Westminster Hall debate on Groceries Supply Code of Practice - Jan 22
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Christina Rees (Neath) (Ind) I beg to move, That this House has
considered e-petition 643216, relating to the Groceries Supply Code
of Practice. It is always a pleasure to serve under your
chairpersonship, Mrs Murray. The petition asks the Government “to
amend the Grocery Supply Code of Practice (GSCP) to require
retailers, without exception, to…Buy what they agreed to buy…Pay
what they agreed to pay…Pay on time”. The petition also states:
“Almost...Request free trial
Christina Rees (Neath) (Ind) I beg to move, That this House has considered e-petition 643216, relating to the Groceries Supply Code of Practice. It is always a pleasure to serve under your chairpersonship, Mrs Murray. The petition asks the Government “to amend the Grocery Supply Code of Practice (GSCP) to require retailers, without exception, to…Buy what they agreed to buy…Pay what they agreed to pay…Pay on time”. The petition also states: “Almost half (49%) of a panel of 100 UK fruit and veg farmers fear they will have to give up their farm within the next 12 months, and many raised concerns about the behaviour of supermarkets, with 69% agreeing that tougher regulations are required to redress the imbalance of power between farmers, processors and the supermarkets. The current GSCP contains provisions that are meant to protect suppliers, but allows supply agreements to be varied in certain circumstances.” The petitioners “believe a stronger, clearer code of practice is needed to make sure that all supermarkets stick to fair practices when dealing with farmers.” There are complex perspectives on the code and the issues raised in the petition that need to be unpacked, but it is worth beginning with an overview of the salient facts and how the situation came into being. The groceries supply code of practice was introduced in 2009, following an investigation by the Competition Commission, in a bid to strengthen the food supply chain and improve relationships between growers and retailers. The Groceries Code Adjudicator, or GCA, was established by the Groceries Code Adjudicator Act 2013, and is responsible for enforcing the code. Despite its success and the best intentions, the code has faced criticism from farmers and academics. The main issues are that the code does not cover the relationships between farmers and any processor or intermediary, that the code does not cover of pricing, that there is an imbalance of power and risk, that the GCA is under-resourced, and that the GCA is both adjudicator and arbitrator. I want to unpick each issue in turn, but let us first recognise the integral role that farmers play in our society: they are the stewards of our land, custodians of our food security and backbone of our economy. However, the code’s structure often leaves farmers vulnerable to unfair trading practices, and places them at a significant disadvantage in negotiations with powerful retailers.
Jonathan Edwards (Carmarthen East and
Dinefwr) (Ind)
Christina Rees
Selaine Saxby (North Devon) (Con)
Christina Rees
Fleur Anderson (Putney) (Lab)
Mrs Sheryll Murray (in the Chair)
Christina Rees The first significant issue to explore is that of intermediaries within the food supply chain. The code has brought many positives, including the removal of back-door illegal practices. Although the code has overseen improved practices, it does not cover the relationships that intermediaries have with either farmers or retailers. Its explicit purpose is to regulate supermarket behaviour to bring value and choice for consumers; it is not, and was never, about producers. The use of intermediaries has the potential to allow retailers to circumvent the code. When I was preparing for the debate, I heard directly from farmers and about how such practices create problems for them. They rarely have a written contract, so a request for 100,000 lettuces during the first week of September could turn into a downgrade to 70,000 lettuces if the sun suddenly disappears and salads become less favoured than soups. That leaves the farmer with 30,000 unpurchased lettuces and a considerable threat to their business. There are perfectly sensible reasons for intermediaries to exist—in particular in the meat supply chain, where a farmer would not sell a whole carcase to a single retailer, and therefore a processor or intermediary sells different parts to different customers—but the potential for unfair and unsustainable practice is significantly increased without regulation. A second issue to consider is pricing. Much of the criticism of the code centres on the fact that it does not cover pricing in the food sector, and the issue is exacerbated by the frequent misconception that it does. However, pricing was never covered by the code and the legislation does not allow for its regulation. Coercion by retailers has also had an impact as the cost of a product is squeezed beyond break-even as retailers put pressure on farmers to reduce their prices to allow them to factor in costs such as packaging, marketing and overheads. Instances of such practices have declined, but still pose a problem in achieving a fair price. We must also look into the imbalance of power and risk. Pricing can illustrate the problem of unequal power and risk within the food supply chain. In 2008, the Competition Commission inquiry found that grocery retailers were transferring excessive risks and unexpected costs to their suppliers. Furthermore, examples such as the one I mentioned previously—when the size of a produce order is suddenly scaled back—illustrate the inequitable distribution of risk, with the grower shouldering most of the burden while the retailer can quickly adapt an order according to market forces without the same risk. The response to that was the creation of the code and enforcement by the GCA. Several mandatory reviews by Government, as well as supplier surveys, have shown significant improvements in supplier-retailer relations during the past decade or so. Despite that fact, fear remains in the industry. Many call on the GCA to make greater use of its powers to issue fines. Some suggest that the GCA is hugely under-resourced. It is widely recognised that the cost of a single investigation is greater than its entire annual budget. The result is a perception that the GCA is toothless. The GCA’s opinion is that it is effective within the current parameters of the law, and it is not for it to say whether those parameters should be expanded. However, it is acknowledged that additional funding and powers would be needed to expand the remit of the GCA. The most common criticism of the code and the GCA is that they do not cover the whole supply chain, which means that they apply only to direct suppliers of the 14 biggest retailers, including Tesco, Morrisons, Sainsbury’s and Aldi. That leaves indirect suppliers unprotected, including many small farmers and primary producers. The Competition Commission predicted that problem back in 2008 and suggested two responses: to extend the code and the GCA to cover indirect suppliers or to introduce complementary codes to cover intermediaries and primary producers. Both options, though, ignore the issue of how such codes and regulators are funded so, finally, we must explore the issue of a regulator being both adjudicator and arbitrator. The GCA is funded via a levy on 14 retailers. This is not uncommon for sector regulators, which are almost always funded via the organisations they oversee. However, that can leave them open to criticism of unfair practice and of not being hard enough on retailers. Although collaboration and arbitration are often useful ways of working, it can be argued that such circumstances pose a challenge if a situation requires the regulator to become an adjudicator and enforce fines. The GCA’s opinion is that the code is flexible enough to deal with a range of issues, including online sales, and that amending it might make it too rigid. When farmers are direct suppliers, the three issues raised by the petitioners are clearly covered and regulated. What reforms are needed? It can be argued that the criticism levied at the code and the GCA is somewhat unfair as most issues, such as pricing and intermediaries, are simply not covered by the existing legislation and procedures. However, that does not preclude the fact that the issues exist and need to be dealt with. To that end, several reforms have been suggested and need exploring, including expanding the number of retailers covered by the code by lowering the threshold for compliance from £1 billion in turnover to £500 million, preventing retailers circumventing the code by purchasing through intermediaries, increasing the powers and remit of the GCA to cover issues such as pricing and processes, and setting up separate regulators with separate obligations. The groceries supply code of practice is a vital tool that can either support or hinder the wellbeing of our farmers. It is our responsibility to advocate for reforms that ensure fairness, transparency and sustainability in the supply chain.
