Statutory Pubs Code and Pubs Code Adjudicator

Thursday 26th January 2017 Commons Chamber

12:09

[Greg Mulholland (Leeds North West) (LD)]

I beg to move,

That this House welcomes the Pubs Code established in July 2016 to deliver a fairer relationship between large tied pub companies and their licensees and to deliver the principle that the tied licensee should be no worse off than a free-of-tie licensee, introducing a Market Rent Only option for tenants, the right in certain circumstances to have an independent free-of-tie rent assessment and to pay only that sum; is dismayed that pub companies are thwarting the Code and are routinely flouting Regulation 50 that tenants who exercise, or attempt to exercise, their rights under the Code should not suffer any detriment; notes that this includes refusing to allow deeds of variation to leases, forcing tenants wanting to pursue the Market Rent Only option to agree a new lease on unfavourable terms; believes that fees being proposed for independent assessors are wholly unreasonable and that unfair additional charges are being demanded which make it unviable to pursue the Market Rent Only option; expresses strong concern that the Pubs Code Adjudicator (PCA), Paul Newby, who holds shares in, and has loans to Fleurets, which derives substantial income from the regulated pubcos, is failing to stop these practices or uphold the Code; calls on the Government to ensure that the Code works as intended and to accept the recommendation of the former Business, Innovation and Skills Committee to reopen the appointment process for the PCA; further notes that the Code does not apply in Scotland; and urges parity for Scottish tenants.

I thank the Backbench Business Committee for granting the time for this important debate. I thank the hon. Members for Hartlepool (Mr Wright) and for Warwick and Leamington (Chris White), who are, with me, lead Members on the debate. The hon. Member for Hartlepool is the Chair of the Business, Energy and Industrial Strategy Committee, and I pay tribute to all the work it has done on this. The hon. Member for Warwick and Leamington, who is also a member of the Committee, has seen at first hand how pubcos are thwarting tenants in exercising their rights under the pubs code, and the failure of the Pubs Code Adjudicator to address this. I must declare my interest as the chair of the British Pub Confederation, which represents the vast majority of tenants’ organisations in the pubs sector, and pub campaigners as well.

It is now six months since the start of the statutory pubs code—the anniversary was 21 January. I wish to make it clear to the House that I did not want to have to call this debate and to bring to the House what I have to bring today. More than anyone, perhaps apart from the beleaguered pubco licensees, I wanted this issue solved. I wanted the unfair business model operated by the pub companies, and all the tales of abuses detailed by the Select Committee and others, to be a thing of the past, but that will not happen, I am afraid, unless the pubs code is working and being enforced by the adjudicator, and that is currently not the case.

Let me say at the outset that the pubs code must work as intended: it is the law. At the moment, pubcos are flouting the code to prevent tenants from being able to access the market rent only option. That is thwarting the will of Parliament and of the Government, who laid out how the code should work—and, of course, it is causing a great deal of stress to tenants.

[Sir Oliver Letwin (West Dorset) (Con)]

Does the hon. Gentleman agree that it is no surprise that the pubcos are doing their utmost to thwart the market rent only provisions—that is to be expected—but it is a surprise that the adjudicator appears to have conceived of his position as being that of a kind of private arbitrator and not what we in this House set him up as—a judge who enforces the law?

[Greg Mulholland]

I warmly welcome the right hon. Gentleman and thank him for his intervention. He has looked at this issue with great thoroughness and intellect, and he is absolutely correct in his assessment.

[Nick Thomas-Symonds (Torfaen) (Lab)]

Does the hon. Gentleman agree that the real issue is that the adjudicator needs to have the confidence of all parties involved, and that does not seem to be the case at the moment?

[Greg Mulholland]

The hon. Gentleman is absolutely right. It is simply not acceptable to have ignored the fact that the majority of tenants’ organisations rejected the adjudicator and do not have confidence in him, and then to have rejected the recommendation from the cross-party Select Committee to replace Mr Newby and reopen the process.

In the course of my speech I will present evidence from the numerous cases that have been taken to the adjudicator. I pay tribute to the organisations representing tenants that have supplied that evidence, including the Pubs Advisory Service, the Guild of Master Victuallers, the Forum of Private Business, Licensees Supporting Licensees, the Punch Tenant Network, and Justice for Licensees. That has led to the British Pub Confederation report, which has 19 detailed pages all based on direct evidence from instances where tenants have sought to secure their legal rights under the pubs code by taking their case to the adjudicator.

So what has the Pubs Code Adjudicator produced after six months? A two-page press release. Worse than that, this press release—this glib statement—from the adjudicator’s office is not an honest description of the situation. It provides unexplained and meaningless data while failing to deal with, or even mention, any of the big issues facing tenants. The adjudicator ignores the ways in which the regulated pubcos are systematically breaching the code, covering up his own failures to uphold and enforce it. In effect—this goes back to the point made by the right hon. Member for West Dorset (Sir Oliver Letwin)—he admits his failure both to enforce the pubs code and to understand the real role of the Pubs Code Adjudicator. The statement makes no mention of the myriad complaints about pubco behaviour; no mention of the many complaints about the adjudicator from tenants and their representatives who have approached him; no mention of the cases where tenants are giving up and giving in because of the failure of the code and his office; and, extraordinarily, no mention of the key issues of complaint and concern on which people are seeking clarification, including the systematic ways in which pubcos are insisting that the market rent only option requires a new lease, often on detrimental terms—a clear breach of the pubs code.

[Kate Green (Stretford and Urmston) (Lab)]

Does the hon. Gentleman agree that the whole point of the pubs adjudicator was to even up an inequality of arms between a single tenant—a sole trader, in effect—or a family business, on the one hand, and very large and powerful chains on the other, and that the lack of equal access to justice or advice for tenants is causing great problems?

[Greg Mulholland]

The hon. Lady is absolutely right. I am afraid that the intention is not the reality, and that is why this House and the Government must take action.

[Chris White (Warwick and Leamington) (Con)]

As the hon. Gentleman mentioned, I have seen some of these things at first hand, and it has been an unsatisfactory experience. I would like to share with the House the following quote from a pubco:

“Moving to a Market Rent Only commercial free of tie lease agreement, means larger upfront payments and the loss of our award-winning, business-friendly services and support, aside from business insurance.”

Without naming the pubco or the pub involved, does he agree that this could be interpreted as threatening, and is not a business-friendly approach at all?

[Greg Mulholland]

The hon. Gentleman is absolutely right. I welcome the support that he is giving to his publican constituents. I have that quote in my speech.

Let me remind right hon. and hon. Members that the pubs code and the adjudicator were introduced in the Small Business, Enterprise and Employment Act 2015. The code came into force last year. It applies only to businesses owning 500 or more tied pubs in England and Wales, of which there are six, and governs their relationship with their tied pubs. The quasi-judicial statutory Pubs Code Adjudicator was created to uphold and enforce the pubs code so that it is properly implemented, and to act as an impartial arbiter when there are disputes on certain issues.

I wish to praise the current Government and the civil servants in the Department—formerly Business, Enterprise and Skills, now Business, Energy and Industrial Strategy—for their very hard and diligent work in bringing through the pubs code, which is a strong, clear document. At this stage, six months in, Ministers and civil servants should not have to intervene given that the adjudicator’s role, as laid down in primary and secondary legislation, is to implement and enforce the code. The role of Ministers should now be to oversee and scrutinise that activity, but I am afraid that they now have to intervene because the Pubs Code Adjudicator is not doing the job as laid down in the pubs code and in the law.

Regulation 50 of the pubs code specifically states:

“A pub-owning business must not subject a tied pub tenant to any detriment on the ground that the tenant exercises, or attempts to exercise, any right under these Regulations.”

This regulation is being routinely ignored and flouted by pub companies. Let me give some examples.

Pub companies are refusing to allow a simple deed of variation to leases if tenants suggest that they want to exercise their right to a market rent only option. This forces them to accept a new lease, which is offered only on unfavourable and clearly detrimental terms, clearly flouting regulation 50. Enterprise Inns is doing this systematically and then telling tenants that they will have to go to arbitration over what is clearly not an arbitration matter but a legal breach of the code’s regulation.

Tenants seeking the market rent only option are being presented with unreasonable charges and terms by pubcos, making it unviable to take or even pursue the option—for example, unreasonable and unaffordable demands for up-front, quarterly payments of rent, or unjustifiable and excessive dilapidations charges. Pubcos are also, as the hon. Member for Warwick and Leamington said, presenting so-called free-of-tie offers, sometimes calling them MRO offers as though they were the same thing as the market rent only option, which they are not; they are deliberately confusing the two. I remind the House that the market rent only option gives the tenant the right to an independent assessment of the market rent, and the right then to take the option on an existing lease with no other changes to the lease or the terms. Yet pubcos are insisting on shorter leases on detrimental terms, clearly breaching the pubs code. In addition, I can tell the House that that document being given to tenants is a Punch document.

Brigid Simmonds, the chief executive of the British Beer and Pub Association—the trade association of the pubcos—has said that it is “inevitable” that free-of-tie agreements would have

“terms that more closely reflect commercial rental agreements elsewhere in the marketplace”.

With the market rent only option, that is not allowed; it constitutes detriment. The lease has to continue on a free-of-tie basis, with the payment of independently assessed rent.

