Only a few days to go: We’re raising £25,000 to keep TheyWorkForYou running and make sure people across the UK can hold their elected representatives to account.

Donate to our crowdfunder

Clause 9 - Investigations: enforcement using financial penalties

Groceries Code Adjudicator Bill [Lords] – in a Public Bill Committee on 13th December 2012.

Alert me about debates like this

Amendment proposed (11 December): 44, in clause 9, page 3, line 17, leave out from ‘penalties’ to end of subsection (1).—(Ian Murray.)

Question again proposed, That the amendment be made.

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Full Member)

I remind the Committee that with this we are discussing the following:

Government amendments 2, 3 and 4.

Amendment 45, in clause 9, page 3, line 26, leave out from subsection (c) and insert—

‘(c) that it shall be paid within 28 days.’.

Government amendment 5.

Government amendment 6, in clause 9, page 3, line 34, at end insert—

‘(7) The Secretary of State must make an order—

(a) specifying the amount of the permitted maximum, or

(b) specifying how that amount is to be determined.

(8) The Adjudicator must, within 6 months beginning with the day on which section 1 comes into force, make a recommendation as to the amount that should be specified in the first order under subsection (7) or the method for determining the amount.

(9) Before making a recommendation the Adjudicator must consult any person he or she thinks appropriate.

(10) The Secretary of State

(a) must have regard to the Adjudicator’s recommendation when making the first order under subsection (7);

(b) may amend or replace an order under subsection (7) only if the Secretary of State has considered whether to do so as part of a review under section 15.

(11) The Adjudicator may not impose a financial penalty in respect of a breach of the Groceries Code that occurs before the first order under subsection (7) comes into force.’.

Amendment (a) to Government amendment 6, after subsection (7) insert—

‘(7A) The Secretary of State must make the order referred to in subsection (7) within 3 months of the Adjudicator making the recommendation referred to in subsection (8).’.

Amendment (b) to Government amendment 6, in subsection (8), leave out ‘or’ and insert ‘and’.

Amendment (c) to Government amendment 6, in subsection (9), leave out ‘must and insert ‘may’.

Amendment (d) to Government amendment 6, in subsection (11), at end add

‘unless the breach started before, and continues after, that date.’.

Amendment 47, in clause 12, page 4, line 22, at end insert—

‘(d) the criteria that the Adjudicator intends to adopt in deciding whether to impose financial penalties under section 9 together with maximum penalty that may be imposed and how the maximum penalty is to be calculated.’.

Government amendments 7, 8 and 9.

Amendment 48, in clause 12, page 4, line 31, leave out from beginning to ‘penalties’ in line 32.

Government amendment 10.

Amendment 57, in clause 15, page 5, line 37, after ‘under’, insert ‘section 9 or’.

Amendment 58, in clause 15, page 5, line 38, leave out ‘that’ and insert ‘the relevant’.

Government amendments 11 and 12.

Amendment 63, page 15, line 36, leave out schedule 3.

Amendment 64, in schedule 3,page 15, line 39, leave out ‘if’ and insert—

‘(1) If the Secretary of State thinks that the Adjudicator’s other powers are inadequate; and

(2) has given due regard to the relevant Ministers in the Devolved Administrations.’.

Amendment 65, in schedule 3, page 16, line 14, at end insert—

(h) consult with the relevant Minister in the Devolved Administrations.’.

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Full Member)

Members will recall that I intended to call Mr Irranca-Davies next. Unfortunately, he is detained for wholly proper reasons on the Floor of the House. I shall therefore call the Minister, and we will take the debate from there. If Mr George is present later, he may wish to speak to his amendments.

Photo of Jo Swinson Jo Swinson The Parliamentary Under-Secretary of State for Women and Equalities, The Parliamentary Under-Secretary of State for Business, Innovation and Skills

Thank you, Sir Roger. I am delighted that we can start this morning’s sitting with the issue that we discussed on Tuesday afternoon. It is fair to say that this group of amendments relates to one of the most hotly debated topics of the Bill, which is whether the adjudicator should have the power to impose fines from the start. As I said on Second Reading and as the Business, Innovation and Skills Committee acknowledged in its report, the issue is finely balanced. I continue to believe, as I explained in debates on earlier clauses, that the sanction of requiring a retailer to publish information—or, in layman’s terms, the name-and-shame sanction—will be powerful and, in a great majority of breaches, sufficient.

The Committee will be pleased to hear that I have, however, listened carefully to the arguments made on Second Reading and by stakeholder groups that the ability to fine from the outset would give the adjudicator more teeth. It is only fair to say that there was an overwhelming consensus on Second Reading that fines were necessary. I am delighted to confirm that—as I have already intimated to all those Members of Parliament who raised the issue by electronic means and, indeed, in correspondence—I have listened to the clearly expressed voice of Parliament. As Committee members will see from the amendment paper, the Government have tabled amendments to give the adjudicator the power to fine from the outset.

