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Neil Parish: Absolutely. I welcome the hon. Gentleman’s comment. Again, to take a wonderful, if perhaps slightly overused, word, this is all about fairness. The supermarkets have huge investments, and they are entitled to a fair profit, but if they use their situation to drive prices down for the producer and keep prices up for the consumer, they are taking too much out of the market.

Those of us who represent rural constituencies very much want agriculture and the growers to get a fair deal from the marketplace. I spent 10 years in the European Parliament; we can talk about the common agricultural policy and about whether we should be subsidised. In the end, however, it would be far better if farmers did not have to be supported through a subsidy. What they actually want is a fair deal from the marketplace.

Historically, the previous Government held an inquiry in their early days into Milk Marque, a large co-operative that bought 37% of the milk in this country. Subsequently, the Office of Fair Trading split the organisation up because it was considered a monopoly. We now have a supermarket with 32% of the trade in this country, but it is not considered a monopoly. I am not going to push the Government to go to war with Tesco, and nor do I want to go to war with Tesco, but I want to put clearly on the record that we must stop being so mealy-mouthed about these things, because, in the end, these guys have huge power.

My hon. Friend the Member for South Staffordshire put it very well when he talked about his pottery business. He said he had a large buyer, who had come along and said, “I’m not going to accept the deal that we’ve done. I want to pay you less. I want to pay you late. That is the deal. Take it or leave it.” That is what the adjudicator needs to sort out as far as food production is concerned. They have to make sure that buying power and scale do not drive prices down.

When the supermarkets decide to have a price war, all consumers are grateful. I would be the last to say that such things should not happen, because that is competition. However, when the supermarkets go into that price war, they must not turn around and tell producers, “Okay, we’re having a war with our neighbouring supermarkets, so we will drive down the price we pay you.” They then drive prices down to below the cost of production. Milk prices are now 3p or 4p below the cost of production. Pig prices are £20 per pig below the cost of production. Cereal prices are probably the highest we have seen for many years, if not the highest we have ever seen. That is adding to industry’s costs, but it is not reflected in the price that the supermarkets and big buyers pay producers. That is why we are so keen to have an adjudicator.

I agree with my hon. Friend and other Members that the adjudicator must have real teeth so that they can take action to stop abuses. I do not think that there will be a huge bureaucracy and a huge problem, provided that the adjudicator has the right muscle and teeth. If they do, they will not need to be used in most cases, because the producer, processor or whoever will be able simply to threaten to go to the adjudicator. That is when the system will really work—not when people have to go through the whole process. People need to be able to go to somebody who can check what is happening.

Smaller producers, in particular, do not need necessarily to declare exactly who they are. I know that that is a more difficult issue, but there is such huge pressure on smaller producers to avoid being targeted by those with

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power in the market. Edward Heath, who was perhaps not always the most popular man in the world, spoke about the unacceptable face of capitalism, but is what we are talking about perhaps not the unacceptable face of the market? As a Conservative, it is perhaps dangerous for me to talk of such matters, but if there are huge, dominant players in the market, smaller producers can be pushed out of business.

I am sure that the adjudicator will be welcomed across the House, but I have one final point for the Minister, to which I am sure he will respond when he sums up. I thank my hon. Friend the Member for South Staffordshire for raising this essential issue, but I wonder whether we can have a real time scale for the Bill. It was to have been published before Easter, and I accept that Easter is coming and that we are obviously not going to see it. When will it come out? How long will the draft stage take? One or two Members, including the hon. Member for Ynys Môn (Albert Owen), asked whether we need a draft and whether the issue is being kicked into the long grass. I do not believe that it is, but the Minister needs to reassure us of that, because many people are pinning great hopes on the adjudicator.

3.17 pm

Roger Williams (Brecon and Radnorshire) (LD): I will try to keep my comments relatively brief so that the Minister can address many of the questions that have been asked.

I want to place on the record my entries in the Register of Members’ Financial Interests. I am a producer of beef cattle and sheep. My beef cattle go to the St Merryn slaughterhouse in Merthyr, which supplies Tesco and McDonald’s. My sheep go to Farmers Fresh—and where they go afterwards, I do not really know, but I suspect that some end up in supermarkets.

Many of the arguments that have been used to reinforce the proposal for a grocery code adjudicator have been made before. However, it is useful that the hon. Member for South Staffordshire (Gavin Williamson) has been able to secure this debate so that we can put the issue under the Minister’s nose, to remind him that it has not gone away, that Members are still pursuing it with great vigour, as we have seen today, and that there is a great appetite for it outside the House.

I have great admiration for supermarkets, which have been the star performers of the retail sector over many years. They have done a lot to ensure that there is a sense of quality about their products, although some people would argue that we could do with more traditional products. None the less, supermarkets set a standard on quality, and they have increased the variety of foodstuffs available to the consumer.

Over the past 10 or 15 years, food price inflation has been very low and often negative, which has made a contribution at times when we have had low inflation figures. This country’s food producers have contributed to low inflation figures, which has been to the consumer’s benefit.

Of course, we are talking about not just producers, but retailers. The argument that we are having today is that the producer rather than the retailer has borne the burden of keeping prices—until quite recently—low. My limited knowledge of economics tells me that in a

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perfect market, there are many sellers and buyers and everyone in the market has a real understanding of the quantity and quality of the commodity being traded.

As far as food production and retailing are concerned, the perfect market does not exist. There are a small number of very large buyers in the market and a large number of small producers. Although the large buyers probably have a good idea of the state of the market, the small producers do not and are therefore unable to take advantage when a possible advantage occurs. We are talking about anti-competitive practices and we have plenty of competition law that should support us in this matter.

I am a generous man and have often said that the supermarkets are so large that they sometimes do not even realise that they are acting anti-competitively. Every move they make and every step they take affects the market. I sometimes compare them to a large person in a narrow corridor. However well behaved that large person is, they are bound to affect the people coming and going. They could act not so politely and have a terrible effect on the passage of people, but even when they are acting politely, they can have an effect, and supermarkets can have an effect. That is why we need somebody external—an objective force—to look at the supply chains and ensure that they are not being abused.

I would like to give a little economics lecture on the profitability of supermarkets, although I am sure that the hon. Member for Shipley (Philip Davies) understands it a lot better than I do. The profitability of supermarkets is determined by two things: one is the margin of the product and the other is the turnover. If they are multiplied, we get the gross profit of the supermarket. Out of that, it has to fund its overheads, labour and financial costs and all the other costs attributed to businesses.

The margin times turnover is key; one could argue that it does not matter at what price a supermarket buys its product, as long as it can get the margin. However, its turnover depends on how competitive it is with other supermarkets. That is when price pressure comes in. People tell me that quality is required and must be delivered, so often the only competitive advantage that people can have is on price. The sheer size of some of the organisations—the 32% share that we heard about—affects the marketplace. They can go in and abuse their dominant position in the marketplace.

I would like to put on the record my appreciation of the wonderful work that many hon. Members, including the hon. Member for Ynys Môn (Albert Owen) and my hon. Friend the Member for St Ives (Andrew George), have done on this subject. Some of us have followed in their wake—and we are still here, still pressing the Minister to take some action, because in the long run that will be to the advantage not only of the producer but of the consumer as well.

We want to ensure that the quality product that the consumer wants is available in the supermarket. We are very worried at the moment that constant cost pressure, particularly on milk and milk products, is driving quality out of the supermarkets. When customers go in them, they will not be able to buy the British product that they so want.

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3.24 pm

Philip Davies (Shipley) (Con): I will speak as briefly as possible, because I know that the hon. Member for St Ives (Andrew George), who has done a lot of work in this area, wants to speak as well. Not for the first time, and no doubt not for the last time, I appear to be in a minority of one in a debate, but speaking up for unpopular causes is something that I enjoy doing, so I will make the most of it.

It is always chastening to see my hon. Friends leaping up to advocate an extra quango, and an expensive one at that. My hon. Friend the Member for Tiverton and Honiton (Neil Parish) seems to think that it would have a minimal cost, and I admire his enthusiasm and, perhaps, naivety. I have never known any of these quangos to have a minor cost. He seems to think that the ombudsman would not have anything to do and that the fact that they are there will be enough to pull everybody into line. I may make an early bid for the job. No doubt, a well-paid position with no work to do sounds like the ideal kind of job for most people.

