Groceries Code Adjudicator Bill [Lords]
The Committee consisted of the following Members:
Neil Caulfield, Kate Emms, Committee Clerks
† attended the Committee
The Chair: Before we begin, I have a few preliminary announcements. Hon. Members may take off their jackets if they so please. Will hon. Members please ensure that their mobile phones, pagers and so on are off or switched to silent? The Committee will first be asked to consider the programme motion, copies of which are available in the Committee Room. The debate on the programme motion is limited to half an hour.
(2) the proceedings shall be taken in the following order: Clause 1; Schedule 1; Clauses 2 to 4; Schedule 2; Clauses 5 to 9; Schedule 3; Clauses 10 to 26; new Clauses; new Schedules; remaining proceedings on the Bill;
Chris Ruane: I thank the Minister for giving way so early. She will know that the title of the Bill is the Groceries Code Adjudicator Bill, which is shortened to the groceries Bill. Many hon. Members have approached me to say that that sounds silly, so may I offer an alternative name? As it is a regulatory Bill, could it be called “Off-trolley”?
I am delighted, Mr Williams, to serve under your chairmanship today and for the rest of the Committee’s proceedings. I am sure that they will be enjoyable. I apologise for having a horrible cold; I fear that other hon. Members, being trapped in a room with me, may contract it, so the sooner we conclude our proceedings, the less likely it is that they will have a grumpy Christmas.
Ian Murray (Edinburgh South) (Lab): It is a great pleasure, Mr Williams, to serve under your chairmanship for the first time, and I welcome you to the Chair. I have no problems with the programme motion, but Opposition Members are already disappointed, before we even hit 9 o’clock, to find that we are not sitting on the Tuesday following 18 December. Given the amount of groceries that are purchased at this time of year, it would have been great to sit then, but I will not press the matter to a Division.
The Chair: Before we begin our scrutiny of the Bill, a brief explanation may be useful to hon. Members who are unfamiliar with Public Bill Committees. The selection list for today’s sitting is available in the Committee Room, and shows the amendments selected for debate, and those that have been grouped together for debate. Amendments grouped together are generally on the same or similar issue; so far all amendments have been selected. The hon. Member who moves the amendment makes an opening speech, and proposes the amendment. Other hon. Members may then speak to the amendments in that group. When all hon. Members have spoken, and the Minister has replied, if appropriate, I will again call the hon. Member who moved the amendment. It will be useful if hon. Members indicate whether they wish to withdraw an amendment before the Committee or to seek a decision. The same applies to the amendments in the group.
Hon. Members should note that amendments are voted on in the order they come in the Bill, although they may have been debated in an earlier group. Amendments that have been debated are called formally. As a rule, my fellow Chair and I do not intend to call starred amendments that have not been tabled with adequate notice. The required notice in Public Bill Committees is three working days, so amendments should be tabled by the rise of the House on Monday for consideration on Thursday, and by the rise of the House on Thursday, for consideration on Tuesday. The House is expected to rise at 5.30 pm on Thursdays.
Finally, there is an error on the amendment paper. The amendments to schedule 1 have been incorrectly marshalled in the amendment paper, so hon. Members should consult the end of the amendment paper for amendments 1, 62, 32, 33 and 34. I hope that that explanation is useful.
It is a very straightforward clause that says there will be a groceries code adjudicator. The history of the issue was outlined in more detail on Second Reading. There is clearly a great deal of cross-party agreement that the
Ian Murray: As the Minister said, there is not much to debate on clause 1. It just gives me the opportunity to pay an early tribute to the Minister in her role on the Bill; she has been both engaging and co-operative so far. Opposition Members look forward to that engagement and co-operation continuing with the Government accepting all of our amendments. If they could accept all our amendments now, perhaps could we go home and have an early Christmas.
I also take the opportunity to pay tribute to my hon. Friend the Member for Ogmore who has essentially done all the work on the Bill as shadow Minister for the Department for Environment, Food and Rural Affairs. However, the way in which this place works means that the baton has passed to the Department for Business, Innovation and Skills for us to take it through Committee.
The Bill started as a reasonable one and became a very good one, with the Minister making the right moves regarding the Government amendments, to make it a great one. We now have the opportunity in Committee to make it a fantastic Bill, after our jovial Second Reading debate. We have an opportunity to create a respected, responsible and credible adjudicator that would be good for supply chains, for innovation, for consumers and, most of all, if done properly, for retailers.
There was a great deal of debate in the other place on clause 1, believe it or not, given that it is only one sentence. My hon. Friend the Member for Ynys Môn (Albert Owen) wanted the clause to read, “the supermarket ombudsman” when he introduced his private Member’s Bill a couple of years ago. We will not make that suggestion. I was very surprised that the clock had not even turned to 8.56 am before my hon. Friend the Member for Vale of Clwyd popped up with his suggestion that the term should be changed to “Off-trolley”. There is nobody more qualified in this place to make that suggestion than the hon. Member for Off-trolley himself.
“My delight knows no bounds when the Minister in her peroration confirmed that this Bill to establish a quango and a regulator is good for growth.”—[Official Report, House of Lords, 22 May 2012; Vol. 737, c. 758.]
I have only a few brief remarks as this is not a contentious clause. There is an opportunity to reflect on the fact that we are at the point of creating an adjudicator following the Competition Commission’s report in 2008. The suggestion at that stage was that this should be a groceries code ombudsman. I know there has been discussion and heart-searching by many to resolve the issue and find an appropriate term that properly reflects the fact that we want something proactive rather than reactive, which would be the impression if the regulator were referred to as an ombudsman.
Andrew George: Sorry, but perhaps the hon. Gentleman coming up with such a suggestion says something about him, as the hon. Member for Edinburgh South suggested. At the end of the day, “adjudicator” is a compromise. There is not a term that will satisfy all those who want to ensure that this is an effective regulator. Whether “regulator”, “investigator”, “ombudsman” or “adjudicator” is used, we all know that there is significant cross-party consensus to try to take the matter forward, and it is marvellous to be at that point. We want a watchdog with genuine teeth to make sure that it bears down on the problems of unfair trading that the Competition Commission identified in its report.
Andrew George: Absolutely, and I was not going to detain the Committee any longer on that point. I am delighted that successive Ministers, in advance of this stage of the Bill, have introduced the opportunity to protect the anonymity of those who bring evidence to the adjudicator and, as we will discuss later, have ensured that investigations can be instigated on the back of market intelligence, providing protections to those who suffer from the kind of unfair dealing that we know has been happening in the sector. I also welcome the Minister’s wisdom in proposing amendments that introduce the availability of fining, which I am sure the adjudicator will take advantage of when the post is taken up. Thank you for allowing me to make a brief contribution, Mr Williams.
Huw Irranca-Davies (Ogmore) (Lab): I welcome the opportunity to serve under your stewardship again, Mr Williams, on this important Bill. Following the contribution by the hon. Member for St Ives, it would be helpful to pay great tribute to his contribution over many years, to the organisations that he has pulled together to garner support for the provisions, and to other Members as well. I say that now to get it out of the way, so that I do not have to repeat it later in the Committee.
Andy Sawford (Corby) (Lab/Co-op): I join my hon. Friend in paying tribute to the hon. Member for St Ives, and I wonder whether he read the hon. Gentleman’s comments last September in Farmers Weekly—I am a regular reader of the magazine. The hon. Gentleman remarked that the Government have dragged their feet on this, observing that there is some reluctance to act. He said:
In the spirit of unanimity, I fully agree. I also pay tribute to my hon. Friend the Member for Ogmore, who has done a fantastic job and is very much the embodiment of the fact that this is Labour’s achievement.
Huw Irranca-Davies: I thank my hon. Friend. There is far too much bonhomie in this Committee already. I concur with the tribute paid to the hon. Member for St Ives and with his urging the Government to get on with it and deliver. It is important, in taking the Bill through the Committee, that all Members reflect the will and the spirit on Second Reading to improve the Bill and turn it, as my hon. Friend the Member for Edinburgh South said, into a very good Bill rather than a half-decent one. We also want to do so in a timely manner and get it on to the statute book as soon as possible.
Huw Irranca-Davies: Indeed. That is why we have an out-date agreed, in very short order, for the Committee. I hope that then, if the Bill meets with our sovereign’s approval, we will have Royal Assent in very short order as well. However, we do need to go through the democratic process.
I want to ask the Minister about this issue: on Second Reading, my hon. Friend the Member for Ynys Môn reiterated his view that this role was, more correctly, that of an ombudsman. I know that, between then and now, the Government have listened to many comments made on Second Reading, particularly those about putting financial penalties on the face of the Bill; that is hugely welcome. We do not intend to argue the toss over what the name should be, but can the Minister put this issue to bed once and for all, by clarifying whether there is some legal or technical distinction between an ombudsman and, as we have here, an adjudicator, and other terms of reference for this regulatory approach, which has led the Government to the conclusion that an adjudicator is the most appropriate type of regulator? Are there fears about the phraseology to do with ombudsmen that have led her stalwart officials to say, “Don’t go near that, because it will lead us down a different track”? It would be helpful for the sector, from grocery providers through to primary producers, to know exactly what the Government’s reasoning is, and whether, in the Minister’s mind, it limits the scope of the role that we have an adjudicator rather than an ombudsman.
Jo Swinson: I am happy to echo the tributes that have already been paid in this short debate to the many individuals who have campaigned, argued and worked tirelessly, for many years, both within this House and outwith it, to make sure that we have a groceries code adjudicator. I am delighted that my hon. Friend the Member for St Ives is on the Committee, as I know he has been working on this issue for many years. The hon. Member for Ynys Môn has been mentioned. He of course had a private member’s Bill on the issue, and when I saw the list of Committee members, I thought that it was a shame that he was not it; no doubt he will contribute further on Report. Perhaps he has been detained by an alternative Committee.
Ian Murray: Just for the record, my hon. Friend the Member for Ynys Môn is a member of the Panel of Chairs, and therefore, although—unlike most other people in the room—desperate to be on the Committee, was barred from being so.