It is important to reflect on the Second Reading debate. Hon. Members will recall that I said that, in my detailed meetings with a range of campaign groups, they had impressed on me the need for the watchdog to have teeth, and I demonstrated the gift—properly declared—that they had given me. I said that

“the dog remains on my office shelf as a reminder that, should we find that stronger sanctions are needed, the Secretary of State will be able to bring in fines quickly.”

As—[Interruption.] The hon. Member for Ogmore points out that this cuddly dog has no teeth, which is accurate.

On Second Reading, the hon. Member for Edinburgh South continued the animal analogy. He said:

“We are in danger of creating this toothless tiger—I have “tiger”, but it could be a dog, I suppose. Let us imagine an old-fashioned circus act. Where is the fear in a circus clown putting his head into a tiger’s mouth, only to have his neck viced by the tiger’s gums?”—[Official Report, 19 November 2012; Vol. 553, c. 336-342.]

The hon. Gentleman regaled us with that very clear imagery, but I want to add that this tiger—alongside this watchdog—definitely has teeth, as Committee members can see. If this were full-size, it would certainly not be the kind of animal that—

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Full Member)

Order. The phrase “toys and prams” springs to mind. It is awfully difficult for Hansard if we have props. The hon. Lady will either have to go into a considerable amount of description, and I would prefer her not to, or we will have to make do without the props.

Photo of Jo Swinson Jo Swinson The Parliamentary Under-Secretary of State for Women and Equalities, The Parliamentary Under-Secretary of State for Business, Innovation and Skills

Thank you, Sir Roger. Perhaps a small amount of description will allow Hansard to make sense of the proceedings: alongside the small cuddly dog, I have produced a small plastic tiger with teeth from a toyshop to illustrate my point.

Photo of Ian Murray Ian Murray Shadow Minister (Business, Innovation and Skills)

Sir Roger, you will be pleased to hear that I do not have a chairful of props. Will the Minister reflect on the fact that, now she has decided to put fines in the Bill, she has pulled the rabbit out of the hat?

Hon. Members:

Oh.

Photo of Jo Swinson Jo Swinson The Parliamentary Under-Secretary of State for Women and Equalities, The Parliamentary Under-Secretary of State for Business, Innovation and Skills

The Committee’s reaction says it all. If the hon. Gentleman ever finds that his services are not required by the good people of Edinburgh South, a career in comedy may or may not beckon. However, he will be glad to know, as will you, Sir Roger, that I do not actually have a rabbit to show as a prop.

The change demonstrates that the Government have listened and have recognised that there was significant will throughout the House for introducing the power to fine from day one, which is why Government amendments have been tabled. The hon. Gentleman has tabled amendments 44, 47, 48 and 63, with the support of the hon. Member for Ogmore, which would also have the effect of introducing fines. I agree with their spirit, but the Government amendments are drafted in a more robust way to address the question of how the maximum penalty will be set, which is not in the Opposition’s amendments.

I also hope that the hon. Members will agree not to press amendments 64 and 65. Both refer to amending schedule 3, which we will come to in the schedule stand part decision later on. As schedule 3 refers to the process by which the Secretary of State will be able to come forward with the power to fine, the amendments will be superfluous as the power will be inserted here from day one.

Photo of Andrew George Andrew George Liberal Democrat, St Ives

Likewise, I do not have a chairful of props to bring out, but I was concerned about the way that the hon. Member for Edinburgh South appeared to be toadying—if the Committee does not mind another animal metaphor—towards the Minister about this proposal. I have tabled a set of amendments, one of which draws attention to the fact that there is no time limit on the Secretary of State bringing forward the order. I hope that she understands the purpose and the spirit behind that amendment.

Photo of Jo Swinson Jo Swinson The Parliamentary Under-Secretary of State for Women and Equalities, The Parliamentary Under-Secretary of State for Business, Innovation and Skills

I thank my hon. Friend for his intervention. Depending on the grace of the Chair, he may have the opportunity to move his amendments later today. I do not know whether that will be possible, as it is above my pay grade, but I certainly hope to be able to reassure him on the issue of the timeliness with which the Secretary of State will make the relevant order, because the Government certainly intend to do so in an appropriate amount of time.

I will now discuss the Government amendments. It is important to make it clear that I expect fines to be used as a last resort, only for the most egregious or repeated offences. However, the fact that the adjudicator has the power to impose them will send a strong message to retailers that compliance with the code is not optional. I am confident that the changes will mean that the adjudicator is able to ensure fair play in the food supply chain and keep the industry growing.

