Pub Companies

Adrian Bailey Excerpts

Wednesday 9th January 2013 Commons Chamber

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

Thank you, Madam Deputy Speaker—

[Madam Deputy Speaker]

Order. I beg your pardon, Mr Bailey. We need to be sure what we are talking about. The original Question is on the Order Paper, since when an amendment has been proposed, as on the Order Paper. The Question is that the original words stand part of the Question. In my haste to get the debate started, I omitted to say that.

[Mr Bailey]

Thank you, Madam Deputy Speaker. I will do my best to ensure that I know what I am talking about.

I welcome the debate and thank the Secretary of State for his letter to me yesterday and for his statement to the House. I want to clarify why we have reached this position and to give the House the history of the matter. There have been four Select Committee reports on this issue since 2004, and the one produced by my predecessor, the hon. Member for Mid Worcestershire (Peter Luff), was key to our reaching the current position. It stated that the industry was not making the progress to which it had previously committed itself to making, that it should be given a further year and that, if it had not made sufficient progress after that time, we should introduce a statutory code that would include provisions for the free-of-tie option and the open market rent review.

[Peter Luff]

I pay tribute to the hon. Gentleman for the way in which he has carried forward the flame so effectively in this Parliament, following on from his membership of the Select Committee during the previous one. Does he agree that the proposals we are debating today illustrate what can happen when Select Committees return to a subject again and again, rather than simply producing a report and letting the matter drop? His determination has paid dividends.

[Mr Bailey]

The hon. Gentleman makes a valuable point. One of the most effective ways in which Select Committees can operate is to consider an issue, then monitor the Government’s performance and commitments on it time and again, so that at the end of the day, sheer pester power can prevail in getting the Committee’s objectives addressed. I want to make it clear that my Committee will certainly exercise such pester power in this instance.

My Committee decided that insufficient progress had been made on this issue, and that a statutory approach was the only way forward. The Secretary of State had previously undertaken to accept the Select Committee’s proposals, and we were rather disappointed when we were rebuffed with the token gesture of an offer to place the existing code on a statutory basis. The Committee decided that that was insufficient, that it would not realise our objectives and that it would not address the problems we had identified.

I subsequently applied for a debate through the Backbench Business Committee, which was heard almost exactly a year ago. I was tempted to go for a confrontational approach, but decided that we might command more support across the House if we gave ourselves a chance to see how the voluntary code was working. The House duly obliged by passing a resolution to the effect that, after so many months, a committee would be set up to review the working of the code. That was ignored by the Government, but I made it quite clear that the Select Committee would not ignore the matter. Indeed, when we questioned the Secretary of State in October, this issue was raised and he was questioned very forcibly about the progress that had been made. I give credit to him for acknowledging that the hoped-for progress had not been made and saying that he would take steps to look at the matter again. The commitment we have secured today is the outcome of that particular process. Let me repeat that this demonstrates what a Select Committee can do if it continues to apply pressure.

All this is not due just to the role of the Select Committee, as a number of Members have shown a degree of commitment and tenacity on the issue to ensure that it never goes away. I mention the hon. Members for Leeds North West (Greg Mulholland) and for Northampton South (Mr Binley)—my colleague on the Select Committee, who unfortunately cannot be here today—and indeed the hon. Member for Cheltenham (Martin Horwood). That is to name just a few of a large number of Members who have continually lobbied on the issue.

In congratulating ourselves on getting to this point, it is important that we do not assume that getting a statutory code of practice will solve all the problems. Some problems that the industry faces are beyond solving in any statutory code. None the less, such a code will go a long way to dealing with some of the sense of injustice felt about the unfair balance of the relationship between the pub companies and licensees. The key question is whether today’s proposals will deal adequately with that problem.

Much has been said about the balance of risk and reward and the free-of-tie option. I am interested in the concept floated by the Secretary of State about the fair deal provision. It is very important that this is defined and well understood. Within the industry and among the licensees, there is a deep suspicion that a closeness with the Royal Society of Chartered Surveyors and sometimes the pub companies has led to artificially high rents, which has removed any advantage that the free-of-tie option might otherwise have had. This comes down again to the issue of getting a fair deal and the balance of risk and award. Without a transparent and accepted basis for rent reviews, the advantage of free of tie disappears. We could end up with a balanced relationship between tied and free of tie, with both being profoundly unfair when it comes to the balance between the pub companies and licensees.

I welcome the opportunity for the Select Committee to contribute to dealing with those issues, and I welcome the Secretary of State’s commitment to be open-minded about the possibility of having a free-of-tie and open market rent review, but I come back to the point that we must have a transparent and robust process for rent reviews that can be accepted across the industry. This particular piece of legislation will not solve everything, but it will go a long way to doing so.

--- Later in debate ---

[Andrew Griffiths]

The House is anxious not to overburden smaller pub companies, particularly family brewers, and I would caution against that. However, I do not think that we have fully thought through the consequences of what is being proposed.

[Mr Bailey]

Do not the issues raised by the hon. Gentleman apply equally to the legislation on the groceries code adjudicator? Did he support that legislation? If so, why can he not support the legislation that is being proposed now?

[Andrew Griffiths]

I do not think that family supermarkets are an issue in this context.

My second point relates to the self-regulatory code. What the Government are proposing is a two-tier system, with the big boys in the first tier. There is some confusion over what they mean by tied leases. The British Beer and Pub Association, for instance, thinks that this applies to two companies, Punch Taverns and Enterprise Inns. If the Government are talking about tied and tenanted leases, that is not what they set out in their press release yesterday, and it is not what the industry thinks that they are talking about. There is a need for the Minister to clarify what the Government are talking about.

All tenants can now go to arbitration, but the arbitration system is funded by the industry as a whole, and large companies such as Punch Taverns and Enterprise Inns are paying the lion’s share of the cost of that self-regulatory body. Those companies will not be prepared to pay to be regulated twice: they will pay either for statutory regulation or for self-arbitration, but not for both, so I wonder what will happen to the self-regulation system. Have the Government talked to the industry about the implications of the big two or big six pulling out of funding the self-regulatory body? I also wonder how much pressure the industry will put on the smaller companies to sign up. I acknowledge that that is not such a big issue, but everybody has signed up to the self-regulatory code, and that pressure will dissipate if the Government’s new system is introduced. Legislation is being proposed in order to tackle one or two problem companies, but have the implications for the rest of the industry been fully thought through? I urge the Minister to address those concerns.

There is another problem that our pubs and landlords face: the beer duty escalator. The amount of duty that brewers and publicans are paying is killing pubs and breweries. The biggest single thing we could do to help the industry is scrap the beer duty escalator. We have had a bit of a love-in with Opposition Front Benchers this afternoon, but it would be remiss of me not to point out the record of 13 years under a Labour Government. They increased beer duty by 60%.