Lord Berkeley
Main Page: Lord Berkeley (Labour - Life peer)Small Business, Enterprise and Employment Bill
Lord Berkeley Excerpts
Lord Stoneham of Droxford (LD)
My Lords, I congratulate the Government on making significant moves with these amendments to deal with some of the problems that we identified in Committee. Obviously, one of our major concerns is that a lot is still to be decided by secondary legislation. We have to make sure that as far as possible we are precise at this stage about what that legislation is going to seek to do.
I accept all the points that the noble Lord, Lord Whitty, made about the point of sale issue. I would like to see stronger safeguards, but I also recognise the move that the Government have made, which I give them credit for, in ensuring that even though sale is not a full trigger point, the amendment will enable certain protections to still be in place, particularly that of the code.
I would also like to hear my noble friend spell out the timescale, because I share some of the concerns of the noble Lord, Lord Whitty, that we need some clarity on the timescale, although I suspect that 10 years is probably a little optimistic. I support the government amendments and ask for clarification on the point of sale issue.
Lord Berkeley (Lab)
My Lords, I support everything that my noble friend Lord Whitty said, but my main reason for rising is to challenge the noble Lord, Lord Hodgson. He said that there is a wave of money wishing to flood into the market—I hope I have got that right—but that the investors are not planning to do so at the moment.
Lord Hodgson of Astley Abbotts
I said that CAMRA claims that there is a wave of money. I said that there is not; the briefing that CAMRA sent us claims that there is a wave of money and that if you remove the tie, people will start to put money into pubs.
Lord Berkeley
I am grateful for that clarification. I do not know whether the noble Lord is aware that a dozen or so tenants of Punch and Enterprise Inns have gone public today, listing all the defects that have not been corrected by their owners—including unsafe gas appliances, leaking roofs, unsafe fire exits and so on —with the companies claiming that they have done the work and having put up the rents to some extraordinary degree to cover that when they have not actually done it. It confirms that something is seriously wrong and needs to be put right.
Viscount Ridley (Con)
My Lords, I declare an interest in that I own two properties that are operated as pubs but they are not beer-tied pubs. I congratulate my noble friend on guiding us through the complexities of these amendments. I have to say, I found the topic of mitochondrial heteroplasmy two weeks ago much easier to understand.
On the whole, I subscribe to the revolutionary idea that people should be free to come up with any commercial arrangements between consenting adults that they wish to, but I certainly recognise that there is a clear wish in this House and the other place for some version of a pub code and a market rent only option. I welcome the Government’s sensible and measured approach to bringing all sides together in this but, as my noble friend Lord Hodgson said, the key question is whether this will keep pubs open.
The industry is clearly warning us that the Bill, unamended, could cost a lot of money—maybe £20 million a year—and could result in the closure of hundreds of pubs. This is confirmed by an independent study by London Economics. It may be wrong and it may be crying wolf, but if it is not, the Bill will have done precisely the opposite of what we all want: it will have closed pubs and thereby damaged communities. It behoves us to tread carefully.
The Government have listened carefully to all sides of this debate and made, as the Minister said, a proportionate and targeted response. They have made important changes to the MRO which will make it more workable, less open to legal challenge and fairer to all stakeholders, while maintaining its spirit. Without the government amendments, there is a risk that we would see less investment. It is a simple fact that many beer-tied pubs have received significant investments. Without the safeguards, the MRO would create uncertainty that deterred investment. We would thereby also lose a low-cost entry into the sector: tenants without the capital to invest in a free-of-tie pub would not necessarily come forward at the same rate—we have heard something on that already. It is crucial that if tenants want to go to an MRO and find investment outside they can do so, but if they want to defer MRO to the next rent review in exchange for investment they should be able to do that, too.
The one law that we keep passing in this House is the law of unintended consequences. Can my noble friend give the House some reassurance that these complicated amendments will minimise the risk of widespread pub closures?
