Good morning everyone, and welcome to this meeting of the Environment, Food and Rural Affairs Committee. We return this morning to our ongoing inquiry into food supply chain resilience and fairness. We are delighted to be joined by a very eminent panel this morning. Just for the benefit of our own official record and for those who are following our proceedings, can you please introduce yourselves to the Committee? Tim, we will start with you.

I am Professor Emeritus—that means I am retired and old—of food policy at the Centre for Food Policy at City St George’s University of London. It is the longest title I have ever had in my life, and it has lots of commas in it.

I am head of policy and advocacy at the Food Foundation.

I am chief executive of the Food and Drink Federation, which represents food manufacturers across the UK. We are the UK’s largest manufacturing sector.

Thank you all for your attendance, we appreciate your engagement. This evidence session follows on from one that we did recently in relation to the work of the Groceries Code Adjudicator, the Agricultural Supply Chain Adjudicator, and other influences around a subject that, it is fair to say, is of significant public concern at the moment: the resilience of our supply chains and the impact on household budgets as a whole. We want to look at how things are going to develop in the coming weeks, months and possibly years, effectively, but starting with a retrospective looking back to the spikes that we have had in recent years as a consequence of covid and the war in Ukraine. The essay question I am putting for you this morning is, what are the most important structural lessons that the covid-19 pandemic and the war in Ukraine have taught us about the UK’s reliance on global markets and just-in-time supply chains? Tim, as the author of the magnum opus on this, can you give us your perspective to start with?

How many hours do you have? In my introduction of myself I left out that I am really here because I did a very big piece of work for the National Preparedness Commission called Just in Case: 7 Steps to Narrow the UK Civil Food Resilience Gap that the chair just alluded to, which was essentially a structural critique of the vulnerabilities of a just-in-time system. You ask what the structural lessons from covid are and where we are. I will say something different to covid than to just-in-time. There was not preparedness in institutional terms. We did not have a food security position. There was not a committee structure that had looked at what would happen in emergencies to the food system. That had to be introduced, as indeed it was. A food industry resilience forum was introduced at the urgent request from the food industry sector, and it had an industry focus on it. People such as me were arguing there should have been a public health perspective, with civil society on such a committee. We had that throughout the covid period but it was a focus on supply, not upon demand, distribution, or whether people were getting the right foods in the right way at the right time. It was a very partial, narrow version of what was meant and what was required for resilience. I am therefore saying that the structural lessons were first institutional: we did not have the right institutions. Secondly, I do not think we had taken security at all seriously; there was almost a philosophical weakness in the British position. We assume food is there, it will always be there, it is built into the British body politic that we assume others will feed us. It will just be there. In current mode, the interviewees in my report said there is very big reliance upon the efficiencies of the retail sector. It is just assumed that they will sort it, a policy position I have characterised as, “Leave it to Tesco et al”. The assumption in Government is very often that is what will sort things out. With covid the situation would have been very different unless there had been suspension of competition laws: basically, application of emergency powers legislation. Distribution and availability of food would not have been as good as it was, patchy though it was at times, so there are big structural lessons such as that. The final point I would like to make is we have had a revolution in the food system over the last 60 years. Everything has changed in how food is produced on the farm right through to how consumers order it. It is now a software-based system, and yet we tend to think of food supplies being about farming. Farming is only one sector of a very complex food system. My interviewees were very clear, whether they were industry or non-industry people, that one of the lessons that came out of covid was that we must have a better understanding of how the dynamics of the food system works. It is not just farming that feeds us or the seas that feed us, there is a complex set of dynamics that have new vulnerabilities that my report went into, which I am sure we can discuss.

It feels as if, looking back at that moment, you are now almost asking yourself, “How did we allow ourselves not to see that coming?” Your point about the system is interesting. This comes to the crux of the session we want to have this morning. You speak about farmers and primary producers. We have a system now where it is difficult for the primary producers to make a living producing the food, which it is then difficult for our constituents—the citizens—to afford to buy in the shops. We have seen the crisis in that system alert us to the fact that there is a problem there. How close are we to actually getting a system that would withstand a shock of that sort?

That is a huge, but a very important question. In the food revolution of the last 50, 60 or 70 years, depending on how you judge it but the post-second world war period, essentially what we have done is cut waste, cut storage, cut time, maximise availability, spread the range and the types of food. It is an extraordinary shift that has gone on, unknown in human history.

With some of these cuts as you style it there—waste, for example—were we maybe cutting things that were not quite as wasteful as we thought they were, with the benefit of hindsight?

What is waste? In nature, nothing is wasted because it can all be recycled and turned into soil. To cut to the quick of your question, and back to your prices issue, the returns to primary producers are very low and the returns on capital to retailers is actually surprisingly low. Bigger profits can be made in the hospitality sector—if they survive—than some other sectors. We have overall increased the number of sectors that take money out of food, so everyone is squeezed and everyone is on a treadmill. It is the industrialisation process. Prices have gone up; they are volatile now for reasons we can go into—oil and all those environmental issues—but returns to producers are low. Is that good strategically? No, because you need primary producers. Unless there are farmers growing and people taking seafood out of the seas, they are not there for others to then value-add to. So primary production matters—where it is and how secure it is. These are hard food defence issues, if you like, not just price and economic issues. I see the strategic importance of your question very definitely as not having received enough attention from the British state. It is overdue. My interviewees from within the state—all anonymous—but also from across the food system were very clear that we need to take hard versions of food security more seriously, as well as, if you like, the more domestic versions of food insecurity about price, cost and affordability. It is getting that overall strategic version of what we want from food security right that has so far eluded the British state, but that we should now be sorting out. As you know, I want your Committee to come up with good, hard answers on this.

We will do our best. I am going to come on in a second to some hard metrics because it is not always easy to quantify strategic objectives and outcomes. But before I do, Karen, Hannah, do you have anything that you would add to the broad basic equation that I have put to Tim there?

When we look back at the previous inflationary cycle we have just been through, it was as a result of three structural shocks. It was not just covid and Ukraine; it was also the disruption of Brexit. Layered across all that was then a series of climate challenges that farming and the industry went through in that broad 2020-25 period. You ask what we learned: we learned that energy is embedded in every single part of the food system, something that now seems very live again. The food system is now competing for energy in a very energy-hungry world. It was very obvious in the last crisis; it is going to be increasingly obvious in the context of the current restrictions and energy shortages. What was different about the last crisis is that you had a demand shock, which was economies emerging from covid, that was swiftly followed by a supply shock: Russia’s invasion of Ukraine and the sudden impact on food: wheat, sunflower seeds, a load of agricultural commodities, fertiliser, and then fuel directly. In that period the other very stark lesson that we learned as a country and an economy is that food inflation operates differently to headline inflation. There is a big time lag built into food inflation because you have energy in particular, and I would describe the covid and Ukraine crises as essentially, in the end, hidden energy crises. You have energy embedded in every part of the system, from farming and fertiliser through to processing, manufacturing, retail, and hospitality. You have energy being used at every part of that system. If you take wheat, you are harvesting your wheat but using energy to mill your wheat and then using energy to turn that wheat into bread. So you are paying multiple energy impacts. You then have all the other inputs into food production that are dependent on hydrocarbons in some way: plastic is a live example at the moment. We saw a very much two-year inflationary cycle; the industry started to see commodity prices rising at the end of the summer of 2021. By July 2022 food inflation had gone above 10% and by March 2023 it was about 20%. But that lagged headline inflation, which is why we had CMA reviews into the food sector in 2023 and 2024, which concluded that cost rises had fed into inflation. Food manufacturers learned in that period, and when we are talking to them now about the energy supply shock that we are going through at the moment, many of them are talking about how they have diversified their supply chains since Ukraine. Lots of companies have looked very carefully at where their inputs are coming from and, where they can, they are relying on a diversity of sources, so in some ways the industry is more resilient on that front. Where it is less resilient is on cost because all the efficiencies, all the changes it could have made to bring down the cost of its products were made in the last inflation cycle, and companies do not now have many places to go. We learned that consumers changed their behaviour in the last inflation cycle. Food volumes in supermarkets are about 5% down on where they were in 2020, so we are definitely seeing consumers buying less as a result of food costing more.

Which leads beautifully on to you, Hannah. The consumer impact and the availability of good quality nutritious food, especially for lower income households?

Yes. At the Food Foundation we do a lot of work around access to affordable and healthy food. We have been tracking what that means for both food prices and food insecurity over the last few years. It is very clear from our data that when food prices rise, food insecurity goes up and, in particular, we see that food insecurity tracks inflation. That tells us that if food prices are going to rise again, we are expecting food insecurity to rise again. Our latest data shows that while food insecurity had started to decline, it is up-ticking again; we are already seeing that. That is really problematic. Households that report to be food insecure have reported to be cutting back on food such as fruit and vegetables: around a half cut back on fruit and around 40% cut back on vegetables. That is really worrying because we know that fruit and vegetables are the foundations of a healthy diet. We also know that that is where the biggest health and diet inequalities already exist. If that is going to continue to get worse, that is going to be really problematic for our nation’s health. It is worth reflecting on two things. First, we are seeing a layering of crises here; we have not fully recovered from the last cost of living crisis. Yes, food insecurity had started to come down but it did not get back to the levels that it was previously, so we are seeing this layering effect. That means that households are already being squeezed and, similar to what Karen just said, they have already started to make the cuts and there is now nowhere to go. So it is really concerning that we are at risk of seeing these food prices rise again.

