Lord Hodgson of Astley Abbotts
Main Page: Lord Hodgson of Astley Abbotts (Conservative - Life peer)Enterprise Bill [HL]
Lord Hodgson of Astley Abbotts Excerpts
Lord Snape (Lab)
My Lords, I support these amendments so ably moved by my noble friend. Like him, I hesitate to lower the temperature of the Committee. As he put it, earlier we had amicable discussions that did not please everyone making representations to noble Lords on both sides of the Committee about the future. We thought, after our discussions on 28 January, that we had an agreement and that we could rely on the good faith of the Minister. As my noble friend says, although the Government have changed since 28 January, we have the same Minister as when we discussed the previous Enterprise Bill.
I hope that I will not need to get too personal in the course of this debate about ministerial responsibility and accountability. However, I remind the Minister that she made certain pledges during those deliberations on 28 January and that we expect those pledges to be confirmed today, rather than her simply sticking to the terms of the consultative document. Like my noble friend, I was shocked to see this. My first indication that the consultative document had been issued was when I received a phone call asking if I had seen the front page of the Morning Advertiser. Surprisingly enough, that is not a publication that I normally enjoy over my breakfast cornflakes, but I made a point of looking at the content of the front page online and, like my noble friend, I was shocked at what I saw. It appears that those pledges that were given on 28 January are to be cast aside because we have a new Government, and I feel that people who made representations about the previous Bill and the present one will feel betrayed—I choose my words carefully—if the words in the consultation document are to become law.
On 28 January, I said in Committee that:
“At Second Reading, the Minister accepted on the part of the Government the will of the Commons and said, basically, that the Government would adopt the principles that the Commons had advocated with regard to pub codes and publicans.”—[Official Report, 28/1/15; col. GC 141.]
All that has been cast aside. The Minister replied in her pleasant and emollient way that she would listen to what the Committee had said and that we could in effect rely on her to bring forward legislation that would meet at least some of the points that we had made. However, as we heard from my noble friend when he moved his amendments, the PRA aspect for the future has been dropped completely.
I ask the Minister what connection there may be between the publication of the consultation document last Thursday, in such an apparently hurried fashion, and the notification from my noble friend and others that various amendments would be tabled to the Bill to ask about progress so far on these matters. It will not have escaped the attention of noble Lords on both sides that the normal procedure for legislation like this, if the House of Commons had voted in the way that it has and the House of Lords had accepted the view of the House of Commons, would be a Bill that would have incorporated the changed views that had been agreed by both Houses. We accepted from the Minister in good faith the need for a consultation period lasting up to a year, and we accepted the assurances that the will of both Houses of Parliament would be respected in the future. That is not what we have here.
I await with interest the Minister’s explanation as to why, other than the fact that the Government has changed. Some former House of Commons Whips more senior than I are present in the Committee today, and I realise that there is a convention that one Parliament cannot bind another. However, I hope that there is also still a convention that ministerial promises are worth the paper that they are written on. We in this Committee expect those promises that were made on 28 January to be kept this afternoon.
Lord Hodgson of Astley Abbotts (Con)
My Lords, those of us who sat through the long reaches of the night on the Small Business, Enterprise and Employment Bill earlier in the year may feel like the football manager being interviewed on “Match of the Day” who says, “I have a sense of déjà vu all over again”. We are repeating the arguments and, although it is almost a year later, I should say that two years ago next February I was a director—I should not say that I was a director, but that I had an interest in it—of one of the pubcos that is covered by the code. At some point I think I ceased to have an interest, but for the purposes of the debate I think I should put that on the record.
Behind the thinking of the noble Lords, Lord Whitty and Lord Snape, about parliamentary procedure is really the question of pub closures and the impact on tenants in particular, along with the reasons why our pub sector is contracting. This is what parliamentary procedure promises and it may be the hook to hang it on, but that is what we are concerned about, wherever you stand on the argument. Underlying the noble Lords’ arguments is the belief that the basic reason for the accelerated rate of closures in the pub sector is the activities of the larger pub-owning companies. It may be argued that they are often predatory and inimical to the rights of tenants. I have to argue with that because I am afraid I think that that is too simplistic an approach to a very complex matter. It is more complex than those who have moved this group of amendments appear to comprehend. Indeed, I argue strongly that if the Government were to accept the amendments, the danger is that it would accelerate rather than slow the rate of pub closures.
If the noble Lords are right about pubcos predating on tenants, the rate of closures in the tied sector would be much higher than in the independent sector, whereas the CGA Strategy analysis shows that the rate of closure is broadly the same—perhaps slightly higher in the independent sector but, as I say, about the same. In those circumstances, it is strange that it is being argued that the pubcos are the cause of it. It seems to me, given that the rate of closure is the same across both sectors, that it is about something much more deep-seated than merely the activities of three or four companies. The reality is that the whole pub sector is under the most terrific pressure. It is not the operators that are causing it—they may have done in some places, but I will come back to that in a second—rather, it is the market.