Jo Swinson: We started off with such consensus, yet the shadow Minister has just suggested that many Members in the room were not desperate to be on the Committee. I know for a fact that that is not the case for the vast majority—certainly the vast majority of Government Members; he can speak for the Opposition Members if their feelings are any different. It is very helpful for the Committee to know why the hon. Member for Ynys Môn is unfortunately unable to play a role in these proceedings; I am sure that he will do so on Report given his strong contribution on Second Reading.
I am also delighted that some of the newer Members of the House are on the Committee, including the hon. Member for Corby. I have not had many dealings with him before now, although when he was sworn in I was on the Bench and of course nodded and so on. I also welcome the hon. Member for Manchester Central. It is great for us to get to know some of the newer Members of the House. This Committee may not be the truest representation of the degree of consensus that usually exists either in Public Bill Committees or in the House more generally, but I am sure that, none the less, it will be a welcome introduction to the joy of Committee proceedings.
We have begun the debate with a degree of good humour, and that bodes well for our deliberations over the next few hours, later this week and next week. Sadly, we will not be here on Christmas day itself, as the shadow Minister said, as we will have concluded our proceedings in advance of that. Members of the Committee may, however, go away for Christmas with a little present to remind them of the proceedings: my cold.
On the issue raised substantively on the choice of name between ombudsman and adjudicator, we have ombudsmen working on a whole range of issues that look after consumers’ interests. We felt that a different name may be better in this case because although there will be benefit to consumers because market practices created a lack of innovation in the market place, this individual will primarily look after the interests of supplier businesses. To create clarity, we chose a different name, but I reassure the Committee that there is no difference in powers. Adjudicator is a positive name; it does not scream conflict. That is helpful because developing a good relationship with both the supermarkets and suppliers will be crucial for whoever takes up the role. I hope that that answers the Committee’s questions and that they will be pleased for clause 1 to stand part of the Bill
‘(4) The Adjudicator’s appointment will also be subject to approval by—
(a) the Business, Innovation and Skills Select Committee; and
(b) the Environment, Food and Rural Affairs Select Committee; or
(c) their respective successor committees from time to time.’.
Ian Murray: Now we will start on the line-by-line scrutiny and get to the crux of the Bill. Amendment 1 was tabled by my hon. Friend the Member for West Bromwich West (Mr Bailey) and the hon. Member for Worcester (Mr Walker). They are not on the Committee and are therefore not able to move the amendment, but their amendment is similar to amendment 62.
First, I pay tribute to the Business, Innovation and Skills Committee and the Environment, Food and Rural Affairs Committee—as they are meeting just through the wall, if I said that loudly enough, they may have heard it live. The amendments demonstrate a commonly held principle: Select Committees do an important job in scrutinising legislation, scrutinising the Government and producing their own reports and inquiries to influence the House’s thinking. We hope to persuade the Minister to allow the appropriate Select Committees to look into the appointment of the adjudicator because it will be one of the key roles created in this Parliament. That must bring confidence to the appointment, but that should be done under proper scrutiny, with other Committees of the House allowed to look into the appointment properly.
The hon. Member for St Ives has spoken already on the Bill, and I pay tribute to his work, as I did on Second Reading—although I did so reluctantly after being barracked by the Government side. He said that the Bill has cross-party support, and on that basis we believe that cross-party Select Committees should look at the appointment of the adjudicator. Lord Knight, the shadow Environment, Food and Rural Affairs Minister in the other place, put forward this amendment as well.
Ultimately, it is about the adjudicator’s accountability. We know that accountability breeds responsibility, and our amendment seeks to achieve that by ensuring that the Government’s recommendation for the important position of adjudicator is subject to confirmation by Joint Committee of the relevant departmental Select Committees. We propose to add to schedule 1, page 12, line 8 that the appointment will also be subject to approval by the BIS, EFRA and respective successor Select Committees.
I appreciate that the Minister may not want to accept the amendment, but perhaps if she were to come back on Report to propose that a cross-section—or any make-up—of those Committees would come together to approve the appointment, we would accept that. Crucially—the Minister may not know it in depth—the 2010 Conservative manifesto stated:
In mentioning major public appointments, the coalition agreement goes even further than talking about the heads of quangos. I encourage the Minister to set out clearly why such scrutiny would not take place in this instance.
I wrote to the Minister’s predecessor, the hon. Member for North Norfolk (Norman Lamb), on 9 July to ask him to consider whether the Select Committees might look at the appointment. He wrote back to me on 9 July:
“play a key role in regulating Government, play a key role in protecting and safeguarding the public’s rights and interests…or where it is vital for the reputation and credibility of the public body in question”.
We are fond of the Minister’s predecessor and we spent many heady days and nights with him in Committee debating the Enterprise and Regulatory Reform Bill clause by clause and point by point. We were so fond of him that we bought him a copy of “Fifty Shades of Grey” at the end of proceedings, because it had been referred to five or six times in that Committee. I hope he has read it, and I hope he will be questioned on it at some point in the House. The proceedings of that Committee demonstrated the level of cross-party support for some of our amendments, and I hope that the current Minister will bring similar qualities to this debate.
Huw Irranca-Davies: I echo what my hon. Friend has said. The Government have shown that they are listening when it comes to the Bill, particularly because new Ministers are overseeing it. Regardless of the previous Minister’s answer to my hon. Friend, parliamentary oversight of the appointment is in the interests of open and transparent government. Given the importance of the groceries code adjudicator, Parliament should oversee the appointment not least to ensure that the candidate satisfies the seven principles of public life. I hope that the Government are listening, because by being open to our reasonable argument, the new Ministers would demonstrate a strong mark of independence.
Ian Murray: I am grateful to my hon. Friend for that intervention, and I will say three things in response. First, the groceries code adjudicator will play a critical role, and given the controversy that even the suggestion
Andy Sawford: Not being as familiar with the hon. Member for North Norfolk, I enjoyed hearing his correspondence with my hon. Friend. I agree with the hon. Member for North Norfolk that there are three important reasons why Select Committee scrutiny of public appointments is appropriate. Will my hon. Friend clarify which of those reasons are relevant to the groceries code adjudicator? As I understand it, the role would fall into two of those three categories.
Ian Murray: Yes. I congratulate my hon. Friend on his wonderful election and his appointment to the House. Given that this is his first Committee I hope that he will be as enthusiastic a Member of Parliament at the end of it as he is at the start. He raises an important point. He is right. I do not think that anyone on the Committee could argue that the adjudicator will play a key role in regulating Government because that is not the role of the adjudicator. We could argue tenuously that the adjudicator is regulating a Government policy in terms of the groceries code, but certainly not regulating Government. My hon. Friend is right to say that the adjudicator probably falls into only two of the three categories. I hope that we are choosing the same two.
The first part of that qualification is quite important. The adjudicator is charged with upholding the code and the code is in place to look after the direct suppliers of the large retailers. If he can look after the direct suppliers of large retailers we have lots of evidence from the Food and Drink Federation and other bodies that that will create innovation, which will hopefully drive down costs, make the supply chains more efficient and put a bit of certainty into the industry. So certainly the adjudicator plays a key role in protecting and safeguarding the public’s rights and interests.
There is no doubt that the reputation and credibility of the adjudicator will be key, for the sake not just of the
Neil Parish (Tiverton and Honiton) (Con): Does the shadow Minister agree that the fact that the major retailers are not very keen, at the very least, for the adjudicator to come forward means that we need to get a very strong individual into the post given the power of these major retailers? One in particular, which I will not name here but everybody knows which it is, has 32% of the retail trade in the country. It seriously needs to be taken to task sometimes and it will need a strong adjudicator to do that.
Ian Murray: That is an important intervention. All such interventions are welcome because “every little helps”. I have never been taken in by petty advertising as you can probably tell, Mr Williams. The hon. Gentleman said that we need a strong adjudicator. The adjudicator needs to be not just strong, but very knowledgeable. These are complex processes. He will need to know not only about the retail market but about the practices of the large retailers. This Committee should not simply bash retailers for the next six sittings. That is not what we are here to do. But I am sure the retailers themselves would agree that the adjudicator has a very important role to play and they would have more confidence in the adjudicator if he knew about the industry and how the supply chains worked. That will make the adjudicator better.
Chris Ruane: My hon. Friend is quite right to focus on the buying policies of individual supermarkets. Are we as a Committee aware of that? Do they buy locally, in what areas and at what prices? Is there any way that we can compare each supermarket, highlight, praise and thereby spread best practice?
Ian Murray: My hon. Friend managed to get through an intervention without using the words “Off-trolley”, which is surprising to me and, I am sure, the rest of the Committee. However, he makes a critical point, because it is difficult to dig down into supermarkets’ pricing and supply chains. Indeed, a report by Which? from a few weeks ago showed that it is difficult to determine the actual cost of the average shopping basket despite all the comparison websites. We have seen issues around buy-one-get-one-free offers, labelling and proper pricing, and I am not sure whether anyone knows how to get to the bottom of them. I hope that the adjudicator, when dealing with some of the investigations that it may
Such issues are nothing new, and, adding to what my hon. Friend the Member for Ogmore has already said, the Treasury Committee will have a confirmation hearing into the new Governor of the Bank of England. There is no doubt that the new Governor is a major appointment, but we should put the adjudicator on the same level. There are confirmation hearings for members of the Office for Budget Responsibility, and thank goodness that there are given how its figures for the economy have been roundly brought down over the past few Budgets and autumn statements. It is right that those individuals have a confirmation hearing.
Huw Irranca-Davies: An important aspect of the adjudicator’s role is the ability of the individual appointed to be trusted right across the sector, not just by primary food producers and the supply chain, but also by the grocery sector. The job description lays out clearly the range of experience that the individual will have, but trust is absolutely essential. That is why the Business, Innovation and Skills or Environment, Food and Rural Affairs Committees, or, as in amendment 62, any subsequent Committees, should be able to judge that individual not simply on their merits and qualifications, but also on whether they command respect across the industry to give impartial, but proactive, judgments on the sector.
Ian Murray: That is the point that I have been trying to make. When the Bill receives Royal Assent and the adjudicator is appointed—hopefully through a confirmation hearing—I hope that they have no work to do. I hope that the supermarkets will comply with the Groceries (Supply Chain Practices) Market Investigation Order 2009, that they respect the adjudicator and that they think that the adjudicator has the power, the credibility and the teeth to be able to hold the supermarkets to account in a proactive manner, so that they do not have to investigate breaches of the code.
