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Supermarkets and Regional Farming

Volume 498: debated on Monday 2 November 2009

Motion made, and Question proposed, That this House do now adjourn.—(Mark Tami.)

Thank you, Mr. Speaker, for allowing this debate to take place. It is an important debate; it is a debate about the power of a supermarket and the future of farming in the United Kingdom. I am sure that the importance of the subject is agreed by nearly all parties in the House, and we should certainly be able to ensure a fair debate. I hope that we can get the points across. The Minister is in his place, ready to answer, and I am sure that we will hear some positive comments coming back.

Of course, as we know, farming has been under the cosh. It went through foot and mouth disease and bluetongue. Indeed, farming in the UK has been through all sorts of other problems. Of course, farming has overcome whatever has been thrown at it— farming struggles on and has kept going. However, there remains a persistent problem that severely limits the ability to maintain a viable farming business: the power of the supermarkets. With constant pressure to reduce prices, farmers are often unable to make profits. The way to address the issue for the benefit of farmers and consumers alike is for the Government to follow the advice of the Competition Commission and introduce a watchdog to oversee supermarkets and to implement a local sourcing policy for the larger chains.

With regard to the mounting pressure for an ombudsman—one was supposed to be appointed in August this year, following consultation—the Competition Commission failed to secure voluntary agreement between retailers. I really do think that that was a let-down. Unfortunately, a great opportunity to show a real will began to fall through. The commission’s chairman, Peter Freeman, who headed up the groceries inquiry, said that smaller chains had recognised the problem; but, regrettably, the majority of them had not. That is a sad indictment, when someone has worked so hard to try to achieve an understanding to work together. Of course, the introduction of an ombudsman to police the way that supermarket supply chains operate is called for and supported by the National Farmers Union, the Campaign to Protect Rural England and Friends of the Earth, just to name a few who believe that that is the right way forward. [Interruption.] As my hon. Friend the Member for North-West Leicestershire (David Taylor) says from a sedentary position, there are others who will express such support.

To highlight the dominance of the supermarkets, I should mention that £1 in every £8 in the UK is spent at Tesco’s. That proves how successful Tesco is; it shows that it is a great British company, with a great ability to get customers through its shops. No one can argue with that. However, the strength and the success of Tesco has allowed it to dominate the market, and it has the power to drive down prices. Because Tesco has such a dominant position and is so powerful, it ought to use that power not to drive down prices, but to ensure that a fair farm-gate price is paid to farmers in the UK. We should stand by our farmers.

We all know that farmers are vulnerable to market conditions, and that supermarkets are placed to exploit that vulnerability. Farmers always risk being driven out of business, as we have seen in the dairy industry, which has been decimated by prices being driven further and further down. The average net income of dairy farmers in Lancashire in 2002 was £32,700. By 2006 that had fallen to £13,300—less than half. I know the Minister will say that it has now gone up, and rightly so, because that level was not sustainable. The problem is that when net income fell so dramatically, we saw a wave of family dairy businesses going out of existence, never to return.

That is the issue. If we are not careful, we will not have young people coming into farming. Farming will not have a future. We have to make sure that farming is attractive and that it has a future. We must stand up for the farmers and ensure that farming in the UK will continue. We must make sure that the UK is not totally dependent on foreign imports of everyday items such as milk. That would be good for UK farming and industry. The same applies to arable farmers, beef producers, the pig industry and poultry farmers. All those foodstuffs could be produced in the UK and must be protected.

Does my hon. Friend agree that local supermarkets would be best advised to sell local products, not just from farmers but from local producers, and not just from the point of view of their own profits, but in order to ensure that goods are not transported halfway across the world, damaging the environment? We should support local farmers and producers, and protect the environment.

I could not agree more. My hon. Friend is right. The aim must be sustainable farming and reducing food miles. If we are serious about climate change and the future of farming, we must follow that local policy and ensure that farmers have a local market. Let us stop the food miles. Let us make sure that sustainable farming is here to stay in the UK, and more importantly, let us ensure security of supply so that this country can feed itself in its hour of need.

Can we not see a good example just 33 kilometres away south across la Manche? In France, the big supermarkets, such as Leclerc, Géant, Casino and Carrefour, are very good at developing links with their local farming community and frequently promote regional produce and allocate part of their space within the store for that. Could we not do that in the UK?

Of course. My hon. Friend is right. Although I would not stand up for the French farmers, they are to be envied for the way that they support each other. Carrefour, one of the biggest supermarkets in the world, ensures that its chain carries locally produced regional produce.