One thing that is putting people off is the fees proposed by assessors for carrying out that independent assessment. I have been sent a document from a surveyor that suggests that the fee can be up to £6,000. Under self-regulation, the maximum fee was £4,000, which was split into a maximum of £2,000 for the tenant and a maximum of £2,000 for the pub company. That was transparent and fair, unlike what the Royal Institution of Chartered Surveyors is presenting. Who is a member of the Royal Institution of Chartered Surveyors? Mr Paul Newby, the Pubs Code Adjudicator. It is a clear case of jobs for the boys, because the people demanding those unjustifiable and excessive fees are his former colleagues, associates and friends. I have to say to the Minister that that shows us again why a surveyor was a wholly inappropriate choice to be the adjudicator.

Pub companies are confusing and misleading tenants so that they miss their trigger point—the very limited window in which they can seek to take the market rent only option. Pub companies are putting pressure on tenants by sometimes bribing and sometimes bullying them into signing on the dotted line, so that they stay tied and do not have the chance to exercise their rights.

Returning to the adjudicator, I remind the House that Paul Newby, the director of pub estate agents and surveyors Fleurets, was appointed as Pubs Code Adjudicator and started work in March 2016, despite the majority of tenants’ groups objecting to his appointment, and despite the fact that he had ongoing financial links to the pubcos that he is supposed to regulate. Mr Newby failed properly to declare the conflict of interest when he applied for the role. As well as being a former director, which he did declare, he astonishingly —and completely unacceptably for someone in a quasi-judicial role—retains shares in Fleurets and has outstanding loans of more than £200,000 to it, with a repayment agreement that is set to last until 2023. That information had to be dragged out of him, and he published it only in December. Just to be clear, Fleurets declares that 20% to 23%—a fifth or more of its income—comes from the regulated pubcos.

To make matters worse, Mr Newby has been allowed to construct his own conflict of interest policy, and—surprise, surprise—it falls well below the industry standard for such documents. Surprisingly, it even falls well below the standards of his own professional body, the Royal Institution of Chartered Surveyors. The conflict of interest policy should be similar to that of the Groceries Code Adjudicator, but, unlike the GCA, the Pubs Code Adjudicator has chosen to publish a separate register of interests, along with an explanation of how his conflict of interest policy will be applied in relation to the register and, specifically, to his own conflict of interest. Mr Newby is setting his own rules to avoid having to disclose fully his conflicts of interest when he takes on cases.

The Select Committee was clear in July 2016 that not only was Mr Newby evasive, but he could not command the necessary confidence of pub tenants, and the appointments process should be reopened. Mr Newby also misled the Select Committee on important points, and has not responded properly to letters asking him for an explanation.

To return to the key point that the right hon. Member for West Dorset made, Mr Newby is the adjudicator, and his job is to uphold and enforce the pubs code. The Government state on the website:

“The Pubs Code Adjudicator (PCA) is responsible for enforcing the statutory Pubs Code.”

He is failing to act as an adjudicator; he is refusing to make rulings on important, basic matters such as the deed and variation versus new lease issue; and he is failing to uphold, never mind enforce, the code. Does he not understand the role—does he not properly understand the code and the legislation—or is this a deliberate attempt to undermine the whole statutory code, as many tenants now fear? The case-by-case approach that he is taking means that there will be no opportunity to look at many of the issues being raised repeatedly by tenants about the way in which pubcos are trying systematically to flout and thwart the code.

[Toby Perkins (Chesterfield) (Lab)]

I congratulate the hon. Gentleman on his campaigning on this issue over many years, and on securing the debate. What he is saying about the motives for the delay may well be true, but the feedback that I am getting is that the entire industry is frustrated about the failure to make any adjudications. The entire industry will benefit from the certainty that will come from the adjudicator’s getting on and making some decisions, and providing clarification on many of the important points that the hon. Gentleman is raising.

[Greg Mulholland]

I know that the hon. Gentleman had a meeting with Mr Newby the other day, and I would be interested to know what was said. I issue a word of caution to the hon. Gentleman to be careful who he listens to, and to listen to the licensees who are concerned about the cases being brought before the adjudicator.

The hon. Gentleman is right when he says that Mr Newby must make rulings. His job is not to horse-trade behind closed doors or to muddy the waters; he needs to provide clear guidance on what the code means and deal with breaches. The hon. Gentleman is right that tenants and pubcos need clarity, which Mr Newby is not providing. Let us be clear that his refusal to step in and stop those breaches, or to make general rulings on certain points, amounts to a refusal to perform his important statutory role. That is simply not acceptable.

The most extraordinary thing that I want to set before the House is the fact that Mr Paul Newby, in his role as Pubs Code Adjudicator, has breached the very pubs code that it is his statutory duty to enforce. Extraordinarily, he has breached regulation 38 of the code, which states that if a pubco and tenant cannot agree on the appointment of an independent assessor, the adjudicator

“must, within 14 days of the notification…appoint an assessor”.

Rather than doing so—that is clearly an important part of his role and laid down in legislation—he is passing that duty on to his colleagues in the Royal Institution of Chartered Surveyors dispute resolution service, who are demanding a fee. They have no right to do that; it is not in the pubs code, which the adjudicator has no right to ignore. That has been raised by the Pubs Advisory Service, which made a complaint because tenants were being charged the £250 fee. Mr Newby has said that tenants will no longer be charged, and that those who have been charged will be refunded, but he let that happen. He says that the fee will still be charged but will be paid from levies.

During the very strange period in which Mr Newby wrongly and illegally delegated his duty to appoint an independent assessor, RICS—with the adjudicator’s knowledge—appointed a surveyor called Barry Voysey for a tenant in a Punch rent case, even though Mr Voysey was acting at the same time for Punch Taverns in another rent case. The tenant was appalled at the obvious conflict of interest and refused to accept Mr Voysey or to pay his up-front invoices. The appointment of Mr Voysey breached RICS guidelines—it is defined as a red non-waivable conflict—but it happened under the nose of, and with the knowledge of, the Pubs Code Adjudicator, Mr Paul Newby, who is a member of RICS.

I want to refer to a couple more issues that are of importance to the House. The first is the proposed Heineken takeover of 1,900 of Punch Taverns’ pubs. That is of great concern to Punch licensees and is opposed by the Punch Tenant Network and the Scottish Licensed Trade Association. Star Pubs and Bars, which is owned by Heineken, has 1,100 pubs, so we would be talking about a pub company with 3,000 pubs.

It is clear—this is a worrying competition issue—that Heineken seeks to take over Punch so that it can insist on many more pubs stocking its product rather than that of its competitors. The Heineken bid document states that the company intends to

“improve visibility and increase sales of Heineken brands in high-quality pubs”.

It is clearly a bid to gain market share through the acquisition of pubs, which would, as people have said, create a monster tie and make it much harder for brewers of all sizes to get their products into pubs —that remains an issue.

It is surely time to look again at the maximum number of pubs that a brewery can own, to stop this sort of market dominance, and consider placing a limit on the number of pubs that can be owned by any company—unlike the flawed beer orders. They were flawed because Ministers caved in to lobbying from big brewers and agreed to the loophole that allowed the huge, non-brewing pubcos to emerge, dominate and create their own unfair model; and here we are today.

In relation to the role of the adjudicator, the concern is that Heineken will seek to force Punch tenants to stock only its products—despite the discussions, there is nothing in the code that says it is allowed to do so—but the adjudicator has so far refused to clarify that simple point, which is within his remit. This lack of clarity means that brewers may be able to use the current confusion to threaten legal challenges that could again be seen as putting off discussion of tenants’ rights under the code.

I must mention Scotland, which is just as important as England and Wales to the British Pub Confederation. The Scottish Licensed Trade Association, which is a member of the British Pub Confederation, does a lot of wonderful work in Scotland. Like the British Pub Confederation, the Scottish Licensed Trade Association supports having the same rights for Scottish licensees tied to pub companies. We have the absurd situation that people tied to the same company have certain rights on one side of the border, but a mile away across the border in Scotland, have none of those rights. Those rights should be extended to Scotland, and I look forward to hearing the comments of the hon. Member for Dumfries and Galloway (Richard Arkless), who will speak for the Scottish National party.

[Toby Perkins]

That is a very important point. In the process of passing the legislation, I believe I am right in saying that SNP Members voted with us in the victory on the vote that was predominantly about pubs in England, because they wanted same rights in Scotland in the future. It is a shame that the system has not been brought in there.

[Greg Mulholland]

The hon. Gentleman is right. The only way to get such rights and fairness for Scottish tenants was for the system to be established in England first, and I was delighted that SNP Members supported that. I am also delighted that they are represented in the Chamber today, because it is simply wrong that Scottish tenants are discriminated against in comparison with their English and Welsh counterparts.

[Richard Arkless (Dumfries and Galloway) (SNP)]

I will, indeed, touch on some of the points that the hon. Gentleman and other colleagues have made during the debate. He has made an excellent case, and has outlined many of the deficiencies of the Pubs Code Adjudicator, particularly his conflicts of interest, which seem to have a causal link with the lack of real adjudication. However, I am slightly confused about why the hon. Gentleman is recommending the system to another jurisdiction given that, by his own admission, it does not seem to be working correctly?