Sir Julian Lewis (New Forest East) (Con)
Christina Rees By advocating for reform, we not only support our farmers but contribute to building a more resilient, ethical and sustainable food system for generations to come. Furthermore, a reformed code should prioritise sustainability and ethical practices. Our farmers are not only responsible for feeding the population but for stewarding our environment. It is imperative that the code encourages and rewards environmentally friendly and sustainable farming practices, which could include provisions for fair compensation for using sustainable farming methods, and penalties for practices that harm the environment. Additionally, the reforms should incorporate measures to address the issue of market access. Farmers, particularly small and local producers, often face barriers that limit their ability to access a diverse range of markets. The groceries supply code of practice can be reformed to encourage retailers to seek out and support local farmers, fostering a more diverse and resilient agricultural system. In conclusion, although the groceries supply code of practice was established with good intentions, it requires significant reform to provide better support for those who toil tirelessly to bring food to our tables. It is imperative that we acknowledge the challenges faced by our farmers and work towards creating a more equitable and supportive system. We must reform the code to ensure a fair distribution of power and risk in the supply chain. This could be achieved through the establishment of a transparent and accountable framework, possibly involving a new regulator, separate from the GCA, that promotes fair pricing, timely payments and equitable contractual relationships. By empowering farmers with the tools that they need to negotiate fairly, we can foster a more balanced and sustainable agricultural sector. Let us stand together in solidarity with our farmers and work towards a future in which their invaluable contributions are acknowledged, respected and fairly compensated. While I was preparing for this debate, I met the petitioners and many stakeholders, and I would be pleased if the Minister could explain his Government’s position on the code and give his opinions regarding the issues I have raised. I also invite him to meet me and the petitioners, so that we can explore these issues in greater depth. 16:49:00
Mr David Jones (Clwyd West) (Con) As the hon. Lady said, small suppliers are the backbone of the food supply industry in this country—many of my constituents fall into that category. Not only do they help to feed us; they look after our countryside and make sure that our environment is clean. Without them, our rural landscapes would look very different. At the other, consumer-facing end of the food supply chain are the large supermarkets. Around 95% of the food consumed in this country is sold by just 12 retailers, many of which are multibillion-pound listed companies. The disparity in bargaining strength between those companies and the small family firms that I mentioned is obvious. The supermarkets have the power to drive hard bargains with their suppliers, most of whom are not farmers but commercial intermediaries. Inevitably, the pressure that the supermarkets exert down the supply chain is felt most keenly by the small farmers and growers at the beginning of that chain. According to the agricultural charity Sustain, farmers often receive less than a penny of the profit generated by their produce, with farm businesses increasingly relying on subsidies to break even, and 40% of farms earning less than £25,000 annually. The impact of that behaviour is felt throughout the supply chain. My constituents Liz Kameen and her husband trade as Vale Grocer in Prion, Denbeigh. They supply vegetable boxes in the locality. They are small-scale growers who have chosen not to try to sell to supermarkets directly. Instead, they have created their own customer base, which they supply. She tells me: “As we supplement produce we grow with produce from organic farms around the UK, we are very concerned about the impact of supermarket behaviour on those producers. If we lose any of our suppliers we cannot continue offering the amazing veg and fruit we do currently.” The pressures inherent in the food supply chain have long been recognised. They led to the creation of the groceries supply code of practice, which, as we have heard, is enforced by the Groceries Code Adjudicator. Although the code is welcome so far as it goes, it does not go far enough to afford adequate—or, indeed, any—protection to smaller famers. That is because it only governs the relationship between the supermarkets and their contractual suppliers, who are very rarely the farmers and growers. The GCA is therefore unable to intervene where the practices of supermarkets cause hardship to those small family firms. In September last year, the GCA published a report on his deep-dive survey of the conduct of supermarkets, in which he noted complaints that some supermarkets had chosen to conduct “warfare” with suppliers and had displayed a lack of good faith in negotiations. Such behaviour ultimately has a heavy impact on small producers. The campaign launched by Mr Singh-Watson calls for new powers for the adjudicator that would enable him to take a more effective and, in appropriate circumstances, punitive stance against unfair practices in the supply chain. It further calls for the code of practice to be revised, embedding the principles that retailers must buy what they agreed to buy, pay what they agreed to pay, and pay on time without exception. Those are entirely fair and reasonable requests; decent retailers should be only too happy for the code to be amended in that way, because that is the way they should be behaving anyway. However, that is not always how they behave. Riverford Organic Farmers cites the example of a potato farmer who was told that his potatoes were no longer wanted by the supermarket he was supplying. He was left with 60 tonnes of potatoes and no customer. Such practices will naturally have a devastating impact on farmers. Research conducted by Riverford indicates that 49% of farmers fear that they will go out of business in the next year; 61% said that supply chain unfairness was adversely affecting their mental health. It is entirely unacceptable that people with a vital role in the nation’s food supply should be driven to feel this way. Riverford, Sustain and the other campaigners are right: the code of practice needs to be brought up to date and up to standard. I know the Government recognise the unfairness in the food supply chain. The Agriculture Act 2020 enables the Department for Environment, Food and Rural Affairs to introduce statutory codes of practice, but it has been questioned whether it makes sense for two regimes to co-exist, especially if they will be enforced by two different regulators. The answer should be to amend the code of practice, as called for in the petition. The Government are consulting on contractual relationships in the fresh produce industry, and I understand that that consultation will close on 22 February. I very much hope that its outcome, informed by this debate, will be that those amendments will be made as soon as possible to provide fairness for the United Kingdom’s farmers and growers. 16:56:00
Helen Morgan (North Shropshire) (LD) I might have mentioned on one or two occasions that my constituency of North Shropshire is rural. The issues that face the farming industry are core to everything that happens in it; farming and food production are core to the economy and our landscape, and are very important in our communities, so the issue affects us all very strongly. It is important to recognise that the farming sector has found itself in the pincer between how the cost of living affects farmers’ business and how it affects consumers. As we know, despite the problems facing the farming industry, food inflation has been running very high, and there is huge pressure from the supermarkets to keep people’s food prices low. It is our food producers who are finding themselves caught in the grip of that pincer. On Friday afternoon, I had the pleasure of visiting Lower Lee dairy farm in North Shropshire, which is a great place to visit. It has cutting-edge technology, with a robot-orientated milking and feeding programme, so it is at the top end of animal welfare. The cows do not have to interact with people too much—I did not hear a single moo while I was there. It is a really important business; though it may be rural and looks very pretty, the technology has required enormous investment. There are growing borrowing costs for farmers, on top of the supply chain issue. If we want these good, modern businesses to thrive, we really need to think about how we will support them. Dairy farmers are feeling the squeeze and worrying about their future. A survey last summer by the National Farmers’ Union found that 23% of dairy farmers were unsure whether they would carry on producing into 2025. That is because the price that they receive for their milk often does not cover the cost of production. As the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) mentioned, soaring input costs such as energy, feed and borrowing costs are fed into farmers’ operating model and have made things increasingly difficult. As we know, the price of milk is affected by global markets, and it has come down from the post-covid highs to leave many dairy farmers in a very difficult position. They often contract directly with a big supermarket or a dairy, and some supermarkets have attempted to improve the model on which they pay farmers to a cost-plus model, which is to be welcomed, but even in those instances, they are strongly incentivised to keep their costs low, and even under-report them in some instances. In the past, the big supermarkets have abandoned the most expensive 10% of producers in the contract. If those producers go out of business, there will not be enough milk for UK demand—it is finely balanced at the moment—and it will have to be imported. It is important to think about the environmental and animal welfare implications