David Cameron has said the government will agree to the pleas of Christine Tacon, the Groceries Code Adjudicator, for the ability to issue huge fines to punish retailers. The government will also consider extending her remit even further, after calls from MPs for the code to include dairy farmers and other small-scale producers.

The Prime Minister’s intervention comes a day after a 25-page report into dairy prices and the problems in the industry by the House of Commons Environment, Food and Rural Affairs (EFRA) Committee claimed the powers of Christine Tacon were “too restricted” to be of assistance to the majority of dairy producers, as they were classified as “indirect suppliers”.

It also follows an investigation into Tesco by the BBC’s Panorama, which was screened on Monday, in which Tacon told how she had been hamstrung in her efforts to reprimand retailers because the government had failed to act on her call for the power to hand out fines. Tacon applied for powers to fine retailers up to 1% of their revenue as long ago as December 2013, but the government is yet to acquiesce.

Speaking during Prime Minister’s questions today, Cameron said “It is time to make sure that organisation has the power, if necessary, to levy fines so that… it can get its will obeyed and I also think it’s time to look at whether there are ways its remit can be extended.”

Cameron said the government was determined to look at ways it could support suppliers against the impact of the price war on the dairy industry. “It is important that we look at the ways we can protect Britain’s dairy farmers at a time of low milk prices. This is an important industry for the country and there are a number of things we can do.”

“As we sit here at the moment I can’t fine a retailer. I have the legal powers to do so, but I don’t have a maximum, so therefore I can’t. There is no figure,” Tacon told Panorama. She also repeated her request for suppliers to come forward with information about allegations of Tesco breaching the code in its relationship with its supply chain.

Vince Cable, the Business Secretary, accused the Treasury of “sitting” on the issue.