[Greg Mulholland]

The hon. Gentleman makes an excellent point. It was made in the briefing that the British Pub Confederation and the Scottish Licensed Trade Association sent to him. I was with the delegation that met the Minister, Fergus Ewing MSP, and that told him—this is one of the exciting possibilities—that it could be done in a simpler, clearer and better way and in a way that is appropriate for Scotland, which is the challenge for the Scottish Government. The Scottish Licensed Trade Association and British Pub Confederation would be delighted to offer support in achieving the best possible result for Scottish licensees. We need to learn some of the lessons about what is going wrong in this country and about the sort of person who should or should not be the adjudicator, if Scotland chooses to follow the adjudicator model.

In conclusion, the reality is that the statutory pubs code is not working as Parliament intended when we voted it through, and it is not working as this Government intended when they drafted the pubs code. It has been routinely flouted and ignored by pubcos, and Mr Paul Newby—a wholly inappropriate choice for Pubs Code Adjudicator—is failing in his basic statutory duty to uphold and enforce the code. Tenants seeking to exercise their legal right to the market rent only option are being discriminated against, misled and bullied into accepting tied deals. The problems identified by four Select Committee reports and now by the British Pub Confederation report are simply not being addressed.

Two things need to happen. I must say that Ministers have so far ignored this matter and washed their hands of it, but they can no longer do so because the pubs code and the law are being flouted. First, they must intervene now and ensure that the pubs code works as they and Parliament intended. They must ensure that the office of the Pubs Code Adjudicator actually upholds and enforces the code. Secondly, having heard the reality of what has gone on in the six months during which the code has been operating, I am afraid that the Secretary of State must now accept the Business, Energy and Industrial Strategy Committee’s recommendation and reopen the appointment process for the Pubs Code Adjudicator. We need an adjudicator who clearly understands and properly fulfils this important statutory role. That will require someone who does not have the conflicts of interest that Paul Newby has, and someone who will carry out the role as intended, rather than seek to skew the role and undermine the code.

MPs, Ministers, civil servants and the Select Committee have put in a lot of time, but all their work is being thwarted and ignored, so the code must now be made to work, with an adjudicator who will enforce it and who can be held to the appropriate standards for someone in a quasi-judicial position. The law must be made to work, and the will of the House and of Parliament must be upheld.

12:35

[Mr Laurence Robertson (Tewkesbury) (Con)]

I congratulate the hon. Member for Leeds North West (Greg Mulholland) on his energy in securing this debate. I thank him for the constant help he certainly gives me, as he perhaps gives other hon. Members, when I encounter certain issues or problems with tenants and leaseholders of pubcos in my constituency

I declare a non-registered interest in that my sister is the tenant of a pubco. Some of my remarks have been generated by my experience in that respect, but not exclusively so, because I have a large number of pubs in my constituency. One or two of them are now closed and are being changed into housing or car parking. The concern about pub closures and about the lack of profitability of many pubs is my motivation for taking part in this debate.

Let me say from the outset that I am not instinctively opposed to the pubco model as such. It has a number of advantages. It allows people with very little capital to go into the pub trade in the first place. In ordinary circumstances, the pubco takes responsibility for the building and exterior work, which can be very expensive, as we all know. When the system works well, the pubco can provide some professional back-up. The model provides access to a wide range of beers. It does not insist that wines and spirits are included in the tie, although I may come back to that point. It provides an opportunity for the landlord to run a restaurant on the premises, and it provides accommodation where the landlord can live. There are some good aspects of the pubco model, in theory at least, so I am not out to attack pubcos as such.

In practice, however, there have been a lot of problems. For example, rents have been very unfairly assessed in many cases. They are based not only on the profit that the pub makes from the tied beer, but on the anticipated profit that it might get, in certain circumstances, from food. The pubco benefits from the sale of its own beer, but when the business does better, the rent is quite often increased, even though the pubco has benefited from the extra beer sales, which seems quite unfair. Pubcos sometimes insist that landlords go on educational courses—it really stretches the imagination to believe that someone who has been in the trade for a long time actually needs to go on such courses—and the pubco benefits from the cost of the courses.

On many occasions, pubcos insist that landlords use the pubco’s own insurance policies, which are enormously more expensive than those that can be found elsewhere in the market. They will not allow another product to be used unless the wording of the alternative insurance policy is identical, which seems very unfair. This costs landlords an awful lot of money. I have even known cases in which the tenant or leaseholder has been told that he must take out an insurance policy that covers the building, even though they are not responsible for the building. Tenants are charged for cover for fixtures and fittings that is not necessary in many cases, and in which the assessed value of the fixtures and fittings is far greater than their actual value, so the landlord again loses out in such cases.

So there are all those problems and the rate of pub closures persuaded Parliament to change the law, but as the hon. Member for Leeds North West accurately and comprehensively showed, the legislation is not working as it should. For example, confusion surrounds who is entitled to the free-of-tie option. Some landlords feel that only leaseholders or protected tenants are eligible. That needs clarifying and I hope that the Minister can do that for us today.

Some tenants are not protected under the clause in the Landlord and Tenant Acts that provides that a tenancy or a lease has to be renewed unless the organisation that owns the building wants to take it back for its own use. Many tenants or leaseholders have that clause struck out in the agreement that they reach. That is all well and good until they get to the point when they need a new tenancy or a new lease and they ask the pubco for a free-of-tie option. Because they are not protected, the pubco can simply refuse to renew the tenancy. Is that fair? I suggest that it certainly is not. Again, I would appreciate some clarification of the exact position. It is an important matter. In answer to a recent written question, I was told that around 11,500 tenants are protected by the code, but there are many more pubs than that in the UK. It is not always easy to get a new tenancy if tenants ask for a free-of-tie arrangement.

The pubcos also often use outside agencies to negotiate the new tenancies, including chartered surveyors, who probably do not understand the local trade, if they understand the trade at all. I have also received complaints that pubcos’ business development managers do not properly discuss the available options with tenants. Tenants are told that even if the pubco is prepared to offer them a new tenancy, the rent might go up considerably. Of course, that is when the adjudicator is supposed to be brought in. Two points arise from that. First, that system makes for bad relations between the tenant and the pubco, and that is not a good situation to be in. Secondly, it poses the question of whether the adjudicator effectively and efficiently engages with pubs and landlords who take cases to them. My experience so far is that that is not happening.

Another tenant told me that the start of his new tenancy—I emphasise “new tenancy”; he has already had one—means effectively having to apply for his own pub as if he is a new tenant, filling in CVs and application forms, having to submit a new business plan and going on training courses, which I mentioned earlier, that he had to attend when he entered the trade. He has been running a pub or a similar establishment for nearly 20 years, so where is the sense and fairness in that?

All that causes a great deal of stress and problems. It is worth pointing out that tenants could fear—and end up—being not only out of work and out of business, but out of a home, because the pub is their home. It is unlikely that, in the course of being a pubco tenant, they have been able to build up sufficient capital to buy a new home or a new business. They are in a precarious position, and the House of Commons did not intend that when it passed the legislation.

The value of pubs to their communities, particularly in rural areas, is enormous. They are often meeting places, and places where people can dine together, clubs and societies can be formed and friendships can be made. Pubs also raise a lot of money for charities—that is often forgotten. Pubs are valuable community assets. I ask the Minister, as far she can today or following the debate, to try to answer some of the questions and consider whether anything else can be done, as the hon. Member for Leeds North West said, to give effect to the law and to what the House of Commons intended when it introduced the changes.

12:44

[Mr Iain Wright (Hartlepool) (Lab)]

May I begin by saying how grateful I am to the Backbench Business Committee for allowing this important debate to take place? I thank the hon. Member for Leeds North West (Greg Mulholland), and the hon. Member for Tewkesbury (Mr Robertson), who has just spoken. I bow to their superior knowledge and awareness of the pubs code and how it should operate. I also pay tribute to the hon. Members for Warwick and Leamington (Chris White) and for Cannock Chase (Amanda Milling), who are in their places, and are fantastic and assiduous members of the Select Committee on Business, Enterprise and Industrial Strategy, which I am privileged to chair. All who have spoken so far have worked hard on pubs and the pub industry.

The industry has been characterised for many years by an imbalance in power between large pub companies and the tenants of pubs tied to those companies. The market has not worked in a fair and equitable way, and tenants have had unfair conditions imposed upon the manner in which a variety of things happen: how they sell beer and, particularly, the rent that they pay and the lease under which they operate.

The pubs code sets out how pubcos should deal with their tenants in a much fairer way. I am pleased that my hon. Friend the Member for West Bromwich West (Mr Bailey), my predecessor on the Select Committee, who worked hard on pushing the matter and ensuring that the Government’s feet were held to the fire, is in his place. I pay tribute to him, his Select Committee and my hon. Friend the Member for Chesterfield (Toby Perkins), who was on the Labour Front Bench at the time and did some great work on the subject. I am pleased to see him in his place. Those hon. Members have worked incredibly hard to try to rebalance the power relationship between pubcos and tenants.

A key part of addressing the imbalance is the Pubs Code Adjudicator. The adjudicator provides guidance on complying with the code and judges transactions to make things fairer. As we have heard, Mr Newby is the first adjudicator. In many respects, by being the first appointment, Mr Newby will shape the nature, style and tone of the job and the way in which matters will be dealt with by his successors. His judgments will set precedents, which could have ramifications for the pub trade and the pub property business for decades.

Dave Mountford of the Pubs Advisory Service and a landlord himself said to the Select Committee when we were taking evidence:

“The Pubs Code Adjudicator needs to be fair and impartial, and the decisions that he makes need to be based on our common law of justice and fairness such that they can then be applied to similar cases, so the precedent is set.”

