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Clause 19 - Levy funding

Groceries Code Adjudicator Bill [Lords] – in a Public Bill Committee at 9:30 am on 18th December 2012.

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Photo of Ian Murray Ian Murray Shadow Minister (Business, Innovation and Skills) 9:30 am, 18th December 2012

I beg to move amendment 60, in clause 19, page 8, line 23, at end insert—

‘(5A) Notwithstanding section 25, the Adjudicator must publish the criteria as set out in subsection (5) within three months of this Act coming into force’.

One or two Opposition Members are starting to croak and sneeze a little bit, but we will not apportion blame for where that might have come from in the first instance. Hansard will confirm the truth of it.

Amendment 60 is relatively straightforward. We seek the Minister’s assurance that consideration is also being given to large retailers. We have been at pains to emphasise time and again that, although the Bill is intended to protect suppliers against the 10 large retailers, it should also protect the large retailers and we need to look at ways of making it more responsive to their needs. We had a healthy debate last week about the time scale for introducing guidance on fines, and whether three or six months was more appropriate.

Photo of Neil Parish Neil Parish Conservative, Tiverton and Honiton

It is Christmas and the shadow Minister is being kind to large retailers, but does he not agree with me that they are big enough and tough enough to look after themselves? I am not entirely convinced that they need even more help. I would have thought that the whole idea of the Bill was to try to balance the process more in favour of those who supply large retailers.

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

That is a fair point, but it is incumbent on the Committee to ensure that the Bill is the best it can be. Opposition Members have said time and again that a good Bill has been turned into a great Bill, and now we have the opportunity to turn it into a fantastic Bill. We need to get the drafting on the levy right to ensure that large retailers, who will be paying the levy, are dealt with fairly, and I think that clause 19 does that. Our amendment would hardly hand the baton to the large retailers to hit the suppliers around the head with; it merely provides that any specifications to do with the levy are introduced in guidance within three months. I am not sure whether that will appease the hon. Gentleman, but we are not swinging the pendulum back to the large retailers.

Photo of David Simpson David Simpson Shadow DUP Spokesperson (Communities and Local Government), Shadow DUP Spokesperson (Business, Innovation and Skills)

The view of the Northern Ireland Retail Consortium is that before any levy is imposed, some form of consultation should take place. What is the shadow Minister’s view on that?

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

That is a good point—perhaps some form of consultation should take place—but our amendment would set a time scale, too, so that clarity is achieved as quickly as possible, the guidance can be produced within three months, the levies can be paid as quickly as possible after that, and the adjudicator can get on with investigating cases brought to him.

In itself, clause 19 provides some clarity around the levy. Many retailers raised concerns with us that, in the first draft of the Bill, the levy was not graduated according the size of the retailer, so I am delighted to see that subsection (5) now allows that. Compare Waitrose with Tesco, or Iceland with Asda: they are completely different businesses in terms of turnover and number of stores, so it is important that the levy and the criteria are put together on that basis. We are saying simply that the criteria should be brought forward quickly. Putting on the face of the Bill a time scale of three months from when the Act comes into force to get the guidance put together would give clarity to retailers. That answers the point made by the hon. Member for Upper Bann, as consultation with retailers could take place within that three-month period. We are talking about only 10 large retailers so it should not take too much time.

Photo of Andrew George Andrew George Liberal Democrat, St Ives

I agree with the hon. Gentleman that this is an important issue to settle, and that we should bring in the guidance as quickly as possible. On the relationship between clause 19 and clause 10, on recovery of costs, does he have a view on what the balance should be when drawing up the criteria? Clearly, one method by which the adjudicator can apportion costs according to the amount of time that he or she spends dealing with a particular retailer is through the proper application of clause 10, as well as getting the criteria right under clause 19.

