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House of Commons Hansard
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Grocery Market Ombudsman Bill (Ways and Means)
23 March 2010
Volume 508

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I beg to move,

That, for the purposes of any Act resulting from the Grocery Market Ombudsman Bill, it is expedient to authorise—

(1) arrangements to raise money from retailers to cover costs associated with the Grocery Market Ombudsman, and

(2) the payment of sums into the Consolidated Fund.

As we have just heard, the Bill introduced by my hon. Friend the Member for Ynys Môn (Albert Owen) received its Second Reading on 5 March. It provides for the creation of a grocery market ombudsman and sets out a number of rules against which the ombudsman would monitor and enforce compliance with the code. It will enable the ombudsman to raise money from retailers to cover costs associated with the grocery market ombudsman, and it will provide for payment of sums into the Consolidated Fund. Accordingly, a Ways and Means motion is required in order that the Bill can be debated in Committee. I commend the motion to the House.

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I rise merely to reiterate my earlier point that the Conservative party is in favour of the principle behind the Bill. We have one or two very small quibbles to be dealt with in Committee, but that is all. We are entirely behind the principle, so we will not oppose the motion.

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Again, I will not delay the House for long. The motion is at the kernel of the argument about this whole issue. The supermarkets that oppose the Bill, which of course not all do, made it abundantly clear that they thought it was an expensive luxury. The reality is that the figure that has always been quoted is some £5 million, which everybody who is fair-minded would say is a drop in the ocean compared with supermarkets’ profits, let alone their turnover. It is absolutely right and proper that we take the Ways and Means motion through.

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I pay tribute to the work that the hon. Gentleman, the hon. Member for Ynys Môn (Albert Owen) and my hon. Friend the Member for St. Ives (Andrew George) have done on this issue. Does the hon. Gentleman agree that what we are discussing now is the answer to those who raised questions in the previous debate? The provisions in the Bill will pull in money to put in place the regulation that we want to see.

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Yes, of course, and that is the whole point of bringing forward the motion.

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In fact, the £5 million to which the hon. Member for North Cornwall (Dan Rogerson) referred is a minuscule proportion of the rates advantage that large shops have over small retailers. It is a drop in the ocean; there is no argument about that.

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That is why I think this motion should be agreed to—unanimously, I hope. This is important legislation, and the motion is about the House doing what it does best. We are bringing fairness and justice to the trade. Those of us who have studied that trade for some time know that the unfairnesses are legion and that they have grown over time. As the hon. Member for Ynys Môn (Albert Owen) said in the debate on the previous motion, we need to bring some fairness back into the grocery trade overall, and this is the legislation to do that.

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I support the Minister and his opposite number on the Conservative Benches, the hon. Member for Weston-super-Mare (John Penrose). I support the motion and look forward to debating the Bill in Committee on 30 March. The motion relates to clauses 11 and 12 of the Bill, which are central to it. When the Competition Commission produced a report on the issue two years ago, it clearly identified that supermarkets were passing unexpected costs on to their suppliers, which has an impact on the ability of the supply chain to innovate and a considerable knock-on effect for consumers.

As I said, the motion is central to the Bill, which the hon. Member for Ynys Môn (Albert Owen) introduced. I hope that we can make important progress next week, and that the Minister will find ways to hasten the Bill’s passage to ensure that it is enacted before we go for a general election.

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Does my hon. Friend agree that this is a most important Bill for rural constituencies? My constituents who are involved in agriculture are absolutely desperate for a fairer deal when they supply the large supermarkets, and this Bill can enable that. For that, the Ways and Means arrangements in the motion are vital.

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My hon. Friend is of course absolutely right to say that the motion is fundamental. I hope that the Minister has heard the wide support for the Bill, of which I know he is aware, and that he will enable the Bill to be enacted before the general election.

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I rise briefly to echo the points made by my hon. Friend the Member for Stroud (Mr. Drew). This motion is the crux of the Bill. It dispels the myth that the Bill will be costly, a notion that many have propagated, particularly when they have been lobbied hard by the larger supermarkets. It is not going to be costly; it will be financed on a formula that withstood scrutiny and which the Competition Commission itself recommended. It is about fair trading and fairness to the suppliers, and it will give better choice to the consumer.

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The Bill will be very costly to the supermarkets if the ombudsman does its job properly and gives a fair deal to our primary producers, particularly those in the dairy industry in constituencies such as mine, and quite rightly too, because that will be fair.