It is this thing about going up like a rocket and coming down like a feather. Karen, did I see that the FDF estimates we are going to have food price inflation at 9% by the time this shock works its way through the system?

Yes, Chair. We did an inflation forecast about six weeks ago looking at the cost of energy and energy futures. We think that food inflation will be somewhere between 9% and 10% by the end of the year. It is instructive that oil prices are $110 a barrel this morning, which is 60% higher, and LNG prices are about 50% higher than they were at the end of February. At the moment we cannot see a resolution on the horizon that would reopen the Straits of Hormuz, and for that cost rise not to ripple through the system, energy supplies need to get back to normal.

In fact as I drove to the airport yesterday morning, the “Today” programme had somebody on who said that even if the Straits of Hormuz opened tomorrow it would be fully three or four months before ships that are currently out of position and the rest would be able to get back to any sort of normal operation. So I do not see any prospect of it opening tomorrow, sadly.

You would get agreement from not just us in front of you, but the vast amount of analysts of the food system that the pre-2020 era is over. We are talking about oil dependency, and rightly so. But there are other shocks coming into the food system as well. In your own constituency Marks and Spencer was hit, but more importantly for you in Orkney and Shetland was the Co-op cyber-attack. Ransomware is now a routine reality of the food manufacturing sector, the food retailing sector and the banking sector. We have multiple shocks, so part of the thinking that certainly I am here to represent is that we need to have a very long, cool look at what we want from our food system in Britain, and whether it is diverse enough to cope with different sorts of shocks, not just climate change and fossil fuel dependency, but other shocks. Misinformation is a key issue in modern consumer culture. What people want and expect has to be part of our thinking. So the distinction between the immediacy and short-termness that we are discussing—obviously the Strait of Hormuz is number one—but also long-term climate change, which is accelerating.

The thing you can no longer take for granted is the lack of volatility.

That is right. Volatility is the new norm, is what most analysts now will tell you, over a glass of wine.

Yes, and we need a system that takes account of that. Just before we move on here, Tim, we have spoken about the lesson from the previous spikes where we did keep food going on to the shelves and the supply was not impacted, but prices went up and they have stayed up. Is there a causal link here? Do we draw a line from that to the strengths and weaknesses of the food system we have that we have developed in the last 50 years?

It goes back to what Karen was raising, which is diversity of supplies. If you have a supply system for a commodity that is heavily reliant upon one source, if that source is knocked or its prices go up, the impact is enormous. If you have more of a spread source of supplies, the capacity for resilience is greater. That is essentially the simple rule.

Self-evidently.

One of the things that troubles analysts is whether, in the name of efficiency, we have built too much concentration into the food system. People in the food industry will tell you now what they would have never dreamed of telling you 10 or 20 years ago: that we need more diversity of supplies.

Although I would say that we have an incredibly resilient food system in the UK that is built into that diversity. I completely agree with you, Tim, that we need your long, cool look at the future of the food industry and making sure that we are not least taking into account the climate challenges that are absolutely coming at the industry. Equally, I would not want people to worry necessarily about supply. This is a tough time for food manufacturers; we are seeing record levels of insolvencies in food manufacturing. Not everybody will survive the coming period but the sector is dynamic and companies will rise up and take the place of those that do not survive. There is resilience and incredible sophistication in the system; I absolutely agree with Tim, we need not to be complacent about that because there are real strains that you can see appearing in different parts of the system. That is where we need to understand where the vulnerabilities are and make sure that, when we come to look at government policy, that it is properly prioritised to look at those vulnerabilities ahead of some of the other things that Government may or may not want us to do.

You have the, forgive the term, hunger games. You are talking about corporate insolvencies in the food industry there. The people who survive then, having come through a shock, need to rebalance their balance sheet and their profit and loss account. Does that account for the prolonged period of food price inflation, the coming down like a feather?

It goes up slowly and comes down slowly.

Karen, you spoke earlier about the way in which your members in the industry have adapted. Can you just expand a little on what we are seeing in terms of real-time lived experience changes that you would see as being a response to the shocks we have previously had? One you spoke about was energy.

Companies have changed their hedging strategies. In these sorts of inflation shocks there is a division in the food industry between larger companies that will hedge and smaller companies that cannot. SMEs become much more exposed in this sort of situation because they do not have the leverage to buy energy or commodities at the prices that a bigger company can. We have not seen it yet, but in the previous crisis many smaller food manufacturers found it hard to renew at prices they could afford at all when their energy contracts ran out. We are in touch with Ofgem and obviously talking to the Government in a live way about energy issues, but it would be really good if that did not happen again and we made sure that SMEs were treated fairly in the energy crisis that we are now in. But I would say that yes, in many cases companies have revised their hedging strategies. Many supply companies have revised their contracts. Our companies have revised their contracts with suppliers to make sure that they can ask questions and have them answered around, “Can you show me where those price pressures are?” when price rises are pushed through the system, in the same way that food manufacturers have to account to retailers on that front to make sure that we are all certain that the price rises coming through the system are fair. Some companies have diversified the ingredients that they are using. We have heard a few companies say that because there were supply shortages last time they have found alternatives to carbon dioxide since the last crisis for the variety of uses that carbon dioxide has in food manufacturing. Companies are being as agile and innovative as they can be. Equally, there will be limits to that, and there are some costs associated with it, which is broadly my point about costs. If you are less just-in-time, if you have spread your contracts across a wider group of suppliers, you are probably paying a bit more, as well.

The risk here, Tim, as you have already identified in your report, is the distorting effect of big, powerful interests in the market. If you winnow out more of the small and medium-sized enterprises, at the end of the process, at least to the short and medium term until that SME growth starts again, would you not end up with the big and powerful being bigger and more powerful?

There is a danger of that, absolutely. Crises can be very beneficial for those who have the capacity, particularly the financial capacity, to survive.

To survive, yes.

That applies in farming and in logistics companies.

That is the beauty of a diverse system, in that we will be fed through it.

There is a public, or a Government, interest in maintaining that spread of diversity in the market, is there not?

Yes, absolutely.

Plus a good outcome for consumers at the end of the day, if you can manage that; we just have to work out how. Sarah, you are going to take us on to some questioning around the impact on UK food supply chains.

Good morning all. We have said that volatility is the new norm; we need to have a system that is able to deal with that. On the other side we have many more people falling into food poverty and food insecurity. What do you feel are the most serious threats? We have discussed this a little around the threats to UK food security and supply chain resilience posed by the war in Iran. How is that going to evolve and what does the road map to resilience look like? That question is to all of you.

You have a first go and we will all chip in, I am sure.

In the current crisis manufacturing companies are seeing rising costs at the moment, particularly in plastics and packaging, road freight and shipping transportation, and inputs such as aluminium. They are very conscious that price rises will come through from the farming sector relatively quickly because of the rising costs of diesel and the availability and cost of fertilisers. There are some immediate costs now and there are costs that companies are projecting into the future, basically around when they renew their own energy contracts. Energy is a real concern in the question of resilience. One of the things that has disappointed food manufacturers, and probably the food sector in the round the most in this is that in the conversations we had with the current Government around the industrial strategy a couple of years ago we fought quite hard for food manufacturing—the UK’s largest manufacturing sector—to be part of the industrial strategy. A lot of that is about resilience, to make sure that we are creating an environment in the UK that is attractive to investors. If you are not investing in your food sector—manufacturing specifically, for my members—they are not necessarily investing in things such as digitisation, AI, automation in some cases, that build resilience into the system. However, we did not win the argument on the industrial strategy, and food is not part of it. The knock-on effect in this current crisis has then been that the Chancellor announced some energy support for the industrial strategy sectors about a month ago, in response to the war in Iran and the energy crisis. We are now seeing more energy support going into car, pharmaceutical, and wind turbine manufacturing, and yet the whole food system is very exposed but not eligible for that support. Obviously we understand that this is not a crisis of the Government’s making and it is very hard to deal with, given the constraints on the UK’s finances, but it does seem to us a bit odd, when food is an everyday essential, that energy support is going into other sectors but not into the food system writ large. There are energy-intensive bits of that, from farming, glasshouses for instance, through processing, into manufacturing and into return on hospitality. We have asked the Government to look at how they might support energy costs for the food system as well. The benefit of doing so is that if you can contain food price inflation that will have an impact on headline inflation, which will have an impact on borrowing costs, credit card costs, mortgages and all those other things which might help the economy through what looks as if it is going to be a difficult period.

