been exceptionally generous throughout his speech.
I have been looking at new clauses 1 and 2, and they seem to be the same except for the level of turnover specified in them. Is that the case, and will my hon. Friend go into some detail on that?
As ever, my hon. Friend is eagle-eyed. The amendments are the same, but the purpose of tabling two was to give the House a choice, because as it happened, I envisaged the interventions that Mark Tami has made.
At Asda, we found huge reluctance on the part of suppliers to stop special offers. They lobbied Asda for ever to do more and more of them to promote their brands, and an everyday low price did not offer them the same marketing opportunity.
I applaud my hon. Friend’s campaign to get his whites whiter, but he must recognise that there is a fundamental difference between a supplier of a brand of washing powder and a supplier of a cauliflower, carrot or parsnip, because it is not possible to brand a carrot or a cauliflower.
Order. I do not wish to interrupt the hon. Gentleman for any length of time, still less to be discourteous to him, but above all I would not want the House to be inadvertently misled. He has no amendments in this group, but he does have a series of new clauses tabled, if memory serves me, in his name and that of Mr Nuttall, namely new clauses 1 to 3, on which I know the House will now focus with beady eyes.
I am grateful, Mr Speaker, and you are absolutely right, as ever. My hon. Friend Mr Spencer seems to indicate that he is prepared to support new clauses 1 and 2, and I will be grateful to him for that. It seems that the longer we go on, the more support I am garnering for my case, so I am encouraged to go on a bit longer.
My hon. Friend will recognise that putting a figure on turnover as suggested in the new clauses would mean that there was a difference between somebody supplying a low-value product such as a carrot and somebody supplying a high-value product such as a bottle of champagne. If we were to put a firm figure in the Bill, as time and inflation moved inevitably forward, that figure would become smaller and smaller in real terms and small and medium-sized enterprises would be dragged over the threshold.
My hon. Friend appears to be indicating that he prefers new clause 2 to new clause 1, which further persuades me that I should seek to press new clause 2 to a Division, if you allow me to do so, Mr Speaker.
The Bill was sold to people on the back of what I believe was a false premise—the idea that supermarkets are screwing suppliers into the ground remorselessly and hoping that as many of them as possible will go bust. It is a completely nonsensical argument.
My hon. Friend asks a good question and strikes at the heart of why the Bill is a nonsense. There is no evidence that the groceries code is being abused. Nobody has yet been able to come forward with any such case. They all give reasons why they cannot do so, but the fact remains that there are none. There is no evidence that the code is not being applied properly.
As the competition authorities have repeatedly found, there is a significant climate of fear in the sector. That is why it is highly unlikely that anyone will use the code until the adjudicator is in place. I ask the hon. Gentleman to look at clauses 4, 10 and 12 in particular, which should give him the reassurance that I believe he is looking for. Potentially powerful suppliers will not abuse their power, because of the reasonableness that is a golden line running through the Bill.
I am grateful to the hon. Gentleman, but again, I do not want to get on to parts of the Bill that are subject to amendments in future groups, so I will resist that temptation.
Supermarkets can operate properly only with the good will of their suppliers. There are often cases in which, for example, a supplier has a problem at short notice—we have seen that recently with the issue of horsemeat. Things have to be taken off sale at short notice and production dries up quickly. That happens when foreign bodies are found in certain products, which have to be taken off the shelves. A supermarket can operate only if it then has other suppliers that it can go to and ask to fill the void at short notice. It goes to another supplier and says, “We’ve got some empty shelves and a lack of supply. Can you come and help us out?” Do people really think that the supplier would help out a supermarket chain that was trying to bankrupt it or screw it into the ground? Of course it would not.
My hon. Friend the Member for Sherwood made the point that the limits in my new clauses may impede small business at some point in future. However, new clause 2 specifies a turnover of £1 billion a year, and all I can say is that, my word, supermarkets must be a force for good if they can turn small and medium-sized enterprises into firms with a £1 billion-a-year turnover. That should be something to celebrate, not to criticise supermarkets for. Suppliers would be delighted to be companies of that scale. I am not entirely sure which ones in his constituency he is thinking of, but if he has any examples of firms that he is worried may have a turnover of £1 billion a year, I would like to meet them to find out what their fears are.
My hon. Friend makes a good point, which strikes at the heart of new clauses 1 and 2. We can argue about the necessity of the Bill, and as far as I am concerned it is not only unnecessary—as my hon. Friend Justin Tomlinson made clear, there are no complaints about the existing code, so it is a solution looking for a problem—but the most unconservative-minded thing that we could possibly see. I have no problem with the Liberal Democrats supporting it, because of course they are always a left-wing tribe, but I am worried that members of my own party are supporting this intervention in the free markets.
Two companies, free to make their own decisions, are making agreements and signing a contract, and then we in the House think that we should intervene in that contract that they have both entered into freely and say, “By the way, we don’t think you should have signed that contract.” I have always thought that companies are more than capable of deciding those things for themselves.
Again, my hon. Friend misunderstands the concept of what the groceries code adjudicator is intended to achieve, which is related to exactly the point that he has just made. When an agreement has been made between two parties, if both sides stick to it there is no problem, but there is a problem when one side tries to change that agreement and goes back on it at a later date.
My hon. Friend makes a good point, and he seems to make the point that the Bill is totally unnecessary. I am not a lawyer—my hon. Friends the Members for Christchurch (Mr Chope) and for Bury North are, and I will happily bow to their expertise—but it seems to me as a layman that if two sides sign a contract and one side then breaks it, there are already laws in place to ensure that the matter can be seen through in the courts. The courts ensure that contracts entered into voluntarily are honoured, so we do not need to do that. The Office of Fair Trading already looks after the groceries code, which deals with these matters anyway.
I am listening carefully to the hon. Gentleman’s point about the role of the courts. Does he accept that the reason why many Opposition Members believe the Bill is important and helpful to farmers, producers, consumers and, ultimately, supermarkets, is the imbalance in economic power and in the relationship between small suppliers and the supermarkets? That the resources available to large supermarkets are vastly disproportionate to those available to small suppliers would be demonstrated in a court process.
This is a red letter day for me, because I now have another volunteer to support my new clause 1 and new clause 2, which I will come on to in a second. The hon. Gentleman may well not have read them and therefore may have intervened inadvertently, but when he actually finds out what is in new clause 1 and new clause 2—if I am ever allowed to get on to that—he will find that he agrees with the point I am making. I do not agree with the principle of the Bill; I am the first to make that clear, and that relates to the purpose of new clause 3. On new clause 1 and new clause 2, the Bill was sold on the premise articulated by the hon. Gentleman—we have big supermarkets that are in a vastly preferential situation to very small suppliers, and that the House should be looking after those very small suppliers where they face problems. That is the premise of the hon. Gentleman’s point, and that is what my hon. Friend the Member for Sherwood is indicating. That is how the purpose of the Bill was sold.
I believe the Bill is totally unnecessary, but I am the first to accept that that is a minority view and that it will go ahead. My new clauses seek to ensure that the Bill hits its given purpose—to look after the small suppliers that my hon. Friend the Member for Sherwood is rightly keen to look after. I do not disparage him for that. Currently, the Bill will not just look after the small suppliers that my hon. Friend and Andy Sawford are so concerned about; it will give an avenue for complaint to all suppliers of supermarkets, whatever their size. All I can do is reiterate the fact that the vast majority of suppliers to supermarkets are huge companies in their own right, and that some of them are bigger than the supermarkets they supply.
Let us make no bones about it. One way or another, the suppliers—whether in terms of special offers, deals or whatever—hope that ultimately the adjudicator will deliver a benefit to their bottom line. Suppliers hope, through whichever avenue, that this will ensure that they have a healthier bottom line.
My hon. Friend must also recognise that the role of the groceries code adjudicator is as a referee. If a large corporation—we all know they exist—is in a trading disagreement with a supermarket, then the supermarket could use the groceries code adjudicator to make sure that it gets a fair deal from that large supplier.
My hon. Friend makes his point. As it happens, I am a Conservative. I know it is an old-fashioned view these days in the Conservative party, but I believe in the free market. Companies such as Asda, Tesco, Morrisons and Sainsbury’s are big enough to look after themselves. They do not need a referee to look after a contract on their behalf against any supplier; big companies are more than capable of doing that themselves. My hon. Friend may take the point that it is the role of Parliament to intervene in every contract negotiation between two companies.
I will in a second. I will deal with this intervention and then give way to the hon. Gentleman. My hon. Friend the Member for Sherwood may think that the role of this House is to intervene in all sorts of contract disputes. Why limit it to supermarkets? There are lots industries where one big person negotiates deals with a smaller supplier; it does not just happen in the supermarket trade. It seems to me that my hon. Friend is arguing for a total business ombudsman looking at every negotiated contract. That is not the kind of country I want to live in; it is certainly not what I consider to be Conservative.
I thank the hon. Gentleman for giving way; he is being very generous. New clauses 1, 2 and 3 lay his cards on the table; essentially, they support the free market option. That is what they are about, regardless of the technicalities. Did he listen to Radio 4, as I did the other morning, when Billy Bragg was being interviewed? He made the comment that when we leave everything to the free market we end up with horsemeat.
I have no doubt that the hon. Gentleman does not believe in the free market—that is why he sits on the Labour side of the House. I have no quibble with Opposition Members agreeing with this nonsensical Bill. He was elected to try and introduce this kind of interventionist nonsense. What I object to is Government Members believing in this kind of stuff. I have no quibble with him believing it.
The hon. Gentleman has painted a picture, which no doubt he actually believes in, where the supermarkets are fair and always have everyone’s best interests at heart. What would they have to fear, regardless of the size of the companies that could take them through this process? According to him, they have never, and will never, do anything wrong.
In a Westminster Hall debate I heard one of my hon. Friends, who is favour of the Bill, make it abundantly clear that he thought the adjudicator would have nothing to do, and that it would, in effect, be a sinecure post. The adjudicator would just be there in case he was needed at some point. It is unnecessary, and I do not believe in creating unnecessary bureaucracies. They end up empire building. They start off small and targeted, but of course once they find out that they have nothing to do they find something to do, even when it is not necessary.
I am going to make some progress. These are the same Members who were happy for the debate on three groups of amendments to be restricted to three hours, and they now want to try to prolong the debate for as long as possible. If they still want intervene at a later point I will try and allow it, but I am sure other Members want to speak.