I have no interest to declare, but, hopefully, I have some experience, both as someone who worked for a supermarket chain for the best part of 13 years and as someone whose stepfather was a dairy farmer who went out of business because it was no longer viable. I like to think that I have seen the problems on both sides. Rather than being anti-competitive, the supermarket industry must be the most competitive industry in this country. It is not only competitive, but one of our most successful industries. I never know why politicians always see a successful industry and feel that the best way to treat it is to clobber it over the head as much as possible and to try to take as much money out of it as possible. We should celebrate our successful industries, not try to clobber them all the time.

Supermarkets have been successful for one reason and one reason alone, which is that they deliver what their customers want at a price at which they want it. All successful businesses have two things in common: they look after their customers and they look after their staff. All failed businesses in the world have two things in common: they do not look after their customers and they do not look after their staff. Supermarkets are successful, because they look after their staff and customers, and we should celebrate that.

Gavin Williamson: As always, my hon. Friend speaks incredibly eloquently. Yes, a successful business is absolutely about looking after staff and, most importantly, customers, but it is also about developing the supply chain. Every one of the major retailers will talk about the importance of their supply chain all the way through. This is about getting that supply chain right and ensuring that there is fairness all the way through.

Philip Davies: My hon. Friend is right. I was going to come on to that point later, but I will mention it now since he has raised it. A supermarket’s success cannot work on the basis of the supermarket versus the supplier. For a supermarket to be successful, it needs products on the shelves just as much as the supplier needs the supermarket to sell its products. A supermarket without Heinz baked beans and Kellogg’s cornflakes would not be much of a supermarket. The idea that the whip hand is always the supermarket’s is not one that I recognise.

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Some suppliers are so powerful that they have the whip hand over the supermarkets, because it is so important that their products are on the shelves.

Neil Parish: My hon. Friend has referred to household names, which, of course, have a great deal of marketing power when dealing with supermarkets. However, a lot of the smaller producers, especially of goods such as vegetables, which are seasonal and have to be sold at a certain time, do not have the same power to trade with a supermarket and the supermarket can then push down the prices.

Philip Davies: The ombudsman, as envisaged, would apply to all suppliers, so even those that are more powerful than the supermarkets would benefit. It would be a boon to big multinational businesses at the expense of the consumer and the supermarkets. In reality, it would do very little to help small suppliers.

I come back to the point that this is a solution looking for a problem. We already have a supermarket code of practice that prohibits any retrospective changes to agreements, which is one of the big beefs that people had. It imposes a prohibition on charging suppliers for shrinkage, which is another cost that supermarkets have to factor into their prices. It has an overarching fair-dealing provision, which the Competition Commission believes balances the need to curtail unreasonable behaviour and to allow some commercial flexibility. I must stress that the code already makes it clear that a retailer may only delist a supplier for genuine commercial reasons, and expressly not for exercising its rights under the code. If any supplier at the moment wants to make a complaint to the OFT, which oversees the supermarket code of practice, it can do so without any penalty. It does not need to have anonymity, and I object to the principle of anonymity.

If somebody were accused of an offence in court, but they had no idea who was accusing them or what they were being accused of, it would be completely unfair.

Gavin Williamson: Will my hon. Friend give way?

Philip Davies: I must press on because the hon. Member for St Ives also wishes to speak. The point is that we already have an existing code. Why we need an ombudsman on top of that when such matters can already be enforced is beyond me.

What does the Minister envisage the cost would be of establishing a grocery ombudsman, and who would pay for it? I think it would be expensive, and that will lead only to higher prices. If we pass on higher returns to the supplier, the only possible consequence in a market that is already incredibly popular—margins for supermarkets are already low—will be an effect on the consumer. In an industry worth £130 billion a year, 1% of that is £1.3 billion, 2% is £2.6 billion and so on. I have no idea how much extra people expect suppliers to get, but even if it is only in that region, it is a massive cost to pass on to consumers at a time when people cannot afford to pay their bills. Constituents who are struggling will not thank hon. Members when they find out that huge increases in cost have been passed on.

Simon Hart: Will my hon. Friend give way?

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Philip Davies: I cannot give way, because we have not got time. The idea that everyone agrees on this matter is not correct. The economist, Professor Lyons, who is one of the two Competition Commission panel members working on supplier issues, concluded that the ombudsman would be counter-productive and opposed its being set up. The commission’s report stated that he

“believed that the Ombudsman would be counterproductive...He was concerned that the Ombudsman may find a role ‘proactively’ representing the interests of suppliers, including global manufacturers and large intermediaries, which he considered would reduce the benefits of competition.”

There are a large number of myths about the relationship between supermarkets and suppliers. The idea that all buy one, get one free promotions are insisted on by supermarkets and paid for by suppliers is completely wrong. When I was at Asda, we tried to stop suppliers from offering such deals and have an everyday lower price. Buy one, get one free deals are promoted to supermarkets by suppliers, many of which have huge marketing budgets. They use such deals as a way to market their products and get people to buy them in the future. Most of the big supermarket suppliers, such as Mars and Proctor and Gamble, have marketing budgets that supermarkets could only dream about. That is the reality of the situation. The ombudsman will do nothing to help the consumer or the small supplier. If anything, it will benefit only the bureaucracy that is set up, which will be self-serving, and big, multinational corporations, which can fend for themselves.

I believe in the free market. For me, the free market means allowing people to make deals themselves. There may be bad deals, but I hope the Government will not interfere in every commercial discussion between two companies and try to fathom out who has got the best arrangement. That should be left for the free market to decide, because the people who benefit most from supermarkets are those who work in them and the consumers.

Mr Roger Gale (in the Chair): Order. I would like to call the Front-Bench speakers at 3.40 pm.

3.33 pm

Andrew George (St Ives) (LD): I will be brief, Mr Gale. It is a pleasure to follow the hon. Member for Shipley (Philip Davies). We disagree, but not in every respect, and I passionately agree with his concluding remarks about the operation of the free market.

The issue is about what happens when the market fails. We have always had the Monopolies and Mergers Commission—now the Competition Commission—and other regulatory bodies to ensure fair dealing, and that is fundamentally what the debate is about. It is not about price setting or protecting large and powerful supermarket suppliers such as Kellogg’s and the producers of baked beans and other similar brands. In 2008, the Competition Commission raised a concern about the transfer of

“excessive risk and unexpected cost.”

The hon. Member for South Staffordshire (Gavin Williamson) should be congratulated warmly on securing this important and timely debate as we look forward to the publication of the Government’s draft Bill. He should also be congratulated on the balanced and considered manner in which he introduced the subject.

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The report from 2008—three years ago—came after years of inquiries by the Competition Commission and the Office of Fair Trading going back to 2000, after which the first voluntary code was established. I will not go into the history of it all.

I will quote from that report, because it fundamentally explains why we are in our position today, and there is great disappointment that we are not further forward. The report concludes:

“We found that all large grocery retailers, wholesalers and buying groups have buyer power in relation to at least some of their suppliers. This buyer power is of benefit to consumers since part of the lower supplier prices arising from this buyer power will be passed on to consumers in the form of lower retail prices.”

That agrees entirely with the hon. Member for Shipley.

“However we found that when, in the hope of gaining competitive advantage, grocery retailers transfer excessive risks or unexpected costs to their suppliers, this is likely to lessen suppliers’ incentives to invest in new capacity, products and production processes. If unchecked, we conclude that this will ultimately have a detrimental effect on consumers, by leading to lower-quality goods, less choice of goods and product innovation.”

I am grateful to the hon. Member for Ynys Môn (Albert Owen) for his major contribution to this debate both today and over the years. His private Member’s Bill helped to stimulate and provoke more rapid progress, although not rapid enough. From his party I also remember the former Member of Parliament for Stroud, David Drew, who was a great champion for this issue.

In the remaining minutes, I would like to emphasise that I entirely sympathise with the hon. Member for South Staffordshire on the issue of the name; given the circumstances, the name is a bit like something put together by Frankenstein. I did not like the word “ombudsman”, because that implies something reactive and we want something that will proactively keep an overview on what is going on throughout the supply chain.

As I said, this issue is about fair dealing. If the adjudicator were called the “supermarkets ombudsman”, the assumption would be that all wrongdoing was on the part of supermarkets. If it were called a “grocery supply adjudicator”, that would recognise that fair—or unfair—dealing might work both ways. In future years, we must keep an open mind as to how that power relationship might play out.