There have been reports in some sections of the press—the issue has not been raised in the House—that the amendment would somehow make Britain a less attractive place to do business. I would add to that assertion by saying that almost all business groups other than the large retailers, including the Federation of Small Businesses, the Food and Drink Federation and the National Farmers Union, support the amendment. Indeed, for retailers who comply with the code, which is an existing legal obligation, there will be absolutely no additional burden, as fines could only ever be imposed for a breach of the code. Fines are something that the retailers would have to deal with only if they had broken the law.

Photo of Neil Parish Neil Parish Conservative, Tiverton and Honiton

The fact that the retailers are not keen on fines at all makes me absolutely clear that they must be there and that how they will be imposed must be absolutely firm. Although we do not want fines to be imposed—they are the last resort—they have to be there firmly in the Bill, and they have to be large enough to frighten some of the very big retailers; otherwise, they will not be fit for purpose.

Photo of Jo Swinson Jo Swinson The Parliamentary Under-Secretary of State for Women and Equalities, The Parliamentary Under-Secretary of State for Business, Innovation and Skills

I thank my hon. Friend for his intervention. He has clearly stated, not only in the Committee, but in previous weeks, his support for the power to fine. He has been working hard on championing that, and I agree with him. I will come to the scale of the fines later.

Photo of Ian Murray Ian Murray Shadow Minister (Business, Innovation and Skills)

The terminology that the Minister used was that fines may make it more difficult or less attractive to come to the UK. However, we must make it clear that fines were in the Bill; it was just that they were not in the Bill from day one. Nothing has really changed, apart from the fact that we will not have the time lag.

Photo of Jo Swinson Jo Swinson The Parliamentary Under-Secretary of State for Women and Equalities, The Parliamentary Under-Secretary of State for Business, Innovation and Skills

The hon. Gentleman is quite right. It was not me who said that Britain would be a less attractive place to do business; that was the charge made in some corners of the press. I do not think—[ Interruption. ]

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Full Member)

Order. I am sorry to interrupt the Minister. I cannot allow private conversations on the Back Benches. There are lovely seats outside for people who wish to go and natter, but they cannot do it in here.

Photo of Jo Swinson Jo Swinson The Parliamentary Under-Secretary of State for Women and Equalities, The Parliamentary Under-Secretary of State for Business, Innovation and Skills

Thank you, Sir Roger. To pick up on the point about large retailers, I have met their representatives, as I have met campaigners who very much support the groceries code adjudicator and the Bill. In my meeting with retailers, they were confident that they have their code already, that it is working, and that they are discussing matters with suppliers. They were confident that there were no resulting problems, to which I explained that if that really was the case, they would not have anything to fear from the adjudicator, as it may well end up not having much to do. I think all of us in the House would be happy if the adjudicator did not have a lot to do, but let us ensure that we have it in place, so that if things are not as rosy as some would suggest, we are able to put things right.

It is also important to note, as I flagged up on Second Reading, that the introduction of the power to fine has to come with a full right of appeal on the merits of the imposition of a fine, or its amount, if it is then imposed. That is fair, and it is set out, but it would not be the case, if lower sanctions were used, such as the name-and-shame procedure or recommendations, that the full merits right of appeal would apply in those circumstances. The full merits right of appeal would be reserved only for cases where fines were introduced.

Photo of Chris Ruane Chris Ruane Opposition Whip (Commons)

Will the reporting of the fines and any breaches be done as and when, during the year, and will there be a table at the end of the year to assess who the good guys and bad guys are, as far as supermarkets are concerned?

Photo of Jo Swinson Jo Swinson The Parliamentary Under-Secretary of State for Women and Equalities, The Parliamentary Under-Secretary of State for Business, Innovation and Skills

As the hon. Gentleman will know, and we will come to this later, an annual report will be produced where the adjudicator will set out the action it has taken. We expect that when an investigation is concluded where a fine is imposed, it is likely that it would be the subject of significant media attention and it would be brought to the public’s notice. It would be up to the adjudicator, if it decided to do so, to couple recommendations or naming and shaming with publishing the fact of the fine. Those matters would all be for the adjudicator to determine, but the annual report, bringing together all the actions that have been taken, will be available for everybody to look at and make comparisons.

Many hon. Members have an interest in and have raised another aspect of the amendments, including the hon. Member for Corby, who made an intervention on  Tuesday afternoon about the level of the fines that should be imposed. We hope that the Committee will accept the Government amendments today, which set out the process for how we can specify the maximum penalty. It is important to set out how it will be determined in either primary or secondary legislation, but simply to insert a maximum figure into the Bill without properly consulting stakeholders would not be appropriate. I do not think that there is much appetite for delaying the Bill for that consultation to be carried out.

Photo of Neil Parish Neil Parish Conservative, Tiverton and Honiton 11:45 am, 13th December 2012

The Minister talks about stakeholders, and they will naturally be the large supermarkets, will they not? When the Government talk to them, they need to be careful that the supermarkets do not try to ensure that there are no fines. They are not going to look forward to fines, so I want to ensure that we negotiate strongly.

