My Lords, I will speak to Amendment 195 in my name and that of the noble Earl, Lord Dundee. I note that there are a variety of amendments to this amendment, including one from the noble Lord, Lord Grantchester, about which we will hear shortly.
The explanatory statement for this amendment says that it
“requires the Government to provide regulations for fair dealing obligations of business purchasers of agricultural products.”
I am sure that we would like to see a day when farmers were not reliant on subsidies to maintain a sustainable income, but, on the other side of the coin, it would not be possible to encourage a rise in food prices when so many people in this country are suffering from food poverty as it is.
The fundamental point I wish to make with this amendment is that the distribution of income within the sector, from the production of food to the retail sector, is not balanced. It is fundamentally unfair. For many years, it has been the case that profit margins within the processing and retailing sectors can be substantially more while the primary producer—the farmer—can barely make a profit on the produce at all.
As a Minister in Northern Ireland who dealt with the food processing sector for a number of years, I saw examples of producers driven down to maybe half a penny of margin on a product. In the days before the Groceries Code Adjudicator was appointed in 2013, there were examples where companies would just say to the producers and processors, “We’re going to extend our credit terms and we’ll not pay you now for 90 days instead of 30”, and apply continuous pressure to drive down the margins. Now business is business, but when you have to substantially subsidise the primary producer through the taxpayer, you need a proper structure to ensure that there is a fair balance at the end of the day.
The remit of the Groceries Code Adjudicator is too narrow. It does not cover indirect suppliers to supermarkets, meaning that many farmers and small food businesses are not protected by the adjudicator or the code. We need an expansion of powers to cover the widest possible extent of the food supply chains that serve our supermarkets. This is not a new idea; in 2008 the Competition Commission looked at grocery supply chains and proposed the establishment of the Groceries Code Adjudicator to tackle unfair trading practices. This report also anticipated that the GCA’s remit may be insufficient, noting that that, if these practices continued, the Government
“should consider the introduction of appropriate measures, including the extension of … the role of the Ombudsman”—
namely, the Groceries Code Adjudicator.
During the past two decades, there has been significant consolidation within the retail and food processing sectors, adding to an imbalance in the market. Primary producers generally do not obtain fair prices and on many occasions do not cover the costs of production. This situation requires political intervention to protect what remains of our farming sector and to assist its rebuilding. We know about imports, weather and other factors, but the fact is that there is a persistent imbalance in the distribution of wealth within the sector from the primary producer to the retailer.
We are at a point of almost generational change with this Bill, and this is an opportunity to reset the clock on how we do this fairly and reasonably. We know that we want to see more food produced in the UK, and we want that food to be of an even higher quality than it is now. We want to see standards maintained. However, we also need investment by the primary producer, and a primary producer cannot invest properly in that business unless they are making money. Therefore, it is in all our long-term interests—not only for food security but for a whole lot of other reasons—to take this opportunity to take positive action to assist our farming community.
It is not simply to add costs to the sale of food in shops, it is to help with the equitable distribution of income and reflect a reasonable return on capital in the profits a farmer can make. That is nothing dramatic: all businesses need that, and I do not see why it should be any different with primary producers. I therefore support this amendment and others of a similar nature in this group.