Huw Irranca-Davies: I agree that it would be ideal if the individual and their office had ostensibly no work to do, but another good reason to put them in front of a Committee is that the salary commanded is up to £120,000 a year. That on its own, from the taxpayers’ point of view, would merit some sort of hearing to judge their appropriateness and suitability for the role.
Ian Murray: Given the amount of public money involved in the adjudication and given that large retailers will be paying the salary of the adjudicator, it is important to ensure that they are the right person for the job. I also hope that the adjudicator will pay PAYE and national insurance.
Peter Luff (Mid Worcestershire) (Con): Can the hon. Gentleman clarify whether amendment 62 would commit the BIS and EFRA Committees to meet together for a single pre-scrutiny hearing, or would they be obliged to meet separately?
Ian Murray: That is a very good intervention, and I mentioned that point at the start. Our amendment seeks to discover whether the BIS and EFRA Committees, or any successors, could hold separate hearings or come together for some special sitting. If the Minister will come back on Report with a formulation of how she thinks that might work, we would happily accept that. We tabled the amendment merely to say that, as a starting point, the BIS and EFRA Committees should look at this, either separately or together, and it is for the House to decide whether to go forward with that.
Ian Murray: Again, it would be for the Minister to decide on the process. I would hope that the personal specification for the appointment of the adjudicator would be strong enough to bring forward candidates who were good enough to do the job. I would also hope that a candidate at a hearing of the BIS or EFRA Committees, or otherwise, would instil confidence in the Committees and the House in their appointment.
If we ended up with the Select Committees not giving their blessing to the appointment, we would have to go through a process of finding someone else, or deciding whether the original candidate could be brought back to the Committees after a period of training or with further information. Admittedly, that would lead to problems, but the very fact that the hon. Gentleman is raising the issue shows that the Select Committees should consider the appointment.
Mr Spencer: The shadow Minister is suggesting a rubber-stamping exercise. Surely the Select Committees already have the power to hold the successful candidate to account through their current working. I wonder whether the amendment is just another layer of unnecessary administration.
Ian Murray: Our amendment says, “subject to approval by”. The hon. Gentleman referred to “rubber stamping”, and if the Select Committees gave approval to the appointment, they would be rubber stamping it, but there should be a robust process to allow the Select Committees to have that input.
Huw Irranca-Davies: It is important to note that the two amendments are slightly different. The second is much more robust in that it would require approval to be sought. There is a precedent for that in other appointments that require the approval of a Select Committee. That is important in such a vital role, and I would be surprised if the BIS and EFRA Committees did not want to have that power to send a positive message to the Government that the individual was the right one or, as we have seen with previous appointments, that they were wrong and that the Government should think again.
Andy Sawford: The point is very well made by my hon. Friend that a range of organisations want a real assurance about the adjudicator’s teeth. I draw his attention to the remarks just last week by Harry Cotterell, president of the Country Land and Business Association, who welcomed the news that fines can be imposed and said:
That concern was clearly expressed earlier. The public, businesses, people in the countryside and farmers want that absolute assurance, and I am confident that the Select Committee process can add to that.
Ian Murray: My hon. Friend makes the most critical point yet, because the other place has given, as will amendments that the Minister will move today or later this week, real teeth to the adjudicator. We could add to the adjudicator’s remedies a specification that they could shoot retailers at dawn, but if the adjudicator is unable proactively and efficiently to take forward an investigation, the remedies are irrelevant because the investigations will be irrelevant. The adjudicator now has real teeth to do something about that, and Harry Cotterell has made that point. We must ensure that now that we have remedies with teeth, we have an adjudicator with the ability to take those remedies forward.
Before the Minister pops up and says it is all very well talking about the Governor of the Bank of England and the members of the Office for Budget Responsibility, I mention again the Enterprise and Regulatory Reform Bill, which has just gone through this House and is in the other place. The specifications in that Bill are to merge the Office of Fair Trading and the Competition Commission to create the Competition and Markets Authority. The appointment of the chair of the CMA will be ratified by the BIS Committee. It seems to me that that post is very similar, in its level of responsibility, to the adjudicator. I cannot understand why that appointment will be ratified by the BIS Committee but that of the adjudicator will not be.
Lord Knight of Weymouth also proposed this amendment in the other place, where it was rejected. It seems to me a procedural matter that would be easy to resolve. The BIS Committee could have held the ratification hearing in the time it has taken me to propose the amendment. I do not think it would be an onerous process and it could be done fairly quickly.
The amendment aims to ensure proper due diligence. We cannot undertake due diligence after the appointment. We will not know if the adjudicator has the skills and knowledge to do the job properly until after the event. It would be in the adjudicator’s interest—something we have not spoken about yet—to have gone through a robust process, because it would give the individual personal credibility in saying to suppliers and large retailers, “I am the adjudicator refereeing GSCOP.” We want to ensure that it can be refereed properly.
To rewind to the start of the Committee, when my hon. Friend the Member for Corby quoted the hon. Member for St Ives on how long it has taken us to get here, I think that, given that lengthy period, we should spend just a little more time to allow the adjudicator appointment to be ratified by the BIS or EFRA Committee, or a combination of the two, to ensure that, having gone through the lengthy process, we now get it absolutely right.
Peter Luff: The Government need not be unduly concerned. I will not be contributing to the Committee at length or frequently. However, as a past Chairman of both the BIS Committee and the old agriculture Committee, now the Environment, Food and Rural Affairs Committee, I have a vested interest in the amendment.
My message to the hon. Gentleman who moved his amendment so fluently—and at such length—is that the Committees are right to want this power. If they do not get it, they can take it anyhow. If the Government reject the amendment, the Committees can hold the hearing anyhow; they have the power to summon people and papers. Were I the Chairman of either of these two Committees, whatever the Minister says when winding up today and whatever is in the Bill at the end of the process, I would summon the adjudicator candidate and ask him or her to justify their appointment. It is up to Select Committees to assert their power in this place, not just to the Executive to give them the power.
Ian Murray: The hon. Gentleman brings a great deal of experience to the Committee. We are delighted he is on it and look forward to his contributions. Surely, the point is that if the adjudicator is appointed and then the BIS Committee, having asked the adjudicator to come before it, decides it is a dreadful appointment, there is no mechanism for the appointment to be looked at, stopped or amended. If the adjudicator is in place and is called retrospectively by the BIS Committee, which concludes they are the wrong person for the job, there is no mechanism for the appointment to be changed.
Peter Luff: The hon. Gentleman makes an important and interesting point. I think the knowledge that the Select Committee would declare in advance, irrespective of the Government’s candidate, that it would summon him or her, would be a powerful discipline on the Government and a real sanction on the appointment. An adjudicator who lost the confidence of the two relevant Select Committees would be ineffective. The Government would probably want to wait for the Select Committees’ decision once the announcement was made anyhow. Select Committees must assert themselves; they must take the power they can for themselves. They have the power to do that irrespective of the hon. Gentleman’s amendment. I give way to my hon. Friend the Member for City of Chester.
Jo Swinson: I am pleased to respond to the amendments moved by the hon. Member for Edinburgh South, one of which is also in the name of the hon. Member for West Bromwich West, the Chair of the BIS Committee. As ever, it is wonderful to hear from my hon. Friend the Member for Mid Worcestershire, and I will perhaps risk incurring the wrath of the Whips by saying that I hope his contributions are not rare. He has lot to offer and is possibly the best placed person to speak on the amendment given his former roles as Chair of related Select Committees.
Select Committees do a fantastic job. Whether it is Business, Innovation and Skills, Environment, Food and Rural Affairs or any other Select Committee, their scrutinising and challenging of the Government is absolutely vital. From my time as a member of the Environmental Audit Committee, I know how important that relationship is. It is vital that the Government take Select Committees seriously. We are committed to increasing transparency and accountability in the public appointments process and to strengthening how Select Committees can scrutinise major appointments where it is warranted. The issue here is about whether this appointment is of sufficient importance to warrant that level of scrutiny. I appreciate that the amendments give us the opportunity to have a good debate on the issue, but, in any event, it would not be normal practice to write such a thing into the Bill. I am not aware that the previous Government ever wrote into legislation what pre-appointment scrutiny is required, so I am not sure whether doing so would be the best way of achieving the amendments’ aim.
Huw Irranca-Davies: Accepting the argument that it is normally rare, but not unique, to have such a proposal written into the Bill, does the Minister have an alternative suggestion? Her Department is currently going through the process of appointment, and there is merit in pre-ratification—the minimal approach taken by amendment 1, rather than the maximal approach taken by amendment 62. Is there some way, through guidance or internal procedure, that that pre-ratification by one of the appropriate Committees could be sought?
Jo Swinson: I hear the hon. Gentleman’s arguments and will come to those points. He is right to draw the distinction between amendment 1 and amendment 62 and between scrutiny and confirmation hearings. The confirmation hearing is rightly reserved for the most important roles, such as the Governor of the Bank of England, and I will mention the significant differences. The hon. Member for Edinburgh South suggested that the role of adjudicator is on a par with the Governor of the Bank of England, but I would gently challenge that.
There is a difference between the confirmation and scrutiny hearings. Indeed, members of the Business, Innovation and Skills Committee already have experience of that difference in the slightly troubled scrutiny of the director of the Office for Fair Access, where the Select Committee played its role, but the Secretary of State none the less decided that the preferred candidate was the right person for the job. There are circumstances where it is appropriate for a Select Committee to take a view, but not necessarily to have a veto over a particular candidate. I hope that all hon. Members will accept that.
Ian Murray: I am grateful to the Minister. I want to follow up on what my hon. Friend the Member for Ogmore said. It is striking that amendment 1 comes from the Chairman of the Business, Innovation and Skills Committee. Some Opposition Members may find amendment 62 rather strong. The Chairman of the BIS Committee is asking this Committee, through amendment 1, for the chance to have at least a look at the adjudicator.
