Supermarkets are accused of creaming off farmers' profits

The main supermarket chains were accused yesterday of "squeezing the lifeblood from the countryside" after figures showed that their profits have boomed but farm incomes have stagnated.

The main supermarket chains were accused yesterday of "squeezing the lifeblood from the countryside" after figures showed that their profits have boomed but farm incomes have stagnated.

Liberal Democrats called on the Office of Fair Trading to appoint a full-time inspector covering the food trade and said a code of conduct governing supermarkets' relations with suppliers should be strengthened.

They demanded action from ministers after research by the party showed that the operating profits of the big five supermarkets; Sainsbury, Tesco, Asda and Safeway and Morrisons, which have now merged, had risen by 300 per cent in the past 15 years, while farm incomes had grown by just 29 per cent over the same period.

At the same time, government research into farm gate prices (the amount that farmers get for their produce) showed that the share of checkout prices that is passed to farmers has fallen from 57 per cent in 1988 to 41 per cent 15 years later.

The findings come three years after Tony Blair pledged action to stop supermarkets holding their suppliers in an "arm lock". But the British Retail Consortium, which represents the supermarket chains, insisted research showed the gap between farm-gate and retail prices was no wider in Britain than in many parts of Europe.

Andrew George, the Liberal Democrat food and rural affairs spokesman, went on the attack after research carried out by the House of Commons library showed operating profits for the big five supermarkets increased from £884m in 1988 to £3,355m last year. Supermarket boardroom pay also jumped, increasing from £4.96m to £30.39 m.

Average farm incomes, by contrast, stagnated, increasing from £12,000 to £15,000 over the same period. Mr George said: "While the supermarkets' 55 top executives are creaming it, many dairy farmers are struggling to make any income at all.

"I'm all in favour of rewarding success, but this is simply rewarding those who have all the cards stacked up on their side of the supply chain.

"Supermarkets are now so powerful they can dictate market conditions for British farmers. It is clear the Government can no longer sit on its hands while the supermarkets squeeze the lifeblood from our countryside.

"Food supply chain relationships need rebalancing, the Supermarket Code must be strengthened and the OFT must get tough with the bully-boy tactics of the big boys."

The OFT is carrying out a study into the operation of the supermarkets' code of practice.

The British Retail Consortium, which disagreed with the Liberal Democrat study, pointed to a study by the consultants London Economics, published earlier this year, that showed changes (up or down) in farm prices were passed on to consumers. Kevin Hawkins, director general of the consortium said: "It is time for those who constantly criticise food retailers' relationships with farmers to admit that their attacks are based on nothing more than myth and prejudice."