Groceries Code Adjudicator Bill [Lords]

Public Bill Committee, 13 December 2012.

Clause 9 - Investigations: enforcement using financial penalties

Roger Gale (Conservative, North Thanet)

I remind the Committee that with this we are discussing the following:

Government amendments 2, 3 and 4.

Amendment 45, in clause 9, page 3, line 26, leave out from subsection (c) and insert—

‘(c) that it shall be paid within 28 days.’.

Government amendment 5.

Government amendment 6, in clause 9, page 3, line 34, at end insert—

‘(7) The Secretary of State must make an order—

(a) specifying the amount of the permitted maximum, or

(b) specifying how that amount is to be determined.

(8) The Adjudicator must, within 6 months beginning with the day on which section 1 comes into force, make a recommendation as to the amount that should be specified in the first order under subsection (7) or the method for determining the amount.

(9) Before making a recommendation the Adjudicator must consult any person he or she thinks appropriate.

(10) The Secretary of State—

(a) must have regard to the Adjudicator’s recommendation when making the first order under subsection (7);

(b) may amend or replace an order under subsection (7) only if the Secretary of State has considered whether to do so as part of a review under section 15.

(11) The Adjudicator may not impose a financial penalty in respect of a breach of the Groceries Code that occurs before the first order under subsection (7) comes into force.’.

Amendment (a) to Government amendment 6, after subsection (7) insert—

‘(7A) The Secretary of State must make the order referred to in subsection (7) within 3 months of the Adjudicator making the recommendation referred to in subsection (8).’.

Amendment (b) to Government amendment 6, in subsection (8), leave out ‘or’ and insert ‘and’.

Amendment (c) to Government amendment 6, in subsection (9), leave out ‘must and insert ‘may’.

Amendment (d) to Government amendment 6, in subsection (11), at end add

‘unless the breach started before, and continues after, that date.’.

Amendment 47, in clause 12, page 4, line 22, at end insert—

‘(d) the criteria that the Adjudicator intends to adopt in deciding whether to impose financial penalties under section 9 together with maximum penalty that may be imposed and how the maximum penalty is to be calculated.’.

Government amendments 7, 8 and 9.

Amendment 48, in clause 12, page 4, line 31, leave out from beginning to ‘penalties’ in line 32.

Government amendment 10.

Amendment 57, in clause 15, page 5, line 37, after ‘under’, insert ‘section 9 or’.

Amendment 58, in clause 15, page 5, line 38, leave out ‘that’ and insert ‘the relevant’.

Government amendments 11 and 12.

Amendment 63, page 15, line 36, leave out schedule 3.

Amendment 64, in schedule 3,page 15, line 39, leave out ‘if’ and insert—

‘(1) If the Secretary of State thinks that the Adjudicator’s other powers are inadequate; and

(2) has given due regard to the relevant Ministers in the Devolved Administrations.’.

Amendment 65, in schedule 3, page 16, line 14, at end insert—

(h) consult with the relevant Minister in the Devolved Administrations.’.

Roger Gale (Conservative, North Thanet)

Members will recall that I intended to call Mr Irranca-Davies next. Unfortunately, he is detained for wholly proper reasons on the Floor of the House. I shall therefore call the Minister, and we will take the debate from there. If Mr George is present later, he may wish to speak to his amendments.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

Thank you, Sir Roger. I am delighted that we can start this morning’s sitting with the issue that we discussed on Tuesday afternoon. It is fair to say that this group of amendments relates to one of the most hotly debated topics of the Bill, which is whether the adjudicator should have the power to impose fines from the start. As I said on Second Reading and as the Business, Innovation and Skills Committee acknowledged in its report, the issue is finely balanced. I continue to believe, as I explained in debates on earlier clauses, that the sanction of requiring a retailer to publish information—or, in layman’s terms, the name-and-shame sanction—will be powerful and, in a great majority of breaches, sufficient.

The Committee will be pleased to hear that I have, however, listened carefully to the arguments made on Second Reading and by stakeholder groups that the ability to fine from the outset would give the adjudicator more teeth. It is only fair to say that there was an overwhelming consensus on Second Reading that fines were necessary. I am delighted to confirm that—as I have already intimated to all those Members of Parliament who raised the issue by electronic means and, indeed, in correspondence—I have listened to the clearly expressed voice of Parliament. As Committee members will see from the amendment paper, the Government have tabled amendments to give the adjudicator the power to fine from the outset.

It is important to reflect on the Second Reading debate. Hon. Members will recall that I said that, in my detailed meetings with a range of campaign groups, they had impressed on me the need for the watchdog to have teeth, and I demonstrated the gift—properly declared—that they had given me. I said that

“the dog remains on my office shelf as a reminder that, should we find that stronger sanctions are needed, the Secretary of State will be able to bring in fines quickly.”

As—[Interruption.] The hon. Member for Ogmore points out that this cuddly dog has no teeth, which is accurate.

On Second Reading, the hon. Member for Edinburgh South continued the animal analogy. He said:

“We are in danger of creating this toothless tiger—I have “tiger”, but it could be a dog, I suppose. Let us imagine an old-fashioned circus act. Where is the fear in a circus clown putting his head into a tiger’s mouth, only to have his neck viced by the tiger’s gums?”—[Official Report, 19 November 2012; Vol. 553, c. 336-342.]

The hon. Gentleman regaled us with that very clear imagery, but I want to add that this tiger—alongside this watchdog—definitely has teeth, as Committee members can see. If this were full-size, it would certainly not be the kind of animal that—

Roger Gale (Conservative, North Thanet)

Order. The phrase “toys and prams” springs to mind. It is awfully difficult for Hansard if we have props. The hon. Lady will either have to go into a considerable amount of description, and I would prefer her not to, or we will have to make do without the props.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

Thank you, Sir Roger. Perhaps a small amount of description will allow Hansard to make sense of the proceedings: alongside the small cuddly dog, I have produced a small plastic tiger with teeth from a toyshop to illustrate my point.

Ian Murray (Labour, Edinburgh South)

Sir Roger, you will be pleased to hear that I do not have a chairful of props. Will the Minister reflect on the fact that, now she has decided to put fines in the Bill, she has pulled the rabbit out of the hat?

Jo Swinson (Liberal Democrat, East Dunbartonshire)

The Committee’s reaction says it all. If the hon. Gentleman ever finds that his services are not required by the good people of Edinburgh South, a career in comedy may or may not beckon. However, he will be glad to know, as will you, Sir Roger, that I do not actually have a rabbit to show as a prop.

The change demonstrates that the Government have listened and have recognised that there was significant will throughout the House for introducing the power to fine from day one, which is why Government amendments have been tabled. The hon. Gentleman has tabled amendments 44, 47, 48 and 63, with the support of the hon. Member for Ogmore, which would also have the effect of introducing fines. I agree with their spirit, but the Government amendments are drafted in a more robust way to address the question of how the maximum penalty will be set, which is not in the Opposition’s amendments.

I also hope that the hon. Members will agree not to press amendments 64 and 65. Both refer to amending schedule 3, which we will come to in the schedule stand part decision later on. As schedule 3 refers to the process by which the Secretary of State will be able to come forward with the power to fine, the amendments will be superfluous as the power will be inserted here from day one.

Andrew George (Liberal Democrat, St Ives)

Likewise, I do not have a chairful of props to bring out, but I was concerned about the way that the hon. Member for Edinburgh South appeared to be toadying—if the Committee does not mind another animal metaphor—towards the Minister about this proposal. I have tabled a set of amendments, one of which draws attention to the fact that there is no time limit on the Secretary of State bringing forward the order. I hope that she understands the purpose and the spirit behind that amendment.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

I thank my hon. Friend for his intervention. Depending on the grace of the Chair, he may have the opportunity to move his amendments later today. I do not know whether that will be possible, as it is above my pay grade, but I certainly hope to be able to reassure him on the issue of the timeliness with which the Secretary of State will make the relevant order, because the Government certainly intend to do so in an appropriate amount of time.

I will now discuss the Government amendments. It is important to make it clear that I expect fines to be used as a last resort, only for the most egregious or repeated offences. However, the fact that the adjudicator has the power to impose them will send a strong message to retailers that compliance with the code is not optional. I am confident that the changes will mean that the adjudicator is able to ensure fair play in the food supply chain and keep the industry growing.

There have been reports in some sections of the press—the issue has not been raised in the House—that the amendment would somehow make Britain a less attractive place to do business. I would add to that assertion by saying that almost all business groups other than the large retailers, including the Federation of Small Businesses, the Food and Drink Federation and the National Farmers Union, support the amendment. Indeed, for retailers who comply with the code, which is an existing legal obligation, there will be absolutely no additional burden, as fines could only ever be imposed for a breach of the code. Fines are something that the retailers would have to deal with only if they had broken the law.

Neil Parish (Conservative, Tiverton and Honiton)

The fact that the retailers are not keen on fines at all makes me absolutely clear that they must be there and that how they will be imposed must be absolutely firm. Although we do not want fines to be imposed—they are the last resort—they have to be there firmly in the Bill, and they have to be large enough to frighten some of the very big retailers; otherwise, they will not be fit for purpose.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

I thank my hon. Friend for his intervention. He has clearly stated, not only in the Committee, but in previous weeks, his support for the power to fine. He has been working hard on championing that, and I agree with him. I will come to the scale of the fines later.

Ian Murray (Labour, Edinburgh South)

The terminology that the Minister used was that fines may make it more difficult or less attractive to come to the UK. However, we must make it clear that fines were in the Bill; it was just that they were not in the Bill from day one. Nothing has really changed, apart from the fact that we will not have the time lag.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

The hon. Gentleman is quite right. It was not me who said that Britain would be a less attractive place to do business; that was the charge made in some corners of the press. I do not think—[ Interruption. ]

Roger Gale (Conservative, North Thanet)

Order. I am sorry to interrupt the Minister. I cannot allow private conversations on the Back Benches. There are lovely seats outside for people who wish to go and natter, but they cannot do it in here.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

Thank you, Sir Roger. To pick up on the point about large retailers, I have met their representatives, as I have met campaigners who very much support the groceries code adjudicator and the Bill. In my meeting with retailers, they were confident that they have their code already, that it is working, and that they are discussing matters with suppliers. They were confident that there were no resulting problems, to which I explained that if that really was the case, they would not have anything to fear from the adjudicator, as it may well end up not having much to do. I think all of us in the House would be happy if the adjudicator did not have a lot to do, but let us ensure that we have it in place, so that if things are not as rosy as some would suggest, we are able to put things right.

It is also important to note, as I flagged up on Second Reading, that the introduction of the power to fine has to come with a full right of appeal on the merits of the imposition of a fine, or its amount, if it is then imposed. That is fair, and it is set out, but it would not be the case, if lower sanctions were used, such as the name-and-shame procedure or recommendations, that the full merits right of appeal would apply in those circumstances. The full merits right of appeal would be reserved only for cases where fines were introduced.

Chris Ruane (Labour, Vale of Clwyd)

Will the reporting of the fines and any breaches be done as and when, during the year, and will there be a table at the end of the year to assess who the good guys and bad guys are, as far as supermarkets are concerned?

Jo Swinson (Liberal Democrat, East Dunbartonshire)

As the hon. Gentleman will know, and we will come to this later, an annual report will be produced where the adjudicator will set out the action it has taken. We expect that when an investigation is concluded where a fine is imposed, it is likely that it would be the subject of significant media attention and it would be brought to the public’s notice. It would be up to the adjudicator, if it decided to do so, to couple recommendations or naming and shaming with publishing the fact of the fine. Those matters would all be for the adjudicator to determine, but the annual report, bringing together all the actions that have been taken, will be available for everybody to look at and make comparisons.

Many hon. Members have an interest in and have raised another aspect of the amendments, including the hon. Member for Corby, who made an intervention on Tuesday afternoon about the level of the fines that should be imposed. We hope that the Committee will accept the Government amendments today, which set out the process for how we can specify the maximum penalty. It is important to set out how it will be determined in either primary or secondary legislation, but simply to insert a maximum figure into the Bill without properly consulting stakeholders would not be appropriate. I do not think that there is much appetite for delaying the Bill for that consultation to be carried out.

Neil Parish (Conservative, Tiverton and Honiton)

The Minister talks about stakeholders, and they will naturally be the large supermarkets, will they not? When the Government talk to them, they need to be careful that the supermarkets do not try to ensure that there are no fines. They are not going to look forward to fines, so I want to ensure that we negotiate strongly.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

My hon. Friend makes an important point. I will, I hope, reassure him on two grounds. We do not intend the Government to be part of the consultation process on, or to set, maximum penalties. We hope that the adjudicator will take the lead, because that is the most appropriate way forward. Obviously, there will be parliamentary oversight and the Minister will make the final decision, but the adjudicator will be best placed to carry out the consultation. My hon. Friend rightly said that retailers will be stakeholders, but of course they are not the only stakeholders. Suppliers, others who are involved and have been interested in the parliamentary process, campaigning groups and some third-party organisations will also have a role and can all have input into the process.

Mark Spencer (Conservative, Sherwood)

I seek assurance from the Minister that she expects the adjudicator to conclude that, if a deal goes wrong and a retailer makes a large profit of £2 million by backing out of it, a fine of £500,000 will not motivate them not to do it again.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

The hon. Gentleman makes a good point. All those factors should be taken into account in the consultation process, when the adjudicator looks at how we could create the appropriate level of fines. I reiterate that I do not think that setting out a maximum in the Bill is sensible, which is why if my hon. Friend the Member for St Ives chooses to press amendment (c), I cannot accept it.

Chris Ruane (Labour, Vale of Clwyd)

The point just made is pertinent. If a supermarket repeatedly breaks the rules, should some kind of escalator ensure that they are well and truly punished? So the supermarkets do not think that they can get away with it on economic grounds, they should be punished where it really hurts—in their pockets—as well as being named and shamed.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

We discussed escalation on Tuesday. It is important to remember that the adjudicator will be at the centre of all of this and have a large amount of discretion. I am sure that repeat offences and breaches of the code would not go unnoticed. On Tuesday, I read out parts of the explanatory notes that pointed out that those would be the kinds of things that could be taken into account when sanctions were decided. Whoever the groceries adjudicator will be will no doubt follow these Committee proceedings and I am sure they will have great interest in that being something that they can take into account.

On how we should set the maximum penalty, it is important to listen to some words of wisdom. My hon. Friend, the Minister of State, Department for Environment, Food and Rural Affairs, posed a question on Second Reading—

“will the hon. Gentleman outline how a big a fine he thinks would be appropriate to deter inappropriate behaviour on the part of, say, Mr Tesco?”