The Bill was sold on its supposed support for small suppliers. If that is what it is about, let us make that support clear in the Bill. New clause 1 states that the adjudicator could not have cases referred to it by, or on behalf of, companies with a turnover exceeding £500 million a year. New clause 2 is exactly the same, but puts the figure at £1 billion a year. To try to be as helpful as possible, I have done some investigation to try to work out what sort of companies would be covered by my new clauses, so that we can see what we are talking about. Perhaps the Minister will be able to tell us whether the purpose of the Bill is to help those companies.
Returning to my point, suppliers hope the Bill will help their bottom line. If it does not, as a company there is no point to it. That is what they are hoping for. Who pays for an increase in the bottom line of a supplier? It will not be the supermarkets. I am sure the Opposition believe the idea that supermarkets’ profits are going to be eaten into, that there will be some kind of magical transfer of wealth from the supermarket to the supplier, and that the supermarket will give up its profits and it will all feed through and go to the small farmers. It does not work like that. What will happen is this: supermarkets work to very, very low margins. The whole purpose of supermarkets is to cut the price and increase the volume—that is how they look to increase their profit. If there is a benefit to the suppliers’ bottom line it will only come from one person: the consumer. Consumers will end up paying more for their products—that is what the Bill will deliver.
If people want to tell their constituents that they are voting for them to pay more for their products, I am happy for them to do so—at least it would be honest, at least they would be saying, “Look, because we want to look after suppliers, you’ll have to pay more for your shopping, but we think it’s a price worth paying.” I would respect that. It is a perfectly respectable view.
My hon. Friend’s new clauses—on the £500 million and £1 billion thresholds—are incredibly sensible. We are talking about companies such as Procter & Gamble, Heinz, Unilever, Coca-Cola, Nestle, Mars, Kellogg’s—multi-billion dollar, multinational corporations—and it would be indefensible for a groceries adjudicator to spend its time on them, instead of on protecting small independent suppliers. He is absolutely right that it will lead to higher prices, because it will make buyers timid: they will not negotiate hard on behalf of the customer, because they will not want their time taken up with a groceries adjudicator. They will not want the bad publicity, so they will settle for second best, and people will get higher prices. He is on the money.
I am grateful to my hon. Friend, who knows a great deal about this subject.
If people want to transfer money to suppliers either, in their idealistic world, from supermarkets or, in the real world, from their constituents, and if they think that a price worth paying, let them say so. If they reject my new clauses, however, I want them to be clear with their constituents about whom they are benefiting as a result of higher prices and who they will be paying their higher prices to. My hon. Friend Mark Menzies listed a few of them, but I will give a more extensive list, with your permission, Mr Speaker. We are talking about companies such as Esso, which supplies petrol to supermarkets. Do supporters of the Bill really want to help Esso, which is far bigger than any supermarket chain? Is the purpose of the Bill to enable Esso to go along with its complaint to the adjudicator, so that the adjudicator can faff about looking at a complaint from Esso about Tesco or Asda? Is that what the Bill is all about?
The hon. Gentleman’s argument, to which I am listening carefully, seems to have been predicated on the premise that there is no problem, so why on earth would there be a problem between these big corporations?
I will try to put it more simply for the hon. Lady’s benefit: I do not agree with the Bill, as I think I made abundantly clear—I did not want to mislead anybody. If we are to have a Bill, however, I want it to focus on the people I think she had in mind when she decided to support the Bill. If anybody wants to intervene and say that when they had the idea of supporting the Bill, the first company they had in mind was Esso, let them do so.
It pains me to have to point out to my hon. Friend that petrol is not a grocery and is not covered by the code, so he is making a completely spurious point.
I am grateful to my right hon. Friend. Perhaps then we can move on to Procter & Gamble. Would it be covered by the Bill? Is that a spurious point too? When he supported the Bill and was telling his farmers how marvellous it was that the Government were supporting an adjudicator, did he say to them, “By the way, the biggest suppliers will have the greatest opportunity to benefit and could clog up the adjudicator with complaints before you get your own complaint heard, and one of those companies is Procter & Gamble”? Did he tell them that that was the sort of company he had in mind? No, I do not think he did.
Again, my hon. Friend is misrepresenting the role of the groceries code adjudicator. When a deal is done between two suppliers, whether large or small, as long as it is stuck to, there will be no role for the adjudicator. Those large companies can do their negotiations, and those deals will stand fast. The adjudicator would get involved only when the supermarket goes back and tries to change the original agreement. That is its role.
So my hon. Friend does not think that Procter & Gamble is big enough to look after itself. He thinks poor little Procter & Gamble—that poor mite—needs a state adjudicator to intervene on its behalf because it might find itself at the wrong end of an unfair negotiation with a supermarket.
We are on the side of David, not Goliath. It seems eminently sensible that my hon. Friend’s new clauses would focus attention on the genuine David, not on supporting the real Goliath.
I am grateful to my hon. Friend. We were told that that was exactly the purpose of the Bill in the first place. When it was being sold to us, nobody said it would benefit Procter & Gamble. As has been rightly said, if we want the adjudicator’s time freed up to look after the small suppliers, we do not want its time being taken up by these big multinational corporations.
As it happens, I am going to say something that might seem controversial, but to be perfectly honest I do not particularly care. If supermarkets are going around screwing Procter & Gamble into the ground to get the cheapest possible price to pass on to their customers, I say, “Good on them!” Procter & Gamble’s profits will not be massively impacted on by the supermarkets. I want supermarkets to negotiate robustly with big companies in order to get prices down for my constituents. The Labour party is supposed to support the working person—the people on fixed incomes—but the early indications are that its Members will vote to protect Procter & Gamble’s interests over the interests of their constituents. What on earth has the Labour party come to, when it sides with Procter & Gamble?
It is not just Procter & Gamble, however. We have Harvest Energy, Green Energy Fuels, Imperial Tobacco, Arla Foods and Gallaher—the top suppliers to supermarkets. The naive people who think that the adjudicator will not empire build are living in cloud cuckoo land. If they think that the adjudicator will not look into all sorts of things, they obviously have no experience of these matters.
Order. I am slightly concerned that the hon. Gentleman has been diverted from the path of virtue on which he embarked some minutes ago. He was talking specifically about his new clauses, but he has since taken a series of interventions that, in a sense, have caused the debate to elide into a Second Reading consideration of the merits or otherwise of adjudicators and so on. I know that he will want to return to the terms of his new clauses, on which, of course, he can expand at such length as he sees fit, as I am sure he will. I call Mr Philip Davies.
Just before that, I call Mr Huw Irranca-Davies on a point of order.
On a point of order, Mr Speaker. It might be of some help to Philip Davies and to you, as Speaker, to be aware that the new clauses refer specifically to the groceries supply code, but many of the elements that he is introducing into his speech have no connection with the groceries supply code. The companies to which he refers might supply supermarkets, but they do not fall within the remit of the groceries supply code.
I am grateful to the hon. Gentleman. I am sure he is seeking to be helpful, but I thought I had myself made the point perfectly adequately that Philip Davies would wish to return to the terms of his new clauses, which are themselves entirely orderly.
My hon. Friend is for ever an optimist, but I am afraid that, in my experience, logic is not usually the great winner in these debates. Unless the Government come up with an idea themselves, they appear reluctant to accept anybody else’s amendment, simply because they did not come up with it themselves.
Do we think the Bill should be directed at Walkers snack foods? What about Coca-Cola? That is a poor, small firm that needs looking after when it negotiates with supermarkets!
My hon. Friend refers to Walkers snack foods. Potatoes are among the raw materials that that company uses a lot of, but there is nothing in the Bill that would protect the suppliers of potatoes to Walkers.
My hon. Friend makes a good point. The Bill would still allow Walkers to screw the potato suppliers—who provide the raw materials—into the ground as much as it liked, but it would prevent Asda, for example, from trying to negotiate the best deal with Walkers for its crisps.
I have mentioned Coca-Cola. I also wonder whether Heinz Ltd would really need to take a complaint to an adjudicator. Is Heinz not big enough to look after itself? Why on earth are we passing legislation to intervene in disputes between big supermarkets and big suppliers such as Heinz, Diageo, United Biscuits, Kraft Foods, Nestlé, Premier Foods, Fullers Foods, Britvic Soft Drinks Ltd and Mars? Are we really saying that the House must set up a state regulator to intervene in negotiations or disputes between massive multinational companies? Those companies have recourse to the courts if they feel that a contract has been breached. Are we really saying that Heinz does not have the wherewithal to take a case to court if it feels that a supplier has dealt with it unfairly? Does anyone want to stand up and say that Heinz does not have the wherewithal to take such a case to court? Who wants to make that point?
I will happily challenge my hon. Friend on that point. Those large companies have the ability to negotiate deals, and those deal will be stuck to. The groceries code adjudicator will not get involved in those kinds of negotiations. The adjudicator will have a role to play when a supermarket tries to go back on a deal and change it at a later date.
We all know that that is the case, but my point is that if companies such as Heinz, Walkers, Nestlé or Coca-Cola feel that a supermarket has breached a contract with them, they can take the case to court. We do not need the state to set up an adjudicator to decide which side is right. As it happens, I am quite relaxed about supermarkets trying to screw those big suppliers into the ground to get the best possible deal. Those suppliers are making massive profits, and I would prefer to see that money benefiting my constituents rather than adding to the bottom line of those multinational companies.
The hon. Gentleman is, in truth, arguing for the abolition of all the competition authorities. That seems to be the direction that his argument is taking. In fact, clause 4 makes it clear that the decision to investigate would be made if the adjudicator had reasonable grounds for suspecting a breach of the code, and clause 10 makes it clear that any supplier who brought a complaint that was “vexatious or…without merit” would be required to pay some or all of the costs involved. Paragraph 48 of the Competition Commission’s final report stated that it envisaged that the groceries code adjudicator
“would prioritize the resources of its office to focus on those disputes and complaints concerning suppliers without market power over and above those concerning suppliers of major branded products that have market power.”
It is clear that such decisions must be made by the adjudicator, and I am perfectly content that the Bill has the capacity to ensure that that description—
Order. I am loth to interrupt the hon. Gentleman in mid-flow, but interventions seem to be becoming progressively longer. There is no problem about their frequency, but there is about their length. We must now hear from Mr Philip Davies.
I am grateful to you, Mr Speaker.
Andrew George misreads the Bill, but I will come to the point about the recovery of investigation costs when we debate the other groups of amendments. The Bill does not say that those costs have to be recovered in that way; it says that they “may” be recovered. He seems to have huge faith in allowing the adjudicator to do just as it pleases, but I do not want it to do just as it pleases. I want it to follow strict rules that will prevent it from empire building, and that is part of the purpose of my new clauses.