May I tell my hon. Friend about my local pig farmers, Brenda Mitchell and her husband John? They have been going round the supermarkets, looking at the sale of produce there and making sure that British produce is labelled as such. They have set up their own business and are doing extremely well. They have taken the supermarkets on. That is a good example of a local farmer who has challenged the system.

The Member for Heywood and Middleton, my good friend, is absolutely spot on. The issue is about challenging supermarkets and ensuring that we have quality produce on the shelves; and, yes, may we continue to do that.

Research has shown that consumers want to buy local produce. They want to ensure that there is local business and a local economy, and that is still true in the current economic downturn.

The hon. Gentleman has a great passion for this subject. Does he agree that, if a local supermarket uses the word “local” and truly wants to do some good, it has an obligation to put something back into the community where the goods were produced?

I absolutely agree with the hon. Gentleman. There are no two ways about it: the issue is about the word “local”, and ensuring that it means local and guarantees sustainability in that community. It is about ensuring that local farmers and producers are protected and have a market on their doorstep, and about pricking the conscience of supermarkets. That is what all my hon. Friends who are present are saying tonight: it is about supermarkets having a conscience.

The issue is important, because in 2008 the local products sold in Tesco accounted for 2.2 per cent. of UK sales, compared with 1.7 per cent. in the previous year. That is a 30 per cent. increase in sales when compared with 2007. The trend is continuing, and there is a market for local produce. Even Tesco recognises that, and everybody else does, too. That is why the issue is so important, and we have got to ensure that people understand it.

In my constituency, we are lucky, because we have Booths, a regional supermarket chain that challenges the main supermarket players. It procures 80 per cent. of its meat from local producers, and it focuses on ensuring that its fish, bread and beer come from local ports, bakeries and breweries. It works hard to engage with the communities with which it trades, and as a result it has developed own-label product ranges in partnership with local suppliers and producers. That arrangement is good for farmers, communities and consumers, who can choose to buy locally sourced food that is celebrated and diverse. What more can we ask for? Booths has set the standard; that is the bar that we expect all the major chains to reach; and that is where we must try to drive the supermarkets. Booths is good for our area and a good employer, and we must listen to it and try to do what it does.

We must ensure that we maintain local protection for our farmers. I am quite happy to say that we should protect our farmers; I have no qualms about that. It was suggested earlier that the French would think of nothing else, so we ought to ensure that we do as they do. The issue is about being fair and ensuring that we do so much more. Morrisons has a local policy to buy British meat—UK farm produce. That is good, but I should like to take Morrisons a little further down that road and say, “We welcome your buying policy for UK produce, but try to buy local for your local supermarkets, rather than shipping food up and down the country.”

On that point, the farm-gate price that Waitrose pays for milk is at least 2p to 3p more than that of other supermarkets, so if some can do it, others can join them.

Absolutely. That is what the issue is about: paying a farm-gate price to ensure that farmers exist in the long term, and do not keel over in the short term. That is why the ombudsman, as recommended by the Competition Commission, will be responsible for investigating complaints that are levelled at grocery retailers under the recently drawn-up grocery supply code of practice. The ombudsman will arbitrate on disputes involving UK farmers who feel that they are not getting a fair deal from the supermarkets for their produce.

This is also about the breakdown of the relationship between suppliers and supermarkets, because that provides no benefit to anyone. The suppliers are being forced to operate on ever-reducing profits, and the supermarkets risk pricing themselves out of achieving the aims of the local sourcing programmes that chains such as Tesco and ASDA now have in place. I welcome those programmes, but the supermarkets must not keep pushing the price down when they want to sell local produce. The ombudsman would ensure that the relations were formally maintained, with a positive outcome. We need a genuine agreement between supermarkets and producers that benefits our farming community and ensures that consumers will still benefit from competitive prices.

My hon. Friend is making an excellent case. One of the interesting things is how split the supermarkets are. A number of them are willing to accept the ombudsman. However, the big supermarkets—principally Tesco and Sainsbury’s—will not. We need to do something about that.

My hon. Friend is absolutely correct. It is the main, big supermarkets that have not signed up. If they were to do so, a lot of the problems would stop. That is why it is important that we ensure that they get it right.

Another example from Chorley that would make significant headway in achieving a local sourcing policy is the idea of tackling the expanding supermarkets before applications are granted. We could do a little more on that issue. In our case, there is a new application from ASDA, creating 400 jobs. Those jobs are welcome. ASDA trades on the outskirts of Chorley, but it wants to come right into the town centre. The 400 jobs are welcome, but what will be the consequence of the supermarket’s arrival in the centre? I want it to be part of the community and support it. It should ensure that it has a local buying policy that would be sustainable for our local farmers. That could be part of the key to ASDA’s commitment to the town.