The hon. Member for Edinburgh South replied:

“That should be in the hands of the adjudicator…The adjudicator should…be given the power to determine the sanction.”—[Official Report, 19 November 2012; Vol. 553, c. 341.]

They are words of wisdom. The adjudicator is best placed to decide the appropriate maximum fine, with, obviously, the parliamentary scrutiny and ultimate ministerial decision that I outlined earlier.

Lucy Powell (Labour, Manchester Central)

May I ask the Minister for clarification about what happens to the fines once they are received? I understand that they will go into a central pot. How will the supplier get compensation should the situation cause a financial loss? How might that come about?

Jo Swinson (Liberal Democrat, East Dunbartonshire)

It is important to remember the scope of the adjudicator’s remit, which is not about compensation for suppliers; it is about ensuring the code is enforced. Because the code is already legally binding, suppliers have the option— through the courts—of taking a breach of contract claim. That is not an option that is often taken up at the moment; we have talked about the climate of fear, and why that option might not be taken up. But if, for example, after an investigation the groceries code adjudicator found that there had been a breach of the code, and if it had been such a significant breach that the adjudicator actually levied a fine on that basis, the supplier would then have a very strong case in a breach of contract claim, given that the adjudicator—an independent body—had properly investigated and then come to that conclusion. It would, of course, ultimately be for the court to decide.

Therefore, the redress is not something that is done through the groceries code adjudicator, but none the less the very fact that there has been an investigation and a result has been pronounced could be something that would certainly assist with any suppliers who were seeking redress.

Ian Murray (Labour, Edinburgh South)

I would like to follow up the intervention by my hon. Friend the Member for Manchester Central, and my point is also slightly related to the intervention by the hon. Member for Sherwood about the fines. I appreciate that a civil case could be sought by a supplier, but we could be in a situation where a supplier could suffer a loss of, say, £750,000—just to create a figure—and the adjudicator recommends a fine of £750,000, because it is within the maximum amount allowable, and then that money ends up on the desk of the Chancellor of the Exchequer. So the supplier would be out of pocket; the retailer would be neutral, because it has made £750,000 through this deal; and the Treasury would be £750,000 better off. I appreciate that the supplier might have to make a civil claim, but would the Minister consider whether or not any compensatory mechanism could be put in place to ensure that the supplier is better off, whereas the retailer would be neutral and the Chancellor would be up by £750,000?

Jo Swinson (Liberal Democrat, East Dunbartonshire)

I understand the point that the hon. Gentleman is making, but it is important that we retain the role of the groceries code adjudicator, which is to enforce the code. It is not about providing redress; that has to be pursued through alternative means. The fine is a penalty, if it is imposed; it is not something that, in itself, is about redress. It may well be the case, in the example that the hon. Gentleman outlined, that the fine would be less than the supermarket gained from what it had done, but then the redress could be sought through the courts. And then, with the addition of the fine, which is a penalty rather than redress, the supermarket would of course end up worse off overall.

Chris Ruane (Labour, Vale of Clwyd)

On the issue of compensating those who have been done down by the supermarkets, is there any way that anything can be put in the Bill to help those people if they go to court? If we establish a new law and it has been broken, and the farmer or the supplier has lost out financially, is there any way that we can write into legislation something that kind of fast-tracks the case to the court, or gives the farmer or supplier some kind of advantage, not only so that we can do the right thing, but to let the supermarkets know that it will not be easy to get one over on their suppliers?

Jo Swinson (Liberal Democrat, East Dunbartonshire)

As we mentioned earlier, the reaction from some of the supermarkets has been somewhat negative—certainly about the introduction of the power to fine from day one. I think they have come round to the fact that the groceries code adjudicator will be in place and they need to work well with it. However, the very fact that we are bringing forward this piece of legislation sends a very strong message that they will not be able to get one over on their suppliers.

Clearly, the suppliers have the option to enforce the contract. I do not think that it is the role of Government to get too involved in what is ultimately a contractual relationship between two businesses. But as I say, the very fact that an investigation will be carried out and an adjudication will be made massively strengthens a supplier’s hand in any subsequent litigation that they may wish to take.

Mark Spencer (Conservative, Sherwood)

Does the Minister agree that, frankly, we should have faith in the British justice system, and that any retailer that lost a case with the adjudicator would be quite foolhardy to try to defend a civil case that was taken by a primary producer? There might also be costs awarded against the retailer if it tried to defend that case through the courts.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

I am not suggesting that it is straightforward. Enforcing contracts is one of the costs of running a business that all suppliers must bear in mind. We are talking about the investigation powers of the adjudicator. It is important to remember that there is also an arbitration power, which we discussed on Tuesday, and suppliers could choose that route if they wanted to.

Suppliers have various options. They will need to take legal advice, and it is not for the Government to be too involved in that, or to give companies legal advice. However, the playing field is much levelled by the existence of the adjudicator’s investigatory powers, which make it possible to examine issues and gather the information necessary to make a judgment.

As to the maximum fine, I have mentioned that the adjudicator will carry out consultation with stakeholders and make a recommendation to the Secretary of State. The Secretary of State will be required to establish the maximum by order, which will help to ensure that fines can be imposed as soon as possible.

I remind the Committee that the amendment to clause 15 allows the Secretary of State to alter the maximum penalty or its method of calculation as a result of the findings of the triennial review. If problems are found with the way the maximum is set it will be possible to make changes by secondary legislation.

The wording that we are using—

“the maximum penalty…or how the maximum penalty is to be calculated”

is being used because we envisage that the Secretary of State could set a specific maximum amount, which would apply as the same fixed maximum for all retailers; but equally if it is found in consultation that a formula is a better approach then that might be adopted. The fine could be x% of a retailer’s groceries turnover or the value of relevant supply agreements. That is a matter to be teased out in the consultation so that we can get the right penalty structure, which will be subject to review at the triennial review if necessary.

If hon. Members are keen to know more, paragraph 92 of the explanatory notes sets the matter out in more detail. The Secretary of State would set the maximum in one of the two ways I have outlined, so I hope that my hon. Friend will not press amendment (b).

As to amendment (d) to amendment 6, a breach of the code that began before the adjudicator was established, but continued afterwards, as we discussed on Tuesday, would still be a valid subject for investigation and possibly sanctions. I hope that my hon. Friend will feel he does not need to press the amendment.

Various hon. Members raised time limits, to which amendment (a) is relevant. I understand the concern about the fact that the Bill does not set out a time limit for the Secretary of State to make the order. Hon. Members will know that it is not common practice to specify time limits for parliamentary processes in primary legislation, simply because they are not entirely in the Government’s control, and that could lead, in an extreme case, to a Secretary of State being in breach of the law through no fault of their own. If, for example, the time limit were to be set at three months, and there happened to be a general election suddenly—let us hope that that does not happen in an unscheduled way—it might be difficult for the Secretary of State to comply technically with the legislation.

I want, however, to reassure the Committee on the basis of our amendment. The word “must” is important and makes it clear that laying the order is not optional. The Secretary of State cannot receive advice from the adjudicator and decide not to lay the order; it must be done within a reasonable time after the receipt of the adjudicator’s recommendation. What is reasonable might vary depending on whether there is a general election in the middle of the time frame. There will be a reasonableness test.

Simon Hart (Conservative, Carmarthen West and South Pembrokeshire)

On that point, who can challenge that? In what circumstances will someone be able to say, “That is an unreasonable amount of time”? What process will an outside interest be able to follow in order to gain some kind of comfort?

Jo Swinson (Liberal Democrat, East Dunbartonshire)

I know that my hon. Friend is an assiduous parliamentarian, and there will be a great deal of interest in the process of setting up the adjudicator and agreeing fines. If there seems to be an undue delay, I am quite certain that hon. Members will hold the Secretary of State to account. However, if that is not seen to be sufficient—although I wholeheartedly think that hon. Members will be able to hold the Secretary of State to account—there is the option of judicial review, if that is deemed to be necessary.

I assure the Committee that Ministers are absolutely committed to give the adjudicator the power to fine from the outset and that there is no intention to backtrack or delay. I hope that I have explained why, for the reasons that I have outlined, including the period of three months in the Bill is not the right approach. I am happy to give a personal commitment to the Committee that, barring extreme matters outside our control, we will have laid an order within three months of a recommendation from the adjudicator; indeed, I hope that it will be much sooner than three months. I hope that that will satisfy the Committee on that matter.

Amendments 57 and 58 are therefore unnecessary, as they would have effect only if the Secretary of State has not made an order about the maximum level of fine by the time of the first triennial review. Clearly, if we intend to lay an order within three months of the adjudicator’s recommendation, there will be no circumstance in which an order will not have been laid by the time of the first triennial review.

Amendment 45 would require fines to be paid within 28 days. Given that the Bill will already allow the adjudicator to specify the period within which a retailer must pay a penalty, I do not think the amendment is necessary. Such detail is more ideally left to the discretion of the adjudicator. For example, in some cases, they might take the view that a fine should be paid in less than 28 days; equally, they may take into account other factors and say that the period should be longer than 28 days. I understand the sentiment behind the amendment, but I think it is important that the adjudicator is genuinely independent.

On the point made by hon. Members regarding redress, clearly, if an investigation has taken place, that would certainly be helpful to suppliers, not least in boosting their confidence. However, the two processes are separate— the investigation through the groceries code adjudicator, and the particular contractual law. A finding of the investigation will not necessarily be a determination of liability, which will have to be done through a separate claim by the supplier. An investigation may be helpful, but redress is not going to be automatic in any way.

The power to impose financial penalties will strengthen the adjudicator’s ability to enforce the code. I am grateful to hon. Members, campaign groups and other stakeholders who have lobbied hard for the change. It is an important example of how Government can listen. I was struck by a remark made by the hon. Member for Edinburgh East on Tuesday about her experience as an Opposition Member, when she said that this has somewhat restored her faith in the parliamentary process—that something has actually changed. With my five years’ experience as an Opposition Member, I entirely have sympathy with her sentiment; it sometimes can feel like MPs raise issues and they are not listened to. It is important that the Government remain open-minded. If strong arguments are made for which the Committee clearly displays its support, the Government may be prepared to reconsider and make changes. That is what we have done with the Government amendments, and I hope that the Committee will wholeheartedly support them.

Andrew George rose—

Roger Gale (Conservative, North Thanet)

Order. I indicated to the hon. Member for St Ives that I would call him next, and I will do so. The Minister has clearly covered a lot of the ground that the hon. Gentleman’s amendments cover, so the Committee may well feel that at least some of his questions have already been answered. I am sure he will tailor his remarks to new matters.

Andrew George (Liberal Democrat, St Ives)

Thank you, Sir Roger. As I said at the time, when I had to leave early on Tuesday afternoon I did not intend any discourtesy to the Committee. Such things are sometimes unavoidable because of the pressures of the parliamentary timetable.

I agree that my hon. Friend the Minister has covered a lot of the ground that the amendments cover and anticipated many of the points that I intended to make, so I have stripped out at least 10 pages from my notes. There is very little left, and I will tailor my remarks accordingly. I will not pass up the opportunity to echo the hon. Members for Edinburgh South and for Corby, among others, in congratulating the Minister on demonstrating that she had listened to and weighed up the debate. Although those of us who are engaged in the discourses and mechanisms of Parliament often feel as though we are throwing ourselves full tilt at a hard and impenetrable brick wall, the Committee’s deliberations have shown—perhaps because of the cross-party consensus that underlies the Bill—that reasonable arguments are listened to and may influence outcomes, as the hon. Member for Manchester Central said, and I welcome that.

I appreciate that we are talking about a fine point of judgment. My hon. Friend the Minister made the point well on Second Reading that there are risks inherent in introducing fines at the first possible stage. If the adjudicator chose to name and shame an offender—the reputational damage option—rather than to impose a fine, the supermarkets might portray that decision as indicating that they had committed a lower order offence, which was less shameful and would cause less reputational damage than might otherwise be the case. That is a fine point of judgment, but my hon. Friend is right to say that the fines are intended to be a last resort if a supermarket has repeatedly failed to comply.

I turn to my amendments, and I will curtail my remarks in view of my hon. Friend’s comments. In my intervention I made it clear that a cynic might interpret the Government amendments as allowing the Secretary of State to delay making an order as set out in Government amendment 6, which would have an effect similar to that of the previous Government’s position. If we did not introduce a measure that would compel the Secretary of State to introduce an order as quickly as possible, we would not be much further forward. The purpose of the Government’s amendment is to tease that point out. The Minister’s remarks were particularly helpful because she put on record that, barring the interruption of a general election or anything else that is outwith the capacity of the Government to avoid, it is her intention introduce an order within a three-month deadline.

Subsection (8) in amendment 6 states,

“The Adjudicator must, within 6 months beginning with the day on which section 1 comes into force, make recommendation as to the amount that should be specified in the order under subsection (7) or the method for determining the amount.”

I believe the Minister needs to address that point because it was not entirely covered by her comments. I press the point because she may wish to reflect on it.

There are two distinct issues here. One is the amount, and the other is the method for determining the amount. Both of those factors are required. The adjudicator must make clear the amount and the method by which it is determined. There may be circumstances, as the Minister intimated, in which the adjudicator may say that it is a matter for calculation. For example, it may be a percentage of turnover. The hon. Member for Sherwood indicated in his telling and important intervention that supermarkets may profit from illegal and improper actions. In those circumstances, the fine should be a calculation rather than a particular amount. Therefore, there will be circumstances in which both of those factors will need to be brought forward. This may be a technical point, and it may be something that can be easily remedied. There is no dispute between us on this point; I am simply making sure that we have covered all the aspects.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

It may be helpful if I give my hon. Friend some reassurance on that point. These amendments deal with how the maximum penalty will be decided. The adjudicator, as set out in the guidance, will have to publish how they calculate individual fines. There is further protection in the investigation reports, set out in clause 5(2)(c), which states,

“An investigation report must, in particular, specify…the reasons for the findings and any action taken or proposed.”

There would not just be a calculation of the maximum penalty, which will be done through consultation and may be a calculation itself; there will also be guidance on how individual fines will be calculated. On the specific investigation, the report will have to give reasons for the actions that are taken. That should give my hon. Friend the reassurances he seeks.

Andrew George (Liberal Democrat, St Ives)

I am grateful to the Minister for that response. At face value, there appears to be an unnecessary “or” in subsection (8), and I do not think anything would be lost by replacing it with “and.” That is all I am suggesting.