What your question is getting to, and picking up on what Karen has just said, food is one of the critical national infrastructures. Britain has a pretty good approach to resilience planning, in theory. The Government resilience framework is good, it just almost completely ignores food. We see it in just what Karen has been talking about. One would expect that food would be taken seriously as one of 14 critical national infrastructures, but suddenly it is just assumed, “Don’t worry, the retailers and the manufacturers can deal with it,” when they cannot. That is actually a political failure. We have to ask, dare I say it, why is DEFRA not seen as really seriously important for public well-being in crises? The answer is that it should be but food is not being taken seriously, despite being a CNI. You ask about planning, but there is not any planning. What came from the Agriculture Act 2020, the post-Brexit structure, was the triennial Food Security Report. The second one came out in 2024. That does not look ahead, it only looks back. You ask who is doing the roadmap, but there is no one to do the roadmap. That is why people such as me have said for a long time, and my interviewees right across the board have said very clearly that we ought to have, as other countries have and as we have with the Climate Change Committee, a council of food security and sustainability—or something, call it what you will—but a long-term institution that looks at where food security is, where we might go and what options there are. A key feature in your question was whose resilience we are talking about: are we talking about Karen’s membership, the food manufacturing sector? Yes, clearly. Retailers? Yes, clearly. The point of my report was to say that actually the resilience of the public really should be the starting point for resilience and security planning, and the public is not being adequately engaged with, compared to other countries. Going through official mechanisms I looked at 10 other countries and was sent very interesting ways of different countries. For example, Germany and Switzerland have very clear advice for the public down to very detailed advice of what the public could and should do, how they can store food and what it is, building in some storage into just-in-time systems at the household level. Other countries say that the household level is not enough. Actually, what is at stake with modern variety of shocks to the food system requires storage at all levels: national, regional, and town levels, and oh yes, individual households can do their storage. When you are asking for a road map, one needs road map for different constituencies that one is interested in. A key insight from my report was the food industries do a good job of arguing their case, the retailers do that, but we do not have enough actually focusing on the public interest in resilience. We should be thinking about what form of public engagements in resilience might be possible. It is Hannah’s area more than mine in front of you, but if we look at people and households on low income, the security welfare net they have has been weakened over decades. When I talked to people running food banks, Second Harvest and all of that poverty infrastructure they said, “Well, we ought to be becoming and maybe we could become community food storage to provide resilience for those with less resources. With issues such as we are discussing here people often say, “Well, what is the road map?” But the point I am throwing back to you, if I may, is whose resilience? Whose road map? Can we get a collective road map? It is actually called national strategy, and we do not have one. We should.

On the consumer point, first, your question about a road map is a really good one, and it highlights the fact that there is a whole host of solutions that we need here. As Tim says, we really need to be focusing on how we actually support consumers. There was a really striking stat out from the ECIU about a week ago that projects that by November, food prices will have increased by 50% since 2021. What is most striking and was a little more hidden in the report is that preceding 2021 it took 19 years to have that same 50% increase. This shows how quickly things are changing and how much more vulnerable everyone in the system—particularly consumers—are going to be, because they are having to adapt very quickly. Benefits, wages, and everything is not keeping up with that, so it is really key that we keep that front and centre. We published a road map last year addressing food insecurity that had a whole host of interventions that are needed to support consumers. I wanted to focus on two of those recommendations. One is the Healthy Start Scheme, which is a really underutilised support scheme for low-income households with children of four and under. It basically provides financial support to purchase essentials such as fruit, vegetables and milk, all things that we know are really critical to the development of children. At the moment the criteria for getting that is very low, and that means that a lot of people who are living in poverty and are affected by food insecurity are not able to get that benefit. The value has also not kept pace with inflation; we saw a small uplift announced as part of the NHS plan last year of 10%, which means it is now at £4.65 a week, which is a very small amount. If it had stayed pace with inflation we would expect it to be £5.30 to £5.70 and, if you take the 50% inflation figures, probably into the £6 something. There are two key areas where we could strengthen this scheme to basically make sure that those low-income, vulnerable households have a bit more resilience when these crises hit and things get tough. This is really important because we are seeing this layering of crises as the new norm. Embedding support for fruit and vegetables is really key. With any roadmap to solve these challenges we have to be really careful that we do not get stuck in a reactive, “What do we need to do today to support people today?” because we have seen these food prices rise. It is absolutely critical that we have to support people in the moment because that is when they are most vulnerable, but if we know that these crises are going to become more and more frequent we need to be looking at the long-term, and embedding something longer-term into our system to support and protect the resilience of citizens, and also farmers and people who are producing our food. We are doing a lot of work at the moment around what a good food Bill could look like, which would basically embed targets for things such as fruit and veg consumption and production and obesity targets—as we know that is one of the impacts of poor diet—and also food insecurity, which we know is closely tracking within inflation and food price rises. Within that Bill it would help to set a long-term strategy that could go through different parliamentary cycles and give that security to the food system. One of the problems we have at the moment is we have a very piecemeal approach to policies across the food system. It is a big and complicated system and there are a lot of different components that we need to address, but at the moment we are cherry-picking different areas and not getting that continuity, even between Government Departments. So we are looking at using this moment to say, “OK, actually this is a huge reminder that these problems are not going anywhere with thinking about the short-term and how we help people today. Let us use this opportunity to learn from the fact that these crises are going to keep repeating and think about the longer-term strategy that we need.” It would be great to see a recommendation around that from this Committee.

I was very proud to table a good food Bill in Parliament recently, so I fully endorse that. Thank you. Tim, just going back to you, you have warned that the UK food system is highly exposed to these external shocks that we have spoken about already this morning. How does that disruption to energy, fertiliser and shipping that we are experiencing in the Strait of Hormuz now around the conflict, illustrate those resilience gaps that you have identified? Are they going to widen, and if they do, what will that look like?

This is now accepted. Chatham House produced a report by Laura Wellesley and Rob Bailey about 11 years ago, warning of British vulnerability in the food system to choke points. We are seeing it, one does not need proof; the proof is in daily reality; Karen was giving minutiae on that as well. This becomes a very political issue. You are an all-party committee, and rightly so. This can easily be a divisive point in politics, but I would argue this is where we need to be arguing for the common good. Other countries that have been reviewing their food security approaches and politics have concluded it is in the interests of the nation state to ensure that all people are well fed in crises. I strongly recommend to you a Swedish report called Food Preparedness for a New Era that came out in 2024, which very broadly concluded what my report concluded, though they were done totally separately. It said that if we make the commitment to feed people in crises it becomes a commitment that is applied in normal times too. At the moment, we have a tacit policy, which is it is individual responsibility to feed yourself or mothers or fathers to feed their families. Britain discovers the collective good in wars. In World War I it began a system of rationing that equalised distribution of food. In World War II this was introduced very quickly, and the health of those who did not die or were not maimed improved. It faced very big philosophical issues, such as what is the point of a food system? Is it to make landowners money or is it to feed people? Can we do both those? Yes, it is possible to do all of those things. You can have good productive land, farmers growing food, horticulturalists growing fruit and vegetables, seafarers producing, and everyone being fed, but it needs a framework to be clear about that. We do not have a framework for that. We joined the European Union and that framework was there because it was one of the founding four areas of the Common Agricultural Policy. We have left the European Union and we have not filled that philosophical gap. I would urge the Committee to say that national food security is in the national interest, it is a common good to ensure that all our people are well fed and to ensure that the food system does that. At the moment it does not, vulnerabilities are growing and capacity to anticipate shocks is not as good as it should be. We are good on cyber security now. We have doubled and doubled again the budget. I support this and called for it earlier—in 2020—that the National Cyber Security Agency should be taken very seriously. It is critical for food. A food system based upon software and IT logistics has to have really tip-top cyber security protection. But the experts will tell you, I have just been at a briefing a couple of weeks ago—not a confidential one, but it was under Chatham House rule—that it is always playing catch up. That is inevitable. But what we can do, back to my point to you earlier, Sarah, is we can engage the public so they are not expecting endless cheap food all the time. We have to change public expectations of the food system. The entire post-war model was saying that we will lower the prices of food. In 1950 food was accounting for 30% of domestic household expenditure. It went down to about 9% on average, 12% if you now include eating out. This has enabled a lot of spending on cars, holidays, children, everything. We are now seeing the inevitable long-term squeeze up of food prices. What is going to give in that?

Just very quickly, to Tim’s point about public expectations of the food system.

Do you agree with that?

Yes, I do, but that is where Government come in as well: Government need to review their expectations of the food system.

Yes, I agree.

We are not involved in any of the investment incentives that the industrial strategy sectors have. To that end, how do we then make the UK an attractive place for food businesses to invest? Because without that investment, our food system will gradually become less resilient.

Yes, I agree.

To the point about cyber security and that going into our whole cold chain, for instance, we do need to make sure that the investments are going in to make sure that those systems are secure, so it is disappointing that the food system was just overlooked in that. To go back to one of Tim’s earlier points, there is an assumption and a bit of complacency on Government’s part that this just all happens. It would be nice if we could get the R&D tax credit incentives, for instance, to invest in innovation in the food system to make it more resilient, but as it is, we do not have that. To one of Tim’s earlier points about the EU and holding the overarching philosophy on food, we are very supportive of this Government’s decision to realign UK food law with EU food law. That seems a very sensible direction to us; over time it will help both imports and exports and, come the next inflation cycle, it will help to protect our system against further inflation spikes. Right now there are issues with the speed at which Government are going. We are concerned that the food system is going to be asked to realign all of the ways in which we operate with EU law by next summer. That is a very short period of time. Food companies across the system, farmers as well, do not employ lots of people to do regulation all the time. If we are going to have to adjust our laws, our view is we need two years to do it.

Indeed, that is another work stream for the Committee. We will maybe try to keep the focus because I am keeping very poor control of the time this morning, but it is absolutely fascinating.

Just very briefly and stepping back from the kind of detail that we have all talked about, what is really clear is that food is chronically forgotten across a lot of policy areas. We really need to be bringing it up the agenda and making sure that we are addressing it where we need to. I was very struck when the Strait first closed that the Prime Minister came out very quickly and said that they will be looking at support for energy bills for low-income households, and I was thinking, why can we not do that for food? There are systems embedded in place already and we need to be making food part of that. We know that consumers are very concerned about the cost of living, it is one of their biggest concerns. Food is up there very specifically, and the reason is because it is something that people are going into their shops on a daily basis and seeing the impact. The food budget that households have is the thing that is squeezed: it is the last thing through a lot of fixed costs. You end up with what is left to spend on food and then every day you are going shopping and seeing that price. There is a disconnect between concern and policy action that we really need to tighten up.