Previous reports have found that supermarkets are so powerful that they can dictate market conditions. They also identified that when suppliers were depended on to complain in order to stimulate an investigation into the breaking of the code, there was a climate of fear among them because of possible retaliatory action.

I do not know the precise answer to the question from the hon. Member for Shipley about how much the adjudicator will cost to set up, but it will be small numbers of millions of pounds, and the cost to the taxpayer should be nil; it will be done through an industry levy, as I hope the Minister will confirm. Ultimately, I hope that the adjudicator will be used as a badge of pride for supermarkets if they get a clean bill of health on an annual basis. I hope it will provide a service to the retail trade in awarding a badge, a tick, to a supermarket because it was found to have done nothing wrong during the year.

As the Minister is aware, I have raised a number of issues with him about the industry levy, which should be based on a formula to reflect the size and turnover of

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the supermarkets that are regulated, as well as the extent to which they are found to comply—or not comply—with the code. The capacity of the adjudicator should be sufficient for it to be capable of undertaking its own independent, proactive investigations. The powers of the adjudicator to undertake enquiries should be sufficient to nullify the risk of retaliatory action being taken against the supplier in a range of circumstances.

It is vital that we move with maximum speed towards a conclusion on this matter. It has all-party support, and I wish the Minister well. I know that with one or two exceptions, he has full backing across the Chamber to move the legislation forward.

3.39 pm

Nia Griffith (Llanelli) (Lab): I congratulate the hon. Member for South Staffordshire (Gavin Williamson) on securing the debate and reminding us of this very important issue. It is now more than a year since my hon. Friend the Member for Ynys Môn (Albert Owen) led the Second Reading debate for his private Member’s Bill—the Grocery Market Ombudsman Bill. In that debate, he made it clear that the concept of a grocery ombudsman or adjudicator is not about being pro or anti any particular interest group. It is about fairness to all those involved, whether they be farmers, small producers, local suppliers, suppliers from developing countries, small shops, convenience stores, supermarkets or, most importantly, consumers.

I pay tribute to the work that my hon. Friend and the hon. Member for St Ives (Andrew George), who chaired the grocery market action group, did in harnessing the support of organisations such as the Rural Shops Alliance, the Association of Convenience Stores, the National Farmers Union, the Farmers Union of Wales, the British Independent Fruit Growers Association, the British Brands Group, Traidcraft, ActionAid UK and Banana Link and in pushing the agenda forward from the early days of the Competition Commission inquiry in 2006 through to the establishment of the new groceries supply code of practice, which came into force on 4 February 2010. They gathered cross-party support, which led to the inclusion of the concept of an adjudicator in each of the three big parties’ 2010 general election manifestos.

In the Labour party manifesto, we said that we would ensure

“fairness for food producers through EU reform and a Supermarkets Ombudsman”

and that

“to protect farmers and food suppliers from unfair and uncompetitive practices by major retailers”,

we would

“create a Supermarket Ombudsman.”

The Conservative party said in its manifesto:

“To ensure the grocery supply code of practice is applied fairly, we will introduce an independent supermarket ombudsman.”

The Liberal Democrats promised in their manifesto to create

“a legal Supermarket Code and a powerful independent regulator of Britain’s food market.”

It is remarkable that three parties should have had such similar wording on a topic.

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Then the coalition was formed and the coalition agreement committed it to introducing,

“as a first step, an Ombudsman in the Office of Fair Trading who can proactively enforce the Grocery Supply Code of Practice and curb abuses of power, which undermine our farmers and act against the long-term interest of consumers”—

strong words indeed. The reason why hon. Members are here today and why the Minister was asked a question on this topic just last Thursday is that hon. Members are wondering what has happened to that commitment. They are wondering whether the commitment in the coalition agreement to introduce an ombudsman has gone the same way as the commitment to create a post bank and whether it could become yet another broken promise.

It was encouraging, therefore, to hear the Minister confirm on Thursday that he expects to publish a groceries code adjudicator Bill “soon after Easter”. We look forward to that. Perhaps the Minister will today give us a more precise indication of what exactly “soon” means and what is likely to be in the Bill. Will he give us more detail of exactly how he envisages the role and work of the groceries code adjudicator and how proactive the adjudicator will be in enforcing the code? As hon. Members will know, the new groceries supply code, which came into force on 4 February 2010, applies to all companies that are active in the sector and have an annual retail groceries turnover of £1 billion or more.

As a number of hon. Members have reminded us, suppliers are reluctant to make complaints for fear that they will be identified and that retailers will subsequently stop trading with them. So the new groceries code introduced independent binding arbitration and made it clear that retailers could stop trading with suppliers only for genuine commercial reasons, not because the supplier had complained that the retailer had not respected the conditions of the original trade deal. Can the Minister confirm that, in keeping with the Government response to the 2010 consultation, the proposed Bill will give the groceries code adjudicator the power to receive anonymous complaints?

The new code also placed the burden of proof on the retailer to demonstrate that the supplier had voluntarily complied with the requests made. It introduced a fair-dealing provision, requiring retailers to act in good faith in both formal and informal agreements. However, proper enforcement of the code is essential in ensuring its effectiveness, which is why an adjudicator is so important.

Will the Minister tell us how his Bill compares with the private Member’s Bill promoted by my hon. Friend the Member for Ynys Môn, in which he mentioned investigating and adjudicating on alleged breaches of the code, and powers to gather information, enforce penalties and award costs? Will the Minister confirm that, as expressed in the Government response to the 2010 consultation, the Government do intend to provide in primary legislation the powers to introduce financial penalties?

I welcome the wording of the coalition agreement, which speaks of an ombudsman who can “proactively enforce” the code. Can the Minister confirm the proactive nature of the adjudicator’s role as he envisages it? Does he envisage the adjudicator’s having the necessary powers and resources to instigate proactive investigations when he feels that those are likely to be justified? What sort of investigative powers will the adjudicator have? Will the

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adjudicator’s powers to request information be backed up by a power to create offences for failure to comply with requests for information?

We have the new groceries supply code of practice, a commitment from hon. Members on both sides of the House and plenty of material on which to build—the Competition Commission evidence, my hon. Friend’s private Member’s Bill and the 2010 consultation. There is general support among the public. The role of the adjudicator is to ensure fairness. That is to the benefit of all.

The very existence of an adjudicator with real powers will be an incentive to good practice and fairness and will focus minds on the groceries supply code. It is important to have powers that can be used, although it is often more desirable to sort out difficulties without having to resort to the full force of those powers. Whatever we call the office—a supermarket ombudsman, as some would say, or a groceries code adjudicator, as the Government now prefer to say—its existence will be good for the consumer and good for all those players in the sector, be they supermarkets, small retailers or suppliers, who want to play by the rules.

We look forward to hearing from the Minister about the progress that he has made to date on the proposed groceries code adjudicator Bill and, in particular, what the time scale is for introducing it. Without further ado, I thank all hon. Members who have brought this very important topic to the Minister’s attention and I ask him to deal with the issues that we are interested in hearing about.

3.47 pm

The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Davey): It is great to speak under your chairmanship, Mr Gale. I congratulate my hon. Friend the Member for South Staffordshire (Gavin Williamson) on securing a debate on this very important subject. It gives me a chance both to answer hon. Members’ questions and to back up what we have already said about it.

Let me come immediately to the timing of the groceries code adjudicator Bill, as almost every hon. Member who spoke is keen to hear about that. I am not quite sure about my hon. Friend the Member for Shipley (Philip Davies), but nevertheless I shall deal with it. I can assure hon. Members that we are not taking a long-grass approach. We said in the Queen’s Speech for the first Session that we would introduce a draft Bill in this Session, and that is what we will do. I confirmed in questions last week that we were not able to publish the draft Bill before Easter, as I had originally hoped, but that we would publish the draft Bill soon after Easter to allow time for pre-legislative scrutiny in the current Session.

Roger Williams: I hope that the Minister realises that Easter is very late this year.

Mr Davey: My hon. Friend is very impatient for the adjudicator. He has campaigned with many others for it. I can assure him that we hope to be able to publish the draft Bill soon after Easter. Our objective is to introduce a final Bill in the Second Session, although we will look at the opportunity for introducing the Bill

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earlier if parliamentary time allows. One reason for publishing the draft Bill as soon as possible is that if parliamentary time allows, we may be able to make it a first-Session Bill, but that is not within my control. I should also make it clear that the timetable even for publishing the Bill is subject to the necessary Cabinet clearances and the outcome of pre-legislative scrutiny. I hope that hon. Members will understand that, but I can assure them that we are working hard to get the draft Bill published.