Amendment (c) to amendment 6 is a small point. Subsection (9) states:

“Before making a recommendation the Adjudicator must consult any person he or she thinks appropriate.”

A level of discretion seems to be available to the adjudicator, so applying the word “must” seems unnecessarily dictatorial and is against the general tenor of my approach to the Bill. The more relaxed word “may” is more appropriate, because, ultimately, the word “appropriate” provides discretion. The Government can “must” as much as they like, but the word “appropriate” introduces the necessary discretion.

On amendment (d) to amendment 6, I carefully followed what the Minister said about the circumstances on Tuesday. If a breach had occurred and is continuing to occur when the fines are introduced, my amendment would put the situation beyond doubt. The wording of Government amendment 6 does not put it beyond doubt that breaches that began before the imposition of fines may be considered outwith the time scale of her amendment. I do not think anything would be lost by accepting amendment (d), which would simply clarify the matter and put it beyond doubt. Amendment (d) would in no way diminish Government amendment 6.

I hope my comments, which are shorter than I intended—[Interruption.] I am sure the Committee would love to hear my full peroration, but I will finish there.

Roger Gale (Conservative, North Thanet)

Ordinarily I would now call the hon. Member for Edinburgh South, who moved the lead amendment, to wind up, but under the circumstances it may be helpful if I give the Minister the opportunity to respond briefly to the issues raised by the hon. Member for St Ives.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

Thank you, Sir Roger. I hope to be able to respond to a couple of points on the specific words “and” or “or,” and “must” or “may.”

Amendment (b) to Government amendment 6 would replace “or” with “and” where the adjudicator makes

“a recommendation as to the amount that should be specified…or the method for determining the amount.”

It may already be possible to include both concepts, but that needs to be up to the adjudicator. As I have suggested, the maximum amount may well be a set figure introduced by the adjudicator, in which case the method for determining the amount would not come into force. My hon. Friend the Member for St Ives has mentioned the word “and,” and we are getting slightly tied up in issues that will be set out in the guidance. Equally, the adjudicator might say that the maximum penalty is the higher of £x or a proportion of turnover. The wording of the Government’s amendment enables that to happen; my hon. Friend’s amendment is a little more restrictive because it suggests that both need to be set out. The adjudicator may want to specify a maximum amount and set out how he will do that, rather than specifying a proportion of turnover. I think that is about the adjudicator’s discretion.

That takes us on to amendment (c) to amendment 6 which would leave out “must” and insert “may”. At this point, my hon. Friend wants more discretion for the adjudicator, so instead of it being that the adjudicator must consult any person that he or she thinks appropriate, they may consult. Although this is slightly on semantics, the difference is that we are clear and firm that, in looking at what the maximum penalty should be, the adjudicator should consult. We want consultation, but it is for the adjudicator to work out how they do that. The word “may” suggests that the adjudicator would consult only if they think it is a good thing to do. We definitely want there to be consultation on the maximum level of fines, which has been a contentious issue.

I hope that, with that explanation, the hon. Gentleman may not be moved to press the amendments.

Ian Murray (Labour, Edinburgh South)

We have split this debate over two days, which is quite impressive. We welcome the Minister bringing forward amendments to allow fines to be in the Bill. Indeed, many of the amendments we placed were before the Minister saw the light in this instance, so I do not think that there is need for us to pursue them. In saying that, perhaps we will come back on Report to examine in detail the amendments the Minister brought forward to see whether we may want to make any changes.

The hon. Member for St Ives made some good points and, indeed, the hon. Member for Sherwood and my hon. Friend the Member for Manchester Central stated instances where we may wish to look at how fines are imposed on the retailer. However, as we now have fines in the Bill, and now we are looking only at the technical aspects of the composition and imposition of those fines and the time scales involved in that, I beg to ask leave to withdraw the amendment.

Schedule 3 - Order conferring power to impose financial penalties

Roger Gale (Conservative, North Thanet)

It is the Government’s intention to withdraw schedule 3.

Clause 10 - Recovery of investigation costs

Ian Murray (Labour, Edinburgh South)

I beg to move amendment 46, in clause 10, page 4, line 10, at end insert—

‘(6) Costs do not form part of financial penalties as described in section 9.’.

There is no doubt that, in the Labour party headquarters, there are people furiously scribbling a press release stating that we have defeated the Government in the Groceries Code Adjudicator Bill Committee. May I congratulate my hon. Friends for allowing that to happen? It must have been the power of our arguments that means that schedule 3 has been removed from the Bill. That was a sensible decision.

The amendment is straightforward. It relates to clause 9 as now amended, but it was tabled before the Minister came forward to put the time scales for fines in the Bill. Now that fines are in the Bill, the amendment is even more important. We seek to ensure that any costs, in terms of investigation, that the adjudicator awards against a large retailer do not form part of any financial penalty levied on that retailer.

We appreciate that fines would be used in the escalator fashion only for serious breaches, but it would be quite unfortunate if a retailer were fined for a considerable breach and then the adjudicator said that the fine should be x—based on the parameters set in the Bill—but it will be reduced to a lesser amount because we are also imposing financial penalties on the retailer. Clearly, costs incurred as a result of any abuse should not form part of the penalties. The amendment is straightforward.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

I thank the hon. Gentleman for his amendment. I hope that I can reassure him and the Committee that the Bill as it stands already ensures that costs and financial penalties are treated entirely separately. Whether a retailer is required to pay a financial penalty is independent of whether they are required to pay the costs of an investigation. The two items—costs and financial penalties—serve different purposes and need to be assessed separately. For example, it would not be possible for a retailer to offset part of a financial penalty against its liability for costs. I hope that that provides a degree of reassurance, so that the hon. Gentleman does not feel the need to press his amendment to a vote. Another option is for the retailer to be required to pay costs when there is no fine, because the Bill as drafted initially did not include fines from day one. It may well be that retailers are liable to pay costs even though the adjudicator has taken the view that a breach was not sufficiently serious to impose a financial penalty or fine in addition. Those are different matters for the adjudicator to consider and, as such, amendment 46 is unnecessary and I hope that the hon. Gentleman will be reassured and agree.

Ian Murray (Labour, Edinburgh South)

I am extremely reassured and, therefore, I beg to ask leave to withdraw the amendment.

Clause 11 - Advice

Ian Murray (Labour, Edinburgh South)

I beg to move amendment 23, in clause 11, page 4, line 14, after ‘to’, insert ‘the public,’.

We are now moving at breakneck speed through the Bill. The amendment is again straightforward, but it goes to the heart of what the adjudicator is meant to be doing at this point. The clause gives the adjudicator the ability to give advice on the code to suppliers and large retailers. It is right for that to be in the Bill because it allows a two-way dialogue on issues that might arise. If the adjudicator can take on the role of allowing advice to be sought from large retailers and suppliers, that might negate any need for investigations or any confusion with investigations. Under clause 10, there is an ability for suppliers to have costs awarded against them if they bring vexatious claims, some of which claims—if there are any—could be negated by simple advice from the adjudicator’s office to the large retailers and suppliers.

The Opposition also believe that insertion of “the public” into the clause could be useful. As discussed in Committee, the adjudicator and the code are in place to regulate the relationship between the large retailer and the direct primary producer; that relationship, however, has a knock-on effect for consumers. If the relationship breaks down, or there is a power play by the large retailer on the supplier, then ultimately the consumer could lose out, whether on prices, future innovation or even the products available. While the adjudicator referees the code that deals with the relationship, it is important to remember that that relationship should allow for the public to gain some information on the code.

Mark Spencer (Conservative, Sherwood)

I understand that the hon. Gentleman’s motivation is honourable, but how does he think that the public might have responded during the recent dairy crisis? It was high in the headlines and the adjudicator might have received a number of letters during such a period, so what effect would it have had on his ability to deal with the core problems?

Ian Murray (Labour, Edinburgh South)

That is a good intervention. The adjudicator might have been swamped during that particular issue, which could have prevented day-to-day issues being dealt with. If during such an incident the adjudicator is swamped by the public’s concerns, whether directly or through Members of Parliament—we were all lobbying pretty heavily on that issue—the adjudicator would be given the opportunity to say, “There is a problem here. Let’s portray what that problem is.” Indeed, giving information to the public might have helped in the campaign to have that issue resolved.

I appreciate that there is a potential for the adjudicator’s office to be swamped in such instances, but the other side of the coin is that the adjudicator being swamped by the public may in fact benefit any investigation that might need to take place.

In fact, some third parties are allowed to make representations to the adjudicators, and some of that information may come directly from the public. It is important that we allow the public to be involved in this particular process. We are not saying that the public should have the ability to lobby the adjudicator: clause 11 seeks to permit the adjudicator to give advice to suppliers or large retailers on matters relating to the code, and we are merely suggesting that he may give such advice to the public as well. That advice could take the form of a public advice campaign or a public awareness campaign on certain issues.

George Eustice (Conservative, Camborne and Redruth)

I understand the hon. Gentleman’s intention of trying to get the public engaged, but, given that the adjudicator’s role is primarily to enforce the groceries code, can he explain where he thinks the public can help in terms of determining whether or not the code has been broken?

Ian Murray (Labour, Edinburgh South)

I am not sure that our amendment would involve the public in the code as such; it merely proposes that the adjudicator may give advice to the public. Clause 11, as it currently stands—and we are back to the “may” or “must” argument that we had before—says:

“The Adjudicator may give advice on any matter relating to the Groceries Code to suppliers or large retailers.”

Our amendment would mean that the adjudicator could give advice to the public on the workings of the code. That, in our opinion, would be beneficial. If we think back to question of the hon. Member for Sherwood about the dairy issue that arose earlier this year, under this amendment the public might have been able to get some information from the adjudicator directly about that particular issue.

Mark Spencer (Conservative, Sherwood)

That particular issue highlights the problem: the public will have been aware that the price that was being paid to farmers was too low, but of course there was no actual breach of the groceries code, because that was an agreement that had been made between the relevant parties. The public might confuse what is a negotiated price with what is a breach of the code.

Ian Murray (Labour, Edinburgh South)

That is exactly why the public should be able to seek advice on such issues: if the adjudicator, when contacted, is able to say to the public, “There has not been a breach of the code in terms of the issues that I deal with; here, therefore, are the other avenues that you might want to go down in order to seek remedy,” that sort of confusion would not arise. Perhaps when we reach clause 13, and, subsequently, the new clauses, we will be able to examine some of the issues of what is included in the code, whether the code is kept live and whether intermediaries are able to be included.

Andy Sawford (Labour, Corby)

This particular issue relates to the point made in a previous sitting by my hon. Friend the Member for Manchester Central about the power of the supermarkets. Supermarkets will be very well able to communicate their position to the public—indeed, they do so very effectively—not just on pricing and offers but on their relations with the adjudicator. We ought to recognise that the adjudicator will want to communicate with the public, as well, and to have that relationship with the public, even though, as the hon. Member for Camborne and Redruth rightly says, that is not the adjudicator’s specific role. We should recognise the power of the supermarkets.

Ian Murray (Labour, Edinburgh South)

That is a useful intervention, and fits comfortably with the interventions from other hon. Members about the amendment. We do not want the adjudicator to turn into a one-stop shop for public complaints about supermarkets; we are merely saying that, if there is advice to be given, on a two-way advice street, the ability for the adjudicator to give that advice to the public—and vice versa—should be on the face of the Bill. Can I therefore ask the Minister whether there will be some kind of public website that the adjudicator’s office will run and maintain to give information about what the adjudicator is currently looking at?

Chris Ruane (Labour, Vale of Clwyd)

My hon. Friend the Member for Corby raised a very valid point. The supermarkets have got their fingers on the parliamentary pulse. They employ professional PR people—ComRes is an example—who send questionnaires out to us MPs on a monthly basis, asking, “What do you think about the supermarkets?” There is an imbalance: the intelligence that supermarkets are getting about Parliament—about MPs and what we feel—is far greater than the intelligence that small suppliers and farmers get. Anything that can be done to redress that imbalance will be well received by farmers and suppliers.

Ian Murray (Labour, Edinburgh South)

That is a valuable point. I thought that my hon. Friend was going to suggest that we use off-trolley.com as the website. He has disappointed me. Perhaps I have not given him the credit that he deserves for that intervention. It is about that power relationship. Having the public involved in the process makes it more transparent, more accountable and allows that information flow to be far smoother. It may ensure that any issues that arise are dealt with properly and the related information is properly constituted. Some kind of public-facing adjudication website or information flow would be the way to do it. It is a straightforward amendment just to give the public a stakeholder engagement in this process.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

I very much recognise the spirit of the amendment tabled by the hon. Members for Ogmore and for Edinburgh South. The provision of advice is an important function of the adjudicator which is why clause 11 is in the Bill. Prevention is always better than cure so it is important that the adjudicator can pre-empt some of the problems that might occur and give advice at an early stage. It was suggested earlier in the debate that if claims were brought against suppliers that were deemed to be vexatious, the claimants could be ordered to pay costs. If anyone came to the adjudicator for advice on a potential claim, they would want to discuss that. We all want to avoid vexatious claims. I think there is already enough in the Bill to enable the adjudicator to do that.

The hon. Member for Edinburgh South said that if people have a question and want to know the answer to something, we want the adjudicator to be able to tell them. Of course they will be able to do that. They will be able to do it in a range of different ways. Paragraph 16 of schedule 1 states:

“The Adjudicator may do anything that is calculated to facilitate the carrying out of the Adjudicator’s functions or is conducive or incidental to the carrying out of those functions.”

That would cover the ability to answer questions from members of the public.

It is also important to make this distinction: while educating the public at large can be valuable, they are not the primary audience for the adjudicator. The focus needs to be on business-to-business relationships between suppliers and the large retailers. While I agree with a lot of what has been said about making sure that the public can be informed and can understand the role of the adjudicator—let us not forget that the public have been very involved in lobbying Members of Parliament about this—it is not the primary focus.

My hon. Friend the Member for Sherwood mentioned the pitfalls if it is not sufficiently clear that the key role for the adjudicator relates to business-to-business relationships. He gave the example of the dairy crisis and the deluge of requests that might swamp the adjudicator. In those circumstances we would want the adjudicator to be able to prioritise their resources properly. Those resources are, after all, constrained. There is not a bottomless pit of money. The adjudicator needs to focus on the key areas.