I do not think that anybody would disagree with that. It is therefore essential that this first appointment of someone to a key role commands universal respect immediately and is not subject to any criticism or accusations of conflicts of interest, whether actual or perceived. Perception is important in such matters.

[Sir Oliver Letwin]

Does the hon. Gentleman agree that the imbalance of which he rightly speaks means that the adjudicator’s proper role is not solely to maintain an impartial view, but specifically to consider cases of abuse by the pubcos? They are asymmetrical cases of abuse: the tenants are not abusing the pub code, the pubcos are allegedly abusing it. The adjudicator’s role should therefore be to enforce on the pubcos obedience to the code. At the moment, we see examples of his looking as if he is just an arbitrator between the two parties.

[Mr Wright]

The right hon. Gentleman makes an incredibly important point. The adjudicator has to redress the balance in the power dynamics in the industry and there is evidence to suggest that that is not happening.

I want to be clear: Mr Newby’s professional credentials and expertise are not disputed. His knowledge of the industry, having worked in the pub property business for something like 35 years, is not in doubt and cannot be questioned. However, having looked at the matter in the Select Committee, we believe that there is a significant reason why Mr Newby will find—and is finding—it difficult to command the confidence of all parts of the industry, namely a strong perception of a conflict of interest, made worse by Mr Newby’s ongoing financial interest in his former firm.

[Chris White]

During the speeches of the hon. Member for Leeds North West (Greg Mulholland) and the Chair of the Select Committee, a number of criticisms have been made of the Pubs Code Adjudicator. Does the hon. Gentleman think that he should be called before the Select Committee again?

[Mr Wright]

The issue has attracted enormous interest, not just from our Select Committee but from predecessor Select Committees, which helped to change the law. As Chair of the Select Committee, I maintain that, given the hard-working and determined members of the Select Committee such as the hon. Gentleman and the hon. Member for Cannock Chase, the issue will not go away, but continue to command our attention. We want to put pressure on the Government to look again and reopen the appointments process so that this important appointment is seen as fair and impartial, and that is not happening.

I want to touch on an issue that came up in the Select Committee’s consideration. Simon Clarke is a tied tenant and a surveyor, and both he and Mr Mountford expressed surprise and concern that Mr Newby, as a chartered surveyor, even applied for the job. Both said that someone from outside the industry was needed. Mr Mountford told us that they had said to the Department that the post required

“a judge, a retired lawyer or somebody with legal experience. We definitely said it should not be a surveyor.”

Mr Clarke said that it definitely should not have been a chartered surveyor, because there would always be a conflict of interest as surveyors would, in all likelihood, have advised one of the parties.

That brings me to the central concern about Mr Newby’s appointment. Before becoming the Pubs Code Adjudicator, Mr Newby was a director of Fleurets, a firm of business property valuers and surveyors. As the hon. Member for Leeds North West mentioned, in giving evidence to the Select Committee Mr Newby said that about 20% to 23% of the firm’s fee income—a material amount—derived from advice provided to the large pubcos. That alone lends itself to accusations of potential and perceived conflicts of interest. However, Mr Newby also continues to have financial interests in the company. He gave evidence to the Committee in May and then clarified some of his self-confessed inaccuracies in a letter to me in November—at, he said, the instigation of the Minister. Mr Newby has both shares in Fleurets Holdings Ltd and debenture loan notes owed to him by the company.

The Committee asked Mr Newby if he would provide a clean and definable break with his old firm by divesting himself of those financial interests. He stated in his November letter to me that the company is unwilling to do so in order to avoid putting

“undue strain on capital resources”—

it is probably more accurate to call it the firm’s cash flow. That is very serious and really undermines the ability of the adjudicator to command the trust and respect of all sides of the industry. He has a significant financial interest in shares and loans from the company, which derives a significant part of its revenue from large pubcos, but he cannot alter that situation because that would put strain on cash flow. In other words, he retains an ongoing financial interest, and it is in Mr Newby’s interest for the firm to do well to secure the moneys owed to him. That could mean that his judgments would assist large pubcos that have commissioned Fleurets to advise on tenancy arrangements so as to maintain the firm’s cash-flow position and profitability, and thus allow payments to be made to Mr Newby.

When Mr Newby came before the Committee, he said:

“I have taken off my previous hat and thrown it away.”

But he has not: the ongoing financial interests mean that he is still clearly wearing that hat. There is a clear perception of conflict of interest. This is like a referee officiating at a football match between Chelsea, who are top of the premiership, and Newport County, who are bottom of league two—

[John Healey (Wentworth and Dearne) (Lab)]

Or Hartlepool.

[Mr Wright]

They are not bottom just yet. It would be like a match between Newport and Chelsea, with a huge imbalance in skills and experience—perhaps that is a subject for a different debate—only for fans to discover that the referee owned shares in Chelsea’s shirt sponsor. It is as close a relationship as that. Perceptions of conflict of interest would have started immediately on appointment, and as I said to Mr Newby at the Select Committee, he cannot possibly win. Any judgment he makes will now always be accused of being unfair and partial—like that referee, who would not be seen as independent. This is a serious failing in the ability of the pubs code to operate effectively.

A vivid contrast was brought home to me in the Select Committee when I asked tenants and landlords and then executives from large pubcos whether they had confidence in Mr Newby and his appointment. The large pubcos said that they did not have a problem. The tenants were clear that they did not believe that judgments would be fair and impartial. That contrast shows that the code cannot operate effectively. The pubs code has broken down before it has even begun, and the Minister needs to intervene to ensure the code starts to work.

I am disappointed that the Secretary of State rejected our calls to reopen the appointment process. I hope the Minister accepts that this case demonstrates a serious perceived conflict of interest, and that perception is stopping the code working effectively. To ensure the viability of the pub industry and to protect the interests of tenants, which have not been addressed for many years, will she look again at reopening the process and have an adjudicator that is, and is seen to be, completely impartial and independent?

12:55

[Toby Perkins (Chesterfield) (Lab)]

I congratulate the hon. Member for Leeds North West (Greg Mulholland) on securing the debate. He is a great pubs campaigner who speaks powerfully on behalf of tenant groups and the whole industry. I am pleased that we worked together to get the Government to introduce the statutory pubs code in the last Parliament and to ensure that a free market rent only option was a part of it. It is a great honour to take over from him as the chair of the all-party parliamentary save the pub group and I am sure that we will continue to work closely together on these issues.

The work we have done together in the past has taken us some of the way to where we are today. I hoped that I would be part of a Labour Government that would get to deliver the pubs code, but sadly that was not to be. The pubs code was a contentious and important battle to win. I recall campaigners’ tears of joy when we finally secured the victory that ensured that the free market rent only option was part of the code, after the hon. Gentleman tabled an amendment on Report. Many campaigners told me, “It’s too late for me—I have gone bankrupt as a result of the imperfections in the way in which the industry has been run in the past—but it is crucial to me to know that Parliament will bring such abuses to an end.” It is important that those campaigners, who spent many years getting the Government to recognise the power imbalance in the industry and the exploitation of that situation, have confidence in the pubs code and that we deliver the expectations expressed in those tears of joy.

The Labour Government of 2005 to 2010—this included excellent work by my right hon. Friend the Member for Wentworth and Dearne (John Healey)—looked at the issue and set a final challenge for the industry. The coalition Government who followed were wary of regulating a complicated industry and attempted to do everything in their power to give the industry time to put its own house in order. It was very much a last resort for the Government to introduce a statutory pubs code, and it came as a shock to them when we were able to get the House to include a market rent only option into the legislation.

Critics always claimed that we should not legislate because it would make matters worse, and pointed out that the beer orders did not turn out as expected. It is important that those people who have faith in the code get the impression that the Government are serious about ensuring that the legislation delivers what we intended. It is to the credit of the Government that following the election they stuck to their word and introduced the code that they had committed to, and it is now in the entire industry’s interest to ensure that the pubs code’s meaning is established, that all those in the industry have confidence in the rigour with which it will be enforced, and that the Pubs Code Adjudicator is, and is seen to be, impartial.

The motion—supported by the Chair of the BEIS Committee as well as the hon. Member for Leeds North West—makes it clear that those tests of confidence are not being met. We have heard at some length deeply concerning allegations about the conduct of pub-owning companies when tenants wish to avail themselves of the market rent only option. A key test of the adjudicator will be whether it offers clarity to tenants and pub-owning businesses on issues such as the appropriateness of deeds of variation as a tool for transferring from a tied to a free tenancy. I have not heard a convincing reason why that should not be appropriate in the majority of cases.

I will come in a moment to the appointment and performance of Mr Newby, but it is fair to say that, alongside my praise for the Government for introducing legislation, I have legitimate questions for them about its implementation. It might seem harsh to criticise them for being too slow and too hasty, but there is a reasonable argument that they were guilty of that. The issues facing the industry have been long discussed and are well known, and the Government could have come forward much sooner with a draft code, giving notice to the entire industry of what was in store, appointed an adjudicator earlier and allowed more time for the set-up process. Given the scale of the changes to the code, most of which I support, the lead-in time was rather short and left the adjudicator and industry with little time to establish the new rules of the game.

