Groceries Code Adjudicator Bill [Lords]
The Committee consisted of the following Members:
Neil Caulfield, Kate Emms, Committee Clerks
† attended the Committee
‘or the Deputy Adjudicator or any person acting on the Adjudicator’s behalf’.
‘or the Deputy Adjudicator or any person acting on the Adjudicator’s behalf’.
‘or the Deputy Adjudicator or any person acting on the Adjudicator’s behalf’.
Ian Murray: It is super to see you back in the Chair, Mr Williams, for what we hope will be our last sitting on the Bill. It feels a little like the last day at primary school. Everyone will fondly recall taking pets and toys into school on the last day, so you will be pleased to hear that I do not have with me a Twister game for the Committee to play or, indeed, Hoagie the hamster, who used to come into school with me. If in every contribution this morning we could hear about what pet the hon. Member took into primary school, that might lighten the mood of the Committee, but let me now return to the groceries code adjudicator, which is the issue at hand.
Our amendments 26, 28 and 30 would merely extend the obligation of confidentiality beyond the adjudicator to their deputy and staff. Currently, clause 18 limits the obligation of confidentiality to the adjudicator. We believe that this is too narrow. Persons connected to the adjudicator should also be covered by this statutory confidentiality provision, and that includes the deputy adjudicator and the adjudicator’s staff.
One of the fundamental principles of the adjudicator will be its ability to investigate complaints and maintain the confidentiality of the identity of the complainants. One of the principles of the whole Bill is to ensure that people feel confident that they can take cases to the adjudicator, whether that be directly, from supplier to adjudicator, or through a trade body or third party.
The Competition Commission found that many suppliers were afraid to make complaints, as they were concerned that that would lead to retaliatory treatment by the retailer—for example, the retailer might stop trading with them completely—so protecting the identity of suppliers will help them to feel much safer in raising disputes with retailers that have breached the code. Therefore it seems eminently sensible that the obligation of confidentiality should also cover the other individuals
You will be pleased to hear, Mr Williams, that the Minister has been in a very generous mood while you have not been in the Chair. She has accepted absolutely none of our amendments so far, but she has taken them in the spirit in which they have been delivered. I am sure that she would agree that we would not want to create a situation in which confidentiality was not applicable to anyone on the adjudicator’s staff other than the adjudicator themselves. I have concerns that that could raise certain legal issues in the process of conducting investigations or, indeed, just gathering evidence as the adjudicator’s role develops in the months and years to come. Again, if the Minister is unwilling to accept any of our amendments, which I suspect will be the case, we may return to the issue on Report, but I look forward to hearing what she has to say on confidentiality.
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson): It is a real delight to see you back in the Chair, Mr Williams, and to be back in Committee. It is also wonderful that we have been joined by the hon. Member for Ogmore, who sadly was nothing more than a presence on the green annunciator screen on Thursday afternoon when he was dealing with his other duties in the Chamber. Members of the Committee will be glad to know that my cold is getting better. I am potentially, therefore, feeling even more generous towards the Committee, although the odd cough and sneeze from others in the Committee might suggest that my Christmas present of a cold has in fact been transmitted. I am feeling generous, yes, but perhaps not quite generous enough to accept the amendment this morning. None the less, I hope to be able to provide the hon. Member for Edinburgh South with some reassurance, because he is right to say that confidentiality is very important to the smooth functioning of the adjudicator and, most importantly, to the confidence that suppliers will have that they are free to make complaints.
We do ensure in the Bill, through clause 18, that there is a strict duty of confidentiality on the adjudicator. The amendments tabled by the hon. Gentleman would explicitly extend that to the deputy adjudicator or anyone else acting on the adjudicator’s behalf. I would like to give the reassurance that anyone acting on the adjudicator’s behalf—or, indeed, of the deputy adjudicator—would already be covered and bound by the duty of confidentiality as set out in clause 18. Normal agency principles will apply. If someone who is acting on behalf of the adjudicator breaches clause 18, the breach will have been made by the adjudicator themselves. The deputy and any others carrying out the adjudicator’s functions will not have any functions independent of the adjudicator, so they will be subject to exactly the same restrictions. We agree that confidentiality is important, and we believe that clause 18 will provide that.
I am grateful to the hon. Gentleman for tabling the amendments, because they have given us the opportunity to clarify that point, which I think is helpful to all involved. As he rightly says, we want to ensure that the
Ian Murray: I have been slightly unkind to the Minister, because I had neglected to mention that we defeated the Government last week; in fact, we encouraged the Government to vote against one of their proposals when it was discussed. My hon. Friend the Member for Ogmore may be surprised to hear this, but on clause 9, we defeated the Government and deleted schedule 3 from the Bill, because the schedule was not competent. They voted against it none the less. We have won one vote in this Committee.
I am reassured by the Minister. The amendments are probing in nature, simply to ensure that the confidentiality clause in clause 18 covers everything—the adjudicator in their office and everyone working for them. Given that reassurance and the confidential clause in clause 18, I beg to ask leave to withdraw the amendment.
‘should reasonably believe could cause the identity of the complainant to be revealed’.
‘( ) Any person who, in contravention of this section knowingly discloses any information obtained when employed by, or acting on behalf of, the Adjudicator is guilty of an offence and liable on summary conviction to a fine.’.
Ian Murray: The amendments are another group of probing amendments. Amendments 27 and 29 may seem to be in the mode of the hon. Member for St Ives—slightly pedantic—in proposing to change “may” to “must”.
Ian Murray: I think the hon. Gentleman tried to change “may” to “must” or “must” to “may” last Thursday. Here, we are trying to instil confidence in clause 18 and make the obligation of confidentiality mandatory and not, as the clause currently reads, potentially discretionary. I am interested in what the Minister has to say.
The obligation of confidentiality under clause 18 as it currently stands can be argued to be discretionary rather than mandatory. Our amendments would clarify that the obligation is mandatory and that it must be enforceable. The provision of a statutory offence would ensure that the obligation is respected.
When the Bill was debated in Committee in the other place, the Minister responsible, Baroness Wilcox, resisted a similar group of amendments, taking the view that “must not” and “may not” “have the same force”. She argued that there was no reason why the amendments should be accepted and the clause made clearer.
The Bill itself uses “must” to signify duty, for example in clause 14(5), under which the adjudicator “must” send a copy of the annual report to the Secretary of State, and the Secretary of State “must” lay a copy of the report before Parliament. That is contrasted with the discretion given to the Secretary of State to make an order regarding information to be considered when deciding to investigate, under clause 15(10), or to transfer functions, under clause 16(1).
We were also disappointed that Baroness Wilcox resisted extending the obligation of confidentiality to the deputy adjudicator. She said that she was “confident” that the obligations so exist, and we have heard the Minister’s response and reassurance on that issue already.
Amendment 31 would provide a criminal sanction for a breach of obligation of confidentiality. Does the Minister agree with her colleagues in the other place that “must not” and “may not” have the same force? If not, I hope that she will be willing to accept our amendment.
With regard to amendment 31, which would add a criminal sanction, although confidentiality is clearly written into the Bill in clause 18, there are no sanctions to prohibit breaking that confidentiality agreement. Therefore, with the clause having no criminal or civil sanction, there is no carrot and stick approach in terms of keeping that confidentiality. Of course, adhering to confidentiality would be in the adjudicator’s interests as they will want to be respected and have the confidence of both the suppliers and the large retailers, but without that potential for a sanction, any breach of the confidentiality obligation has less impact. I hope that the Minister will look at that point and give some reassurance that confidentiality is enshrined within clause 18, with sanctions for if that confidentiality is breached.
Jo Swinson: I thank the hon. Gentleman for tabling these amendments. I suspect that they were tabled in a probing capacity but we may yet find that he intends to press them. On Thursday afternoon we had a good discussion about the differences between “may” and “must”, with “may” being permissive. I think that the main point he seeks to tease out is on how firm the confidentiality protections are in clause 18. I hope to reassure him and the Committee on that point.
As it stands, the drafting is clear: the adjudicator should not disclose the identity, or any other details, of complainants except in three very narrow cases. Those are: with the consent of the complainant, which is uncontroversial, or if obliged to by either EU law or the Courts. Clearly, we need to ensure that legislation passed in this place is compliant with existing law.
The hon. Gentleman suggests that “must” would make subsection (1) prohibitive, whereas “may” would not, but we believe that the correct legal definition is in the Bill as it stands. In this context, the word “may” is clearly intended to appear prohibitive. There may be other contexts in which “may” and “must” have different meanings, as we discussed last Thursday afternoon, and “must not” would not be particularly wrong, but it would make less sense, so “may not” is better in this circumstance. If “may not” was permissive here, that would mean that the adjudicator would be allowed not to make unauthorised disclosures, which does not make
In addition to the context in which the words exist, that makes it clear that the wording is prohibitive; it would not be allowed to happen. The intent of the clause is clear, and it would be interpreted in that way by the adjudicator and any other reasonable parties. It has been helpful to clarify that, and put on the record that the clause is clear on that front for anyone who wishes to understand the meaning of the wording.