That leads on to the point that we have seen the same structural vulnerabilities play out again around food security, have we not? To Tim’s point that it should be a national public good, should we leave it to the markets? What would that mean?

If you leave it to the market you are going to suffer the price squeezes accelerating; it is only the reframing of the market that will have any chance of doing that. I am sure it is not lost, particularly on your chair, who has a Scottish constituency, that the Scottish Government today announced they are going to introduce price controls, which is going back 50, 60 years. It is very interesting politically. One wants to know how it is going to be done; we want detail. There are other ways of feeding people than just saying, “Leave it to the market.” You can say that we want a regional market or a more diverse market: you can frame markets. We assume markets only work in one way. Framing markets is the job of politics.

Indeed. I am resisting the temptation to go round the table and ask who wants to fight the next election on a manifesto of increasing food prices, and that is where the rubber really hits the road.

That is where the rubber hits the road, that is absolutely right.

That comes straight away to the point that Karen was raising about investment and capacity for investment. As someone who talks, probably not as much as Karen does but quite a lot, to the logistics industry, they could do with a lot of investment. We have vast warehousing on and attached to motorways which are oil dependent. We need to be thinking about what more regional, shorter chain logistics would look like. Indeed, my endless discussions with the logistics industry gave me the title for my report. Someone said, “Tim, what you are talking about is the just-in-case system.” We do not have that. I said, “You have just given me the title, but you are right.” That is an example of what we need to do when people such as me talk about reframing markets. We want more diversity down to the regional level, not just diversity of big players but diversity in regional markets. The experience of other countries—France, Italy, Germany—shows us that when you have regional authorities they start wanting to have regional food systems, having encouragement for more diverse sources of growing, wanting to redevelop horticulture industries, and having new storage capacity.

Decentralised Government, who would have thought it?

Yes, that is right. It becomes an issue about devolution and decentralisation. Britain is a highly centralised state that has done some patchwork decentralisation in Scotland and Wales, and not much in England yet.

You have been reading my emails. I will need to move on: this is fascinating, but I am letting it run.

On that question of diversification, companies are doing it. As I said, one of the things that we have spoken to companies about in this current energy shock is, “What are you doing differently?” As I say, many companies learned lessons from Ukraine and are looking at a much more diverse and much more hedged strategy for inputs and input costs. It is in companies’ interest to do that because, of course, every company wants to be able to survive the current crisis and to thrive. Some of that is built into the way in which companies operate. That is when costs come in. The UK’s energy electricity costs are 100% higher than they are in Spain. They are really, really expensive. For instance, if you are going to run a programme to consolidate your data, you can run AI through your data across manufacturing sites—say you have a few—in order to increase your productivity and efficiencies, which is good for the economy in the round. Companies can make those investments only if they can afford to, and if they can attract investors to support them in doing so. Investors will do that only if they can see a return. Companies have to be able to work out their prices over a period of time and work out that they can recover the investment. That is where I come back to the point about how we need to make sure that the UK is an attractive place to invest in the food sector, in whichever part of it somebody might want to do that: farming, manufacturing, processing, whatever it is. Companies want to build strength; they want to be resilient. That is what the Government want as well, but the way we do that is by investing. When Hannah and Tim talk about a more joined-up view of Government, we need a joined-up view around how we attract that investment.

What you are describing is companies responding to the market, but the player that seems to be missing here is the state, notwithstanding the question of the Scottish Government. Without that guidance, companies will follow the market.

It is that strategic overview. Look at the transition we are making on energy at the moment towards renewables, and the way in which the Government have intervened at certain strategic points in that journey to make sure that companies are able to make the business case and get the investment. We have to make a big transition in the food system as well, whether that is on environmental pressures or on shifting the population towards healthier diets. You really want the private sector to invest in that. You want the private sector to invest in their own facilities and in farming. The private sector will always have more money to invest than Government ever will, but we need a strategic overview. To a point that Hannah made, at the moment we do not really have that. What we experience then is not only volatility in externalities, in global energy shocks, but actually quite a lot of instability in the regulations and policies that Government pursue. Different bits of government want the food system to do different things all at the same time. At the moment there is a chronic lack of prioritisation on Government’s part. We have to work our way through what will be a really complex SPS exercise. When we left the EU, our laws did not change. We have counted 450 amendments to the laws that apply to manufacturers, not to farming or retail, which our companies will have to align with in order to become compliant again with EU law. We still have massive recycling and packaging reforms going through, EPR and DRS, which are the right thing to, but they are very expensive. We have asked Government to look at getting rid of the plastics packaging tax, the packaging recovery notes, to offset that, but so far, we have not had any feedback on that. We have the Government wanting to overhaul the current high fat, salt and sugar regulations, which may be a thing for the future, but with everything going on at the moment, there is all this alongside, “Would you mind keeping food prices down and continuing to invest in the resilience of the food system?” That is a really big ask. As a system, and joined up with Government, we could be doing it better than we are.

That is precisely why I said very early on that there is a strong case—it was made in my report—for a long-term body. It would be the equivalent of the Climate Change Committee, or other countries have councils of food or councils of food security. Something that takes the long strategic look, pulls together the bits that otherwise do not get pulled together, and makes it clear that it becomes a political priority to address it.

We definitely already have quite a pipeline of strategies. I hesitate to add to it.

This one will resolve a lot of their difficulties. The problem they have is that they are patchy in what they do. This is the important one. This is why, 30 years ago, the word F for, “Food” went into DERA’s title. It was not the Department for Environment and Rural Affairs, it was the Department for Environment, Food and Rural Affairs. The food bit gets lost.

In terms of the concentration of supermarket power, you have nine major retailers accounting for 94.5% of all retail food in the UK. The starter for 10 is whether that helps or harms the resilience piece that we have been talking about, particularly during geopolitical shocks.

Karen and I can probably chip in on this, and Hannah too. Those are the Kantar figures. Broadly, they have given that picture. The retailers are not the only source Britain gets its food from; it also gets it from hospitality. It is still nine companies. What has been interesting as a long-term watcher of the retail market is that the Tesco immersion became very big very quickly, accounting for about 30% of retail sales. What has been interesting is that the arrival of the German discounters has brought more diversity into the British retail market. You could say that, compared with other countries, having nine big retailers providing 94% is quite a diversity. Back to a different part of what Karen was saying earlier, the SME sector is actually what we should be giving more attention to. Why do we not have small retailers in food? What would be needed to encourage them to rebuild some diversity, maybe at the local level or regional level? The classic example here was always EH Booths of the north-west of England: Lancashire, Cumbria, a bit of Cheshire. It is very successful, occupying a high-end, Waitrose-type position. However, there have not been other equivalents. They existed in the past, but they did not grow in the way that Booths remained and survived. That is not what I work on, but it has constantly come up in terms of resilience thinking that it would be good to have other sources of food for retail outlets. What do I mean by that? The Chair’s beginning question was, “What are the structural lessons about covid?” One of them was that Britain was stupid in closing down the hospitality sector but belatedly taking the retail sector very seriously. Hospitality could actually quite quickly become a quasi-retail outlet, and some nimble-footed cafes and restaurants turned themselves into food sales outlets. In resilience planning, that is what we should do. We should be taking the hospitality sector as a really important counterweight to the nine concentrated big retailers we have because they provide different localities and supply chains. They do not just get the same branded foods as the big retailers and, as retailers, they are mostly interested in selling cooked foods. The diversity of them is really important for the general analysis your Committee is making about food security. Back to your central point, nine is quite good. Other countries maybe have three or four that account for 75% to 80% of markets, so you could say nine is good. But I repeat, the points I would like to flag are first, what about hospitality as a source of food? Secondly, how can we encourage more small-scale retailers so that they grow and become the bigger ones of later? Karen will give a different view.

I agree with Tim that relatively, we have quite a diverse retail sector compared with many other countries. When we look at North America, it has far fewer food retailers. We have a famously fiercely competitive food retail sector, which has become more competitive since the arrival of the German discounters. That serves the population really well in terms of food prices. It is really interesting that even with the 40% food price inflation that the UK has experienced in the last six years, UK food prices are broadly average compared with other European countries. We were below average before the last inflation cycle. We have moved up to average because we experienced higher inflation in the UK than many other European countries, but we are still about average. That is a testament to our very sophisticated and successful retail sector in this country. From FTF members’ point of view, the establishment of the Groceries Code Adjudicator has been a good thing, especially for our SME members and especially around now, when manufacturers are starting to experience price rises. They might need to negotiate a price rise with a supermarket, which can be very tough for small manufacturers. We encourage all our members to train up on negotiations and contracts, and we encourage them to use the Groceries Code Adjudicator when they think they have a problem. In general, reported complaints to the Groceries Code Adjudicator have gradually gone down since it was set up in 2014. Our members manage that as well as they can, and the British public are the beneficiary in terms of competitive food prices.

We had the Groceries Code Adjudicator in, and there has been a rise from 30% to 32% in terms of suppliers reporting a code issue with supermarket retailers. We had Mark White in, who said there was a need to remind retailers that compliance is important, thinking about the teeth and the need to enforce.