The adjudicator will clearly have finite amounts of time and resources. Surely it would be better for it to focus on the smaller suppliers who do not have the confidence or the resources to take on the supermarkets.
My hon. Friend is absolutely right; that is the purpose of the Bill. The big multinational companies that I have mentioned are the biggest suppliers to the supermarkets, in that they supply the biggest volume of the 40,000 or so products on sale in supermarkets at any given time, and they therefore have the most scope to benefit from the Bill. Why on earth should we wish to enable them to do that? I do not know the answer, and no one has yet argued that Heinz or Nestlé cannot afford to take their contractual disputes to court or explained why we need an adjudicator to act on their behalf. They do not need an adjudicator; they are perfectly big enough and bad enough to look after their own interests without needing an adjudicator to step in, and so are the supermarkets.
When there is an agreement between a huge multinational supermarket such as Asda, which is owned by Wal-Mart, and a huge multinational supplier such as Heinz or Walkers or Nestlé, let them get on with it. If there is then a row about who has broken a particular rule, let them get on and sort it out themselves. Believe you me, Asda needs
Heinz products in its stores just as much as Heinz needs Asda to sell its products. It is a perfectly even arrangement between the two; the one could not manage without the other. Let them sort the disputes out between themselves. Why on earth are we legislating to get involved in those disputes? That is completely ridiculous. Members are arguing that the introduction of a groceries code adjudicator will help small suppliers, and supporting new clauses 1 or 2 will give them an opportunity to make it abundantly clear to the House that the Bill is designed to help the smaller suppliers to supermarkets.
I want to explain why I have used the figure of £500 million in new clause 1 and £1 billion in new clause 2, and why—with your permission, Mr Speaker—I shall put new clause 2 to a vote. I have listed some of the suppliers that would be covered by the £1 billion figure in new clause 2. The adjudicator will deal with retailers with a turnover of more than £1 billion. The Bill is effectively saying that other people need protecting from such huge organisations, and that they are too big not to have an unfair advantage in any contract negotiation. The Bill therefore puts in place a kind of backstop. My point is that if a supermarket with a turnover of £1 billion a year is deemed big enough to look after itself without any extra help or support, surely suppliers with a similar turnover are in exactly the same situation. If a supermarket with such a turnover is deemed too big to be trusted to negotiate properly, why would a supplier with a similar turnover need the protection of the adjudicator? Where on earth is the logic in that?
We have all been listening carefully to the hon. Gentleman, but I want to make two important points. First, his proposals are not backed by the industry itself. The Food and Drink Federation and the British Brands Group do not support the proposed restrictions in his new clauses. Secondly, although I have some sympathy with his wish to move further down the supply chain, his proposals were not accepted in Committee.
That is an extraordinary intervention. The hon. Gentleman is saying that he is not minded to support my new clauses because the representatives of the food and drink industry, who represent massive suppliers, do not support them. The Opposition are not going to support them because they want to look after the interests of those massive organisations that pay the bills of the Food and Drink Federation. Can the hon. Gentleman not make a decision for himself on this matter? Has he not got the capability to understand the equation for himself? I will make it simple for him. Why do suppliers with a turnover of more than £1 billion need help, if a supermarket retailer with a turnover of more than £1 billion does not need help? It is a nonsensical position for anybody to hold.
I notice that we have two Liberal Democrat Ministers on the Front Bench: they are used to holding nonsensical positions, and I do not doubt that they are going to stick to them; they have made a political career out of nonsensical decisions. I ask Conservative Members—people who, for goodness’ sake, have some common sense—to think about the issue and what we are voting for. I ask Labour Members to think about it, too. Who is it that they were sent here to represent? Were they sent here to represent the interests of Mars and Nestlé? No. Surely they were sent here to represent the interests of their constituents, who go to the supermarket week in, week out, who are worried by the cost of living, and who do not want to see prices put up unnecessarily to add to the bottom line of Nestlé. The whole thing is completely nonsensical. My new clause would ensure that the Bill serves the purpose for which it was intended.
Let me touch briefly on new clause 3, after which I will allow others to contribute to the debate. New clause 3 provides a sunset clause for the Bill, so that it would expire after a certain period of time. The appropriate length of time can be debated, and such decisions are rather arbitrary. I chose a period of seven years to give a chance to see how the Bill works in practice.
My hon. Friend Mr Spencer has made the point that if supermarkets stick to their agreement, there would be nothing for the adjudicator to do. We would be paying her a huge salary to do nothing, which seems a bizarre situation, but there we go. On the other hand, there might be lots of complaints and everything could be working fantastically with everyone thinking that the Bill has been a great triumph, with even small suppliers thinking that it has been great, and all the rest of it. Well, in seven years’ time, we can let the Bill expire and decide for ourselves whether it was a good thing or a bad thing. We can also decide whether the threshold I favour is worth putting back in again if we agree to it today or worth inserting if we do not. We will be able to see how it works in practice. If all my fears turn out not to be a problem, it can all be resolved when the Bill is looked at again in seven years’ time. If my fears are proved to be correct and people accept that some of my concerns were true, it could equally be dealt with at that particular point. Why box ourselves into something that is a complete waste of time? Let us have a sunset clause, so that we can deal with any anomalies and the Government can start from scratch with a future Bill that is more fit for purpose.
I am considering whether to support new clause 3. Am I right in understanding that if, in seven years’ time, the post of adjudicator turns out to have been superfluous, it would just fade away, whereas if it has been a good measure, Prime Minister Cameron would, in his 21st year or whatever, be able to reintroduce it?
My hon. Friend is right. He knows as well as I do that if such a sunset clause is not introduced, and if the Bill is shown to be a completely unnecessary waste of time and an expensive bit of bureaucracy that we could well have done without, it will carry on endlessly. Nobody will have the guts to do anything about it. The provision will provide a mechanism for getting rid of the legislation if it is seen to be unnecessary. If it were seen to be necessary—who knows, I do not think it will, but it might—people could bring it back and would be anxious to get the legislation in place again. My new clause 3 will stop some ridiculous white elephant carrying on in perpetuity, when it is seen to be unnecessary. I say in passing that it would be sensible if more Bills had sunset clauses included in them, so that we can analyse whether they have been worthwhile and have done what was said on the tin.
My intention in this group of amendments has been to focus on new clauses 1 and 2. With your permission, Mr Deputy Speaker, I would like to divide the House on new clause 2, which would put the same £1 billion threshold on suppliers as applies in the Bill for the retailers themselves. There seems no good reason to me why the same figure should not apply to both sides of the equation. A Division will enable us all to see who has gone into the Lobby to look after the interests of big multinational suppliers and who effectively wants their constituents to pay more for their shopping to benefit the bottom line of those companies.
I do not believe I was sent to Parliament to boost the profits of Heinz, Mars or Nestlé, who are perfectly capable of looking after their own interests. I want my constituents to pay the lowest amount necessary for the products they buy in the supermarket. They are already struggling with the cost of living. How ridiculous it would be if we were to put legislation in place that made them pay more than they would otherwise need to pay for their shopping. I hope that the Government will see sense and realise that the same equation should apply on both sides of the supply chain—to retailers and suppliers. I hope they will think about that and listen to reason. If they do not, I hope the House will force them to do so.
I shall provide a brief background to amendment 3 and to the other amendments tabled in my name.
I am chair of the Bakers, Food and Allied Workers Union parliamentary group. We meet that union, which represents the workers in the baking and confectionary industry, on a regular basis. We have had a long campaign over a number of years to express our concerns about below-cost selling in the baking and confectionary sector. The concern relates to the Bill’s general provisions, but because I raised it on Second Reading, I shall not delay us further except to explain that the same pressure suppliers have felt from supermarkets has had its effect on the baking industry, as it has on farming and elsewhere.
The pressure to cut overall costs has reduced the quality of the product. Concerns have also been expressed over the years about the safety of ingredients. Some consumer organisations have pointed out the deterioration of the quality of bread as a result of the amount of water introduced into bread production, which has undermined the nutritional benefits from eating bread and has had an impact on the population’s health.
The anxiety is that the same sort of pressure has been applied to the baking industry. The result for members of the bakers’ union has been reductions in wages and job cuts, and the reduction in overall pay means that this sector has significant levels of low pay; in fact, it is one of the most low-paid sectors in our industry at the moment. Another impact of that pressure is deteriorating working conditions and terms of employment. Bakers have expressed the concern that skills within the sector have been undermined, too. With people’s potential to be upskilled undermined, it means further pressure on wages.
These are vulnerable workers, therefore, and they are fearful of raising their concerns about what is happening in this sector. That is why the bakers’ union has combined with employers and others to welcome this Bill. It feels that it gives its members protection when they blow the whistle on some of the supermarket practices that lead to deteriorating conditions in the industry. That, then, is the background to the amendment.
The bakers’ union welcomes clause 13, which enables the adjudicator to recommend to the Office of Fair Trading changes to the code as issues arise over time. It is important, however, that this process is seen to be open and transparent. That is what amendment 3 is designed to achieve. It would simply ensure that the Office of Fair Trading is required to publish its response to the recommendations in the groceries code adjudicator’s review. The response should explain whether the OFT has acted on those recommendations. The amendment would introduce a process of openness and transparency that will lead to accountability. It would place a statutory duty on the OFT to make its functions patently open to scrutiny from the general public and the industry itself.
I expect that my hon. Friend Ian Murray will speak about amendments 34 and 35, which relate to the wider concern that we now feel about the nutritional content of some of the consumer goods that are placed before us. My amendment responds to some elements of that concern by proposing that recommendations whose implementation would improve the nutrition of our country and the operation of a particular food sector are in fact implemented, or reasons are given for the fact that they are not being implemented.
When Labour Members tried in Committee to strengthen the relationship between the adjudicator and the Office of Fair Trading, we were given very unsatisfactory reassurances. We were told, for example, that the adjudicator could use the publicly available telephone line to contact the OFT. Any measures that strengthen that relationship must surely be welcome.
I followed the dialogue that took place in Committee and read the reports of it. That has been one of the joys of my life over the last couple of months. The Minister said that an amendment such as mine was unnecessary, and would not give the Bill any additional force. She suggested that if the OFT repeatedly failed to act on the adjudicator’s recommendations, two routes would be available. Select Committees, she said, would have “a role to play”, and it would also be possible for any supplier to conduct a judicial review of the OFT, in particular to establish whether it was behaving reasonably or in relation to its duties under the Enterprise Act 2002.