I understand the sentiment of amendment 31, which would create a new offence with the potential of a fine to be levied if someone were convicted. However, creating a new offence is a serious undertaking and, in this case, I do not think that it is necessary. The adjudicator will already be a public authority and, therefore, expected to take their statutory duties seriously. If the Committee seeks additional reassurance, I refer it to schedule 1(6)(e), which says,
Given the importance of confidentiality, which we outlined already, it is fair to say that serious breaches of confidentiality—either by the adjudicator or by people working for him or her—would have the potential to invoke that clause. Therefore the threat of dismissal is—if you like—a stick, a deterrent, although I am not convinced that a stick is necessary.
The hon. Gentleman talked about the lack of sanctions, but he also said that it is in the adjudicator’s interest to make sure that the provision works well. We expect to have somebody in post who will be able to command respect across the industry and who will take their job very seriously. If things went horribly wrong, they would have the protection in schedule 1, but we do not expect such a situation to arise in the normal course of events.
On amendment 59, the existing wording in the Bill is already adequate. There is already a demanding duty for the adjudicator. Of course, as a public office holder, they are subject to the normal constraints of public law. It is clear that the adjudicator must seriously consider the risk of identifying a complainant when disclosing information. There is no possibility that they can simply ignore or close their mind to the issue to avoid triggering the prohibition. The way in which they undertake their responsibilities under clause 18 will be important, and the protections and the meaning are clear in the Bill as it stands. However, I welcome the opportunity to provide further clarification for the Committee on that point.
Ian Murray: I appreciate what the Minister says. I do not want to get into the semantics of “may” and “must”, Mr Williams, but at the start of the formal sitting of the Committee, you told hon. Members that they “may” take off their jackets. If you had said that they “must” take off their jackets, it would have had a slightly different meaning, because we would have had to take off our jackets. In that context, “may” and “must” have different meanings. Clause 18(1) states:
Jo Swinson: I hear what the hon. Gentleman says. Given that it says he “may not”, it is therefore clear that if he were to do so, he would not be able to say, “I may do it”, because it clearly states that he may not. The hon. Gentleman puts his finger right on the point when he says this is all about the context.
Ian Murray: I am grateful for that intervention. If the Minister had said, “May the shadow Minister give way?” or “Must the shadow Minister give way?”, it would be completely different in that context as well. But I will not get into the semantics—
Jo Swinson: In that context, if the Chair had, for example, said, “The shadow Minister may not give way”, this intervention would not have been able to take place, so that would have been an example of the words “may not” being used in a prohibitive context.
Ian Murray: Yes, it may. If Mr Williams had said, “You must not give way”, I would not have. It is a semantic point, but it is important to examine the language and to get confidence in the critical parts of the Bill. There is nothing more critical in the Bill than the confidentiality clause. Suppliers need to be able to have confidence in the code. We are talking about breaches of the code, not speculative or vexatious claims. If a supplier, a third party or a trade body has evidence that there has been a significant breach of the code, it would be wrong if the person pursuing that complaint did not feel that their confidentiality would be maintained. I will not press the Committee to a Division on “may” or “must”. We may or we may not, or we must or we must not delay the Committee any longer than is required.
The Minister also mentioned amendment 31 and having an offence in the Bill. I appreciate that the Secretary of State can dismiss the adjudicator, but by the time the Secretary of State has got to a point where he or she feels that the adjudicator is unfit for purpose, many suppliers or large retailers will have lost confidence in the adjudicator and may have had their businesses and contracts severely disrupted, if not ruined by the adjudicator making claims that may or may not, or must or must not, have been disclosed. I beg to ask leave to withdraw the amendment, but I want us to consider the “mays”, “musts” and “may nots” as we progress to see whether further probing is needed.
‘(3A) Notwithstanding subsection (3), the Adjudicator shall, before permitting any disclosure of the identity of any complainant or provider of information to the Adjudicator, take all practical steps to protect the identity of that person by redacting, anonymising and where appropriate otherwise limiting the disclosure of identifying information to any third party and further by obtaining binding undertakings of non-disclosure from any person to whom identifying information is disclosed.’.
Andrew George: The amendments show the significance and importance of “absolutely”. Perhaps the word “absolute” needs to be introduced at this stage. Suppliers and those who may be the source of information to the adjudicator need to be absolutely reassured that their identity will be protected.
The important and significant difference between where we were three years ago and where we are now is that a clear climate of fear existed throughout the supply chain under the previous voluntary code, which was pretty much unused. It was certainly ineffective and the competition authorities were clear in their reports and assessments that the code was toothless and worthless.
One of the primary advances, on which I must congratulate the Government, is the introduction of a strong element of reassurance that confidentiality will be protected, but it is important to get the wording in clause 18 absolutely right to ensure that the message goes out to the industry, throughout the supply chain. A party may have evidence and decide to pursue the matter. When they make the adjudicator aware of that evidence, they must be reassured that there is not something that will put them at risk if the retailer decides to pursue the matter to the nth degree and to take it to court to appeal. The supplier of that information and the supplier to the retailer must be reassured that something later in the process will not put them at risk. That is why the hon. Member for Edinburgh South, who was not being pedantic—I do not think that any of the amendments so far have been pedantic—was absolutely right to highlight the importance of finding additional belts and braces and of getting reassurances that those who supply information can and will be protected.
I would have thought that my dear Conservative friends—I know a large number of them become exercised whenever the UK feels under the cosh due to an obligation to the EU—would be delighted to see paragraph (b) deleted, as amendment 17 would do. I am sure that I have their support on that amendment. The amendment would also delete paragraph (c):
Huw Irranca-Davies: May I welcome both the spirit and the intention behind the amendments? Will the hon. Gentleman comment on whether he thinks they are particularly important not only to protect those in the UK supply chain but those overseas as well? These amendments are very much in the spirit of the requests
Andrew George: The hon. Gentleman is absolutely right. International law and obligations on overseas suppliers or sources of information adds a further dimension of potential complexity and difficulty. One has to question the extent to which an Act will be able to place an obligation on overseas suppliers. I would be interested to know what the Minister has to say about that.
Andrew George: Amendments 17 and 18 seek to ensure that the substance of the evidence is supplied without disclosing or putting in jeopardy the complainant, or the source of the information. Amendment 18 addresses the need to redact and protect. It is not a question of seeking to frustrate the will of courts through an Act of Parliament—I am not sure that could be achieved anyway. With both amendments, we aim to give absolute reassurance that, if information is supplied to a court, it will be done so in a way that protects the identities of those who supply the information and does not place them at risk of de-listing or any other retaliatory action.
If a retailer disputes the adjudicator’s decision, it may appeal to the adjudicator. At that point the retailer will find itself in court, and it is important that the identity of complainants or suppliers is kept confidential. I think the Minister agrees with that. All sources of those complaints and the information underlying them should also be protected. We seek reassurance that we will send a strong message to suppliers of information to the adjudicator that, ultimately, they will be protected. Suppliers need to hear that, where complaints are not malicious or false, the identity of complainants will be kept confidential. I look forward to the Minister’s response.
Jo Swinson: Given the importance of the clause, I welcome the opportunity to probe it and to get clarity for the Committee about its strong protections of confidentiality. My hon. Friend was a key campaigner to ensure that we could have third-party complaints. It is important that there is confidentiality in terms of the climate of fear. It is therefore important to ensure that the Bill works as intended. He is right to raise issues to ensure that it does what it says it will do.
However, I am not convinced that my hon. Friend’s amendments are the right way to do that. Amendment 18 could have some unintended consequences that would be unhelpful to suppliers, and amendment 17 would create issues about whether the measures complied with existing law, and whether there was a conflict between our international and domestic legal obligations.
In particular, striking out the references to an EU or court obligation to disclose, as amendment 17 sets out, just would not be workable. An EU obligation to disclose information is just that: it is an obligation under international law, and the adjudicator must comply with that. It is fair to say that we think it very unlikely
Similarly, we should not exclude the possibility that a court could ultimately order the disclosure of an identity if it is absolutely necessary to deal with court proceedings fairly. However, I think that my hon. Friend was keen to get clarity, and I hope that I will be able to reassure him. He talked about a message going out about confidentiality being really important—clause 18 gives a very strong signal about Government and Parliament’s intention for the adjudicator, the adjudicator’s confidentiality responsibilities, and the importance of protecting them for complainants.
The courts, of course, would have to give significant weight to Parliament’s intention when looking at this issue. They are used to dealing with sensitive information and issues. My hon. Friend mentioned looking at different ways to provide information if disclosure were necessary. I would like to reassure the Committee that there is already a range of practical measures that can help to keep the identity of complainants secure, even if information has to be provided to a court. An example would be redaction, a word that perhaps was not in common parlance until 2009, but now every MP knows exactly what it means. Other examples include substituting anonymous references, ordering disclosure to lawyers only, and even hearing proceedings in private, so there is a range of ways in which a court could get information if it were required, while protecting confidentiality.
