Groceries Code Adjudicator

I will try to keep my comments relatively brief so that the Minister can address many of the questions that have been asked. I want to place on the record my entries in the Register of Members' Financial Interests. I am a producer of beef cattle and sheep. My beef cattle go to the St Merryn slaughterhouse in Merthyr, which supplies Tesco and McDonald's. My sheep go to Farmers Fresh—and where they go afterwards, I do not really know, but I suspect that some end up in supermarkets. Many of the arguments that have been used to reinforce the proposal for a grocery code adjudicator have been made before. However, it is useful that the hon. Member for South Staffordshire (Gavin Williamson) has been able to secure this debate so that we can put the issue under the Minister's nose, to remind him that it has not gone away, that Members are still pursuing it with great vigour, as we have seen today, and that there is a great appetite for it outside the House. I have great admiration for supermarkets, which have been the star performers of the retail sector over many years. They have done a lot to ensure that there is a sense of quality about their products, although some people would argue that we could do with more traditional products. None the less, supermarkets set a standard on quality, and they have increased the variety of foodstuffs available to the consumer. Over the past 10 or 15 years, food price inflation has been very low and often negative, which has made a contribution at times when we have had low inflation figures. This country's food producers have contributed to low inflation figures, which has been to the consumer's benefit. Of course, we are talking about not just producers, but retailers. The argument that we are having today is that the producer rather than the retailer has borne the burden of keeping prices—until quite recently—low. My limited knowledge of economics tells me that in a perfect market, there are many sellers and buyers and everyone in the market has a real understanding of the quantity and quality of the commodity being traded. As far as food production and retailing are concerned, the perfect market does not exist. There are a small number of very large buyers in the market and a large number of small producers. Although the large buyers probably have a good idea of the state of the market, the small producers do not and are therefore unable to take advantage when a possible advantage occurs. We are talking about anti-competitive practices and we have plenty of competition law that should support us in this matter. I am a generous man and have often said that the supermarkets are so large that they sometimes do not even realise that they are acting anti-competitively. Every move they make and every step they take affects the market. I sometimes compare them to a large person in a narrow corridor. However well behaved that large person is, they are bound to affect the people coming and going. They could act not so politely and have a terrible effect on the passage of people, but even when they are acting politely, they can have an effect, and supermarkets can have an effect. That is why we need somebody external—an objective force—to look at the supply chains and ensure that they are not being abused. I would like to give a little economics lecture on the profitability of supermarkets, although I am sure that the hon. Member for Shipley (Philip Davies) understands it a lot better than I do. The profitability of supermarkets is determined by two things: one is the margin of the product and the other is the turnover. If they are multiplied, we get the gross profit of the supermarket. Out of that, it has to fund its overheads, labour and financial costs and all the other costs attributed to businesses. The margin times turnover is key; one could argue that it does not matter at what price a supermarket buys its product, as long as it can get the margin. However, its turnover depends on how competitive it is with other supermarkets. That is when price pressure comes in. People tell me that quality is required and must be delivered, so often the only competitive advantage that people can have is on price. The sheer size of some of the organisations—the 32% share that we heard about—affects the marketplace. They can go in and abuse their dominant position in the marketplace. I would like to put on the record my appreciation of the wonderful work that many hon. Members, including the hon. Member for Ynys Môn (Albert Owen) and my hon. Friend the Member for St Ives (Andrew George), have done on this subject. Some of us have followed in their wake—and we are still here, still pressing the Minister to take some action, because in the long run that will be to the advantage not only of the producer but of the consumer as well. We want to ensure that the quality product that the consumer wants is available in the supermarket. We are very worried at the moment that constant cost pressure, particularly on milk and milk products, is driving quality out of the supermarkets. When customers go in them, they will not be able to buy the British product that they so want.