I shall not comment on the hotline issue mentioned by my hon. Friend Andy Sawford, because I thought it too bizarre, to say the least. I took it to be just part of the knockabout of Committee stages in which Members engage just to keep themselves awake. I shall, however, deal with the issue of the judicial review. Of course it is open to any supplier to initiate such a review, but it is virtually impossible that it would succeed on reasonableness grounds, especially in the context of the OFT’s powers and the broad range of the adjudicator’s role. I do not think that it would be a constructive process. Moreover, the time required for it would not deal with the immediacy of some of the adjudicator’s recommendations.
As for Select Committees, of course they have a role, but they have no directional force. They can recommend, but their recommendations are often ignored, or there is a long gestation period between the initiation of a review and the acceptance and implementation of recommendations in the consequent report.
I understand the reason for the Minister’s responses in Committee. I realise that she does not want to over-bureaucratise the process. However, I think that the world has changed and moved on since the Committee stage. There has been, for instance, the issue of public concern about the content of consumer goods following the horsemeat scandal. People expect the Government to be decisive, as well as open and transparent, in tidying up the current mess, but in the long term they expect a system that will monitor the operations of the supermarkets and other parts of the grocery supply chain. It is necessary to ensure that when we have a structure in place it operates openly, transparently and effectively, and that is what my amendment seeks to do.
If we cannot give the OFT a duty to report on whether or not it has acted on a recommendation from the groceries code adjudicator or has taken it into account, that demonstrates the weakness of the Bill. The amendment does not even require a detailed report giving reasons for the OFT’s decision, although there will probably be a public clamour for such a requirement following the rejection of a recommendation. This is a simple, minor amendment, which I think the House would be expected to support in the current climate. For that reason I intend, if time permits, to press it to a Division.
I listened carefully to what was said by my hon. Friend Philip Davies. I fully accept the logic of saying that there are some very large food producers in the world whose market dominance is such that they do not need the protection of the Bill. However, I think that a careful reading of it demonstrates that it will ensure that the instances cited by my hon. Friend will not actually come to pass. I remind him of my earlier point—which was endorsed, in different terms, by Huw Irranca-Davies—that this was purely about the groceries code adjudicator. Many of the businesses listed by my hon. Friend may be only partly involved in groceries. For instance, a number of the products of Procter & Gamble, about which he spoke at length, are not grocery products. Moreover, the trading arms of big multinational conglomerates are likely, as individual suppliers, to be much smaller organisations.
Let me now deal with a point of principle raised by my hon. Friend. He sought to pour scorn on those of us who are also Conservative Members, but who support the Bill. He said that he was entirely in favour of a free market. I too am in favour of a free market, but I also believe in a fair market. If we took the definition of a free market to its extreme, which my hon. Friend came close to doing, we would end up with a single retailer and a single supplier, because that it is the eventual aim.
The game of Monopoly is the arch-example of a total, unfettered free enterprise. I strongly believe, not that markets must be regulated, but that when there is a clear imbalance in a market, some element of fairness is necessary. I remind my hon. Friend that one of the great market philosophers, Adam Smith, said that a true market was one in which there were equal numbers of suppliers and purchasers.
I will come to that specific point, but let me first deal with the more philosophical point raised by my hon. Friend the Member for Shipley, who made clear that he did not consider those of us who share these Benches with him to be true Conservatives if we supported the Bill. I wish to rebut that view. The Bill is necessary because—as has just been suggested by my hon. Friend Justin Tomlinson—notwithstanding what was said by my hon. Friend the Member for Shipley, there are plenty of examples of supermarkets exceeding what I believe to be fair terms of trade.
During my time as a Minister, I had a number of meetings with supermarket chief executives, either alone or in a group. Most of them—and, indeed, other senior directors and officials from supermarkets—would argue, as has my hon. Friend the Member for Shipley, that there is no need for the Bill, and that they are already doing everything fairly, above board and properly. I can only conclude that many chief executives do not know what is being done in their names by people operating much further down the chain. Reference has been made to buyers. Since the code was introduced in 2010, there have been numerous examples, some quite recent, of suppliers being verbally required by supermarkets to use a nominated haulier, even though the supplier may be able to find an equally good and competent haulier to do the job for less money. There are also examples of supermarkets seeing that a supplier has made a certain amount of profit in one year, but instead of saying to them, “We think you’re being excessive and therefore we should pay you slightly less for your product next year,” which we could all accept, they say they want a cheque now—today—for £1.5 million or more before they will even consider doing business with that supplier next year. That is not acceptable; it is not a moral way of doing business, which is why I strongly believe the supermarkets need to be investigated. The debate has understandably ranged over a number of different types of commodities, but the most glaring examples of these practices have been in the fresh produce sector.
My hon. Friend also said that having a supermarket adjudicator would be a waste of time if it turned out that he had nothing to do. My attitude is different. I would be delighted if the adjudicator had nothing to do, because it would demonstrate that everything was being done in accordance with the code and that all suppliers were being treated fairly—although I have to tell my hon. Friend that I do not believe there is any chance whatever of that being the case. Indeed, a number of cases are already being brought forward for the adjudicator to deal with, and I have described a couple of them. I think the threat of such action may well prove to be the answer to our problems, but it is wrong to suggest that there is no need for an adjudicator on the basis that the code is in place, as it is clearly not enforceable through the Office of Fair Trading.
My hon. Friend also seems to ignore the point made by my hon. Friend Andrew George. The Competition Commission’s reason for all this was to look after the consumer. The whole thrust of its argument was that shifting risk from the retailer to the supplier was putting the long-term interests of the consumer at risk, with the result that while items may be cheaper today, they may be far more expensive in future, or the supply chain may no longer exist. That is not in the long-term interests of the consumer.
I will ignore the nonsensical—and, to be frank, idiotic—point that this measure will be of benefit to consumers. My right hon. Friend said he would be happy for the adjudicator to have nothing to do. Will he tell us how much the adjudicator is going to be paid?
I do not know, because it has not been made public. That is a complete irrelevance, however. It is not a reasonable argument, because the situation in this case is the same as it is for judges: if everybody obeyed the law, we would not need any judges, but we would still have them, just in case. There is ample evidence that there will be cases for the adjudicator to adjudicate on, however. The Bill contains a number of limiting provisions, too: the adjudicator can decide not to take up a reference; the adjudicator can fine somebody if the reference has no serious foundation; and the adjudicator’s job is only to arbitrate on alleged breaches of the code, which is quite a narrowly drawn document. I strongly believe the Bill is right as drafted.
The right hon. Gentleman acquired extensive knowledge of the food sector in his time as a DEFRA Minister. As this new clause addresses the balance of power between suppliers and retailers, I wonder whether in his time as a Minister he came across any evidence that big suppliers were putting downward pressure on retailers in the way Philip Davies has advanced.
The honest answer is that, no, I did not come across such evidence, but it may well have been happening and I just did not know about it, because, as my hon. Friend the Member for Shipley rightly said, those very big suppliers can look after themselves. I am not arguing against what has been said. Indeed, I would have had some sympathy for new clause 2 and the £1 billion threshold if I thought my hon. Friend’s motives were justified, but as a result of the rest of his argument I completely lost any support for it that I might otherwise have had. I also think the Bill as currently drafted will militate against big organisations acting in such ways. The Bill is designed to deal with problems that we all agree arise, and which tend to fall on small and medium-sized enterprises.
I entirely endorse my right hon. Friend’s comments. Following the logic of the arguments advanced by the hon. Member for Shipley, the conclusion we would draw is that the Bill should look both ways, as it were. I have drawn that conclusion and would like the Bill to reflect that, by seeking to ensure there is fair dealing across the supermarket supply chain, so that if a supplier became too powerful, complaints could be made the other way.
I have been listening to my right hon. Friend’s speech very carefully, as it serves to balance the debate. I am very attracted to new clause 2. The Bill is designed to look after the small guy and not the big guy. How would accepting new clause 2 present a problem?
It is entirely for the Government to decide whether to accept new clause 2. It does not cause me a huge problem, but I believe it to be completely unnecessary for the reasons I have described. Nothing I have said could be deemed as suggesting I am against it, but I just do not see any need for it. I certainly believe, however, that there is a very real problem that needs to be addressed, and this Bill seeks to do precisely that. That is not the basis on which my hon. Friend the Member for Shipley proposes his amendments, however; as he has said, he does not agree with the Bill at all. I do agree with it, and I would like its provisions to become law as soon as possible.
It is a great pleasure to follow Sir James Paice. As his contribution shows, we have a cross-party and cross-House consensus on this matter, and we should take it forward.
Amendment 28 provides that when the adjudicator publishes guidance, she must include guidance about which law applies to arbitration and where the arbitration should be conducted. That is particularly important where there are suppliers from remote parts of the United Kingdom. Article 11 of the Groceries (Supply Chain Practices) Market Investigation Order 2009—that rolls off the tongue—provides for a dispute resolution scheme. The scheme provides for the application of certain arbitration rules, with London as the default location for any arbitration. Clauses 12(5) and 12(6) of the Bill make provision for the amendment of the scheme and the application of the Arbitration (Scotland) Act 2010 to arbitrations carried out by the adjudicator. However, it will be important for suppliers and retailers alike to be given statutory guidance on the law applicable to arbitrations and the choice of location for arbitration. Our amendment would require the adjudicator to issue such guidance.
Amendments 30 and 33 would require the adjudicator to give consideration to large retailer subsidiaries and supply chain intermediaries when making recommendations to the Office of Fair Trading. Amendment 33 appears to duplicate amendment 30, but if the provision goes into the Bill twice, I am sure the message will go out about what we are trying to achieve. However, we will not press amendment 33 to a Division, given that it is a duplicate.
Our amendments aim to deal with the issue that the code does not cover some areas in the supply chain where abuses occur. I shall provide two such examples: company subsidiaries—Asda, for example, has a subsidiary called International Procurement and Logistics Ltd that sources 100% of its product requirements; and intermediaries in the supply chains, which, in some cases, are larger than the retailers themselves. That touches on the point made by Philip Davies that the whole point of the groceries code and the adjudicator is to try to even the balance of power in the two relationships and that often the balance can lie on the other side. I am disappointed that Andrew George did not press his amendments in Committee, as the adjudicator would then have been able to operate in both spheres and the large supermarket would have been able to take to the adjudicator issues concerning multinational companies that had been brought to its attention.
