It is a pleasure to serve under your chairmanship, Mrs Murray, and I start by drawing Members’ attention to my entry in the Register of Member’s Financial Interests. I congratulate the hon. Member for Neath (Christina Rees) on leading this important debate and, of course, the petitioners on reaching the threshold for it. The number of people who signed the petition demonstrates how highly the people of the United Kingdom value their farmers, and they want to see them getting a fair deal. It is also telling that the debate has been well attended and there has been quite a lot of cross-party consensus. The contributions have been well informed and a spectrum of information has come from Members, which also demonstrates how important farming is to their constituents.
The petition asks the Government to amend the groceries supply code of practice to better protect farmers from “unfair behaviour”. The Government want all farmers to receive a fair price for their products, and we
are committed to tackling contractual unfairnesses in the agrifood supply chain. We recognise that some poor practices affect producers across several agricultural sectors. We are taking action to address them, but we do not believe that amending the code is the most appropriate way to do so. The key issue is that relatively few farmers sell directly to supermarkets. Far more often, they sell their produce through intermediaries and processors, and the Government are therefore committed to using powers in the Agriculture Act to introduce statutory codes that apply across the whole supply chain to deliver fair prices to all farmers.
I should declare that I was a member of the Bill Committee for the Groceries Code Adjudicator Bill, and the groceries code was put in place following a detailed market investigation by the Competition Commission in 2008 that found that suppliers of groceries to large supermarkets faced unfair risk that adversely affected competition. For producers that supply directly to the 14 largest retailers designated by the Competition and Markets Authority, the code already covers the issues raised in the petition. For example, it prevents the unilateral variation of supply agreements, specifically covers issues such as wastage and forecasting errors, and requires retailers to pay invoices on time. The code is enforced by the Groceries Code Adjudicator, who is appointed by the Secretary of State for Business and Trade. The Secretary of State is required to undertake a review of the effectiveness of the GCA every three years. The most recent review was published in July 2023, and found that the Groceries Code Adjudicator continued to be an effective regulator.
The positive impact of the GCA is clear in the latest results of its annual survey. It now receives responses from over 2,000 suppliers from the UK and abroad. In 2014, just after the GCA was set up, four out of five direct suppliers said they had experienced an issue with the code. That figure has now fallen to fewer than one in three. It is, of course, concerning that suppliers are being let down in some cases, but those achievements have been delivered through the Groceries Code Adjudicator’s collaborative approach to regulation, which involves gathering insight from a range of sources and working closely with a small number of regulated businesses to quickly change their behaviour.
Of course, that does not mean that all unfair practices have been permanently stamped out, and we have heard examples today of farmers who have felt unfairly treated. Unfair practices can be exacerbated by external factors, such as the recent cost price pressures. The Government are aware that there are behaviours throughout the supply chain that are not covered by the GCA, and crucially the code does not always reflect the farmers’ indirect relationship with supermarkets. In 2016, in response to a call for evidence that explored the case for extending the GCA’s remit, we highlighted our intention to target further interventions on a sector-by-sector basis. As a result, we took powers in the Agriculture Act to enable the introduction of statutory codes of contractual practice to protect those farmers. The codes will apply to any business purchasing agricultural products directly from farmers. They will provide greater certainty for farmers by ensuring that clear terms and conditions are set out in contracts. We intend to tailor the powers to those sectors that need them, because we acknowledge that the problems experienced by each sector differ
quite widely. We must avoid introducing broad regulation that places burdens on sectors that may not require intervention, but we must make ensure that we concentrate on those areas that do.
We carried out the first review, in the dairy sector, in 2020, and it was clear from the responses that a minimum framework of contractual standards was required to offer improved protections to those farmers. We have worked closely with industry to ensure that the regulations are tailored and proportionate, providing the flexibility required in a global commodity market.