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Supermarkets: Payments to Suppliers

– in the House of Lords at 2:46 pm on 26th February 2003.

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Photo of Lord Mackie of Benshie Lord Mackie of Benshie Liberal Democrat 2:46 pm, 26th February 2003

asked Her Majesty's Government:

Whether they will invite the Competition Commission to review the practice of supermarket chains taking 100 days' credit before paying farmers for their produce.

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Deputy Chief Whip (House of Lords), HM Household, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, as a result of the Competition Commission's detailed report on supermarkets in 2000, the largest four supermarkets signed legally binding undertakings to comply with a code of practice governing relations with their suppliers. Last week, the Office of Fair Trading announced that it was embarking on a review of the code and would write to suppliers' organisations and the supermarkets themselves, requesting views on how the code has worked in practice. If any supplier has evidence that a signatory to the code of practice is not meeting the requirements of the code, he or she should approach the Office of Fair Trading.

Photo of Lord Mackie of Benshie Lord Mackie of Benshie Liberal Democrat

My Lords, I thank the Minister for that expected reply. The code of practice states that the supermarket should pay "within a reasonable time". That is open to a little interpretation, but 100 days is outwith the normal practice, especially as the farmers have waited for over a year to sell their goods, whereas the supermarkets place them on the shelves and get their money the next day.

Does the Minister think that there is a case for the Competition Commission to consider again the position of farmers relative to the supermarkets? They recommended the break-up of Milk Marque, which was to the great detriment of the farmers.

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Deputy Chief Whip (House of Lords), HM Household, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, it is difficult to define what reasonable payment should be. The only safe thing for us to do is to say that it is a matter of a commercial contract between the suppliers and the supermarkets. There is, however, the Late Payment of Commercial Debts (Interest) Act 1998, which says that, in default of any other agreement, the payment period should be 30 days. I am sure that the noble Lord, Lord Mackie of Benshie, would welcome that as an alternative period to the 100 days that he cited.

Photo of The Bishop of Durham The Bishop of Durham Bishop

My Lords, will the Minister take the opportunity to commend direct selling from the farmers to the public, through the farmers' markets and the like that take place in many of the northern dales that I know? That system requires no credit.

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Deputy Chief Whip (House of Lords), HM Household, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, I do not know that I am in a position to commend that system as a Minister, but, as an individual and a user of farmers' markets wherever they can be found, I think that they are a good thing.

Photo of The Duke of Montrose The Duke of Montrose Conservative

My Lords, I declare an interest as a farmer. Does the noble Lord agree that, in most sectors, the supermarkets are supplied by processors? Nowadays, they take almost all of a processor's production and call that a "partnership". It is a strange sort of partnership.

Will the Office of Fair Trading look into the number of processors that have ceased to be public limited companies because they can no longer offer the financial returns that make them attractive to investors? Similarly, the processors do not have a margin to pass back to the farmers.

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Deputy Chief Whip (House of Lords), HM Household, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, if that is part of the code of practice, it could well be part of the review that the Office of Fair Trading is to undertake, which I just announced. I see no reason why it should not be part of that review.

Photo of The Bishop of Hereford The Bishop of Hereford Bishop

My Lords, in view of the difficult financial situation in which British farmers find themselves and the problems with supermarkets to which the noble Lord, Lord Mackie, alluded, is DEFRA paying promptly all the moneys that it owes to farmers in compensation for bovine TB, for example, and for arable area payments and so on? There is a great deal of unease in farming communities that DEFRA payments also are being unduly delayed.

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Deputy Chief Whip (House of Lords), HM Household, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, as one who, when I was in the private sector, used to complain about government departments being very slow in paying private suppliers, I have much sympathy with the question. I cannot give an unqualified undertaking that any department is, in all circumstances, paying with a reasonable amount of delay, but there has been a substantial crackdown on late payment by government departments.

Photo of Baroness Miller of Chilthorne Domer Baroness Miller of Chilthorne Domer Liberal Democrat

My Lords, when the Minister last replied to my question on this issue, he kindly subsequently wrote to me to correct the implication in his answer that the code would be reviewed every six months. For the reasons highlighted by my noble friend Lord Mackie, it is obvious that the code is not working very well at the moment, so will the Minister ensure that a review does take place every six months? Will he further ensure that the specifications of items that supermarkets make to their suppliers are not unreasonably changed?

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Deputy Chief Whip (House of Lords), HM Household, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, I said that a review is about to start. Any subsequent interval will be decided in due course. It is not necessarily a good thing for a review to take place every six months. One of the issues that the review will have to deal with is the reluctance of suppliers to come forward to make complaints. It is a serious matter. That is why the Office of Fair Trading has made it clear that it will accept complaints from suppliers' organisations rather than from individual suppliers, which will be able to make their complaints to those organisations in confidence. That is a significant step forward. It will help the code of practice to work better than perhaps it has done in the past.