Clearly, the adjudicator’s role is to address and remedy any abusive purchasing practices perpetrated by the “buyers” defined in the groceries supply code of practice—GSCOP—who will include a significant number of overseas suppliers. Their role in supplying the UK market with food is vital in terms of addressing the adverse effect on competition identified by the Competition Commission in 2008. It said that there was evidence that excessive risks were being passed on to suppliers, an issue that has been mentioned by hon. Members from both sides of the House. We are concerned at the increase in the number of retailers setting up sourcing offices in a number of countries. For example, Asda set up International Produce Ltd—recently renamed International Procurement and Logistics Ltd—to undertake the buying of what will go on to Asda’s shelves. Therefore, there is a strong case for the Bill to include such organisations, which make the key resourcing decisions—for example, on price, volume, specification and the payment process—on the products that end up on the shelves of the 10 retailers.
We must remember that there is a strong international perspective to this issue. ActionAid and Traidcraft have been active and strong supporters of not only the Bill, but its strengthening in this regard. They were seeking a resolution to ensure that retailers trade fairly with overseas producers well before the code was envisaged or indeed delivered. UK supermarkets buy a significant volume of their products from overseas and produce a considerable —[Interruption.]
Order. Mr George, I am sure that you are not listening to a message while you are in the Chamber. I hope that we do not see a repeat and that your phone is completely switched off.
Thank you, Mr Deputy Speaker.
We know the origins of the code came from the Competition Commission report in 2008; we have already discussed the excessive risks to suppliers, particularly overseas ones. The practices behind that would have had the potential to harm those producers overseas who are the most vulnerable and to be an obstacle to progress on the pay and conditions of, and innovation by, farmers and farm workers in developing countries. UK shoppers rightly enjoy the widest range of choice, via large retailers. The outstanding quality of produce cannot be in doubt, but the Bill has the opportunity to ensure that there is protection for all territories and to make a large contribution to the development of other countries. Amendment 30 asks for the code to be extended to other territories and asks the adjudicator to look at this matter when making recommendations to the OFT.
The subsidiaries issue is also worth exploring, as it shows clearly that the large retailers have different arrangements in place. That has to be taken into account, which is what the amendment seeks to achieve. It would be good to get clarity from the Minister on what the process would be if difficulties were identified with regard to the code in these subsidiaries or other territories. The relationship of the code in the complex matrix of buying and production is from the large retailer to the immediate supplier. As the Bill stands, that means that the large retailer is able to set up subsidiaries to buy apples from X Ltd rather than directly from the supplier.
Amendment 34 stands in my name and that of my hon. Friend Huw Irranca-Davies, and it goes to the heart of some of the main issues that have been discussed in the House over the past few months. Our amendment calls on the Government to ensure that the GSCOP, which the adjudicator referees, covers the issue of commercial pressures that can be put on suppliers and that drive down quality and safety, creating possible food scandals, such as the recent revelations around horsemeat in beef products.
The amendment would explicitly enable the adjudicator to include in its annual report details of any incidents where it had become aware that commercial pressure had been applied to suppliers to drive down costs, standards and health and safety, resulting in a drop in food standards or authenticity. To answer some of the criticisms that will probably come from the hon. Member for Shipley and his like, I should say that the amendment is directly related to clause 14 and the annual report to the OFT, not necessarily in the sense of the issues arising where someone takes a case to the adjudicator to deal with in terms of the code.
Amendment 35 would require the adjudicator to send its annual report to the Food Standards Agency. That would create an important link between the adjudicator and the FSA in terms of some of the issues related to the horsemeat scandal that we have seen in recent weeks. As has been reported, the UK’s National Beef Association has blamed what it called the “bullying culture” that retail buyers have used for decades for the presence of horsemeat in beef products. Its national director, Chris Mallon, has said the public and retailers were paying the price for
“short-sighted, price-led purchasing tactics”.
He said that buyers had
“adopted a bullying culture aimed exclusively at securing as much farm food as possible, for as little cost as possible, and the result is tortured supply chains that add so much unnecessary cost that short cuts on quality and traceability, and even cheating by some suppliers, was inevitable.”
That quote shows how important it might be to include the amendment in the Bill.
Consumers must have confidence that the food they buy is correctly labelled, legal and safe, but over recent weeks that confidence has been hit hard. Many of the problems in this particular scandal have been outright criminal, and, of course, the criminal courts will deal with those, but Ministers have been slow to act, as has been shown in our debates in this House. The Food Safety Authority of Ireland has been ahead of the UK every step of the way. By having an annual reporting requirement on food safety and hygiene through the adjudicator, some of the issues that have been raised eloquently by the national director of the UK NBA could be dealt with.
The amendment has another link with the Food Standards Agency, as its budget has been cut from £143 million to £132 million. Although we should not get into a debate today about budgets of particular Government agencies or Departments, it would be an important step to say that the adjudicator, in its report to the OFT, could refer some of these cases. That might help to soften the blow caused by the reduction in resources.
It would be helpful if the hon. Gentleman made clear his belief, which is certainly my belief, that no matter what commercial pressures there are, it does not excuse criminal behaviour on the part of producers, processors or retailers.
I agree 100% with the Minister. We hope that by having the adjudicator reporting annually to the OFT on those issues, steps would be taken before any criminal activity had taken place. That might be dealt with at a much earlier stage in the process, because the adjudicator may come across instances where it feels the costs have been driven down so low as to compromise food safety. Our approach would allow a supplier to take such issues to the adjudicator, and they may be included in the adjudicator’s annual report. That might help to stop things reaching the stage we have seen in the past few weeks. The amendment could play an important part in tackling future abuses that could occur—that goes to the heart of what the Minister has just said. Does the Under-Secretary of State for Business, Innovation and Skills, Jo Swinson, who is going to reply, agree that it is crucial that the adjudicator is alert to these issues? Will she therefore support our amendment to allow the adjudicator to report any abuses it sees occurring on food hygiene and food safety issues directly to the OFT? My hon. Friend the Member for Ogmore might want to expand on some of those points.
Amendment 3, tabled by my hon. Friend John McDonnell, is critical as it would require the Office of Fair Trading explicitly to respond to the recommendations that the adjudicator publishes. If the adjudicator were to include a food hygiene or food safety issue in their annual report to the OFT, it is only fair that the OFT should have to respond to those recommendations. That should be considered in how the GSCOP and the adjudicator are set up.
As the Bill stands, the adjudicator can make recommendations to the OFT should it determine that changes should be made to the groceries code. Of course, only the OFT can change the code, but, critically, nothing in the Bill binds it merely to respond to the recommendations. We are not saying that a binding clause in the Bill should ensure that the OFT acts on every recommendation, but the OFT should at least be bound to respond to the recommendations so that the industry has some transparency on the issues raised in the report. We made that point in Committee on a number of occasions. The Minister responded that if the OFT continued to ignore the recommendations, the Government would step in and do something about it. Indeed, she suggested that there could be some review of the OFT’s processes. That is all well and good, and I appreciate the fact that she gave that reassurance, but we are looking for a two-way dialogue between the adjudicator’s office and the OFT. My hon. Friend the Member for Ogmore and I have put our names to the amendment and we will certainly support my hon. Friend the Member for Hayes and Harlington if he wishes to press it to a Division.
Let me turn briefly to some of the issues raised by the hon. Member for Shipley. Sometimes we need regulation to allow the free market to work properly. Indeed, the whole purpose of the groceries code and the groceries code adjudicator is to ensure that those markets work properly without a damaging imbalance in the power of the various factors concerned. The large companies listed by the hon. Gentleman can look after themselves, and he is right to raise that issue, but they will not go to the adjudicator. The adjudicator has been set up to consider supplier imbalances in market power, as considered by the Competition Commission. I am sure that the adjudicator would not wish to consider an imbalance in the other direction just because she is not mandated to do so.
As for the sunset clause, the hon. Member for Shipley cannot have it both ways. He says that the adjudicator will have nothing to do, but also says that the adjudicator will look after the interests of the very large organisations. If the adjudicator will have lots to do, we will not want a sunset clause after seven years. The adjudicator will therefore carry on. New clause 3 is unnecessary as we must show our confidence that the adjudicator will do a good job.
I do not think that I need to deal directly with the amendments tabled by Mr Chope, given that we have already dealt through amendment 30 with whether the ActionAid and Traidcraft issues of international territorial extent can be dealt with. I have some sympathy with amendment 27, as one of the big arguments in Committee was that the adjudicator could not come in on day one after Royal Assent—I think Andrew George also mentioned that in one of his amendments—to consider the issues happening now as well as to collect evidence on what has happened since the groceries code came into effect. The amendment would be very sensible; the quicker the adjudicator gets up and running the better as she will have to deal with either lots of issues or, if the hon. Member for Shipley is correct, none.
I will wish to test the view of the House on amendment 34, which is, of course, consequential on amendment 35. We would also like to support my hon. Friend the Member for Hayes and Harlington if he wishes to press amendment 3.
I shall not detain the House for long, but I want to make some general comments about some of the amendments and new clauses.
I rise with an enormous amount of frustration, because in my opinion a number of Members seem not wholly to understand the role of the adjudicator and how they will fit in to the grocery supply chain in the United Kingdom. There has been an enormous amount of debate on new clauses 2 and 3, tabled by my hon. Friend Philip Davies, which I would like to explore. I understand his motivation in trying to ensure that the adjudicator deals with smaller companies, but I think he misunderstands how the grocery supply chain works.
I agree with my hon. Friend that large companies are big enough, ugly enough and strong enough to do their own negotiation. That is what will happen between those suppliers and supermarkets; the groceries code adjudicator will have no role in those deals or supply contracts. Even a small producer could agree, if they chose to do so, to supply a product at below the cost of production. If they were minded to do that, that would be entirely their decision. They could commit suicide in that way and the adjudicator would have no role to step in and get involved in the deal. The only point at which the adjudicator would get involved would be when the supermarket wanted to change the deal agreed by the supplier and the retailer. It seems simple to me: Unilever and other large corporations have the commercial muscle to negotiate a deal with which they and the retailer are happy. As long as that deal does not change, no one will get involved. That seems to me to be a system that will work well and that, through market forces, has worked well for generations.
My hon. Friend’s point about trying to restrict the remit of the Bill to companies with a very small turnover might be honourable, but it is not necessary. No case will come forward.
My amendment does not seek to restrict the remit only to very small suppliers but to suppliers with a turnover of up to £1 billion; surely my hon. Friend cannot argue that a supplier with a turnover of £950 million is a very small supplier.
