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Food Pricing

Volume 471: debated on Thursday 31 January 2008

4. What consideration he has given to the regulation of farm to retail price spreads, with particular reference to supermarkets; and if he will make a statement. (178858)

The Government believe that prices are for the market to determine and do not get involved, provided that competition rules are respected. As the hon. Gentleman is probably aware, the Competition Commission is currently conducting an inquiry into the groceries market as a whole.

Figures show that while the average farm-gate price for a litre of milk is 18p, it costs 21p to produce it, and it is then sold for 60p in the supermarket. What is the Minister going to do to give a fair deal to farmers, who are being held to ransom by the big supermarkets?

I am grateful for that question. Gate prices have increased considerably. That is partly to do with changing markets, with China and India increasingly wanting dairy products. We had the interim report from the commission in October, and we expect a report in the first half of this year. Some of the issues that it will consider include tightening up the code, perhaps to include some of the other supermarkets. It is vital that we have transparency from farmer to producer to supermarket so that we can answer these questions, which people have been concerned about for a long time.

The wages and conditions of workers have an impact on the farm to retail prices in our supermarkets. Is my hon. Friend aware of Unite’s campaign to highlight the plight of migrant workers supplying food to major supermarkets such as Marks & Spencer? Does he agree that the terms and conditions of those migrant workers should not be exploited in order to produce cheap food for the supermarkets?

I am grateful to my hon. Friend for making that point. He has a proud track record in introducing the Bill that became the Gangmasters (Licensing) Act 2004. The authority is prosecuting where migrant and mobile workers are being exploited. We have the legislation and a series of safeguards, but if hon. Members are aware of any cases, they should bring them to the authority’s attention. I have met its representatives, who have prosecuted where they have found such cases and will continue to do so.

But does the Minister accept that the low prices in the livestock sector recently were not the fault of the supermarkets, which actually behaved very responsibly, but of the Department for Environment, Food and Rural Affairs, which provoked the foot and mouth crisis that caused such a problem? Interestingly, in comparison with Scotland, where farmers have been compensated for collateral damage, English farmers have been left to shoulder the entire responsibility for losses on their own.

We know that prices for livestock have fallen. That is partly to do with the considerable increase in the price of feed, and the prices have not worked their way through the system. We are aware of that, but the situation is not DEFRA’s fault, as the hon. Gentleman suggests. Feed prices have gone up across the world; all member states are concerned about those increases, and they are impacting on livestock farmers.

I hear what my hon. Friend says, but is he surprised, as I am, at how few suppliers have chosen to give evidence to the Competition Commission inquiry? Does he have a theory as to why so few have given evidence, and how might he encourage them to give evidence to that important inquiry?

My noble Friend Lord Rooker has submitted evidence to the Competition Commission. He was concerned about the power of supermarkets to force prices down, about the viability of wholesale distribution and its effect on independent stores, and about the effectiveness of the code of practice. We have put forward those points for the Competition Commission to consider. It is at liberty to conduct the inquiry as it sees fit, and I am sure that it has heard my hon. Friend’s comments.

The Minister is entirely right to want to keep the Government out of this matter. I can think of no bog in which one would descend more rapidly than that of trying to get price controls between farmers and supermarkets. Will he beware of sweeping generalisations, such as statements about how much it costs a farmer to produce a litre of milk? Given the huge variety in the prices the farmers receive, depending on their circumstances, would he note that dedicated supply chains are being put together by supermarkets, which will integrate the chain much more effectively? Will the Government confine themselves to encouraging all sides of the supply industry to co-operate more closely so that it can deliver what the consumer wants at a price the producer can afford, and so that supermarkets can make a reasonable return?

There is a law in other countries to ban retailers from selling products at a price below the cost to them. That issue has been raised most recently in this House in relation to cheap alcohol, but it applies equally to direct farm produce such as milk. Will my hon. Friend at least consider such a change to the law on prices to prevent predatory pricing practices?

As I said in an earlier response, the Government do not intend to get involved in price control.

Consumers visiting their local shop or supermarket who wish to shop ethically, on environmental or animal welfare grounds, or simply because they want to back British farmers, will want to buy British. Is the Minister aware that it is currently entirely permissible for animal carcases to be imported into this country, processed and then packaged as British. Does he agree that that is an outrageous deception, and will he take steps to ensure that the only meat that can be packaged and presented in this country as British comes from British animals?

There is a European Union ruling that makes what the hon. Gentleman suggests impossible, but increasingly we see packaging that promotes local produce. The situation is changing, and people are looking to see where food is grown, where it is reared and, more specifically, which of the different counties of our country it comes from. When I was in the hon. Gentleman’s constituency last year, I went to the food hall, which was full of businesses from his community providing fantastic produce, which all came from Cumbria. On talking to those businesses, I heard that they were finding access to markets. The Competition Commission has not found any impediment preventing local producers from accessing markets. The message from this House to the consumer must be, “Be discerning. Buy local and buy British.”

I am sure that the Minister is aware that there is a double rip-off in that not only the farmers but the consumers—the families who buy the milk—are being ripped off by the supermarkets. What can we do to stop that double rip-off? Farm-gate prices are not fair and families pay too much.

In response to several hon. Members, I referred to the undesirability of the Government getting involved in price controls. We are not going to do that. However, the Competition Commission is thoroughly examining the matter and a range of issues to do with the relationship between farmers and supermarkets. We expect its report to be published in the early part of this year. If it makes recommendations to the Government, we will, of course, consider them and follow them up.