The market can be looked at in various ways. The brutal fact of the matter is that we can leave this House and buy a pint of lager for 75p, 80p or 90p a pint. It is available in the local supermarket. Many people would prefer to pay that price than pay £3 for a pint in a pub. They take the drink home and drink it there. Along with the fact that some young people buy “a slab”, as it is called, in the supermarket to drink in the street and then go into the pub to watch the football, that is one of the reasons why pubs are struggling. Moreover, there has been a regulatory impact on pub operators, owners and tied tenants, whether it is licensing, smoking, drink-driving, the increase in council tax or the late night levy for pubs that wish to extend their financial take by opening for longer. Not one of these issues on its own is back-breaking; they are all straws, but together they make the life of a pub operator in whatever form very difficult. The sector is not profitable enough now and it is under pressure wherever it is. Unsurprisingly—if I was a tenant I would think this—tenants think that somewhere there is a hidden pot of gold that they cannot get their hands on and is somehow being hidden from them.
There is another, psychological reason for disapproval of larger pubcos. For many people, taking on a pub is a lifestyle choice—a second career. As they undertake it, they leave the pressure of a nine-to-five job and have visions of themselves as cheery landlords dispensing pints and homespun philosophy over a bar as the evening sun goes down. However, tonight there is not much sun going down. You will be sitting in your pub dispensing not many pints to not many people and wondering why on earth you are there. In reality, running a pub is grindingly hard work and not everybody is cut out to be a landlord. None of us, wherever we are, likes to accept that the failure lies with ourselves in whatever we are trying to achieve. We think that there must be some external reason that has caused us to fail, and who better to blame than our landlord or pubco? If they could help us more, we would be in a position to make sure that everything was all right.
When the inevitable problems happen—and happen they do—there is a very sympathetic reaction among the community. The community believes that there are three essential ingredients: a post office/shop, a pub and a church. People do not want to use them much but they will go to the post office and shop when they have failed to buy a pint of milk at Tesco; the rest of the time they do not go at all. They will go to the church for what are vulgarly called “hatches, matches and dispatches”, and occasionally they will go to the pub. They like it to be there and, if they see it disappearing, they are upset and believe that it should be preserved. Unfortunately, you have to use a pub or you lose it, and too often, to be candid, pubs are not being used.
Also behind the noble Lords’ thinking is the CAMRA belief that if you could remove the dead hand of the big pubcos there would emerge a range of independent pubs that would provide new, independent opportunities for beer brands. I am afraid that that is misplaced optimism.
Lord Snape
Perhaps I may tell the noble Lord that I am not a member of CAMRA and that I do not even like real ale very much. That will probably get me denounced in some political circles. The noble Lord is giving a highly polished speech, which it should be as he has delivered it two or three times already. It is a rather—if I may say so without offending him—Second Reading speech. Would he like to talk about the matters before the Committee at present, particularly the difference between the consultative document and the agreement that both sides of this Committee thought we had with this Minister in January this year?
Lord Hodgson of Astley Abbotts
I am afraid that I have to disagree with the noble Lord. I am explaining why the background to these amendments is the rate of pub closures. That is what we are seeking to consider. That is the whole background to the amendments. I am sorry if the noble Lord feels that I am making a Second Reading speech but I am just trying to set out the status of the pub sector at present. In about a minute and a half, I will come to the treatment of the three amendments that the noble Lord, Lord Whitty, has tabled, and I shall certainly tackle them straight on. However, I need to do that against the background of the reasons for the problems in the sector. Those are not merely to do with the operation of the Mulholland amendments but are part of a bigger societal change.
Going back to CAMRA for a moment, I think that this is misplaced optimism. There is not the demand for a wide range of specialist beers changing week by week—Old Boot Polish one week and Sheep Dip the next. Some pubs will be interested in selling those but, for the most part, demand is for the well-known lagers such as Stella Artois, Peroni and so on. That will be the profitable and sensible way for landlords to trade.
I would not want the Committee to think that I was arguing that everything in the sector was rosy. In a sector with 20,000-plus tenants, there are bound to be pubcos—and, dare I say, tenants—who do not behave quite as well as they might. I freely admit that in the tied sector that conflict of interest is most acute.
Lord Mendelsohn
Given this rather large view of returns on the market, I have a quick question. If there were not the unsustainable leverage and the change in the business models of the companies concerned, would the noble Lord be making the same speech?
