The milk blockade is part of a far crueller story

It's just an episode in a scandalous, decades-long tale of corporate greed.

Every couple of years the papers run a story about the food in your local supermarket. It goes like this: you know that Lochmuir Salmon you get in Marks and Spencer? Well, turns out Lochmuir isn’t a crystal-clear lake near Edinburgh, populated by ginger-haired men in rowing boats, catching ethically-sourced salmon in small nets.

In fact, there’s no such place as Lochmuir: it’s just a brand name, chosen by a panel of consumers. The salmon’s actually farmed on an industrial scale at various sites around Scotland, by a supplier called Scottish Sea Farms.

Having revealed this and other similar tricks (Tesco’s Willow Farm, home of its chickens, is just a bunch of barns across the country, for example), the journalists generally shrug their shoulders. But it’s where the story begins. Because the idea is to give the impression of “local” food from a guaranteed source: products that have, in recent years, exploded in popularity. And the fact they only want to give this impression helps illustrate a scandalous, decades-long tale of corporate greed.

Unlike the bankers at RBS and other institutions, it didn’t financially imperil the country. Many of those who suffered weren’t the kind of people journalists care about. But in terms of pure, callous, blood-soaked capitalism, you’d do well to find a more nauseating story.

Let’s rewind the clock a couple of decades. Between 1990 and 1996, the number of independent shops with annual sales of less than £100,000 declined by 36 per cent. Over an equivalent period, the number of superstores in Britain more than doubled, to over 1,000. A 1998 report by the now-defunct Department for the Environment, Transport and the Regions made an explicit link between the two figures. It said some food shops lost up to 50% of trade when a supermarket opened.

This, we’re told, was simply the market in action: customers getting what they wanted. But you have to ask why customers got what they wanted so quickly, while no provision was made for those who’d be left behind by this brave new world.

The answer in the first instance is that corporations know how to grease the wheels of local government. In one town alone -  Seaton in Devon - Tesco offered a package including a visitor centre, football pitches and buses. For the people of Witney, it offered to build a new main road.

And the supermarkets exerted even more influence at a national level – quite apart from the number of supermarket execs on government task forces over the years, one need only look at the 13 meetings Tesco, Asda and Sainsbury held with Department for Business, Innovation and Skills ministers and officials between 2008 and 2009: years when their stores were springing up at a rate of nearly one a day.

“But the superstores create jobs!” was the mantra, churned out by the companies themselves and rarely challenged by the government, despite a 1998 report by the National Retail Planning Forum that found evidence the superstores had a negative net impact on employment up to 15km away.

It’s hardly rocket science. Your local butcher might well be less efficient than a supermarket, but he’s more likely to buy his meat from a local farm, use a local builder for maintenance jobs, and spend his profits in the local economy.

This caused untold damage to the social fabric of our small towns and cities, but was as nothing compared to that wrought on food suppliers. Tesco, Sainsbury's, Asda and Morrisons have now taken control of nearly 80 per cent of British food retail. Your out- of-town supermarket controls a local monopoly, and it’s most effective for it to buy most of its produce from a small number of large farms.

And all this has had a heavy impact on the two million people in rural Britain living below the poverty line, and, according to last month’s Observer, to the 3,000 small and medium-scale farmers in Britain put in poverty or out of business over the past decade.

I have my journalistic case study; but it’s one I can’t bear to write about in detail. He was a close friend of a friend, and he died by his own hand. Was his depression purely a result of his financial worries? No doubt it could be spun that way. Such things are impossible to quantify. All we know is: they have an impact. Governmental figures from the 1990s revealed that farmers were nearly twice as likely to commit suicide as the rest of the general population, and one shudders to think what results a similar survey would reveal today

And what of the “lucky” farmers who do supply the supermarkets? They have nowhere else to go, and so the stores can specify any number of conditions over the meat or crops they supply. Supermarkets can set whatever price they like, until the farmer’s business folds, whereupon they’ll find a new supplier.

“You won’t hear a word from the farmers on record,” says Jeanette Longfield, coordinator of Sustain, a charity that campaigns for better food and farming. “The simple fact is they’re scared to come forward, because they know they’ll be punished.”

This month we’ve seen an uncharacteristically coordinated response to the supermarkets’ sharp practises, with farmers taking to Westminster and blockades of milk plants around the country. But this is one of many occasions over the last couple of decades when the supermarkets have overstepped the mark.

“This issue comes up time and again,” says Longfield, “Milk, unlike other products, is hard to transport, so you’d think the farmers would have bargaining power. But the National Farmers’ Union (NFU) has historically seemed either unable or unwilling to unionise their members.” And indeed, many have asked whether the NFU can really be called a union at all, such is its close relationship with government.

All this pain, we’re told, is worth it for low food prices. Some will point the finger of blame at producers like Dairy Crest. But Andrew Hemming of Farmers For Action this morning left Radio 4 listeners in no doubt as to the culpability of the supermarkets in putting pressure on them. The prices paid by the supermarkets – some less than the cost of production – must be seen in the context of a world in which they’ve quadrupled their profits on every litre in the last 15 years. As Longfield says: “Would consumers even notice a few pence extra on the price of their milk? People gladly pay more for bottled water. It’s madness.”