Baroness Neville-Rolfe
My Lords, I apologise for the confusion. There are a lot of different amendments here and perhaps I may have noble Lords’ patience. Perhaps the noble Lord could clarify to which amendments in which groups he seeks a response, because there are two or three different ones that relate to “must” and “may”. I explained where I was happy to accept “must”. If he is asking me to accept it in other places, there are reasons that I can go through.
My apologies to the House; we have moved on more rapidly than I could possibly have believed. I thank the noble Lord, Lord Stoneham, for his amendments. Amendments 33H and 33K would change two references to “may” in Clause 42. This would turn the powers in the Pubs Code to require pub companies to provide parallel rent assessments and give the adjudicator functions in relation to PRAs into duties. We have made a commitment to this House to introduce PRA. This commitment, together with the duty on the Secretary of State to produce the Pubs Code in Clause 42(1), means that the Government must deliver on these provisions in the secondary legislation one year after these provisions come into force, as I explained a minute ago. There can be no doubt that we will introduce these provisions.
We had similar debates on a number of topics in Committee. As I set out then, it is standard legislative drafting to refer to provisions that “may” be set out in secondary legislation to preserve some flexibility. If we were to change these “mays” into “musts”, we would need to be aware of the possibility of overly restricting and restraining the use of these powers. For example, we have said that the adjudicator “may”, in the interests of fairness and administrative effectiveness, choose not to charge fees to smaller pub companies that have bought only one pub formerly owned by a pub company. These amendments would remove such flexibility and I hope my noble friend will recognise the undesirability of that. I can assure him that the Government will include all the provisions set out in the Bill in the statutory code, which will be made by secondary legislation and subject to parliamentary scrutiny by the affirmative procedure.
With noble Lords’ permission, I shall comment on Amendments 33AJ, 33AL and 33AP. Where the Bill provides that the Secretary of State “may” by regulations give the adjudicator functions in relation to dispute resolution and determining rent for market rent only, it is clear that the Government must set out these functions for the adjudicator in secondary legislation. Clause 42(1) sets out a clear duty on the Government to introduce the statutory code within 12 months of the Bill coming into force—14 months from Royal Assent, as I have said—and to establish an adjudicator to enforce the code. The code must include the market rent only option and the adjudicator must therefore be able to enforce the market rent only option.
I turn now to Amendment 33AR. The definition of a tied pub set out in Clause 68 determines the scope of the regime and deliberately focuses on the alcohol tie, rather than other product and service ties. This is because it is in the abuse of the combination of the alcohol tie and property rent that we have evidence of problems in the relationship between tenants and pub-owning companies. This has been documented in the evidence we received to the Government’s consultation, in the continued correspondence the department receives from tied tenants, and in the multiple reports into the sector carried out by the BIS Select Committee. These reports and the evidence we have received point to problems with the alcohol tie.
The requirements for a market rent only-compliant agreement set out in the Bill specify that an agreement made once the tenant has opted for MRO must not include any alcohol, product or service ties. This is to ensure, when a tenant opts for MRO, that he or she is offered a genuinely free-of-tie agreement. However, it does not follow that all pubs with any kind of tie should be brought into the scope of the code at the outset. Amending the definition of a tied pub in the way proposed is a different prospect, as this changes the scope and application of the measures as a whole. For example, this would mean that a pub with no alcohol tie but with a service tie of some description would be covered by the legislation. This would bring into scope a pub that is contracted to a pub-owning company for something like cleaning services, but is in all other respects free of tie and able to purchase beer and other products from any source. This is not the sort of pub where we have evidence of a problem, and I believe we must avoid inadvertently capturing free-of-tie pubs and creating greater uncertainty in the regime. Focusing these measures on those pubs that are tied for their beer and alcohol will ensure that we target that part of the market where we have evidence of a problem.
I hope that my noble friend Lord Stoneham has found my explanation reassuring. I know it is all very complex, but on the basis of my full explanation, which I think has explained why the Bill says “may” and “must” on different occasions, I hope that he will feel reassured and able to withdraw his amendment.