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As I said in the previous debate, we are dealing with a money resolution and a Ways and Means motion, but the issue is fairness, so the hon. Gentleman is right. However, I believe that the supermarkets, which have adopted the new code, will be fair, that that will benefit our suppliers, and that consumers will benefit as a result.

The Bill is about fair dealing. Some of the supermarkets are already adhering to that, and I think they will all come on board. Tonight I support my hon. Friend the Minister, who is taking the matter forward and who supports the principle. We have great consensus across the House and have united the Front Benchers. I hope the motion is passed tonight and that we can get on with talking about the details in the Bill. As I said, there is much consensus and good will, so let us move that forward.

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Again, I find myself almost in a minority of one, but that will not inhibit me in saying what I am going to say, because I know that what I say is echoed by Sainsbury’s and Tesco and a whole lot of major supermarkets. Why are they major supermarkets? Because they have the confidence of their customers and they deliver good quality at keen prices. The supermarket market is very active, with firms coming and going depending on how they perform. Our successful supermarkets are the ones that operate in favour of the consumer, on behalf of whom I speak unapologetically. Other hon. Members have spoken on behalf of the producers.

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I want to clarify something. The hon. Gentleman said in the previous debate that he thought the Bill had merit, but he now seems to be saying that the whole premise is incorrect. I am intrigued.

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I never said that I thought the Bill had merits; one of my hon. Friends did. If the hon. Gentleman looked at the report of my speech on Second Reading, he would see that I do not find any merit in the Bill.

I am sure that the problem should and could be addressed by the Office of Fair Trading and the Competition Commission. I do not think that the Bill is the solution.

In particular, what I do not like about the aspect of the Bill that we are discussing is the fact that the measure will be financed by a levy on the supermarkets. That levy will be of unlimited extent, as the Minister for Regional Economic Development and Co-ordination said when she referred to the issue on Second Reading. She also said:

“We are determined not to place any unnecessary costs on business, particularly in a period of economic difficulty. That is one of the reasons why we are consulting on the scope, scale and responsibilities of the new ombudsman. We want to make sure that we get this right.”—[Official Report, 5 March 2010; Vol. 506, c. 1164.]

The Government have got the cart before the horse: they should have consulted and thought through the issue before the legislation was brought forward. It should have been sorted out before the Ways and Means motion was brought before us. Under the Bill, if it ever becomes law, there will be no limit to the amount of money that could be spent by the ombudsman, and therefore to the costs that could be imposed on supermarkets and their customers.

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The hon. Gentleman is slightly misrepresenting the formula, which says, from memory, that each of the 11 large supermarkets will contribute 0.005 per cent. of its turnover under the scheme. Those that will pay the most are those that are referred to the ombudsman the most. All those supermarkets accept the code of practice, so they have nothing to fear unless they breach contracts or cases are taken up by the ombudsman. The hon. Gentleman is, I feel, misleading the consumer when he says he thinks that there will be additional costs placed on them, or on the goods. The good supermarkets will take that on board, and we will see fair trading.

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I am grateful to the hon. Gentleman for that intervention. If there are additional costs, I do not see how they will not have to be borne by somebody. If they are not borne by the supermarkets, they will have to be passed on to their customers. The hon. Gentleman refers to the reimbursement formula; I will not trouble the House by reading out the best part of 40 lines in clause 12 that set out the formula in great detail. It is clear from those provisions in his Bill that the reimbursement formula is at large. That is why the Minister said what she did when summing up the debate on Second Reading. There is still great uncertainty about the exact basis on which the money will be raised and recovered by the ombudsman.

Nobody can dispute that any person appointed ombudsman is likely to want to increase their empire, rather than do themselves out of a job. That is the nature of Parkinson’s law.

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Lord Parkinson of Carnforth would be flattered to be thought the author of Parkinson’s law, but those of us of a certain age remember its real author. Nothing has changed since that law was discovered: the instinct for the public sector, in particular, to grow like Topsy, and to use every power that it is given to grow its own empire, is apparent. Indeed, the latest figures that I have seen show that while private sector employment has fallen by about 500,000 over the past year, there has been an increase in public sector employment. Obviously, there are some people in the House who would like the public sector to grow even larger, and obviously—

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Order. Will the hon. Gentleman please come back to the motion before the House?

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Absolutely, Mr. Deputy Speaker. If the public sector grows any larger, it will be even more of a burden on the people who are paying, and the point of the motion that we are discussing is that, ultimately, the people who will pay are the consumers.