While I agree that being able to answer questions and being able to advise someone who is thinking of making a claim about whether it is worth pursuing or whether it might be deemed to be vexatious is perfectly in order, I was a little bit more worried when the hon. Gentleman talked about launching public awareness campaigns. With a constrained budget that might not be the best use of the adjudicator’s money. I want to see the adjudicator focusing heavily on enforcing the code, so we need to be a little careful about the amendment.

It is also worth reminding the Committee that the adjudicator will be a public officer. They will therefore generally be required to act reasonably if a member of the public requests advice. However, they will obviously operate within constrained resources, and given that the public are not the key audience, it is not necessary to include the words in the amendment. None the less, I give an assurance that paragraph 16 of schedule 1, as well as the general fact that the adjudicator will be a public officer and will have to act reasonably, mean that they will certainly not be prevented from answering questions from members of the public. I hope that that gives the hon. Gentleman some reassurance and that he will withdraw the amendment.

Ian Murray (Labour, Edinburgh South)

I appreciate what the Minister says about the adjudicator looking at a purely business-to-business transaction, but it does have a consumer impact, and it is not technically just a purely business-to-business transaction in the sense that there is no consumer involvement whatever. That was the main reason for the amendment.

On public awareness, I did not envisage television adverts like those we used to have in the 1960s and 1970s or that the adjudicator would be dealing with Government public awareness campaigns. I was merely responding to the dairy example raised by the hon. Member for Sherwood. That would have nothing to do with the adjudicator and the code because there was no breach, but if there was that level of public awareness, with people swamping the adjudicator, the adjudicator would be able to advise people that no code had been breached and would not, therefore, have to deal with the issue.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

It might be helpful to mention a point I forgot to touch on in my remarks. There will be a website, and the public will be able to see various pieces of information, such as investigation reports, the guidance that has been put together and the annual report. That will all be in one place on the website, and I think that that will help to address some of the issues the hon. Gentleman has raised.

Ian Murray (Labour, Edinburgh South)

I was just about to push the issue to a vote, but we now have an assurance that there is a website. May I suggest that the Minister considers off-trolley.com? Given that I had also not realised the direct connection with paragraph 16, which gives the adjudicator the power to take up some of these issues, I beg to ask leave to withdraw the amendment.

Clause 12 - Guidance

Andrew George (Liberal Democrat, St Ives)

I beg to move amendment 39, in clause 12, page 4, line 25, at end insert

‘including monitoring compliance with the Groceries Code.’.

Roger Gale (Conservative, North Thanet)

With this it will be convenient to discuss the following:

Amendment 41, in clause 14, page 5, line 12, at end insert—

‘(d) the Adjudicator’s assessment of large retailers’ compliance with the Groceries Code.’.

Amendment 36, title, line 2, after ‘Code’, insert ‘monitoring it’.

Andrew George (Liberal Democrat, St Ives)

We are accelerating the pace, and it is my intention to keep that up. These three amendments are intended to address the adjudicator’s role in monitoring not only the operation of the code but the context in which it operates.

In my parliamentary career, I have never been able to fathom why amendments are debated in the order they are, and not necessarily in what I would consider a logical, clause-by-clause order, or why those relating to one clause are debated with another clause. Equally, my amendment 36 is found right at the end of the amendment paper, even though it refers to the very first line of the Bill—indeed, the title. That aside, all three amendments, taken together, address the adjudicator’s monitoring role.

As I said in earlier debates about the adjudicator’s purpose, it is a great pity that the supermarkets had not embraced the introduction of an adjudicator, because it is in the interests of consumers and, ultimately, of the supermarkets. Had the supermarkets embraced the adjudicator, they could have seen that role develop into that of a fair trade regulator. The adjudicator would produce annual reports and could ultimately give charter marks that stood outside the stores to reassure customers that the supermarkets were fair trade retailers.

I do not mean “fair trade” in the sense that supermarkets put at the end of some aisles a sign for fair trade items or place them in certain locations, and point a finger at themselves and say, “We are good boys and girls, really”. It could be an ethos that would unpin the entire actions of retailers, something that they could extol and which would independently be verified by the groceries code adjudicator or the fair trade regulator, as I would like the role to develop.

That is the context in which the amendments should be considered. The role of the groceries code adjudicator would be not only to encourage compliance and enforce the grocery code, but to monitor compliance with the code. Under the Bill, at present, the role is only to encourage and enforce the code, and the Secretary of State will monitor how the adjudicator will bring about compliance with the grocery supply code of practice.

We are missing a step, because I want the adjudicator to be able to state their view of whether the retailers are complying with the code and whether that has led to a reduction in the transfer of risk and unexpected costs, the term used by the Competition Commission, and justifies the setting up the code and the role of adjudicator. That role is not required of the adjudicator, yet the Secretary of State will review how well the grocery code adjudicator has operated. We are missing a step, which is to review the retailers’ general compliance with the code. I tabled the amendments for that purpose, because it would be sensible of the Government to accept them as they would empower the adjudicator to have that over-arching brief.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

I thank my hon. Friend for tabling the amendments and for enabling further discussion of monitoring compliance with the code. The amendments would explicitly extend the adjudicator’s role to monitoring compliance, but he will be aware that that is already the responsibility of the Office of Fair Trading under section 162 of the Enterprise Act 2002 and article 10 of the Groceries (Supply Chain Practices) Market Investigation Order 2009. They provide an explicit and statutory duty on the OFT, and to insert into the Bill a parallel duty on the adjudicator would create duplication and would not be the best use of public resources.

Under the Bill, the role of the groceries code adjudicator will be to enforce the groceries code and encourage compliance with it. In the course of taking such action, the adjudicator will do many things, including carrying out arbitrations and investigations, giving advice, publishing guidance and producing an annual report. Indirectly, such activities will provide information about compliance with the code. When the adjudicator undertakes an investigation, the findings will obviously determine whether a particular retailer is breaching the code. The annual report will bring together in published form and in detail all the arbitrations and investigations that have been carried out. The adjudicator will report on various aspects of how the code is being complied with.

I direct the Committee to paragraph 56 of the explanatory notes, which states:

“Each annual report should therefore contain information which is useful to the Office of Fair Trading in monitoring the Groceries Supply Order and the Secretary of State in reviewing the Adjudicator under clause 15, as well as to users of the Groceries Code generally.”

Information collected by the adjudicator will be helpful, but we should not duplicate a requirement of monitoring compliance with the code. That is a power for the OFT. It is important to keep those two powers separate, although, as I said, there is information that may be useful to the OFT.

Andrew George (Liberal Democrat, St Ives)

That clarification is helpful. However, it raises the question of the nature of the relationship between the adjudicator and the OFT. I am not sure how the OFT could undertake the monitoring role without having private conversations with the adjudicator. The adjudicator will not only have the published material but will have to provide a lot of private material to the OFT. In effect, it will be ghost-writing the OFT’s monitoring report.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

My hon. Friend mentions the information that the OFT would require to monitor the code properly. Of course, it already has a great deal of power to require information. It has a general duty to monitor the operation of the order and consider whether that needs to be changed. Article 7 of the 2009 order requires retailers to provide the OFT with information to monitor and review the operation of the order, so the OFT already has powers to get that information. All I am saying is that what the adjudicator can provide will be additional and helpful. I am sure that in the light of published investigations, the OFT will take an interest in progress and in the findings that have been made as it undertakes and fulfils that general duty. The OFT has the ability and the powers to do that, and it is assisted by the annual report. If the groceries code adjudicator has information such as my hon. Friend mentions in addition to the published reports, the Enterprise Act 2002 allows it to pass further information to the OFT. I hope that reassures him.

The triennial review provides another point at which the adjudicator’s effectiveness at enforcement of the code will be considered. That will also provide information about how the code is complied with. I come back to my main point, which is that the responsibility lies with the OFT. The adjudicator can certainly assist in some ways, but it is best not to duplicate that responsibility, which would cause confusion and not be the best use of resources.

Ian Murray (Labour, Edinburgh South)

My point is related not directly to the amendments but to the clause itself. To avoid duplication, will the Minister consider removing that power from the OFT and giving it to the adjudicator? Has the Minister or the Department considered that move as the referee comes in?

Jo Swinson (Liberal Democrat, East Dunbartonshire)

It is appropriate for the OFT to retain that power because it is well placed and resourced to do so. The groceries code adjudicator that we are setting up will have a narrow set of functions. The competition authorities are best placed to enforce and monitor compliance with the orders that they have brought into being. I think there has been a lot of agreement in the House on that principle, including from the previous Government. The point has been made and, if nothing else, considered in this short debate in Committee, but the Government’s firm view is that it is right for the OFT to have the remedies, as it is a strong organisation.

The competition landscape is obviously changing, and the Competition Commission and the OFT will be merged into the Competition and Markets Authority, but that is the right place for the compliance functions to lie. That is not to undermine or belittle the important role that the adjudicator will have in encouraging retailers to meet their legal obligations under the code by using its investigative powers. I hope that I have been able to reassure my hon. Friend the Member for St Ives, and that he will withdraw the amendment and we can move on.

Andrew George (Liberal Democrat, St Ives)

I am grateful to my hon. Friend for her comments on my amendments. Clearly, I must reacquaint myself with section 162 of the Enterprise Act 2002 in order properly to reflect on her comments. I am grateful to her for offering to give it to me while I am speaking, but I will reflect on it later. However, on whether the adjudicator or the OFT undertakes the monitoring role, frankly, I do not mind who does it. It could be the adjudicator, the OFT or Father Christmas, as long as that function is undertaken by someone.

I am afraid I am going to say something critical of the OFT. My main concern is that those who have been involved in the pursuit of what we have always argued is necessary regulation of the sector and the supply chain have been monumentally disappointed by the reaction of the OFT over the past decade. It is only as a result of the phenomenally professional work undertaken by the Competition Commission, not the OFT, that we are where we are today. Quite frankly, if it was left to the OFT, we would still be light years away from the sort of sensible measure we have before us. Nevertheless, I hope that the reformed OFT with the adjudicator embedded in it will recognise the import of its role, that that relationship works well and that the monitoring role will draw regulation in the direction that I indicated earlier.

Finally, the Minister mentioned article 7 of the 2009 order. In fact, the order refers only to the supply of information by retailers to the OFT, not to the adjudicator—or to the ombudsman, as it would have been at that time. Nevertheless, it has been useful to advance the point. I hope that the Government will consider it further and ensure in their conversations with the OFT and the adjudicator that the important monitoring role will be recognised and acted on in the way I have described. I therefore beg to ask leave to withdraw the amendment.

Ian Murray (Labour, Edinburgh South)

I beg to move amendment 49, in clause 12, page 4, line 37, at end insert

‘including appropriate Ministers from the Devolved Administrations.’.

Roger Gale (Conservative, North Thanet)

With this it will be convenient to discuss amendment 54, in clause 15, page 6, line 14, at end insert—

‘(h) the relevant Ministers of the Devolved Administrations.’.

Ian Murray (Labour, Edinburgh South)

I thought that we were going to debate this clause between just the two of us, Sir Roger. What a good debate that would have been. Welcome back everyone after a short break.

Amendments 49 and 54, it is no surprise to hear, are straightforward. The Minister’s generosity will certainly be tested with them. Amendment 49 is to clause 12. Where the amendment would be made, it currently reads:

“Before publishing guidance under this section the Adjudicator must consult any persons he or she thinks appropriate.”

We understand that that is a fairly wide provision, and it would be useful if it specifically said that the consultation should include the appropriate Ministers from the devolved Administrations. I am not the biggest proponent in this place of the Scottish National party, as you will understand, Sir Roger, but it is important that, given this is a UK-wide Bill, the devolved Administrations of Northern Ireland, Wales and Scotland have the ability to comment on the guidance or to try to influence the adjudicator in the consultation on that guidance, purely because they may have instances that are geographically significant or geographically important to them.

Amendment 54, which is in the name of my hon. Friend the Member for Ogmore, would include the relevant Ministers in the devolved Administrations in the list of people who would be consulted in the review. On the review, clause 15 currently states:

“In carrying out a review, the Secretary of State must consult—

(a) the Adjudicator;

(b) the Competition Commission;

(c) the Office of Fair Trading;

(d) the retailers mentioned in Article 4(1)(a) and (b) of the Groceries Supply Order;”—

that is the top 10 largest retailers—

“(e) one or more persons appearing to the Secretary of State to represent the interests of suppliers;”

“(f) one or more persons appearing to the Secretary of State to represent the interests of consumers”—

which both seem sensible—and

“(g) any other person the Secretary of State thinks appropriate.”

Clause 15(7)(g) is wide enough to cover the devolved Administrations, but it is important that the relevant Ministers in the devolved Administrations are mentioned specifically in the report, so they can have an input into the review process and the published guidance.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

I am sure it would have been a delightful debate, had it just been the hon. Gentleman and yourself, Sir Roger, but I am none the less pleased that we have a much fuller complement this afternoon, although it is not an entirely full complement.

I thank the hon. Gentleman for his amendments. As the Committee will be aware, both he and I have a particular interest in matters north of the border, because we are both MPs for Scottish constituencies. I think we would all agree that it is important that the devolved Administrations are adequately consulted where that is appropriate.

I want to put it on record that we are very grateful for the support that we have had in dealings with the devolved Administrations as we have come forward with the Bill. We have been looking at this issue for some time, because, as hon. Members will be aware, it was a draft Bill in the first Session of this Parliament. Officials have been in regular contact—roughly monthly—with officials from the devolved Administrations. We gave evidence to the Northern Ireland Assembly Committee on the issue. The Scottish Government confirmed earlier this year that no legislative consent motion is needed. We have certainly involved them at the stages of the Bill’s development. At ministerial level, we have had a formal write round on more than one occasion to ensure that they are well abreast of what we are doing.

The amendments raise an important point, but there is a difference between whether it is important to consult and whether it should be a statutory duty, with devolved Administrations named on the face of the Bill. I would reject that part of the approach because the groceries code is a non-devolved issue, as it is about competition law, and that matter is reserved. Therefore, the adjudicator has no formal responsibilities to the devolved Administrations. In that case, a statutory duty to report to such bodies would not be appropriate and could muddy the waters around the adjudicator’s role. It could suggest, for example, that the devolved Administrations had some kind of oversight role for the adjudicator, when they do not have powers to control either the code or the adjudicator.