In 2014, 79% of suppliers reported an issue. That has gone down to 30%. If it has upticked to 32% that might reflect the fact that supplier-retailer relationships necessarily become more tense in a period of inflation because, as I said, suppliers will generally see price rises first. They will have to have a negotiation with a retailer about whether that price rise can be passed through. That is why very often, when SMEs are in that conversation earlier than bigger companies, by the time bigger companies get there the fact that inflation is in our system tends to be more accepted. It is always a bit tense at the beginning of an inflationary cycle. If it is upticking now, that does not particularly surprise me, but in general the trend has gone downwards. What we will do with our members now is remind them all about doing the training and remind them that they can use the GCA if they need to. Equally, I also saw Mark Wright the other day, and he said that he continues to remind supermarkets of the code and how it should be used. It will be another test of the code, if we go through another inflation cycle, as to whether we can keep the perceived fairness through the supply chain. Those conversations can be really hard but, in general, the system works pretty well.

Are you concerned that manufacturers are going to be forced to absorb more of those costs because of the fact that you have that inherent power imbalance, and because of the fact that there are nine and they dominate nearly 95% of the market?

Ultimately, that comes back to price. It is really acute now because all our member companies are watching their input costs starting to rise, and they can see the energy prices on the horizon and contracts going up significantly. Nobody wants to raise prices. That is always a last resort. All our companies know that they have a responsibility to keep food affordable. We are very conscious that people are going into this current inflation crisis already feeling the impacts of the last. We are already in a cost of living crisis and we are about to go through another inflation cycle. Our companies will be really careful about asking for cost price rises. They will do it only when they have nowhere else to go. That is true of everybody through the supply chain. The evidence from the last inflation spike is that most companies were absorbing an amount of the cost; nobody passed on the full amount of the cost. Some was absorbed along the way, whether it was the input costs or rising labour and finance costs because of interest rates. You will see everybody absorbing costs where they can across the whole system. Companies have to do that in order to remain competitive, but in the end, if inflation reaches unmanageable levels, companies will have to ask for cost price rises. The retailers will have to weigh those up.

In terms of those smaller manufacturing companies that will not have that brand recognition or negotiating leverage, and then those smaller ones on tiny margins having to absorb those costs, and when there is a prolonged cost shock, are you worried they cannot sustain that?

That is always where the issues and tensions become obvious the most quickly. We have had a few of our smaller companies contact us and say that they are having difficulty getting cost price rises through. We encourage them to look to their contracts and the relationships they have with the retailers, and if they have a concern to raise it with the Groceries Code Adjudicator. Of course, it is harder for smaller companies where your brand is less established and you just have less leverage. Equally, during the last inflation cycle, on balance the supermarkets dealt responsibly with their suppliers. The supermarkets are balancing that relationship with the suppliers and what they think is reasonable to ask of consumers. It makes those relationships tense, it makes them a bit stressful, but we have the systems in place that ought to be able to deal with challenges when they arise.

I had two slightly related but less specific points about the retailers. First, when prices are being squeezed down the system, our concern will be that it does not impact on the quality and that we are not embedding less healthy food more and more into the system. That is exactly why we need HFSS policies alongside those policies that boost the healthy food, which is really what we want to do: we want to make healthy food affordable, which is different from cheap. We want to make it affordable for people and look at the mechanisms. On a slightly related note, both Tim and Karen have talked about SMEs and the smaller players in the sector. One area where this also plays out is within public sector procurement or procurement generally. It is a really important lever that we need to be considering within the spectrum of food prices and the role that Government can play. For instance, we know School Food Standards are being updated at the moment, can we look at how we procure better? How can we use government contracts to build more regional or local food systems by strengthening the contracts in place, allowing the smaller farmers to get a foot in the door? Your question has implications across the different sectors, not just in retailers, but in terms of actually making sure that other smaller players get space. As I say, procurement is an area that we have not talked about but is really key.

Yes, and obviously farmers are going to be even more price takers in those relationships below the manufacturers. Can I come back to the retailers though? We mentioned that the nine figure versus Europe, maybe that slightly higher figure and level of competition—albeit more in an oligopoly sense—still means that the UK grocery prices remain the lowest in Western Europe. We have been told by Andrew Opie from the BRC that market competition will effectively force those supermarkets to reinvest profits into price caps to protect customers rather than increase margins. Do you agree with that? Are you confident that is going to be the case?

The only other option none of us has referred to, which there was quite a hoo-ha about, is that the one option manufacturers have is to reduce the amount of food they sell in a packaged good. It used to be called shrinkflation. The chocolate bar is reduced in weight. However, consumers are pretty savvy about that; they see it happening. It becomes a critical issue. Policy is what Hannah was referring to: nutrient intake. From the point of food security and resilience planning, the critical thing is to make sure that the public get nutrients that are good for their health. One of the things that my report argued—this is slightly askance to your question, but it is relevant, if you bear with me—is that we need to be thinking not just about a healthy diet, but a resilient diet. Do we have the capacity to ensure that security of supply, to ensure the public get what they need for good diets? That almost certainly requires us to do what we do not do at the moment: we do not pay for food for its nutrients; we pay by weight. It is assumed that the nutrients will be adequate to give us a good diet. That is a really long thought I am throwing at you, and bodies such as the Scientific Advisory Committee on Nutrition should be asked to look at. If we want to have a good diet for public health in, from and aftershocks, we need to have a better understanding of what the nutrient flows through the food system are: do the public get it? Very often, nutrients are lost when they go into processing. There is a loss of nutrients down the food supply chain. This is a very academic and esoteric point I am throwing at you, but it becomes really important in shocks because you want to make absolutely sure you can feed your population a diet that is good for health. It becomes very critical. In World War II, Britain managed that very well, actually. It started in 1939, thinking very seriously about nutrient flows. We need to get more thinking about nutrient flows through the retail system, not just the price of it; not that they are unrelated. It is a big thought I am giving you.

No, I suppose you are thinking about certification when you think about your eggs, or your—

Maybe. I am not saying we want certification; I would just like my fellow academics to start looking at this more again, as we used to, actually. Where are the nutrients, the inputs and the outputs? We are having to do it now in carbon, and the fossil fuel crisis is making us think about energy flows through the food system. I am saying on the back of energy flows, we need to be thinking also about nutrient flows through the food system and then making sure the pricing system is capturing that. That is a really long-term, big thought, but if there are big shocks hitting the food system, that becomes critical overnight.

That is probably our third major piece of work we are taking on this morning.

I like to do my best to keep you employed.

Pass. I do not know, but if you start asking about nutrient flows, all those questions then follow, and you think, “Ooh, what are we going to do in a crisis? What would happen if Tesco’s 20 distribution centres were taken out by drone attack in one night?” It is quite possible. What would happen if the electricity system went down? I am not expecting Karen to have the answer.

Can I just go back to your point about the trend in relation to reference to the Grocery Code Adjudicator? I do not want to put words in your mouth, but you seem to be implying that that was the consequence of improved behaviour by retailers so that the GCA was doing its job. There are other possible explanations, are there not? We had quite remarkable evidence from the GCA last month about what he termed, “A collaborative approach with supermarkets,” which I fully confess made me feel somewhat uneasy. If your members see an attendant level of risk by going to the GCA, could that downward trend of complaint actually reflect a lack of confidence in the operation of the adjudicator itself? That is a, “What is the point” type of question.

We do not get involved in the commercial relationships between our members and the supermarkets.

I realise that.

I need to be quite clear about that. We have a relationship with the GCA and, equally, many of our members will contribute to the GCA’s survey every year. My rule of thumb is, how many companies are coming to us saying they have a problem that is not being resolved? They would do that only on a one-to-one basis. We do not get a lot of that feedback, but it seems completely fair that a GCA survey could ask that question confidentially.

You are right. It is obviously not your role to get involved in the commercial relationship between members and supermarkets, but you do some exceptionally valuable work in gathering data and highlighting trends. You have your state of the industry report and it shows that manufacturers often face a lag between rising costs and the ability to pass these on, creating financial pressure during sustained disruptions. Your own analysis of the drivers of food and drink inflation in 2023 stated that, “Previously, manufacturers have been absorbing some cost increases themselves without passing them on to retailers and consumers.” That is not the operation of a healthy market where competition is between equals, is it?

When you look at the last inflation cycle, what that reflected was how high food inflation went. There was a desire on the part of everybody—food manufacturers and retailers—to make sure that consumers were shielded as far as companies possibly could from—

But your members were taking that on themselves, rather than expecting the retailers to do it.

Everybody was doing that. As I say, in the first instance, companies do not want to put up prices. Especially now: they know that households are really cash strapped. They will always look to efficiencies first, and that is about their own competitiveness. If I am making a tin of tuna or a tub of ice cream, I do not want to go first in raising my price because somebody who is trying to save money in their weekly shop will look across the shelf and they will not pick my product anymore. Part of that is inbuilt competition between manufacturers themselves. Part of it is that the really useful drive when these crises come around is always for everyone to think, “Okay, do I have inefficiencies in my supply chains one way or the other?” That is always a company response to that sort of thing in a good way. However, yes, when you have major efficiencies, you have absorbed what costs you can and you still need a price rise, that is when companies will go to whomever they are selling through to say, “I need a price rise.” Very often that is then a negotiation, depending on the sort of contract that companies have with retailers. Retailers have the ability in some contracts to ask suppliers to open their books to demonstrate where the price rise is coming from and to ensure that it is evidenced. The rigour that goes on in manufacturers and in the contracts they have with retailers is really a good thing for consumers. It forces the system to be as efficient and competitive as possible. However, last time we had food price inflation because retailers recognised that there were cost increases in the system that had to be passed on to consumers. I would be really surprised if that is not the case in this inflation cycle as well. As we discussed earlier, given that there is no current prospect of oil and LNG flowing normally through the Strait of Hormuz again, the pressures are just continuing to mount into the system. Chair, earlier you talked about three to four months to normalise the flow. It is going to be a couple of years before the damage to energy processing facilities in the Gulf is rectified. Yes, oil will begin to flow again, but query at what rate. Given that those pressures exist, there will be the search for efficiencies first and then conversations about what prices can legitimately be passed through to the consumer.