of importing milk, because our cattle are some of the most well looked after and environmentally friendly in the world. So this is not just about maintaining our landscape and our economy; it is the right answer for the environment and animal welfare. It is really important that we support dairy farmers to be paid a fair price for the milk they are producing. We not only have cows in Shropshire, but grow fruits, vegetables and other crops as well. When I meet constituents, they raise the issue of intermediaries and people who process food. Just before Christmas, I went to see the director of Maincrop Potatoes Ltd, who trades potatoes throughout the UK. Potato farmers have had a particularly torrid time over the last winter with the rainfall we have seen and the difficulty in getting potatoes out of the ground. They are not well positioned to benefit from the sustainable farming incentive because of the things that have to be done to grow potatoes and the way crops need to be moved around from year to year. They are squeezed to a horrendous extent. A major producer of chips and other similar types of potato goods increased payments to its contracted suppliers by 0.4% this year in the face of increased costs for fertiliser, fuel, machinery and doing business that are clearly way in excess of that. That has taken its toll: potato acreage is falling and we are starting to increase our imports of potatoes from countries such as Egypt. We face the same problem of damaging our food security and importing goods from countries where we do not have control over whether they take the environmental steps required to produce in the most sustainable way. We need to recognise the importance of food security and affordability. I do not think anybody here would like to see food prices rocket for consumers. That is where the Groceries Code Adjudicator is so important: it is not just about the margin that the supermarket takes. Supermarkets have made absolutely astronomical profits during the cost of living crisis and have not been feeling the squeeze in the same way that farmers and consumers have. However, we also need to look at food producers that intervene in the supply chain before things reach the supermarket. There are people are like me who do not cook everything from scratch and do not always use a raw potato or a raw carrot—they buy some processed food as well. We need to make sure that those producers are not gouging prices from farmers. I would really like to see the code of practice extended to anybody who buys produce from farms so that the balance of power between the producer and the processor is appropriately managed. In conclusion, I echo the calls of the petitioners to extend the code to intermediaries and producers, and to resource the adjudicator properly so it can make sure that those provisions are being enforced and that the farmer, who is often a small business, does not have the teeth to shout up and is in fear of losing their contract, is properly protected by the arrangements we have put in place. I support the petitioners, our farmers and our food producers, and I would like to see the amount of profitability through the supply chain looked at and managed so that we keep our farmers in business and do not have to import food from across the world. 17:04:00
Alicia Kearns (Rutland and Melton)
(Con) We all know that national food security is a Government priority, yet all too often there seems to be a disconnect between the recognition of the importance of food and how it is produced, and the reality where farmers are often left feeling that this rests solely upon their shoulders. To support farmers, we need to ensure that we speak up for them and help them to do their job, not only feeding our nation, but conserving the precious character of our countryside. When it comes to food and drink, very few can compete with Rutland and Melton. Whether it be bison and lamb, chicken and eggs, dairy, elderflower, beef, sugar beet, crops—you name it, we have it. There is also the infamous stilton and Melton Mowbray pork pies—I considered pausing to allow the audience in the Gallery to provide that line, but we shall just move on swiftly. I would also like to give a specific shout-out to the amazing Allerton Project in Loddington, which I know the Minister visited. It leads a lot of the research into how we do sustainable farming and is decades ahead of the rest of the country—it really is leading the way. Although we may say otherwise sometimes, farmers largely put their heads down, pull their socks up and crack on with producing the food we need. When they speak, we need to listen, and this is one of those times. This petition is not asking for the world, and the requests it makes are balanced, fair, and in my view—and clearly that of so many others—worthy of adoption by the Government. It also reflects the requests that so many of us have made since we came to Parliament. I fully support the three asks: first, that suppliers should buy what they have agreed to buy; secondly, that suppliers should pay what they have agreed to pay; and thirdly, that the grocery supply code should ensure that they pay on time. It is really not that much to ask. The grocery supply code applies only to retailers with an annual turnover of £1 billion or more. These companies are surely more than capable of honouring the amount bought, the price given and the date of payment agreed. Time and time again, farmers have said that the balance of power is weighted towards large suppliers, leaving them underpaid and under-informed and feeling undervalued. These three common-sense additions to the code go some way to evening the scales towards fairness. We saw this during the recent issue over the price of British sugar beet. While a deal has finally been reached, it was disappointing that so many farmers, particularly in my constituency, faced uncertainty over what price they would get for their crop. I know Ministers were very active in helping to resolve the dispute, and I thank them for their efforts, but we need to bring the same energy to this issue. It is therefore in that spirit of hope that I am also calling for the lowering of the threshold for inclusion in the supply code to retailers with a revenue of £500 million. That would spread the benefits of the code to many more farmers and provide a degree of economic certainty in these uncertain times. We should acknowledge that the conversations we are having today are only possible because of the extra powers that we voted to give Ministers in the Agriculture Act 2020. I commend the Government for their drive to clamp down on unfair practices in food supply chains, but we need to use these powers to go that bit further, and demonstrate that we have a steadfast commitment to British farming by adopting the three simple asks in this petition. I would like to take this opportunity to reiterate my ask for the establishment of a gas fertiliser price index, as we need to ensure transparency and fairness in the fertiliser market. We already have indexes for grain and many other commodities, and a fertiliser index would bring clarity to a market that is currently opaque and prone to damaging fluctuations. I also thank the Government for announcing the biggest upgrade to UK farming schemes since we left the EU. We are seeing an increase of 10% to rates for the environmental land management scheme, which my farmers raised with me and are thankful for. We have seen plans to improve food labelling to protect farms better. We have seen far less paperwork—I am really hearing that on my monthly visits to a farm in my constituency—and enhanced payment for protecting our environment. I thank the hon. Member for Neath again for leading this vital debate, and I thank the 286 people in Rutland and Melton, and the 276 in Stamford and Grantham, who signed this petition calling for reform to the grocery code. I hope this debate tells them that they have been heard. I am sure my right hon. Friend the Minister will show the Government’s willingness to help when he makes his comments, just as I stand here today and reassure you, if you are a farmer in Rutland, Melton, the Vale, the Harborough villages and the Stamford villages, that I, for one, will always stand on your side. 17:09:00
Sarah Dyke (Somerton and Frome) (LD) We need to get fair about farming, because farmers are often disenfranchised in the agrifood supply chain. It requires a concerted effort to tackle the systemic issues, promote equitable relationships and ensure a sustainable and fair system so that British farmers can produce high-quality food for our tables. I rise on behalf of the many farmers in Somerton and Frome, who, like many others across the constituency, are key drivers of the rural economy. They are also the custodians of our natural environment. We must therefore ensure that they get a fair deal for the work that they do and the food that they supply. The public agree. Polling from More in Common shows that 88% of the public think it is important that farmers are paid fairly for their work, and they would even pay a little more if they knew the money went to support British farming. However, food does not need to be expensive; just a bigger proportion needs to go back to the farmer. Tackling contractual unfairness in the agrifood supply chain is central to ensuring fairness. Farmers are operating in a marketplace where they have little control or say over who they sell their produce to. Research from Sustain shows that producers receive less than one pence in the pound of the profit that they produce. Forty-nine per cent of British fruit and veg farmers fear that they will go out of business within the next 12 months, with three quarters of them stating that supermarket behaviour is a significant factor. To highlight the stark reality of the issue, Riverford Organic Farmers placed 49 scarecrows outside Parliament earlier today, representing those farmers. As well as farmers in my constituency, farmers in Totnes have said that the Government are not listening to them over subsidies, have let them down on the Australia trade deal and should do more to ensure fair pricing from supermarkets.
