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As my hon. Friend made clear, the history of cosy consensus in the House is not happy. He gave a list of examples, and I will add a couple more if he and you, Mr. Deputy Speaker, will allow me. I believe the Child Support Agency was supported by all parties, and it has been a complete and utter disaster. I might even add our membership of the exchange rate mechanism, which everybody thought was a marvellous thing but which had catastrophic economic consequences for this country. We do not accept that a cosy consensus between the Front Benchers guarantees that something is right.
Indeed, I share my hon. Friend's view that a cosy consensus in this place leads to the inevitable consequence that something is wrong.
We have clarified that we do not believe that the ombudsman will sit and do nothing even if there is nothing to do, and that he will, as Professor Lyons said, find a proactive role in representing suppliers' interests, even when no particular problems are reported to him. It was interesting that the hon. Member for St. Ives was so dismissive of Professor Lyons. Contributors to the debate have said time and again that we need the ombudsman, not because they think so or have evidence or know what they are talking about, but because the Competition Commission said that we need one. Yet the hon. Gentleman was quick to discount the opinions of Professor Lyons, who was one of two panel members on the Competition Commission who examined the supplier issue work stream. Why was the hon. Gentleman so quick to dismiss him while praying in aid the body on which he served? I would have thought that his views were particularly relevant.
We know exactly what will happen. The ombudsman will start sticking his nose in and the only possible consequence of that interference will be increasing the cost to retailers of the products that they buy from the suppliers. If that does not happen, there is no point in the Bill. The inevitable further consequence is higher prices in the supermarket. I hope that those who support the Bill will make it clear that they are happy with higher prices. It would be helpful if they said by how much they were prepared for prices to increase.
The hon. Member for Ynys Môn said that the ombudsman would cost around £5 million and that that represented 0.0007 per cent. of sales in supermarkets, or something along those lines. I am sure that he will correct me if I am wrong, but I have not seen a limit on the cost of the ombudsman in the Bill. Indeed, as I made clear in an intervention, the exact opposite applies because the measure would give the ombudsman free rein to appoint as many staff as he deemed necessary to carry out his duties. Instead of a curtailed minimal cost, we are invited to support an open-ended cost so that the ombudsman is free to build his empire and make it as big as he wishes.
Albert Owen: The hon. Gentleman is trying to confuse the House. The Competition Commission's report makes clear the cost to the retailer. It has been estimated at £5 million, which is 0.005 per cent. of the sales of the some of the largest retailers. The only variant would be the number of complaints about the retailer. The formula is in clause 12-I am sure that he has understood that. However, the setting-up costs would, of course, be separate.
"The Ombudsman may appoint staff which the Ombudsman thinks are necessary for the fulfilment of the Ombudsman's functions."
People can interpret that as they wish. I interpret it to mean that the ombudsman may appoint as many staff as he deems necessary to carry out his job. If he wants to start empire building-I suspect that that will happen
because that is what happens with all such quangos-the Bill would give him or her an open-ended opportunity to recruit as many people and make the empire as big as they see fit. I have quoted from the Bill-I do not intend to mislead anybody; people can make up their own minds.
First, the Bill provides for an open-ended cost for setting up the ombudsman. So that we know where we stand, we must always be clear that, when we refer to cost, it will ultimately be borne by the consumer. The hon. Gentleman estimates that the cost to the consumer of setting up the ombudsman will be £5 million-that limit is not in the Bill, and he might wish to consider introducing it in Committee-but that is not the cost that consumers need to worry about. The cost that consumers ought to be worried about is the higher prices that they will be expected to pay as a result of the ombudsman's decisions.
The grocery market in this country is worth in the region of £130 billion a year. What extra moneys do we expect supermarkets to pass on to their suppliers as a result of the ombudsman's intervention? Let us be modest and say that suppliers will get a 1 per cent. increase in their income from supermarkets as a result of the ombudsman being set up. I am sure the hon. Gentleman had something much more ambitious than 1 per cent. in mind, but based on the size of the grocery market at the moment-it might grow-that would mean that suppliers could expect a further £1.3 billion. Who will pay that extra cost? The consumer will pay. Even if the grocery ombudsman delivers only a 1 per cent. increase in income for suppliers as a result of the empire that will be set up, that will cost consumers in this country £1.3 billion. What a surprise that nobody mentioned that earlier and told the public what the cost would be to them through higher shopping bills.
We are in the midst of a recession. People are losing their jobs and struggling to get by, and many fear for the future, yet hon. Members, who seem to be occupying an ivory tower today, seem happy to pass billions of pounds of costs on to their constituents when they can least afford it.
Mr. Roger Williams: The hon. Gentleman has picked a figure of 1 per cent. Does that mean that supermarkets are underpaying suppliers by £1.3 billion as a result of their unfair practices? Is that the assumption he is making with the figures he has picked out of the air?
Philip Davies: I shall try to speak more slowly for the hon. Gentleman's benefit. Those who propose the ombudsman take the view that supermarkets are screwing suppliers into the ground. Therefore, from their perspective-I do not believe that an ombudsman is necessary-the ombudsman will be useful only as a means by which to divert more money from the supermarket to the supplier. I am merely following through the consequences of that for our constituents, namely by saying that there will be an increase in prices.