As we said earlier, Karen, the FDF has revised its food inflation forecast upwards to as much as 10%. That will be very concerning to all our constituents. Mine in Cannock Chase will worry about how they are going to afford an extra 60p on a pack of chicken or 20p on a bag of potatoes. It adds up over their weekly shop. Could you tell us a bit more about how the FDF has arrived at that forecast? You have talked about some things that you want to see the Government doing to mitigate that; could you tell us the most important ones that you think the Government should really be focusing on urgently in the coming weeks?

Yes. We published our forecast about six weeks ago because energy is embedded in every part of the food system. When there is an energy shock, you can then anticipate some pressures that are going to build in energy and the other farming inputs that flow through the Gulf, particularly fertilisers, such as ammonia and urea. We wanted to make sure that we had worked that through our figures and that we were updating our forecast so we were being straight about what we thought the future held for us. I can write to you in detail about how we came to that forecast; I am not our economist, and I do not want to misrepresent the hard work that our economics team went through when they came up with the forecast. However, yes, it stands at somewhere between 9% and 10% by the end of the year. When we looked at that there were two key things that come to mind. First, is it right that the Government support the food system on energy costs? We have had a bit of a conversation about that already. We know that government finances are very, very tight, but we have asked for support for energy costs really in the context of, “Well, if you’re going to support other industrial sectors, we think you should look at food as well.” It is not just food manufacturing we have asked the Government to look at, but across the food system. We have asked them to look at the energy intensive parts of the food system. For us, that would be bakery, sugar, dairy processing and coffee. In farming it would be things such as greenhouses. We have said, “Why don’t you look at the energy intensive parts of the food system?” The Government have that in all their economic statistics, and/or you could look at supporting volume producers because of the amount of food that they are producing. If you supported their energy, you would be bringing down costs across a very wide range of food. We talked to Government about that. We have been talking to them about that for five or six weeks. They are thinking that through, but we have not really had any detailed feedback. The other thing we have asked them to do, which again has come up in conversation, is to prioritise their regulatory asks of the industry. There is very often an assumption that companies have a lot of people doing regulatory work. They really do not. Food companies are there to make food. The vast majority of their resources are focused on manufacturing nutritious food and distributing it safely for the population. When we have a whole range of changes coming at us at one time, that increases the cost on companies. If we are looking, first, at the changes that we will have to make to realign with EU law and whether we can do that in the coming year, as I say, we have identified 450-odd amendments to EU law that food manufacturing companies will have to comply with by the time we realign. Our 450 amendments do not include plant protection, animal feed or fertiliser. There are an awful lot of changes going on there. What Government have underestimated in that is that the deal is called an SPS deal, but it is not restricted to SPS products. It is not really about trade; it is about a wholesale change across UK law. If we are going to do that, we are going to need the bandwidth to do it, and we are going to need the time to do it. Then we have EPR and DRS, which are expensive and still working through the system. We have said to Government, “You could at least get rid of packaging return notes and the plastics packaging tax, which is double taxing now.” Those should have been folded into EPR. Those are legacy costs. Government could also look at just bringing down the cost of EPR bills if they wanted to support the industry across the board. That is manufacturers, but it goes into retail, it goes into hospitality. Thirdly, the Government want to change the high fat, sugar and salt regulations by changing the nutrient profile model, which is the scale on which Government judge whether a food is healthy or less healthy. Our strong view on that is because the advertising aspects of HFSS regulations came into effect only in January this year, we should stick with the regulations we have, evaluate them over the five-year period that Government said they would evaluate against, and switch to a new policy only if that is what the evidence says that we should do. Our companies and the retailers would say that actually the market is changing. There are many more of the healthier options out there for consumers to choose from, whether they are new products or healthier variants of current products. Let us stick with that policy and see how it is working. Let us implement mandatory reporting, which we can do now, and let us look at changes to the NPM in slightly slower time. The other thing I would add to that, which is not necessarily part of government regulation now but companies are really worried about, is the climate transition that we are having to go through. Companies need to find the investment funds and the bandwidth to make sure we are continuing to invest, particularly in our farming supply chain, to make sure that we are transitioning our supply chain as quickly as we need to. The other thing that all our members are really conscious of—I said this at the beginning—is we have had a series of structural shocks in the last six years, but those have been made worse by a series of climate shocks as well. We need to be ensuring that companies are able to do that. If you look at inflation, then you look at a series of pieces of regulation, and then you look at the climate element of that, we would really like Government to prioritise the regulation to make sure they are not asking hard-pressed companies with small teams on regulation to make a lot of changes all at once. In the end, that is going to cost something. In the end, those will become policy costs that add to inflationary costs.

Obviously, you said you have been speaking to DEFRA about short-term help on energy, but I take it you have also been speaking to it about those regulatory points. Have you been reassured by what you have heard, or do you still feel that the direction of travel has not changed from what has already been planned?

To some points that we have made on the panel this morning, one of the things that the food system really lacks is a joined-up conversation across Government about what Government want from the food system. What we find is different Departments regulating for different things in different ways. If you are a single food company trying to absorb all those different changes, it does not appear joined up or coherent. One of the things that Emma Reynolds, the Secretary of State, announced in November last year when she was relatively new in office was a Food Inflation Gateway. She said it was a policy that DEFRA was working on, whereby it would ask other Departments to assess the inflationary impact of new policies before they were agreed on and legislated for by Government. It is a bit of a shame that since November we have not really seen any detail on the Food Inflation Gateway because we thought it was a really good idea. It would have asked a question of all Departments when they were thinking of new policies for the food system, “Will there be an inflationary impact, and how could that be mitigated?” If DEFRA could roll that out across Government, then that would be really helpful. That might have stopped some competing priorities that companies are juggling right now.

I have just two more brief follow-ups, if I may, on support for energy intensive industries. One of the complaints I have heard from businesses in my county is that a lot of the government support schemes at present are very focused on electricity and they ignore the gas component of the pressure that a lot of companies are facing. Do I take it that a lot of the energy cost pressures that you described are related to gas rather than electricity, and so the present schemes, even if they were extended to many of your members, would not necessarily help them with their overall energy cost burden?

It is a mix of energy that is used. You find in bakery that there is still a lot of gas used. Where you need to create intense energy, yes, gas is a more efficient way of doing it. However, frankly, if the Government wanted to support on only electricity but extended that to the food industry, it would be really helpful. The British Industrial Competitiveness Scheme works by removing a range of the non-commodity costs from industrial electricity bills. For our companies at the moment, about 60% of their electricity bill is non-commodity costs. If you could reduce that—maybe not by as much as 60%, but by 20% or 30%—all our companies will use electricity one way or another, so that would really help. Sugar and oils have had some BICs extended to them, but the feedback we have had from our companies is that it is quite a complex scheme. The guidance has not been written yet, so it is really hard to understand whether it will actually help because it is in very specific areas, not across the whole of that business. It is in very specific aspects of their energy use, so it is not really clear that it would help. To be honest, because everybody uses some electricity, if it was only electricity that was supported that would be helpful. Something would be better than nothing.

I just have a question on the SPS negotiations with the EU. As you will have seen, as a Committee, we put to the Government in our fifth report that there should be a two-year implementation period, which I believe aligns with your position. However, as you alluded to, they said that they are very keen to see a deal implemented in the middle of next year, with the caveat that some businesses will need more time to adjust as part of a “smooth transition.” I assume that is also something you have been speaking to DEFRA and possibly Cabinet Office about. Do you have a sense of whether the concerns of your members will be listened to in terms of all those dynamic alignments that you have mentioned that run into the hundreds, or are you still concerned that the voice of your members is not being heard in that implementation period?

DEFRA is listening, and I absolutely accept it is in the middle of a tough negotiation. When we were in the EU, we used to be very pleased that the EU trade negotiators were as tough as they were. Now we are outside the EU, we are experiencing that toughness as a third country. I have no doubt that the negotiation is difficult, but none the less, our companies look at realignment with the EU as a long-term benefit. There is going to be short-term disruption. Companies are going to have to reconfigure their supply chains to make sure that the wheat they are buying to put into bread that they want to bake has not been grown with a pesticide that is not compliant with EU law. There are a lot of aspects to the work that companies do to make sure that on the day the deal is enacted, they can be compliant. It is really tough to ask companies to do that in a year. A standard transition period is 24 months. It is also standard to run your transition period from the date of enactment of the law that brings into effect the trade deal. What we are currently looking at is a one-year transition period from the date the deal was signed. It is really hard for companies to start changing their supply chains based on something written in a deal that is not written into law because of the cost of a mistake. If you change your whole packaging supply chain for the plastics that you wrap your bread in or put your frozen broad beans into, and then actually the law when it is enacted and the guidance that goes with it rule out the particular type of polymer you are using in that plastic, then you have made a really expensive error. It is only fair to ask companies to go through all that work when they see the enacting of legislation and the detail of the guidance that goes with it.