Mrs Sheryll Murray (in the Chair)
Sarah Dyke One farmer described the Government’s trade deal with Australia as a “disaster”, and another as “criminal”. Another said it would “only benefit Australia, New Zealand and the UK supermarkets”. It seems that the strong arm of the supermarkets is leaving farmers stranded at the bottom of the supply chain. The imbalance needs to be equalised if we are going to ensure food security in the UK. Many farmers are on the brink, but that is nothing new. The decline has been a long time coming, with 110,000 farms lost since 1990. Growing up in a farming community, I know how damaging that has been to my family, friends and neighbours. Our hard-working farmers know that quality food should not cost the earth, either for the consumer or our precious environment. Our farmers are the guardians of the countryside. They know that farming and the environment are intrinsically linked. They are responsible for keeping our natural biodiversity flourishing. If we drive family farms out of business, they will be replaced with larger, industrial farms that will be less entrenched in our communities and care less about protecting biodiversity. A Guardian article from 2021 summed it up perfectly when it said that the alternative could be “factory farming with a” thin “green veneer.” I cannot emphasise this point strongly enough: if we want to maintain our beautiful British countryside, we need to protect our farmers. Farmers need to be able to plan ahead. They need commitment from others in the supply chain, but all too often, that trust is broken as supermarkets vie for cheaper food, reject produce at short notice or simply change their minds, leaving farmers without a market, without an income or security, and so often without a future. Some farmers are able to avoid selling to supermarkets, but many are left exploited on an industrial scale. Most often, the exploited farms will be small family farms struggling to produce food to suit the ever-changing demands of the supermarkets, whose focus is the pursuit of ever-cheaper food at any cost. As I have said, the public want farmers to be paid fairly, and they want to be able to access healthy, quality food, but the current system does not allow that to happen. As Liberal Democrats, we want to give the Groceries Code Adjudicator more teeth to address unfairness in all supply chains, not just the transactions related to those who directly supply retailers. Alongside my Liberal Democrat colleagues, I am calling for the Competition and Markets Authority to investigate any profiteering that has taken place among the big supermarkets and food multinationals, and for tougher rules to prevent them from raising food prices more than they need to. This disenfranchisement among farmers in the agrifood supply chain is complex, with significant social and economic implications, but so many of the Government’s decisions are made in silos, all the while leaving farmers facing financial hardship and food rotting in the fields. The Liberal Democrats listen to farmers, and we know they need a fair deal. We want to give an extra £1 billion boost to British farms to enable more sustainable family farming and to allow them to continue providing the public plate with high-quality, locally sourced, seasonal food at a fair price. 17:16:00
Anthony Mangnall (Totnes) (Con) The five principles have been mentioned already, but it is important to ensure that they are hammered home: buying what you committed to buy, paying on time, committing for the long term, agreeing on fair specifications and paying what you agreed to pay. Those are not radical ideas or concepts that would be out of place in any other sector, yet farmers often find themselves on the wrong side when supermarkets change tack. We often talk in this place about certainty and about how we want to create it for businesses, small and large, across this country, but where do farmers fit into that? We should strive every day to ensure that the people who fill our bellies and put food on our tables are supported, so that they can carry on doing so. Having listened to the speeches made in this Chamber already, I find it extraordinary that the Liberal Democrats have at no point mentioned the legislation that has been passed, which might facilitate some of the things they are asking for. We could talk, for instance, about the Procurement Act 2023—I accept that many colleagues might not be interested in it, because it is perhaps one of the most boring pieces of legislation that has ever passed through this place, but it is also one of the most important. It is designed to shorten supply chains, to help small businesses and small farmers access the supply chain, and to ensure that they can provide food for public organisations. That then opens up the idea—this came up in the debate I held a few weeks ago on this very subject, at which none of the Liberal Democrats were present—that we could use the £4.6 billion of taxpayers’ money we spend in this regard to support small farmers in the fruit and veg markets and farms across this country. The opportunity is there for us to be constructive in this place and to come up with ideas as to how we can use that legislation to the most effect. I ask the Minister, when he stands up to speak, what steps he will take to ensure that the Procurement Act comes forward and that we look at how we can change our methodology. I agree entirely with my hon. Friend the Member for Rutland and Melton (Alicia Kearns) about ensuring that the Agriculture Act is used to the most effect, amending the supply chain and updating the Groceries Code Adjudicator. I also point out that there is a requirement in the Act for the Secretary of State to update the House on food security every few years. What is the purpose of that, if we have no farmers producing food? If that threshold of just under 50% of farmers go out of business, we should be deeply alarmed. Not only will we see our food security targets reduced, but our whole structure of supporting and rewarding our farmers will go down the can. While we have time, can we use the Agriculture and Procurement Acts to proper effect on a cross-party basis—there is clearly agreement on this—to find ways to make sure the food security target is heading in the right direction? As I have said many times in this place, we should sometimes think about being a little more French. We must think about how we structure our farmers’ markets and how we can allow them to diversify. There will be no telling what we can do if we ask for fairness in a contractual agreement that can create certainty and opportunity for small farmers and ensure that taxpayers’ money is spent in the right way—to support those farmers, while also opening up new avenues for them. We could create a new generation of farmers who will be able to supply us with our needs. My last point is about ELMS. Even the Guardian columnists who live in my constituency have commented that, in their eyes, the one benefit from Brexit has been the invention of ELMS—the end of our involvement in the common agricultural policy and the introduction of the new environmental land management scheme. As colleagues have mentioned, there is no doubt that there have been positive steps, but to make the scheme as effective and impactful as possible, we must ensure that ELMS goes further for small farmers, who do not always have the ear of Parliament or the ability to raise their voices—although, obviously, the Riverford campaign has shown what small farmers can do. We must make sure that their voice is always heard at our meetings and that we can diversify those markets. There is a huge opportunity in front of us. I hope the Minister will listen, because not only could there be a cross-party working group on this issue, but we could start it in rapid order as well. 17:21:00
Ben Lake (Ceredigion) (PC) The strengthening and broadening of the scope of the groceries supply code of practice is necessary; as has been rehearsed already by those far more eloquent than I, it is also very timely. It is important to emphasise at the outset that our farmers, including those in Ceredigion, find themselves in a situation of severe uncertainty. We have already heard quite a bit about the impact of inflation; I do not need to rehearse the statistics, other than to say that the spikes in input and production costs have been severe. Although inflation in terms of many of those input costs has come down, they are not reducing—there has not been deflation. Many of our farmers are still struggling with heightened input costs. This is also a time when unfair and quite extraordinary trading practices have been exercised by too many of the large grocery industry businesses. As the hon. Member for North Shropshire (Helen Morgan) mentioned, there has been a pincer effect on many of our farmers, who find themselves vulnerable. It is timely that we should be debating some of these changes this afternoon. Farmers across the United Kingdom, and specifically in my own constituency of Ceredigion, value certainty. The businesses are built on long-term models, due to the investments required in agriculture and the growing and production cycles. So, yes, as we have heard, farmers are particularly vulnerable to inflation spikes but also to the extraordinary and unfair trading practices that arise from the severe power imbalance that many Members have described in detail this afternoon. The fact is that the buying power of the groceries sector affords it a significant ability to apply short-term pressures on suppliers and producers, without much understanding of the long-term consequences. We have seen that power dynamic play out to disastrous effect over the past 18 to 24 months, particularly in the horticultural and poultry sectors. Other sectors also complain of severe practices being aggressively applied by some of the larger companies. It is quite appalling to hear about people being told at the very last moment that they are no required to produce as much, and the hon. Member for Neath mentioned lettuces. Others are finding that their contracts or verbal agreements are being changed with little notice. Indeed, some growers find out the price they will be paid for their produce only when they come to harvest. For an industry that is so dependent on certainty and long-term planning, these practices are simply disastrous, so it is right that we debate ways to address them and to restore some balance of power across the supply chain. The right hon. Member for, I believe, Vale of Clwyd—
Mr David Jones
Ben Lake I refer Members to the example of the dairy industry, where many people have suffered from consolidation. Consolidation in the processing sector has its benefits, but one downside is that it often leaves primary producers with less choice about whom to sell their produce to, and the problem is particularly acute in the dairy industry. If we were to extend the code, as many Members have called for this afternoon, it would not only ensure that we have a greater balance of power across the supply chain, but help to balance some of the risks throughout the supply chain—something other Members have mentioned. Why should we be so concerned about this issue? The fact of the matter is that many of these awful practices are causing such strain for farmers across the UK that far too many are considering whether they have a future in the industry. Some 25% of dairy farmers are considering whether they will still be milking in a year’s time. The impact that that has on not just our productive capacity but our food security is quite severe. I agree with the hon. Member for Totnes that this should be a cause for real concern for Members of all political parties because, in a world with a changing climate, many growers and producers overseas will not be in a position to fill the gap if we lose our domestic productive capacity. I will end by reiterating the call from the petitioners and the Riverford farming campaign not only to strengthen the Groceries Code Adjudicator so that it is empowered to take effective and, if needs be, punitive action against those committing unfair trading practices in the supply chain, but to extend the groceries supply code of practice to intermediaries as well. It beggars belief that we are here debating the importance and urgency of enshrining the simple principle that retailers should give suppliers certainty that they will buy what they agreed to buy, pay what they agreed to pay and pay on time. If we could make swift progress on this issue, it would go some way towards addressing a key concern for many of our farmers, and especially those in Ceredigion, about the future. In so doing, it would ensure that we have the productive capacity in the United Kingdom to safeguard our food security for the future. 17:29:00
Greg Smith (Buckingham) (Con) In fear of replicating some of the arguments that have already been made by other hon. Members, the point I really want to land today is that this is fundamentally about fixing a broken market. It is about ensuring that there can be a functioning market between our farmers and those that buy their produce—be that food processors, retailers or the supermarket giants. It is clear that we have a market that has become broken in many respects, and which needs extra regulation so our farmers have an extra tier of safety. The groceries supply code of practice should be a cornerstone of fair dealing in our agrifood supply chains. Before I come on to those arguments, it is important to recognise the indisputable impacts of the covid-19 pandemic, coupled with the effects of Putin’s invasion of Ukraine. Those have resulted in a storm of challenges that have tested the resilience of all our farmers and our agrifood supply chain, and posed an existential threat to the very fabric of British agriculture. I see that in my own constituency: 335 square miles of north Buckinghamshire, where 90% of the land is agricultural. I talk to farmers regularly, and I have seen at first-hand the impacts that some of those hard-working farmers—deeply rooted in agriculture—are grappling with. The surge in input costs, not mirrored by a rise in prices from processors and retailers, has pushed many to a tipping point.