I am conscious of the Select Committee’s strong criticisms of the process that led to the appointment of Mr Newby, repeated by my hon. Friend the Member for Hartlepool (Mr Wright), and the question of whether his background opened him up to perceptions of partiality, and I sympathise with many of those sentiments. The hon. Member for Leeds North West mentioned my meeting with Mr Newby this week. I was happy to have that meeting. As always, my approach is to meet all parties involved. In the couple of weeks I have been in post, I have also met some of the campaigners my hon. Friend has met. I have not yet, however, met the British Beer & Pub Association, the Association of Licensed Multiple Retailers or the other organisations, but I will do, because it is important that everyone gets an opportunity to be heard. That is always my approach.

I said to Mr Newby that the focus on his background would continue while there are no adjudication decisions coming from his office and while the perceived conflicts of interest persist. We all want the adjudicator to get on and adjudicate and start answering questions about the interpretation of the pubs code. Once some initial decisions have been taken, tenants will have much greater clarity. As the right hon. Member for West Dorset (Sir Oliver Letwin) said, the adjudicator will then have the opportunity to represent the people he is there to represent—those we set up the pubs code to protect—and to say to the pub-owning companies, “We’ve met previously about The Red Lion, and now you’re coming back with the same issues with The Dog and Duck. Why are we still having these arguments?” The hon. Member for Leeds North West made the important point that there might be differences of interpretation and fact between individual cases, but themes have emerged that could be looked at and quickly processed to give clarity. Across the industry, on both sides of the argument, there is real frustration at how long it is taking for decisions to emerge, but Mr Newby has assured me that decisions will start coming out of his office within the next month. We all hope he delivers.

The motion refers to Mr Newby’s shareholding and loans to Fleurets. The Commissioner for Public Appointments reviewed his involvement in Fleurets and decided that there was no conflict of interest, but the fact that it is still being raised undermines his perceived impartiality. Mr Newby told me, as he told the Select Committee, that he had attempted but been unable to come to an early settlement of his loan to Fleurets. I will be writing to Mr Newby and Fleurets to urge them to recommence talks aimed at ending his involvement with the firm so that the perceived lack of impartiality might be addressed.

I call on the Minister to do the same: to ask Mr Newby and Fleurets to recognise that this perception is undermining his ability to be seen as impartial and to take every possible step to find an alternative source of money. I will not mention the amounts concerned on the Floor of the House, but in the context of the industry, they are not huge sums. It would pose a serious question about the stability of a company if it was unable to replace such a sum of money. It is significant enough, however, for it to be relevant—or at least to be perceived as being relevant—to an individual’s decision making. I said to Mr Newby’s face that the perceived relationship would undermine his decision making. It is important that the adjudicator be free to adjudicate on the basis of the evidence. If he knows that every time he makes a decision, people will say, “Well, he hasn’t based his decision on the evidence; he made it because of his interest”, it will undermine his decisions.

I know that campaigners have called for Mr Newby’s dismissal and the restarting of the process. I am anxious that restarting the entire process might push the prospect of resolution further away for many tenants who desperately need the certainty that the code adjudications will bring. The hon. Member for Leeds North West is right that people are already walking away from the process, either by settling, having lost confidence in the process, or having gone bust or been unable to carry on in the trade. If the Government are minded to agree with the motion, I would ask them to set out how quickly we can start getting some decisions. Much like Brexit, sometimes no deal and a bad deal are the same thing. We need to start getting some decisions. Mr Newby has been described to me as a “rabbit in the headlights”, afraid to make a decision that will ultimately need to be made, and the sense of frustration at the failure to start providing certainty is a strong and real one. The Government and Mr Newby should be under no illusions about the damage that further delays will pose to the entire process.

In summary, the pubs code and the adjudicator need to gain public confidence. This has not been a great start. The Government should do more to identify the cause of the delays and provide whatever support is needed to clear the blockage. They should also urge Fleurets and Mr Newby to sever their ties, which are comparatively small and should not be beyond the wit of man to overcome, and give the industry the certainty it is crying out for.

13:07

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

I congratulate the hon. Member for Leeds North West (Greg Mulholland) on securing this debate and compliment him on his tenacious commitment to this cause, which I know goes back over many years. That we are having a debate now, on the application of the pubs code, rather than its introduction, is some consolation and a reflection of the progress made.

I feel a sense of déjà vu standing here and once again debating this issue. In 2009, I was on the Business, Innovation and Skills Committee, chaired by Sir Peter Luff, that did an inquiry into pubcos—the third such inquiry, two predecessor Committees having held similar inquiries—and as the Committee Chair, I chaired another such inquiry in 2014. I had hoped, after the Government eventually accepted the Committee’s recommendation to introduce the code, that it would be the last time we would feel the need to debate it. I thank my hon. Friend the Member for Hartlepool (Mr Wright) for chairing the successor Committee, which has been prepared to look at the issues arising from the appointment of the adjudicator and to carry the torch carried so long by different manifestations of the Committee.

I think it fair to say that the history of this issue has been characterised by obstructiveness and an unwillingness on the part of the pub companies to recognise the reality of the injustices done to their tenants and licensees, and the flawed business model of which they are part. Their failure to act on the often quite moderate recommendations of successive Select Committees has reflected their obstructiveness when it comes to any legislation that challenges their business model; and, in fact, we have legislation because of that obstructiveness. The pub companies have exploited every opportunity to thwart the will of Parliament, and I am afraid that it was always likely, even following the implementation of legislation, that they would continue to do so. Current experience and, indeed, this debate are a reflection of the culture that prevails in the industry.

The pub companies proclaim publicly that they accept —indeed, embrace—the legislation, and are anxious to make it work, but the evidence submitted by the hon. Members for Leeds North West and for Tewkesbury (Mr Robertson) demonstrates overwhelmingly that their private actions completely contradict their public posturing. The most common approach seems to be to make rent demands which in themselves reflect the level of profitability that would come from a tied tenancy—perhaps just for negotiating purposes, perhaps not—and then to add a number of other conditions which have the potential to make the agreement even more uncompetitive.

It is not surprising that in the first five months of his appointment, the adjudicator has received some 376 calls. I believe that there are currently 77 referrals before him, most of which relate to the market rent only option. That in itself, given the obstructiveness of the pub companies and the lack of clarity in the information conveyed to many licensees—in effect, to obscure their rights to take such action—reflects profound dissatisfaction with the process so far.

As several hon. Members have said, the role of the adjudicator is crucial to the successful outcome of the legislation, and to the implementation of successive Select Committee recommendations. Generations—almost —of parliamentarians have committed themselves to making this system work, and if we do not get it right, a great deal of effort on the part of many Members of Parliament and a great deal of parliamentary time will have been wasted.

The role and financial interests of Paul Newby have been subjected to considerable scrutiny, and I commend the Select Committee for the forensic way in which it interviewed him. I am always reticent about criticising people before they have had a chance to demonstrate their ability to do their job, and when Paul Newby was appointed my instinct was to say, “Let us just see how he gets on before we make a judgment.” However, given the key nature of the adjudicator’s job, the culture that he is there to change and the role that he has in changing it, I think that certain issues have to be resolved.

My hon. Friend the Member for Chesterfield (Toby Perkins), among others, referred to Paul Newby’s financial involvement with Fleurets. As the old adage has it, perception is reality. When an adjudicator has a financial interest in a body that is associated with one side of the arbitration procedure, there will always be a perception that he or she cannot act impartially. We heard from, I think, my hon. Friend the Member for Hartlepool that when interviewed by the Select Committee, the pub companies declared total confidence in Paul Newby, but the representatives of the tenants said the opposite. It is very difficult to secure confidence in a process when one of the two sides that will be affected by that process has absolutely no confidence in the person who is carrying it out. My hon. Friend used the metaphor of a football referee.

It concerns me greatly that many tenants who need that adjudication, and whose livelihood it might preserve in the long term, will be unwilling to use the processes that are available, and which Parliament has fought to secure over the years. If they feel that going to the adjudicator means that they will not have an impartial hearing, and indeed that by doing so they could prejudice their own business position, they will be reluctant to take such action. Built into the adjudicator’s appointment is the implication that the potential benefits of the legislation will be undermined from the start.

I think there is a way forward. My hon. Friend the Member for Chesterfield said that Paul Newby should divest himself of his financial interest, and certainly, if Paul Newby is really committed to making his role a success, it should not be beyond his ability to find some way of doing so. If he refuses to act on that recommendation, I think that the House should propose that further action be taken to ensure that he is removed, or the problem should be dealt with in some other way.

This Parliament and Members within it have worked for many years to get this far. It is crucial to the livelihood of thousands of publicans up and down the country, and essential to the future success of the business model, that the system works. We cannot have someone at the heart of the process who potentially undermines the working of that process. The adjudicator should divest himself of his interest, or Parliament should act.

13:18

[Richard Arkless (Dumfries and Galloway) (SNP)]

I, too, congratulate the hon. Member for Leeds North West (Greg Mulholland), not only on securing the debate but on his tenaciousness, which has been documented. I suggest that he is indeed the pub champion of Westminster. At the very least, given the secondment of the hon. Member for Burton (Andrew Griffiths) to the Tory Whips Office, he has a clear run at that title now—and goodness me, our pubs need a champion.

I was brought up in a pub—thankfully, the right side of the bar. My parents owned a couple of pubs when I was a kid, which extended to a snooker club where I spent most of what some would describe as a misspent youth. If any Members would like to challenge me to a game on the green baize in a nearby establishment, the evidence of that will be there for all to see.

I have always thought of pubs not necessarily as places where people get drunk, but places where people meet one another. I have been fortunate enough to live in various places throughout the United Kingdom, and the first place where I would always go to meet members of the community would be the local pub. It is not only the place to get a drink and have a chat, but anyone looking for a plumber can find one there within 10 minutes, and even get seven or eight different reviews of that plumber from people sitting at the bar.