However, it is important to stress that that is at the discretion of the courts. There is no need to specify it in legislation, but we are making very clear the importance of confidentiality in the Bill, and, of course, courts do take a steer from Parliament as to the intention of the law. Going further, as my hon. Friend suggests, would not be appropriate. Every incident will be quite different, and the facts of the case will be different. That is why we have courts that can use their discretion and look at the specific circumstances.
I am sure that that is well intentioned, but, as currently drafted, the Bill makes it clear that there are only three very narrow and specific exceptions to the general provisions for confidentiality: the two legal ones I have just discussed, and the very uncontroversial one where the complainant has consented. By specifying “all practical steps”, the amendment implies that there may be other reasons outside those exceptions for the adjudicator to divulge identity details. I am sure that we would not want to put that into law, because it would create less clarity for suppliers. It would be better not to raise any doubts about such a crucial tenet of the adjudicator’s effectiveness, particularly on the ability to keep complainants’ identities secret.
I hope that I have reassured my hon. Friend about the protection of confidentiality in the Bill as it is currently drafted. It is very strong, very clear, and it is absolutely
Andrew George: I am very grateful to my hon. Friend for her reassurance. We are trying our best to anticipate a set of circumstances. We are trying to prevent disclosure that would create or re-create a climate of fear, because we believe that that would entirely disable the effect of both the code and the adjudicator.
The amendments are intended to probe the issue, and it is enormously helpful to have my hon. Friend’s comments on record. I am grateful to her for pointing out the slight technical deficiencies in the amendments, because that will allow me to review them, taking into account her comments, and return to the matter on Report, if I decide to do so. That is something that we will have to reflect on. If it is a question of compliance with the law, and obligations under the law, we will have to reflect on that as well. I am grateful to my hon. Friend, because the record will now help to send the message that I believe the Bill should send, and I hope that that will give suppliers the reassurance that they deserve. On that basis—perhaps I should have said at the outset that I did not intend to press the amendment to a vote—I beg to ask leave to withdraw the amendment.
‘(5A) Notwithstanding section 25, the Adjudicator must publish the criteria as set out in subsection (5) within three months of this Act coming into force’.
One or two Opposition Members are starting to croak and sneeze a little bit, but we will not apportion blame for where that might have come from in the first instance. Hansard will confirm the truth of it.
Amendment 60 is relatively straightforward. We seek the Minister’s assurance that consideration is also being given to large retailers. We have been at pains to emphasise time and again that, although the Bill is intended to protect suppliers against the 10 large retailers, it should also protect the large retailers and we need to look at ways of making it more responsive to their needs. We had a healthy debate last week about the time scale for introducing guidance on fines, and whether three or six months was more appropriate.
Neil Parish (Tiverton and Honiton) (Con): It is Christmas and the shadow Minister is being kind to large retailers, but does he not agree with me that they are big enough and tough enough to look after themselves? I am not entirely convinced that they need even more help. I would have thought that the whole idea of the Bill was to try to balance the process more in favour of those who supply large retailers.
Ian Murray: That is a fair point, but it is incumbent on the Committee to ensure that the Bill is the best it can be. Opposition Members have said time and again that a good Bill has been turned into a great Bill, and now we have the opportunity to turn it into a fantastic Bill. We need to get the drafting on the levy right to ensure that large retailers, who will be paying the levy, are dealt with fairly, and I think that clause 19 does that. Our amendment would hardly hand the baton to the large retailers to hit the suppliers around the head with; it merely provides that any specifications to do with the levy are introduced in guidance within three months. I am not sure whether that will appease the hon. Gentleman, but we are not swinging the pendulum back to the large retailers.
David Simpson (Upper Bann) (DUP): The view of the Northern Ireland Retail Consortium is that before any levy is imposed, some form of consultation should take place. What is the shadow Minister’s view on that?
Ian Murray: That is a good point—perhaps some form of consultation should take place—but our amendment would set a time scale, too, so that clarity is achieved as quickly as possible, the guidance can be produced within three months, the levies can be paid as quickly as possible after that, and the adjudicator can get on with investigating cases brought to him.
In itself, clause 19 provides some clarity around the levy. Many retailers raised concerns with us that, in the first draft of the Bill, the levy was not graduated according the size of the retailer, so I am delighted to see that subsection (5) now allows that. Compare Waitrose with Tesco, or Iceland with Asda: they are completely different businesses in terms of turnover and number of stores, so it is important that the levy and the criteria are put together on that basis. We are saying simply that the criteria should be brought forward quickly. Putting on the face of the Bill a time scale of three months from when the Act comes into force to get the guidance put together would give clarity to retailers. That answers the point made by the hon. Member for Upper Bann, as consultation with retailers could take place within that three-month period. We are talking about only 10 large retailers so it should not take too much time.
Andrew George: I agree with the hon. Gentleman that this is an important issue to settle, and that we should bring in the guidance as quickly as possible. On the relationship between clause 19 and clause 10, on recovery of costs, does he have a view on what the balance should be when drawing up the criteria? Clearly, one method by which the adjudicator can apportion costs according to the amount of time that he or she spends dealing with a particular retailer is through the proper application of clause 10, as well as getting the criteria right under clause 19.
Ian Murray: The hon. Gentleman knows the Bill intimately and makes a valuable point. The retailers have made clear both their discomfort at paying the levy if they are not the polluter, and their wish that the polluter should pay. That is a reasonable request, and that principle encourages the retailers to do the right thing, so that they are not punished. It is important to reward retailers who do the right thing.
In terms of the relationship with clause 10, if the adjudicator has in the back of his or her mind the idea that awarding costs will redress the balance a little between the levy and the costs paid by the polluter, it is important to take that forward. It would enable good retailers, who are not subject to investigations by the adjudicator, to pay a levy that would stay stable or even be reduced should the amount of costs awarded in some circumstances increase, so the polluter would pay the largest proportion. That would be the right and fair thing to do. What we do not want is retailers who are doing the right thing feeling that they are being punished, as that may encourage them not to do the right thing. The hon. Member for Sherwood has told us before about how, in some instances, gains from breaking the code may far outweigh any costs or levies paid. The balance between costs and levy might address that issue as well.
I thank the hon. Gentleman for the amendment and the opportunity it gives to discuss the levy. It is important to note that the insertion of subsection (5) in the clause was assisted by the scrutiny in the other place. The levy to fund the adjudicator’s work may well be varied according to a range of factors that the adjudicator can take into account. He gave the example of Tesco and Waitrose being vastly different sizes, but I would argue that that is not necessarily the best criterion to distinguish by, because there is not necessarily a correlation between the size of a retailer and the number of investigations it will attract. Indeed, even being subject to an investigation is not necessarily the best criterion, because the investigation could find that the retailer had not breached the code.
The important thing, however, is that the adjudicator will be able to look at this in the round and see where work has been apportioned between arbitrations and investigations, perhaps giving particular weight to investigations. Where the adjudicator has found a breach of the code it would be reasonable, on the polluter-pays principle, that those who have rightly stuck by their legal obligations would see some benefit, while those who require the adjudicator to do more work to ensure their compliance with the code would bear more of the cost and the levy.
That is quite broad wording—in fact, it includes the word “broadly”. It seems that may be open to challenge by a retailer who felt that that broad description of the adjudicator’s criteria was treating it unfairly. Has she been advised that this is strongly enough worded, or is there something that will follow on from this?
Because the adjudicator will have to report on what the levy is, that will be open and transparent, and the adjudicator is ultimately accountable to the Secretary of State, so were the adjudicator to recommend an unequal distribution of the levy, that would have to be based on that sort of assessment of their time, not just on turnover and general factors, unless there was found to be a correlation.
There is a whole paragraph in the explanatory notes, but the main underlying point is to give the adjudicator flexibility. The adjudicator will be there at the coal face, dealing with this day in, day out, and will therefore be the one who is best able to understand which retailers are causing the most work. It is helpful that the adjudicator will be able to apportion the levy accordingly. It is important to note the other tools available in clause 10, so that the adjudicator will also be able to award the costs of an investigation against a retailer who is in breach. There is also this provision in clause 19(5). I hope that helps my hon. Friend the Member for St Ives.
The amendment acknowledges the consensus that clause 19(5) is a good thing, but suggests the three-month time scale. Although we want the differential levy to be introduced as soon as possible, it is expected—it is already set out—that in the initial year there will be a flat rate levy shared equally between all retailers. While it will be helpful to have a differential levy, I cannot see how, in year one, the case can fairly be made that this or that retailer will cause more work for the adjudicator. Although I absolutely support the differential levy, in year one the only fair way is a flat rate levy. Only when we have experience, in the second year or later, will we be able to move to a differential levy. The amendment does not help us, because it suggests that we move to that point within three months, when there will not be the experience needed to provide enough evidence and information to work out what the best differential levy should be.