It is worth putting our debate into context. A persuasive case for an adjudicator has been made by all parties. As others have done, I remind the House of its genesis. The groceries supply code of practice was recommended by the Competition Commission following its market inquiry into the supply of groceries. Its final report was delivered in April 2008. The commission concluded that, although the exercise of buying power by grocery retailers was in general a good thing for consumers, it could raise concerns in certain limited circumstances. For instance, if retailers transfer excessive risks or unexpected costs to their suppliers in the hope of gaining competitive advantage, it is likely to blunt suppliers’ incentives to invest in new capacity, products and production processes. That is bad for consumers, and the code of practice is intended to remedy the problem.

Like my hon. Friend the Member for Shipley, I believe in the free market and in competition; and like him and others, I believe that our supermarkets do a fantastic job. The Competition Commission has inquired into the matter and made its recommendations, and we are not going outside those in establishing a groceries code adjudicator. Bearing that in mind, it is clear that it is not some sort of dramatic interventionist policy; I believe that it goes with the flow of ensuring fair dealings in that market.

The groceries supply code will apply to all companies active in the sector with an annual retail groceries turnover of £1 billion or more. Its provisions are now included in all retailers’ contracts with their grocery suppliers. It gives suppliers greater security, which should encourage them to invest in their operations. The code sets out a clear and overarching requirement for fair dealing, and bans retailers from imposing retrospective changes to terms and conditions agreed with suppliers. It also limits the extent to which suppliers are required to foot the bill for listings, promotions, inaccurate forecasts by retailers, or customer complaints. In short, the code is about introducing clear standards and greater certainty. As a result, those parts of supply agreements that may subsequently change are discussed up front, and both parties are agreed on how costs and payments will be allocated in such situations.

The Competition Commission concluded that the code would be far more effective if it was enforced by an adjudicator. That should dispel the climate of fear among suppliers, who felt that they risked being de-listed by their buyers if they invoked the previous code of practice. The commission does not have the power to establish new bodies. After failing to win universal agreement from retailers to establish such a body on a voluntary basis, it asked the then Government to act. The present Government agree that the code of practice needs to be independently monitored and enforced if it is to succeed.

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The groceries code adjudicator will act as arbitrator in disputes arising under the code. He will receive complaints about potential breaches and, when appropriate, conduct investigations. The adjudicator will have the power to accept complaints about retailers’ treatment of primary suppliers from anyone in the supply chain, at home or overseas. That will include indirect suppliers who, like many farmers, may not supply the large supermarkets directly. The adjudicator will have the power to require information from retailers in the course of an investigation so that conclusions are based on reliable evidence. He will also take account of other evidence in the public domain, but will not be obliged to investigate every complaint.

I emphasise that last point, because it deals with questions about how the adjudicator will act. The adjudicator can take complaints from suppliers directly, as I said, but it can also take account of other evidence that has been published. That is important; in my judgment, it strikes the right balance between preventing the adjudicator going on fishing trips and enabling him to consider information that is available to others.

Gavin Williamson: If a trade organisation or association has made a study of a certain part of the market, would that information be admissible as the Minister states?

Mr Davey: That is exactly the sort of information that I would expect the adjudicator to consider. If such a report or study gave the adjudicator cause for concern, it would be a reason for it to investigate.

The adjudicator will publish guidance on the code and make recommendations to retailers on improving adherence to it. It will also have to publish an annual report summarising its activities; that will include monitoring and commenting on compliance with the code.

My hon. Friend the Member for South Staffordshire raised the question of anonymity for complainants, as did others. I make it absolutely clear that the adjudicator will be able to deal with complaints confidentially. That is an important provision; suppliers can be confident that retailers will not be able to retaliate by discriminating against them, as their identities will be protected. The adjudicator will have a duty to protect suppliers’ identities, and will need to consider whether any of its actions could jeopardise matters before proceeding.

Another issue raised during the debate was whether the groceries code adjudicator would have teeth. I believe that the code will help the adjudicator to impose the necessary sanctions on retailers guilty of breaching it.

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The initial sanctions include the naming and shaming of individual retailers, and I believe that the ensuing negative publicity will be an effective deterrent. In a highly competitive market, retailers will not want to risk customers going elsewhere in protest at their shoddy behaviour towards suppliers. However, I make it clear that the draft Bill will include a reserve power for the Government to introduce financial penalties if experience shows that recommendations and negative publicity do not work.

Andrew George: What my hon. Friend says is extremely helpful. As for naming and shaming or the application of financial penalties, it is important that we do not have to come back to the House again, and I hope that there will be sufficient flexibility in the legislation. Further, I hope that the industry levy takes account not only of compliance with the code but of the size and turnover of the supermarkets caught within its ambit.

Mr Davey: On my hon. Friend’s last point, about the funding of the groceries code adjudicator, there are a number of options and he mentioned one. However, he is right to say that the taxpayer will not be funding it; it will be the industry. My hon. Friend the Member for Shipley asked about the cost. We estimate that the total cost will be about £1 million a year, which will come from the industry. Once the Bill is published, he will see that it will not be a quango. I know that he is interested in working for it, but given his commitment to the free market I suggest that he applies to the Competition Commission or a similar body.

Albert Owen: May I return to the timetable? Will the Minister explain why we needed a draft Bill if we are not going beyond the premises of the Competition Commission report of 2008? What is the blockage? I understand about Cabinet clearance, but surely his Department has all the evidence to introduce a draft Bill now?

Mr Davey: As I said, we are close to publishing a draft Bill. The hon. Gentleman asks whether it was necessary to publish it in draft form. In the battle for legislative space it was a good tactic to produce a draft Bill, because that ensured that it was in the Queen’s Speech. We are ready if a slot appears; if parliamentary time opens up towards the end of the Session, we have a Bill ready to go. Rather than dragging our feet, I hope that the Department and I have been boxing rather intelligently, thus putting ourselves in a position to do what Members wish. I hope that the House is reassured that I and the Department wish to take this important matter forward.

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Net Neutrality

4 pm

Mr Dominic Raab (Esher and Walton) (Con): It is a privilege to secure my first Adjournment debate and to hold it under your chairmanship, Mr Gale. I wish to raise the increasingly important topic of protection of competition in the online marketplace and the neutrality of search engines. Free markets require the rule of law and space for robust competition, but they offer no place for monopolistic or cartel abuse, which is as true for the online market as it is for any other. The EU Competition Commissioner, Joaquin Almunia, has stated:

“I believe that the principles of competition must be maintained in the digital economy with the same intensity that they are imposed in the brick and mortar world.”

At both national and European levels, rules exist to prevent dominant undertakings resorting to anti-competitive practices to reinforce their position. Those rules do not prohibit or deter success in the global online marketplace. Businesses can hold, secure or maintain a dominant position, but not abuse it, and there is growing evidence that that is exactly what Google is doing.

Search engines are the gateways to the internet. With a 95% share of the search market in Europe, Google is in a uniquely powerful position. It is the most visited website in 25 of the 27 EU member states.

Foundem, a UK-based price comparison website, has complained to the European Commission that it, among others, has fallen foul of anti-competitive abuses by Google. The complaint is threefold. First, it was unfairly penalised by the mechanism Google uses to rank search results, especially the exclusionary automated penalty that has been applied to it and other competitors. The effect was to suppress Foundem on Google’s search results. Until December 2009, when it was corrected, Foundem’s rankings on a typical product such as a motor bike helmet were: first by Yahoo, seventh by Bing and 144th by Google. As the top five recommendations on the first page of results account for 88% of hits, Foundem effectively disappeared from the Google landscape. The day after the penalty was lifted, Foundem immediately rose to sixth place on Google’s rankings, so the impact is clear.

Secondly, Foundem’s complaints concern the review procedure at Google. It took Foundem more than three years to secure the lifting of the arbitrary penalty against it. For a small business in a fast-moving environment and marketplace, that could prove fatal. It did not in this case, but it certainly could for other small and medium-sized enterprises.

Thirdly, Foundem says Google distorts search results by imposing its own services in prominent positions. In the two years after Google started promoting its own price comparison website, Google Product Search, UK visitors to that site increased by 125%. Over the same period, visitors to the UK’s leading price-comparison websites fell by an average of 41%, so the discrepancy is stark. The fact that the European Commission has decided formally to investigate Google shows that these complaints are serious and that they require an answer.