Jo Swinson: Indeed. I echo the points made by my hon. Friend the Member for Mid Worcestershire. It is certainly up to Select Committees if they want to assert their authority, and the Business, Innovation and Skills Committee, in tabling amendment 1, has made clear its desire to be involved in the adjudicator’s appointment. Select Committees should be closely involved in the appointment of individuals to such positions by being able to summon them and ask them questions. Whether or not that means pre-confirmation hearings, I hope that whoever is appointed as the groceries code adjudicator will have a productive and close working relationship with Select Committees and be available whenever they are keen to see them for an update.
Huw Irranca-Davies: I want to tempt the Minister to go further. I think she has some sympathy at least with the spirit of the first amendment. The critical difference between that amendment and the approach taken by the former BIS Committee and the hon. Member for Mid Worcestershire, with his great experience, is that it is a clear and expressed desire of the BIS Committee to have pre-appointment hearings—not confirmation hearings. As my hon. Friend the Member for Edinburgh South said, it would be of benefit to the individual if in that pre-appointment—rather than post-appointment—hearing the Committee could validate, and say this is the right woman or man for the job.
Jo Swinson: I thank the hon. Gentleman for his intervention. I quite understand the distinction he draws between the approach outlined by my hon. Friend the Member for Mid Worcestershire and amendment 1. It would be helpful if I outlined to the Committee the procedure that is in place for making these decisions. It is a system that was agreed by the previous Government for working out and agreeing between Parliament and the Executive which public appointments would be subject to a pre-appointment scrutiny hearing. A document entitled “Pre-appointment hearings by Select Committees: Guidance for Departments”—a helpful title—was published by the previous Government in August 2009. The Government follow those guidelines.
Under that system the Secretary of State discusses and agrees with the Chair of the relevant Select Committee which appointments will have this kind of hearing and the Cabinet Office then publishes a list of those appointments. That current system works well and the Government do not think there is any particular advantage in formalising that process in legislation, and no real case for doing so in respect of individual roles such as that of the groceries code adjudicator. Obviously this
Andy Sawford: I sense that there may be some difference of view, which I hesitate to say given the unanimity on many points so far in the debate, on the importance of this post holder. The Minister is quite right to say that we would all agree that the post is not as significant in our national life as the Governor of the Bank of England. Nevertheless this post is very important to so many people. Could I draw her attention to the trade union perspective which is always worth listening to? The president of the National Farmers Union, Peter Kendall, said only last week:
Jo Swinson: I thank the hon. Gentleman. I do not think there is a difference of opinion about the importance of this role, except perhaps with the shadow Minister who places the adjudicator on the same par as the Governor of the Bank of England. But the hon. Gentleman accepts that there is a difference between those two roles and the place they have in our public life. The Government believe that this is a very important position, particularly within the grocery sector and those related groups such as the NFU, which is closely affected by everything that happens in that sector.
As set out in the letter from my predecessor, my hon. Friend the Member for North Norfolk, there are three criteria for determining which posts should be subject to pre-appointment hearings. The first are posts which
There has been general acceptance that that does not apply in this case. The shadow Minister attempted to make a tenuous link but I think he would accept that it does not apply. The second are posts which
That is where I think there is potentially some discussion to be had. I am happy to consider that issue and the arguments that have been advanced, but I just want to outline to the Committee why I think that there is a difference between this role and some of the other roles that have been mentioned. They include the Governor of the Bank of England, the head of the Office for Budget Responsibility and the head of the new Competition and Markets Authority.
Groceries code adjudicator is a very important role, but it is an individual office holder, focused on one particular sector and with a tightly defined remit within
Lucy Powell (Manchester Central) (Lab/Co-op): Does the Minister agree that the issue is not just the remit of the role in terms of breadth and so on, but the nature of the interests that the adjudicator will come up against? Those will be very powerful vested interests. We are talking about supermarkets. Those interests are hugely powerful, much more powerful than any one individual whom we here could give powers to, and therefore it is critical that we give this position as many teeth as possible. Like, I am sure, many other members of the Committee, I meet through my role many suppliers who just would not go to this person—even though it would be in their interest to do so—unless they felt that they really had teeth, because those interests are so powerful.
Jo Swinson: I thank the hon. Lady for her eloquent intervention. On the basis of that, I am sure that she will make a strong contribution to the House. She raises a very important point similar to that raised by my hon. Friend the Member for Tiverton and Honiton. He, too, outlined the importance of this individual being a strong person who can stand up to vested interests. There is recognition that this person needs to be able to command the respect of both supermarkets and suppliers. They need to know that this person will be fair, will have a good knowledge of the sector and will be an individual whom people can trust and have confidence in. That certainly is important.
Huw Irranca-Davies: I am sure that the hon. Lady does not mean to undermine the scope of this role, but just in case she is in any danger of doing so, I just want to point out that it is within a sector that is the largest employer in the UK. We are talking about food processing and food manufacturing, from the primary sector all the way through retail, manufacturing and distribution. It is the largest employer and one of the biggest economic contributors. If we get this right, the impact on consumers through efficiency in the supply chain will be massive, hence I suggest that there is a strong argument for something in the spirit of the amendments, even if the Minister just brings back something that would allow this appointment to be the subject of some predetermination by one of the Select Committees. I am thinking particularly of the BIS Committee, because of my comments on the importance of this to employment, manufacturing and growth.
Jo Swinson: I thank the hon. Gentleman for his intervention. He is right. I hope—I am sure that the record will show this—that I have not in any way undermined the importance of this position. It is also
I hear the arguments have been put forward. I am generally a great believer in transparency and the power of Parliament to hold to account not just the Executive but the role that it plays in our wider public life. That is very important, and I will consider very carefully the arguments on the third criterion—the independence of the adjudicator and the need for the adjudicator to be seen to be independent. While I do not think that there is a case for pre-appointment confirmation, I will consider whether pre-appointment scrutiny is something that Select Committees could do. I am not making any promises to the Committee, but I will consider that further. Perhaps we can return to this matter on Report.
Huw Irranca-Davies: I intervene only to be of assistance to the Minister and to seek some clarification. She heard the views expressed and showed once again that she is listening, but she does not want to over-promise. Is she suggesting that she may return with something of her own making on Report? We would be particularly content with that if it focused on the pre-appointment element.
Jo Swinson: I am not promising anything—I say that again—but I will consider those issues between now and on Report. Even if it is not in the form of an amendment—being overly prescriptive in a Bill is not necessarily helpful—I will look carefully at whether the issues raised on pre-appointment in terms of Select Committees can be resolved.
Huw Irranca-Davies: I thank the Minister for her helpful response. In the period between Committee and Report, will she seek counsel directly from the Chair of the BIS Committee to get his input on this? From his amendment, it is clear that there is a specific and explicit desire for his Committee to be involved in pre-appointment scrutiny.
Jo Swinson: The hon. Gentleman is quite right that the tabling of the amendment made that point clearly. I am always happy to have discussions with the BIS Committee Chair, and it is appropriate for me to do so.
In closing, I note that the hon. Member for Edinburgh South talked about a gift he gave to my predecessor, my hon. Friend the Member for North Norfolk. That set the standard, and it was not even near Christmas when that Committee concluded, so on the basis that I will consider the matter further, perhaps he will give me an early Christmas present by withdrawing the amendments.
Let me provide some clarity. In my contribution, I was not saying that the adjudicator would be at the same level as the Governor of the Bank of England or the chair of the Office for Budget Responsibility; I was merely highlighting that those two roles go to the Treasury Committee, a powerful Committee. More of a comparison can be made with the chair of the Competition and Markets Authority, and that similar role will go to a pre-appointment hearing at the BIS Committee.
The key to the two amendments—I agree with my hon. Friend the Member for Ogmore—is that amendments 1 and 62 are two sides of the spectrum, and somewhere along that spectrum there are points that could be looked at. That highlights some points made by the hon. Member for Mid Worcestershire. The very fact that the Chair of the BIS Committee tabled amendment 1 says that the Committee wishes to have a pre-appointment hearing, and also that it considers the adjudicator’s role to be worthy of its scrutiny. I do not think that the BIS Committee tabled such an amendment to the Enterprise and Regulatory Reform Bill with regards to the Competition and Markets Authority chair, so it must consider pre-appointment scrutiny of the adjudicator to be as important, if not more important than that.
Ian Murray: Absolutely. The point has been well made that those Committees could do that. That is why I find it slightly strange that the Government will not accept at least amendment 1—just to put the pre-appointment hearing on the face of the Bill—not just for the sake of the very first adjudicator, but for any other adjudicator that may be appointed in the future.
Ian Murray: Perhaps we could encourage the Chair of the BIS Committee to table, on Report, an amendment mentioning the EFRA Committee. I think we are discussing semantics now. The broad principle of allowing those Committees to carry out such scrutiny is quite clear.
If the Minister can assure the Committee that she will talk to the Chair of the BIS Committee, or, indeed, that she has already done so, that will certainly be a step forward. If it then transpires that the Minister has to table an amendment on Report, we would welcome that. We welcome the Minister’s assurances and the communications that will happen between her and the BIS Committee.
Huw Irranca-Davies: I aim to be of help to the Minister. She will no doubt have discussions on this issue between Committee and Report. Can I suggest to my hon. Friend that it would be of great help if the Minister were to share her considerations and any solutions she might propose in advance of Report? That way, we can consider them before we have to vote on them on Report.
Ian Murray: The Minister has heard that request. If the request to the BIS Committee could be copied to members of this Committee that would be useful, and would give us the assurance that we require that both the BIS and the EFRA Committees are being properly consulted on this issue. Given those welcome assurances from the Minister, I beg to ask leave to withdraw the amendment.
‘for the appointment of staff’.
‘if asked to do so by the Adjudicator’.
Ian Murray: We have started the Committee at breakneck speed, and are racing through the amendments; we have got past clause 1, that simple sentence setting up the adjudicator, and are now looking at some of the details of schedule 1.
This group of amendments is designed to give the adjudicator the independence they require. They need to be completely independent of Government influence. Under paragraph 9 of schedule 1, the adjudicator can make arrangements to second staff from
Amendment 32 aims to dispense with any perception that the independence of the adjudicator might be curtailed through seconding staff. It is important that the adjudicator is completely free from any influence from the Secretary of State, and so we would like the secondment of staff from the Secretary of State removed from the Bill. The adjudicator ought to be able to appoint their own staff from wherever those staff are needed; that will not necessarily be by secondment of the Secretary of State’s staff.