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

The hon. Gentleman knows the Bill intimately and makes a valuable point. The retailers have made clear both their discomfort at paying the levy if they are not the polluter, and their wish that the polluter should pay. That is a reasonable request, and that principle encourages the retailers to do the right thing, so that they are not punished. It is important to reward retailers who do the right thing.

In terms of the relationship with clause 10, if the adjudicator has in the back of his or her mind the idea that awarding costs will redress the balance a little between the levy and the costs paid by the polluter, it is important to take that forward. It would enable good retailers, who are not subject to investigations by the adjudicator, to pay a levy that would stay stable or even be reduced should the amount of costs awarded in some circumstances increase, so the polluter would pay the largest proportion. That would be the right and fair thing to do. What we do not want is retailers who are doing the right thing feeling that they are being punished, as that may encourage them not to do the right thing. The hon. Member for Sherwood has told us before about how, in some instances, gains from breaking the code may far outweigh any costs or levies paid. The balance between costs and levy might address that issue as well.

I did not expect to take so long moving the amendment, but it has been a useful discussion, and I am interested to hear the Minister’s response.

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 note what the shadow Minister said about the sneezing in the Committee and have to confess to feeling a certain degree of guilt.

I thank the hon. Gentleman for the amendment and the opportunity it gives to discuss the levy. It is important to note that the insertion of subsection (5) in the clause was assisted by the scrutiny in the other place. The levy to fund the adjudicator’s work may well be varied according to a range of factors that the adjudicator can take into account. He gave the example of Tesco and Waitrose being vastly different sizes, but I would argue that that is not necessarily the best criterion to distinguish by, because there is not necessarily a correlation between the size of a retailer and the number of investigations it will attract. Indeed, even being subject to an investigation is not necessarily the best criterion, because the investigation could find that the retailer had not breached the code.

The important thing, however, is that the adjudicator will be able to look at this in the round and see where work has been apportioned between arbitrations and investigations, perhaps giving particular weight to investigations. Where the adjudicator has found a breach of the code it would be reasonable, on the polluter-pays principle, that those who have rightly stuck by their legal obligations would see some benefit, while those who require the adjudicator to do more work to ensure their compliance with the code would bear more of the cost and the levy.

Photo of Huw Irranca-Davies Huw Irranca-Davies Shadow Minister (Environment, Food and Rural Affairs)

Will the Minister tell us what advice she has had on how technically and legally robust this welcome clause is? It says that

“any differences must be based on criteria broadly intended to reflect the expense and time that the Adjudicator expects in the light of previous experience”.

That is quite broad wording—in fact, it includes the word “broadly”. It seems that may be open to challenge by a retailer who felt that that broad description of the adjudicator’s criteria was treating it unfairly. Has she been advised that this is strongly enough worded, or is there something that will follow on from this?

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 sure the Government’s position would be that we always bring forward legislation that is robust and strongly enough worded, but I take the  hon. Gentleman’s point and refer the Committee to paragraph 71 of the explanatory notes, which goes into a little more detail. It refers to the types of factors that could be taken into account—for instance, it will be easier for the adjudicator

“to determine, based on evidence, which retailers, or which types of retail activity, are creating the most work for the Adjudicator and determine a funding model which reflects this.”

Because the adjudicator will have to report on what the levy is, that will be open and transparent, and the adjudicator is ultimately accountable to the Secretary of State, so were the adjudicator to recommend an unequal distribution of the levy, that would have to be based on that sort of assessment of their time, not just on turnover and general factors, unless there was found to be a correlation.

There is a whole paragraph in the explanatory notes, but the main underlying point is to give the adjudicator flexibility. The adjudicator will be there at the coal face, dealing with this day in, day out, and will therefore be the one who is best able to understand which retailers are causing the most work. It is helpful that the adjudicator will be able to apportion the levy accordingly. It is important to note the other tools available in clause 10, so that the adjudicator will also be able to award the costs of an investigation against a retailer who is in breach. There is also this provision in clause 19(5). I hope that helps my hon. Friend the Member for St Ives.