I suspect that the hon. Gentleman has a more ambitious figure than 1 per cent. in mind. I am simply illustrating what every 1 per cent. more that goes from the supermarket to the supplier will mean for the consumer. He might think that a 5 per cent. increase is necessary. If
so, I hope he tells people that that would mean that they will be paying an extra £6.5 billion a year in their shopping bills.
Mr. Williams: I will try once more. The hon. Gentleman says that the supermarkets are not trading unfairly in any way. Presumably therefore, in his analysis, the ombudsman would not make any award or decision that increases what supermarkets pay to suppliers. However, he has given the figure of 1 per cent., which assumes that there is unfair trading to the tune of £1.3 billion.
Philip Davies: This is very hard work. I will try to explain my point to the hon. Gentleman for the third time. Perhaps detention and a bit more homework is required. I will try to give him one more opportunity to grasp this point. The only reason to set up the ombudsman is to make supermarkets give more money to suppliers-if he has a different reason for setting up the ombudsman, perhaps he could tell me what it is. However, I presume that he is in favour of an ombudsman because he thinks that it will deliver more money from supermarkets to suppliers. The fact is that every 1 per cent. extra that goes from the supermarket to the supplier will mean a £1.3 billion cost that will ultimately be borne by the consumer.
If the hon. Gentleman believes that setting up the ombudsman is such a good thing, and that it is a price worth paying, he should have the courage of his convictions and say so. To try to pretend that any extra money that goes to the supplier from the supermarket will not cost the consumer or the supermarket anything-which seems to be the length and breadth of the argument that we have heard so far-is ridiculous. People are not stupid, and they can see that that is a ridiculous argument. If anybody gets extra money, it must come from someone else, and in this case, it will come from the consumer. Those consumers are our constituents. All I am urging hon. Members to do is to be up front with their constituents about what they are proposing, instead of just telling them the benefits that will occur. Why do people in this country have so little faith in Members of Parliament? It is because they think that their MPs are not straight with them and do not tell them all the facts. People think that MPs do not tell them the bad news as well as the good news. Let us try to put that right, be open and up front with our constituents and tell them the full consequences of introducing the ombudsman-higher prices at the checkout. That is an inevitable consequence of the Bill, and it is very depressing that hon. Members will not be up front with their constituents.
I return to the point made by my hon. Friend the Member for Christchurch in his all-too-brief speech. He hit the nail on the head when he described the Bill as fiddling while Rome burns. We have hon. Members supposedly championing our hard-pressed suppliers today-we keep being reminded how hard-pressed they are-and yet those same Members are the greatest advocates of piling more and more costs on to those suppliers, including employment costs, additional regulations and other burdens. For instance, the cost of EU regulations drives many companies, and farmers, to despair. The biggest issues facing many suppliers are the increase in regulation, red tape and employment costs. Those are driving suppliers into the ground and are far more important than their relationship with the
supermarkets. But those hon. Members who act as the self-appointed champions of the suppliers are also the greatest cheerleaders for the extra regulation, costs and taxation that is imposed on them. I suggest that it would be more helpful to the suppliers to consider those issues.
Who would be protected by the Bill? It would not be many of the small producers and farmers. Instead, it would be large multinational companies that will use the threat of this legislation to try to bolster their negotiations with supermarkets. Those companies make hundreds of millions of pounds of profit every year, and the effect of the ombudsman will be to deliver even bigger profits to those big multinational suppliers at the expense of the consumer who will have to pay more. I am sure that the hon. Member for Ynys Môn, as a good Labour man, believes in the redistribution of wealth, but it is beyond me how on earth he can justify redistributing wealth from some of the poorest of his constituents, who go to supermarkets specifically because they deliver low prices-they might be on fixed incomes, and it might be all that they can afford-to some very big, multinational suppliers. I have no idea on what basis that could be considered fair, but it is not my definition of fairness. It would do the poorest of his constituents a great disservice by wanting to line the pockets of some very big, multinational companies. That is the only possible upshot of an ombudsman.
Following on from the point about suppliers, I must point out, because a great disservice is being done to supermarkets today, that supermarkets are some of the most proactive organisations in getting small suppliers up and running, taking on their products and helping them to get started and to grow and thrive. Without the actions of many supermarkets, many small suppliers would have gone down the pan an awfully long time ago. I remember, from my time at Asda, receiving a thank you letter from a bakery, I believe-either way, it was a small business-to Asda for helping and supporting it through a difficult period. Without that help, it would not have been able to survive and flourish. The idea that it is a one-way street of supermarkets trying to drive smaller suppliers and retailers into the ground is not borne out by the facts.
