My Lords, I beg to move that your Lordships do agree with another place in their Amendments 1 to 9. I shall speak also to Commons Amendments 11, 14, 16 and government Amendment 14A to Commons Amendment 14.
Commons Amendments 1 to 9, 11, 14 and 16 all together resolve what has been the most hotly debated topic of this Bill: whether the adjudicator should have the power to fine written on to the face of the Bill. As the Government have said throughout, and as the BIS Select Committee has also acknowledged, this is an issue that is finely balanced. However, at Second Reading in another place there was an overwhelming consensus that fines were necessary. This echoed sentiments expressed in your Lordships’ House. Accordingly, the Government have listened to the clearly expressed voice of Parliament and have tabled amendments to give the adjudicator the power to fine from the outset.
I would like to make clear that I expect fines to be used as a last resort, only for the most egregious or repeated offences. However, the very 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 these changes will mean that the adjudicator is able to ensure fair play in the food supply chain and keep the industry growing.
This will also benefit the farming industry. While many farmers are unlikely to be direct suppliers to retailers, and thus formally out of scope of the groceries supply code of practice, they will still benefit from increased trust and transparency in the supply chain.
It is important to note that the adjudicator’s functions will not be a panacea for all the difficulties of the farming industry. She cannot set prices or address pay and conditions, but improved relationships between direct suppliers and retailers will have beneficial effects along the entire supply chain.
There have been suggestions that the power to impose fines from the outset would make Britain a less attractive place to do business. I would respond by saying that, other than retailers, almost all business groups, including the Federation of Small Businesses, the Food and Drink Federation and the National Farmers’ Union, support this amendment. I would further say that for retailers who comply with the code, an existing legal obligation, there will be absolutely no additional burden, as fines could only ever be imposed for a breach of the code. Retailers will also have a full right of appeal on the merits against the imposition of a fine or its amount.
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One further aspect of these amendments is that they set out the process for specifying the maximum penalty. This is clearly a critical part of the power and I consider that it is important that the basis of determination of the maximum penalty be set out in legislation. Equally however, simply to insert a maximum into the Bill without consultation with stakeholders would not be appropriate, and most people would agree that we would not wish to delay the Bill to allow that consultation to be carried out. It is our intention that the adjudicator will set out in her guidance the criteria that she intends to adopt in deciding the amount of any financial penalty.
The guidance will be published in draft form shortly after commencement for a 12-week consultation period. This will allow stakeholders to express their views regarding the maximum level of the fine and will allow the adjudicator to reflect those views in her final recommendation to the Secretary of State. It would be more appropriate for the adjudicator to take the lead in recommending the maximum penalty based on the evidence from the consultation, subject of course to the Secretary of State making the final decision and to parliamentary oversight.
It is therefore essential that consultation be carried out on this matter. Stakeholders, both retailers and suppliers, deserve to have an input into this process. Accordingly, the government Commons Amendments 6 to 9 to Clause 12 require the adjudicator, alongside the initial consultation on guidance, also to consult on what the maximum penalty should be or how the maximum penalty should be calculated and then, via Commons Amendment 5 to Clause 9, to make a recommendation to the Secretary of State. The Secretary of State will then be required to establish this maximum by order. This will ensure that fines can be imposed as soon as possible.
I should like to inform your Lordships that in Committee in another place the Minister, my honourable friend Jo Swinson, gave a personal commitment that, barring extreme matters outside the control of the Government, the order establishing the amount of the maximum fine or how that amount will be determined would be laid within three months of the adjudicator’s recommendation to the Secretary of State.
I also draw your Lordships’ attention to the fact that Commons Amendment 11 to Clause 15 allows the Secretary of State to alter by order the maximum penalty or how the maximum penalty is to be calculated as a result of the findings of a triennial review. To clarify, the wording relating to the maximum penalty or how the maximum penalty is to be determined is used because we envisage that the Secretary of State could set a maximum either as a specific amount—X pounds, which would apply as the same fixed maximum for each retailer—or by reference to a formula, such as X% of a retailer’s groceries turnover, or the value of relevant supply agreements. This approach is set out in paragraph 92 of the Explanatory Notes.
Finally on this topic, I turn to Amendment 14A on the marshalled list, the new government amendment to Commons Amendment 14. Amendment 14A has been tabled in response to a recommendation from your Lordships’ Delegated Powers and Regulatory Reform Committee in their 16th report of this Session. It recommends that the order with which the Secretary of State will set the maximum level of the fine, or the basis upon which it should be determined, should be subject to an affirmative parliamentary resolution rather than through the negative procedure as currently stated in the Bill.
There are already safeguards on the use of the power; it can be exercised only after a recommendation from the adjudicator who must first consult about it. The Delegated Powers and Regulatory Reform Committee recognised that this would usefully serve to inform the Secretary of State’s exercise of the power. However, the committee has advised that because the upper limit of the penalty is not in the Bill the power to fix the limits should be subject to a significant level of parliamentary scrutiny. Amendment 14A will therefore ensure that the order will be subject to the affirmative resolution procedure, thereby ensuring that Parliament will be able to scrutinise and positively approve the order. I beg to move.