I am grateful to my hon. Friend for his intervention, as it allows me to clarify that that is my exact point. At no point will there be such a negotiation, as this is not a David and Goliath situation. We are talking about two Goliaths, so the adjudicator will have no role. My hon. Friend has made a career of criticising unnecessary legislation and it seems strange that he should now want to introduce an unnecessary clause into a Bill. I hope that he recognises that new clause 2 would not be necessary simply because the adjudicator will not have a role in negotiating between two Goliaths.
Again, there is a misunderstanding of what will happen. We are talking about very large companies that are negotiating with very large companies.
They both have an equal amount of commercial muscle, so no one party will be able to bully the other. That is quite important. The adjudicator is meant to get involved as a referee and negotiate when one large party abuses a smaller party and uses its commercial muscle to push something through.
I support the arguments that my hon. Friend is making. He knows that this is a dynamic and creative market in which a number of intermediaries and subsidiaries have been created with a turnover of more than £1 billion, which could be used as a means of sidestepping the legislation if new clause 2 was accepted.
I recognise that. I pay tribute to the hon. Gentleman, who has worked on this matter since before I became a Member. Perhaps that is something that the adjudicator could look at as we move forward. There is this ability to put a film between parties and cause an issue. That comes back to small suppliers, who supply the middlemen.
New clause 3 would cause the Bill to expire after seven years. It would be disappointing if it did so. Using the analogy of a football match, if we get to half time and the referee has not needed to issue a yellow card, no one suggests that we do not need a referee in the second half.
We have had plenty of time to understand how supermarkets deal with their suppliers and it is precisely because of that that everyone who has looked seriously at this issue has concluded that we need an adjudicator.
Does my hon. Friend agree that, regardless of whether there have been complaints, the existence of the adjudicators office will bring a cost so it would make sense to bring the whole thing to an end if it is not proving worth while to the consumer?
My hon. Friend makes an interesting point. We could make the same argument across government; if crime starts to fall in an area, do we withdraw the police because they are not necessary? We have to have a referee to make sure that the rules are being obeyed. The groceries code adjudicator will be a great referee and will have the teeth to make sure that the Goliath does not bully the David. That is something that the Government should be proud of and take forward to bring a little parity and common sense to the market.
I am pleased to speak in this debate and I welcome the speeches that have been made so far. I did not expect it to be as sparky as it has been, but I welcome that because it allows us to flush out the arguments about the amendments and new clauses, as well as the fundamental principles of what we are trying to achieve.
I did not intend to speak to new clauses 1, 2 and 3, but I wish to reiterate the comments made by Mr Spencer, Sir James Paice and others. A great deal of discussion in Committee focused on the fact that the adjudicator’s office will intentionally be small, mean and lean. It will not be some behemoth, as the hon. Members who spoke to new clauses 1, 2 and 3 suggested it would be. It is supposed to be an intelligent organisation that does not go on fishing expeditions but responds to good intelligence. I suspect that if there are no cases to follow, the report will be very slim indeed. I suspect that the adjudicator will not respond to Procter & Gamble or anyone else if they are asked, “Please look at the power relationship within the supply chain and how we are being disgracefully abused.”
Philip Davies spoke to new clauses 1, 2 and 3 at great length. New clause 3 gives the reality to the mission, which is at a set moment in time to get rid of the adjudicator, which would fly in the face of the advice that has come down over years from the Competition Commission and others that there is a need for such an adjudicator. Lean and mean, yes, but the hon. Member for Shipley should have some faith in the adjudicator and, having advertised the position and given her the power and set up the office on a lean, mean basis, he should allow her to decide where to investigate to achieve a good, efficient supply chain.
I am in no way being critical of speaking at great length. I can extemporise for the nation myself on occasions. I do not criticise the length of time and I am glad that the hon. Gentleman has had the opportunity to expound his arguments. I have no doubt that he and colleagues who spoke in support of his new clauses believe firmly in what he was saying and believe that we should have much more of what he regards as a free market. I am not anti-free market. The hon. Gentleman may not realise it, but I spent six years working in the private sector running leisure centres, theatres and so on. I understand how the free market works. I have worked within it as a manager and as a business person. I am opposed to the approach that says that we can beggar our neighbour or have a race to the bottom.
The hon. Member for Shipley challenged Members to go and explain to their constituents why they would argue against the cheapest possible price. I will not argue that we should have the cheapest price for every product on a supermarket shelf if that means sacrificing much-needed employment protection such as the Gangmasters Licensing Authority or sacrificing the standards in British agriculture of which we are rightly proud, such as animal welfare standards and so on. His argument that we should provide the very cheapest by lowering standards on food safety, food provenance, nutrition or employment rights is the argument that has previously exposed to their detriment multinational companies when they have been caught out for exploitation or low standards. We have only to think back, in a wholly different sector, to some years ago and to Nike in the previous World Cup when the very footballs on the field were being produced in sweatshop conditions in developing countries. Was that to its benefit?
I want to speak to our amendments 34 and 35, which stand in the names of Ian Murray and myself. Another illustration, if the House wants a more recent case, is the issue of food provenance and safety. No hon. Member can seriously argue that the commercial pressures along a complex supply chain have had no bearing on the entry of significant levels of adulterated meat. That is where a pure free market ideology will take us, and that is why I stand out firmly against the spirit in which the new clauses were tabled.
The hon. Gentleman has intrigued me. Let us say that a larger operator over the turnover steps forward to the adjudicator with evidence that does not affect it directly but affects a series of smaller suppliers right down the chain. Does he seriously suggest that the adjudicator should not be able to take action on that? I trust the adjudicator to follow the evidence and identify the power relationship if the supply chain is being abused. If the evidence comes from a larger operator, all to the good. I want the adjudicator to step in and take the right action.
The hon. Lady is right. She speaks to the spirit and the letter of the amendments, to which I will now turn my attention. Amendments 34 and 35 are critical in view of what has passed before our eyes in the time since the Bill left Committee.
As hon. Members will know, last week, Sodexho, one of the biggest catering firms in the UK and indeed in Europe, which supplies processed meat to schools, hospitals and our armed forces, withdrew all its frozen beef products after discovering adulteration with horsemeat. This is where the race to the bottom and the aim to be the cheapest of all lead us, when the cost of horsemeat going into mince is a quarter of that of good British beef, without appropriate regulation—and enforcement of that regulation.
People may say, “Well, that only affects poor people shopping the bargain ranges.” But Sodexho also supplies Royal Ascot—what was in those hors d’oeuvres that were passed around?—the Chelsea flower show and the Open golf championship. This is a major issue. In Scotland last week, schools, council leisure facilities and social care establishments were told not to use any current stocks of frozen beef products after the discovery of contaminated beef at a school in Lanarkshire.
On Friday, the Food Standards Agency released the second tranche of test results. The first tranche of a week earlier was revealing enough. The second tranche, submitted by the food industry, revealed that one in 80 beef products had been found to contain horsemeat—[Interruption.] Hon. Members on the other side of the House are discussing—like a “University Challenge” panel, they are conferring—which amendments my points relate to. They are related to amendments 34 and 35 on commercial pressures in the supply chain, as my hon. Friend the Member for Edinburgh South explained.
We have also had the revelation about IKEA. Many people have visited IKEA and, on the way through its “shopping experience”, stopped to sample the meatballs. But they cannot do so at the moment as those meatballs have also been withdrawn. We now know that some catering companies have been withdrawing products on the quiet. Rather than being open, as the big supermarkets have been, and testing, they have been withdrawing products that they suspect have been adulterated before they can be tested. As the shadow Secretary of State for Environment, Food and Rural Affairs said, it is totally wrong for companies to recall suspect meat products on the quiet without telling the FSA.
I have one final illustration of why the amendments are so critical, and it relates to evidence from LGC, which is the UK’s designated national measurement institute for chemical and biochemical analysis. It is the national reference laboratory and the host organisation for the Government’s chemist function. In short, it knows what it is talking about. It has made public its findings on the use of phenylbutazone. I shall not quote from it selectively: I shall be fair and quote its first five points, because they are critical to give the overall picture. LGC states that
“the levels of phenylbutazone, if present in horsemeat, are thousands of times lower than any that caused adverse effect in humans…the risk is small and rare, estimated to affect perhaps one in 30,000”.
My quick calculation suggests that one in 30,000 is about 2,000 people in the UK. LGC continues,
“however on a precautionary basis”—
“it is important to prevent meat containing phenylbutazone from entering the food chain because the information does not exist to set a safe level in food animals and there is a possibility of adverse effects albeit rare.”
I have read the advice in full. Far from scaremongering, I have quoted the advice from those who advise the Government—
It is important that people understand what that advice is and what the data suggest. It has been set out very clearly by the chief medical officer, and I do not want anyone to go away from this debate believing that one in 20,000 people are subject to serious medical consequences from consuming bute. It is clear that the highest level that could be found in food products is, by a factor of thousands—by a factor of 10(3)—lower than that shown to have any adverse consequences for human health. Moreover, those adverse consequences affect only a very small proportion of people receiving pharmaceutical doses of the drug. It is very important that we understand the risk factors, and I am sure that the hon. Gentleman does not wish to misrepresent them.
Order. I am sure that we do not want to continue this debate and that the hon. Gentleman is desperate to get back to the subject of the amendment.
Absolutely. I make the point to illustrate how important this amendment is in terms of food safety and provenance. I just want to correct the record. The Minister said that it was one in 20,000, but it is roughly one in 2,000. I repeat to the Minister that the advice given directly to the Government was that there is a possibility of adverse effects—
Order. Do not test my patience any more. We can both agree that you are desperate to speak to the amendment and now you are going to go back to it. We do not want to have to bring someone else in just yet, do we?
I do not know why on earth the hon. Gentleman thinks that I might want to draw him into confrontation with you, Mr Deputy Speaker.
I want to challenge the hon. Gentleman on a more fundamental aspect of the amendments. In an earlier intervention on my hon. Friend Philip Davies, the hon. Gentleman rightly made the point that the whole Bill is about enforcement of the grocery code of practice. I understand his wanting to raise the horsemeat scandal whenever he can, but does he really believe that these amendments—especially amendment 34, which would require the adjudicator to report on issues of food safety, food hygiene and food authenticity—fall within the code of practice? He is proposing to extend dramatically the power of the adjudicator and the role of this legislation way beyond anything that the Competition Commission ever envisaged.
I thank the right hon. Gentleman for not tempting me to infringe the guidance you have given, Mr Deputy Speaker.