In the interest of time, can I just come to you briefly, Hannah? As we have heard, food inflation on some real staples such as milk and meat is rising even faster than headline inflation. For example, we heard that the price of beef could be up by 19% at the end of the year. I represent many people who are really struggling to afford food as it is, so what could this spike in inflation we are looking at mean in terms of household food insecurity, particularly for people who are on very low incomes?

Prices are already increasing after a plateau; we are expecting that food insecurity will rise as a result. What we have seen over the last few years is increasing dietary inequalities, which means that basically those on a lower income are more affected by things such as childhood obesity. We know that children from deprived households are twice as likely to have obesity. We see really big divisions in diet quality as well. We see fairly high but similar intakes in things such as fat, sugar and salt, but actually we see really big inequalities in things such as fruit and vegetable intake. Almost nobody in the population is getting enough fibre. These things are going to get worse. We have already seen them get bad. We have this challenge that is going to impact the population health, which is then going to have a knock-on impact on the economy through productivity and health. It is really, really concerning. Coming back to your first point, we are expecting that food insecurity to increase. I just want to come back on the HFSS point again: this is why these changes are really important. We are going to see health inequalities come out of increasing food insecurity and price rises. We need to be protecting our citizens as much as possible from that. The new NPM is actually not very new. It was first developed in 2018, so when you see the 2018 NPM model in 2026, it seems a bit odd. It is based on dietary guidance that has been around for a while, and we have not caught our policies up. We are actually behind where we should have been. There were various delays already, and we really need to stop using food prices as a reason not to support a healthier food system. The policies that it is going to apply to are advertising to children and volume-based promotions. My preference would be that the food would be improved. Companies cannot advertise those, and if they are making healthier products, that is where we can prioritise the advertising. We need to be really, really careful when we are prioritising. I totally agree that we need to prioritise policies and how we make this work for everybody, but we need to be really careful what the outcome is that we want, when we know that things such as dietary inequalities are likely to only get worse in the face of the rising food prices. Regarding the other point around the different Departments, when the food strategy was established last year or the year before there was quite a big focus on bringing in the different Departments. We have seen that to an extent. It would be good to see a bit more momentum behind that food strategy to really try to identify where there are shared priorities between Departments, how we can make sure that this is cohesive, and understand where those tensions are across those Departments in the context of food. It is so important that everybody is working in the same direction. This comes back to the idea that if we had something such as a food Bill that anchored that prioritisation, it would give businesses and consumers the certainty of that direction of travel. It would keep us all within a framework and put the correct duties on all the different Departments to actually be thinking about food in a more coherent and longer-term way because we know that short-term solutions in themselves are not going to solve the problems.

Before we move on to the final section, Karen, you touched on climate change as a driver of inflation and I was struck. The Energy and Climate Intelligence Unit suggests that climate-related impacts and energy price shocks have driven a near fourfold acceleration in food price inflation. This means that prices have risen over the past five years at roughly the same rate as they did over the two previous decades, just to put it into its context. Is that a factor in this phenomenon of the prices going up and staying up? Are we seeing a cost to climate change in people’s shopping baskets there?

The inflationary period that we have gone through since broadly 2020, which is different from the last 20 years, was a result of a series of shocks. We have already talked about covid and the war in Ukraine, but what made those shocks worse at different periods was droughts or flooding, basically. We saw the impacts on various agricultural outputs in the UK, but there is a global impact there as well. Yes, I would say that the food industry writ large is concerned about climate shocks, which are increasing in their regularity anyway, and making sure that the UK is adapting the way it is farming and growing to take that into account while we are all trying to drive down emissions at the same time. That is the long-term slower burn driver of inflation, which can very often get pushed out of the headlines by the much more immediate oil shock or shock caused by a war. However, it is the thing that we really need to bear in mind as well.

If the unit’s figures are right, it is not that slow a burn; it is accelerating.

Yes, of course it is accelerating. Yes, but very often the headlines last for a shorter period of time. It goes in and out of people’s consciousness.

That is another illustration of the fact that—to pick up Tim’s expression earlier—volatility is the new normal.

If I can just add one point to that, the science is becoming very clear on the impact not just on prices, but on crop availability. There has been really remarkably consistent modelling showing that by 2050 onwards, cropping will change due to climate inflation, which will therefore be an acceleration of price inflation. Getting back to the issue of Mr Newbury’s question, that is why most analysts agree that price inflation is going to continue. The Bank of England is the only one that so far has pitched it lower, but everyone else sees it as not returning to the situation of low cost but accelerating the inflation.

The attendant risks of forecasting, is it not?

Yes, it is.

Can I quickly make one more point before we move on? It is really to flag to Hannah that we need a conversation about the HFSS changes. The unintended consequence we are concerned about is that it will disincentivise reformulation because a range of products that have been made to be healthier will fail the new NPM. They will not be able to be advertised. Very often they then will be removed from sale because if they go on to the shop shelves, if you have a low-fat version next to a high-fat version, very often in the moment the consumer will choose the non-reformulated product because they think it will taste nicer. What we are concerned about is that we do not reduce the number of healthier products that are available by mistake. We think there is a different way to incentivise that change. I should underscore that in not supporting the Government’s ideas that they put out there in their consultation, all our members absolutely know that dietary patterns have to change in the UK. We want to make sure that we are part of that change. In fact, the Government’s other announced policies at the same time as the changes to the NPM—introducing mandatory reporting and retailer targets—could be much more impactful in the longer term. Certainly, all our members are behind rolling out mandatory reporting as quickly as possible.

I am just reflecting on what you were saying earlier, Tim, in respect of how after the second world war people were spending 50% of their disposable income on food. If you take a point in respect of inequality: the most deprived 20% of the population with children would need to spend 70% of their disposable income on food to have the Government—

A healthy diet. The squeeze is on. My point is this is not being discussed politically, and it should be. It is just by stealth. It is why cost of living politics is so serious in the bottom half of disposable income households in Britain. It is the number one issue for them because they have fixed costs, whether it is rent, mortgage, cars to go to work, or cost of children, or school meals or whatever. Food bills are what is left.

Personal credit. Add personal credit to that list.

If anything, we have talked about DEFRA, but we have not talked about the Department of Health and Social Care. This ought to be a feature. It is what Wes Streeting said in Opposition: he would try to address prevention to lower the burden on healthcare. But it is not happening. Here is an example of where we need to have that joined-up thinking. The other bit is the Treasury. The Treasury has wanted to get us out of the European Union’s common agricultural policy. In 2005, it made it very clear that it saw that as a good thing. Well, beware what you wish for because we have that and we now have absolutely no leverage as a relatively small country in European terms or compared with the European Union. We do not have much leverage on how to get food prices into a way that is affordable.

There is a bomb into the middle of the debate eight minutes before we finish it.

It will keep us going.

Just really quickly, that is a Food Foundation statistic that you just quoted, and the 70% is for households with children. I have two points on that. It is published in one of our annual reports called, “Broken Plate.” We are publishing the next one in a couple of weeks, so I will make sure that you all receive the new data. What I can say is that it has got worse. That is really worrying, particularly as it is households with children. This then comes back to my point before around the opportunities we have with a scheme such as Healthy Start, where you are supporting those lowest income households with children during that really key developmental phase to support their access to fruit, vegetables and milk, which we all know are essential. I will share that report when it comes out in a couple of weeks, but it has unfortunately got worse.

Sarah, you are going to bring it home for us.

We have been discussing our increasing dependence on food imports at this time of geopolitical instability, but also climate change disruption. What are your views on the long-term strategic priorities needed to improve our food system’s resilience to these shocks, particularly around climate change? I am a farmer’s daughter, and anecdotally, I am hearing from farmers not only in my constituency—Glastonbury and Somerton—but across the patch, how climate change impacts them on a day to day level. We know that climate-driven extreme weather is already impacting food prices; in my patch, for six months of the year—most of the winter—farmers can see their fields covered in rain water. A farmer I spoke to recently was farming 650 head of beef cattle, but he has had to reduce that down to 300 as a direct result of the constant year on year effect of having water on his land. That is just one example. How do we build resilience in our food system to deal with those shocks?

