A decision on whether to appoint a grocery ombudsman will be made before the end of the year, the government has confirmed.

Speaking in a Westminster Hall debate on the UK grocery market, Under-Secretary of State for International Development Michael Foster revealed that the government has not yet approved the creation of an ombudsman because it is not convinced that the benefits would outweigh the costs, and that it thought suppliers in developing countries could be better helped in other ways.

He said: “The Competition Commission believes that the benefits of effective enforcement and monitoring by an ombudsman would accrue from future investment and innovation due to increased confidence on the part of suppliers.

“However, we think that the evidence relating to the argument about those benefits is insufficient at present, which is why we want to do a more careful analysis to inform a future decision. An ombudsman would, of course, generate additional costs that would be borne by the retailers, but our view is that, although such costs are likely to be passed on to consumers, they would not constitute a material increase in consumer prices.

Foster continued: “Little is known about the potential impact of either the code of practice or an ombudsman on developing countries. The number of suppliers in developing countries who would engage with and make use of the code of practice or an ombudsman would be relatively low, so that the benefits would likely be insignificant. We think that the government can operate in a more effective way to improve the livelihoods of poor farmers in developing countries.”

The debate was initiated by St Ives Lib Dem MP Andrew George, who is chair of the Grocery Market Action Group, which was set up in July 2006 at the start of the Competition Commission's inquiry into the grocery sector.