As the supermarkets have said, the Bill is misconceived, because it is helping the suppliers and attacking the consumer interests. Some of those suppliers are much larger international conglomerates than the supermarkets themselves. I think it is very sad that the House is not prepared to leave the retail grocery industry alone and let it get on with it, because it is one of the most successful and vibrant parts of our economy. There are many people living elsewhere in Europe, and further afield, who envy us the quality and value that we get from our supermarkets.

I fear that the Bill will enable an interfering ombudsman, rather like a self-financing regulatory authority, to expand an empire and to impose arbitrary penalties and the substantial and expanding costs of his office on the supermarkets. Inevitably, the supermarkets either will be made less competitive or will have to pass on those costs to their customers. In my submission, it is a matter of basic economics, and I hope that the House will therefore reject this Ways and Means motion. If there is a silver lining, it is that if the Bill goes to Committee, we will at least be able to see, when my hon. Friend the Member for Weston-super-Mare (John Penrose) tables his amendments, exactly how much he would like to constrain the Bill, so that it can deliver a leaner and meaner solution.

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I have not heard such a load of rubbish in many years.

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I do not believe that!

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Well, we do hear a lot of rubbish in this place—that is quite right.

In my respectful submission, the £5 million that was posited is a small price to pay to ensure a fair deal for suppliers. Let us cut to the chase. We are talking about small and medium-sized farms, which are at a competitive disadvantage. Typically, they sell milk, for example, to supermarkets, often at cost price. They say, “We carry on doing that because at least there’s a cash flow involved. At least we can more or less pay our bills. There’s not much profit at the end of the year, but at least we can pay our bills. We can do that now, but the next generation will not be following us.”

At the end of the day, by adopting the Bill we are trying to stem the way in which the dairy industry in particular is being decimated by unfair competitive advantages. Other parts of the agricultural industry are affected as well. I think it is a splendid Bill, and I congratulate the Member in charge, the hon. Member for Ynys Môn (Albert Owen), on bringing it to the House.

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I happen to agree very much with what the hon. Gentleman has said. I hear on the grapevine, among dairy farmers, that it is very difficult for them to take a position towards the supermarkets. The supermarkets have so much control over their lives that it is almost impossible for them to resist the basis of the monopoly about which I shall speak in a moment.

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The hon. Gentleman is right. Some years ago, I went to see Lord Bach to complain about the situation. Although I had enough evidence, I did not have names and addresses of suppliers, because they were afraid to supply them. He said, “If you come back with some suppliers who are prepared to stand up and be counted, we can do something.” As I said, however, the point is that at least they are getting some form of cash flow that is keeping them just above water. That is not the basis on which to look forward—

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Order. I am reluctant to intervene on the hon. Gentleman, but he is in danger of moving towards a Second Reading debate. This, actually, is simply about the financing of the arrangements.

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As I was saying, the £5 million, to me, seems a fair figure taken in the round. I fully support the Bill—

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Will the hon. Gentleman give way?

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In a moment! [Hon. Members: “Ooh!] The hon. Gentleman is a serial intervener—Lembit the Intervener, as he is known in Montgomeryshire. I shall briefly finish my point, having been admonished by the Chair. This is a good Bill, and I hope it can see the light of day and make the statute book before we rise for the forthcoming skirmish.

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I am grateful to the hon. Gentleman for indulging my enthusiasm for standing up for the constituency that I love—Montgomeryshire. On this occasion, I simply ask whether he agrees that this small sum provided through the Ways and Means arrangement would not be necessary had the supermarkets taken a more considerate, conciliatory approach towards suppliers, whom they are virtually squeezing out of their livelihoods.

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I think that that is right. I would also add that it would have helped if the Office of Fair Trading had had a few more teeth.

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Has the hon. Gentleman forgotten that, after the foot and mouth disease outbreak, the supermarkets came to the assistance of the dairy industry and offered it more money? The consequence was that the supermarkets were taken to the Competition Commission because it was suggested that they were doing down the consumers.

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Yes, I recall that happening, and I thought it was quite bizarre. The Competition Commission was at fault to take such a stance. Anyway, I support the Bill and I wish it well.