The hon. Member for Upper Bann made a point about a consultation. This will happen regularly, so we do not need to bog the adjudicator down in unnecessary bureaucracy. However, the levies need the consent of the Secretary of State, so there is that accountability, and reasons must be given each time for how the levy has been allocated. Those two things taken together provide accountability. It is set out clearly, so there is also transparency. There is therefore some protection. No doubt hon. Members will be keen to see what is proposed. They are assiduous in asking questions when they think things are happening that are not quite right.
I hope I have reassured the Committee that the amendment is not necessary but that that the differential levy is a good improvement to the Bill. I am still hopeful that the Opposition will be able to declare that it is a
Ian Murray: I appreciate what the Minister said, particularly about the differential levy. It was an important aspect of the success of the Bill’s passage through the Lords that they were able to insert that into the levy funding provision. It is important that the polluter pays. I understand why the Minister says there are no time scales; there has to be a period of bedding-in before the adjudicator can identify where the investigations come from and who may be the cause of them. Interestingly, we are not sure that the adjudicator is able to impose levies under clause 9(1), which states that the adjudicator “may” not “must” do so. The adjudicator is not compelled to ask the retailers for a levy, so perhaps we should have tabled an amendment to change “may” to “must” there.
Jo Swinson: The hon. Gentleman mentions the use of the word “may” and alludes to an amendment that he might table on Report. I suggest that it is a permission rather than a requirement to have differentiated levies. In the scenario where there were, for example, no investigations required, there were few arbitrations or nothing was found to have been done wrong by the retailers, the adjudicator might well take the discretionary view that splitting it equally was appropriate. The permissive “may” is quite appropriate in this circumstance.
Ian Murray: I fear your wrath, Mr Williams, for going slightly off piste, but I should like to respond briefly to that intervention. The adjudicator may require the retailers to pay a levy, but must obtain the Secretary of State’s consent. Later, the clause states that if there is a surplus
I think that means that the adjudicator may repay it—perhaps he will not—but certainly consent must be given by the Secretary of State. There are a few “mays” and “musts” that might need to be clarified.
Amendment 60 was tabled as a probing amendment and to say that we want the process to be as swift as possible. We want the Bill to become an Act as quickly as possible. When it is up and running we want the investigations to take place as quickly as possible, particularly in the light of responses that the hon. Member for St Ives had on earlier clauses saying that investigations will not be taken until such time as this is ready to go and the guidelines are in place. That time lag is a concern for us all, and I hope that the Minister will reflect on that on Report. The aim must be to ensure that the levies are paid, that the adjudicator is up and running and that investigations can begin. We want to be able to seek justice for suppliers who may have been wronged by a large retailer.
One of the lovely things about this place that one can move technical amendments relating to little-known procedures. Amendment 13 is routine and is necessary to remove the subsection that prevents the other place from having any control over money matters. I am informed that this happens with every Bill that starts in the Lords, although I had not noticed it before, and it is part of the ancient historical privilege of the Commons as the sole body responsible for money matters. The amendment is not controversial, so I commend it to the Committee.
Ian Murray: I could stand and say that the removal of this provision is a disgraceful abdication of the Minister’s responsibility to go against the other place, but given that the amendment removes a technical provision inserted into Bills in the other place—I had not noticed such measures before, either—I do not think that we will press it to a vote.
‘(1) In advance of each annual report prepared under section 14, the Adjudicator shall consider any information received in the preceding year concerning supply relations between suppliers and third parties (intermediaries) who on onward suppliers to large retailers;
(2) If under subsection (1), the Adjudicator has information of incidents that, were they to have occurred between a supplier and a large retailer, would have constituted a breach of the Groceries Code, the Adjudicator shall consider and make recommendations on whether the pattern of such incidents merits an extension of the Groceries Code to such intermediaries and therefore a redefinition of “direct supplier” in the Groceries Code;
(3) In advance of every third annual report prepared under section 14, the Adjudicator shall consider any information received in the preceding three-year period concerning supply relations between suppliers and third party onward suppliers not covered by subsection (2);
(4) If under subsection (3) the Adjudicator has information of incidents that, were they to have occurred between a supplier and a large retailer, would have constituted a breach of the Groceries
We are now rattling through the Bill, and the Whips will be pleased to hear that we will not spend too much longer on it. The new clause would provide the underpinning for the phrase that we have been using: turning this into a fantastic Bill.
There is a nagging doubt within our consideration over ensuring that the adjudicator can referee abuses of the code as the Bill will not allow the adjudicator to look at issues that are not covered by the groceries code. That is why we have tabled new clause 2, which would require the adjudicator to give due consideration—that is the key phraseology—to any information received regarding supply relations between the supplier and third parties or intermediaries. Should such information suggest that, had those relationships occurred under the code, the code would have been breached, the adjudicator would be allowed to make recommendations on whether the code should be extended to consider those third parties and intermediaries.
The new clause would not make the Bill any wider, but merely suggests that the adjudicator, in the course of their investigations, should on occasion look at the whole supply chain. Currently, they can referee only within the rules of the code. Therefore, a third party, trade association or direct supplier might be found to have been wronged by a large retailer, but have no redress either under the code or through the adjudicator. Central to the new clause is the fact that the code is limited for that purpose. An issue has been raised by a number of voices across various sectors that much of the bad practice occurs at the level of the intermediaries below the first-level supplier—the regional wholesalers and processors that are competing to offer the best price to retailers.
An example that has been brought to our attention highlights some of the issues that we are trying to deal with through the new clause. Let us look at supermarket A—we will not name any supermarkets—which buys from a food processor a ready meal product that contains 25% carrots; let us use the carrot example, as we have used that before. The code governs the relationship between the large retailer and the food processor that produces the ready meal. If the supermarket wants to change any of the terms of the contractual relationship with the ready meal supplier, it must do so within the context of the code. A proper notice period will have to be given to the food processor to say, “Reduce the percentage of carrots in that ready meal to 15% from 25%.” There will be no breach of the code. The supplier may not like it, but the process will have been done completely transparently, but there is nothing then to prevent that food processor from doing to the carrot supplier or carrot farmer exactly what the code is protecting it from with respect to the retailer. In a time shorter than the three-month period that the code states that information and notice have to be given to the first-level supplier, the processor can say to the carrot supplier, “We no longer need you because we no longer need that number of carrots.”
In that albeit simplistic example, there is a real issue regarding the grass roots of the supply chain. The hon. Member for Sherwood has already raised concerns in Committee about the lower level supply chain. There is a view among the public, and certainly in the House, that the groceries code covers the whole supply chain, but it does not; it covers only the first levels of the relationship between a large supermarket or retailer and its supply chains.
Equally—we discussed this briefly last week—there is a binary view of the marketplace regarding the adjudicator. Essentially, we are protecting relationships between large suppliers and large retailers. Those large suppliers might have turnovers well in excess of many multiples of those of the retailers. We are talking about branded goods manufacturers such as Unilever, Kraft, Nestle and Coca-Cola, whose turnovers are incredibly large; they are worldwide, multinational brands. There seems to be a little contradiction between the Bill protecting the relationship between Tesco and Coca-Cola, but not that between supermarket A and the carrot farmer.
The adjudicator will be required to recommend changes to the code to the Office of Fair Trading, yet the British Retail Consortium claims that in the case of annual reports its members have submitted under the Groceries (Supply Chain Practices) Market Investigation Order 2009 on the implementation of the code, the OFT has taken no action to offer feedback, or even published reports. That came directly from the BRC to us. That kind of two-way dialogue has to happen. The thrust behind one of our earlier amendments was to allow that dialogue in terms of being able to publish reports back. If those reports are not going back and forward from the adjudicator to the OFT, recommending changes to the code or any further implementation, we are not going to have a transparent situation whereby those changes can be made within the code.
This matter goes right down to the grass roots to the farmers and the growers who are not covered by the code. They are often the ultimate victims of some of the supply-chain issues raised in the code.
Andrew George: The hon. Gentleman is making a valid point about the need for an open-minded review of the effectiveness of the code and the role of the adjudicator. In previous debates on the subject, I urged that the Bill be drafted in a manner that does not imply that it is all a one-way street. Perhaps some decades ahead, farmers might have retailers under the cosh—an entirely different relationship from the one we currently experience. We have to keep our minds open to that possibility, and a lot of us might dream of such days to come, but what needs to underlie this matter is ensuring that fair dealing is observed. To that extent, will hon. Gentleman reflect on whether the new clause would enable such an adjustment to the legislation to be made?
Ian Murray: I thank the hon. Gentleman for that crucial intervention. We have attempted to draft the new clause so as to create a two-way street—the point is to keep the code live to deal with those very issues. He imagined a situation in 10 or 20 years’ time when
If we looked to protect large retailers, our new clause would give no reason why the adjudicator could not realise there was a problem between the large retailers and some of the larger suppliers, who hold large retailers to account through supply chains. The new clause could not be used in that instance. The adjudicator, who will look at those supply chains and relationships day to day, is in the best place to consider those issues. That is why I am keen to emphasise that the adjudicator should give due consideration. We propose that the adjudicator should immediately refer information to the OFT to have it change the code to include intermediaries or other parts of the supply chain. The adjudicator should certainly have the power in the Bill to give due consideration to information that might need to go back to the OFT to be looked at.