Photo of Jo Swinson Jo Swinson The Parliamentary Under-Secretary of State for Women and Equalities, The Parliamentary Under-Secretary of State for Business, Innovation and Skills

My hon. Friend makes an important point. I will, I hope, reassure him on two grounds. We do not intend the Government to be part of the consultation process on, or to set, maximum penalties. We hope that the adjudicator will take the lead, because that is the most appropriate way forward. Obviously, there will be parliamentary oversight and the Minister will make the final decision, but the adjudicator will be best placed to carry out the consultation. My hon. Friend rightly said that retailers will be stakeholders, but of course they are not the only stakeholders. Suppliers, others who are involved and have been interested in the parliamentary process, campaigning groups and some third-party organisations will also have a role and can all have input into the process.

Photo of Mark Spencer Mark Spencer Conservative, Sherwood

I seek assurance from the Minister that she expects the adjudicator to conclude that, if a deal goes wrong and a retailer makes a large profit of £2 million by backing out of it, a fine of £500,000 will not motivate them not to do it again.

Photo of Jo Swinson Jo Swinson The Parliamentary Under-Secretary of State for Women and Equalities, The Parliamentary Under-Secretary of State for Business, Innovation and Skills

The hon. Gentleman makes a good point. All those factors should be taken into account in the consultation process, when the adjudicator looks at how we could create the appropriate level of fines. I reiterate that I do not think that setting out a maximum in the Bill is sensible, which is why if my hon. Friend the Member for St Ives chooses to press amendment (c), I cannot accept it.

Photo of Chris Ruane Chris Ruane Opposition Whip (Commons)

The point just made is pertinent. If a supermarket repeatedly breaks the rules, should some kind of escalator ensure that they are well and truly punished? So the supermarkets do not think that they can get away with it on economic grounds, they should be punished where it really hurts—in their pockets—as well as being named and shamed.

Photo of Jo Swinson Jo Swinson The Parliamentary Under-Secretary of State for Women and Equalities, The Parliamentary Under-Secretary of State for Business, Innovation and Skills

We discussed escalation on Tuesday. It is important to remember that the adjudicator will be at the centre of all of this and have a large amount of discretion. I am sure that repeat offences and breaches of the code would not go unnoticed. On Tuesday, I read out parts of the explanatory notes that pointed out that  those would be the kinds of things that could be taken into account when sanctions were decided. Whoever the groceries adjudicator will be will no doubt follow these Committee proceedings and I am sure they will have great interest in that being something that they can take into account.

On how we should set the maximum penalty, it is important to listen to some words of wisdom. My hon. Friend, the Minister of State, Department for Environment, Food and Rural Affairs, posed a question on Second Reading

“will the hon. Gentleman outline how a big a fine he thinks would be appropriate to deter inappropriate behaviour on the part of, say, Mr Tesco?”

The hon. Member for Edinburgh South replied:

“That should be in the hands of the adjudicator…The adjudicator should…be given the power to determine the sanction.”—[Official Report, 19 November 2012; Vol. 553, c. 341.]

They are words of wisdom. The adjudicator is best placed to decide the appropriate maximum fine, with, obviously, the parliamentary scrutiny and ultimate ministerial decision that I outlined earlier.

Photo of Lucy Powell Lucy Powell Labour, Manchester Central

May I ask the Minister for clarification about what happens to the fines once they are received? I understand that they will go into a central pot. How will the supplier get compensation should the situation cause a financial loss? How might that come about?

Photo of Jo Swinson Jo Swinson The Parliamentary Under-Secretary of State for Women and Equalities, The Parliamentary Under-Secretary of State for Business, Innovation and Skills

It is important to remember the scope of the adjudicator’s remit, which is not about compensation for suppliers; it is about ensuring the code is enforced. Because the code is already legally binding, suppliers have the option— through the courts—of taking a breach of contract claim. That is not an option that is often taken up at the moment; we have talked about the climate of fear, and why that option might not be taken up. But if, for example, after an investigation the groceries code adjudicator found that there had been a breach of the code, and if it had been such a significant breach that the adjudicator actually levied a fine on that basis, the supplier would then have a very strong case in a breach of contract claim, given that the adjudicator—an independent body—had properly investigated and then come to that conclusion. It would, of course, ultimately be for the court to decide.

Therefore, the redress is not something that is done through the groceries code adjudicator, but none the less the very fact that there has been an investigation and a result has been pronounced could be something that would certainly assist with any suppliers who were seeking redress.