I hope that the Committee is reassured and satisfied that the adjudicator will work closely with the devolved Administrations where appropriate, considering their interests carefully. The Government’s approach up to this point helps set the tone for that engagement, which we would expect the adjudicator to continue. As the hon. Gentleman said, the drafting as it stands allows both the Secretary of State and the adjudicator to consult any other person thought appropriate. It would be natural that that would include the devolved Administrations, so that their views could be considered under the provision. Specific requirements to consult them are unnecessary, and because of the issues on devolution and reserved matters that I have mentioned, it would not be appropriate to include such requirements in the Bill, in primary legislation. I hope the amendment was offered in a probing spirit, aimed to make sure that the devolved Administrations are to be involved, as they have been up to this point, without the formality of a statutory duty.

Ian Murray (Labour, Edinburgh South)

These were indeed probing amendments, for the simple reason that the Scottish Government in particular do not have a track record at the moment of consulting other organisations, even when they say they have, whether that be this place, the European Union, or the Bank of England Monetary Policy Committee. I thought it was important to make sure that the devolved Administrations had been involved in the process, and that that was on the record. I take reassurance from the fact that, as I said, the Bill gives the Secretary of State power to consult the devolved Administrations, both on the guidance and on the review process. I hope that the message to the Secretary of State from this short debate is that we hope the devolved Administrations are involved. Given the Minister’s reassurances, I beg to ask leave to withdraw the amendment.

Ian Murray (Labour, Edinburgh South)

I beg to move amendment 50, in clause 12, page 4, line 39, leave out ‘6’ and insert ‘3’.

This is a straightforward amendment. We had a long debate on Second Reading about the haste with which we wish to see the legislation getting Royal Assent and appearing on the statute book. I had a wholesome discussion with the hon. Member for St Ives—prior to my complimenting him on his lifetime’s work of getting the Bill this far—on whether it was the previous Government or this Government who were responsible for that delay. I am glad that we are now in a position to be able to take the Bill forward after it has come from the other place.

The amendment’s purpose is to reduce the amount of time that it will take the adjudicator to bring forward the guidance from six to three months. I appreciate that in today’s earlier debate, the Minister suggested that the guidance for fines was at six months because there may be a general election—on this side of the House, we hope that that happens sooner rather than later, if the coalition decides that its marriage of convenience needs to collapse. If the time for getting the guidance together was changed to three months, a greater focus would be given to the adjudicator and all the bodies that would be involved in bringing the guidance together, so that we could try to get the adjudicator up and running as quickly as possible. Therefore, the purpose of this probing amendment is to get reassurance that the work will be done quickly.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

I think the intention of all parties is to make sure that the adjudicator is up and running and able to discharge their duties without delay. We all want to see that. The hon. Gentleman said that we want to see this matter proceed with haste. That is fair. However, it is important that we do not do so hastily, if I can make that distinction. That is why I reject his amendment to shorten the period in which the adjudicator has to publish their guidance from six months to three months. Three months is an overly ambitious period if the adjudicator is to be thorough in their consultation on what should go into the guidance. The guidance will be an important piece of information for all the parties involved, whether they are retailers, suppliers or even, as mentioned in previous discussions, interested members of the public. We need to make sure that it is absolutely right if it is to be the cornerstone of subsequent investigations.

Public consultations typically last between 10 and 12 weeks, although the Government’s guidance shows that if there has already been extensive consultation or there are extenuating circumstances, consultations can have a shorter time scale than that. A wide range of issues will be considered in the guidance that the adjudicator publishes, therefore we want it to have the full amount of time for public consultation. If a consultation lasted for 10 to 12 weeks, the amendment’s three-month time scale would be overly restrictive. Time is needed to draw up the consultation guidance, to review what has been sent in and to create the finalised guidance for publication at the end of the consultation. A six-month time scale allows some weeks before the consultation to draw up the guidance. It allows time for a thorough consultation, and to bring forward the finalised guidance. A three-month time scale would not allow that.

It would be a shame if the adjudicator’s guidance was unworkable or ineffective as a result of undue hastiness. I therefore encourage the hon. Gentleman to withdraw his amendment. Let us make sure that this proceeds with haste, but not in a hasty manner.

Ian Murray (Labour, Edinburgh South)

I appreciate the Minister’s comments. We want haste, but we do not want to be hasty. That is good terminology. I want to draw a parallel with the shares for rights proposal in clause 23 of the Growth and Infrastructure Bill, which will be before the House for Third Reading and Report stage on Monday. It was announced by the Chancellor at the Conservative party conference, there were six weeks of consultation and a major piece of legislation appeared not long afterwards. The Minister says she wants this to come forward in a proper fashion to get it right. The unworkable nature of the shares for rights clause in that Bill shows that the Minister is right. We do not want to just pick an idea off the shelf, hastily put it together and make something, in her words, unworkable.

I will not press the amendment. I am reassured that six months is about right. I do not think the Minister said that six months would be the maximum, so there would be nothing to stop the adjudicator from publishing the guidance sooner, if that is the case.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

The hon. Gentleman is absolutely right. The adjudicator must publish guidance within six months. If the adjudicator felt that proper consultation had happened, there would be nothing to stop their publishing earlier. The clause gives the adjudicator the opportunity to use that six months if it is needed.

Ian Murray (Labour, Edinburgh South)

I am delighted for that clarification and reassurance. I hope that the adjudicator, the Secretary of State, the Minister and everyone involved in this process will take on board the will of the entire House. We want this to happen as quickly as possible. Perhaps that six month maximum could be reduced if the Government are able to put together in a proper fashion a shorter, more sensible time frame. On that basis, I beg leave of the Committee to withdraw the amendment.

Clause 13 - Recommendations to Office of Fair Trading

Andrew George (Liberal Democrat, St Ives)

I beg to move amendment 16, in clause 13, page 5, line 3, at end add—

‘(2) In considering such changes, the Adjudicator shall review the territorial extent of the Groceries Code, especially in relation to the activities of large retailers outside the United Kingdom, such activities to include supplier trading practices and activities undertaken by the subsidiaries of large retailers.’.

This amendment ought to be debated alongside amendment 40, which we debated with clause 4. In some sense, it is a pity that the amendment cannot be debated again in the context of extending the scope of the adjudicator’s responsibility to overview changes to and powers in the code to the order.

Amendment 16 would expand the scope of who has to comply with the code. I have raised the issue in the debates on amendments to clause 4. It is inevitable that over time, retailers will look at the regulations that apply to them and seek to evolve their supply chains to adapt to the circumstances that they find themselves in; it is, I suppose, the equivalent of tax avoidance. It is necessary for the adjudicator to be able to update who needs to abide by the code. It is also necessary for the adjudicator not to be caught in the straitjacket of dealing merely with the relationship between a final supplier and a supermarket. If the final supplier is effectively a subsidiary or company that has been set up by the supermarket in order to keep the supermarket’s own hands clean from how the subsidiary behaves, either in the country in which the supermarket is purchasing its food supply or in this country, that can rather undermine the very spirit of what the adjudicator is attempting to achieve.

The extraterritorial action of retailers need to be included; I have mentioned Asda’s subsidiary, IPL, and Tesco has an internal department called Group Food Sourcing. Sainsbury’s has independent companies such as Chingford that source products for and sell only to it. Fortunately, the order will contain a definition of buyer, which will, hopefully, include such entities, and I hope that the Minister will confirm that that is the case; the purpose of the amendment is to probe the issue. The adjudicator needs to be able to recommend new entity organisations to abide by the code.

Previously, some retailers would source from two or many more suppliers and therefore negotiate with a number of suppliers; for example, if retailer X used to source apples from suppliers A, B and C. Now, however, in many circumstances, it appears that retailers have set up subsidiaries to do that for them. When retailers outsource 100% the purchasing of a particular product, it is the supplier that sources on behalf of the retailer. That supplier now has the possibility to abuse buyer power by sourcing all the retailer’s requirements under the cloak of being a separate company. Such companies need to be included within the scope of the code. I hope that my hon. Friend the Minister agrees and will reassure me that mechanisms are available to avoid such attempts by supermarkets to avoid their responsibilities under the code, which I am sure will happen.

Ian Murray (Labour, Edinburgh South)

The hon. Gentleman will not be surprised to hear that we support his important amendment. I am disappointed that he has tabled it merely as a probing amendment, because it gets to the heart of some of the issues that are still outstanding in the Bill. We are pleased that third parties’ anonymity is now in the Bill, but we need to deal with the intermediaries and the setting up of subsidiaries by the major supermarkets. There is a strong international perspective and the adjudicator has to have the powers to be able to look at that. The territorial extent of the Bill needs to at least be kept under review to enable some of the issues to be resolved.

Perhaps the Minister has the figures for the UK supermarkets; I do not know what proportion of their buying is overseas. I imagine that at certain times of the year they import a substantial amount of the goods that we buy in the shops. The code itself came from the Competition Commission report in 2008, which stated that large retailers were known for transferring excessive risk to suppliers. Such risk is amplified for a third party in a developing country. ActionAid has been vociferous in its lobbying of the Committee on that issue and looking after developing countries and third-world suppliers. It has provided data on case studies, one of which concerned a cashew nut grower in India who had packaged an order for one of the major supermarket clients in the UK. The client then decided that they wanted different packaging and the grower was stuck with the order.

Cashew nut growers in India do not seem to me to be the type of supplier that can withstand supplier arrangements being changed at the last minute. That case was one of the major pieces of evidence that went to the Competition Commission, which led it to conclude that large retailers were known for transferring excessive risks to suppliers. That then feeds into progress in the supply chain and the pay and conditions and innovation that third world and developing countries are able to put in place. ActionAid has given us examples of labourers being pretty badly treated. There could be a number of reasons for that, but one of the reasons given is that supermarkets have driven down costs so much that the workers who are producing and supplying the supermarkets are not able to have breaks and are not treated properly because of the terms and conditions. It is hugely important to look at the territorial extent of the clause and to give the adjudicator some power to examine the issues and take them forward if necessary.

The subsidiary issue is also worth exploring. I raised that issue directly with the British Retail Consortium. A large retailer can set up a subsidiary in this country or in another to do all the buying for particular items, or indeed for all its items. The relationship would therefore be between the large retailer and the subsidiary, rather than between the large retailer and anyone who was supplying any of their goods. The British Retail Consortium said that that would already be covered by the code and that it would be unlikely that that would happen. However, the hon. Member for St Ives has given examples where that might not be the case. The adjudicator will be refereeing the relationship between the large retailer and the first-level primary producer. That first-level primary producer or supplier could be a subsidiary based in another country and would not be able to be covered by the code.

If the large retailer were to set up a subsidiary in another country, which might not even be in Europe, to buy apples from Apple X Ltd, the relationship with Apple X Ltd would be through the subsidiary to the supermarket or the large retailer, and not the supplier of apples sitting below Apple X Ltd. So territoriality and whether the subsidiary element of large retailers would be covered by the code is important. Hopefully, the Minister will say that the code allows the direct supply chain to be covered by the code and that the hon. Gentleman’s very good probing amendment allows us to look at some of those issues. Or perhaps she will come back on Report not with an amendment to the Bill, but certainly with some analysis on how the measure would work in practice. The large retailers are wily old chaps who will do anything they can—not to circumnavigate the legislation; I would not be that cruel to them—to affect the impact on their profitability and efficiency. They may decide that this is a good way for them to go.

On the point about subsidiarity and the large retailers, there is an issue on the other side. Many of the primary producers and first-level supply chain suppliers involved in that direct relationship are sometimes bigger than the retailer. Coca-Cola and Kraft are probably bigger than most of the retailers, if not all of them put together. We are legislating for that relationship as well. That is a relationship whereby the very large supplier may be powerful in conjunction with smaller large retailers as defined in the Bill. Given the subsidiarity requirements, in that case we would be protecting Coca-Cola’s relationship with Iceland, for example, but we would not be protecting the Indian cashew nut grower in relation to Sainsbury’s. There is a bit of a dynamic shift in the Bill. I would welcome some comfort from the Minister on the point of the subsidiarity and territoriality of the Bill.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

There has been a little discussion about intermediaries, but I am sure, Sir Roger, that you would not want me to stray on to that territory until later in our proceedings—perhaps on Tuesday morning—when we reach the relevant provisions. I shall therefore focus my remarks on subsidiaries.

The amendment tabled by my hon. Friend the Member for St Ives would require the adjudicator, when recommending changes to the code to the OFT under clause 13, to consider the territorial extent of the code and the activities of the large retailers outside the UK. I do not think that the amendment is necessary. Importantly, article 4 of the Groceries (Supply Chain Practices) Market Investigation Order 2009 already requires large retailers to procure that their subsidiaries—whether or not in the UK—comply with that order, which includes incorporating the code into their supply agreements. Article 4(4), which is in part 2 of that order, states:

“Each Designated Retailer will procure that its subsidiaries comply with this Order as if they were themselves bound by them”,

so such protection is already in place. In addition, article 5 of the order requires that the code is incorporated into supply agreements, so any subsidiaries involved in buying activities would be required to have the code incorporated in such agreements.

There is further protection in clause 22 of the Bill, which makes it clear that

“‘large retailer’ means a designated retailer as defined by Article 2 of the Groceries Supply Order or a subsidiary of a designated retailer”.

Subsidiaries are therefore covered by the code, regardless of whether they are based in the UK.

Andrew George (Liberal Democrat, St Ives)

I am grateful to my hon. Friend for highlighting those points. Perhaps I should have expanded on the word “subsidiary” when I was moving the amendment, but how does she define “subsidiary”? We suspect, as the hon. Member for Edinburgh South suggested, that these are wily people who have the bottom line very much in mind. If they think there is a way of redefining this issue and finding a way around it, I am sure that they will.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

My hon. Friend posits the suggestion that some of the supermarkets might be tempted effectively to use another company that is not their subsidiary. He gave an example involving apples and suggested that a company that was not the subsidiary would do all the buying, and therefore be able to put the thumbscrews on the next stage in the supply chain. The definition of “subsidiary” is clearly set out in law in Companies Acts, so the key point is whether the company at the top controls the subsidiary, which would ultimately be tested in law. During the two years for which the order has been in place, there has been no evidence that such practice has been happening, but if there was evidence that that type of thing was going on, the OFT and the Competition Commission could consider whether the order needed amending. They could do that independently, without any recommendation from the adjudicator, but we do not anticipate that being necessary.

It is important that this clause on recommendations is clear and broad, and that it covers absolutely everything that the adjudicator may want to include. It states:

“If the Adjudicator considers it appropriate for any changes to be made to the Groceries Code, he or she must recommend them to the Office of Fair Trading.”

The power proposed by my hon. Friend’s amendment is certainly not prohibited by that wording, and singling out one specific aspect of the code would place that on a different level and highlight that we might expect a problem in that particular area, which could give it more prominence than any other aspect that the adjudicator may suggest.

