Friday 24 February 2023

Something in the water?


Perhaps they’re just stupid, or maybe there’s something in the ‘water’ that they’re drinking, but it increasingly appears that some Tories can’t see a hole without jumping into it and digging it deeper. I suppose the Environment Secretary’s Press Officer might have had a day off, but he or she would not have been doing the job very well if they had not anticipated the “Let them eat Turnips” headline which followed the minister’s statement to MPs. The basic point she was making – that it is preferable to eat what happens to be in season – is eminently sensible, albeit unlikely to prove terribly popular with people who have become accustomed to year-round availability. To say nothing of the inherent contradiction with the Brexiteers’ message that Brexit would not impact the availability of products on UK supermarket shelves. And who wants to live on turnips anyway, even if it were possible for supply to immediately follow demand in the oversimplistic way that economics tends to assume.

There is, of course, some debate about the extent to which Brexit is to blame for what will surely be known to future generations as the Great Tomato Crisis of 2023. Those Tory MPs denying the impact of Brexit on the shortage are surely right to argue that voting for Brexit didn’t cause storms in Spain or frosts in Morocco, but that doesn’t entirely explain the empirical fact that the shortages are not being replicated across the EU. If suppliers can’t meet all the demand, it would not be surprising if they took the easy way out of supplying those countries to which they can export hassle-free rather than the country which has imposed swingeing economic sanctions on itself by erecting barriers to trade and committing itself to putting further obstacles in place in the future. Brexit is at least part of the problem.

It isn’t, however, the full story. A report on the BBC a few days ago also drew attention to the different procurement models in operation, suggesting that UK supermarkets have signed long-term deals with suppliers so that prices are fixed for 18 months, whereas EU supermarkets tend to buy their fruit and vegetables on a month by month basis at the spot price applying at the time. The UK’s approach works well if supplies are plentiful and stable: both supplier and purchaser have a degree of certainty. Suppliers can plan their seasonal activity well in advance, and retailers can keep prices stable for end-consumers. It falls down, though, when there is a disruption to supply. If producers, forced to prioritise, can get a higher price in the short term by prioritising customers prepared to pay more and with less paperwork and hassle, why wouldn’t they do exactly that?

There’s a wider issue here as well. ‘Procurement improvements’ are often touted by politicians as some sort of ‘efficiency saving’, and it’s true that better procurement can bring savings to the organisation doing the procurement. There are usually costs and consequences to someone else, however. Combining procurement needs for several departments or, in the public sector, for several different organisations (it might well be called a cartel if the private sector did the same thing) can make it harder for small local companies to supply goods and services; but using larger, more remote companies helps to leach cash out of a local economy. And whilst one of the other common tricks – using purchasing power to demand more credit by taking longer to pay invoices – improves the cash flow of the buyer, it has precisely the opposite effect on the supplier. What looks attractive at the micro level to the organisation(s) wielding the purchasing power can be a lot less so at the macro level for local workers and companies in general.

By unfortunate coincidence, the Labour Party announced a few days ago that one of the ways in which they are going to pay for their programme in government (because they’re hooked on the fantasy that everything has to be fully costed) is by improvements to public sector procurement. I’m sure that they’ll even put a specific sum of money on the benefit, even though the actual number is necessarily unknowable. They are unlikely to spell out the consequences for other parts of the economy, but consequences there will be (there always are) even if unintended. They’ve probably been drinking the same ‘water’.


Gav said...

There are pictures going around of Thérèse Coffey and a turnip - "she's the one on the left". People are so mean.

CapM said...

It's only a matter of time before some Tory minister will say that eating raw turnips will save on fuel bills.