Let us be clear about an important distinction that underpins competition law. It is one thing to sell space, ranking or priority online, but it is another thing altogether deliberately to stack the deck against potential rivals

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while at the same time pretending to be operating and offering a neutral service. Google is trying to bury the competition.

I understand that the Minister may feel tempted to defer to the European Commission inquiry, but Britain must also ask whether enough is being done to prevent such abuse and why we have to wait for the cumbersome, clumping, clumsy conclusions of the European Commission to preserve our own free market at home. I would welcome the Minister’s views on this vital area of policy.

As a matter of domestic policy, there might be a prescriptive solution. I am not one to call for extra regulation or legislation, but one of the points that Foundem makes is that it champions the principle of search neutrality. That states that search engines should be transparent about the rationale and mechanism behind their online results rankings and that affected sites should have access to a timely appeals process.

The second principle advanced by Foundem is that search engines should not be allowed to discriminate in favour of their own services while maintaining the guise of neutrality. If their own products are inserted into search results, they could be identified in the same way as sponsored links. There is no reason for Google not to advertise its own wares, but it is something of a fraud to dress it up for the consumer under the ostensible impartiality of ordinary search engine results.

The proposals could be considered on a voluntary or industry-wide code basis or under legislation. I am fairly open-minded about that. An alternative solution is to focus on the more rigorous enforcement of the existing powers that domestic authorities have to preserve competition. After all, the Office of Fair Trading and Ofcom have the necessary authority under the Competition Act 1998 and EU law to issue directions and hand out fines.

I recognise that purists will say that we should resist any intervention in the online search market. Some will argue that the internet is a fast-moving and changing world and that we must be wary of trying to prejudge or predetermine its future development. Unless competition is safeguarded, a flourishing river of competition could become a stagnant pond. Does the Minister agree that far from being incompatible with a robust and rambunctious marketplace, this principle of search neutrality could bolster competition and consumer choice?

Our regulators can already take action, but they have so far proved unwilling to take a proper look at Google. The chief executive of Ofcom talks about the need to avoid suppressing reward for innovation and risk—we can all agree on that along with motherhood and apple pie. With more than a hint of complacency, the chief executive of the OFT has said that most complaints come from

“competitors who are not best pleased that Google makes a better offering to their customers.”

Mr Fingleton says that the OFT would like to see complaints coming from customers themselves. That is all very well, but customers may be oblivious to what Google is surreptitiously doing.

Another argument that Google advances against intervention is that competition is just a click away. In other words, an open internet allows consumers to use any search engine they want. This theoretical defence misses the practical point. It is precisely the scope for

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competition that Google is killing off. If Google’s policy means that businesses cannot access potential consumers, they will be choked out of the marketplace.

In his Budget statement, the Chancellor highlighted the importance of promoting high-technology growth in small businesses. He called for Britain to become a “home of innovation”. He is absolutely right. I hope that the Minister will recognise that there is a risk of that vision being jeopardised by anti-competitive abuse online and that the market must remain an enabling environment for businesses of all kinds, small and large, and not one that is condensed and conditioned to preserve the status quo.

Google is one of a handful of companies that has transformed our understanding of the internet’s potential. I have no doubt that it will continue to do so in the future, but it must not be allowed to pull up the ladder. We must preserve the space and scope for innovators and entrepreneurs to mirror, and even surpass, Google’s astonishing and outstanding success.

4.9 pm

Dr Phillip Lee (Bracknell) (Con): Thank you, Mr Gale, for chairing this debate and thanks to the Minister for allowing me to make a short contribution.

I begin by congratulating my hon. Friend the Member for Esher and Walton (Mr Raab) on securing this timely debate. The primary reason why I am speaking in it is that Foundem is based in my constituency of Bracknell. I am very proud of this highly innovative UK technology business, and I am also proud that it is at the forefront of challenging Google in this way. By doing so, it is going into bat for future UK start-ups, particularly in the IT sector.

I noted that the Government’s new “Start-up Britain” website actually has Google on it, giving away AdWords. I must say that my eyebrows were raised by that and I suspect that, when that website was launched, those of Foundem’s owners were raised too, because when Foundem was launched in 2006 Google’s AdWords were 5p a hit. Overnight, that went to £5 a hit and, as my hon. Friend the Member for Esher and Walton has pointed out, Foundem slipped down the Google search rankings from fourth to 120th. Foundem was never given a reason for that, and it took the company more than three years to have that situation turned around. In that period, Google Product Search went up dramatically, a dramatic amount of money was made and a significant part of the search business was taken by Google.

It is time that we all got real about this. Ofcom and the Office of Fair Trading have the necessary legislation—the Competition Act 1998—and EU law to support them. They need to get on with protecting British start-ups, so that those businesses can thrive and there is a fair environment in which they can exist.

I note that in 2009 the chief executive officer of the OFT was quoted as saying that there was no case for the regulator to challenge Google’s dominance. In the same year, there was an op-ed piece in The New York Timesby one of the founders of Foundem, which basically outlined what had happened to the company in the preceding three years. Anybody who has heard Foundem’s case and seen its PowerPoint presentation would feel

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the same way. I encourage the Minister to meet with Foundem’s representatives. I know that they have already requested a meeting with the Minister and I encourage him to see Foundem’s presentation, because it is quite compelling and totally contradicts the view of the OFT’s CEO in 2009.

Finally, I want to open this debate up by saying that it is not only about commerce. Commerce is obviously very important, and Foundem’s case is based on commerce, but the principle here is about where we access services, knowledge and information. Google provides 95% of searches in Europe. If someone goes to Google to search for a dishwasher or a new television, they also go there to search for news and knowledge. We now have Google providing search products, Google News, Google Health and a Google bank. Next we might have a Google dictionary and later on a Google religion. I may be overplaying things, but the reality is that this company has suppressed the growth of a business in my constituency—that is the reality. I do not think that that is in the best interests of this country, and I do not think that one company having that amount of power is in the best interests of this country, either.

Google is part of the infrastructure of the internet. That is the reality. If we stopped people on the street and asked them, “What is the internet?”, most of them would view it as starting with a search engine. And for search engines, 90% of Britons use Google. Google is to be congratulated on achieving such a powerful position in the world economy, but because it has that position, it needs to be subject to regulation so that companies such as Foundem and many others in the future can get a fair hearing in the world economy.

4.13 pm

The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (Mr Edward Vaizey): It is a delight to serve under your chairmanship this afternoon, Mr Gale. I participated in a Westminster Hall debate with you only this morning and I think that this is the second of three debates that I will be responding to in Westminster Hall today. I gather that my colleague the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Kingston and Surbiton (Mr Davey), has responded to the other two debates in Westminster Hall today, so we are slightly monopolising the time here.

I congratulate my hon. Friend the Member for Esher and Walton (Mr Raab) on securing this debate. He said that it was his first Adjournment debate and that he was sitting on the “wrong” side of Westminster Hall; although he is sitting opposite me, we are in effect on the same side.

I also welcome the contribution of my hon. Friend the Member for Bracknell (Dr Lee) in standing up for his constituents who established Foundem. In what is an extraordinary “David and Goliath” story, those constituents have managed to get the European Commission to investigate allegations of anti-competitive behaviour by Google.

I should say at the start that I am extremely sympathetic to what my hon. Friends have set out in terms of their principles. If I can take, as it were, a philosophical approach—although it might be unhelpful for a Minister to take such an approach—there is no reason why any

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organisation should be exempt from the competition rules simply because it exists on the internet.

We could all reel off a list of companies that are, in effect, the dominant providers on the internet and from which we purchase our books, our groceries or our consumer goods, or from which we access search facilities or other applications, because they have first-mover advantage. However, they certainly seem to have held on to that advantage for a significant amount of time. It is perfectly appropriate for the competition authorities, when appropriate and when a matter is referred to them, to look into those organisations.

However, one of the reasons why people feel that the internet is perhaps more competitive than the high street is that the barriers to entry are lower on the internet. If someone wants to set up a retailer providing a service, they do not have to go and buy land or rent property—or take on, say, the established supermarkets in trying to provide better products. The regulations are much lower for the internet and people can set up a website at very low cost.