It was helpful that my hon. Friend said that subsidiaries could cause a problem—his hypothetical has been posited—but that is not necessarily something that we are expecting. It is ultimately for the OFT and the Competition Commission to decide whether, having looked at the facts, a change is appropriate in the context of their competition powers under the Enterprise Act 2002.

I hope that my hon. Friend is reassured that the adjudicator will be able to make recommendations as it sees fit and that the OFT will have a responsibility to consider those recommendations in line with its duties under the 2002 Act. If a change is needed, that can certainly happen, and I hope that that explanation is sufficient for him to feel able to withdraw his amendment.

Andrew George (Liberal Democrat, St Ives)

I have such admiration for the Minister that if she is reassured, I am reassured. I am also reassured that there is no method by which the supermarkets might sidestep their responsibilities under the code by setting up bodies or organisations, or by using their relationship with other companies—be they subsidiaries under defined law or otherwise. The fact that she believes that the amendment is unnecessary is reassuring.

As I have done following our consideration of my other probing amendments, I will leave the Minister with a couple of thoughts on which the Government might wish to reflect. First, she has referred on several occasions to wishing not to constrain the adjudicator, but rather to give it as much discretion as is reasonable. It might be useful for the Government and their lawyers to enable the adjudicator to be given sufficient discretion so that it is nimble, capable and able to chase down any attempt by supermarkets to sidestep their responsibilities. At this stage in the Bill’s passage—this is the case for any legislation, but certainly for legislation such as this—we are attempting to anticipate circumstances in which those who have sought to resist the imposition of these regulations are able to employ the highest paid lawyers to avoid working under it. We need to ensure that we have anticipated their attempts to avoid their responsibilities by being as clever as they are, or wish to be.

My hon. Friend highlighted importance of the recommendations that the adjudicator can make to the OFT. My attempts on amendment 40 have not been successful—at least not so far—but given that she is saying that the adjudicator should have discretion, will she will reflect on whether it would be reasonable for it to be given the authority to make recommendations in relation to the order, as well the code itself? I do not think that anything would be lost by giving such discretion to the adjudicator. Indeed, it would further strengthen the Bill and reassure many of us who are concerned that this is an area in which we need to be ever vigilant and watchful that the code can be effectively enforced and not sidestepped by the supermarkets.

Having said all that, however, I did appreciate the Minister’s response, as I appreciated what the hon. Member for Edinburgh South said. There may be some issues to consider on Report, which I urge my hon. Friend to think about, but we have had a good debate, and I beg to ask leave to withdraw the amendment.

Ian Murray (Labour, Edinburgh South)

I beg to move amendment 51, in clause 13, page 5, line 3, at end add—

‘(2) The Office of Fair Trading shall be required to respond to the Adjudicator and Secretary of State on the recommendations as set out in subsection (1) explaining whether they will be acted upon or not.’.

Roger Gale (Conservative, North Thanet)

With this it will be convenient to discuss amendment 56, in clause 14, page 5, line 14, at end insert—

‘(3A) The Adjudicator must consider in advance of each annual report whether to recommend changes to the Groceries Code to the Office of Fair Trading.’.

Ian Murray (Labour, Edinburgh South)

First, I should confess that I will not be speaking to amendment 56. Although I tabled it, on reflection, I have absolutely no idea what it means. I looked at it yesterday to try to come up with an argument in its favour, but I think we have already covered the relevant points.

Stephen Mosley (Conservative, City of Chester)

That has not stopped you with previous amendments.

Ian Murray (Labour, Edinburgh South)

The hon. Gentleman is very cruel, but I shall take his point in the spirit in which it was intended. I hope that he will see fit to support the amendment that I do understand.

Amendment 51 would put a requirement in the Bill for the OFT to report back to the adjudicator about any recommendations made under clause 13 and what actions will be taken. As the hon. Member for St Ives said in the previous debate, it is important that we keep the code as live as possible. The adjudicator is only as effective as the code; if it is refereeing an ineffective code, the whole process is undermined.

I welcome the thrust of clause 13, which allows feedback about the code to be given to the OFT, but I refer back to amendment 40, which would have been quite useful, as it would have said that the referee of the code would be involved with both the code and the groceries supply order. If the adjudicator had the ability to amend both, even by recommendation, it might keep the whole system live and up to date to reflect what is happening in the industry.

There is little point in an expert such as the adjudicator making recommendations if the OFT or the Secretary of State do not act upon them. There might be perfectly good reasons for not acting, but it would be appropriate for the OFT—and the Secretary of State, if it goes to that level—to report back to the adjudicator publically so that the process is as transparent as possible.

The National Farmers Union has set out clearly its belief that the Bill should be amended to ensure that the regulator is required to make a regular assessment of the effectiveness of the code. Clause 13 hints at that process, and we support that. Some feedback probably will be given under clause 13, but the Bill does not mandate a formal mechanism for assessment. New clause 2, which we will debate on Tuesday—probably early on Tuesday—would bring intermediaries into the scope of the code. Although we will not discuss intermediaries now, and the Minister has given us a hint about that, the issue is closely related to this clause. Indeed, new clause 2 was originally drafted as an attempt to amend clause 13 to allow for the code to be extended to intermediaries.

We have heard that the adjudicator is the referee for the code, but the adjudicator must be able to identify when the code is defective and to recommend a remedy to ensure that suppliers and retailers are protected. I said on Tuesday that we have a focus on suppliers, but the code has to be kept live for the benefit of the retailers. If an aspect of the code is defective, we may find that retailers breach it more regularly than would be practical. It is important to stress that making the relationship work better is a two-way street.

The adjudicator might recommend to the OFT that the code should be changed in such a way as to improve the relationship, but the OFT might decide not to do so. When we were debating fines, I used the analogy of a football referee issuing a red card, and we talked about how convoluted the old process was—admittedly, it has now been amended—and how long it took for the ultimate sanction to be issued. That is now sorted, because the Bill covers fines. To continue with my analogy, however, the referee might decide that a yellow card was too little punishment for a certain offence, but that a red card was too much, and thus recommend that the OFT should amend the code to include a green card that would sin-bin a player for a certain amount of time, rather than going to extremes. The adjudicator might recommend year after year in its annual report that the OFT and the Secretary of State should look at that matter, but those recommendations might be completely ignored and simply disappear into the ether. If there was no feedback from the process, there would be a question of whether the code was staying live.

If I may extend my sporting analogy a little further, referees sometimes recommend changes to the rulebook to make it work better. There was a prime example in tennis, for which the challenge rule was introduced because the pace of the modern game made it difficult for referees and umpires to tell whether a ball was in or out. McEnroe had been throwing his rackets around for 20 years—he became famous for doing so—but following a recommendation from the referees, a diktat came down from the governing body to say that the rules could be changed, with an explanation of why. Equally, governing bodies give explanations of why things cannot be changed all the time. The public would appreciate such transparent, two-way dialogue.

We can envisage the OFT making adjustments to not only the code, but the supply order itself. It might decide to make some changes to the order without a recommendation from the adjudicator, because the adjudicator does not have the power to make one, and there could then be a two-way dialogue about what approach would be most appropriate.

We want to ensure that there is transparency and accountability. We have discussed at length the need to place the adjudicator on a credible footing, to ensure that large retailers are confident that it can do its job properly, and to ensure that suppliers are confident that their complaints will be dealt with properly and transparently. If the adjudicator recommends changes to the code under clause 13, any feedback from the OFT about its decision would provide transparency and credibility, and that would inspire confidence in the system and give it more teeth, although I do not know whether it is possible to magic up a tiger with two sets of teeth.

We really wish to probe the Minister on this point. We appreciate that the adjudicator will have wide-ranging powers, that it will make recommendations and that the OFT, in all its wisdom, will probably act on those recommendations. However, unless the OFT reports back, there is no way of knowing whether that will happen, so the requirement to report back should be in the Bill. There needs to be transparency in the process whereby reports and recommendations go to and from the adjudicator and the OFT so that the code is live, and it is kept live.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

I thank the hon. Gentleman for his honesty on amendment 56. We have possibly all been in that situation from time to time, and I welcome his recognition that the duty and requirement on the adjudicator in clause 13 already means that it will need to make recommendations to the OFT if it thinks changes ought to be made to the groceries code. That will be a duty upon it at all times, not just in advance of producing the annual report. I welcome his recognition the amendment is therefore unnecessary.

My task is now to persuade the hon. Gentleman that amendment 51 is also unnecessary. As he said, the amendment would explicitly require the OFT to respond to any recommendations made by the adjudicator. I understand the logic behind the amendment, but I do not consider it strictly necessary because of a range of other requirements on the OFT that are already in place, which would require it to respond appropriately.

As a public authority, the OFT has a general duty to act reasonably, which includes a duty to respond, where appropriate, to members of the public and to other public authorities. More specifically, it has a duty to keep under review the groceries supply order—we heard of that earlier today, and indeed I brandished the book in which it is contained at my hon. Friend the Member for St Ives—in accordance with section 162 of the Enterprise Act 2002. If it considers that a change is appropriate because circumstances have changed, it will advise the Competition Commission accordingly. It is worth drawing to the Committee’s attention that such changes would need to be related to the material adverse effect originally identified and reported on by the Competition Commission when it performed its initial investigation.

The OFT will need to consider its actions in accordance with its duties under the Enterprise Act and its broader statutory functions and duties. I certainly do not think that a situation such as has been mentioned, whereby it just ignored recommendations that were put to it, would come to pass. It will not always act on the adjudicator’s recommendations, because it is the competition authority responsible for examining in detail whether a further change may be required. However, it would be reasonable for it to consider the recommendation, at least.

I can almost hear the potential intervention: what if, year after year, the OFT ignored the recommendations? In that extreme circumstance, if it did that without giving any rationale or reason, it would still be possible to challenge it. Select Committees would have a role to play, and it would even be possible for a supplier to take out a judicial review against the OFT if it had failed to act according to its reasonable behaviour duties and the Enterprise Act duties.

It is unnecessary to add the amendment’s wording to the Bill, as it would not provide any additional force to what the OFT would have to do. I hope that the hon. Member for Edinburgh South is reassured by the legal position and the duties that are already on the OFT.

Ian Murray (Labour, Edinburgh South)

I appreciate the Minister’s comments. The amendment was not intended to undermine the OFT in any way; it does a good job, and in many instances it acts reasonably. The amendment was intended to suggest not that the OFT would not act reasonably, but that a formal mechanism for reporting back to the adjudicator should be put in place so that it can assess how any recommendations that it has made have been considered and whether any action will be taken.

I mentioned that the OFT might ignore recommendations. I am not suggesting that it would, but it may choose not to address them, or it might address them but choose not to act upon them because it does not feel that is required. Putting a formal reporting process in the Bill would say to the adjudicator that we have a mechanism for it to recommend changes to the code, that the recommendations will be addressed and that the adjudicator will be told whether they will be acted on, and if not, the reasons why not. That would keep the whole process transparent.

I understand that there are already mechanisms in place for the OFT to be taken to task if it is felt that it is not carrying out its duties correctly, but I feel that there should be a mechanism in the Bill that allows a transparent approach of reporting back to the adjudicator what could be pretty substantial recommendations, to keep the code live. However, because I feel as generous today as the Minister felt on Tuesday, I will not press the amendment to a vote. I beg to ask leave to withdraw the amendment.

Clause 14 - Annual report

Ian Murray (Labour, Edinburgh South)

I beg to move amendment 52, in clause 14, page 5, line 12, at end insert—

‘(d) the resources available to the Adjudicator.

(e) recommendations made to the Office of Fair Trading as set out in section 13.’.

Roger Gale (Conservative, North Thanet)

With this it will be convenient to discuss amendment 53, in clause 14, page 5, line 19, at end insert—

‘(c) the Business, Innovation and Skills Select Committee;

(d) the Environment, Food and Rural Affairs Select Committee;

(e) their respective successor committees from time to time; and

(f) the Devolved Administrations’.

Ian Murray (Labour, Edinburgh South)

The Committee will be pleased to hear that I do know what these amendments are about. Perhaps the power of my persuasive argument will mean that the hon. Member for City of Chester will feel able to support them.

As clause 14 stands, the report that the adjudicator must prepare at the end of each reporting period must include a summary of disputes, which we would assume would be in the report as a matter of course; the investigations that have been carried out, which again seems fairly obvious; and the cases in which the adjudicator has used enforcement measures, as we discussed when considering clause 6. That seems a reasonable summary of what should be included in the report, and amendment 52 would merely add two very small specifications to that list.

Subsection (2)(d) in amendment 52 would result in the report specifying the resources available to the adjudicator and whether they were adequate for their purposes. That is quite a sensitive issue, because the adjudicator will be paid for by a levy on supermarkets and large retailers, so keeping under review the resources available to the adjudicator, by including them in the adjudicator’s report, is a sensible approach.

The second point, which would be added by proposed new paragraph (e), would have been to add to the report any

“recommendations made to the Office of Fair Trading as set out in section 13.”

That was consequential to amendment 51 to clause 13, but as the Committee did not agree to that amendment, it is no longer required. However, we would like to press the issue of adding to the report the resources available to the adjudicator.

Andy Sawford (Labour, Corby)

I think the public have a healthy scepticism about the role of quasi-autonomous non-governmental organisations—they come with all sorts of different names, do they not? If the adjudicator is to have the confidence of the public, the public will need to see that the adjudicator is good value for money. Does my hon. Friend agree that that is a good reason to support his amendment?

Ian Murray (Labour, Edinburgh South)

I appreciate my hon. Friend’s intervention. Every member of the Committee will appreciate that the Opposition look to spend every penny of public money sensibly. The adjudicator will be funded by levies on the large retailers. It will be important that, on a regular basis, the adjudicator says in the report to the OFT and the Secretary of State, “The levies we are getting in from the retailers are enabling us to do x, but in actual fact, we are finding breaches of the code that mean that we would like to do y; also, many third parties are coming forward and telling us about historical breaches that are still happening now, and we would like to investigate those.” The ability to take such issues forward would come down entirely to the resourcing of the adjudicator, and therefore the report should include not only the resources available to them but the resources that they may require.

We do not want to see large amounts of—or indeed any—public money being given to the adjudicator because they do not have the resources they need. The adjudicator’s office is a body that should be funded by the industry. My hon. Friend makes a valuable intervention, and I hope that the Minister will give us some assurance that the adjudicator will be properly resourced and that the annual report will include the issue of resourcing.

