Watchdog to police supermarket giants to ensure 'fair competition'

After months of campaigning and speculation, the Government confirmed yesterday that an ombudsman will be appointed to resolve problems between farmers and retailers and to enforce a new industry code of conduct.

Ministers had decided to act upon the advice of the Competition Commission who, following a two-year investigation into the groceries industry, said such a figure was necessary to ensure fair prices for farmers and consumers.

The appointment follows pledges from both the Tories and Liberal Democrats to appoint a supermarket ombudsman if elected to office.

The decision prompted praise from Britain's farming industry, which has been campaigning for the appointment for several years, but drew criticism from retailers who warned an ombudsman would ensure only more red tape and higher prices for consumers.

There were also concerns raised about the lack of detail about the ombudsman's powers and when an appointment will actually be made.

Announcing the move to Parliament in a written statement, consumer minister Keith Brennan said: "Free and fair competition is the key to a healthy market and it is right that there should be an enforcement body to make sure that consumers are getting the best value for money.

"We do not anticipate a significant impact on consumer prices or workers resulting from the creation of an enforcement body. It is not a question of whether a body is needed, but exactly how that body will operate."

The Government said the ombudsman would cost 5m to establish and said this bill would be paid by retailers.

The move was warmly welcomed by the National Farmers' Union president Peter Kendall, who called it a victory for consumers.

"Ministers have taken the right decision and 2010 must be the year we begin to eradicate unfair dealing and protect investment and innovation in British agriculture for the benefit of consumers," he said.

The Federation of Small Businesses national chairman John Wright also welcomed the announcement, but called for it to be put in place as soon as possible and said the Government must ensure the new ombudsman has powers of enforcement.

But the Conservatives described the move as "too little, too late", with shadow business minister Mark Prisk questioning the lack of detail.

"Nearly two years after the Competition Commission recommended an ombudsman, the Government has finally come to a decision," he said.

"But even now, ministers still can't decide when the ombudsman will be created, what powers it will have, and who will be in charge.

"Meanwhile, consumers, farmers and small shops will continue to lose out."

The Tories have committed to founding a dedicated unit in the Office of Fair Trading to a supermarket ombudsman.

The British Retail Consortium's director general, Stephen Robertson, said: "This is not about farmers, very few deal directly with supermarkets, and it's not about a 'mere' 5m of extra costs."

And Friends of the Earth spokeswoman Helen Rimmer accused ministers of "dithering" and called for a fully indep-endent watchdog to be established.

The announcement comes in the same week that market leader Tesco reported a 4.9 per cent rise in its Christmas profits from the same period in 2008, nearly double market projections.