Despite the adjudicator’s best efforts such problems may persist. The purpose and spirit in which the adjudicator is being put in place might be undermined, because what would have been deemed breaches of the code had the suppliers been involved in the code cannot be dealt with under the code by the adjudicator. Thinking about it in those terms, we see quite clearly that the adjudicator is unable to promote that fairness, which is the very word that the hon. Gentleman has just used.
Huw Irranca-Davies: Does my hon. Friend agree that it would be a tragedy were the improvements to the Bill so far to be undermined two or three years down the line by the very examples that he cites? The supply chain’s trust and confidence in the adjudicator would be undermined. In trying to keep the code and the adjudicator live to any necessary changes, new clause 2 would not only empower the adjudicator, but give greater confidence in their ability to do the job.
Ian Murray: I am grateful for that intervention, because that has been the spirit of all the Opposition’s amendments: we want to instil the adjudicator with that confidence. The adjudicator will probably become the UK’s leading expert on the relationship between suppliers and large retailers, and we want them to take that knowledge and be able to say to the OFT that the code is working in areas x, y and z, but that changes to the code are necessary to keep it live and relevant, and to address breaches elsewhere.
I am sorry to upset the hon. Member for Tiverton and Honiton again by defending large retailers, but they also deserve protection from not only larger suppliers, but the carrot farmer’s claims—as in the example I gave earlier—that they may have wronged through the process. The unnamed, faceless food processor Y, who makes branded products for supermarket A, could quite easily breach the code with regard to the carrot supplier, but the large retailer could be named and shamed. We need to protect that relationship. To be fair to large retailers, they deserve protection from the carrot supplier at the bottom of the supply chain jeopardising their relationship
What consideration has the Minister given to the concerns around the supply chain? Government policy, and indeed Opposition policy, on the Department for Business, Innovation and Skills is to help to foster the supply chains in all industries, whether that be the car industry or the energy sector. We should therefore be protecting the supply chain in this sector, which will give us the food innovation that we desire and, we hope, increase the number of products and drive down costs, and for consumers as well. If the Minister is unwilling to accept new clause 2, will she bring back on Report a measure that is drafted in such a way as to allow the proposal to go forward? If she is not minded to do so, will she discuss the issue of intermediaries with the Competition Commission or the OFT? Is there a mechanism that might allow the adjudicator to look at intermediaries and keep the code live?
I want to stress to the Minister that there is a positive and a negative behind the new clause; my hon. Friend the Member for Edinburgh South has given much consideration to its wording and to its spirit. The positive is that we still very much want to keep this as a live code. We do not want to tie the adjudicator’s hands behind their back from the word go. I see Government Members nodding; we have discussed the issue previously in Committee and in Westminster Hall. We know that the problems in the supply chain are often not purely confined to the relationship between the largest suppliers and the individual producer. We often see myriad complex relationships along the supply chain that can sometimes be used by retailers to mask their true intentions. To pick up on the point made by the hon. Member for St Ives, should there be an occasion in the future—I cannot think of a current example—where an extremely powerful consortium of East Anglian vegetable producers or a large, powerful farm co-operative had a major retailer over a barrel, I would make exactly the same argument.
We are arguing for keeping the code live, so that the adjudicator—who will, as my hon. Friend the Member for Edinburgh South said, become over time the absolute expert in understanding the minutiae of the relationships along the supply chain—can come back to a Secretary of State, whether Conservative, Liberal or Labour, or some unknown future Secretary of State, and say, “Look, in the powers that you have given me, we have had some fair successes. We have managed to deal with the worst aberrations—misdemeanours—along the supply chain, but we have also seen areas where you have said that we cannot go, but I can now suggest to you, under the change made by the Committee, that I should revisit the code to extend my remit slightly, so that I can go further down the supply chain to deal with new exigencies that have come forward since we debated the matter.”
Huw Irranca-Davies: I thank the hon. Gentleman for his intervention. He is absolutely right. As we sit here in Committee, we cannot foresee the full range of eventualities, but we can guess that the supply chain will change over time. There are existing examples, as he mentioned, and there will be examples that we cannot possibly foresee. There is a tradition in the House of introducing framework legislation that will allow some flexibility to deal with future changes. The new clause might not be perfectly formed or perfectly worded, but its spirit is crystal clear.
The hon. Member for Sherwood has a background in farming and food production, as do other Members. I say to Government Members, in a positive way, that I have spoken to farmers in Pembrokeshire, Lincolnshire and Northern Ireland, and they say that this is the type of amendment that they want to see. I am not talking about allowing the adjudicator to grow into some massive behemoth who builds a massive empire. In fact, the new clause would allow the Secretary of State to say to the adjudicator, even if they brought back recommendations, “Frankly, you can go whistle. I don’t agree with you. I think your remit is sufficient.” But they would have to do that in the full glare of open, transparent government. Should an adjudicator make a recommendation that the code needed to be adjusted, and the Secretary of State disagreed, we can bet our bottom dollar that the Chairmen of the Business, Innovation and Skills and the Environment, Food and Rural Affairs Committees would pull in the Secretary of State and say, “We would like to hear a fuller explanation.”
The new clause would not force the hand of the adjudicator or the Secretary of State. It says, “Let us keep the code live and look at the possibility of a future where we cannot see how the paradigm—the power shift—along the supply chain will change.” It may well be that, in a decade, we have extremely powerful farming consortiums. I hope that we do, because it may redress some of the imbalances in the supply chain. Many of us on the Committee support the idea of having more powerful farming co-operatives and collectives of farmers coming together to try to add more to the value within the supply chain. The new clause would allow that to happen, although I am sure that the Minister will set out a range of assurances.
The new clause is more than merely probing. It goes to the heart of what we see as a positive, proactive adjudicator role. We want an adjudicator who can not only use the powers provided in the Bill as it is, but could come back and have a frank and honest conversation with the Secretary of State, with the supply chain at large and with the country at large and say, “We might need to go a little further but I give you, Secretary of State, the option of making that decision for me. What I will do is bring forward the recommendations.” The
Jo Swinson: I very much accept and understand the spirit of the new clause. I appreciate that the Opposition have a genuine desire for the adjudicator to have a wider remit than what is currently set out in the Bill. There is an issue here about expectations management. The hon. Member for Edinburgh South said that, at the moment, the adjudicator cannot look at issues not covered by the groceries code. The clue is in the name. This is the groceries code adjudicator. It is being set up for that very specific purpose. It is very tightly drawn, based on evidence, to look at how we can resolve the specific problems of competition, or the lack of proper competition that creates consumer detriment in the groceries market, and where the evidence that that was a problem was from the large retailers.
It is not intended to be a referee of all business relationships in the grocery sector. I know that some people would like that to be the case but the Government will have to disappoint them. It is not generally the Government’s role to intervene in contractual business-to-business relationships. It is right that the Government are careful and cautious about the occasions when we would do that.
Andy Sawford (Corby) (Lab/Co-op): I am a bit confused by the Minister’s point. Does she acknowledge that the new clause does not seek for the Government to intervene in the supply chain but rather for the adjudicator, who is at considerable arm’s length and will, we hope, operate independently, to do so? The status of that is entirely different.
Jo Swinson: I hear the hon. Gentleman’s intervention and I do not agree with it. It may not be the Government on a day-to-day basis making that intervention, but the very fact that it is not just up to businesses to have a contractual relationship, and that is it, is in itself a further intervention, which is unusual and not normal business practice.
Andy Sawford: I am still confused. I think that the Bill, for which the hon. Lady argues passionately, and which was strengthened during the last few sittings, is needed precisely because the relationships between the suppliers and the supermarkets do not always work in either their interests or those of consumers. We have made a judgment in principle to make an intervention—an intervention that is at arm’s length, and so, given that the Bill is being introduced, I do not see that her argument follows.
Jo Swinson: That is exactly my argument. The hon. Gentleman is right: we have made a judgment that the relationship between retailers and their suppliers does not work in the interests of the consumer. However, we have not made that judgment by looking out of the window and thinking, “Well, that’s happened”, or even on the basis of anecdotes about things that have happened that might seem unfair. We have based that judgment on a market investigation and recommendations from the Competition Commission. The Bill is very much focused and worded on the basis of that evidence and those recommendations, which did not refer, as the new clause would, to the relationships between suppliers
Huw Irranca-Davies: The Minister has been very clear on that distinction, but does she not accept that some breakdowns in the supply chain are not purely because of the superficial relationship between the large retailer and the producer, but happen because intermediaries sometimes feel under pressure from a large retailer to take actions that seemingly have nothing to do with that large retailer?