Amendment 33 is to paragraph 11(2) of schedule 1, which allows the Secretary of State to appoint a deputy adjudicator. It is important here, as well, that we allow the adjudicator to make those sorts of decisions on their own, without reference to the Secretary of State.
Stephen Mosley: Paragraph 11 applies only if both the adjudicator and the deputy adjudicator are unable to act because they have declared conflicts of interest. Does the hon. Gentleman really think it appropriate that somebody who has declared a conflict of interest should then appoint the person who will make a decision
Ian Murray: The hon. Gentleman makes a good point; however, we are trying, through these amendments, to make the adjudicator’s office completely independent. I appreciate what he says on conflicts of interest for the adjudicator and the deputy adjudicator, but we are looking at whether or not it must be the Secretary of State who appoints a replacement deputy adjudicator. Essentially, there must be a firewall between the office of the adjudicator and the Secretary of State to enable that office to operate properly; otherwise, quite rightly, retailers could suggest that any Government—not just this one—could have undue policy influence on the adjudicator’s office, when the role of that office is to referee the code. It would be clear at any point in that process if the adjudicator or the deputy adjudicator had a conflict of interest. I cannot foresee any circumstances in which that would happen, although the Minister may be able to provide some examples.
That reflects back to the first set of amendments, because such a conflict might be teased out at a pre-appointment hearing with the BIS or EFRA Committee. It is important for the adjudicator not only to be able to appoint the deputy, but to be in charge of the process. That would provide transparency and remove any concerns about conflicts of interest.
We witnessed a great deal of debate in the Growth and Infrastructure Bill Committee about the Secretary of State for Communities and Local Government sucking up powers, and we do not want this Bill to allow the Secretary of State for Business, Innovation and Skills to suck up powers away from the adjudicator. The adjudicator must be an independent body that can control what it wants to control, and surely it will be best placed to decide what is in the interests of the adjudication. I appreciate the hon. Member for City of Chester’s raising the matter, but I would have thought it wholly unlikely that both the adjudicator and the deputy adjudicator would have a conflict of interest. If the adjudicator felt that they had a conflict of interest they would pass something to the deputy, and vice versa.
Ian Murray: That is the point I have just made. It is very unlikely that both the adjudicator and the deputy adjudicator will have a conflict of interest. Will the Minister tell us whether the Department has modelled any circumstances in which that might be an issue? Although I appreciate what the hon. Member for City of Chester has said, the amendments are designed simply to tease out the independence of the adjudicator from the Secretary of State. This Bill and many others allow Secretaries of State to take powers as and when they want to, but it is important that the office of the adjudicator remains completely independent, and I hope that the Minister can assure us that that will be the case.
Jo Swinson: I thank the hon. Members who have tabled the amendments, which I take in the probing spirit in which they were meant. I agree that the independence of the adjudicator is important. Amendment 32 suggests that the adjudicator should appoint staff rather than relying on secondments, but I hope to reassure the hon. Gentleman that secondment has significant advantages over appointment. We intend that the adjudicator will have a pretty small office that carries out very specific functions, and we do not want the budget to become overblown with a large permanent staff. The advantage of secondments is that they give the adjudicator flexibility to increase or decrease resource quickly as the work load requires. The work load will fluctuate depending on the arbitrations and investigations that are taking place and the number of complaints that have been submitted to the adjudicator.
Huw Irranca-Davies: I am just wondering whether the Minister can explain which public body or intra-Government agency those staff are likely to be seconded from in different situations. As she has said, it will depend on the circumstances, but I am sure that she has some idea already where that core of three, four or five people will come from.
Jo Swinson: Absolutely, and there is a real advantage in the adjudicator’s being able to second staff who have specialist knowledge. The adjudicator will be able to bring in staff with the skill set or knowledge base that is relevant to each investigation. It is inevitable that the adjudicator will not have extensive knowledge of every part of something as large as the grocery sector, so bringing in people with the relevant expertise, where appropriate, makes a lot of sense.
That expertise can lie in a range of different areas, including the independent competition authorities, the Department for Business, Innovation and Skills, the Department for Environment, Food and Rural Affairs and other areas of the public sector. The shadow Minister said we would not want the adjudicator to rely only on the expertise of the BIS Department, and I quite agree. That is why paragraph 9(1) states:
That means that a really wide range of people could be seconded, including from the sector regulators, which may have specific expertise. That will be very effective, particularly in short-term investigations.
Huw Irranca-Davies: There is a vital point about the expertise in a very small team and about the adjudicator’s ability to identify, seek and secure particular people. Under paragraph 9(1), the adjudicator can
but who will argue for the adjudicator’s right to draw on those people, when—this is not a political point—all Departments and public bodies are, at this very moment and for the foreseeable future, under such stringent cost constraints that their heads are likely to argue to retain the best, most appropriate staff? Who will battle for the adjudicator?
Jo Swinson: That is a discussion between the adjudicator and the Secretary of State. It is certainly envisaged that there will be a close working relationship between the adjudicator and BIS, as the lead Department. The hon. Gentleman highlights a situation in which there could be a difficulty and some reticence. The adjudicator has a budget, which it will be expected to spend on staffing and other things, so it might be an advantage, where organisations’ budgets are stretched, for individuals to be seconded for a period to the adjudicator’s office.
It is also worth pointing out that this would be an opportunity for staff to gain additional experience in something a little different. They would return to their sponsor Department or public body enhanced by their experience with the adjudicator, so a secondment might be a personal development opportunity. There are therefore advantages to public bodies in complying, but, as I say, we will have a close working relationship with the adjudicator, and we will certainly be able to try to unblock any difficulties that may occur.
Let me reassure the Committee by emphasising that there is no intention that secondments will in any way compromise the adjudicator’s independence. Once somebody is seconded, they are under the direction and control of the adjudicator, not their home employer, so they are not there to do the bidding of the body they have come from. People can come from across the public sector, which reduces the possibility of independence being compromised.
Would such arrangements with the Secretary of State allow for secondments from a private sector organisation, such as the British Retail Consortium? My interpretation of the wording is that expertise would not need to be sought from within the Department, but from outside, including from industry.
Jo Swinson: I thank the hon. Gentleman for his question; he is quite right that it is important that the Committee can be clear about these things. It is not the intention that that expertise could come from a private sector organisation, and I can understand that there would be concerns if that were the case. I am happy to give the Committee that answer.
Huw Irranca-Davies: I appreciate that the best intentions in statute can amount to nothing. Will the Minister clarify the point, if not now, perhaps in writing? My interpretation of what she has just put on record is that the intention is clear: the expertise should not be from the private sector. However, my reading of paragraph 9(1) is that it actually allows for private sector firms to become involved in this area. That may or may not be a good or bad thing, but paragraph 9(1) says:
That would allow the Secretary of State to go to the British Retail Consortium, or to the National Farmers Union, or to the NFU Scotland, or whatever, and say, “Your person has got the expertise; we want to bring them in.”
Jo Swinson: I thank the hon. Gentleman for further probing this issue; I appreciate that he wants to ensure that there is clarity on it. I encourage him to look at the explanatory notes for the Bill, in particular paragraph 82 on page 15, which says:
“The Adjudicator is not permitted to engage staff but, under paragraph 9, may make arrangements for staff to be seconded by the Secretary of State or any other public authority. This would be on arms’ length terms and would be likely to be by agreement as to the identity of the individuals in question.”
As I say, I appreciate his expression of concern that there is not clarity on this issue, but I think that the explanatory notes provide further clarity on it. I am also able to give that reassurance to the other members of the Committee, but I have no problem whatsoever in writing further to members of the Committee to put that matter beyond doubt, if that would be helpful to the hon. Gentleman.
Ian Murray: I am grateful to the Minister for giving way; there is still a good mood of generosity prevailing at this stage. My hon. Friend the Member for Ogmore has just raised the issue of where the adjudicator can second staff from. We are concerned about paragraph 17, entitled “Assistance from Office of Fair Trading”, although we did not table an amendment. There might be a slight conflict of interest for the OFT in the provision of staff, premises and facilities, given that it is the ultimate arbiter of competition in the sector, to the new Competition and Markets Authority. Does paragraph 9(1) allow the adjudicator and the Secretary of State to make secondments from bodies where there may be a conflict of interest but which are in the public sector? That concern is slightly different from my hon. Friend’s concern about the private sector; it is about possible conflict of interest in the public sector.
Jo Swinson: The hon. Gentleman makes a useful point. There is further information on page 16, paragraph 85, of the explanatory notes about the role of the OFT. That role is clearly intended to be helpful, particularly to the public purse, and the adjudicator could reduce costs by sharing premises with the OFT, again on arm’s-length terms and subject to the appropriate safeguards being in place to protect confidentiality, to avoid conflicts of interest and so on. The hon. Gentleman is right that it is important that any conflicts of interest are avoided, whether by the OFT or indeed any other body. In any secondment, we would want to ensure that safeguards were in place.
The fact that the appointments will be made with the agreement of the Secretary of State provides some accountability. It would be unhelpful to be more prescriptive within the schedule, because we would not want to have a situation whereby there might be a conflict of interest with one part of one body but a really excellent person could be seconded from another part of the body. We will avoid that problem, because safeguards can be put
Amendments 33 and 34 propose that the adjudicator should be able to appoint a deputy adjudicator rather than making a request to the Secretary of State. I appreciate that amendment 33 is a probing amendment, but we disagree on the issue. As my hon. Friend the Member for City of Chester pointed out, paragraph 11(1) applies only
We expect such a situation to be rare. We are keen to avoid conflicts of interest for the adjudicator or the deputy adjudicator, but it is worth ensuring that we have made provision if such a conflict did arise. On the rare occasions when there is a conflict of interest for one of those individuals, the other will be able to deal with the issue in question, but a conflict of interest for both individuals is not beyond the bounds of possibility. In that circumstance, it would be advantageous for the appointment to be made by the Secretary of State, because by definition, the adjudicator would have a conflict of interest.