Photo of Ian Murray Ian Murray Shadow Minister (Business, Innovation and Skills)

I would like to follow up the intervention by my hon. Friend the Member for Manchester Central, and my point is also slightly related to the intervention by the hon. Member for Sherwood about the fines. I appreciate that a civil case could be sought by a supplier, but we could be in a situation where a supplier could suffer a loss of, say, £750,000—just to create a figure—and the adjudicator recommends a fine of £750,000, because it is within the maximum amount allowable, and then that money ends up on the desk of the Chancellor of the Exchequer. So the supplier would be  out of pocket; the retailer would be neutral, because it has made £750,000 through this deal; and the Treasury would be £750,000 better off. I appreciate that the supplier might have to make a civil claim, but would the Minister consider whether or not any compensatory mechanism could be put in place to ensure that the supplier is better off, whereas the retailer would be neutral and the Chancellor would be up by £750,000?

Photo of Jo Swinson Jo Swinson The Parliamentary Under-Secretary of State for Women and Equalities, The Parliamentary Under-Secretary of State for Business, Innovation and Skills

I understand the point that the hon. Gentleman is making, but it is important that we retain the role of the groceries code adjudicator, which is to enforce the code. It is not about providing redress; that has to be pursued through alternative means. The fine is a penalty, if it is imposed; it is not something that, in itself, is about redress. It may well be the case, in the example that the hon. Gentleman outlined, that the fine would be less than the supermarket gained from what it had done, but then the redress could be sought through the courts. And then, with the addition of the fine, which is a penalty rather than redress, the supermarket would of course end up worse off overall.

Photo of Chris Ruane Chris Ruane Opposition Whip (Commons)

On the issue of compensating those who have been done down by the supermarkets, is there any way that anything can be put in the Bill to help those people if they go to court? If we establish a new law and it has been broken, and the farmer or the supplier has lost out financially, is there any way that we can write into legislation something that kind of fast-tracks the case to the court, or gives the farmer or supplier some kind of advantage, not only so that we can do the right thing, but to let the supermarkets know that it will not be easy to get one over on their suppliers?

Photo of Jo Swinson Jo Swinson The Parliamentary Under-Secretary of State for Women and Equalities, The Parliamentary Under-Secretary of State for Business, Innovation and Skills

As we mentioned earlier, the reaction from some of the supermarkets has been somewhat negative—certainly about the introduction of the power to fine from day one. I think they have come round to the fact that the groceries code adjudicator will be in place and they need to work well with it. However, the very fact that we are bringing forward this piece of legislation sends a very strong message that they will not be able to get one over on their suppliers.

Clearly, the suppliers have the option to enforce the contract. I do not think that it is the role of Government to get too involved in what is ultimately a contractual relationship between two businesses. But as I say, the very fact that an investigation will be carried out and an adjudication will be made massively strengthens a supplier’s hand in any subsequent litigation that they may wish to take.

Photo of Mark Spencer Mark Spencer Conservative, Sherwood

Does the Minister agree that, frankly, we should have faith in the British justice system, and that any retailer that lost a case with the adjudicator would be quite foolhardy to try to defend a civil case that was taken by a primary producer? There might also be costs awarded against the retailer if it tried to defend that case through the courts.

Photo of Jo Swinson Jo Swinson The Parliamentary Under-Secretary of State for Women and Equalities, The Parliamentary Under-Secretary of State for Business, Innovation and Skills

I am not suggesting that it is straightforward. Enforcing contracts is one of the costs of running a business that all suppliers must bear in mind. We are talking about the investigation powers of the adjudicator.  It is important to remember that there is also an arbitration power, which we discussed on Tuesday, and suppliers could choose that route if they wanted to.

Suppliers have various options. They will need to take legal advice, and it is not for the Government to be too involved in that, or to give companies legal advice. However, the playing field is much levelled by the existence of the adjudicator’s investigatory powers, which make it possible to examine issues and gather the information necessary to make a judgment.

As to the maximum fine, I have mentioned that the adjudicator will carry out consultation with stakeholders and make a recommendation to the Secretary of State. The Secretary of State will be required to establish the maximum by order, which will help to ensure that fines can be imposed as soon as possible.

I remind the Committee that the amendment to clause 15 allows the Secretary of State to alter the maximum penalty or its method of calculation as a result of the findings of the triennial review. If problems are found with the way the maximum is set it will be possible to make changes by secondary legislation.

The wording that we are using—

“the maximum penalty…or how the maximum penalty is to be calculated” is being used because we envisage that the Secretary of State could set a specific maximum amount, which would apply as the same fixed maximum for all retailers; but equally if it is found in consultation that a formula is a better approach then that might be adopted. The fine could be x% of a retailer’s groceries turnover or the value of relevant supply agreements. That is a matter to be teased out in the consultation so that we can get the right penalty structure, which will be subject to review at the triennial review if necessary.

If hon. Members are keen to know more, paragraph 92 of the explanatory notes sets the matter out in more detail. The Secretary of State would set the maximum in one of the two ways I have outlined, so I hope that my hon. Friend will not press amendment (b).