John McDonnell (Hayes and Harlington)
(Lab)
Greg Smith The Promar report of December 2023 attests to the severe cost increases within the horticulture sector: energy costs have soared by 218%, fertiliser by 47%, and labour by 24%. In addition, in 2023, for example, egg production in the poultry sector fell to its lowest level in over nine years, culminating in the evident shortage of eggs on the shelves in 2022 and 2023. Meanwhile these spikes—and this is the important bit—are not being reflected in the prices the tertiary sector is willing to pay. That blatant mismatch has all but erased profits, leaving consumers with stark consequences: a diminished output, shelf shortages and the regrettable loss of over 8,000 agricultural businesses in recent years. The groceries supply code of practice was instituted with the aim of promoting a functioning market—a fair market. But, as I think we have all agreed this afternoon, its reach falls short, and its grasp lacks the precision needed for effective oversight. As it stands, the GSCOP regulates entities with a turnover exceeding £1 billion. That threshold, as others have said, is disproportionately high, leaving countless suppliers—and by extension, our farmers—unprotected. An adjustment is desperately needed. It is imperative that we prioritise lowering the threshold to, I would suggest, the NFU’s ask of £500 million; although we can always debate the precise numbers around that. That change would increase accountability and ensure more comprehensive coverage. To secure our agricultural backbone, we must also adamantly support the extension of the GSCOP’s reach, if not for the sake of fairness in our markets and the wellbeing of our invaluable farmers, then for the preservation of our nation’s food security and rural economy. The reach must expand beyond supermarkets to encompass processors, the hospitality sector and manufacturers, which are key players in the supply chain that can exert just as much pressure on our farmers as the largest retail giants. The foundation laid by the Agriculture Act is robust, but it is not the only solution. It is but the ground upon which we must build that fairer market, and we must not falter in doing so. 17:35:00
Richard Foord (Tiverton and Honiton)
(LD) I have been meeting with farmers across mid and east Devon villages in recent months. It is plain to me that, when we talk about farming, we are not just talking about a job—farming is a vocation; it is a way of life. It employs huge numbers of people, not just in farming but in the supply chains, both up and down. Simply, farmers are the beating heart of our countryside. I pay tribute to the people who came up with this petition, which 112,780 individuals have signed. Of the 650 constituencies in the UK, mine was seventh in terms of the number of constituents who signed; the neighbouring constituency to my west has 840 signatories and is sixth on the list. Plainly, this is a real priority for constituents in my part of the world.
Mrs Sheryll Murray (in the Chair)
Richard Foord In recent years, the British farming sector has come under enormous pressure. Uncertainty over the amount of support and the way the Government give the support have been central to that, but we have talked on other occasions about the deleterious effect of some of the trade deals that have been struck, such as those with Australia and New Zealand. The pressure has pushed many small farmers almost to the brink, and threatens the future of the countryside itself. I invite hon. Members to do what I did in December. I went to the top of Hembury fort, which is in the area I represent, and surveyed the countryside. It is very apparent that farmers do a whole lot more than produce food for our families: they tend to the land, provide public goods and provide solutions to climate change mitigation, which we all need. If we want to create thriving communities, we have to ensure that our farmers get a fair price for their produce. I am afraid that that it is often not the case: many struggle against the big supermarkets. Some of the supermarkets operate a little like a cartel. I am not alleging that there is a cartel, but they are operating a little like a cartel. To give an example—again from December—Aldi stated just before Christmas that it would sell six vegetables for 15p: for example, people could buy a bag of carrots for 15p. That is way below the cost of production. That would be one thing, but then it was copied by the other supermarkets: Asda, Tesco, Lidl and Morrisons stated that they would sell their vegetables at these rock-bottom prices in the pre-Christmas period. That is less about veg as a loss leader than about a complete lack of leadership. I am afraid that that is a loss to this country. If our vegetable producers find that they cannot make ends meet, we will end up importing more and more food. That comes back to a lack of reliability on the part of the Groceries Code Adjudicator. We find that some producers are being paid not only insufficiently for the goods that they produce, but late or in a way that means their original contracts are not being honoured. We often hear about retail being an industry with small profit margins, but not in this case. Tesco, for example, ahead of Christmas saw sales increases of 6.6%, which delivered £2.7 billion in profit. It simply cannot be right that the big supermarkets walk away with so much money, when the people who actually put in the work to produce the food are not seeing it. The majority of British producers run fragile businesses that are already subject to the vagaries of the weather, without being held hostage by the key players in the food supply chain. I pay particular tribute to Guy Singh-Watson who created Riverford Organic. Arriving by train today, I saw a Riverford stall at Paddington station, selling that excellent produce. But how are such brilliant producers supposed to compete when our supermarkets are selling at silly prices? That does not apply just to vegetables. As we have heard, we saw fewer eggs last year—egg production fell to its lowest level in nine years. I heard about that directly from one of my constituents, Liz Warner, who serves on the National Farmers’ Union poultry board. In recent months, I have travelled to meet In My Back Yard, an online farmers market selling local, ethical food sourced in Devon, Dorset and Somerset, and partnered with Good Food Loop. It has volunteer collection points in Honiton, Ottery St Mary, Seaton and Sidmouth. Such initiatives are great and it is fantastic that people support local produce, but if most people get their staple food from supermarkets, we have to look at the Groceries Code Adjudicator to sort things out. This afternoon, we have heard reference already to the environmental land management scheme and specifically to the sustainable farming incentive. My Liberal Democrat colleagues and I are wholly supportive of the end that we want to get to with ELMS and SFI, but the implementation has been utterly botched. Recently, a farmer went past me, then he backed up his 4x4, wound down the window and said: “DEFRA: that stands”—in his mind and that of his colleagues—“for the Department for the Extinction of Farmers.” One thing that Ministers and civil servants can do right away would be to ensure that the Groceries Code Adjudicator is empowered to take more effective action against unfair practices. That would make retailers honour the payment of the price that they agree to in the first place, and would ensure that they pay on time, so that our farmers do not have to wait months to be paid. While big companies can sit on their hands, those further down the supply chain are left to suffer, despite holding up their end of the bargain. We must ensure that fairness is imbued throughout the system, and we must ensure that our farmers get the fair deal that they deserve. 17:43:00
Simon Jupp (East Devon) (Con) I am glad we have found the time to debate the reforms to the groceries supply code of practice, and there is clearly significant strength of feeling on this subject in Devon. The petition was signed by 840 of my constituents and 8,490 people in Devon. I wanted to be here today to put on the record my backing for the petition. Its message is clear: first, farmers and producers should be better protected; and, secondly, the big retailers and supermarkets should buy what they agree to buy, pay what they agree to pay, and pay on time. Farmers in East Devon work hard around the clock to keep great quality food on our plates, and they deserve a fair price and fair practices. They are not getting that at the moment. Our farmers are at the heart of our rural economy, bringing jobs and opportunities to East Devon. I regularly hold farming roundtables across my constituency with local farmers to hear their concerns, the most recent ones being in Talaton and Sidford. Last year, I had the pleasure of welcoming the Minister to Ottery St Mary, a visit attended by a range of local dairy, livestock and horticultural farmers. I thank the Minister for that visit. This Conservative Government listen to our farmers. That is not to say that we get everything right first time, and I am certainly no stranger to ruffling a few Government feathers on farming. In the summer of 2020, I supported an amendment to the Agriculture Bill on food standards, which was tabled by the much missed Neil Parish. It is clear that the Government are taking steps in the right direction already. Last year at the Farm to Fork summit, they announced a review into contractual relationships with the UK egg industry. That announcement was certainly welcome to egg producers in my constituency, and I urge the Minister to publish a Government response to the consultation as soon as possible. It is also clear that the groceries supply code of practice needs to be fit for purpose, and I hope the Government listen and act there too. It does not cover indirect suppliers to grocery retailers. That must be looked at, especially as dairy and pig producers often do not directly supply grocery retailers. I also back the National Farmers Union’s ask that the scope of the groceries supply code of practice be expanded beyond the biggest players in the market. This debate goes right to the heart of fairness in the food supply chain. If changes are needed to address contractual issues, I hope the Government can use powers under the Agriculture Act 2020 to bring that forward with haste. Strong action is undoubtedly needed because supermarkets occupy a privileged and dominant position—and that can be abused. They are effectively the middlemen between a public, who want to buy local and support our farmers, and producers. British people clearly value our farmers; an NFU survey reveals that 86% of the public wants to buy more British food, and why not? I firmly believe that farmers’ high quality British produce deserves VIP status and must be easily identifiable to shoppers. The Government have drawn up plans to ensure that British produce will stand out from the crowd. Last year, I signed a public letter written by my hon. Friend the Member for Bosworth (Dr Evans) calling for supermarkets to introduce a “Buy British” button on their websites. I understand that, so far, only Morrisons has stepped up to the plate, which is disappointing to say the least. This debate demonstrates that supermarkets need to give our farmers a fair deal. East Devon produces some of the best food and drink in the country, and I will continue to work with producers and the Minister to support our fantastic farmers and producers. 17:47:00