We had a great deal of debate in Committee on the ability of the groceries code adjudicator to comment on several issues concerning the supply chain. In fact, on both sides of the House, several hon. Members said that if the adjudicator were aware of abuses elsewhere they would expect the adjudicator to inform the relevant authorities. I shall be interested in the Government’s response to the amendment, but I would have thought that there would be almost an obligation on the adjudicator to report any observed abuse in the management of the supply chain. That is what the amendment seeks to achieve. I agree with my hon. Friend the Member for Edinburgh South that amendments 34 and 35 are important, and we are convinced that the adjudicator should have an eye to this function as well as his or her core role on the supply chain.
I support new clause 2. In most people’s eyes the Bill was designed essentially to protect the UK supplier, particularly of fresh produce, as my right hon. Friend Sir James Paice said. What Huw Irranca-Davies has just delivered is a scaremongering speech designed to undermine British suppliers of fresh meat and produce. That is extremely regrettable.
Last night I attended a speech given by the Minister of State, Department for Business, Innovation and Skills, Michael Fallon. His speech was entitled, “Deregulation for Growth”. I must admit to being slightly confused about what I have heard so far during this debate, because it seems to be about regulation. How, I ask the Minister, will the Bill be consistent with the Government’s growth agenda? Perhaps she will tell us when she responds.
The Minister last night said that there was a two-for-one principle—that for every £1 of additional burden imposed through regulation, £2 of savings of regulation had to be found. That brings me to new clauses 4 and 5, which are designed to highlight the fact that the Bill as drafted will embody the law of unintended consequences writ large. It will potentially benefit suppliers not only from elsewhere in Europe, but from right across the globe, when most people who support the Bill think they are doing so in order to help the farmer down the road in the United Kingdom. That is far from the case. What will happen is that the Bill will enable suppliers from overseas to exploit our system, at a time when our own suppliers and producers are not able to access overseas markets on an equivalent basis.
My hon. Friend anticipates the argument that I am going to put. I was in discussion about whether an amendment referring only to “outside the United Kingdom” would be in order and selectable. On advice—obviously, I am responsible for deciding whether to act on advice—I decided that my new clause was much more likely to be selected if, instead of referring to the United Kingdom, I referred to the European Union. That is because of single market and European Union rules. Obviously, I wanted to ensure as far as possible that my new clause would be selectable, but my hon. Friend makes a good point. He is saying that the whole public debate is about why cannot we buy British—buy UK food and thereby avoid the risk associated—[Interruption.]
Order. May I gently remind Parliamentary Private Secretaries —[Interruption.] Order. A Member is speaking, and unfortunately every time a PPS walks past, it is at eye-level of the camera. The first time it is not too bad, but it is happening constantly. We all want to hear Mr Chope, and I am sure the PPSs would like to hear a little more from him.
The only comfort that I take is that my remarks are evidently creating such confusion on the Front Bench that Ministers need an enormous number of messages sent to them from the Box. I take some consolation from that.
It is incumbent upon the Minister when she replies to explain how the Bill will help UK producers while not giving benefits and privileges to producers from the rest of the European Union, let alone from outside the European Union. I should like to give the Minister the maximum amount of time to respond to the debate.
Amendment 27 seemed to be warmly endorsed from the Opposition Front Bench. I do not understand why the Opposition did not table such an amendment themselves in Committee or on Report. The amendment proposes that the Bill come into force two months after Royal Assent. Then it would be clear on the face of the Bill when it would come into force. If this is such fantastic legislation, why do we not bring it in in the normal way—the whole Bill, two months after Royal Assent? I hope the Minister will respond to those points and particularly to the powerful argument advanced by my hon. Friend Philip Davies in relation to new clause 2.
I shall be brief, because under the programme motion we have only half an hour left to discuss the whole of the remaining stages of the Bill. The programme motion has been proved to be hopeless, as we will not even get to the next group of amendments.
I refer the House to my entry in the register. I cannot quite relate to the supermarket industry, but I can relate to the travel industry, where the margins are similar and the competition levels are as great, and there are a number of big suppliers who put pressure on smaller suppliers. In my day, I was one of those smaller suppliers, but I did not come across the practices that have been described as happening in the supermarkets, where there have been nasty attempts to force the use of the hauliers demanded by the supermarkets. I did not come across such things, so I accept that this is a very different case.
The whole House supports the small producers, who are unfairly penalised by the actions of very large supermarkets. However, the House should not be united in giving support to companies that may be even greater than the supermarkets. I am attracted by and minded to support new clause 2, unless the Minister—and a very fine Minister she is, too—can persuade the House that there is some fundamental reason not to support it. It is possible that having listened to arguments from all parts of the House, she will say that the Government accept new clause 2.
That is the sort of thing that I would like to see more often in Parliament when reasoned cases are made which do not in any way affect what the Government want. In fact, new clause 2 enhances what the Government want. If big companies are excluded from being able to use the adjudicator, that will allow the adjudicator more time and allow the adjudicator to reach decisions more quickly on the small suppliers that matter. That is why I intervened on the former Minister, my right hon. Friend Sir James Paice. I wanted to see whether there was a reason why we should not adopt new clause 2. I see no reason why we should not go ahead and accept it. I hope the Minister will do that, but if not, I am minded to support it in a Division.
I thank all the hon. Members who have contributed to the debate on this series of amendments and for tabling the amendments, through which we have discussed and probed various issues.
It might be helpful to recap briefly on why we are here, which relates to the reasons why I may have to disappoint hon. Members and not be able to accept their amendments—that is, the purpose of the groceries code adjudicator and how we have come to the Bill before us. That relates to the Competition Commission report, which found that although the market was functioning effectively in delivering low prices to consumers, some practices by large retailers could have an anti-competitive effect.
The Competition Commission found that, through buyer power, the large retailers were engaging in practices that transferred excessive risk and unexpected costs to their suppliers, and that this in turn could reduce the incentive of suppliers to invest and innovate, which would act against the long-term interests of consumers. It is worth noting that all six members of the Competition Commission group who undertook the market investigation into groceries agreed that the transfer of excessive risks or unexpected costs by grocery retailers to their suppliers is likely to lessen suppliers’ incentives to invest in new capacity, products and production processes. If unchecked, those practices would ultimately have a detrimental effect on consumers. Paragraph 11.375 of the commission’s report states clearly that all but one member of the investigation panel considered the adjudicator essential for the monitoring and enforcement of the code and that the code on its own would not be enough. That relates to the points my hon. Friend Philip Davies raised earlier.
The Competition Commission’s report is absolutely key. It created the groceries supply order and the code is derived from it, and that is what needs to be enforced by the adjudicator. That is why the Government will resist the amendments that would encourage the adjudicator to deviate from the report.
It is worth mentioning that creating the adjudicator was in all three major parties’ manifestos. It has been endorsed by the Business, Innovation and Skills Committee in pre-legislative scrutiny. It is appropriate at this moment to report to the House that, following our discussions on Second Reading and in Committee and other representations, pre-appointment scrutiny by the Select Committee will now happen. I am delighted that the Government have been able to accommodate that request, because such scrutiny from a Select Committees is welcome, leads to better legislation and strengthens Parliament.
No, but I think that it is very important to listen to Parliament, as I have outlined. Indeed, I think that was the point that some of my hon. Friend’s colleagues made earlier.
A code without an adjudicator is, to borrow an analogy from my hon. Friend Andrew George, like a sports match with a rule book but no referee. Huw Irranca-Davies described the climate of fear, which can mean that suppliers are unwilling to come forward, and that is why the independent adjudicator is necessary.
New clauses 1, 2, 4 and 5, which were tabled by a combination of the hon. Members for Shipley, for Christchurch (Mr Chope) and for Bury North (Mr Nuttall), would all restrict the operation of the adjudicator so that it would be less extensive than the coverage provided by the code, either by excluding suppliers above a certain turnover or excluding supplies from outside the EU. I do not think that in principle that is a sensible approach to take. As I have said, the groceries code was put in place by the Competition Commission, after a detailed and thorough investigation, to rectify certain features of the groceries market that were causing long-term detriment to consumers. The adjudicator’s prime purpose is to enforce the code, so it is sensible and coherent that they and the code should have the same coverage.
With regard to the suggestion in new clause 2 that suppliers with a large turnover should be excluded, it is important to point out that the Competition Commission and the Select Committee explicitly considered that and concluded that excluding certain suppliers would not be appropriate. The Committee stated in its report that such an approach “would be impractical” and that because GSCOP applies to suppliers of all sizes, so should its monitoring enforcement. The Committee stated that the adjudicator is the gateway to the dispute resolution procedure, so with no access to the adjudicator large suppliers would have only the courts for redress, not the arbitration process, which is also very helpful. If the evidence from large suppliers on whether retailers are complying cannot be taken into account, smaller suppliers—this point was made earlier by other hon. Members—might also lose out because the evidence might be crucial to the case. According to the Select Committee, large suppliers might be better able to bring widespread potential breaches to the adjudicator’s attention than small suppliers. For all those reasons, it is important that the scope of the adjudicator fits that of the code.
We had many discussions on whether we should restrict who can complain. In Committee and in the earlier pre-legislative scrutiny those discussions centred on whether trade associations should be allowed to complain. We have decided to allow evidence from any source whatever. Ruling out evidence from particular sources would weaken the adjudicator, which I suspect might be the intention of the amendment, given that it has been tabled by those who do not want the adjudicator to be in place at all.
The Minister is quite wrong on that. I am not coming from that position; I came to that view after listening to the debate. Does she not fear that there is a danger that allowing large suppliers to go to the adjudicator will clog up the system so that it cannot look after small suppliers, which is what it is supposed to do?
I do not believe that is the case. The adjudicator will obviously be able to make their own assessments. The industry is confident that there will be very few complaints, and I wholeheartedly hope that will be the case, but if we find that there are many breaches of the code, and if the evidence comes from a variety of sources, the adjudicator will need to look at that and be empowered to make recommendations and requests, and they will need to be properly and adequately resourced in order to do so. Therefore, an arbitrary restriction on who can complain would actually make the adjudicator’s life harder and, indeed, could increase the risk of judicial review, so we will reject the new clause and encourage hon. Members to oppose it if it is pressed to a Division.
The hon. Member for Shipley seemed to suggest that the provision would cost consumers more money, but all the supermarkets that gave evidence on the matter said, when asked, that complying with the code had not caused them to raise prices, so his concerns are misplaced. This will not cost consumers. Indeed, surveys have shown that 84% of consumers support the adjudicator, and I am sure that hon. Members will be well aware from their mail bags that there is a great deal of public support for the adjudicator.
