Global Policy Forum

By Julia Finch

Tesco's record profit is equal to half the income generated by the entire UK farming industry, and the supermarket's directors and shareholders are benefiting at the expense of the farming community, it was claimed yesterday.

Andrew George MP, Liberal Democrat food and rural affairs spokesman, said it was "incredible" that Tesco's profit was nearly 50% of the £3.6bn generated by British farmers. He claimed that the UK's biggest food retailer had pushed up the price of fresh food to shoppers but refused to pay higher prices for supplies. "In such a tight market it is not the shareholders or senior executives who are suffering. It's the farmers' incomes that are being squeezed.

"Over the last 20 years there has been a consistent increase in the retail price of produce charged to consumers, but over the same period farm gate prices have been pegged."

His attack was echoed by green campaign group Friends of the Earth, which accused Tesco of treating farmers unfairly. FoE said the Competition Commission report into the supermarket sector in 2000 had named Tesco as paying the lowest prices to suppliers, and the lobby group said that since then "things have got worse". The campaigners also accused Tesco of using its muscle to put small shops out of business and of selling furniture made from illegally logged timber.

Chief executive Sir Terry Leahy described the FoE claims as "absolute nonsense". He added: "They are based on a series of allegations that are completely untrue."

Sir Terry said he was willing to talk to any interest groups: "We are always prepared to explain what we do ... I will explain to anyone who wants to listen."

The Consumers' Association sprang to his defence, saying: "Tesco profits are not bad for consumers." It is also backing Tesco's convenience-store expansion plans.

It declared the grocery business "generally competitive" and urged independent retailers to do a better job rather than cry foul. "Rather than demand more regulation and government help," said the CA's Phil Evans, "the convenience sector should recognise the threat of a strong competitor and meet it by focusing on what consumers want."