Stephen Mosley: Paragraphs 11(3), 11 (4) and 11(5), along with the explanatory notes, refer to an “acting Deputy Adjudicator.” The cause of the shadow Minister’s confusion may be that paragraph 11(2) refers to a “deputy Adjudicator”. Should that say “acting Deputy Adjudicator”, and if so, should that be added to the measure on Report?
The phrasing—“to act as”—means that the person will be the acting deputy adjudicator. There is not a capital “A” in “to act as”, and I am quite a stickler for such grammatical issues, as my Department will attest—particularly around apostrophes. I think the phrasing fulfils what is required, but I welcome my hon. Friend’s eagle eyes, not only in spotting the flaws inherent in amendments 33 and 34 and expressing them so clearly, but in ensuring that we are covered for the rest of paragraph 11. The other advantage to the appointments being made by the Secretary of State in this scenario is that there is accountability to Parliament.
Huw Irranca-Davies: Again, this is on a point of clarification—it is helpful for the Minister to put her thoughts on record. We have begun to explore how the appointment of the adjudicator and the deputy adjudicator will be made; guidance is out there at the moment, and the Secretary of State will have oversight. In the appointment of the acting deputy adjudicator—or the deputy adjudicator in an acting position—would the same process apply? I ask because that relates to the time delay. The appointment would be in respect of a particular conflict of interest and a particular case that
Jo Swinson: The hon. Gentleman makes a good point. The rare situation that we are making provision for—and it is absolutely right that we do so—would be one where there is a requirement to take action quickly, because it would deal with one particular matter, as it is only one case where there would be a conflict of interest. We do not want a lengthy process that holds that up, as he rightly highlights. We would still want to ensure that we appointed the right person with the relevant skills and so on, but it would therefore be a quicker process. In relation to our discussions on a previous group of amendments that I endeavoured to go away and look at, I do not think that a full-blown process in quite the same way would be appropriate in such a circumstance.
Huw Irranca-Davies: Can the Minister again enlighten the Committee on what discussions she has had with her expert team on time scales? Would it be one month or three? Certainly not six months, I hope.
Jo Swinson: I would certainly not be looking at six months, nor do I think that we would want to delay for three. Equally, I would not want to be too prescriptive to the Committee. It is important that this is done properly, but swiftly, and if it took a month, that would be fantastic, but if it took six weeks, or if it could be done in a fortnight, that may be appropriate, too. In this rare occurrence, we would have to leave the matter to the discretion of the Secretary of State, acting on the recommendation that the adjudicator identified, and if there was a conflict of interest, that would need to be dealt with. If there was concern in Parliament about an undue delay or about something being rushed, I am sure that questions would be raised in BIS questions. If the matter was urgent, Mr Speaker has a tendency to be kind in granting urgent questions, so I am sure that there would be the opportunity for parliamentary scrutiny, if the time period that was used was not seen as appropriate. I hope that I have answered all the Committee’s questions on this group of amendments, and that I have provided the reassurance required to enable them to be withdrawn.
On the Secretary of State appointing a new or deputy adjudicator when there is a conflict of interest, under clause 2, the adjudicator will appoint someone to arbitrate on such issues. Given that the Minister has said that that provision will be rarely used, I would hope that the Secretary of State’s involvement will be minimal, if not zero. We have discussed the adjudicator’s independence, and have been reassured about the appointment of staff and having a firewall between the adjudicator’s office and any other appointed office.
Ian Murray: I suppose the best person to investigate a complaint is the skeleton that has been in the same cupboard. The Minister has heard the very good points that my hon. Friend the Member for Ogmore has made. We have been assured about conflict of interest, but closing the door on any organisation ever being part of the adjudication unit is a bad idea. We have had some superb and knowledgeable contributions from the National Farmers Union, Traidcraft, and ActionAid, which have all given evidence to members of the Committee. Someone who works for a large retailer may want to contribute to the adjudicator’s office.
Jo Swinson: I hear the point that the hon. Gentleman raises, but of course there are many occasions when people who have worked in the private sector subsequently work for regulators or in different parts of the public sector. We will still have the opportunity to access the expertise of a poacher turned gamekeeper when appropriate.
Ian Murray: I am delighted that the Minister has been able to reassure my hon. Friend the Member for Ogmore, who in turn has reassured the Minister that we are reassured. We are all reassured, and I beg to ask leave to withdraw the amendment.
‘(3) Where the adjudicator is appointing an arbitrator the following must be taken into account—
(a) the location of the arbitration considering the convenience of the supplier;
(b) the qualifications of the arbitrator;
(c) the experience of the arbitrator; and
(d) the awareness which the arbitrator has of
(i) the laws applying in—
(a) England and Wales;
(b) Scotland; and
(c) Northern Ireland; and
(ii) the market and economic conditions applying in—
(a) England and Wales;
(b) Scotland; and
(c) Northern Ireland.’.
We move on to clause 2 and arbitration. Our amendment would augment the clause. We do not disagree with specifications in the Bill which, however, does not set out the criteria for the appointment of an arbitrator.
We tabled the amendment because the Bill does not specify matters concerning the location of adjudication or the convenience to the supplier. Small suppliers might want to bring an investigative case to the adjudicator’s office, which is why location is important. We must also consider the issue of staffing and the adjudicator’s pre-appointment hearing. There must be guidance about the necessary experience and qualifications of someone who can arbitrate in a case that has been brought forward by the supplier.
As I have said, there must be awareness of the laws that apply to England and Wales, Scotland and Northern Ireland where there are slight differences in the law. Clause 3 refers to requirements in civil proceedings and mentions the different legal systems and the different Acts that apply in different jurisdictions. It is important that that is taken into account when the adjudicator appoints someone to arbitrate on their behalf.
We can envisage circumstances in which suppliers from the highlands and islands, for example, bring forward specific issues relating to that particular market. Given the information that we have received from some suppliers, specialised suppliers will have particular issues in mind about the breaking of the code, which they want to bring to the attention of the adjudicator. We are delighted that the Government and the other place accept that third parties can bring forward such matters, but it is important to ensure that if the adjudicator or deputy adjudicator does not have the required skills to deal with a specialist investigation, whoever is appointed to perform that arbitration role has the necessary experience.
There must be a minimum threshold of skills. People must have confidence in the system to be able to bring forward a case for investigation. The amendment is fairly straightforward, and I hope that either the Minister will accept that it makes important provision on arbitration or, after the wave of reassurance we have had, can provide us with even more reassurance that such specifications will be taken into account when appointing the arbitrator.
Jo Swinson: I thank the Opposition for tabling the amendment. There is a great deal of agreement between us. We both recognise that arbitration is an important part of the Bill, and that it will be an important part of the adjudicator’s role through arbitration to enable suppliers to resolve specific disputes with retailers so that they receive the necessary redress. Such measures will enable the adjudicator to add real value to the process. The other place had a lengthy debate on arbitration, as well as on the issues referred to under the amendment.
Amendment 22 sets out a detailed list of the issues that an adjudicator must consider when appointing an arbitrator. Such matters are important and will be expected to be taken into account but, without wishing to disagree with the hon. Member for Edinburgh South, it is not necessary to be so prescriptive and add such provisions to the Bill. I hope that I have convinced him of that. As a public authority, the adjudicator will be bound to act reasonably and carefully when selecting an arbitrator, if the adjudicator were not carrying out the arbitration. Naturally, the qualifications and experience of the proposed arbitrator will be taken into account, but that does not need to be stated expressly in the Bill.
Andy Sawford: Will the Minister indulge a new Member and help me understand her approach in accepting all aspects of the amendment tabled by my hon. Friend the Member for Edinburgh South, yet saying it is not helpful to include that in the Bill? It seems to me, as a new Member of the House, that in the interests of the public and all those concerned that the adjudicator should work effectively with those involved in arbitration, it would be incredibly helpful to have it in the Bill. I do not understand the Minister’s reluctance.
Jo Swinson: I am more than happy to indulge a new Member. It is a debate I am sure he will hear many times; the desire to put more and more information and detail in legislation. That often comes from the Opposition, though not exclusively. Government often prefer to have legislation at a higher level. The clarity of legislation is important, and we should put on record the fact that we are discussing a plain English Bill. That might not be immediately obvious to members of the public who decide to read it, but it is better than many Bills in how understandable it is for those of us who have not studied law in detail.
The purpose and aim of legislation should be as straightforward and understandable as possible for anyone who chooses to read it. The more detail that is put into any piece of legislation, especially where it is unnecessary because protections already exist, the more complicated it becomes. That is where there is a role for reassurances from Ministers and the explanatory notes that set out the intention of legislation.
Andy Sawford: The Minister says that it is important that the Bill is in plain English. I welcome the way in which my hon. Friends have used this brief opportunity in seeking to put that in the Bill and specify that the arbitrator would have an awareness of laws applying in the different jurisdictions. While it may be in plain English, to apply that so that it is clear to people in Scotland and Wales that the arbitrator would understand the laws of those countries would be incredibly helpful. I understand the Minister’s point about not being too prescriptive or detailed in the Bill. However, there is beauty in the simplicity of the amendment and the key issues it addresses on jurisdictions.
Jo Swinson: I thank the hon. Gentleman for his further intervention. It is quite appropriate for us to describe amendments as beautiful or otherwise. However, beautiful or otherwise, the amendment is still unnecessary.
Simon Hart (Carmarthen West and South Pembrokeshire) (Con): As a veteran of arbitration under the jurisdiction of the Royal Institution of Chartered Surveyors in a previous career, I can assure the Minister and the hon. Member for Corby that all the concerns in the proposed amendment are dealt with as a matter of course in the appointment of an arbitrator. The system works perfectly well in a range of other professions. There is no need to clog up the Bill or impinge on the adjudicator’s work as far as the amendment is concerned.
Jo Swinson: I thank my hon. Friend for his well-informed intervention. There are many reasons for reassurance that the appropriate factors will be taken into account without being specifically included in the Bill. The order in article 11 gives the steer that the rules of the Chartered Institute of Arbitrators will be used. It is reasonable that the arbitrator will have the ultimate choice. There are well-established criteria that are taken into account. I see no reason, in my hon. Friend’s words, to “clog up” the Bill with superfluous words. We will resist the amendment while understanding the helpful spirit in which it is offered.