Dr Lee: I just want to expand on my hon. Friend the Minister’s analogy of the internet being like going to the shops. There is a sense with Google that there is one big motorway that we all travel along to go to a set of shops, some of which Google itself owns. The problem is that there are not enough roads to lots of different shops, because there is a perception that people go to Google to go shopping.

Mr Vaizey: Absolutely. In effect, I was going to agree with my hon. Friend’s point before he made it, in the sense that the internet is seen as being different because it is possible to set up a new company and to compete relatively cost-effectively on it. One only has to look at, for example, the rise of Groupon, which is another one of these phenomenal companies. It effectively started from zero and now, within about 18 months, it is worth an estimated $20 billion. One also sees it in the market of political journalism, which I could say is a market close to our hearts. Nevertheless, there should be concerns when there appear to be dominant providers on the internet.

As my hon. Friend the Member for Esher and Walton is aware, there is an EU anti-trust probe into alleged abuses by Google, concerning allegations about the manipulation of its search results, the consequent unfavourable treatment of its unpaid and sponsored results and the preferential placement of Google’s own services. Although my hon. Friend said that the process of the EU’s anti-trust probe was going to be clunky and time-consuming, I remind him that the EU challenged Microsoft a few years ago and fined it substantially. This process regarding Google will be effective, as it continues, in establishing whether any of the allegations that have been made against it are true and need to be remedied.

It is perhaps ironic, given that Microsoft was in a dominant position a few years ago, that it is now Microsoft asking the European Commission to investigate the dominant position of Google. To a certain extent, that reinforces the point that although there may be so-called “dominant providers” on the internet, the

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balance of power can shift extraordinarily quickly, particularly if one does not anticipate, as it were, “the new new thing”.

For example, if I was a spokesman for Google, I might say that Google’s next threat was not necessarily from the European Commission, but from Facebook, which is now the dominant provider in social media services. It might well be that we have not anticipated Facebook’s next threat, but that it will manifest itself in two or three years’ time. Nevertheless, it is interesting to note that Microsoft has asked to be joined in this action against Google and Microsoft makes some interesting points. The position that Google would take—perfectly justifiably—is that alternative search methods are just “one click away”. Indeed, I understand that we have something like 177 UK search engines serving the UK market at the moment.

I have already agreed to see one of those companies, Reach Global, when I am next in Manchester, at the invitation of the hon. Member for Hyndburn (Graham Jones) in whose constituency it is based. I would be absolutely delighted to take up the offer made by my hon. Friend the Member for Bracknell to meet the founders of Foundem. Microsoft’s point is its allegation that Google restricts access to certain content, particularly to YouTube content on phones that run Windows, and it has set out its concerns extensively.

Google also comes in for criticism from rights holders, who say that the search engine helps to promote piracy, and Google is taking steps to address those concerns. For example, its introduction of predictive text when searching for a piece of music in effect meant that the phrase was filled in with BitTorrent, almost directing someone to pirate sites to download music. That has now been remedied by Google, and it is now also very good at addressing concerns about its AdSense product. That product allows adverts to appear on appropriate sites with appropriate content, but they were often appearing on sites that promoted pirated music. Google is now happy to remove those ads, if notified by the rights holders. I also know that the company is keen to work with rights holders on notice and take-down issues, and will take down search results that direct users to private sites, provided that it is notified and given adequate evidence.

Google’s unique selling point, and the area in which it finds it much more difficult to accommodate the concerns of rights holders, is in-search rankings, so one can perhaps see why there is such intense debate on the issue. Search rankings are one reason why Google is so popular. They are the holy grail, and the algorithm is the secret formula that provides swift and accurate search findings.

One concern of rights holders and of companies that seek to rival Google products is that they do not appear adequately high enough in the search rankings. A recent example that was brought to my attention by rights holders was that the day after publicity appeared for a single that will not be released until 30 May, typing in the name of the single revealed 160 different websites from which it could be downloaded illegally. Often, the legal source for a song will come on only the sixth or seventh page of the search results. Those are huge concerns, and it is absolutely right and proper that my

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hon. Friends should bring them to the attention of the House, and that they should be debated as openly as possible.

I should address the point made by my hon. Friend the Member for Esher and Walton about whether the OFT or the Competition Commission should investigate the matter. The EU anti-trust probe is, I think, an adequate remedy at the moment, and I gather that the OFT looked into the matter three or four years ago and does not feel the need to do so again at this time. My hon. Friend is, of course, perfectly able to contact the OFT and to suggest a change of heart. Without wishing for this to be taken in any way as a criticism of the OFT or the Competition Commission, I should say that my hon. Friend might find that their procedures, in his perception, are clunky and time-consuming—I imagine that any probe would take at least two years.

The reason why this debate is so important is that we are constantly going to be challenged about the development of the internet. My hon. Friend the Member for Bracknell mentioned the possibility of a stranglehold on news by a company such as Google, and the rise of Google religion, almost like an Aldous Huxley novel, but it is not wrong of him to raise what some people might consider fantastic concerns; such concerns are raised with me all the time, although not specifically about Google.

As distinguished a man as Tim Berners-Lee has very strong feelings and very real concerns about keeping the internet as open as possible. That part of the debate, the net neutrality issue, which is the formal title of the debate today, focuses much more on the people who provide the infrastructure and the networks—the telecoms companies, in effect—than on web-based companies.

Mr Raab: It is useful to know that this is the latest in a series of feedbacks that the Minister has had. I know that he has debated the issue in Westminster Hall before. The OFT and the Competition Commission, as part of the quango review, are looking at their practices and at how they will consolidate. Might the Minister take this opportunity to feed in some of the points that have been raised about their ability to deal with online competition, so that when they consider whether they have the right level of powers and the right balance between looking at things thoroughly and quickly, they might consider this issue, which is likely to arise more and more?

Mr Vaizey: I absolutely take on board my hon. Friend’s point. The review currently being conducted by the Department for Business, Innovation and Skills aims to reduce costs and bring in greater efficiency, but there is

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an ongoing debate about the scope of a particular Competition Commission review, a debate that often, certainly from my perspective—this is the area I know best—touches on the changing face of the media. For example, when we discussed contract rights renewal, there was a strong debate about whether the Competition Commission had looked widely enough at the competition that ITV faced from the internet. Given not just the convergence of the media but bizarrely, now, its huge expansion regarding competition both in this country and globally, that is a very live issue.

On the general principles, it is important that we, in this House, stay focused on the need for an open internet. In a speech last year I raised net neutrality, which has not been an issue for live debate in this country, although there has been a very live debate in the United States. I raised the issue to start a debate, because the future operation of the internet, as my hon. Friend the Member for Esher and Walton said, is absolutely fundamental to the future of this country and of many economies across the world.

In that speech, I set out what our principles should be: openness in infrastructure provision by both fixed and mobile operators; a clear obligation to offer all legal content at the speed at which consumers contract for; transparency, in the sense that consumers know what speeds are offered and what traffic management practices are taking place; and, finally, support for innovation and investment, so that we can create the content and the network that the future requires.

I have maintained my focus on this very important debate and last month I held a round-table discussion on the open internet, with attendees from across the industry, including internet service providers, mobile network operators, content providers, and also Google, which continues to engage with us on a whole range of issues. I was privileged to have Sir Tim Berners-Lee speak at the meeting, as well as the chief executive of Ofcom. I was also delighted that we were able to launch a first draft of a voluntary code of practice on traffic management transparency, developed by the broadband stakeholder group, and I am very happy that the industry has committed to working together to further develop those principles.

I thank you, Mr Gale, for the opportunity to debate these important issues, and I look forward to meeting representatives of Foundem. The EU will continue its process, which is effectively a judicial one. No company, internet-based or not, should be above competition rules, and no doubt many of the concerns that have been raised by my hon. Friend the Member for Esher and Walton, and by my hon. Friend the Member for Bracknell on behalf of his constituents, will be raised in the very robust and thorough investigation taking place in Brussels.

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Library Services (South Manchester)

4.29 pm

Mr John Leech (Manchester, Withington) (LD): It is a pleasure to serve under your chairmanship this afternoon, Mr Gale. I am delighted to have secured this short debate. Most of my remarks will relate to Barlow Moor library on the Merseybank estate. This debate was sparked by the decision of the Labour-run Manchester city council to close the library as part of its cost-cutting programme. Before I give the House a brief history of Barlow Moor library and the council’s policy on the provision of library services, I pay tribute to the staff who work in library services in Manchester. I suppose that I ought to declare an interest, as I hold Friday surgeries in three of the libraries in my constituency: Chorlton, Withington and Didsbury. I appreciate the work that the staff do to accommodate my surgeries and, more important, to make libraries a welcoming place and encourage more people to use our local library services.