Amendment 53 would add conditions relating to publishing the report. The clause already says:

“The report must set out any recommendations that the Adjudicator has made to the Office of Fair Trading for changes to the Groceries Code.”

That report will be published and sent to the Secretary of State and the Office of Fair Trading, but we should also ensure that it is available to the relevant Select Committees. We discussed at great length in our debates on clause 1 the involvement of Select Committees in pre-appointment hearings, and it is important for the annual report to given to Parliament. The Business, Innovation and Skills Committee and the Environment, Food and Rural Affairs Committee will have a key input into the adjudication process and the work of not just the adjudicator but the industry as a whole. The BIS Committee may want to look at a business aspect of the matter, or there may be an ongoing issue to do with food production, rural affairs or the environment. Those Committees may want to look at the annual report from time to time, as may the devolved Administrations.

I am sure that the Minister is going to pop up and say that as a matter of course, any Select Committee can call in a report, hold an inquiry and debate it, and that it will be sent to the devolved Administrations as a matter of course as well. However, it is important to say in the Bill that the process will be transparent and inclusive, and that Select Committees are a valuable resource for the House and will be sent a copy of the report as a matter of course. The Committees can then decide whether they wish to act on the report itself, or whether they wish to set up an inquiry to examine anything that comes from it. These are two straightforward, sensible and—I think this was the terminology from Tuesday—beautiful amendments. I hope that the Committee will support them.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

Again, I thank the hon. Gentleman for his amendments, although I am not sure whether they could be considered beautiful. Perhaps in a charitable mood I could agree that that might be the case, but I do not think that is a good enough reason to include them in the Bill. Beautiful or otherwise, they are unnecessary, and I hope to convince him and the Committee why.

The annual report will clearly be an important tool in the adjudicator’s armoury. I am sure that it will be looked at by a range of stakeholders, from campaign groups to retailers, suppliers, members of the public and Members of Parliament. We want it to set out a factual description of the adjudicator’s activities, which will ensure transparency as to what the adjudicator is doing. It will also have to set out the actions that the adjudicator has undertaken in the course of their duties during the preceding year. It is quite right that it will be scrutinised thoroughly, which is to be expected.

I turn to amendment 52, and particularly the part about the resources available to the adjudicator. I accept what the hon. Gentleman says about paragraph (e) of no longer making much sense, given that the previous amendment was not accepted. However, information on those resources will already be available, and that is already set out in various places. Clause 14(4) states that the recommendations made by the adjudicator must be set out. If Members turn to page 14 of the Bill, they will see that paragraph 15 of schedule 1 states that the Secretary of State must lay before Parliament a copy of the adjudicator’s statement of accounts, which must have been certified by the Comptroller and Auditor General. Clearly, that statement will have to contain details of the resources available to the adjudicator. Clause 19(8), on levy funding, states:

“The Adjudicator must publish detail of levies and an explanation of how the amounts have been decided”.

All that information will make clear what the resources of the adjudicator are.

The hon. Gentleman was right to say that such information needs to be in the public domain, which is why that is stated in the Bill. It will be possible for people to make judgments about value for money, and details of the resources available to the adjudicator to enable it to carry out its functions will be transparent for everybody involved. For that reason, amendment 52 would not add substantively to what is already in the Bill.

The hon. Gentleman set out the case for amendment 53, which would require the annual report to be sent to the Business, Innovation and Skills Select Committee and the Environment, Food and Rural Affairs Select Committee. He anticipated my response—I do not believe it is necessary to set that out in the Bill. The annual report will be laid before Parliament in accordance with clause 14(6), which means that it will also be available publicly online for Select Committees to consider. They will be able to conduct such inquiries or scrutiny as they see fit. The amendment is definitely well meant, but it is not essential.

I expect all such information to be contained on the website, to which reference has been made. It is worth bringing to the Committee’s attention that the name www.off-trolley.co.uk does not seem to have been taken. “Unknown host” is the message that comes up, so who knows what suggestions might arise from the creative talents of the hon. Member for Vale of Clwyd?

Ian Murray (Labour, Edinburgh South)

Just for the sake of clarity, will the Minister repeat that suggested name, as I believe that the hon. Member for Vale of Clwyd might have been the out of the room while that particular bombshell was being dropped?

Jo Swinson (Liberal Democrat, East Dunbartonshire)

I am very happy to oblige. I am sure that the hon. Member for Vale of Clwyd, who has been doing his job assiduously in the Committee, will be keen to know that I have just checked, and www.off-trolley.co.uk does not yet appear to have been nabbed. It currently says “unknown host”, so I do not know whether there will suddenly be a flurry of applications to the various authorities that give out domain names before we leave Committee this afternoon. Who knows? That might well be an option for the adjudicator to pursue. However, Select Committees will already be able to get the information from whatever website it is published on, whatever the URL.

The devolved Administrations are also referred to in amendment 53. As we have discussed previously, we want the adjudicator to work closely with devolved Administrations, but because competition law is reserved and they will not have direct authority over the adjudicator, putting that in the Bill would run the risk of a degree of confusion and blurring the lines of authority on the role of the adjudicator. Obviously the devolved Administrations will have access to the information, as is appropriate. I hope I have convinced the hon. Member for Edinburgh South that the provision of information will be adequate and that the amendments are unnecessary.

Ian Murray (Labour, Edinburgh South)

I feel reassured. My hon. Friend the Member for Ogmore is not in the Committee this afternoon—he is here in name, but not in presence. We were thinking that he would quickly take part in the debate in the House and then rejoin us, but matters are obviously taking slightly longer than we had thought. I appreciate what the Minister says about the details of the resourcing of the adjudicator being included in other parts of the Bill, so I shall not press amendment 52.

I am unclear why the Government are so reluctant include in Bills the need for scrutiny by Select Committees, as that would be sensible action to take. My hon. Friend the Member for West Bromwich West (Mr Bailey) and the hon. Member for Thirsk and Malton (Miss McIntosh) might be surprised to know that the Minister is so reluctant to include their Select Committees in the Bill. However, given that we have discussed the matter and probed the Minister into telling us why she hates Select Committees so much, I beg to ask leave to withdraw the amendment.

Clause 15 - Review of Adjudicator and guidance from Secretary of State

Ian Murray (Labour, Edinburgh South)

I beg to move amendment 24, in clause 15, page 5, line 27, after ‘must’, insert

‘appoint an independent Review Panel to’.

Roger Gale (Conservative, North Thanet)

With this it will be convenient to discuss amendment 25, in clause 15, page 5, line 28, at end add—

‘( ) The Independent Review Panel shall be chaired by a judge of the High Court or the Court of Session and comprise—

(a) a representative of the retail sector;

(b) a representative of the supply sector; and

(c) a consumer representative.’.

Ian Murray (Labour, Edinburgh South)

Again, these amendments are about the independence of the adjudicator. Although we appreciate that the Secretary of State has a supervisory role, we have to ensure that that does not mean that the adjudicator is consumed by political influence or issues that the Secretary of State wants them to address. Amendment 24 is a simple probing amendment that suggests that an independent review body may be a far better mechanism to review the adjudicator and to provide guidance. Will the Minister consider an independent review panel that would look at the work of the adjudicator and consider their powers? Will she consider reviews being carried out by such a panel, rather than by the Secretary of State?

Amendment 25 sets out what the panel would look like. I appreciate that we do not want to be racking up significant costs or delays through an independent review panel, but if it were chaired by a senior member of the court system and had representatives from the retail and supply sectors and a consumer representative, we would have a really strong system whereby the work of the adjudicator could be reviewed by the very bodies that they are refereeing. That would allow for a healthy debate between consumers, suppliers and the large retailers and for an open and independent review of what was happening with the adjudication unit, rather than that role being taken by the Secretary of State.

I hope that the Minister appreciates that we are trying as best as possible to make the whole project open and transparent and to have a proper dialogue between all the parties involved. An independent review panel would be in a far better position to independently review the work of the adjudicator outwith the powers of the Secretary of State. That would remove any possible accusations of political influence over any of the major issues that the adjudicator may deal with.

As all Committee members have mentioned and the hon. Member for St Ives has emphasised, we hope that the adjudicator will become redundant when the Bill comes in. We hope that the adjudicator will have absolutely nothing to do and that supply chains will work seamlessly. However, if the opposite situation arises and there is a major problem, an independent panel would ensure that it would not appear that the Secretary of State had any political influence over the adjudicator in the review process. That would not only protect the adjudicator but, to a certain extent, would protect the Secretary of State from such accusations. An independent review body would be allowed to examine such issues on a level playing field, with equal representation from all parties involved, and then be able to make recommendations about reviewing the adjudicator.

The amendments are fairly simple, but they are intended to protect the adjudicator and the Secretary of State, and I hope the Committee will accept them.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

I hate to disappoint the hon. Member for Edinburgh South. It must sound uncharitable, but I am not particularly minded to accept the amendments. I hope, however, to convince him through the powers of persuasion and argument that his is not the best way to proceed. I understand the issues he raises around independence and ensuring that the adjudicator functions well, but there are a couple of reasons why the amendments are not the right way forward.

First, the adjudicator is a ministerial appointment. It is therefore consistent that it is the Minister—in this case the Secretary of State—who should review their progress and effectiveness. It is important that independent ministerial appointments are ultimately accountable to elected Ministers and, through them, to Parliament. The independent review panel outlined in the hon. Gentleman’s amendment would not have that same accountability function. I want to reassure the Committee, as I have on some earlier groups of amendments, that we absolutely recognise the importance of the adjudicator’s independence. They will have full operational independence, without being subject to political interference.

The adjudicator’s functions can only be carried out by the adjudicator. They will not be a civil servant, and the Secretary of State has only a very limited power to give guidance after a triennial review. The adjudicator can only be removed from office under exceptional circumstances. All those things ensure that there is genuine independence. It is important, however, that at some point, offices established by Government are accountable to Ministers and, through them, to Parliament. That is the purpose of the triennial review, and it is right and proper that the Secretary of State carries that out.

Secondly, while the amendment has a clear desire to give affected parties a stake in the future of the adjudicator, there are better ways to achieve the same ends, which we share. Paragraphs (d) to (f) of clause 15(7) clearly lay out an explicit requirement that the Secretary of State consults representatives of retailers, suppliers and consumers when conducting the triennial review. That will allow stakeholders’ views to be clearly heard in that process, while rightly leaving the final decision in the hands of Ministers.

I hope that those two points have both reassured and persuaded the hon. Gentleman that the adjudicator is properly independent and that stakeholders will be appropriately heard. Ultimate accountability for this public office has to come to Parliament and that is why it is appropriate that the Secretary of State carries out the review.

Ian Murray (Labour, Edinburgh South)

We tabled the amendments on the review process purely because Traidcraft and other organisations were concerned about the potential politicisation of the process, given the power relationship between the large retailers and the suppliers and that between the large retailers and this place. There were concerns that the Secretary of State conducting that review may feel obliged, one way or another, to be influenced on how the adjudicator operates. I am content with subsection (7), which states that the Secretary of State must consult a number of bodies. We attempted with an earlier amendment to add the devolved Administrations to that list, but I appreciate that there will be that kind of consultation with all the interested parties when the review is being conducted. I beg to ask leave to withdraw the amendment.

Ian Murray (Labour, Edinburgh South)

I beg to move amendment 55, in clause 15, page 6, line 18, leave out subsection (10).

The amendment is in the name of my hon. Friend the Member for Ogmore, but given that he is still in the Chamber, I will speak to this probing amendment.

The reason for this amendment—the hon. Member for City of Chester might be interested to hear this— is that we are not quite sure what this part of the Bill is for. We are looking for an explanation from the Minister. Our amendment would simply leave out subsection (10).

Allowing third-party evidence was a victory for organisations and the noble Lords in the other place. It strengthened the Bill immeasurably and will help with the adjudicator’s work in identifying and dealing with breaches of the code. The Minister’s predecessor in her role, the now Minister of State, Department of Health, the hon. Member for North Norfolk (Norman Lamb), who has had quite a hearing in this Committee, said earlier this year:

“I have responded to concerns from the Select Committee and others that trade associations should be able to complain to the Adjudicator and have amended the draft Bill to provide for this.”

That was a great step forward, because it widened the scope of the adjudicator. We now have third-party evidence and fines on the face of the Bill. I hope that the Minister will be generous enough to include intermediaries when we get to that part of the Bill on Tuesday. We will wait and see. I hope she has an incredibly good weekend and will be able to accept some of our amendments. One of the key points is anonymity. There is a grave concern that this section of the Bill is unnecessary and may compromise some of that anonymity.

Clause 15(10) says,

“The Secretary of State may by order provide that the following section is to be inserted after section 4 if, as a result of the findings of a review, the Secretary of State thinks that it would be desirable to do so.”

There is no explanation of what would constitute the Secretary of State thinking it would be desirable to do so. There is nothing in the other subsections of the clause that would give rise to whether the Secretary of State may or may not want to include this part of the Bill. Trade associations have the important role of protecting the identity of their members who might want to complain about breaches of the code. It seems that inserting proposed new section 4A into the code would undermine that process. I look forward to the Minister’s explanation.

We do not want to end up with vexatious or malicious complaints, or to have the adjudicator going on fishing missions because a third party has brought forward information for the adjudicator to deal with. Frivolous and malicious complaints will undermine the whole system. I hope the adjudicator will be particularly strong in dealing with those. They have to be given the power to do that.

Importantly, the adjudicator will first have to be satisfied of the veracity and integrity of any complaint before launching an investigation. We discussed the knowledge and expertise of the adjudicator on a previous amendment. This is an area where that will come into play with their ability to deal with information coming forward. Their understanding of the code and the industry will be fundamental. That will go some way to reducing malicious, frivolous or vexatious claims, or abuses that cannot be substantiated.

There is a feeling that the safeguards that have been built into the Bill by successes in the other place are potentially being undermined by the Secretary of State inserting this particular part into the Bill. I say this is at the whim of the Secretary of State but there is no specification in the Bill of the circumstances whereby the Secretary of State might want to use this provision.

Has the BIS Department undertaken any analysis of the likelihood of frivolous claims? Has any modelling been done of how many would come forward?

Andrew George (Liberal Democrat, St Ives)

On the point of inappropriate claims, does the hon. Gentleman accept that clause 10, which would permit the recovery of costs against those whose complaints are demonstrated to have no merit, would be sufficient to address that issue?