To be brutally honest, it is difficult, but we have to accept that it is what we need to do. At one level it means taking out a blank sheet of paper and saying, “What do we want for 2050, for 2060? What is a good food system?” The question you are asking is, “What is the point of land if the farmer or grower cannot anticipate the state of the land in relation to climate change?” If the point of the food system is to feed people, then we have to retrofit carefully and say, “We want some land to be growing food directly for people.” In Britain, the number one priority is horticulture; we have a dangerously low horticultural and field crop sector. We tend not to talk about field crops, but we should. Old style farming was based around crop rotation, and field cropping was a really important part of delivering that. The analysis in my report was very clear; we plan around shocks. We can see most of the range of shocks; we may not know all of them, but we have a pretty good idea of what they might be. Climate change we have talked about, energy, oil and gas crises we have talked about, but we have not talked about water contamination and zoonoses. The National Risk Register referred to 89 risks facing British society and the economy; the most important was the prospect of pandemics affecting our food supply and hitting the labour force. The entire labour force of FDF members can be wiped out by zoonoses. We have not talked about how that should be addressed. Choke points we have talked about; we have not talked very much about geopolitical risks, but we assume those risks. A major point—certainly in my report—is that we have to take risks to direct the weaponisation of food in Britain, in other words, using it; people making food a weapon. Whatever you think of Israel and Gaza, we have seen it being done there. Whatever you think about Russia and Ukraine, whatever you think about Sudan, we have seen it there also. We are seeing overt ways in which food can be used as a weapon against the public and we have to build that capacity. The other countries I looked at are taking that prospect much more seriously than Britain. The good news is that in the Cabinet Office, in the Resilience Directorate and Resilience Academy, there is a more awareness and interest in this, which is great, and I would like this Committee’s report to encourage that. Again, there is now a unit in DEFRA taking this hard issue of food security more seriously. I welcome that. Is it enough? No. Does it have priority thinking in DEFRA? No, it has not. To be frank, ministers are not taking the possibility of heavy shocks to the British food system seriously enough. But the key point is that we must engage the public. The public is not being engaged in the possibility of shocks to its food. We talk about the food industry or retailing, but it is the public who want the food and need to have it. The rethink of British food security policy that people like me and lots of others now want has to start with what a resilient food system would look like. First, it would be better prepared for shocks. We have individual corporate planning for shocks; Tesco has done meticulous, detailed planning for every little jot and tittle of its operation if it was hit by, for instance, an energy outage. But that is not about the food system. We have to achieve a joined-up approach: we need legislation, and only Government can do that. The 1947 Agriculture Act set the direction of the last 70 years; now we need something big and bold to do that again.

I am going to take you back to climate change. What impact do you think it will have?

The impact will be huge. Climate change is not a slow ticking clock; it is accelerating. I am privileged to know people in the IPCC world, the scientists who work and contribute on this subject. I do not just read the outputs, I follow them; I was policy lead for the Lancet report of 2019. This is very heavy politics, and we are ducking it. We are not preparing the British food system for climate change. We need the Scientific Advisory Committee to provide specifics; it should be giving climate-friendly dietary advice, and we should design a food system that can deliver to all the people and children in low-income households. They are not getting a decent diet in nutrient terms, and they are not getting a resilient diet in future-proof terms. We need a big rethink.

What do those strategic priorities look like?

They are in the critical national infrastructure. We have the structure but we are not applying it to food. All three of us have said that to you. It is not being taken seriously.

If we return to the point on dietary inequalities, we need to promote fruit, veg and beans in people’s diets. This country is very climate vulnerable, but we import food from places that are even more climate vulnerable. One of the solutions is to look at how we can boost British production; our survey shows that that 60% of people would support Government action to increase British production of fruit and veg. Another of our surveys showed that 87% of MPs agreed with the same proposal, so it is something that is well supported. People know we need to do it. We need to remember that we have climate vulnerability in this country because sometimes people think of it as a problem that happens elsewhere. We are vulnerable, but there are a lot of things we can do in this country to boost our own food system, particularly for fruit, veg and beans. That feeds back into making sure that we have a strong horticulture strategy to support the sector, giving alternative routes to market such as direct to consumer, through market gardens and so on. It also feeds back into procurement, and how we can embed more British and locally produced fruit and vegetables into the food provided with public sector money. I am thinking primarily of schools but also hospitals and other places.

Beans fix nitrogen, for goodness’ sake. We have been talking about fossil fuels and the impact on climate change; put beans into the field and they will take nitrogen from the air. It is good for our health.

It is. We know that 96% of the population do not meet their fibre recommendations and beans are a really good way of doing that, so we should make a big push for beans.

I planted my climate-friendly French beans yesterday.

I am very happy to come in on beans. To your point on climate change, Sarah, food manufacturers are British farmers’ biggest customers, and we want to continue to buy British produce. I come back to my key word, which is investment. We need to make sure that investment is made in climate transition, first from a farming and primary producer point of view, and secondly into the resilience of food manufacturing and distribution and the rest of the system. We need to make sure that we are making the right investments to reduce carbon and regenerate nature biodiversity in farming; we need to make sure that we have the right technologies and infrastructure in place. At the end of the day my strong view is that, although Government will invest some money, the private sector ought to be able to scale that funding and produce the lion’s share. We need to be asking ourselves how we are channelling the right investment into the farming transition and into the resilience of the rest of the system. That comes back to my earlier point, which is that Government need to look more closely at how we ensure that the UK is an attractive place for that investment. For instance, we have companies that are investing in a farming technology that enables fertiliser to be targeted on a particular crop by inserting it into the ground rather than spraying it across the field. That needs to scale. When we came out of the European Union and the Government were looking at farming subsidy policies—this was before my time at the FDF—there was a suggestion that the Government should include the manufacturing and retail sectors in that conversation as well. For whatever reason that did not happen, but it seems to me that in the transition we have to make we need a join-up between public and private investment. We need a different type of thinking to make sure that we are scaling investment into our food system rapidly enough and that we are countering not only our climate problem in the UK but, as Hannah and Tim have said, making sure that we are an agricultural powerhouse when agriculture becomes much less possible in other parts of the world. When the centre of the world becomes too hot to grow food, temperate parts of the world will need to be make up the difference. So for us, it is a question of investment and getting that right.

It seems to me, Chair, that Britain needs a good food Bill.

A food security Bill, is what you meant to say.

Yes, exactly; it would set out those long-term targets for food security. It could tap into food production and innovation, ensuring that our farmers are growing the right crops and planting beans when they should. It would also help with food security and bringing people out of food poverty. Hannah, why do you think it is important to get the legal obligation in place to make sure the good food Bill is co-ordinated effectively?

We have seen food strategies and food policies come and go over a number of years. As I have said before—you have also referred to this, Karen—there needs to be a vision, and a direction of travel that everybody knows they are working towards. Our Bill proposition includes targets for fruit, veg, obesity and food insecurity, but we also include things such as a reference diet; a core diet that we are working towards as a population and that policies are developed around. Again, that gives an anchoring for the direction of travel. We know what we are trying to achieve, we know the outcomes that we want, and we develop policies around that central point. At the moment we have policies over here and policies over there; we constantly have to renegotiate the parameters of what we are trying to achieve, whose diet we are trying to improve and what we are trying to address. If you embed all that in a legal framework, it adds a requirement to act and it keeps that focus for everybody. The other important element is for all the different Government Departments to have a duty to think about food and to think about it in the context of what would be laid out in that legislation. Food touches on almost every Department in some way, yet we do not hear it talked about in every Department. This is about making food central to what we need to address as a society, as a country, or through whatever lens you look at; it is key to bringing it all together and setting a direction that can withstand different parliaments.

Your point is that if we do not put some framework in place the reality will be stark.

The drift will continue.

Exactly. We need to take decisive action because we know these crises are going to become increasingly common. Climate change is sitting alongside geopolitics in terms of crises that we are responding to at the moment. It is only going to get worse, and we are going to need to continue to respond; if we have a legislative framework anchoring that response, we can act quickly. As we have seen in health policy, it cuts out negotiations where we are always starting from scratch.

We should be making sure that we have access to food that is resilient, nutritious, and affordable.

Yes, and across the food system, from production through to consumer.

I would simply say that we need that sense of strategic vision. I do not think it needs to be in legislation; sometimes a strategic policy framework can be more flexible, given the levels of change and volatility that we are seeing at the moment.

We have an industrial strategy, for example.

We do, and it is having an impact on those sectors. We have a food strategy that has been less strategic and forward thinking; there is definitely a case for a more strategic joined-up vision across Government, and across industry, around what we need from our food system in the future and how we sensibly get there.

I disagree with Karen. I agree with the point that Hannah was making and the evidence agrees with it too: we need legislation. Legislation gives it longer life; the impact of the 1947 Agriculture Act lasted decades. We do not have a long-term strategy for food, and we need it. The other reason is to link the hard defence version of food security with the domestic household version of food security. That is a big think, it is a big strategy, and we have had a debate about this with many supporters of the idea of food legislation. Again, if we do that in legislation, such as the National Health Acts did in 1944 and 1946, we provide for the long-term. We know that short-term and long-term shocks are pressing in on us. Climate change is not going away, oil dependency is not going away, ransomware and cyber-attacks are not going away. Food inequality is not going away. In an era of influencers, the capacity of populations to have knowledge, confidence and trust in food is a problem that is not going away. We need food security and sustainability for the common good, and we need legislation to nail that down. That is what I want from a food Bill.

Let me do the typical Lib Dem thing of saying that I think you are both right.

We will accept that.

The danger is that legislation is passed, and then people think, “Well, that’s fine, we’ve got a law, we’ve changed this now, so we don’t need to do any more.” We passed the Climate Change Act in 2008, but the problem still remains.

Look at how effective that Act has been. It has not been effective enough, but wow, we would not have had anything—

It was a moment, but the world changes, and continues to change.

That was an example of a really good piece of legislation.

Tim, at the start you asked us, “How long do I have?” The answer was about two hours, and I am afraid we have exhausted that.

We have exhausted you.

If anyone needs me for the rest of the day, I will be in a dark room with a towel around my head trying to make sense of this. Can I thank the three of you for an exceptionally engaging and informative session, and one that I hope for the Committee’s purposes will ultimately be productive as well? We shall be returning to this in the short, medium and long term of the work of the Committee. It has been enormously helpful but for the moment, regrettably, I have to draw proceedings to a close.