Manchester has certainly had a tough Budget settlement —it has been particularly hard due to the front-loading of spending reductions—but the Labour council has responded by using the settlement as an excuse for cuts that it has wanted to carry out for many years but never thought that it could get away with politically. It is making politically motivated cuts with the intention of discrediting the coalition and the coalition’s attempts to tackle the Budget deficit.

When the Labour council announced its budget, it included the axing of numerous front-line services, including libraries and leisure centres. Labour said that there was no alternative, blaming the Budget settlement and coalition cuts. Interestingly, the Liberal Democrat opposition on the council proposed an alternative budget that would have kept all the leisure centres and libraries open, but it was voted down by Labour.

However, it was not the alternative budget that nailed the lie that there was no alternative to cutting front-line services such as Barlow Moor library and leisure centres; it was the huge community campaign in the constituency next door against the closure of Levenshulme baths. The council’s position was that it had no alternative but to close the baths, but it has done a U-turn, and Levenshulme baths will now remain open. The council failed to con people into believing that there was no alternative and got cold feet once a community campaign was up and running with enormous local support.

Why does the council want to close Barlow Moor library? The simple fact is that it has wanted to run down the library service on the Merseybank estate for years. It has made no real commitment to maintaining the local library, concentrating resources instead on the main libraries, including a multi-million-pound investment in the city centre. The council has shown a serious lack of commitment to Barlow Moor library over the years. Even before I was elected as a local councillor, one of the first campaigns in which I was ever involved opposed plans by the Labour council to reduce Barlow Moor library’s hours to save money. At the time, we warned that reducing the library’s hours would ultimately threaten its future, which is proving true.

Unfortunately, a few years later, the library was burned down in an act of arson. Despite promises to the contrary, the library was not rebuilt. Instead, it was

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permanently relocated in a shop unit on the other side of the road. After the library was burned down, it was agreed that the council should delay rebuilding while discussions continued about revamping the shops and the opportunity for a joint service centre on Merseybank avenue, which would have secured the future of Barlow Moor library for years to come.

However, it is unfortunately now clear that the council never had any intention of pressing ahead with that much-needed investment. Although the plans were supported by council officers, local Liberal Democrat councillors and local people on the estate, they were dropped by Labour councillors. The council’s Labour leader, Richard Leese, stated in a council meeting that Merseybank was not a priority for the council—a shameful remark—despite the fact that Merseybank falls within the top 5% of deprivation in the country.

Why was the library not simply rebuilt with the insurance money? That would seem fairly sensible, and insurance was paid out, but unfortunately it appears that the payout was not enough to rebuild the library. The council spent half of it securing the site and removing the remains of the building. That is a scandal, and we still do not know what happened to the rest of the money. Instead, the temporary library on the other side of the road has remained, but it has been open for only 15 hours a week. Given that it is open for so few hours, is it any wonder that library usage at Barlow Moor is lower than at any other permanent library in Manchester? There is a lot of uncertainty about when the library is open. Residents often tell me that they are never sure when the Barlow Moor library will be open, so they choose to use other libraries that are open longer.

Compared with those 15 hours a week, the next closest library, Chorlton library, is open 61 hours a week. That is the crux of the problem. Although investment has been made in the main district libraries, including Chorlton, and hours have been extended, smaller local libraries, which tend to be in more deprived areas, have been neglected. In my view, there has been a deliberate policy of concentrating resources in the bigger libraries while starving the smaller ones and running them down so that they can ultimately be closed.

Since the announcement that Barlow Moor library would close, along with a couple of other local community libraries, the Labour executive member with responsibility for libraries has gone on a charm offensive, attending consultation meetings on the future of library services and attempting to blame the proposed closures on the coalition Government. At a meeting on the Merseybank estate, Councillor Amesbury even had the cheek to claim that the council had been just about to rebuild the library when the coalition cuts were announced. That is simply not true, and when he was challenged, he made no attempt to back up his claims.

That series of meetings is not just about Councillor Amesbury’s attempt to deflect the blame for Labour’s closure of libraries in Manchester; it is also about a consultation on the future of the libraries. My concern, which I voiced at the Barlow Moor library meeting, is that the consultation will be unbalanced and will give the council the opportunity to press ahead with its policy of running down the smaller libraries at the expense of the larger ones. Far more people who use the bigger libraries, which have a much greater footfall, will fill in the “Over to you” consultation. Although council

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officers have agreed to make the consultation documents as readily available as possible in the local community, the reality is that people are far more likely to pick up a consultation document about library services in the library, so the consultation will be skewed in favour of the larger libraries. At the same time, what incentive do users of Barlow Moor library have to fill in a consultation on the future of their local library when they have already been told that the council has decided to close it?

I am trying to get as many people as possible to take part in the consultation. Part of the reason why I wanted this short debate was to highlight the issue of the consultation and get as many people as I could to sign the petition against the closure of Barlow Moor library. The people of Levenshulme have shown that the council can be forced into a U-turn, and we know that there is an alternative to Labour’s cuts.

A politician recently said:

“Libraries are a vital resource; they are hubs of our communities. Libraries open doors to a world of opportunities, not just for reading, but for learning, self-improvement, access to employment. Closing libraries denies many people these chances and leaves us all poorer.”

I could not agree more, and I am sure that the Minister could easily have made that statement himself. However, it is actually a quote from the shadow libraries Minister. It is a shame that Manchester Labour councillors seem to think that it is acceptable to close such an important local facility.

The additional worry is that the consultation will result in further cuts to our library services, possibly including a reduction in hours across all libraries. The council consultation document points out that a reduction in hours can always be reversed once budgets are not so tight, but that somewhat contradicts the decision to close libraries such as Barlow Moor. I am fairly certain that most library users would prefer to see a reduction in hours across the board rather than library closures, but the problem is that a reduction in hours is much more likely to be in addition to, rather than instead of, library closures.

We ought to look at all alternatives to reducing library hours, whether through a volunteer network of library supporters or through other cost savings, because there is a real danger that the hours will not be restored in the future. This is particularly important for local community libraries, which may end up, in years to come, with the same fate as Barlow Moor library if their hours are cut further, perhaps down to the number on which Barlow Moor library has been surviving.

Finally, I will mention briefly the mobile library service, which also faces the prospect of being wiped out following the consultation in Manchester. The provision of mobile library services costs £13.26 per visit, which is approximately six times as much as the £2.27 per visit to permanent libraries. The library service in Manchester says that there is evidence that a significant number of mobile library users also visit permanent libraries. Clearly, those people would be relatively unaffected by the closure of the mobile library service, but it is a lifeline for a relatively small number of mobile library users, who are probably among the most vulnerable of library users. It

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is vital that those people are included in the consultation, to ensure that they are able to retain some level of library service in the future.

4.41 pm

The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (Mr Edward Vaizey): I am grateful, Mr Gale, to serve under your excellent chairmanship for the second time this afternoon. I congratulate my hon. Friend the Member for Manchester, Withington (Mr Leech) on securing this important debate. He spoke with passion and eloquence on the library in his constituency that he seeks to keep open. I hope that, when we look back at this campaign, which I hope will be successful, the library will be renamed the John Leech library, in honour of the campaign that he has started.

I have probably said too much already, because it would be wrong of me to get involved in any specific campaign on any reorganisation of a local library service. As the Minister with responsibility for libraries, my first point is that library provision is still very much a local service, albeit with a statutory underpinning to which I shall return in a moment. One of the things that I was keen to stress when I became a Minister was that libraries are a local service, which means a number of things. It is important that they are a local service, because one would expect the local council to understand the local community and to know its varied needs, which are different in different parts of the community. The idea that that provision could be second-guessed from Whitehall is absolute nonsense.

It is also important that local councils engage with their local communities in the running of their local library services. One of the things that I have found disappointing over the past few months, as library closures have reared their heads and campaigns have started, is that some councils—I would not dream of naming any of them—did not engage more with their library services many years ago to see what opportunities were available. Some truly innovative councils have realised that libraries are an extraordinary resource to support the local community. Yes, they are about books and literature, but, in the 21st century, they are also about access to the internet, education, adult education and learning, and about access to health, council and community services. Those councils that have seen and seized that opportunity have provided go-ahead library services.