On the subject of location, it is appropriate for a Scottish Member to point out the challenges in geography that sometimes exist. However, the Groceries (Supply Chain Practices) Market Investigation Order 2009, article 11(6) provides that
The supplier already has a right to say where that will be. I appreciate that if someone is in the highlands and islands that might mean a bit of a trek, but it does mean that they do not have to go all the way to London.
Ian Murray: The Minister is being generous in dealing with some of our queries. Can she give some reassurance that if a supplier asked for an adjudication to take place in Inverness or Aberdeen, or indeed in Wales or Devon, it would not be unreasonably turned down?
Jo Swinson: To provide that reassurance, I will re-emphasise what have I said. Inverness and Aberdeen certainly count as cities, and the Groceries (Supply Chain Practices) Market Investigation Order 2009, on which all these provisions are based, provides that
The supplier is in the driving seat, and I think we would accept that that is absolutely appropriate. I hope that I have given the Committee some reassurance on the matter and that the hon. Gentleman will therefore withdraw the amendment.
Ian Murray: The beauty and simplicity of the amendment was there purely to ensure that issues regarding qualifications, location and experience were taken into account. I am reassured by the explanatory note, which states that the rules of the Chartered Institute of Arbitrators will govern those issues. Such bodies are well respected.
I am also reassured that the supplier will be able to nominate where the arbitration takes place, and that no reasonable request will be turned down. To provide a bit of balance though, the retailer itself is allowed to request some arbitration, and would therefore also be covered by our amendment. I understand, however, why the Minister would not want to put it in the Bill, and I beg to ask leave to withdraw the amendment—even though it is a rather beautiful and simplistic one.
Jo Swinson: I do not intend to detain the Committee for long, but a bit of explanation of the clause will, I think, help. The 2009 order establishes that if there is a dispute between a direct supplier and a retailer on a matter that is contained in the groceries code and the matter is not resolved to the supplier’s satisfaction within 21 days, the supplier may refer it to arbitration during the following four months. A large retailer must submit to the arbitration, and one of the functions of the adjudicator is to arbitrate such disputes. Subsection (1) requires the adjudicator to either arbitrate or appoint another person to do so if the supplier refers a dispute to arbitration in such a matter. We expect that in most cases the adjudicator him or herself will be able to arbitrate, but in specific cases that might not be possible and another arbitrator can be appointed. We have been able to have a bit of a discussion about how such a decision would be made.
The 2009 order has already established a dispute resolution scheme for disputes arising between a retailer and a direct supplier under the groceries code, and the order anticipates that the adjudicator—referred to in that legislation as the ombudsman—will arbitrate such disputes. That will ensure that disputes are arbitrated by an individual with a high level of expertise in the sector, and will allow the adjudicator to gain a greater understanding of how the code is operating, which will help them in carrying out their other functions, such as preparing the annual report or providing advice.
Ian Murray: I do not need to detain the Committee at all. We welcome clause 2, particularly as it also gives the right to the large retailer to refer a dispute. It is a particularly good clause to have in the Bill.
Jo Swinson: As we have just heard, if a supplier refers a dispute to arbitration under the Groceries (Supply Chain Practices) Market Investigation Order 2009, the adjudicator must either arbitrate the dispute or appoint someone else to do so. That means they will gain a greater understanding of how the code is operating.
Clause 3 ensures that the adjudicator will still be able to access that information, even if he or she appoints another person to arbitrate. Subsection (1) enables the adjudicator to obtain information on an arbitration carried out by an alternative arbitrator by establishing a requirement that any person appointed by the adjudicator
Subsection (2) establishes that the requirement to provide information may be enforced by bringing civil proceedings in England, Wales or Northern Ireland to obtain an injunction, or in Scotland to obtain an order for specific performance.
The clause will ensure that the adjudicator is able to access the information that he or she needs to facilitate his or her duties, ensuring that the adjudicator is not disadvantaged by appointing someone else to arbitrate a dispute. The confidentiality of the parties to an arbitration is protected by clause 18(1).
Huw Irranca-Davies: We have no difficulties with this welcome clause. As we may move subsequent amendments, we particularly welcome the provisions because, should we have a live code where the adjudicator is able not only simply to learn from its current remit, as prescribed by the groceries code, but to report back on the role of intermediaries, and should the Minister smile on those amendments, the clause will not only stand the Bill in good stead but stand the amendments in good stead, too.
Ian Murray: The Committee will be aware that we have agreed with the Minister whenever she has moved a stand part debate, but she has yet to agree with us. This is the third time that we will not get in the way of a clause standing part of the Bill.
My hon. Friend the Member for Ogmore is absolutely right: we are enthusiastic about the clause not only because it is in plain English but because when we consider later clauses it will help us to put together a proposal to make this a live code. Clause 3 makes the Bill live in itself, so we will not stand in its way.
‘(1) The Adjudicator may carry out an investigation where there are reasonable grounds to suspect that a large retailer has—
(a) broken the Groceries Code; or
(b) failed to follow a recommendation made under section 7; or
(c) failed to incorporate the Groceries Code into a supply agreement, as required under Article 5 of the Groceries Supply Order.’.
Amendment 20, in clause 6, page 2, line 26, leave out from ‘that’ to end of line 28 and insert ‘any of the grounds for launching an investigation under section 4(1) has in fact occurred, the Adjudicator may take one or more of the following enforcement measures—’.
‘(1) If the Adjudicator chooses to enforce through making recommendations, that means—
(a) in the case that a retailer has been found to have broken the Groceries Code, or has failed to follow a previous recommendation made under this section, recommending what the large retailer should do in order to comply with the Groceries Code; and
(b) in the case that a retailer has been found to have failed to incorporate the Groceries Code into a Supply Agreement, as required under Article 5 of the Groceries Supply Order, recommending what the large retailer should do in order to comply with Article 5 of the Groceries Supply Order.’.
Andrew George: I seek to continue the consensual nature of the debate so far with a well formed amendment that has both beauty and simplicity, which I hope will improve the Bill. Having said that, although this group of amendments would strengthen the Bill, I reassure my hon. Friend the Minister that they are intended to probe and to elicit what I am sure will be a helpful response that clarifies the points highlighted by the amendments. Unless the Minister alarms me, and I am sure she will not, my intention is to probe the issues.
Clause 4 is important, and it went through a number of iterations during the development of the draft Bill. I know the Department considered the clause over some time. Indeed, it is important that the clause refers to “reasonable grounds”, rather than stating that investigations would necessarily only be instigated on the back of complaints brought forward, either anonymously or otherwise, by suppliers. As previous Competition Commission reports have shown, because of what it has described as “a climate of fear” in the supply chain, complaints were just not likely and, indeed, under the previous voluntary code they were simply not brought forward. That was even though it was recognised that many improper and unacceptable practices had been carried out, which was why the Competition Commission held its inquiry—originally instigated in 2006—in the first place. The clause is therefore a watershed in moving the issue on, because the provision is vital in that context, and I warmly congratulate the Government on its introduction.
The purpose of amendment 19 is to ensure that recommendations are followed up, because a potential weakness in the Bill’s drafting is a failure to ensure that that will happen. The Bill currently provides the adjudicator with three forms of enforcement, namely recommendations, the publication of information—naming and shaming, or the reputational damage that the Government have previously said would be sufficient to bring the larger supermarkets to book and to contain the practices that many of us have criticised—and fines. We must congratulate the Minister on her wisdom in tabling amendments about fines.
Recommendations are intended to be the most light-touch of the three forms of enforcement. It is expected that recommendations will set out the action that the adjudicator believes a retailer needs to take to comply with the code. For instance, a recommendation might be to remove from supply agreements provisions for
It could be argued that the original breach—for instance, the inclusion of provisions for shrinkage in a supply agreement—might be the basis for further enforcement measures, but that would be extremely controversial. Due process demands that multiple or successive sanctions are not appropriate for a single transgression. Instead, the Bill should simply be amended so that, if required, the adjudicator could apply a further enforcement measure when a recommendation is ignored.
A failure to follow a recommendation need not always lead to further enforcement. The Bill would not require that, because it states that the adjudicator “may”, not “must”, use enforcement measures. For instance, if a retailer has remedied a breach through an action that was different from the one recommended, the adjudicator would have no interest in pursuing the failure to follow that recommendation, and that could be set out in the adjudicator’s guidance. Nevertheless, the adjudicator must be provided with some way of ensuring that recommendations are enforced where they have been ignored.
Huw Irranca-Davies: I commend the hon. Gentleman for the way in which he articulates his arguments. I have great sympathy with his amendments, albeit he said they were probing. One of those ingenious amendments would provide that after a failure to follow a previous recommendation the adjudicator could recommend what should be done. Where is the final backstop following that subsequent recommendation?
Andrew George: The purpose of the amendments is to highlight the fact that there appears to be no further sanction available to the adjudicator, who can simply monitor and seek to ensure that the recommendation has been enforced. The group is intended to ensure that the adjudicator can move on to further actions. I am looking to the Minister to confirm that there would not be a separate cul de sac of recommendations, out of which the adjudicator could not move. They would have to be able to move on and take further enforcement action such as naming and shaming or, indeed, fines, in the event of a retailer’s persistent failure to follow recommendations.
Amendments 20 and 21 deal with the failure to incorporate the code in contracts or supply agreements, and are fairly straightforward and technical. Article 5 of the Groceries (Supply Chain Practices) Market Investigation Order 2009, the order that established the code of practice, requires:
That requirement, however, is part of the order and not the code, which is set out in a schedule to the order. Failure to comply with the order is enforceable by the Office of Fair Trading rather than the adjudicator, who is concerned solely with compliance with the code. That means that, should retailers fail to provide written supply agreements that include the code—something that has often been reported—the adjudicator will not be able to investigate. At least, some of those who have examined the clause believe that to be the case. Technically it does not constitute a breach of the code.
That is a major oversight. Inclusion of the code in supply agreements is crucial in ensuring that retailers observe its provisions, and is something that the adjudicator should clearly be able to monitor and enforce. The adjudicator will be much better placed than the OFT in that regard, and there are many who have concerns about the matter remaining the sole responsibility of the OFT.