Ian Murray (Labour, Edinburgh South)

Yes, but in instances where costs can be awarded in the employment tribunal system, for example, judges are very reluctant to award costs for frivolous claims. I appreciate that that matter is in the Bill. One often finds at employment tribunals that judges want to hear the facts of a case going down certain avenues until they decide whether it is vexatious or otherwise. They are very reluctant to use cost orders in that example. I hope the adjudicator would feel confident enough to use cost orders in this example. It will be only in practice that we will know whether that is the case. I hope the message goes out from this Committee that we would support the adjudicator in the use of those powers. I hope the adjudicator will use them regularly and appropriately. There will of course be instances when the adjudicator may use the cost powers in the Bill for an issue that the adjudicator feels is vexatious or frivolous and then it turns out not to be. Mistakes will be made but I hope the adjudicator will have confidence. That is a question to put to the Minister.

Was any analysis done before subsection (10) was put in place? On the basis of our concerns, I am asking, through the amendment, whether something can be brought forward on Report to clarify what that subsection is designed to do, because if proposed new section 4A is inserted after section 4, it will confuse the issue in relation to frivolous claims, anonymity and the information that can be supplied to the adjudicator when they are making a proper assessment of whether an investigation should be conducted.

Andrew George (Liberal Democrat, St Ives)

The Committee pausing for a moment to debate this issue is worth while, so I am grateful to the hon. Member for Edinburgh South for raising it. A very important milestone in the development of the Bill was reached as a result of people expressing concern—the Select Committees also raised the issue—that in view of the climate of fear, suppliers would not use the code to complain directly about their treatment by supermarkets and that there had to be a mechanism by which information presented to the adjudicator could be dealt with in a protected manner. This is not just about trade associations publishing material on the current state of the milk supply chain or whatever it may be. Trade associations and others may also seek to provide information to the adjudicator indirectly, perhaps by means of a collection of suppliers. Therefore, any reassurance that the Minister can give that the adjudicator has the power to instigate investigations on the basis of what one might broadly describe as market intelligence in that manner is very important.

Also, there appears to be an internal contradiction between subsections (1) and (2) of proposed new section 4A. Subsection (1) states that the adjudicator “may consider only” certain limited items, in paragraphs (a) to (d), yet subsection (2) says that the adjudicator

“is not limited to considering the information mentioned in subsection (1).”

I admit to being rather confused by that, because it seems that subsection (2) in effect strikes out subsection (1) and more or less says that any information is appropriate. It seems to make subsection (1) rather superfluous.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

I appreciate the opportunity for us to discuss this issue in Committee. I am very happy to explain the background of how we have got to this point, with clause 15(10) being part of the Bill. The wider issue was discussed extensively during the pre-legislative scrutiny phase. I am referring to the issue of who should be able to complain to the adjudicator and what can be a trigger for starting an investigation. As has been outlined, when the Bill was originally published, clause 4 was much more restrictive about how an investigation by the adjudicator could be triggered. One could be triggered only by information from suppliers or information that was already in the public domain when they were deciding whether to start an investigation. It is fair to say that suppliers are the most likely parties to have information that would show that a breach of the code has taken place, and we do not want the adjudicator to be deluged by large amounts of information that does not necessarily relate directly to issues that they should be dealing with.

However, we did listen carefully because, at the pre-legislative scrutiny stage, the BIS Committee made a clear recommendation that we remove the restriction and allow the adjudicator to consider information from any source that came forward. As my hon. Friend the Member for St Ives and others have mentioned, a range of supplier groups put forward a coherent argument that that climate of fear and concern could mean that the additional protection of being able to complain through a third party—a trade association—would be helpful. That might also be able to give more of a context to the types of practices that are going on, because it would not just be about an individual supplier, as a trade association might have experiences from several suppliers and could therefore point to broad patterns of behaviours. We accordingly listened and amended the Bill to allow the adjudicator to look at information from any source. I absolutely stand by that; it was the right thing to do, because it is likely to be more successful if that information can be considered.

That does not mean, however, that our concern about the adjudicator being deluged by irrelevant information has entirely gone away. We touched on that earlier, when discussing whether advising the public should be expressly written into the Bill. In the example of the recent dairy issues in the industry, had the adjudicator been up and running, it could have had a deluge of contact.

On vexatious and frivolous complaints, it is right that because of the awarding of costs outlined in clause 10(2), some protection is provided against such complaints. However, the adjudicator will have a small budget and a small team of staff, and they really need to be focused on particular breaches of the code, rather than having a wide, overseeing role. There is the fear that through the best of intentions, third parties could bring forward lots of information, perhaps through campaigns or otherwise, with much of it potentially irrelevant or even misleading. That could lead to a situation we do not want to see, where there is a big strain on the adjudicator’s time and resources, and unnecessary burdens on retailers. That is why we looked—at the same time as bringing forward the ability to have information coming from any source—at having a backstop, in case the issues we were concerned about came to pass.

Ian Murray (Labour, Edinburgh South)

I wonder whether the Minister can provide clarity. Is she saying that while the Government have amended the Bill to allow trade-association third parties to provide information, the Secretary of State is reserving the right to reinsert a provision into the Bill to stop it from happening in future? If that is the case, what is the mechanism for that to be removed from the Bill, if the Secretary of State thinks it is appropriate? I think that the Minister mentioned a triennial review previously, so that could mean that trade associations are able to bring forward such complaints to the adjudicator for that period of time.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

The hon. Gentleman asks a good question. If the Secretary of State finds that there is a problem when looking at the overall workings of the adjudicator through the triennial review, proposed new section 4A could become part of the Bill. That would be done through secondary legislation, so it would not be without parliamentary scrutiny, as Parliament would ultimately have to agree to it. However, the change would be possible without the need for new primary legislation. Such matters would have to be looked at in the years that the triennial review takes place. Protection is provided in terms of further parliamentary approval being required. It is important to note that we absolutely envisage this as a backstop safeguard, only used if, as the result of a review—in which there would also be full consultation, as we have discussed in earlier clauses—it was decided to make the order restricting the sources of information that could be brought forward.

An issue was raised about whether this would lead to problems with anonymity, and the protections that are outlined in clause 18 would still apply. A supplier could bring a complaint to the adjudicator if proposed new section 4A was in place, but they would still be able to be treated anonymously by the adjudicator. It is fair to recognise that that one additional layer of confidentiality or anonymity—if the complaint were made through the trade body—would be gone were this enacted, but the overall protection on anonymity would none the less still be there.

Ian Murray (Labour, Edinburgh South)

The Minister talks about anonymity in a later clause, but surely she must appreciate—she said so herself—that removing the layer of trade associations or third parties removes a layer of anonymity. If someone is the only chanterelle mushroom producer in the country, a complaint to the adjudicator is hardly anonymous if the complaint is about chanterelle suppliers, of which there is only one to that supermarket. The Mushroom Growers Association could take a complaint to the adjudicator on the basis that it thinks that something is going on that is not directly related to that particular supplier, and therefore that supplier is protected.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

I welcome the hon. Gentleman’s intervention. His knowledge of different mushroom types exceeds mine, but they are not my favourite food. In the scenario that he outlined, the chanterelle mushroom supplier would none the less have protection in terms of confidentiality. It would be up to the adjudicator to decide the terms of the investigation and they would be able to know that this was the only chanterelle mushroom supplier. For example, they might decide to undertake an investigation into all mushrooms—chanterelle, shiitake and various other types. My list of mushrooms is drying up.

Lucy Powell (Labour, Manchester Central)

Porcini.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

Indeed. There is a whole range. I hope that I have reassured the Committee.

Ian Murray (Labour, Edinburgh South)

Deep fried.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

I am very sad to hear that the hon. Member for Edinburgh South suggest deep-fried mushrooms, unwittingly confirming some of the worst stereotypes of Scottish food, which I wholeheartedly refute. I am sure he said it only in jest.

My hon. Friend the Member for St Ives wanted further clarification on the drafting of proposed new section 4A(1) and (2). He pointed out that subsection (2) gives the adjudicator wide powers in terms of the information that they could consider from a wide range of sources, which would include trade associations. The difference is that that would be when they are carrying out an investigation and the trigger point is whether to carry out an investigation.

This section gives a power if there is a real concern that the resources of the adjudicator are being clogged up by irrelevant or unnecessary information. As a public authority, the adjudicator would have a duty to respond to that in a reasonable manner. If they ended up in that situation, the Secretary of State, following a full review and consultation that went along with that review, could then make a recommendation. There would then need to be parliamentary approval for that, and that would mean that investigations could be triggered only by the different types of information outlined in proposed new section 4A(1). However, once an investigation has been triggered, any information would be able to be considered as part of the investigation.

Andrew George (Liberal Democrat, St Ives)

I am grateful to my hon. Friend for clarifying that point. I understand that there is a narrow interpretation of what is appropriate at the point of deciding whether an investigation should be instigated. However, I am troubled by what the Minister said earlier, and indeed on many occasions. She said that the adjudicator should be left, as far as possible, with the discretion. Given that we have clause 13, which allows the adjudicator to review their powers, if they have been snowed under with too much evidence, they can define and indeed write their own amendment to the code.

Rather than have a prescribed solution pre-prepared in advance of the event, is it not appropriate for the adjudicator to be given discretion to come up with their own solution and propose something that will work, instead of narrowing down their scope of manoeuvre?

Jo Swinson (Liberal Democrat, East Dunbartonshire)

We certainly want to give the adjudicator a wide range of discretion in what they will do. Clause 13, which we were discussing recently, will give the adjudicator the power to make recommendations to the Office of Fair Trading if they think any changes need to be made to the code. However, it will not give them any power to review what is in the Bill, which is, rightly, a matter for Parliament rather than the adjudicator. That is the real difference. If we did not include the proposed new section in the Bill, further primary legislation would need to be tabled. That would inevitably lead to delay, and we could end up with a situation in which the adjudicator was not able to be as effective as they would like to be.

Returning to the process that would need to be followed in order for proposed new section 4A to come into force, we would need to have the triennial review, during which there will be a full consultation, which will include the adjudicator. They will not get to decide what powers are in the legislation, but they can propose what they think is necessary. The Secretary of State would then have to lay an order before Parliament, which would have to approve it. Only when all those steps have taken place would proposed new section 4A become part of the legislation. Significant hurdles have to be overcome.

The hon. Member for Edinburgh South asked to what extent we think there will be lots of frivolous complaints and the extent to which the adjudicator will be snowed under. That is not necessarily what we would expect to happen. Clearly, the campaign groups and trade bodies that have been involved in arguing for the Bill have generally acted in an appropriate, helpful and reasonable manner. We would expect that to continue. It is important that the safeguard is present, not least because it will be a further incentive for everyone involved to raise issues with the adjudicator in a reasonable way, rather than deluge them with irrelevant or unnecessary requests for information. As a public authority, the adjudicator will be required to respond to such requests. We do not want all their resources to be used to respond to complaints that are not key to the focus that we want them to have.

That is very much a hypothetical situation. The place of Committee is to debate and discuss the hypotheticals and to try to think through and anticipate what can happen. That is why we have included the provision in the Bill in conjunction with allowing more information to be considered in triggering investigations, which has been welcomed. Proposed new section 4A would put a safeguard in the legislation at the same time. It is probable—I very much hope that this will be the case—that it will never be necessary to use the power. However, the fact that it is present will provide a clear incentive for third parties to act responsibly while still playing an important role in contributing to the adjudicator’s work.

I hope that that gives some reassurance to the Committee regarding the hoops that have to be jumped through before the power in proposed new section 4A may be used. It is intended only as a backstop safeguard. None the less, because of the changes we have made in allowing third party complaints, it will have some value. I hope that, on that basis, the hon. Member for Edinburgh South will be happy to withdraw the amendment.

Ian Murray (Labour, Edinburgh South)

I am going to break with tradition, because I do not feel reassured by the explanation. I return to the point that I made when moving the amendment: I cannot see the point of subsection (10) in the first place. I would hope that trade associations and third parties—for example, the National Farmers Union—would act responsibly as a filter in the first instance before suppliers took action with the adjudicator. Not only would they wish to take cases that they think have merit, but they would want to protect their reputations and that of the adjudicator. In that sense, it is important that the adjudicator is able to take those examples.

I understand the issue of being swamped, and I understand that this is a reserved power that the Secretary of State would only use after a triennial review. The Minister did not answer the question about how it would be removed from the Bill. Would another review period be needed for that to happen? Perhaps she will reflect on that.

There is the issue of anonymity. I gave the example of mushrooms because supermarkets stock some very niche products. The adjudicator can trigger an investigation on the basis of a claim from a particular supplier, without a trade association providing the supplier with a second level of anonymity. I understand that the adjudicator will take a nuanced approach. If they thought that the confidentiality and anonymity of a supplier could be compromised, they might widen the scope of an investigation to the whole of a particular product range. They might investigate all mushrooms, for example. However, that will not protect anonymity in all instances. If there has already been a relationship breakdown between a supplier and a supermarket, and there is an investigation into all mushroom suppliers to that large retailer, there may be a situation in which that relationship and that anonymity is compromised.

I appreciate the distinction that the hon. Member for St Ives made between an adjudicator’s decision whether to carry out an investigation, and how it carries out the investigation. There is a distinction between those two things, which almost contradicts the need for the clause. What is to stop a trade association or a third party from approaching a supplier that it feels has a problem and saying, “I think you should approach the adjudicator to see whether it will trigger an investigation”? When the investigation is triggered, the third party or trade association can supply evidence. In that sense, there is no safeguard if the Secretary of State decides to use this power. Although trade associations and third parties will be unable to petition the adjudicator to carry out an investigation, they can trigger an investigation through a supplier. Proposed new section 4A(2) allows them to supply information. That would seem to negate the need to have this proposal in the first place.

I have not been wholly reassured about the clause. I am always incredibly uncomfortable when the Secretary of State is given an open-ended power to review something without steps being put in place to say why that should be the case. I appreciate that the Minister said that it would be in the context of the review, with all the review consultees that are included in the clause. However that is not what the clause says. It says that if

“The Secretary of State thinks that it is desirable to do so”

they will do it. That gives me some concern, based on the first draft of the Bill that we have seen. I will withdraw the amendment, reflect on what the Minister said and perhaps bring something to the House on Report.

Roger Gale (Conservative, North Thanet)

Before we leave, I wish to say that Mr Williams will be taking both sittings on Tuesday, if there are two, which means that I shall not see you again on this Committee. I take this opportunity to thank you all for your courtesy and the manner in which this has been handled, and I wish you all a very happy Christmas.