It is also important to stress—I say this as a matter of principle, with no reference to the specific case raised by my hon. Friend—that, sometimes, closing a library does not necessarily mean that the service is being run down. I always think about the service in Tower Hamlets, where a number of libraries were closed to create a much more vibrant library service. It provided access for a much wider part of the community, particularly young people, simply by investing in core libraries and looking at the different services that different parts of the community wanted. I also look, at a time of cuts, at library services that not only sustain their existing service, but go ahead and open new libraries. For example, the royal borough of Windsor and Maidenhead plans to open more libraries and is putting police points in its library service, because it understands that it is a community service. Hillingdon has also refurbished its library estate.

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Mr Leech: The Minister may not be aware that, at the same time as it is closing libraries in Manchester, the local council has just opened a couple of new libraries in other parts of the city. If we have an existing service that is valuable to the local community, why is that being closed when resources are being put into other parts of the city for other local communities?

Mr Vaizey: Again, I hesitate to comment on the specific example. Suffice to say that one reason why we support libraries as local services is that the council should be free to reorganise its library service in the way that it sees best. It should also, however, consult local people, and there will clearly be disagreements about the strategy. For example, I remember a vigorous discussion in Swindon, which is, perhaps, a parallel case. Swindon opened a brand new central library and was going to close the old town library, and there was a campaign to keep it open. Bizarrely, the solution, which was to close the old town library but move it into the arts centre around the corner, has transformed that library. When people visit the arts centre or attend an evening performance, they end up looking at the library as well, and visits to it have increased significantly. There are, therefore, solutions, some of which can be imaginative.

My hon. Friend mentioned a volunteer network to sustain libraries, which is an important point. I have been pilloried in the past for suggesting that volunteers should play a key role in sustaining library services. I do not want to sound like I am crying over spilled milk, but I have been misrepresented by being seen to suggest that volunteers should replace professional staff, which is not my view at all. I certainly know, however, that volunteers work in libraries throughout the country and, as my hon. Friend has indicated, if they can be brought into the fold, they can keep an existing library open for longer at the times when the community wants to use it. As my hon. Friend has indicated, it can become a self-fulfilling prophecy: if the local council keeps the library shut for the majority of the week, fewer people will use it and the local council will then say, “Very few people use this library, so there is no justification for keeping it open.”

Although this sounds extraordinarily perverse, I think that, when a library is under threat, there is a massive opportunity to embrace volunteers. For example, in my own constituency, where Grove library is threatened with closure by the county council, I have engaged with the local community and have actively suggested that it seek to staff the library with volunteers. I have also gone further—this is in my role as a constituency MP—and suggested that, even if the council reprieves Grove library, it should still hold on to the volunteer spirit that has emerged through the desire to keep it open. Too often, we sit back passively and allow libraries to be run in a passive-receive mode by a local council, but if we engage with them, we can have them open when we want, and they can start to provide the additional services wanted and suggested by people, which is a much more open process. I hope that Grove library is reprieved—although that will be a decision for the county council—and that a volunteer network will continue to support that library in the future.

Another thing that I did when I became the Minister with responsibility for libraries was to set up the future libraries programme. As I indicated earlier, I feel very

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strongly that there are some examples of outstanding leadership in the library service up and down the country. It is important that such best practice is shared between local authorities. One of the frustrations that I felt was that some local councils were perhaps trying to reinvent the wheel or to start from scratch when examining their library service, instead of learning from their peers about how they could engage local communities in their libraries, provide additional services and, indeed, save costs. Another frustration is that there are 151 library authorities and 151 sets of overheads. I hope that there will be progress in shared services across council boundaries. That might apply to Manchester, where a Greater Manchester library service could be put in place.

In terms of my national responsibilities, the Secretary of State has responsibility for superintending the library service, and it is a statutory responsibility for local authorities to provide a comprehensive and efficient library service. If local authorities fail in that duty, the library can be reviewed by the Secretary of State. That has happened only once formally since the Public Libraries and Museums Act 1964 was passed. Some people think it happened twice, because they include Derbyshire but, in fact, it has happened only once with the Wirral in, I think, 2009. I campaigned for the then Secretary of State to call in the Wirral, and I am one of the few people who opine on the subject who bothered to go to the Wirral. Indeed, I also went to Swindon, which was another high-profile case that people were jumping up and down about. When I visited, I felt that no thought or strategy had gone into the plan for library closures.

The Secretary of State’s decision to review the Wirral case achieved two things. First, the Wirral stopped its library closures. However, more importantly, the report prepared by Sue Charteris provided an outline of the kind of steps that a local council should be taking when seeking to provide a comprehensive and efficient library service, which included taking account of the needs of local communities. Since becoming the Minister with responsibility for libraries, I have written at least twice to the leaders and chief executives of library authorities to remind them not only of their statutory duty, but of the steps that they should take to ensure that they are providing a comprehensive library service.

I understand my hon. Friend’s passion for Barlow Moor library, but it is certainly not my role as a coalition Minister to defend a specific example of what Manchester council is doing, particularly if it is seeking to blame the coalition for some of the decisions being made. In some ways, it makes me rather sad that it should do so. If one considers what Manchester has done from a distance, one can certainly see a case for its having a clear strategy for its libraries. It has opened six new libraries in the past seven years, including three in 2010. I am told that the council is planning to open two more next year and that several of its libraries operate in shared buildings. Co-location is a very good example of best practice, because one increases the footfall and new members coming through. What saddens me is that the leaders of Manchester council should be trying to convince local people in making the case for its strategy. It seems that it has put itself in a position of conflict with the local community, particularly in terms of Barlow Moor. In fact, it should be engaging and looking at a solution that delivers not only the required savings, but a service that is much desired by my hon. Friend’s constituents.

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I have tried to fill out the time allotted, but I am reluctant to comment on the specific case of Barlow Moor too heavily. If the Secretary of State were to review any library authority’s decisions, he would have to sit in a quasi-judicial capacity to do so. It would therefore be wrong for Ministers to comment too freely on any particular examples. That is why I have so far resisted meeting the many campaigners who have got in touch with me. I have not done so because I wish to be rude to them in any shape or form but because, as proposals for the reorganisation of library services come forward, it is important that Ministers do not get involved unless and until they have to.

By that I mean, first, that many of the library closures that people are talking about are simply proposals that are being consulted on with local communities. Oxfordshire county council, which I know best because I am a Member of Parliament for that area, has said that it is going back to the drawing board with its proposals, which shows how quickly issues can change. Many other local authorities that on paper appear to be closing a large number of libraries have revised their proposals. We are talking about a constantly moving landscape, and it would be wrong for Ministers to intervene at an early stage. Consultation needs to take place and councils need to make a final decision. Importantly, Ministers need to get independent advice from the Museums, Libraries and Archives Council, which is soon to be merged with Arts Council England, on whether an examination is needed before deciding whether to call in any particular case.

I want to use this opportunity to emphasise the alternative nature of engagement that Ministers have taken. As I have said, shortly after we came into office, I was at the launch of the future libraries programme, which will connect up to 36 local authorities with each

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other to share best practice. Indeed, we published the findings of the future libraries programme on the website of the Museums, Libraries and Archives Council towards the end of last week, so that everyone can see what best practice was shared. We have written to every library authority in the country to remind it of its duties and set out the steps that it needs to take to provide a comprehensive and efficient library service. Even more importantly, officials from the Museums, Libraries and Archives Council have engaged on the ground with individual local authorities to assist them.

I am a passionate supporter of local libraries. I believe that they can sit at the heart of communities and provide a fantastic service for them. I am not complacent in the slightest, but there is a danger of exaggerating the level of closures. As I have said, many of the cases people are talking about are proposals. I do not wish to sound perverse, but it is a good thing to behold the number of communities that have risen up to defend their library service, engage with the council and put forward alternative proposals. No council holds the holy grail or the secret code of how to run a local library service. If a local council is prepared to share the financial information and all the relevant data with local communities, it may be pleasantly surprised by the kind of ingenious solutions and engagement that will emerge.

The library debate has put into sharp focus the need for us to move away from the traditional top-down approach, where a solution is handed down from on high—whether that is the council or the Government—towards embracing a bottom-up approach, where communities work with councils or the Government to provide the solution that they need.

5 pm

Sitting adjourned without Question put (Standing Order No. 10(11) and Order of the House, 29 March).