If ASDA offers three hours’ parking at its supermarket, could it not help subsidise the parking around the market? It will be competing with the other shops—the small, independent retailers. We have to give a bit of support. I want supermarkets such as ASDA and Tesco to be part of our community. They could do so much more. We do not want to stop ASDA—far from it. We want it to engage in supporting Chorley; we want it to be part of the town and play its part.

It would be nice to hear from the chief executive of ASDA. He rightly says what a great store ASDA is, and I am not going to knock that. However, I would like him to come along and say what his company is going to do for Chorley to help it become a more vibrant town. Chorley is a market town, of which I am proud. I was born and brought up there. I do not want to get ASDA out, but I want to get ASDA to be part of Chorley, like me. That is where the future lies. I am sure that the Minister will be able to consider the issue and see what we can do.

We can build on that. This is about the future. As we said, the competition is so important. We should ensure that there is competition, but it should be fair competition for all. The issue is about sustainability, security of supply and supporting the farming industry. Farming has enough on its plate: we need to sort out the badger problem in other areas and we must ensure that the nitrates issue is sorted out as well. All these pressures are being exerted on farmers.

My last point to the Minister is about the forms. Why do farmers have to fill in form after form? Why do we not let them get on with what they do best—farming? We could avoid the duplication for different Departments. Let us streamline it all, so that there is one form, instead of the multiple forms, for all the Departments. The bottom line is that if farmers are filling forms, that stops them in making money. In the UK we have good pig, beef and dairy industries. We have upland and lowland sheep farmers. We have to protect the future, including that of our chicken and egg industries. I look to the Government to be on the side of farmers and not against them. I look forward to what the Minister has to say.

I congratulate my hon. Friend the Member for Chorley (Mr. Hoyle), as well as his supporters on both sides of the House, on securing this debate and on the manner in which he made his remarks. I listened closely to the points that he made, and I will try to respond to him over the next few minutes. If I am unable to do so or if I miss any of his concerns, I will of course write to him.

I congratulate the farming industry on its progress as a successful and vibrant industry that produces the raw materials that we need to enjoy a wide range of delicious and nutritious food. Lancashire of course has its fair share of excellent food and drink products, including traditional Lancashire cheese, which was one of the first UK foods to take advantage of the European Union protected food name scheme. In August, I had the pleasure of helping to host an event at No. 10 to promote the scheme and to encourage more of our quality regional food producers to take advantage of it. There has been interest in the scheme from other food and drink producers in the county, and from the Department for Environment, Food and Rural Affairs officials stand ready to provide guidance as appropriate. I hope that my hon. Friend will communicate that offer to his local producers.

My hon. Friend says that we have many good things in Lancashire, particularly Lancashire cheese. If he will come up to Chorley and visit Pat’s cheese stall on Chorley market and Mr. Brown the butcher, he will realise the quality of local produce.

I am grateful for my hon. Friend’s kind invitation. I would be happy to take advantage of it if I get the chance to do so before the general election.

The Government recognise that the marketing of regional and local food can bring benefits for producers and consumers. There are fewer middlemen, and that means farmers and small producers are able to retain a higher proportion of the end price for their produce. Local food chains increase consumer choice and raise awareness of and interest in local food by helping to improve consumers’ links with and understanding of the rural economy and food production. Suppliers will flourish by providing what customers want, and there is growing public enthusiasm for locally produced food, especially food with a clear regional provenance. Consumers prefer to buy local if they can, and supermarkets are supporting that. Although I would not want to comment on Asda’s recent planning application to open a new store in Chorley town centre, as mentioned by my hon. Friend, its early support of the Plumgarths regional food hub is an example of the retailer’s interest in local food. As he and other hon. Friends said, that should be supported.

Research suggests that UK locally sourced food retail sales will total £6.2 billion by 2013, up from £4.7 billion in 2008—a growth of some 31 per cent. over that brief period. In recognition of this, we have provided a range of assistance to local food chains, including helping regional and local food producers to overcome various barriers to market. We have funded meet-the-buyer events for retailers and the food service sector. We also support farmers markets and farm shops and encourage the use of food hubs and shared distribution facilities.