The Minister is making a compelling case for the Bill, which we all support. I wonder whether she will reflect on the fact that some of the evidence we received in Committee and before showed that the groceries code and a well-functioning adjudicator will help innovation in the supply chain sector and therefore has the opportunity to lower prices for the consumer.
The hon. Gentleman makes an important point. The Competition Commission was very clear that innovation could be stifled by the potential anti-competitive practices in the sector, so it absolutely follows that encouraging innovation by ensuring that no anti-competitive practices are going on will allow consumers ultimately to get a better deal, and that is in their interests.
A few red herrings were put forward on the question of whether Esso and tobacco companies would be protected in some way by this. I refer hon. Members, as Sir James Paice did, to the Groceries (Supply Chain Practices) Market Investigation Order 2009, which is very clear. It states, on page 3:
“Groceries means food (other than that sold for consumption in the store), pet food, drinks (alcoholic and non-alcoholic, other than that sold for consumption in the store), cleaning products, toiletries and household goods, but excludes petrol, clothing, DIY products, financial services, pharmaceuticals, newspapers, magazines, greetings cards, CDs, DVDs, videos and audio tapes, toys, plants, flowers, perfumes, cosmetics, electrical appliances, kitchen hardware, gardening equipment, books, tobacco and tobacco products”.
That is what was found to be relevant through the Competition Commission’s investigation. I think that it is important to note for the record that some of those earlier red herrings were just that.
The hon. Member for Ogmore said that the adjudicator’s office would not involve huge costs. It is estimated that the costs of running it, including all running costs and staff salaries, will be £800,000 a year. As for how much of that is for the adjudicator themselves, they are currently acting as adjudicator-designate for one day a week on £23,000 a year, going up to three days a week on the same rate once we have Royal Assent and commencement, as we very much hope we will.
On new clauses 4 and 5, it is fundamentally right that large supermarkets should treat their suppliers fairly wherever those suppliers are located. The Competition Commission’s finding of decreased innovation and investment in the supply chain is likely to result from unfair treatment of suppliers and to cause detriment to consumers, regardless of whether those suppliers are outside the EU or the UK. Excluding overseas suppliers would therefore not be helpful to the fundamental purpose of the provision and would, indeed, undermine it. The code and the adjudicator complement each other and so they need to have the same scope. I resisted in Committee amendments that would have expanded the adjudicator’s role beyond merely enforcing the code, but I must now also resist amendments that would limit the adjudicator’s scope to being narrower than the code. I hope that my hon. Friends will withdraw their amendments, but if they choose not to do so I will advise colleagues to vote against them.
I turn to amendments 34 and 35, tabled by the hon. Members for Edinburgh South (Ian Murray) and for Ogmore. I absolutely recognise and share the outrage of MPs and the public about the recent horsemeat scandal. Of course it is wholly unacceptable if people buy products marked as beef that turn out to contain horsemeat. Consumers must be the absolute priority, and they need to be confident in the food they buy. The safety issues have been well explained by the Minister of State, Department for Environment, Food and Rural Affairs, my hon. Friend Mr Heath. Food labelling is incredibly important. I myself suffer from a very severe allergy to nuts, and I completely rely on labels on food products being accurate in order ultimately to stop me from having a life-threatening anaphylactic reaction. There are very important reasons why this is very serious and is being taken as such. That is why my ministerial colleagues in DEFRA have taken strong and decisive action—action with food businesses, action in Europe, and action in tracking down the people who have caused this and bringing them to justice. As Members will know, the Food Standards Agency’s investigations have already led to arrests, and Ministers and the FSA are working with scientists, inspectors and food businesses in Britain and across Europe to ensure that this does not happen again.
However, while those recent incidents have been appalling, they are not a matter for the adjudicator. Expanding the adjudicator’s role to consider these issues would not be helpful. It would lead to counter-productive duplication with the FSA; it is not where the adjudicator’s expertise will be developed; and the office is not being set up to look at competition issues. What the adjudicator does in promoting productivity and investment in the food chain or the supply chain might help to create an environment where such scandals are less likely to happen, but that is the extent of their role in the current horsemeat scandal; it is very different from their actually enforcing these matters.
On reporting, in Committee we had requests for a variety of different issues to be included in the adjudicator’s report, such as available resources, recommendations to the Office of Fair Trading, and monitoring compliance. It was even suggested that they should have to report on cartel activity. Of course, if they came across any criminal activity they would be expected to report it to the police. However, we want to make sure that the reports will be sensible documents rather than being about a tick-box exercise with a list as long as your arm of the things that they have to include. On that basis, I ask hon. Members to withdraw the amendments. I hope they agree that I am being even-handed and consistent on the subject of the adjudicator’s scope and role.
Amendments 30 and 33, also tabled by the hon. Members for Edinburgh South for Ogmore, are of a slightly different nature. They prescribe what the adjudicator should consider under clause 13 when they assess whether changes to the code should be recommended to the Office of Fair Trading. In Committee, a particular concern was raised about Asda and a foreign subsidiary that had been set up—I think it was called IPL. I can reassure the House that large retailers are required by the order as it stands to procure in such a way that all their subsidiaries comply with it as though they themselves were bound by it. That includes incorporating the code into supply agreements. If that did not happen, it would constitute a breach of the order by the large retailer, which is named in the order. I think that that provides protection that can give Members some reassurance.
In Committee, we discussed at length the code’s territorial extent, and I hope that I gave substantial assurances at that time. We also discussed whether the code should be extended to intermediaries. I do not plan to revisit those arguments, but the fundamental question is whether it is appropriate to single out two particular issues for the adjudicator to focus on when considering any changes to the code. My view is that that is not the best way to progress. Clause 13 is widely drafted, and rightly so. That means that if the adjudicator considers it appropriate for any changes to be made to the groceries code, he or she—it is a she at the moment—must recommend them to the Office of Fair Trading. To single out specific issues would weaken the clause, rather than strengthen it.
Singling out intermediaries would be particularly inappropriate, because it is unlikely that the code could be amended to include them without a further investigation by the Competition Commission. The reason for that is that the legal framework under which the order can be amended is set out in section 161 of the Enterprise Act 2002. It states that, in order for that to happen, there must be a change in circumstances—for example, a new, abusive practice by retailers—and, indeed, that that change must relate to the initial adverse effects found by the Competition Commission, namely the passing of excessive risk and unexpected cost to suppliers. It is unlikely that those conditions would be met with regard to intermediaries. It is more likely that this could be extended to uncover another abusive practice similar in nature and effect to those already described in the code but that was not present in the market when the Competition Commission did its initial investigation.
This group of amendments also includes a set about the operation and review of the adjudicator. Amendment 3, tabled by John McDonnell, would require the OFT to respond to recommendations. I do not believe that that is necessary. I appreciate that the hon. Gentleman has looked at what was said in Committee, where we discussed the issue in detail, but the OFT has a general duty to act reasonably, which includes a duty to respond to members of the public and other public authorities where appropriate. This is about creating a system that is not overly prescriptive for the adjudicator, while recognising that they will discharge that public duty in a responsible way.
I absolutely give that assurance. If a body such as the OFT receives information, particularly from a respected public servant, we would expect it to respond appropriately as part of its general duty, but we do not want to be overly prescriptive in how we set that out in legislation. I hope that that reassurance is helpful to the hon. Gentleman and I urge him not to press his amendment.
Amendment 28 would require the adjudicator to set out in guidance which laws will apply to arbitration and where it will be conducted. The amendment is superfluous, because it would duplicate information that is already in the groceries supply order. We discussed arbitration in Committee, as did the other place when it debated the Bill. Article 11 of the order sets out the rules that will apply and the fact that
“the seat or legal place of arbitration will be London…or such other city within the United Kingdom as the Supplier nominates.”
Of course, the adjudicator may choose to publish guidance on arbitration, but we do not believe that it is necessary to make that a requirement under the Bill.
No, I am not. We have had an interesting debate, although I suspect it could have been more concise; nevertheless, we are where we are.
Mr Chope tabled amendment 27 on commencement. I am happy to make a commitment that the Government intend commencement to take place two months after the Bill receives Royal Assent. It is, however, usual procedure not to set that out in legislation, but to allow the Secretary of State discretion to commence an Act by order.
Finally, I cannot accept, in fact or in spirit, new clause 3, which was tabled by the hon. Member for Shipley. I agree that we do not want statutory offices to continue when they are not needed, and the Government have been working according to that principle. Indeed, in accordance with our general policy on sunsetting, the Bill’s sunset clause—clause 15—means that the Secretary of State must review the adjudicator every three years and may decide, if appropriate, to abolish the office. However, proposing an arbitrary end to the Act is not appropriate. If, in seven years’ time, the problems with large retailers that have led to the creation of the Bill and the adjudicator persist, we would not want the Act to be repealed automatically. I reassure Members that the Secretary of State will be rigorous in reviewing this matter. I believe that that is a much better way to ensure that statutory offices do not continue unnecessarily.
I hope that hon. Members are satisfied with my assurances and explanations, and that they will not press their amendments. If that is not the case, I urge hon. Members to reject the amendments before us.
We have had a good debate. I am grateful to my hon. Friends who have supported my proposals. I am particularly grateful to my hon. Friend Mr Bone who, as he has made clear, came to listen to the debate before making his mind up. He has decided that if new clause 2 was not accepted, we would be in the ludicrous situation whereby retailers with a turnover of more than £1 billion will be subject to the code, but can be taken to the adjudicator by suppliers with a turnover of more than £1 billion who are perfectly big and capable enough to look after their own interests and to take any disputes to court.
Unfortunately, while my hon. Friend the Member for Wellingborough came to the debate with an open mind, the Minister did not. She made it abundantly clear that she had already decided what the Government’s view was and that the Report stage of the Bill was a completely pointless exercise. Perhaps that is why we have had only three hours to discuss all of today’s proposals. She made it abundantly clear that she was not prepared to listen to the debate or to any arguments because the Competition Commission had told her what she should say and she was not prepared to deviate from that. That makes a farce of having Report stages of Bills. I will allow her to reflect on that.
We cannot allow it to stand that we will be setting up an adjudicator to which multinational companies with a turnover of more than £1 billion will be able to go to make complaints against retailers that also have a turnover of more than £1 billion. We should deliver the best deal for our constituents, not add to the bottom line of big multinational corporations. For that reason, I wish to withdraw new clause 1, but to press new clause 2 to a vote. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.