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I rise to support the general principle of the Bill, but I have to say that I am concerned about the mechanics and what I would describe as chicanery in the conduct of procedures of the House. When I see those on the Front Benches taking positions in advance of a wash-up, I begin to smell a rat. I am concerned, although I do not know for sure whether this is going to happen, that—

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Order. I am not asking the hon. Gentleman at this stage to withdraw anything, but he has used terms such as “chicanery” and “smell a rat”. I think that he ought to be a bit more moderate in his language.

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I have used that expression in the past, Mr. Deputy Speaker—

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Order. Not in my presence, I suspect.

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I am more than happy to moderate my expressions, Mr. Deputy Speaker. Let us be moderate and charming in our language; let us admit that there is sometimes an understanding—I am not saying that there is in this case—between the Front Benches, and that is when I say, “Watch out for the silver spoons!”

An important principle is involved. I have listened with interest to other Members, and I strongly believe that free trade is important, as is fair trade. I have seen dairy farmers and, indeed, small businesses in my constituency subjected over and over again to the overarching influence of the uncompetitive strength of the supermarkets. I acknowledge that supermarkets do an enormous amount of good, in terms of what the average person buys and the extent to which they are used, and I understand the argument put forward by my hon. Friends the Members for Christchurch (Mr. Chope) and for Wellingborough (Mr. Bone) on that point, but the reality is that when enormous supermarkets are sited outside small towns, or when they invade them, the small businesses there dry up. In the high street—

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Order. I do not enjoy interrupting hon. Members when they are in full flow, but this debate is about the funding for the Bill; it is not a Second Reading debate.

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I accept your point, Mr. Deputy Speaker, but monopoly is about economics, you see, and about financing. It is the very financing that poses the question: “Who gets what for what?” The bottom line is that £5,000 an hour is nothing for the supermarkets. I would simply say that money speaks. Given the financing and economics involved, the people who suffer are the small businesses and those affected by the use of monopoly power. Farmers, who are often unable to resist the power of the supermarkets because they are so reliant on them, are also affected.

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I am sorry that my hon. Friend and I are not agreeing, but does he accept that the consequence of this Ways and Means resolution will be a financial burden on the supermarkets which will inevitably be passed on to consumers?

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I certainly agree that achieving fairness may turn out to have a cost attached to it, but we need to be aware of the monumental profits made by companies such as Tesco, Sainsbury’s and others and the effect on small businesses, certainly in Stone. That is not to say that I object to the fact that we have supermarkets, but I do object to the fact that there is an on-cost for the smaller businesses and for dairy farmers.

When it comes to Ways and Means motions such as this, it is important to try to find a resolution. This does not mean that supermarkets are going to end; this does not mean that they are not going to create competitiveness. However, this also provides an opportunity for those who have a genuine grievance. I have raised matters such as the cost of milk with the Office of Fair Trading. I spoke to the director-general—or whatever he is called—of the competition tribunal and I am deeply worried that it does not work effectively.

I have some reservations. We saw what happened with Equitable Life, but I am not going to go down that route, Mr. Deputy Speaker. Ombudsmen may or may not have a cost, but they do not necessarily produce all the answers. I strongly support the idea of the Bill, which I hope will work in practice and I hope will not do damage to consumers. Without a doubt, I am in favour of the small businesses and the dairy farmers, and I want to be sure that we end up with those people being properly looked after. It is not protectionism, but looking after people in a fair manner.

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I will be brief. It is a pleasure to follow my hon. Friend the Member for Stone (Mr. Cash). I do not want to talk about the merits of the arguments, although they have been powerfully made. I am sure that the Bill is a good one. The Ways and Means motion will obviously incur a cost to industry, which is part of the debate that arises on the Bill.

We would not necessarily be in this position if, earlier this year, the House had not amended the Standing Orders. We would have had more time for private Members’ business and we could have sat on this—

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Order. The hon. Gentleman has immediately gone out of order. We are talking about the funding of the grocery market ombudsman, not the time allocated for debate or any other matter.

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I apologise, Mr. Deputy Speaker. All I can say is that we just cannot go on like this; it is time for change.

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I am glad that in calling the hon. Member for Stone (Mr. Cash) to order, Mr. Deputy Speaker, you echoed the maxim of the late great Michael Foot, “He can rat, but he can’t re-rat.”

The Ways and Means motion, which is what we are debating, even though we have ranged quite widely, is designed to demonstrate how the ombudsman could be funded by a levy on industry. It has wide support across the House. It will be reasonable and proportionate and it will bring value to producers and consumers. That is why I commend it to the House.

Question put and agreed to.