Lord Berkeley
My Lords, could the noble Baroness clarify—I, too, feel that it is a bit complicated—that the first five amendments in this group from the noble Lord, Lord Stoneham, which replace “may” with “must”, will in fact be done in secondary legislation? Even if she does not accept these amendments, will their spirit and meaning be in the secondary legislation?
Baroness Neville-Rolfe
I am sorry; I think he is a friend on this occasion. The noble Lord, Lord Berkeley—I will have to go back to Lords school shortly. As I explained in my long reply, it is standard legislative drafting to refer to provisions that “may” be set out in secondary legislation. In practice, we will do all the things that I have described. Therefore, I feel that these “musts” are not needed.
Lord Snape
I am grateful for that clarification; perhaps if the noble Lord had made it at Second Reading we might have spent less time bickering. The noble Lord’s Amendment 33Y seeks to put into the Bill some exemption for franchise agreements. The Minister will correct me if I have got this wrong but I think the Government have taken care of those franchise agreements and arrangements within the Bill itself. If they have not, they left themselves enough time, with the consultative procedures that the Minister has so ably outlined, to look at them again over the next few months, when these consultative arrangements are actually taking place.
The problem with accepting the amendment, of course, is that in effect it would pre-empt that consultation and we would be likely to see the pubcos working their way around the legislation in the way about which the noble Lord, Lord Hodgson, warned us. So although I found him as lucid as ever, I think that he convinced one or two of us on this side of the House that his amendment not only was not necessary but, were it to be accepted by the Minister, would lead to an even worse situation than we are in. Surely the noble Lord can see that making exemptions in the Bill, denying the adjudicator and the Pubs Code the opportunity to consider what agreements should be exempt, and to reverse that exemption if it transpires that the exemption is being gamed at a later date to circumvent the legislation, is the proper way forward. I hope that the way in which the Minister indicates the Government’s attitude to this amendment will indicate the way in which they will take this matter forward.
Like the noble Lord, Lord Hodgson, I am coming to the conclusion of my own remarks on the Bill. I would like again to say a few words about investment. It has been a consistent theme of the noble Lord that the Bill and the failure to accept his amendment would have a serious negative effect on investment that the pubcos make in licensed premises generally; I think that that is a fair summing up of his position. However, when one looks at what I repeat is the myth of investment by the pubcos, a different situation is immediately apparent. In 2014, for example, Punch invested £43 million in its core estate but sold pubs to the value of £111 million. It has already announced that it hopes to make £307 million from selling over 1,000 of its non-core estate. Enterprise Inns invested £66 million in pubs that year, then disposed of £73 million-worth of them. This does not sound to me like either a prosperous industry or an industry controlled by those who seek a sensible and profitable way forward for it, regardless of the legislation before your Lordships today.
Lord Berkeley
Could my noble friend clarify whether those investment figures are those quoted by the companies concerned, or are they the figures that they told the landlords they were investing but in fact did not, so the landlord had to do it and then got charged extra for the investment that did not happen?
Lord Snape
My Lords, the figures that I gave were the ones that the pubcos themselves published, but I certainly agree with my noble friend. Again, without detaining your Lordships too long, I could produce in the course of the debate on this amendment 14 or 15 independent licensees who told me—along, I am sure, with other noble Lords on both sides of the Chamber—about the broken promises made by the main pubcos about investment.
I admire the oratory and indeed the optimism of the noble Lord, Lord Hodgson, who not only told us that these institutions—the pubcos, whose creation he inadvertently deplored as a result of the legislation passed by a Conservative Government back in the 1980s —were really decent chaps who are anxious to invest in their property, but forecast the result of the election as a Conservative majority. However, my reaction is: has he put his money where his mouth is? Even better, perhaps he could put the pubcos’ money in that direction because, like me, he does not know the outcome. None of us does. Not even those well known pundits, the pollsters, can tell us the result of the next election. I admire his optimism, if not his sentiments, as far as the pub industry is concerned. I hope that the Minister will do as she has done with the two previous attempts made by the noble Lord, Lord Hodgson, at amending this legalisation and will smother him with honeyed words but kick his wishes into touch.