Jo Swinson: I hear what the hon. Gentleman says, but I would ask about the evidence, which is where he and I differ. We are following the evidence from the report of the Competition Commission’s market investigation, which did not find the problem of intermediaries that the new clause is intended to address.
Huw Irranca-Davies: I thank the Minister for giving way again. I suspect that if there is no evidence, the adjudicator—under the new clause, which seeks to make the code a live one—would bring forward no recommendations. However, should it find such evidence, the new clause would enable it to make recommendations.
That would dilute the adjudicator’s focus on the enforcement of the code. I also suggest that the adjudicator will not be adequately resourced, as competition authorities are, to gather and analyse the type of evidence required to judge that there is a competition problem. The adjudicator will have a small team to look forensically at the specific issues relating to the current groceries code, and it will not have the resources to gather evidence on wider competition issues.
Andy Sawford: I thank the Minister for giving way. It may be the cold that I recently picked up—she may be able to hear it—that is causing me some confusion, but will she tell me from which lines of the new clause it follows that the adjudicator would have to look for such information? I agree with my hon. Friend the Member for Ogmore that if evidence presents itself during the adjudicator’s investigations, the new clause would mean that the adjudicator did not have to seek further primary legislation for a natural and well-supported extension of its role.
Jo Swinson: We are returning to our earlier debates in Committee about whether we should continually add on things—such as evidence of fraud or other criminality—about which the adjudicator would be forced to make recommendations. Putting something in the Bill would create an expectation that the adjudicator has to look for it, because otherwise why would that be done?
George Eustice: I understand the Minister’s reluctance to go down the route of broadening the adjudicator’s scope. However, Opposition Members have put their finger on the particular problem that the large co-operative representing a huge number of carrot growers has less of an incentive to register a complaint under the suppliers code than do those carrot growers. In many cases, the co-operative might find it easier to pass the pressure on it down to the carrot growers, rather than to stand its ground and argue its case under the code. Is there a way round this in that, if lots of carrot growers supplying a particular co-operative register a complaint about not being paid on time, and the adjudicator concludes that the co-operative—rather than the supermarket—is not paying them on time, that would be reflected in the adjudicator’s investigation report? That would go some way to addressing Opposition Members’ concerns.
Jo Swinson: Clearly, given that we have the third party right of complaint, it does not need to be the direct suppliers that put forward concerns. If individual carrot growers wanted to make a complaint, and it was found that they had not been paid because the retailer had not been acting in accordance with the code, that would absolutely be within the remit of the groceries code adjudicator.
We come down to a fundamental issue of principle here, which is whether the Bill is about regulating an entire industry or dealing with a specific problem. In the grocery sector as a whole there is not a natural monopoly, such as in energy or rail, so I do not think that general Government regulation is appropriate, nor is it backed up by the evidence. I would be very reluctant for there to be regulatory creep, where, instead of dealing with a specific problem for which there is evidence, the scope of the measures becomes much wider.
As I was saying, the Government should be cautious and careful about intervening in contractual relationships between businesses. In this specific case there is a reason to intervene on the grounds of competition. Where competition is not functioning as it should, the Government have a role to try to ensure that that is rectified, because competition is good for consumers and the economy. That has not been done lightly, but on the basis of a market investigation by our well-respected competition authorities, which found evidence of detriment from the way that large retailers were treating their suppliers.
Clause 13 allows for the adjudicator to make recommendations for changes to the code if they are in the right area—for example, if large retailers are finding new wheezes for getting round their obligations to
There is an issue, over which there may well be a difference of opinion, about whether there are competition problems elsewhere in the groceries industry supply chain. That was not found to be the case when the Competition Commission undertook its investigation. However, if anyone, including the groceries code adjudicator, thinks that there are competition problems in any sector, they can of course make their views known and the information they have available to the OFT, which can then decide whether there are sufficient grounds to conduct a market investigation.
That would be the proper way in which the code could be extended—not in an ad hoc way, where we just decide what will be the case, but on the basis of proper evidence. I will give way first to the hon. Member for Ogmore, who tried to intervene earlier.
Huw Irranca-Davies: May I suggest to the Minister that, outside the groceries code, a parallel has been drawn with the dairy crisis over the summer? In that case, the naming and shaming of supermarkets frankly had limited effectiveness because the problem lay not, ostensibly, they would say, with them, but with the major distributors—Arla, Müller and so on—who cared little about being pigeonholed because most of the public do not buy their milk from them.
The new clause would simply enable the adjudicator to come back to the Minister at some point and say, “We have a problem somewhere along the supply chain that is to do with the relationship between the largest retailers and the producers, but it is a part of the supply chain that we are not allowed to touch.” That is what we are trying to achieve. If the Minister is really concerned about there being some sort of obligation, in the light of the discussion of amendment 27, she could happily introduce a similar measure that removes “shall” from the new clause and replaces it with “may”.
The hon. Gentleman raises the issue of the dairy industry, about which a lot of discussion has taken place. There was, of course, a real problem this summer in the dairy industry, where many farmers face significant hardship. Indeed, that was mentioned and discussed a little on Second Reading. My hon. Friend the Minister of State, Department for Environment, Food and Rural Affairs has also been involved in the action that the Government have taken to resolve that issue, so we are not saying that that was not a problem, but it is not the same as the problem that the groceries code is set up to deal with.
There was not necessarily a problem directly between retailers and their producers. In some cases, the retailers were quite helpful. Various retailers made a virtue of
The Government are taking a range of different actions to help the dairy sector: facilitating the development of a voluntary dairy code and implementing the EU dairy package so that producer organisations can negotiate contracts, including the prices paid. We are also investing £5 million to improve competitiveness and efficiency in the dairy sector.
The Government are trying to improve matters in the dairy industry. However, there are two different sets of issues. To suggest that they have the same remedy and the same solution is not necessarily accurate.
Andy Sawford: The Minister makes a strong point about the ability of the adjudicator to refer matters to the Office of Fair Trading. However, does she not accept that that would be a much stronger and frankly more valid argument had we strengthened the relationship between the adjudicator and the OFT in an earlier clause? Having left it so that the only relationship is for the adjudicator to ring the public hotline, it is not a strong argument or reassurance to say that the relationship would satisfy the concerns that people rightly have about unintended consequences for, for example, dairy farmers or carrot farmers. The risk is being transferred from the major supermarkets to the large suppliers, but the people who are made perhaps more vulnerable, unless she accepts the new clause, are the small farmers in the chain: the little man.
Jo Swinson: I appreciate that there is genuine concern about small suppliers and small farmers, but I do not think that such concerns are always backed up by evidence. The difficulty with putting additional duties on the adjudicator in the Bill, when there is no evidence that such detriment is occurring, is that it suggests that that detriment is there, but it is not based on evidence and is therefore superfluous. We do not have evidence that there are problems lower down the supply chain. There is no more evidence for that than, for example, that the major supermarkets are breaching minimum wage legislation.
We are not suggesting that we write it into the Bill that, if the adjudicator came across evidence that retailers were breaching minimum wage legislation, they should make a recommendation that that should be dealt with. If we came across evidence that minimum wage legislation, or any other legislation, was being breached, any reasonable individual—particularly anyone who was a public authority with responsibilities to act in a proper way—would make sure that such information was provided to the proper authorities. I do not think that we need to write it into the Bill.
On the issue of difference, my point is that, because the Competition Commission market investigation did not find evidence lower down the supply chain of competition detriment between suppliers, there is no more likelihood that that is going to be found in the adjudicator’s daily duties than any other breaches of criminal law. Putting it in the Bill would suggest that we
Huw Irranca-Davies: The Minister provides a vivid example, but the amendment focuses on the efficiency of the supply chain, not on trafficking, gang masters, minimum wage or anything else. It is very much related to the ethos and principle underpinning the whole Bill. That is the difference. We could extend the provision to report back on a wide range of issues. We would expect the adjudicator to inform if they saw examples of x, y and z, but this provision is specifically on the supply chain and it seems to fit well within the Bill.
Jo Swinson: I hear the hon. Gentleman’s point, but I disagree because the groceries code adjudicator’s focus should be on the groceries code as it is set out. I suspect that the general harmony that we have had in this Committee may not last through this new clause—[ Interruption. ]. The hon. Member for Edinburgh South, from a sedentary position, says that the code is the problem, but I do not think that it is. The code is based on what has been found to be the issue; it is based on the order, which was put into force by the competition authorities, and it has a great degree of cross-party support. In fact, one of the reasons why the Bill has such cross-party support is because it has proceeded on an evidence basis; it is a proportionate, light-touch regulatory response to a specific point where there is evidence of detriment.
Sheila Gilmore (Edinburgh East) (Lab): I congratulate the Minister on her commitment to evidence-based decision making. I hope that she will have words with her colleague who, yesterday, was defending the employee share scheme—or whatever it is now called—which is clearly not based on any evidence whatsoever.