We recognise, however, that there has been mounting concern over recent years among various industry and lobby groups about the power of major supermarkets, as described by my hon. Friend, and the impact that this has had, including on the ability of local producers to access markets. The Government and the Office of Fair Trading shared these concerns and so asked the Competition Commission to investigate the groceries market to see whether supermarket power was indeed detrimental to consumer interests. The Government are committed to fostering competitive markets that work in the best interests of consumers, including in the groceries market. By looking for ways to help make markets work better, we can enable businesses to compete freely and fairly, giving UK consumers more choice and better value.

We therefore welcomed the commission’s final report, published last year, and thank it for its work to implement its findings. The commission found that in many respects competition between supermarkets was strong and working effectively. Competition in the groceries market provides consumers with diverse choice, good value and low prices, which is reflected in the numbers of shoppers who choose to buy their groceries in supermarkets.

The Minister says that this is about ensuring fair competition. I think that competition failed in respect of the price that was being paid to farmers for milk. As one supermarket altered it, another followed, so the price went up for the consumer while the price being paid to the farmer went down. That acted against not only the farmer but the person shopping in supermarkets.

My hon. Friend makes a fair point. The hon. Member for South-West Norfolk (Christopher Fraser), who is no longer in his place, mentioned the premier contracts that some dairies have with farmers. I discussed that matter with my hon. Friend the Member for North-West Leicestershire (David Taylor) and the Select Committee on Environment, Food and Rural Affairs only last week. It is producing a report on the failure of dairy farmers in Britain, which will draw on the lessons learned and help the industry to move forward.

The Competition Commission identified two adverse aspects of competition—areas in which the market structure does not work in the best interests of consumers. It identified areas where local groceries markets were dominated by single retail chains, restricting the choice available to shoppers. It also found that certain supermarket practices passed unacceptable risks or costs on to suppliers, mainly food manufacturers and processors, creating higher levels of uncertainty about their income and so limiting their ability to invest and innovate.

The commission proposed a number of remedies and recommendations to address the adverse effects on competition identified. They include a new groceries supply code of practice for all supermarkets with a turnover of more than £1 billion a year. The GSCOP will come into force next February, and the OFT will play an important role in overseeing its implementation. Additionally, the commission recommended that the Government establish an ombudsman, which my hon. Friend the Member for Chorley and our other hon. Friends who support him mentioned. Its duty would be to monitor the GSCOP and arbitrate disputes between suppliers. It was also recommended that a competition test be added to the planning rules regarding the location of new supermarkets. That was a request that my hon. Friend made in his closing comments.

The Government are considering those recommendations carefully. Competition policy is a matter for the Department for Business, Innovation and Skills, but DEFRA too will play an active role in determining the Government’s response to the proposal to create an ombudsman, and we want to take full account of the views of stakeholders.

By chance, I have a meeting with one of the BIS team tomorrow. Can I be assured that when I say to him that DEFRA is on board with the recommendation for an ombudsman, I am speaking from the correct record?

My hon. Friend tempts me to comment on a matter that is under collective Government discussion. I am sure that he is aware of the position in respect of the ombudsman, and we hope to bring forward a conclusion shortly.

I should like to comment on the relationship between retailers and farmers. The GSCOP will be for companies that supply directly to retailers. Most fresh produce is supplied to retailers through intermediaries such as packers, processors and fresh food wholesalers rather than by farmers. The Competition Commission found that the combined total value of direct purchases from farmers by six large grocery retailers amounted to less than 2 per cent. of the total value of agricultural production.

Although most farmers will be outside the direct scope of the GSCOP, the limited value of direct purchases by grocery retailers from farmers understates the closeness of the trading relationship between primary producers and grocery retailers. Farmers may be members of, or shareholders in, intermediary businesses that market their produce to grocery retailers, so the GSCOP will provide them with some certainty.

Given the importance of food to the economy, the Government are working with regional development agencies and regional food groups to develop businesses and market their products, promote regional food and farming and create demand for local seasonal produce. Where consumers continue to want good, distinctive and nutritious local food, supermarkets and local shops will continue to be able to supply it.

My hon. Friend the Member for Chorley mentioned sustainable production. He will know that a raft of documents and consultations have been going through DEFRA recently, and “Food Matters”, food security measures, the “Food 2030” programme and food miles could all be the subject of debates in their own right. I will write to him and update him with the latest on each of them, as well as on training, skills and colleges for the agricultural community and the progress that we are making on cutting regulation for the agricultural industry. I congratulate him and our other hon. Friends who have participated in this debate, and if I have missed out any of the issues that he raised, I will write to him as promised.

Question put and agreed to.

House adjourned.