As to amendment (d) to amendment 6, a breach of the code that began before the adjudicator was established, but continued afterwards, as we discussed on Tuesday, would still be a valid subject for investigation and possibly sanctions. I hope that my hon. Friend will feel he does not need to press the amendment.

Various hon. Members raised time limits, to which amendment (a) is relevant. I understand the concern about the fact that the Bill does not set out a time limit for the Secretary of State to make the order. Hon. Members will know that it is not common practice to specify time limits for parliamentary processes in primary legislation, simply because they are not entirely in the Government’s control, and that could lead, in an extreme case, to a Secretary of State being in breach of the law through no fault of their own. If, for example, the time limit were to be set at three months, and there happened to be a general election suddenly—let us hope that that does not happen in an unscheduled way—it might be difficult for the Secretary of State to comply technically with the legislation.

I want, however, to reassure the Committee on the basis of our amendment. The word “must” is important and makes it clear that laying the order is not optional. The Secretary of State cannot receive advice from the adjudicator and decide not to lay the order; it must be done within a reasonable time after the receipt of the adjudicator’s recommendation. What is reasonable might vary depending on whether there is a general election in the middle of the time frame. There will be a reasonableness test.

Photo of Simon Hart Simon Hart Conservative, Carmarthen West and South Pembrokeshire

On that point, who can challenge that? In what circumstances will someone be able to say, “That is an unreasonable amount of time”? What process will an outside interest be able to follow in order to gain some kind of comfort?

Photo of Jo Swinson Jo Swinson The Parliamentary Under-Secretary of State for Women and Equalities, The Parliamentary Under-Secretary of State for Business, Innovation and Skills 12:00 pm, 13th December 2012

I know that my hon. Friend is an assiduous parliamentarian, and there will be a great deal of interest in the process of setting up the adjudicator and agreeing fines. If there seems to be an undue delay, I am quite certain that hon. Members will hold the Secretary of State to account. However, if that is not seen to be sufficient—although I wholeheartedly think that hon. Members will be able to hold the Secretary of State to account—there is the option of judicial review, if that is deemed to be necessary.

I assure the Committee that Ministers are absolutely committed to give the adjudicator the power to fine from the outset and that there is no intention to backtrack or delay. I hope that I have explained why, for the reasons that I have outlined, including the period of three months in the Bill is not the right approach. I am happy to give a personal commitment to the Committee that, barring extreme matters outside our control, we will have laid an order within three months of a recommendation from the adjudicator; indeed, I hope that it will be much sooner than three months. I hope that that will satisfy the Committee on that matter.

Amendments 57 and 58 are therefore unnecessary, as they would have effect only if the Secretary of State has not made an order about the maximum level of fine by the time of the first triennial review. Clearly, if we intend to lay an order within three months of the adjudicator’s recommendation, there will be no circumstance in which an order will not have been laid by the time of the first triennial review.

Amendment 45 would require fines to be paid within 28 days. Given that the Bill will already allow the adjudicator to specify the period within which a retailer must pay a penalty, I do not think the amendment is necessary. Such detail is more ideally left to the discretion of the adjudicator. For example, in some cases, they might take the view that a fine should be paid in less than 28 days; equally, they may take into account other factors and say that the period should be longer than 28 days. I understand the sentiment behind the amendment, but I think it is important that the adjudicator is genuinely independent.

On the point made by hon. Members regarding redress, clearly, if an investigation has taken place, that would certainly be helpful to suppliers, not least in boosting their confidence. However, the two processes are separate—  the investigation through the groceries code adjudicator, and the particular contractual law. A finding of the investigation will not necessarily be a determination of liability, which will have to be done through a separate claim by the supplier. An investigation may be helpful, but redress is not going to be automatic in any way.

The power to impose financial penalties will strengthen the adjudicator’s ability to enforce the code. I am grateful to hon. Members, campaign groups and other stakeholders who have lobbied hard for the change. It is an important example of how Government can listen. I was struck by a remark made by the hon. Member for Edinburgh East on Tuesday about her experience as an Opposition Member, when she said that this has somewhat restored her faith in the parliamentary process—that something has actually changed. With my five years’ experience as an Opposition Member, I entirely have sympathy with her sentiment; it sometimes can feel like MPs raise issues and they are not listened to. It is important that the Government remain open-minded. If strong arguments are made for which the Committee clearly displays its support, the Government may be prepared to reconsider and make changes. That is what we have done with the Government amendments, and I hope that the Committee will wholeheartedly support them.

Andrew George rose—

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Full Member)

Order. I indicated to the hon. Member for St Ives that I would call him next, and I will do so. The Minister has clearly covered a lot of the ground that the hon. Gentleman’s amendments cover, so the Committee may well feel that at least some of his questions have already been answered. I am sure he will tailor his remarks to new matters.