Jo Swinson: I will, of course, be guided by your wisdom on these matters, Mr Williams, disappointed as I am not to be able to stray on to other matters. I will give way to the hon. Member for Edinburgh South, who I am sure would not dare to stray on to other matters.
Ian Murray: Absolutely; the Minister knows me well enough. May I follow up on the evidence-based issue raised by my hon. Friend the Member for Edinburgh East? Our amendment would do just that; if the evidence base points the adjudicator to a part of the code that is deficient, which does not allow them to do their job properly, surely the adjudicator should suggest in the triennial reports to the OFT that the code should be changed, based on evidence built up over that period of time?
Jo Swinson: Without getting too much into the semantics, I would say that if the adjudicator finds that the code is insufficient, and there is evidence that points to that, in order to deal with the detriment outlined in the initial market investigation properly, clause 13 absolutely provides the ability to make recommendations on changes to the
One issue raised earlier was also on the relationship in terms of large suppliers and small suppliers. Some suppliers to supermarkets are powerful—Unilever was mentioned—but there is a range of different companies. It is right that the code does not deliberately distinguish between large and small suppliers; to do that would be incredibly complex and fair dealings should apply to everyone in any case. We expect, however, that the adjudicator will prioritise small suppliers as larger suppliers have legal departments and are more ready and able to bring their own private claims or to go through arbitration procedures.
Even if, for a second, we put aside the issues I mentioned about proceeding with the groceries code adjudicator on the basis of the order on which it is based as being the foundation for the Bill—the code was written to deal with the relationships between the big retailers and their direct suppliers—and also that extending regulation into an area that it was not intended to cover may bring negative unintended consequences, and we just look at the specific issue of the burden on business, there is significant reason to reject the new clause.
The cost of complying with the code is significant. The 10 large retailers will be spending approximately £170,000 each on it, and that does not include any additional costs of complying with investigations by the adjudicator. That kind of sum is a significant one, but these are very large businesses. Large retailers have a big turnover, so we have taken the view that they can afford the cost and the Competition Commissioner has recommended—on the evidence—that regulation is needed.
However, let us as a Committee imagine for a moment that burden being extended to literally thousands of direct suppliers to supermarkets, all of whom would then have to begin appointing compliance officers, training their buyers in the code and meeting all of the related expenses. I think that the food and drink manufacturers across the country, many of whom this Bill is intended to help, and the small farmers who were prayed in aid earlier would not welcome this amendment. Organisations such as the Food and Drink Federation would not be keen to see extra burdens being placed on their member businesses, particularly in a period when the food and drink manufacturing sector is not experiencing fantastic times. The sector has decreased by 2.4% compared with last year. So, that burden on business is another significant reason why we should not be blasé about just saying that we could extend the code to cover intermediaries.
That also underlines again why the only way in which the code should be extended, if it were to be extended, is through a proper market investigation finding evidence of real competition detriment that would justify additional burdens and costs being placed on business.
Ian Murray: The Minister is making a compelling case about the burdens on business, and of course no Government would wish to increase burdens on business that were indeed unnecessary. However, on that point about burdens, I just refer members of the Committee to the explanatory notes on clause 13 of the Bill, which say:
So, under clause 13 there is surely an opportunity for the adjudicator to say to the OFT, “There is a problem with intermediaries and the rest of the supply chain, and I am making that recommendation to the OFT to change its code.” New clause 2 would strengthen that by putting the power for the adjudicator to do so on the face of the Bill .
Jo Swinson: As I have outlined earlier, the specific requirement in clause 13 relates to changes to the code that would be required in order for the detriment outlined and found in the market investigation to be rectified. Indeed, in the explanatory notes on clause 13 of the Bill, which the hon. Gentleman has just read out the beginning of, it points out later in the same paragraph:
The Opposition can suggest amendments that relate sufficiently closely to the material adverse effect that was identified back when the Competition Commission investigated this issue, including passing on excessive risk and unexpected costs. However, that is about whether or not the retailers have found some kind of new trick, or some kind of new way, to do those things. It is not about bigger changes, such as extension to intermediaries.
Andrew George: A moment ago, my hon. Friend prayed in aid the Food and Drink Federation, which of course supplied us with its own notes in advance of the Committee stage of the Bill. Of course, the FDF is a very strong supporter of the Government’s policy, with all-party support. However, in its briefing, it went on to say that having identified significant areas where there was a climate of fear and where there were dealings that were unfair with regard to de-listing and other factors, from its own anecdotal evidence—particularly that acquired by talking to members of small and medium-sized enterprises—it is clear that these practices continue to happen. It was highlighting that it was not the large members but the smaller members, which in many cases are intermediaries, not the ultimate suppliers to supermarkets. So the Food and Drink Federation has concern for the intermediaries as well.
If the Food and Drink Federation has examples of smaller suppliers having competition problems with intermediaries, I would encourage it to send that information to the OFT. However, some problems with parts of the supply chain or with intermediaries are not competition problems. It is then a matter of looking at the contractual relationships to see whether remedy can be sought through the courts and those contracts enforced.
The Food and Drink Federation recognises that its small members want to make sure that they do not have significant problems with their contracts but also do not want additional regulatory burdens to be placed on them. I think that is accurate. I suspect that there may just be disagreement about whether there is evidence of harm already happening.
The Bill will introduce a measure that is proportionate, light-touch and based on evidence from the Competition Commission. The new clause would allow significant regulatory creep. It would place new obligations on suppliers to other suppliers and potentially to retailers. Such a major extension should not be based just on anecdotal experiences and created on a whim by a ministerial decision that says, “Well, we should do this.” It should be based on proper market investigation by our well-respected competition authorities. To include the new clause suggests that there are problems, which are not backed up by evidence.
I recognise that there may still be a difference of opinion on this matter, but I hope that I have been able to set out clearly why the Government believe that to proceed on the basis of the initial market investigation is the right approach. I hope that we will maintain strong cross-party support. I therefore urge the hon. Member for Edinburgh South to withdraw the new clause.
Ian Murray: We have had a lengthy and detailed debate on the new clause. It was important to have the debate. We could end up in a situation, as the hon. Member for St Ives said, where we have a code that is not fit for purpose. I hope that the OFT, under clause 13, would realise that that may be the case, and amend the code.
A number of organisations told us that the problems are further down the supply chain. The hon. Member for Camborne and Redruth suggested a solution to that problem, which I welcome. The recommendations of the investigation report could include problems further down the supply chain, which the adjudicator is not able to deal with. An investigation might conclude that there is detriment somewhere, but the code does not allow it to be dealt with. It may recommend that the code reflects that.
This is a relationship between the large retailers and the first-level supplier, which could be some of the major companies in the world. We are not protecting the carrot grower in the example given by the hon.
I will not press the new clause to a vote, although I am tempted to do so. Given the interventions from Government Members on the matter, perhaps the Minister will reflect on whether she might introduce a measure on Report to deal with some of the issues that have been raised, after which we can consider whether we want to press the matter further in the House. I beg to ask leave to withdraw the motion.
‘(1) Within three years of this Act coming into force, the Competition Commission shall conduct a review of the effectiveness of the Act’s provisions with regard to levels of compliance with the Groceries Code.
(2) If the review finds that the levels of compliance are unsatisfactory, the Secretary of State shall prepare and lay before Parliament regulations containing analogous provisions to those in the Groceries Code, thereby giving statutory effect to the Code.
(3) “Levels of compliance” as referred to in section (1) shall be deemed unsatisfactory if (without limitation) they have not improved since the bringing into force of the Act.
(4) The Groceries Supply Code of Practice shall thereby be revoked.
(5) Where the Secretary of State proposes to issue or revise a code of practice under subsection (2), he shall prepare a draft of the code (or revised code).
(6) The Secretary of State shall consult the following about the draft—
(a) The Competition Commission;
(b) The Office of Fair Trading;
(c) The retailers mentioned in Article 4(1)(a) and (b) of the Groceries Supply Order;
(d) one or more persons appearing to the Secretary of State to represent the interests of suppliers;
(e) one or more persons appearing to the Secretary of State to represent the interests of consumers; and
(f) any other person the Secretary of State thinks appropriate.
(7) If the Secretary of State determines to proceed with the draft (either in its original form or with modifications) he shall lay the draft before Parliament in the form of regulations.
(8) Such regulations shall be made by Statutory Instrument and may only be made if a draft of them has been laid before and approved by resolution of both Houses of Parliament.
(9) A code (or revised code) issued under subsection (6) shall come into force on such date as the Secretary of State may by order made by statutory instrument appoint.’.—(Ian Murray.)
“It is fundamentally odd that while Parliament is entitled to debate and scrutinise the function and powers of the referee, we are denied the opportunity to give the same scrutiny to the rulebook itself.”—[Official Report, House of Lords, 26 June 2012; Vol. 738, c. GC 80.]