Keir Mather (Selby and Ainsty) (Lab) Farms both large and small are the bedrock of communities in my constituency. North Yorkshire’s farmers are crucial to national supply chains, keeping our shelves stacked and shielding consumers from spiralling prices to the greatest extent they can. Under those circumstances, reforms to the GSCOP seem well overdue. But we suffer from a problem. In naval circles, the term “sea blindness” describes insufficient awareness of the challenges that Britain faces as an island nation overwhelmingly dependent on maritime trade. In 2024, I would argue that we face a similar form of land blindness for UK farming, as many are unaware of the extent to which agricultural production forms both the foundation stone of our national security and the lifeblood of our economic vitality. We must all, including our largest supermarkets, play our role in ensuring that farmers, who form the crucial link in that chain, are given a fair deal. We know that the supply chain in which UK farmers operate today is volatile, but it is also characterised by very limited market choice, which makes GSCOP reform so necessary. Currently, 95% of Britain’s food is sold through just 12 retailers, which curtails consumer choice and limits farmers’ bargaining power when negotiating contracts with shops that cannot be relied on to properly honour their arrangements. Moreover, the sector has experienced significant shocks, which have been borne disproportionately by farmers and their families. Unjust trade deals negotiated by this Government, covid-19, the war in Ukraine and multiple climate events have precipitated a form of permacrisis that farmers must navigate through every single day. Meanwhile, many of the supermarkets that farmers supply have seen their profits skyrocket in a climate of inflationary pressures and rising prices. GSCOP reform would ensure that those retailers played by a fair set of rules and helped farmers to weather some of the global shocks that they are currently experiencing. Those trials are only the start of what farmers in my constituency of Selby and Ainsty face. Between Cawood, Wistow and Kelfield in my constituency, hundreds of acres of prime arable land have been submerged for weeks underneath floodwater, which has killed crops that add to the hundreds of thousands of pounds’ worth of losses that local farmers have so bravely borne and been forced to endure due to repeated flood events. The farmers not only keep food on all our tables across the UK; they quite literally hold back the water in my part of North Yorkshire to stop homes from flooding. They hold back water that would otherwise reach people’s doorsteps in Selby; they receive no compensation for doing so and get inadequate support from local agencies. In that context, the very least we can do is ensure that some of the effects are ameliorated for farmers by ensuring that they are paid for what they produce and in a fair and timely fashion. Our farmers require more than just thanks for the service that they provide to the British people: they need to know that they have a Government who are on their side. That is why I am pleased to support the Labour party’s pledge to use Government purchasing power to back our agricultural businesses, ensuring that British produce makes up at least half of the food used in schools, hospitals and prisons. This Prime Minister may have paid lip service to the NFU’s Buy British campaign, but it is the Labour party that is committed to putting those values into practice. Finally, we must stand alongside the businesses that do their bit to ensure a fair deal for North Yorkshire’s farmers. I draw particular attention to Sedamyl, an agribusiness operating in my constituency that is committed to getting wheat and alcohol production from within 60 miles of its North Yorkshire plant. That is a North Yorkshire business putting its money where its mouth is to support local farmers and preserve our rural way of life. It does not need to be told to meet its obligation to farmers in my constituency, but it is clear that reform of the code is necessary to compel those supermarkets that do not have the same respect for our farming communities to do the right thing and get behind British farmers. Those efforts will go some way to strengthening the hand of farmers across Selby and Ainsty, giving their family businesses a fair chance at a viable future. They will level the playing field and reshape a system that, for far too many, penalises farmers, and they will hopefully create a stable basis for farmers in my constituency to carry on their family businesses long into the future. 17:52:00
Kirsty Blackman (Aberdeen North) (SNP) Hon. Members will realise that I am not my hon. Friend the Member for Coatbridge, Chryston and Bellshill (Steven Bonnar), who unfortunately has been caught up in the travel chaos as a result of the storms. I am super-subbing it today, so I hope that everybody will forgive me if I do not know the answers to any questions that may get thrown at me. I declare an interest: my mum’s sister owns a small farm, and my mum’s sister and brother both own sheep and a handful of cows. The number of sheep varies throughout the year, but it is less than 500 at any time. The hon. Member for Rutland and Melton (Alicia Kearns) talked about somebody who was a fifth-generation farmer. I asked my mum about farming in our family, and she said that she does not know of any of her direct ancestors who were not farmers. My dad’s family do not know of any of their direct ancestors who were not fishermen, so we have food production running through our veins. However, I am firmly a toonser rather than a teuchter, and I visit the farm about once a year just to see the lambs. That is about as good as it gets when it comes to my farming, I am afraid. However, farming is vital to Scotland. Some 67,000 people throughout Scotland are directly employed in agriculture, and throughout the UK about 400,000 people are employed in food manufacturing, as well as 500,000 people in farming and fishing. We are absolutely clear that farmers must be paid what they are owed because they provide a secure, fair and sustainable future for British family farms on these islands. I am sad that I missed the scarecrows today, but I thank you for all the work you have done in bringing this to the attention of people. I hope that it gets the attention it deserves from not just around the House—
Mrs Sheryll Murray (in the Chair)
Kirsty Blackman I have some points from the Scottish Government and from a Scottish perspective. We are looking for clarity and certainty on the future of rural funding. We are committed to maintaining direct payments, but it would be incredibly useful to know exactly what will happen in the future. We are also still looking for more information on the EU labelling rules—the labels that say, “Not for EU”. The Scottish Parliament has the right to make decisions on labelling because it is a devolved matter. However, the UK Government are making decisions and saying that they apply across the whole UK. We do not want that burden to be put on our farmers when we are not choosing for that to happen. Anything the Minister can do to ensure that there are communications with the Scottish Government so that they are kept as up to date as possible on the labelling issue would be useful. On spending and how farmers are managing at the moment, there continues to be an issue around immigration, in relation to both seasonal workers and food manufacturing —in particular when it comes to abattoirs—despite the fact that the Government have introduced temporary, short-term visas to allow people to take on those roles. There is a significant issue with vets. Food manufacturing ends up costing significantly more because if it is much more difficult to get vets, it is even more difficult for farmers to get what they need in terms of producing costs. Lastly, the issue around seed potatoes continues to be significant and, as far as I know, does not look like it is going to be solved. It would be helpful if we were able to export seed potatoes again. The Scottish Government have created an £180,000 pilot fund for abattoirs and small food producers. If the UK Government were willing to look at the results of our pilot, once we have them, they may be keen to take on that way of funding small producers and abattoirs to ensure that they continue to keep their heads above water into the future. We cannot lose our farming industry. We also cannot allow consumers to be ripped off when they are buying food at the supermarket. I have very little sympathy for supermarkets that are making billions when my constituents cannot afford food and farmers are being paid pennies—if that—in every pound for the food they produce. The UK Government’s food security targets are all well and good, but there needs to be more intervention to ensure that they are met: things like the trade deals, for example. During my time on the EFRA Committee, it seemed to me that nobody had thought about how those might impact farmers in these islands. It seemed that it was just, “We have decided that this is a good thing and therefore we are doing it”, and that farmers’ voices were not heard during those negotiations. I know that lots of things need to be taken into account when trade deals are signed—I absolutely get that. But the fact that farmers seemed to be so sidelined and not listened to in the process really concerned me.