So pubs are crucial to communities. They bring communities together—they are not only about the pursuit of alcohol—yet they are struggling. Some 25% of our pubs in Scotland have disappeared over the past 10 years. There are social, economic and all sorts of other challenges that they face. People tend to drink at home now; they are reclusing inside their house instead of opting to go to the community-friendly pub. I think that is a great shame, so it is very heartening to have people such as the hon. Member for Leeds North West championing this cause. I wish him all success on the wider issue of bringing pubs back into communities.

The hon. Gentleman gave a detailed analysis of the problems we are facing with the Pubs Code Adjudicator. He and I have spoken on this issue a couple of times, and in particular on the conflict of interest position that the Pubs Code Adjudicator allegedly finds himself in. Being a former lawyer, I am acutely aware of what constitutes a conflict of interest. The word “perception” has been used many times in today’s debate, and I would suggest that a perception of a conflict of interest is indeed enough to create that conflict of interest. We cannot enter the controlling mind of that person and say whether in any given circumstances that particular financial interest is likely to cause them to make a different decision; the perception of that conflict is enough, and I cannot understand why the Government cannot see this. This is the clearest example that I think I have ever seen of a conflict of interest position, and something must be done as a matter of great urgency—perhaps not reopening the appointments process, but at least the Government should call Mr Newby before them to see whether that conflict of interest position is tenable. I cannot understand how anyone looking at this situation could fail to see a clear conflict of interest.

[Greg Mulholland]

Perhaps I should say, to help the hon. Gentleman on that point and to remind the Minister, that part of the problem is not only that these conflicts were not properly declared by Mr Newby, but that the right questions were not asked at the appointments process. So these things were not known, which is why we have the absurd situation of the Select Committee forcing him to publish his real conflicts of interest when he had been in the job for five months.

[Richard Arkless]

I thank the hon. Gentleman for his intervention. If clear evidence is given to the Select Committee that that is indeed the case, surely that ought to compel immediate action from the Government. It is clear that there is a conflict of interest position here, and if the whole point of the adjudicator is to address the inequality of arms between big breweries and small, defenceless tenants, that matter needs to be addressed with the greatest urgency.

There have been many excellent speeches here today and I will run through some of the points made in them before I make some further comments on the position in Scotland, which has been alluded to in the debate. The hon. Member for Tewkesbury (Mr Robertson) outlined, as everybody did, some of the problems the Pubs Code Adjudicator process is facing, and he asked the Minister to answer some questions. I was particularly interested in the problem he outlined in relation to the renewal of tenancies. He asked the Minister to give some clarity on that issue, and I call on the Minister to do so. The hon. Gentleman described pubs as valuable community assets; given what I have said, I clearly agree wholeheartedly. I hope we can start campaigning to make the consciousness of the public turn back towards seeing pubs as community assets and places where communities can be brought together.

The hon. Gentleman also talked about awareness of the pubs code, which is crucial. If tenants do not know that they have a code and the right of redress, Mr Newby will get away with any conflict of interest position he puts himself into, because if people do not know their rights, they will not pursue them.

The hon. Member for Hartlepool (Mr Wright), Chair of the Business, Energy and Industrial Strategy Committee, made an excellent speech, and again touched majorly on the conflict of interest point; I can add nothing to his comments. He touched on the perception point, and I reiterate that a perception of a conflict of interest is indeed a conflict of interest.

Lawyers are acutely aware of conflicts of interest; we look for them in every single transaction we do. As a lawyer, I was taught by a partner how to identify a conflict of interest. He said to me, “If it looks like a duck, quacks like a duck and walks like a duck, chances are, Richard, it’s a duck.” So if it feels like a conflict of interest and it looks maybe like a conflict of interest, it is, categorically, a conflict of interest.

I listened with great interest to the hon. Member for Chesterfield (Toby Perkins), who admitted that the Pubs Code Adjudicator process had not made a great start; that was corroborated by Members across the Chamber. He provided useful historical context from the past 10 years, summarising the good work he did in the last Labour Government to initiate and bring about this change. He has been campaigning very successfully on this issue. I would politely add that he has been marginally more successful here than in his last campaign, where he was suggesting that supporters of the Scottish national football team should be singing “God Save the Queen” before matches, which even for the most ardent of Unionists would have been a bitter pill to swallow. That is a bit like asking Manchester City fans to sing “Glory, glory Man United” before City play.

[Toby Perkins]

I never made any such suggestion.

[Richard Arkless]

If that is the case, I stand to be corrected, but the House was full of leaflets detailing this a number of months ago—but if I am mistaken, I would never attempt to mislead the House.

[Toby Perkins]

I will be brief, because I do not want to detain the House on this, but actually what I was proposing was that the English football team should have a separate national anthem from “God Save the Queen”, and that “God Save the Queen” should only be used when Britain was playing and England should have an English national anthem. I was not telling Scotland or Wales what to sing at all.

[Richard Arkless]

I will have another look at the leaflet to see if I stand to be corrected—and, indeed, I do not think we should detain the House on matters not relevant to this debate.

The hon. Member for West Bromwich West (Mr Bailey) talked about déjà vu. Again I do not think he was talking about a déjà vu experience that is positive, and we seem to be back here discussing some of the other problems that have occurred in respect of the Pubs Code Adjudicator. The fact that we keep coming back to these problems indicates that it would be a slavish policy for the Scottish Government to accept a system of a one-size-fits-all, broad-brush approach that clearly has problems.

I should make it clear that I am committed personally to fairness to pub tenants, and the Scottish Government are committed to making sure that inequality of arms does not persist. The motion

“urges parity for Scottish tenants”,

and clearly I would urge parity in fairness, but whether fairness exists within the current system, given the problems we have identified, is another matter, and I think the Scottish Government are right to take the approach they have taken, which I will outline in more detail now.

The Scottish Government introduced a voluntary code for pubs and landlords in 2015. Clearly, a voluntary code is not, potentially, as effective as a compulsory code, and we consulted from July 2016 and published a 77-page report in December of that year. It highlighted that the pub sector in Scotland has different facets and characteristics from the pub sector in the rest of the United Kingdom. Some 40% of pubs in the UK are tied, while only 17% are tied in Scotland. There is also a much higher proportion of longer leases across the rest of the UK than in Scotland. That is further evidence that a one-size-fits-all policy might not be the best suggestion, but that is not to say that we do not recognise that there are concerns.

The report stated:

“The evidence collected did not suggest that any part of the pub sector in Scotland was unfairly disadvantaged in relation to another. As a result, further dialogue between the relevant trade bodies, government, and other interested parties, should continue before making any changes to legislation”—

but that is not, I emphasise, ruled out.

The report continued:

“Based on the findings from the research, it is clear that there is more work to be done in ensuring that the relationship between Pub Companies and tenants is further strengthened and clarified.”

I think everybody would welcome that. The report added:

“Further clarification is also required on beer costs, the cost of entry into the sector and the value of…benefits.”

The report also stated:

“The contractor faced significant challenges in recruiting licensees and Pub Companies to participate in the research, created by an apparent unwillingness to engage on the subject at a detailed level. As a consequence, it is recommended that a further more detailed study should not be undertaken without a significantly increased level of interest and involvement from the wider industry.”

To put it bluntly, we feel more evidence is required before we can go down the road of having a compulsory pubs code adjudicator, and clearly there are lessons to be learned from the system implemented by this place. I do not think there is anything wrong with that; sometimes Holyrood will do things first and this place will learn, and sometimes this place will do things first and Holyrood will learn—[Interruption.] Yes, and of course, ultimately, Holyrood will, without question, do it better, but that is a very healthy process.

That concludes my comments, but finally I reiterate that we believe in fairness for pub tenants. We are not at the stage in Scotland yet where the evidence has been compelling enough to make us go down this road, but we are looking at the system, thinking about it and analysing the mistakes, and hopefully in the future we will devise a system that properly protects the rights and fair treatment of tenants of tied pubs.

13:30

[Gill Furniss (Sheffield, Brightside and Hillsborough) (Lab)]

I congratulate the hon. Members for Leeds North West (Greg Mulholland) and for Tewkesbury (Mr Robertson) on securing the debate and for being real supporters and defenders of pubs. The pubs code came in after much wrangling in Parliament. It had been called for by many stakeholders in the industry. One of its most important objectives is to provide a level playing field for tenants, often in local pubs, so that they can compete fairly with pubcos in negotiations. This was mentioned by my hon. Friend the Member for Chesterfield (Toby Perkins). I congratulate the House on highlighting certain issues in the code, including the successful introduction of the market rent only option for tenants, which enables them simultaneously to seek the best deal for their pub while negotiating with one of the large pubcos.

The Government then set out to appoint a Pubs Code Adjudicator, and the decision was made to appoint Mr Paul Newby to the position, to oversee the running of the code, to provide information about the code and, when necessary, to enforce the code. In the midst of all this, there has been great tension between some groups in the pub industry, particularly around the role of the Pubs Code Adjudicator. My hon. Friend the Member for Chesterfield highlighted some of the issues around conflicts of interest; he made some sensible points. He and others have made eloquent contributions on that issue. They include the hon. Members for Leeds North West and for Tewkesbury, the right hon. Member for West Dorset (Sir Oliver Letwin) and my hon. Friends the Members for Hartlepool (Mr Wright) and West Bromwich West (Mr Bailey). I will not repeat the points that they have already so eloquently made.