In many cases, supermarkets go over and above what is expected of them. I think I am right in saying-I will happily be corrected-that Morrisons has introduced a scheme under which it pays its smallest farmers within seven days. That is a fantastic initiative that is doing an awful lot to help-I presume-those small suppliers that need rapid cash flow. Given how the Government sometimes treat their suppliers, it does not behold people in the House to want to set up a Government-inspired quango to lecture retailers, which are often good at paying their suppliers quickly, on how they should be looking after them. In many cases, food retailers and supermarkets are some of the best in the industry at looking after their suppliers and paying them promptly. It would be wrong for people to be left with the impression, from this debate, that supermarkets are among the worst offenders, when they are not.
I do not intend to delay the House further. On all these issues, particularly where we have a consensus between the Front-Bench spokespeople, it is important to hear the alternate view. There is always another side of an argument, but unfortunately in this place it is
sometimes hard to find somebody who will stand up and put it, if people think that the proposals are popular. However, it would do a great disservice to a very successful industry, of which we should be incredibly proud-the supermarket industry-were somebody not to speak up and put the other side of the argument. To try to give the impression that supermarkets are mean-spirited organisations-they are not-would be unfair to the millions of people who work in the food retail sector and supermarkets and who are rightly proud of the companies for which they work and of how their companies look after their staff, suppliers and customers. It would be grossly unfair on consumers were we not to put the other side of the argument, because the one thing that I can guarantee is that, if a grocery ombudsman is set up, there will be only one loser at the end of the day: consumers-our constituents-who are often the poorest people in our constituencies. They go to supermarkets because they have the cheapest prices, and they will be the ones who suffer as a result of grandstanding by some hon. Members in the House who know very little, I am afraid, about the industry to which they want to do so much damage.
The Minister for Regional Economic Development and Co-ordination (Ms Rosie Winterton): I congratulate my hon. Friend the Member for Ynys Môn (Albert Owen) on raising an important issue. I think we have all noted his genuine concern and desire to protect the businesses that supply supermarkets with grocery produce, and his wish to ensure that commercial relationships in the sector are conducted fairly. He has been a champion of the cause, and his speech demonstrated the passion with which he has pursued it.
I pay tribute to my hon. Friends the Members for Stroud (Mr. Drew) and for Llanelli (Nia Griffith), and to the hon. Member for St. Ives (Andrew George), who has also been supportive. The hon. Member for Weston-super-Mare (John Penrose) raised points with which I shall try to deal later. It was obvious that the hon. Members for Christchurch (Mr. Chope) and for Shipley (Philip Davies) held a different opinion, but they have form when it comes to issues such as this. Their desire to abolish the national minimum wage was an indication of their view that any interference from Government in the form of regulation intended to look after workers' rights was to be resisted at all costs. That is part of their philosophy.
Ms Winterton: That is a tremendously appropriate Bill to present during an economic downturn, I must say. It certainly shows where the hon. Gentleman is coming from on the protections that have been introduced for workers.
As for the Bill we are discussing today, I assure my hon. Friend the Member for Ynys Môn that the Government share his concern. The Bill provides for the creation of a grocery market ombudsman, and sets out a number of rules against which the ombudsman would monitor and enforce compliance with the grocery supply
code of practice. As Members have said, the code was drawn up by the Competition Commission. It was one of the commission's recommendations following its market inquiry into the supply of groceries in the United Kingdom, which resulted in a report published in April 2008.
I thank the commission for its thorough examination of the issues, and for the hard work of all its staff during the investigation. I also commend it for producing the new code, and for its valiant efforts-sadly, they proved fruitless-to win the agreement of the largest grocery retailers to set up an ombudsman scheme voluntarily. Its investigation was exhaustive. I understand that it received more than 100 submissions from grocery retailers, and more than 600 from a wide range of suppliers, consumers and local authorities from all over the United Kingdom. Some 80 hearings were staged, involving all the interested parties, and a number of other meetings were held as well.
Mr. Nigel Evans (Ribble Valley) (Con): Can the Minister tell us how many submissions came from farmers or farm workers? As she will know, there are a great many farmers in my constituency. A problem in the past has been the driving down of the amount of money they receive for their goods, which is great for consumers but not for producers. In the long term, we need a little bit of fairness for both.
Ms Winterton: The hon. Gentleman makes a good point. What he describes is exactly what the Competition Commission was trying to get to grips with because there had been so many complaints. I do not know exactly how many farmers made representations, but I know from the speech made by my hon. Friend the Member for Ynys Môn that the National Farmers Union has been very supportive of the work that he and others have done.
In addition to the hearings, questionnaires, surveys and other industry publications were used and the commission also used its legal powers to ensure that other essential information was provided and could be taken into account. The result was a 270-page report containing more than 30 detailed appendices and, as I say, very important and valuable work. The inquiry concluded that although the market is generally working well, there are concerns about the long-term future of the supply chain.
The commission's main concern was about the exercise of buyer power by certain grocery retailers in respect of their suppliers of groceries, particularly through their adoption of supply chain practices that transferred excessive risks and unexpected costs to those suppliers. The commission was at pains to point out that the exercise of buyer power by grocery retailers is likely to have positive implications for consumers, especially where the competition between grocery retailers is effective, as consumers benefit through lower prices and this can also spur innovation in the supplier chain. However, the exercise of buyer power can raise concerns in certain limited circumstances.
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