Anthony Mangnall
Kirsty Blackman
Anthony Mangnall
Kirsty Blackman Mrs Murray, in this room you have heard today the voices of people who listen to their constituents and are heavily involved in their constituency. I would like those voices—indeed, voices from all parts of these islands—to have a say, but I still think that we are not quite there yet. Farmers and crofters absolutely deserve a fair return for the costs and risks involved in their work. They produce the highest quality food and drink. Also, the environmental benefits of their work are significant. The landscape management and climate change mitigation work that farmers do has been mentioned, as well as the economic benefits of farming. All those things are important. Contracts should reflect the real costs of farming and should allow for regular review as well, especially in the event of unexpected shocks. Although farming is absolutely about long-term planning, farmers cannot work out five years in advance that inflation and fertiliser prices will go through the roof, so contract reviews need to take place, so that they can reflect the costs that farmers face, particularly when those costs go up. Changing the GSCOP is important, as is giving the GCA more teeth. Lastly on the SNP’s position, we agree with NFU Scotland that the UK Government have a key role to play in helping to engage the retailers and food service companies, to ensure that supermarkets do not price-gouge, that food growers and their supply chains are sustainable, and that food processors and producers, farmers, fishermen, food manufacturers and those involved in abattoirs are fairly compensated for their hard work and dedication to feeding the people of these islands. 18:02:00
Daniel Zeichner (Cambridge) (Lab) I thank the hon. Member for Neath (Christina Rees) for opening this debate on behalf of the Petitions Committee, and for delivering such a well researched and thoughtful introduction to it. I thank colleagues from all parties for their contributions; there has been a remarkable amount of agreement, and the Minister has been sent a strong message. Of course I also thank Guy Singh-Watson of Riverford Organic Farmers for his work organising the petition, which has secured so many signatories. Clearly, he has touched a nerve. I also thank the 49 scarecrows that we have heard about. Obviously, I am not referring to parliamentary colleagues, but to the 49 scarecrows that apparently are in Victoria Gardens to represent the 49% of farmers who fear going out of business, with 75% of them citing pressure from supermarkets. That is a powerful image. I thank Orla Delargy at Sustain and Vicki Hird, now at the Wildlife Trusts, for providing me with very helpful facts and observations about the food supply chain over many years, since the passage of the Agriculture Act 2020. I also thank Lesley Mitchell, whose excellent report for last year’s Oxford farming conference is an important contribution to this debate. It is not a great surprise that the petition has elicited so much support, not least because it is clear that farmers and growers in this country are struggling. They have been grappling with formidable challenges over the last few years: the skyrocketing costs of fertiliser, animal feed and energy; tight profit margins; avian flu; a rocky transition from the common agricultural policy to environmental land management schemes; and more. Also, of course, over the past four to five years, the sector has experienced significant shocks: in 2019, there were the uncertainties around Brexit, closely followed by the covid-19 pandemic; and then in 2022 there was the start of the war in Ukraine. Additionally, throughout 2023 and into this year, climate events across the globe have impacted on many crops and harvests. Too many farmers have had to endure the distress of seeing the destruction of their crops or livestock due to floods, such as the devastating ones we have seen recently, and sometimes, sadly, because of the persistent shortage of labour. As we have heard, farmers’ tight profit margins have been squeezed at the other end by supermarkets and intermediaries driving a hard bargain. Too often, primary producers get a tiny portion of the final product price, and little or even no profit from selling into mainstream supermarket supply chains. The 2020 report commissioned by Sustain, an independent study, tried to ascertain the profit margins of the suppliers. The report, “Unpicking Food Prices”, looked at five everyday foodstuffs—apples, cheese, beefburgers, carrots and bread—and found that, after intermediaries and retailers take their cut, farmers are sometimes left with less than 1% of the profit. That really cannot be a fair reward for the efforts that are made. Farmers take a large proportion of the risks of production, working with unpredictable natural circumstances and often long timeframes to produce a crop or product. Alongside that, public support payments that, for years, have meant the difference between viability and going bankrupt for a large proportion of UK farmers have been changing. Somewhere in the food supply chain, there is clearly an issue of unfairness and imbalance, and in some cases, as we have heard from other speakers, the situation has become so difficult that farmers are pulling out of producing staples such as eggs and vegetables altogether because it is no longer economically viable. It is reported that almost half of that panel of 100 UK food and vegetable farmers fear that they may have to give up their farm within the next 12 months. As a consequence of all this, sadly, UK farmers are producing less food than previously. Put simply, the reward must outweigh the risk if farmers are to continue producing food. For an increasing number of them, that risk-to-reward ratio is out of kilter. Many farmers have raised concerns about the behaviour of supermarkets, with 69% agreeing that tougher regulations are required to address the imbalance of power between farmers, processors and the supermarkets—points well made by my hon. Friend the Member for Selby and Ainsty (Keir Mather). Farmers and suppliers have repeatedly claimed that retailers—particularly the big supermarkets—are not giving them a fair deal. For example, it is claimed that they take far too long to consider cost price increase requests that are justifiable when costs are rising dramatically; that they take too long to pay invoices; that they do not honour the original order, or change or cancel it; and that they reject produce on grounds of aesthetics, rather than quality—not to mention the wider arguments over de-listings and promotions. As a consequence of all this, there is huge waste in the system. One grower told me that he sells only about 50% at best of the lettuces he grows. The waste is particularly depressing during a cost of living crisis. For many years, I have heard farmers’ reports, as I think we all have, of a really quite problematic and in some cases deeply unpleasant—one might almost say toxic—dynamic in the relationship between buyers and suppliers. This disturbing dynamic, exacerbated by the other pressures that growers have had to face, has understandably taken its toll on the mental health and wellbeing of too many. I hope and understand that the more unpalatable and aggressive tactics deployed by retailers may be less common than they used to be. Credit must go to successive Grocery Code Adjudicators for their role in curbing such unacceptable behaviour, but I think we were all dismayed to read in the GCA’s most recent report that many suppliers feel that we have gone backwards, and that supplier-retailer relations have regressed. Indeed, his report paints a pretty bleak picture of what one stakeholder has called the “brutal” environment that suppliers are being exposed to. The report quotes survey responses that complain about “combative” retailers, who have returned to pre-pandemic behaviour and have chosen to conduct “warfare” with suppliers rather than take collaborative action to handle the flood of cost price increase requests and more recent demands for deflation. The report found that, while supermarkets have been engulfed by demands for CPIs in the past two years, the tide has begun to turn, with retailers demanding cost price decreases. The GCA states: “Some major retailers have begun asking for price decreases, accompanied by delist threats, forcing suppliers to operate at a loss, which they feel has created an unfair playing field and changed power dynamics.” We must be careful not to jump to conclusions about exactly where the fault lies. Supermarkets are often lambasted as being the sole cause of all ills in the supply chain, which is not entirely fair or accurate. Behaviour varies considerably across the retail sector: some supermarkets really value and nurture constructive long-term relationships with their suppliers. I also appreciate that they are in tough competition with aggressive rivals, some of whom—I am thinking of some of the relatively new entrants to the market—are not subject to the same pressures to deliver short-term shareholder value as public companies. Although consumers care very much about the quality of their food, and about where and how it is produced, they understandably want low prices, particularly during a cost of living crisis. We are all deeply unhappy about the soaring price of food over the past 12 months, which reached as high as a 20% increase last spring. The statistics from the Trussell Trust about the escalating reliance of many families on food banks are shocking. The behaviour of the supermarkets is rightly scrutinised, but the role of the intermediaries—food manufactures, processors, importers and packers—can be somewhat overlooked in these discussions. Often, the more fraught relationships are between suppliers and intermediaries, rather than the big supermarkets, yet the intermediaries are not required to abide by the GSCOP. Having said that, I have heard worrying anecdotal evidence that some retailers game the system by instructing suppliers to deal with intermediaries as the buyers, rather than with the retailer, so that the latter cannot be held to the code. I was also struck and concerned by the comments of Mark White, the Groceries Code Adjudicator, in launching the most recent report. He said the report showed that supermarkets “appeared less invested in the continued relationships with their suppliers”, adding that “Suppliers feel there is now less good faith shown by retailers in CPI negotiations”. He