The pubs code plays an essential part in moving towards a level playing field for pub tenants and the larger pubcos. In doing so, it provides an outline for protecting pub tenants against the very large pubco organisations. The market rent only option was successfully introduced to give pub tenants more flexibility in their operations, and it was welcomed by many stakeholders. However, as we have heard, there are serious questions about the effectiveness and implementation of the code, and about the role and conduct of the Pubs Code Adjudicator and the perceived conflicts of interest relating to him. The hon. Member for Dumfries and Galloway (Richard Arkless) used his legal background to explain clearly how that perceived conflict of interest could be a serious barrier, and said that the issue needed to be looked into.

Since the introduction of the code last year, 77 referrals have been put forward to the Pubs Code Adjudicator. Most of them have related to market rent issues, a crucial matter for many of the small operators in the sector. There is clearly a demand for arbitration via the code, and it is a matter of great concern to me and many others that not one of those cases has yet reached resolution. I recognise that the Pubs Code Adjudicator has been in post for only six months, but he should have made his mark on the industry in that time in order to try to gain the confidence of the market. It is essential that the process of referrals and subsequent decisions by any adjudicator should be seen to be fair and free of any conflict of interest. This is an issue that the Government need to address urgently, as my hon. Friend the Member for Hartlepool said.

The pub industry employs 850,000 people in the UK, mainly in the local pubs that form the hub of many communities. At this time of Government cuts to vital local services, we have seen community pubs stepping in to provide libraries and cafés to serve their communities. I commend the work being done by the not-for-profit organisation, Pub is the Hub, in this regard. It is crucial that the pubs code should work for everyone as the effective measure it set out to be and was expected to be.

This brings me to the points raised by hon. Members on the role of the Pubs Code Adjudicator. There have certainly been raised tensions in the debate over the appointment of Mr Newby as the PCA. As I have said, I welcome the points that hon. Members have made about the perceived conflict of interest issues surrounding Mr Newby’s former employer. I urge the Minister to look into the recommendations of the Select Committee, particularly those relating to the perceived conflict of interest and to Mr Newby’s shareholdings and the loan issues that have been raised today.

In my view, we should not hide away from serious concerns such as these. The Government must ensure that the role of the Pubs Code Adjudicator is truly impartial and independent, so that the pub tenants whom the pubs code is there to serve can be satisfied with the work being done. That is clearly not the case at the moment, as the hon. Member for Dumfries and Galloway pointed out. Only in this way will we ensure a fair and proper process and a focus on the real and important issues. I urge the Government to examine the role of the Pubs Code Adjudicator and to explore options that will increase transparency and fairness.

Over the past couple of weeks, I have had many meetings with representatives of pub tenant groups and of the larger pubcos. In all those meetings, there were recurring themes that appeared to unite all the stakeholders, one of which was business rates. We must focus on the issues that act as barriers towards a thriving pub industry. The pub is a long-established part of British life, and a visit to a pub is now No. 3 on the list of things to do for tourists coming to the UK. We must do everything we can to ensure that that continues.

The pubs code is there to help local pub tenants to get a fair deal when negotiating with the large pubcos, but we have already heard today that some in the industry are unconvinced that it is working for them. I strongly urge the Government to do what they can to ensure that the pubs code is properly implemented for everyone, but in particular for the tied tenants who have long campaigned for fair negotiations. Also, it is only fair to Mr Paul Newby that the Minister should review the way in which he was appointed and the matters that have arisen from this debate and from the Select Committee, so that we can move on and make progress towards ensuring that the pubs code is properly implemented and that everyone has confidence that it can work in the way that it was meant to do.

13:37

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Margot James)]

I congratulate the hon. Member for Leeds North West (Greg Mulholland) and my hon. Friend the Member for Tewkesbury (Mr Robertson) on securing today’s debate on the Pubs Code Adjudicator, and I thank all Members across the House who have contributed to the excellent and thought-provoking debate. Clearly this subject continues to attract strong views and passionate debate, and I want to reassure the House that the Government are fully committed to ensuring that tied tenants can operate in an environment that is fair and that allows them to thrive. That is why we introduced the pubs code. I pay particular tribute to the role that the hon. Member for Leeds North West played in bringing about that piece of legislation.

The pubs code regulates the relationship between around 11,500 tied pub tenants and the large pub-owning businesses that rent the pubs to them and sell them tied products. The pubs code applies to pub-owning businesses with 500 or more tied pubs in England and Wales. There are currently six pub-owning businesses that fall within the scope of the code: Admiral Taverns; Enterprise Inns; Greene King; Marston’s; Punch Taverns; and Star Pubs & Bars, owned by Heineken.

The two principles of the pubs code are: fair and lawful dealing by pub-owning businesses in relation to their tied tenants; and that tied pub tenants should be no worse off than if they were not subject to any tie. The pubs code should make sure that tied pub tenants: receive the information they need to make informed decisions about taking on a pub or new terms and conditions; have their rent reassessed if they have not had a review for five years; and are enabled to request a market rent only option to go free of tie in specific circumstances, including at a rent review or on the renewal of tenancy.

I will first address the appointment of Mr Newby and the performance issues raised in this debate. I am sure we can return to some of those important issues during my speech. We believe that he is the right person to ensure that the pubs code delivers its statutory objectives and, for reasons I will set out, we think he got off to a good start with his responsibilities.

Since his appointment, Mr Newby has made himself visible and accessible. He has attended at least eight conferences, various events and eight roadshows across the country, at which he has met many stakeholders, including several hundred tenants. He has also taken pains to pursue greater visibility for the pubs code and to raise awareness among tenants by appearing on various television programmes, including a pubs special of “The One Show” and “The Great British Pub Revolution,” with the aim of bringing the pubs code to the attention of a wider audience. I did not watch the programmes, so I cannot comment on their creative content, but they are a means of raising awareness with the target audience.

Through those appearances, Mr Newby has explained his role and responsibilities, and has shown his determination to help to create a fairer business environment for tied pub tenants that allows the pubs, which are so important to our communities, to thrive. Contrary to what we have heard, he has been raising awareness among tenants that under regulation 50:

“A pub-owning business must not subject a tied pub tenant to any detriment on the ground that the tenant exercises, or attempts to exercise, any right under these Regulations.”

It is important that he continues to make that case.

[Toby Perkins]

Will the Minister clarify that, in the context of that desire and regulation 50, a pub-owning business that moves from a tied model to a free-of-tie model will be able to do it with a simple deed of variation? That would make it the only change to the business’s terms and conditions, and all the other terms and conditions would not have to be reviewed as a result. Can she confirm that that is consistent with what she has just said?

[Margot James]

I have great sympathy with the hon. Gentleman’s point, and I hope that it will be clarified by the Pubs Code Adjudicator in due course. The pubs code itself is not clear on that aspect, and it will be up to the Pubs Code Adjudicator to pronounce on it when he feels that he has enough evidence. I reiterate that I have considerable sympathy with the hon. Gentleman’s point.

Mr Newby has received a positive response from tenants, with the majority supporting his role. I accept that some tenants are deeply opposed to his role, and I could not have sat here for the past hour and a half without realising that, even if I had not known beforehand.

[Greg Mulholland]

Will the Minister give way?

[Margot James]

I will make some progress before giving way to the hon. Gentleman.

[Greg Mulholland]

Give us the evidence.

[Margot James]

I might as well have given way to the hon. Gentleman, because he is making his point anyway. I will shortly come to his point about tenants who support Mr Newby. Suffice it to say that the number of referrals that Mr Newby is getting bears witness to there being tenants who support his role.

Tenants are coming to the Pubs Code Adjudicator to seek the protections provided by the pubs code. In its first six months, the inquiry line set up by the adjudicator to provide information about the pubs code received 435 inquiries, 91% of which were from tied pub tenants or their representatives, which bears out the imbalance that these businesspeople have had to suffer over many years. In the same period, the adjudicator received 121 referrals for arbitration.

I will now respond to a few of the comments made in the debate. My right hon. Friend the Member for West Dorset (Sir Oliver Letwin) and others observed that the Pubs Code Adjudicator has a dual role in both upholding and enforcing the code and in adjudicating on alleged breaches of the code. The pubs code was introduced in law to bring greater protection to tenants and to strengthen their position on what was a very un-level playing field. The PCA’s role is therefore to uphold the law and not to interpret it in a way that is biased towards one party or another on the adjudication side of his responsibilities.

We have heard allegations of ongoing abuse by pub companies, particularly from the hon. Member for Leeds North West, to whom I listened very carefully, and my hon. Friends the Members for Warwick and Leamington (Chris White) and for Tewkesbury. Tenants seeking the market rent only option, it is alleged, are being undermined by tactics deployed by the pub companies that threaten to make the pursuit of a market rent only option unviable, in direct contravention of regulation 50. There have clearly been instances in which the code has been flouted, and hon. Members are right to bring those cases to the House this afternoon. The code is designed to root out those cases, and I urge hon. Members to refer them to the Pubs Code Adjudicator.