A common belief is that the farmers are all subsidised by the European Union, so none of this really matters. “It’s not that simple,” says Longfield. “Due to the complexity of the Common Agricultural Policy regime, large farms will work the system to their advantage. The subsidies often don’t benefit the smaller farms.”

The impotence of politics in the face of big business is highlighted by how long it’s taken for any kind of legislation to appear that might stymie this lunacy. It only materialised, in fact, because, in 2006 the Office of Fair Trading made a reference to the Competition Commission after a court case involving Action Aid and the Association of Convenience Stores. The resulting report in 2008 proposed a better code of practise enforced by an ombudsman. The resulting Groceries Code Adjudicator Bill is at its third reading in the House of Lords.

Michael Hutchings, a solicitor who has advised the grocery market on the inquiry, says: “By this point competition policy was supposed to be politically independent and in the hands of the OFT and Competition Commission, but as we saw with Lloyds/HBOS – and more recently BSkyB - the government was happy to fudge the decision.

“All the details have been decided and have cross party support – it just needs a stroke of a statutory pen. Instead we’re getting long parliamentary debates in the Lords. One peer wants to give retailers the right to go to court before reports into them are published – the adjudicator won’t have the hundreds of thousands of pounds required to fight a case like that.”

Despite this, Hutchings still expects the bill to be passed without being watered down too much: “An adjudicator will have two jobs – first to arbitrate disputes between the two – this won’t really happen because the producers are scared. But more importantly, to carry out generic investigations, which will have an impact. The important thing is that the bill starts with the principle of fair dealing. Most industries do work fairly, because you don’t have such an imbalance of power between producer and supplier. This is a special case.”

 

Supermarkets can set whatever price they like for farmers' produce. Photograph: Getty Images

Alan White's work has appeared in the Observer, Times, Private Eye, The National and the TLS. As John Heale, he is the author of One Blood: Inside Britain's Gang Culture.

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BHS is Theresa May’s big chance to reform capitalism – she’d better take it

Almost everyone is disgusted by the tale of BHS. 

Back in 2013, Theresa May gave a speech that might yet prove significant. In it, she declared: “Believing in free markets doesn’t mean we believe that anything goes.”

Capitalism wasn’t perfect, she continued: 

“Where it’s manifestly failing, where it’s losing public support, where it’s not helping to provide opportunity for all, we have to reform it.”

Three years on and just days into her premiership, May has the chance to be a reformist, thanks to one hell of an example of failing capitalism – BHS. 

The report from the Work and Pensions select committee was damning. Philip Green, the business tycoon, bought BHS and took more out than he put in. In a difficult environment, and without new investment, it began to bleed money. Green’s prize became a liability, and by 2014 he was desperate to get rid of it. He found a willing buyer, Paul Sutton, but the buyer had previously been convicted of fraud. So he sold it to Sutton’s former driver instead, for a quid. Yes, you read that right. He sold it to a crook’s driver for a quid.

This might all sound like a ludicrous but entertaining deal, if it wasn’t for the thousands of hapless BHS workers involved. One year later, the business collapsed, along with their job prospects. Not only that, but Green’s lack of attention to the pension fund meant their dreams of a comfortable retirement were now in jeopardy. 

The report called BHS “the unacceptable face of capitalism”. It concluded: 

"The truth is that a large proportion of those who have got rich or richer off the back of BHS are to blame. Sir Philip Green, Dominic Chappell and their respective directors, advisers and hangers-on are all culpable. 

“The tragedy is that those who have lost out are the ordinary employees and pensioners.”

May appears to agree. Her spokeswoman told journalists the PM would “look carefully” at policies to tackle “corporate irresponsibility”. 

She should take the opportunity.

Attempts to reshape capitalism are almost always blunted in practice. Corporations can make threats of their own. Think of Google’s sweetheart tax deals, banks’ excessive pay. Each time politicians tried to clamp down, there were threats of moving overseas. If the economy weakens in response to Brexit, the power to call the shots should tip more towards these companies. 

But this time, there will be few defenders of the BHS approach.

Firstly, the report's revelations about corporate governance damage many well-known brands, which are tarnished by association. Financial services firms will be just as keen as the public to avoid another BHS. Simon Walker, director general of the Institute of Directors, said that the circumstances of the collapse of BHS were “a blight on the reputation of British business”.

Secondly, the pensions issue will not go away. Neglected by Green until it was too late, the £571m hole in the BHS pension finances is extreme. But Tom McPhail from pensions firm Hargreaves Lansdown has warned there are thousands of other defined benefit schemes struggling with deficits. In the light of BHS, May has an opportunity to take an otherwise dusty issue – protections for workplace pensions - and place it top of the agenda. 

Thirdly, the BHS scandal is wreathed in the kind of opaque company structures loathed by voters on the left and right alike. The report found the Green family used private, offshore companies to direct the flow of money away from BHS, which made it in turn hard to investigate. The report stated: “These arrangements were designed to reduce tax bills. They have also had the effect of reducing levels of corporate transparency.”

BHS may have failed as a company, but its demise has succeeded in uniting the left and right. Trade unionists want more protection for workers; City boys are worried about their reputation; patriots mourn the death of a proud British company. May has a mandate to clean up capitalism - she should seize it.