Ian Murray: The hon. Gentleman is making some super points about the way that the adjudicator operates. I wonder if I may ask two questions in one intervention. First, many suppliers have said to us that they have no supplier agreements at all and, indeed, no contracts at all. Perhaps we should be considering that. Secondly, if it were possible fully to enforce the inclusion of the groceries code in a supply agreement, would that allow a supplier to pursue a breach of the code through other legal mechanisms, as well as through the adjudicator?
Andrew George: On the first point, with regard to retailers saying that they do not have any written or any supply agreements, that has always been a weakness in the past of the verbal nature of “contracts” between large retailers and their suppliers. Of course, such contracts suit the larger and more powerful of those engaged in that relationship, because they can always retrospectively change those arrangements or claim that suppliers might have misheard or misunderstood the verbal contract that was previously entered into. Recourse to law is available to either party and would, I understand, remain, but the purpose of the adjudicator is to avoid either side in that agreement seeking recourse to law. The purpose behind what the Competition Commission originally set out when bringing forward the code—and proposing that it should be backed up by an ombudsman, as it described it—was to ensure that there is a rules base and that everyone understands where they stand. Indeed, a written agreement should be attached to each written contract between supplier and retailer.
Mr Spencer: It is important that the market can be flexible. I am sure that the hon. Gentleman understands that trying to tie down verbal agreements takes flexibility out of the market. The market can be warped by weather events, for example, or other market factors and it is vital that retailers and producers have flexibility, allowing them to rapidly fill that gap in a retail market.
Andrew George: I accept that. My experience in the agricultural trades prior to coming to the House demonstrates clearly to me that being flexible and being able to change arrangements at relatively short notice are important. The Minister may wish to comment on that, because the methodology by which written contracts or any amendments to those are established, particularly with the information technology available to us—my Committee colleagues are perhaps engaged in negotiating supply agreements or amendments to those, as well as listening intently to me—does not necessarily mean the use of quill pen and parchment with a wax embossment, delivered by courier. Changes to supply agreements can be recorded through electronic communication. I look to the Minister for reassurance on that point, because the last thing we want is to introduce something that means that those agreements are not flexible and cannot move forward.
It is important that suppliers are reassured and know precisely the nature of the contract between supplier and buyer that they are entering into, rather than face a great deal of uncertainty, as in the past, and a significant prospect that, in days or weeks, they may face retrospective change about which they have no say whatever. It is important that that happens.
Let me talk about the purpose of amendment 40, proposed and encouraged by the many non-governmental organisations that are interested in fair trade in developing countries. The amendment would cover enterprises buying for resale. It is another probing amendment. It would ensure that the adjudicator had power over enterprises that buy for resale on behalf of retailers and could recommend changes not only to the content of the code but its scope. It would reinforce the need for the code to apply to enterprises that are buying for resale products sold in retailers’ outlets covered by the code. For example, the adjudicator needs to be able to investigate the activities, if I may mention the name, of International Produce Ltd, a wholly owned subsidiary of Asda. It needs to be able to investigate where retailers have set up sourcing offices in supplier countries which they are using as a means of having arrangements that are outside the provisions of the code.
The Government need to reiterate that the code and the adjudicator apply to enterprises purchasing products that will then be resold by retailers which need to comply with the code of practice. If retailers outsource the buying of products to different entities, those new entities need to come under the scope of code. Although the amendments cover a range of contexts in which investigations take place and enforcement measures can be carried out, I hope that the Minister appreciates that they are intended to tease out the strength of the Bill as drafted, to maintain its beauty and form and ensure that the issues I have raised are taken on board by the Government. If reasonable points have been advanced, the Minister may wish to respond by introducing Government amendments on Report.
Jo Swinson: I thank my hon. Friend for his constructive approach. He has been working constructively on this issue for many years. I am sure he is frustrated by the length of time he has had to work on this issue, but I hope he feels that his constructive approach with the previous and the current Government has paid off. I thank him for his congratulations on the wisdom of my
I should like to set out an overview of this group of amendments and then turn to the specifics in detail. The generality is about whether the adjudicator’s duties should go beyond enforcing the code as it stands; about incorporating the code into supply agreements; about whether the adjudicator should be able to enforce this obligation and enforce recommendations and sanctions if the recommendation is not followed; and whether they should be able to make recommendations to the Office of Fair Trading about changes in the GSCOP.
The principle that underpins all this, which was established by the previous Government in the Enterprise Act 2002 which set up the OFT and the Competition Commission, is basically that competition remedies are the responsibility of the independent competition authorities. That is an important principle because it ensures that the important economic remedies needed are made and enforced by the bodies that have the necessary independence and expertise to do so fairly and objectively.
Neil Parish: I think my hon. Friend the Member for St Ives was saying that the groceries code adjudicator should be much more proactive. Over the years, the Office of Fair Trading and all sorts of people have looked at the situation in the grocery trade and the general way that the market works. While there needs to be flexibility in the market, there also need to be, if the adjudicator feels that a case should be investigated, powers for it to do so. It would be a great shame if we missed this opportunity to get the issue right. Before we have tried and fiddled while Rome was burning. I think Rome still burns today.
Jo Swinson: My hon. Friend referred to the Competition Commission, which looked at the issue. Indeed, it is because it has looked at the issue that we are here today proposing a Bill to enforce the groceries code.
The specific recommendation by the Competition Commission was that there should be an ombudsman, which we are now calling an adjudicator, to enforce the code, not the order. It is important to draw a distinction. The order is enforced by the Office of Fair Trading, while the Bill is focused on enforcing the code. It is important that the order is also enforced and that the OFT is able to do that. Duplication is not helpful, which is why the groceries code adjudicator will have the ability to make recommendations for changes to the code but not the order. That distinction is worth bearing in mind.
Andrew George: As the Government have decided, rightly, that the adjudicator will sit in the OFT’s office, will the walls between the adjudicator and the OFT regarding compliance with either order or code make it more easy or more difficult to pursue a potential conflict by either body?
The OFT has powers under the Enterprise Act 2002 to enforce the groceries supply order if it is not being properly incorporated into supply agreements. If suppliers believe that retailers are not incorporating that, they should ensure that they tell the OFT. Suppliers have further remedies available to them. Under section 167 of the 2002 Act, if they suffer losses as a result of a failure to incorporate the order, they can bring an action against a retailer. Existing remedies are available.
Regarding amendment 40, similar principles apply. The amendment says that the adjudicator should make recommendations to the OFT for changes to the order as well as to the code. However, the provision as it stands makes sense. As the adjudicator’s remit is specifically about the code, that is what it should consider in its recommendations. The code is what the adjudicator is responsible for enforcing and overseeing. Given that it is the OFT’s responsibility to oversee the order, the ability to make any recommendations to change the order should be reserved for the OFT.
Regarding the issue raised by the hon. Member for Edinburgh South in his intervention about supply agreements, we do not have robust evidence that shows that the code is not being incorporated. Where it is happening, I would urge people to take that to the OFT. Verbal agreements were mentioned. Article 6 of the groceries supply order is clear that supply agreements must be in writing. As it may be helpful to the Committee, I will quote paragraph 8 of article 6—“Duty to provide information to Supplier”—of the code:
“Where any subsequent agreements or arrangements made under or pursuant to a Supply Agreement are agreed orally between the Supplier and a Designated Retailer, the Designated Retailer must confirm the terms of such arrangements in writing with the relevant Supplier within three working days of such arrangements being agreed.”
Therefore, not only does such confirmation need to be in writing, but it needs to be made promptly after a verbal agreement is reached. In answer to the concern of my hon. Friend the Member for St Ives about whether that confirmation needs to be made on parchment with a quill and with an embossed wax stamp, it does not. We live in a digital age and e-mail is a perfectly accepted form of “in writing”, so I hope that provides some reassurance.
The main issue is not about the code not being incorporated into supply agreements; it is about whether the code is being followed and whether retailers are using their buying power to pass excessive risk and unexpected costs on to suppliers. That is what we hope that the adjudicator will be able to address.
Huw Irranca-Davies: As the focus is on the implementation and following of the groceries code, will the Minister explain why amendment 19, tabled by the hon. Member for St Ives, is an obstacle to the good functioning of the Bill and why she does not agree with it? I do not see it as an impediment. It is an advantage
Jo Swinson: If they have not incorporated the order, that is a matter for the OFT. The issue is about not having duplication, so that we can focus the adjudicator on the things that are specific to the role. Duplication would ultimately take the adjudicator’s time away from focusing on the things that we want them to.
I turn to the other elements of amendment 19, especially around sanctions to ensure enforcement and whether recommendations are followed. Recommendations are deliberately intended to be non-binding. They are the lightest of the enforcement mechanisms available to the adjudicator. That is deliberate. If there is a severe breach of the code, we expect the adjudicator to reach for the further available sanctions, such as naming and shaming or financial penalties, in addition to making recommendations. The problem with sanctions for when a retailer has not followed a recommendation is that that would effectively make the recommendations binding and therefore remove them as a light-touch measure. That would be a real shame and not necessarily the right way forward.
When an adjudicator makes a recommendation that a retailer is no longer breaching the code, they may recommend a particular activity that would help to stop another breach of the code. I will give an example. There could be a scenario where an individual buyer at a retailer mistakenly issues an incorrect contract that causes problems for a supplier and technically breaches the code, but the adjudicator finds that it was a genuine mistake. The adjudicator could make a recommendation to ensure that the retailer does not accidentally breach the code again, but all of Bob’s—the individual buyer’s—contracts get signed off by the code compliance officer for the next six months. The retailer could take the view that a better way of ensuring that it does not happen again is to give Bob some more training, which then leads to the code not being breached again. In that situation, the recommendation will not have been followed, but I do not think that the Committee would deem it appropriate for enforcement action to be taken in that scenario. We want to ensure that the light-touch recommendations can be made, but if a retailer, which knows its business better, can find a better way of ensuring that it complies with the code, that can be done.
George Eustice (Camborne and Redruth) (Con): My hon. Friend the Member for St Ives makes a good point. If one supermarket becomes a repeat offender and effectively ignores the code, how would that be handled? There is a need for some kind of escalating level of sanction to correct that. I understand the problem that the Minister highlighted about putting such a measure in this clause, but is it something that she could envisage being included in the guidance published by the adjudicator?