Photo of Andrew George Andrew George Liberal Democrat, St Ives

Thank you, Sir Roger. As I said at the time, when I had to leave early on Tuesday afternoon I did not intend any discourtesy to the Committee. Such things are sometimes unavoidable because of the pressures of the parliamentary timetable.

I agree that my hon. Friend the Minister has covered a lot of the ground that the amendments cover and anticipated many of the points that I intended to make, so I have stripped out at least 10 pages from my notes. There is very little left, and I will tailor my remarks accordingly. I will not pass up the opportunity to echo the hon. Members for Edinburgh South and for Corby, among others, in congratulating the Minister on demonstrating that she had listened to and weighed up the debate. Although those of us who are engaged in the discourses and mechanisms of Parliament often feel as though we are throwing ourselves full tilt at a hard and impenetrable brick wall, the Committee’s deliberations have shown—perhaps because of the cross-party consensus that underlies the Bill—that reasonable arguments are listened to and may influence outcomes, as the hon. Member for Manchester Central said, and I welcome that.

I appreciate that we are talking about a fine point of judgment. My hon. Friend the Minister made the point well on Second Reading that there are risks inherent in introducing fines at the first possible stage. If the adjudicator chose to name and shame an offender—the reputational damage option—rather than to impose a fine, the  supermarkets might portray that decision as indicating that they had committed a lower order offence, which was less shameful and would cause less reputational damage than might otherwise be the case. That is a fine point of judgment, but my hon. Friend is right to say that the fines are intended to be a last resort if a supermarket has repeatedly failed to comply.

I turn to my amendments, and I will curtail my remarks in view of my hon. Friend’s comments. In my intervention I made it clear that a cynic might interpret the Government amendments as allowing the Secretary of State to delay making an order as set out in Government amendment 6, which would have an effect similar to that of the previous Government’s position. If we did not introduce a measure that would compel the Secretary of State to introduce an order as quickly as possible, we would not be much further forward. The purpose of the Government’s amendment is to tease that point out. The Minister’s remarks were particularly helpful because she put on record that, barring the interruption of a general election or anything else that is outwith the capacity of the Government to avoid, it is her intention introduce an order within a three-month deadline.

Subsection (8) in amendment 6 states,

“The Adjudicator must, within 6 months beginning with the day on which section 1 comes into force, make recommendation as to the amount that should be specified in the order under subsection (7) or the method for determining the amount.”

I believe the Minister needs to address that point because it was not entirely covered by her comments. I press the point because she may wish to reflect on it.

There are two distinct issues here. One is the amount, and the other is the method for determining the amount. Both of those factors are required. The adjudicator must make clear the amount and the method by which it is determined. There may be circumstances, as the Minister intimated, in which the adjudicator may say that it is a matter for calculation. For example, it may be a percentage of turnover. The hon. Member for Sherwood indicated in his telling and important intervention that supermarkets may profit from illegal and improper actions. In those circumstances, the fine should be a calculation rather than a particular amount. Therefore, there will be circumstances in which both of those factors will need to be brought forward. This may be a technical point, and it may be something that can be easily remedied. There is no dispute between us on this point; I am simply making sure that we have covered all the aspects.

Photo of Jo Swinson Jo Swinson The Parliamentary Under-Secretary of State for Women and Equalities, The Parliamentary Under-Secretary of State for Business, Innovation and Skills

It may be helpful if I give my hon. Friend some reassurance on that point. These amendments deal with how the maximum penalty will be decided. The adjudicator, as set out in the guidance, will have to publish how they calculate individual fines. There is further protection in the investigation reports, set out in clause 5(2)(c), which states,

“An investigation report must, in particular, specify…the reasons for the findings and any action taken or proposed.”

There would not just be a calculation of the maximum penalty, which will be done through consultation and may be a calculation itself; there will also be guidance on how individual fines will be calculated. On the specific investigation, the report will have to give reasons for the actions that are taken. That should give my hon. Friend the reassurances he seeks.

Photo of Andrew George Andrew George Liberal Democrat, St Ives 12:15 pm, 13th December 2012

I am grateful to the Minister for that response. At face value, there appears to be an unnecessary “or” in subsection (8), and I do not think anything would be lost by replacing it with “and.” That is all I am suggesting.

Amendment (c) to amendment 6 is a small point. Subsection (9) states:

“Before making a recommendation the Adjudicator must consult any person he or she thinks appropriate.”

A level of discretion seems to be available to the adjudicator, so applying the word “must” seems unnecessarily dictatorial and is against the general tenor of my approach to the Bill. The more relaxed word “may” is more appropriate, because, ultimately, the word “appropriate” provides discretion. The Government can “must” as much as they like, but the word “appropriate” introduces the necessary discretion.