expressed disappointment at the feedback from the survey, and concern that poor negotiations over CPI have had a significant impact on the relationships between retailers and suppliers. I mentioned the 2023 report of the Oxford farming conference. The report from this year’s conference by Ged Futter, founder of the Retail Mind, touched on similar issues. He has predicted that relations will worsen in the months to come—that the next six months in the grocery market will be more brutal than any time in the last four years. He claims that retailers have focused solely on lowering costs, and that they have even asked for cost decreases in some cases in which they did not grant an increase in the first place. There is a problem here that needs to be addressed urgently before the situation deteriorates further. We know that it has taken the Government a long time to use the powers in the Agriculture Act to look at the dairy and pig sectors. Can the Minister explain what plans the Government have to rectify these system-wide problems? Have the Government, in the first instance, conducted a thorough assessment of the robustness—or lack of it—of the food supply chain? Where exactly are the weaknesses, and how much progress has been made in mitigating them? Why is it taking so long to devise and/or implement the fair dealing codes set out in 2020? It seems that the Groceries Code Adjudicator has been working hard and is making inroads on improving some retailers’ compliance with the GSCOP. I am encouraged by the tone of the GCA’s remarks following his recent report; it indicates a willingness to get tough with those who do not abide by the letter and spirit of the code, and to get to the bottom of what is generating negative comments such as those made by suppliers during his deep-dive survey. His determined efforts are to be applauded, but I am aware, as has been referenced, that he has quite limited resources at his disposal. That makes me, too, ask whether those resources are sufficient. Does the GCA have the capacity to be as effective as we need it to be? Relative to other regulators, the GCA is extremely small and understandably constrained in the number of investigations it can conduct, the number of complaints it can investigate and the extent to which it can provide arbitration. It is worth considering whether the size of the GCA is proportionate to the challenges that it faces, particularly as those challenges grow and become more formidable. I understand that both suppliers and retailers articulated the view that the GCA needs more resources, so I ask the Minister whether the Government have considered that issue. Last year, the Government were considering subsuming the GCA into the Competition and Markets Authority, which I think was widely considered to be a retrograde step. What is the current thinking on this issue? Are the Government committed to retaining the independence of the GCA, and in considering that merger, did they review the remit, responsibilities and powers of that body? It is worth looking at that question closely, because it strikes me that there are gaps in the suite of powers granted to the GCA. Intermediaries are not obliged to abide by the GSCOP, and the GCA has no remit with regards to the relationship between suppliers and intermediaries. Many stakeholders have suggested to me that the GCA is well placed to take on that additional responsibility. I remind the Minister that the Opposition argued that point during the passage of the Agriculture Act. Have the Government explored requiring more transparency when it comes to data and pricing in supply chains? Many stakeholders are calling for the implementation of rules for transparency in supply chains to ensure that farmers have greater bargaining power when negotiating prices and deals. In addition to the range of pressures that farmers are having to contend with, I have also become increasingly aware of the growing burden of audits that, according to the Oxford farming conference report, is at “a record high”. The report suggests that one supplier interviewed was audited in 40 out of 52 weeks in 2022, with more than 190 audits, many of which were unannounced. Each audit not only requires people on the day but needs to be followed up afterwards to ensure that any actions are carried out. It seems to me that there must be some room for consolidation and rationalisation. Have the Government considered how they can help by working with the range of bodies that ask for those audits to lighten the burden on farmers, particularly at such a challenging time? It is perhaps also worth returning to the time-honoured question of whether there is more scope for suppliers to collaborate with one another to strengthen their hand. The culture of fierce independence here in the UK, with a preponderance of small producers doing their own thing, does not always help. In many ways, it is admirable, but I fear that culture may be weakening the bargaining position of farmers and growers. In that environment, one supplier usually capitulates to pressure from the retailer to suppress prices. The Oxford farming conference report talks about a prevalent mentality of “last man standing”, where some farmers think they can hold out in selling their produce at a very low profit margin until everyone else has crumbled and vacated the market, and then somehow they will emerge triumphant as the monopoly supplier. That pyrrhic approach, however, is usually counterproductive or very short lived, as the retailer usually looks elsewhere and quite often will source the product in question from overseas at a lower price. If collaboration happens, the report claims that it is often a last-resort tactic “when ‘backs are against the wall’.” If we look abroad to Spain and France—earlier we were encouraged to be more French sometimes—we can see much more collaboration with many more co-operatives. Co-ops can bolster collective bargaining power to secure better deals from supermarkets and reduce price volatility. However, co-operative farming now constitutes only 6% of our domestic agricultural market, compared with 45% in Spain, 55% in France and 68% in the Netherlands. This morning I visited the Arla Foods dairy in Stourton, outside Leeds, and I could not help noticing that the co-operative has protected the interests of its farmer members very effectively, as well as being highly successful commercially—frankly, we need more of that. In conclusion, the issue is increasingly urgent, and we need to take complaints from suppliers very seriously. It is not about blocking, hampering or meddling with market forces. It is about making a problematic market, the food supply chain, work much more efficiently, effectively and equitably so that it becomes a market where risks and rewards are shared more proportionally and fairly. The danger is that if nothing is done to improve the supply chain, more suppliers will be driven to the brink and they will pull out of producing food altogether. We are already losing too many British growers and food companies: that is bad for them, bad for the UK in general, and bad for UK food security. The petition is timely and I again thank the petitioners, in particular Guy Singh-Watson and Riverford Organic Farmers, as they have raised a really important issue that merits a strong response from the Minister. 18:18:00
The Minister for Food, Farming and Fisheries (Mark Spencer) 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.
Daniel Zeichner
Mark Spencer
Kirsty Blackman
Kerry McCarthy (Bristol East) (Lab)
Mark Spencer
Kirsty Blackman
Mark Spencer
Kerry McCarthy
Mark Spencer We have worked closely with the industry to ensure that the regulations are tailored and proportionate, and provide the flexibility required in a global commodity market. They will create a new enforcement regime, and we will appoint an adjudicator to oversee compliance for our sector-specific codes. The regulations are undergoing final checks before their planned introduction to Parliament, as I say, hopefully before the Easter recess. In 2022, we followed our dairy review with a review of the pig supply chain, and we published a summary of responses in 2023. We have committed to developing similar regulations to those being introduced in the dairy sector to introduce new rules for supply contracts and to improve market transparency through better market reporting data. We have developed a proposal that sets out the main features of the new regulations. We have been discussing them with industry and we expect to introduce them in summer this year.
Helen Morgan
Mark Spencer Last year, we launched two further reviews into egg and fresh produce supply chains. The public consultation on the egg sector supply chain closed on 22 December, and we are in the process of analysing the responses. As I said, the review into fresh produce was published on 14 December and closes on 22 February. Anything that hon. and right hon. Members can do to promote that to their constituents, so that they can feed into it, would be very welcome. We will publish the responses for each review within 12 weeks of the closing dates, and we will provide a summary of the findings and our next steps for each sector. We can only decide what action is needed once we have analysed the responses, but I can assure Members that we will use the powers in the Agriculture Act to introduce legislation wherever it is necessary. I hope this debate will encourage anyone with relevant views in the fresh produce sector to engage in the public consultation.
Anthony Mangnall
Mark Spencer I hope the debate will encourage anyone with relevant views to feed into the consultations. I hope it will help us to understand the issues being faced by the sector and allow us to protect our farmers, who, in turn, protect our fantastic landscapes and produce beautiful, quality food. As a Government, we want to continue to tackle the unfair practices that still exist by working across the sector to see a thriving retail sector that keeps our supermarket shelves filled but also protects our fantastic farmers, the landscapes that they hold so dear, and the food that they produce. 18:34:00
Christina Rees I thank the Minister for his positive response, and I am sure that the petitioners look forward to meeting him in the near future. I thank you, Mrs Murray, for chairing this debate with your usual aplomb. Question put and agreed to. Resolved, That this House has considered e-petition 643216, relating to the Groceries Supply Code of Practice. |