Lord Hodgson of Astley Abbotts
Certainly. The noble Lord is a businessman to his bootstraps. He knows perfectly well that if you are running a public company, you will be required and encouraged by your shareholders to take on a certain level of gearing. He would; I am sure that he does in his own businesses, which no doubt he looks after splendidly. The idea that somehow a business should be run with a completely different model because it happens to be in the pub sector does not hold water. It is bound roughly to march to the beat of the same drum that applies to public and private companies generally.
I promised the noble Lord, Lord Snape, that I would get to the specific amendments, of which there are three. Amendment 53ZD is obviously concerned with introducing all pubs. That really has absolutely nothing to do with anything that the Minister has said or any part of our discussions earlier in the year. Managed pubs are an entirely different matter and are run in an entirely different way. They are run by employees, who have a bonus system and a wage system. To say that this is a way of gaming the system, as was said by the noble Lord, Lord Whitty, is not accurate at all. If the amendment were passed, some companies that have no tied pubs at all would be caught, so the tied pub area would not even be further dealt with. I cannot see that Amendment 53ZD has any relevance to what has gone before, to what the Minister said, or to tackling the basic problem that we have been considering.
Amendment 53ZC has exceptionally vague wording. One important aspect of maintaining pubs is for there to be some effective secondary market. Pub companies rebalance their portfolios where they have too many pubs in one part of the country and want exposure in others. To be perfectly honest, some pubs will operate better with individual ownership and should therefore be sold to individual proprietors. An acceptance of this amendment, with its broad powers and imprecise determinations, would freeze up that secondary market and make it almost impossible for new entrants to come to the market, or indeed for existing pubcos to operate effectively.
Amendment 53ZF is about parallel rent assessments. Although the noble Lord has specified Section 43(5) I think that he means Section 42(5), but we do not need to worry about that. As I understand it—if my noble friend does not support me on this, I shall go down in flames—when the market rent option is triggered, there will be an opportunity for the PRA to be introduced. That is provided for in the consultation. Therefore, no tenant undertaking the MRO route can be precluded from the parallel rent assessment. He or she can make a judgment as to which is the best route to follow. That answers the point about the dangers of the PRA being unduly sidelined.
Finally, I think that the noble Lord, Lord Snape, believes that somehow big pubcos want to close pubs. I was the director of an integrating brewery; we wanted to sell our beer. We wanted good pubs because that meant that we managed to sell more beer. We wanted to find every way to make our pubs do better. The same may not be true of the pure pubcos that do not have brewers in them, but I urge noble Lords to be careful what they wish for. There is now the concept of a real estate investment trust, or REIT. It would be perfectly possible for a pubco to create a REIT to remove all the support from their pubs. They would make quite a lot of money in the short run because quite a lot is spent on supporting their pub chains. Over time, some or many pubs would fail and they would close them down and sell them off. They could do so within the very tax advantageous structure of a REIT.
We have not even reached the stage of implementing the results from the last set of consultations and already people are starting to think about how things should be tightened up, changed and altered. We should at least allow some time for the structure to settle down so we can see how things develop. Creating further uncertainty in a sector that is under extreme pressure, as I have explained, would be a grave error. It would not help all of us who would like to see the maximum number of pubs maintained in a way that is fair to all parties.
Lord Berkeley (Lab)
The noble Lord said he wanted to have good pubs and that he was worried about uncertainty in the sector. I recall that in the Committee and Report stages that my noble friend referred to, the noble Lord repeated that but could not answer the questions of so many landlords who are working very long hours for very little money. There seems to be a turnover of landlords in many pubs of not much more than a year or 18 months. That does not make a good pub and it creates uncertainty. There may have been one or two cases when landlords were not performing but probably the financial pressures from the pubcos were so high that they could not cope. Does the noble Lord not recognise that that is at least as much of a problem as the one he is talking about?
Lord Hodgson of Astley Abbotts
Of course I understand the pressure on tenants. But the noble Lord must agree that the pressure on the sector is terrific. If your primary product can be bought down the road at 25% of what you sell it for you are under pressure. You will find it exceptionally difficult to buy a pint of lager for less than £3 in a pub. But I will take the noble Lord out, when Committee ceases to sit this evening, and we will find lager at 75p a pint within two miles.
Lord Snape
Does the noble Lord realise that he has just made a very effective case for the argument we are putting from this side of the Committee?
Lord Hodgson of Astley Abbotts
Before the noble Lord concludes, can he explain why we are going back over the managed pub issue? We have covered that already. We agreed that there was an issue with tied pubs, but Amendment 53ZD takes us back to stuff that we cleared away before. I accept the arguments and discussions about the parallel rent assessment, but it was perfectly clear that we were not going to include managed pubs, because they do not operate in the same way as tied pubs. Nor indeed did we talk about further reports on people wishing to sell tied pubs. People are free to sell tied pubs. Why should that be something that applies particularly to the adjudicator?