On the performance issues, the hon. Member for Chesterfield (Toby Perkins) rightly raised his concern that there have not yet been any adjudications. There is a clear appetite, shared by the Pubs Code Adjudicator himself, for adjudications to start coming out, and I have no doubt that they will start coming out without further delay. There is no doubt that the Pubs Code Adjudicator will start to form some views, based on the evidence that he is seeing, so that we do not indefinitely have a situation in which every single case takes the same length of time as the cases in the first few months of his deliberations. I concur with that point, and I have questioned him about it. He assures me that although the law is technical and is not clear on every point, he will most certainly issue guidance when he is satisfied that he is in a position to do so.

Of course, the Pubs Code Adjudicator has already made statements that should give comfort to the House. On 9 September he made a public statement in response to information he received from stakeholders, in which he reminded the pub-owning companies of their obligations and what he expected of them in relation to the code:

“I expect pub-owning businesses to act in a manner that does not inhibit a tied tenant from accessing their rights”.

He also said that pub-owning companies must make available all relevant information relating to rent assessments and proposals for tenancies, and that they must ensure that MRO tenancies comply with the code and do not contain the sorts of unreasonable terms that we have heard about this afternoon. It is clear from our investigations prior to this debate that at least one pub-owning company is still not complying with the code and is making life difficult for its tied tenants. That needs to be rooted out.

[Greg Mulholland]

I remind the Minister of her wonderful work when she was a member of the Select Committee and shared exactly its view. She must substantiate her statement that the majority of tenants support Paul Newby. Does she realise that the only organisations he cited in support are: the Association of Licensed Multiple Retailers, which has a regulated pubco as a member; the British Institute of Innkeeping, which is run by someone who used to be a boss of a former pubco; the Federation of Licensed Victuallers Associations, which is run by a former director of Enterprise Inns; and Enterprise Inns, which pays for licensees to sign up to membership? Those are the only people who have signed up, so will she correct the record? The majority of tenant-representing organisations oppose Mr Newby and always have.

[Margot James]

I do not accept the hon. Gentleman’s criticisms. I am sure that he has not interviewed all 11,500 tied tenants. From the representations that I have seen, the number of tenants that the British Pubs Confederation represents is open to question. It is all very well for the hon. Gentleman to be so critical of the Association of Licensed Multiple Retailers and the Federation of Licensed Victuallers Associations—[Interruption.]

[Greg Mulholland]

It was no criticism.

[Margot James]

Well, it is all very well for him to say what he said, but they are credible organisations. They welcomed the Pubs Code Adjudicator’s appointment and said that it is essential for the post to be held by someone with an in-depth knowledge of the market. When I visited the office of the Pubs Code Adjudicator in Birmingham and met the staff who work behind him, they were relieved that they had the leadership of someone who knew so much about the industry and the market.

Members raised other important issues, including the conflict of interest mentioned by the hon. Member for Hartlepool (Mr Wright). There have been two accusations against Mr Newby: that he has conflicts of interest through his financial interests in Fleurets and—I do take this seriously—that the perception that he is conflicted means that he is not able to carry out his role effectively. There is a delicate balance to be struck when saying that the perception is the reality, which can lead to opportunities to give further credence to the conflict of interest. However, as the Secretary of State explained to the BEIS Committee on 14 December, the appointment process for the post was run in full accordance with the code of practice for ministerial appointments to public bodies. It was a proper and rigorously followed process. The panel concluded that Mr Newby had no conflicts of interest that would call into question his ability to do the job.

The Commissioner for Public Appointments, Peter Riddell, also considered the matter and has confirmed his view that nothing was hidden and that there had been a proper, transparent process. He is also satisfied that the panel was entitled to conclude that Mr Newby has no such conflicts of interest. It would be wrong to deny the judgment of the independent figure responsible for overseeing such procedures. Mr Riddell is a man of great integrity who has a deep understanding of the principles of public appointment.

The Government do not agree that Mr Newby’s previous employment with and financial interests in Fleurets create a conflict of interest that could give rise to a reasonable perception of bias—[Interruption.] I am sorry that hon. Members are dissatisfied with that. We have heard the accusations that Mr Newby misled the BEIS Committee about his financial interests in his former company, but he has not attempted to disguise the nature of his financial interests in Fleurets. He answered the questions he was asked to the best of his ability at the time and there was no intention to mislead. He later became aware that some technical parts of his evidence were inaccurate and wrote to the Select Committee to set the record straight.

The request for early repayment was referred to by the hon. Member for Chesterfield, who was backed up by the hon. Member for West Bromwich West (Mr Bailey), whose speech I listened to with great attention having sat on the former Business, Innovation and Skills Committee in the early years of my time in Parliament when he was its Chairman. During his oral evidence, Mr Newby was open about the nature of his loan arrangements with Fleurets. In order to be helpful, he said:

“I could ask if it would be possible to be repaid more quickly, but that agreement was already in place when I left.”

Mr Newby took the opportunity to update them on that request when he wrote to the Committee. His willingness to seek to address the Committee’s concerns should not be construed as an admission that he is conflicted, nor that the Government think that that is the case.

In conclusion, the pubs code is important for the pubs sector. It is vital that Mr Newby is now allowed to get on with the job. Many adjudications are awaiting an outcome and I share the frustration that we have not yet seen any results. However, six months is not a long time, considering the burden of work associated with the role and the small team of nine people. It is therefore incumbent on us all to give Mr Newby the space to do his job properly over the next few months. I am sure that hon. Members will no doubt request a further statement or perhaps another debate, and I hope that we will be talking more about the outcome than the process. Mr Newby is doing a good job and has much important work to do. Through that work and his adjudications, it is important that the sector’s confidence is built up and, most important of all, that tenants in all our constituencies are protected as Parliament intended.

13:55

[Greg Mulholland]

I thank all the hon. and right hon. Members who have taken part in this important debate. Excellent contributions have come from both sides of the House. Notably, not a single Backbencher stood up in support of Mr Paul Newby or claimed that the pubs code was working. I like the Minister, who did great work with the former Business, Innovation and Skills Committee. I pay tribute to all colleagues on the Business, Energy and Industrial Strategy Committee and to the Member for West Bromwich West (Mr Bailey), its former Chair. I remind the Opposition that the process was started by a Conservative former Chair of the Business, Innovation and Skills Committee, Sir Peter Luff, so it has involved cross-party working.

However, the things that the Minister has had to say today must have stuck in her craw, because she was regurgitating the misleading nonsense that is coming from the office of the Pubs Code Adjudicator. She spoke of visits, visibility, roadshows and what a lovely, charming chap he is, but that is precisely the kind of backslapping approach that has got this sector in such a mess. We have surveyors who know pubco bosses and play at the same golf clubs; we have to get away from that and have a proper system and a real adjudicator, just as the right hon. Member for West Dorset (Sir Oliver Letwin) said. I urge the Minister to listen to him, the hon. Members for Tewkesbury (Mr Robertson), for Warwick and Leamington (Chris White) and for Peterborough (Mr Jackson), and all her colleagues who understand the situation. She did admit that there are clear examples of where the code has been flouted, but she did not acknowledge that the Pubs Code Adjudicator is doing absolutely nothing about them, including deeds of variation, on which I hope we will now get some action.

Will the Minister meet me and representatives from the British Pub Confederation? We will send her a copy of the report, which we must discuss with her and her officials. As we have heard today, the reality is that Mr Paul Newby’s position is untenable. He cannot perform this role and will never have the confidence of tenants. The whole situation around him stinks. The hon. Member for Dumfries and Galloway (Richard Arkless) said something like, “If it looks like a duck and quacks like a duck, it is a duck.” Frankly, Mr Newby is worse than a dead duck; he is a duck that is in real danger of compromising, skewing and watering down everything that the Government tried to do in the pubs code and what this House stood for.

This situation will not go away; Mr Newby will never have the confidence of tenants. The pubs code must be made to work and it is the duty of the Minister and her ministerial colleagues to do that. I look forward to meeting them to discuss that and to present the real evidence, not the nonsense. I remind the House that Greene King, one of the six regulated pubcos, is a member of the very organisation that Mr Newby has claimed supports him. That is the situation, and it is not good enough. The vast majority of tenants, representative organisations and licensees, and all the people whom the British Pub Confederation is representing in cases, oppose Mr Newby and have no confidence in him. He must go. That will happen, but it depends on whether we see leadership from the Government or whether the situation has to drag on for another six months or a year. It will not go away.

Question put and agreed to.

Resolved,

That this House welcomes the Pubs Code established in July 2016 to deliver a fairer relationship between large tied pub companies and their licensees and to deliver the principle that the tied licensee should be no worse off than a free-of-tie licensee, introducing a Market Rent Only option for tenants, the right in certain circumstances to have an independent free-of-tie rent assessment and to pay only that sum; is dismayed that pub companies are thwarting the Code and are routinely flouting Regulation 50 that tenants who exercise, or attempt to exercise, their rights under the Code should not suffer any detriment; notes that this includes refusing to allow deeds of variation to leases, forcing tenants wanting to pursue the Market Rent Only option to agree a new lease on unfavourable terms; believes that fees being proposed for independent assessors are wholly unreasonable and that unfair additional charges are being demanded which make it unviable to pursue the Market Rent Only option; expresses strong concern that the Pubs Code Adjudicator (PCA), Paul Newby, who holds shares in, and has loans to Fleurets, which derives substantial income from the regulated pubcos, is failing to stop these practices or uphold the Code; calls on the Government to ensure that the Code works as intended and to accept the recommendation of the former Business, Innovation and Skills Committee to reopen the appointment process for the PCA; further notes that the Code does not apply in Scotland; and urges parity for Scottish tenants.