The new clause is almost a sunset clause, whereby in three years’ time the code would cease to exist as an executive order. During that period, the Government would put the code on a statutory footing, which would allow the Secretary of State to consult on a draft code, as in new clause 3(6), with a variety of stakeholders—including the devolved Administrations, which should have been included, but which we seem to have omitted.
The new clause would also allow Parliament to amend the code in future years. Instead of the situation we debated under new clause 2 and other parts of the Bill, whereby the adjudicator makes recommendations to the OFT, which it may either ignore or implement to make the code live, under new clause 3 the Government would, in three years’ time, introduce a statutory code using the knowledge that had been accumulated under the existing adjudicator.
The new clause is fairly straightforward, and we hope that the Minister sees the need to put the code on a statutory footing to make it a living document that both Houses of Parliament may debate and change. That would be better than leaving it to the OFT, under an executive order with no statutory footing, to change the code by way of recommendations to the House.
Jo Swinson: I confess that I find the new clause slightly puzzling. The Bill already contains provision for the Secretary of State to review the adjudicator, which is the principal part of the Bill, within three years; that is already due to happen. Responsibility for reviewing public offices should remain with Ministers, who are accountable to Parliament, so I am not sure why the Opposition want to transfer that responsibility to the Competition Commission.
I do not see the benefit of revoking the code and then re-establishing it by statutory order. I know—the hon. Member for Edinburgh South alluded to this—that the matter was discussed in the other place, where the same fundamental point was made: the code is not voluntary. The code, as it stands under the Groceries (Supply Chain Practices) Market Investigation Order 2009, already has full legal force and the requirement to incorporate it into supply agreements is already binding on the large retailers, so I do not see what would be gained by establishing it through a statutory instrument. It would
If the intention of the new clause is to allow the Secretary of State or Parliament to modify the code—I think the hon. Gentleman suggested that—that is not appropriate. We have just had a lengthy discussion of the means by which the code could be amended, and that is an issue for the competition authorities, as it is a competition remedy. If the Government were to intervene in that way, it should be done through the competition authorities, not as a result of whatever Parliament happened to think should suddenly change. That would be a detailed thing for Parliament to do.
The new clause is not needed. We already have a good Bill in front of us, which has the proper channels of accountability, with the possibility of the code being amended or recommendations being made to that effect where necessary. The code also has full legal force, so I am struggling to the see the benefit that the new clause would offer. Perhaps the hon. Member for Corby can enlighten me.
Andy Sawford: As the new clause asks us to look three years ahead, can the Minister, like me, imagine a scenario where, following the general election campaign in two and a half years, she and I find ourselves freshly re-elected having had conversations with farmers and others in our constituencies who feel that, despite our best efforts in what is a great, but not fantastic, Bill, the adjudicator’s role has not transformed the real problems that we and the OFT have found? Imagine how satisfied she and I would be to find that, through a statutory instrument, we could offer additional force and ensure that we achieved the transformation we hoped for.
Jo Swinson: The hon. Gentleman tempts me to envisage a scenario where huge power is available to Parliament through a statutory instrument, but his comments express a general unease among some Opposition Members that these problems in competition should be looked at and remedied by the competition authorities. As I outlined earlier, Government and Parliament should be pretty wary of intervening in business-to-business relationships.
As far as possible, we should let businesses get on with the job, rather than getting in the way. Therefore, if there is a case for the Government to take action, it has to be made through specific channels. The Enterprise Act 2002, which was passed under the Labour Government, sets out the framework through which that should happen. That is the proper way to do things; the order and the code should be left to the competition authorities. That structure and framework are in place, and the Bill will create the role of adjudicator to ensure the proper enforcement of those things that have been deemed to involve how the rules can be structured so that detriment does not occur. That is the role of the Bill. I therefore do not think that the new clause would add to the Bill and I encourage the hon. Member for Edinburgh South to withdraw it.
We have been very measured with the new clause, which would establish a three-year time frame to allow the Government to consider what they wished the code to look like. They would have the experience of the adjudicator to draw on and could take in all the information that arose from the adjudicator’s investigations and recommendations. They could then put the code on a statutory footing. If there were any breaches of the code or any competition issues, the Government could, as in many other instances, refer such issues to the Competition Commission or the OFT.
Jo Swinson: I thank the shadow Minister greatly for that. He said that the code can be revoked at any time, but, to provide further reassurance to the Committee, that could proceed only on the basis of a change in circumstances and evidence, for example, that the code was not needed any more. I hope that that quells concerns that the code might suddenly be done away with on a whim.
Ian Murray: I somewhat wish that the Minister had not intervened, because the Government do not have a particularly good track record of basing anything on evidence. Indeed, last night, my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) spoke in the Chamber of policy by prejudice, which is a pretty good notion to express and one that was roundly welcomed.
Ian Murray: The hon. Member for St Ives never disappoints me. We have given him tremendous credit for what he has done on the issue. Indeed, on Second Reading, I had two paragraphs of praise for him, but just before I got to them he made an intervention very similar in tone to the one he has just made. However, we are not begrudging, and on Second Reading I gave him the praise he deserved. I do not know whether that can be scratched from the record; perhaps we can try at some future point.
I will not press the new clause to a vote. I will merely say that we might look at the issue again on Report in the House, as the national farmers unions of Scotland, Northern Ireland, England and Wales were quite keen for us to look at a statutory footing for the code. However, I beg to ask leave to withdraw the motion.
Jo Swinson: On a point of order, Mr Williams. I want to put on record my gratitude for your fantastic chairmanship of the Committee, and indeed that of Sir Roger. You have very much kept us to topic. I am grateful to all those involved in making the Committee run smoothly and efficiently: the Clerks, the doorkeepers, the Hansard reporters and so on. I am also grateful to the members of the Committee, who have performed their scrutiny role admirably. The shadow Ministers have, in their customary fashion, conducted themselves with good humour. It is particularly lovely to have inducted two new Members, the hon. Members for Corby and for Manchester Central, to the wonderful world of Public Bill Committees.
My hon. Friends have perhaps been a little less vocal than some Opposition Members, but, none the less, my hon. Friends the Members for Tiverton and Honiton, for Camborne and Redruth, for Sherwood and for City of Chester have put their points on the record succinctly and at opportune times. The Whips have done their job fantastically; indeed, the stand-in Whip, my hon. Friend the Member for Mid Worcestershire, was excellent. Perhaps my hon. Friend the Member for Preseli Pembrokeshire should look out. I also thank my Parliamentary Private Secretary, who was wonderful—
I feel a slight guilt about my cold, and I should perhaps say, in the way they do on “Sesame Street”, that this Committee has been brought to you by many cold and flu remedies, Ultra Balm tissues and throat sweets. While I hope my cold is not a present that I have given hon. Members for Christmas, I have enjoyed this experience.
Ian Murray: Further to that point of order, Mr Williams. I hope this is a point of order. May I, too, offer my thanks to you and your colleague in the Chair, Sir Roger Gale? You have presided over us with a firm hand, but also with good humour, and you have given us a little latitude in our discussions.
May I thank the Hansard staff, who have kept up with the frantic pace with which we have gone through the Bill, and the doorkeepers for all their work? Of course, there are also the BIS officials, who are always here, working hard and frantically scribbling notes to keep the Minister not only inspired, but on message. We are delighted that they do, and we thank them.
I pay particular thanks to the Clerk to the Committee, Mr Caulfield, who has helped us on numerous occasions late into the evening to put together our amendments. The hon. Member for City of Chester said last week that none of the Opposition’s amendments made sense—there is an intervention we can appreciate—so I will deflect that criticism of the shadow ministerial team straight to the Clerk’s office, adding some tinsel and baubles, given the time of year.
I pay tribute to the Government Members on the Committee, who have been in good humour. I am delighted that the temporary Whip, the hon. Member for Mid Worcestershire, who had a temporary promotion, did a wonderful job. I am not sure whether you were in
It has been a great pleasure to serve under our own Whip, my hon. Friend the Member for Vale of Clwyd, who has been efficient and effective, it says here. He coined the term “off-trolley”, which will always be used in the parlance of the groceries code adjudicator; indeed, I hope my hon. Friend purchases off-trolley.com at some time in the future.
Like the Minister, I pay tribute to the two new Members on the Committee. They have both made valuable contributions, particularly my hon. Friend the Member for Corby. When, over his Christmas lunch, he reflects on his first few weeks in this place, he may wonder why he ever attempted to get elected in the first place.
Finally, I pay tribute to the hon. Member for St Ives —I had scored those words out, but I have decided to pay tribute to him. After many years of discussion, cajoling and debate, we have reached the end of consideration in Committee having put in place a groceries code adjudicator. All the suppliers who feel a little better this Christmas can thank the hon. Gentleman, my hon. Friend the Member for Ynys Môn (Albert Owen) and other Members of the House who have pushed the issue.
We have had tigers, dogs, hamsters, teeth—indeed, two sets of teeth—and “off-trolley”. We have had quite a good Committee, and we are now reporting the Bill to the House. All that remains for me to say is merry Christmas.