On amendment (d) to amendment 6, I carefully followed what the Minister said about the circumstances on Tuesday. If a breach had occurred and is continuing to occur when the fines are introduced, my amendment would put the situation beyond doubt. The wording of Government amendment 6 does not put it beyond doubt that breaches that began before the imposition of fines may be considered outwith the time scale of her amendment. I do not think anything would be lost by accepting amendment (d), which would simply clarify the matter and put it beyond doubt. Amendment (d) would in no way diminish Government amendment 6.

I hope my comments, which are shorter than I intended—[Interruption.] I am sure the Committee would love to hear my full peroration, but I will finish there.

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Full Member)

Ordinarily I would now call the hon. Member for Edinburgh South, who moved the lead amendment, to wind up, but under the circumstances it may be helpful if I give the Minister the opportunity to respond briefly to the issues raised by the hon. Member for St Ives.

Photo of Jo Swinson Jo Swinson The Parliamentary Under-Secretary of State for Women and Equalities, The Parliamentary Under-Secretary of State for Business, Innovation and Skills

Thank you, Sir Roger. I hope to be able to respond to a couple of points on the specific words “and” or “or,” and “must” or “may.”

Amendment (b) to Government amendment 6 would replace “or” with “and” where the adjudicator makes

“a recommendation as to the amount that should be specified…or the method for determining the amount.”

It may already be possible to include both concepts, but that needs to be up to the adjudicator. As I have suggested, the maximum amount may well be a set figure introduced by the adjudicator, in which case the method for determining the amount would not come into force. My hon. Friend the Member for St Ives has mentioned the word “and,” and we are getting slightly tied up in issues that will be set out in the guidance. Equally, the adjudicator might say that the maximum penalty is the higher of £x or a proportion of turnover. The wording of the Government’s amendment enables that to happen; my hon. Friend’s amendment is a little more restrictive because it suggests that both need to be set out. The adjudicator may want to specify a maximum amount and set out how he will do that, rather than specifying a proportion of turnover. I think that is about the adjudicator’s discretion.

That takes us on to amendment (c) to amendment 6 which would leave out “must” and insert “may”. At this point, my hon. Friend wants more discretion for the adjudicator, so instead of it being that the adjudicator must consult any person that he or she thinks appropriate, they may consult. Although this is slightly on semantics, the difference is that we are clear and firm that, in looking at what the maximum penalty should be, the adjudicator should consult. We want consultation, but it is for the adjudicator to work out how they do that. The word “may” suggests that the adjudicator would consult only if they think it is a good thing to do. We definitely want there to be consultation on the maximum level of fines, which has been a contentious issue.

I hope that, with that explanation, the hon. Gentleman may not be moved to press the amendments.

Photo of Ian Murray Ian Murray Shadow Minister (Business, Innovation and Skills)

We have split this debate over two days, which is quite impressive. We welcome the Minister bringing forward amendments to allow fines to be in the Bill. Indeed, many of the amendments we placed were before the Minister saw the light in this instance, so I do not think that there is need for us to pursue them. In saying that, perhaps we will come back on Report to examine in detail the amendments the Minister brought forward to see whether we may want to make any changes.

The hon. Member for St Ives made some good points and, indeed, the hon. Member for Sherwood and my hon. Friend the Member for Manchester Central stated instances where we may wish to look at how fines are imposed on the retailer. However, as we now have fines in the Bill, and now we are looking only at the technical aspects of the composition and imposition of those fines and the time scales involved in that, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: 2, in clause 9, page 3, line 17, leave out subsection (1).

Amendment 3, in clause 9, page 3, line 20, leave out from ‘to’ to end of line 21 and insert—

‘enforce through imposing financial penalties, that means imposing a penalty on the large retailer of an amount not exceeding the amount of the permitted maximum (see subsection (7)).’.

Amendment 4, in clause 9, page 3, line 25, leave out ‘and’.

Amendment 5, in clause 9, page 3, line 26, at end insert ‘; and

() how it must be paid.’.

Amendment 6, in clause 9, page 3, line 34, at end insert—

‘(7) The Secretary of State must make an order—

(a) specifying the amount of the permitted maximum, or

(b) specifying how that amount is to be determined.

(8) The Adjudicator must, within 6 months beginning with the day on which section 1 comes into force, make a recommendation as to the amount that should be specified in the first order under subsection (7) or the method for determining the amount.

(9) Before making a recommendation the Adjudicator must consult any person he or she thinks appropriate.

(10) The Secretary of State—

(a) must have regard to the Adjudicator’s recommendation when making the first order under subsection (7);

(b) may amend or replace an order under subsection (7) only if the Secretary of State has considered whether to do so as part of a review under section 15.

(11) The Adjudicator may not impose a financial penalty in respect of a breach of the Groceries Code that occurs before the first order under subsection (7) comes into force.’.—(Jo Swinson.)

Clause 9, as amended, ordered to stand part of the Bill.