Lord Mendelsohn
I thank the noble Lord, Lord Hodgson, for that intervention. I shall make it very clear. We introduced these as probing amendments to test a variety of things. The context is that that was prior to the publication of the consultation, and the debate that we have had is very different from the one that we would have had. I and, I suspect, some others in this Room would have tickled the noble Lord, Lord Hodgson, on some of those issues in other circumstances, but these are the circumstances that we are presented with: we are focusing on the consequences of the consultation.
It will come as no surprise to anyone to hear that I was always sceptical of the legal advice—we are going back to the constants of “may” and “must”—but I also presented in meetings counsel’s views, which have turned out to be rather prescient. I would be very grateful if the noble Baroness, who will always resist publishing the advice, would at least give us a much greater recitation of what legal advice has been given and whether the Government have taken effective external advice, as well as advice on whether the consultation was consistent with the Act. Will the Minister give a timetable for the Government to come forward with a proper impact assessment of the consultation proposals, as opposed to the proposals that we all agree to? We would also be grateful if she would set out whether existing legislation will allow the Pubs Code Adjudicator to deal with the pubcos gaming the system. If this measure goes through in the form it is in now, it will mean that the pubcos can game it to their hearts’ delight.
We would also be grateful if the Minister could give us an indication as to whether the Minister in the department directly responsible for signing off this consultation gave direction to the officials to draft the consultation on the basis of the proposals not contained in the Act and whether there has effectively been a change of policy to ignore the Act and introduce a different form. This more consistently follows what was proposed previously as opposed to the Act, and we would be very grateful for some assurance that such directions were not given by the Minister responsible.
Baroness Neville-Rolfe
My Lords, this amendment is designed to protect small businesses from cyberattacks. I was really pleased to hear about the knowledge of the noble Lord, Lord Mendelsohn, on this issue. I wish I had been at the conference which he described and I agree with his objective of amplifying the issue, especially in relation to small business. I also agree with him about the role of the City of London Police.
When I worked in business, an attack on personal data held by the company was one of my top risks and concerns. Recent events demonstrate that businesses need to take action on cybersecurity and can benefit from external advice and guidance. I think it is fair to say that the Government are doing a great deal in partnership with industry on cybersecurity. We have a strong strategic programme in place, which is right. There is a five-year plan for an £860-million national cybersecurity programme to provide a range of advice and guidance to businesses of all sizes, including a specific guide, Small Businesses: What you need to know about Cyber Security. I have copies of that guide.
We have stepped up this activity recently by relaunching the “Cyber Streetwise” campaign, which offers small businesses clear and simple advice on how to protect themselves. There is information in the press and the Committee may have seen advertising at train stations or on the tube. In addition, the Government’s “Cyber Essentials” scheme shows small businesses how to protect themselves against common cyberthreats. Since October 2014 the Government have required their suppliers to hold a Cyber Essentials certificate if they are handling personal data or sensitive information. That is all increasing awareness by amplification. There are more than 1,000 Cyber Essentials certificates, which have been issued to big organisations such as Vodafone, JCB, Barclays, the Royal Mail and BAE, as well as to colleges, universities and so on. We are working to get thousands of companies and their supply chains to adopt the scheme.
Our approach is to work with a range of law enforcement and other bodies to build partnerships with businesses, representatives and trade bodies, and to use these to increase awareness. We do not believe that the suggested amendment, which I think is mainly probing, goes beyond the existing approach in ambition or effectiveness. Putting guidance into legislation could result in a tick-box approach where guidance is merely published without the associated awareness-raising, partnership-building and behaviour change that is completely essential in this area.
We want to avoid unnecessary regulation. The amendment would create uncertainty as to what businesses were legally required to do and what was best practice, possibly even giving rise to litigation. It could also reduce our flexibility in dealing with what is, frankly, a very fast-moving issue. I think we were all astonished by the Sony leak and by recent events in the UK. We are not convinced that legislating in this Bill is the right thing to do. Following the information leak at TalkTalk, though, a committee of the National Security Council is now looking at this. Cyber Ministers are looking as a group at what further changes are needed. In addition the Digital Economy Minister, Ed Vaizey, promised last week that we would meet the Information Commissioner.
Lord Hodgson of Astley Abbotts
As my noble friend is talking about the broad range of plans that the Government have, could they address something with the European Commission? As the noble Lord, Lord Mendelsohn, pointed out, cybercrime is no respecter of boundaries. The Commission has located a cybersecurity centre in Heraklion in Crete, a place that you cannot fly to in winter because you have to go via Athens. In this very fast-moving area, it would be sensible to find a way of placing the centre more centrally where people would be prepared to work and operate. I mention that in passing because it is something that needs to be looked at. I underline absolutely what the Minister says—the Government are doing a very great deal here—but this is something that just does not fit with our plans, because the European convention is so important.