The amendment acknowledges the consensus that clause 19(5) is a good thing, but suggests the three-month time scale. Although we want the differential levy to be introduced as soon as possible, it is expected—it is already set out—that in the initial year there will be a flat rate levy shared equally between all retailers. While it will be helpful to have a differential levy, I cannot see how, in year one, the case can fairly be made that this or that retailer will cause more work for the adjudicator. Although I absolutely support the differential levy, in year one the only fair way is a flat rate levy. Only when we have experience, in the second year or later, will we be able to move to a differential levy. The amendment does not help us, because it suggests that we move to that point within three months, when there will not be the experience needed to provide enough evidence and information to work out what the best differential levy should be.

The hon. Member for Upper Bann made a point about a consultation. This will happen regularly, so we do not need to bog the adjudicator down in unnecessary bureaucracy. However, the levies need the consent of the Secretary of State, so there is that accountability, and reasons must be given each time for how the levy has been allocated. Those two things taken together provide accountability. It is set out clearly, so there is also transparency. There is therefore some protection. No doubt hon. Members will be keen to see what is proposed. They are assiduous in asking questions when they think things are happening that are not quite right.

I hope I have reassured the Committee that the amendment is not necessary but that that the differential levy is a good improvement to the Bill. I am still hopeful that the Opposition will be able to declare that it is a  fantastic Bill before we conclude our proceedings, but certainly it is a much better Bill for the inclusion of clause 19(5). I welcome the opportunity we have had to explore it a little further in Committee.

Photo of Ian Murray Ian Murray Shadow Minister (Business, Innovation and Skills) 9:45 am, 18th December 2012

I appreciate what the Minister said, particularly about the differential levy. It was an important aspect of the success of the Bill’s passage through the Lords that they were able to insert that into the levy funding provision. It is important that the polluter pays. I understand why the Minister says there are no time scales; there has to be a period of bedding-in before the adjudicator can identify where the investigations come from and who may be the cause of them. Interestingly, we are not sure that the adjudicator is able to impose levies under clause 9(1), which states that the adjudicator “may” not “must” do so. The adjudicator is not compelled to ask the retailers for a levy, so perhaps we should have tabled an amendment to change “may” to “must” there.

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

It is not too late. We may reflect on that before Report.

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 mentions the use of the word “may” and alludes to an amendment that he might table on Report. I suggest that it is a permission rather than a requirement to have differentiated levies. In the scenario where there were, for example, no investigations required, there were few arbitrations or nothing was found to have been done wrong by the retailers, the adjudicator might well take the discretionary view that splitting it equally was appropriate. The permissive “may” is quite appropriate in this circumstance.

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

I fear your wrath, Mr Williams, for going slightly off piste, but I should like to respond briefly to that intervention. The adjudicator may require the retailers to pay a levy, but must obtain the Secretary of State’s consent. Later, the clause states that if there is a surplus

“the Adjudicator may repay some or all of it to the specified retailers.”

I think that means that the adjudicator may repay it—perhaps he will not—but certainly consent must be given by the Secretary of State. There are a few “mays” and “musts” that might need to be clarified.

Amendment 60 was tabled as a probing amendment and to say that we want the process to be as swift as possible. We want the Bill to become an Act as quickly as possible. When it is up and running we want the investigations to take place as quickly as possible, particularly in the light of responses that the hon. Member for St Ives had on earlier clauses saying that investigations will not be taken until such time as this is ready to go and the guidelines are in place. That time lag is a concern for us all, and I hope that the Minister will reflect on that on Report. The aim must be to ensure that the levies are paid, that the adjudicator is up and running and that investigations can begin. We want to be able to seek justice for suppliers who may have been wronged by a large retailer.

We will consider what the Minister said and may return to some issues on Report. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 19 ordered to stand part of the Bill.

Clauses 20 to 22 ordered to stand part of the Bill.