Pub Companies

Andrew Gwynne Excerpts

Wednesday 9th January 2013 Commons Chamber

[Toby Perkins]

That is an excellent point—it is so good that I intend to make it myself shortly. I agree entirely with my hon. Friend.

You will note, Madam Deputy Speaker, that I have thus far been unremittingly positive in my contribution, but even I have my limits. Even my naturally sunny disposition cannot conceal the painful truth of the challenges that the Secretary of State faces if his optimistic announcement is to deliver change. The stipulation of the principle that a tied licensee should be no worse off than a free-of-tie licensee will inform the interpretation of decisions made by the Royal Institution of Chartered Surveyors. The advice that guidance should be interpreted in the light of the principle is an extraordinarily welcome step. Beyond rents, however, it is hard to see how that principle can be assured without the freeing up of the market that would happen if a free-of-tie option were offered to all new or renewed contracts. Surely, it is only the combination of fair rents and freedom to buy where the landlord chooses—tied if they wish, free if they do not—that frees the industry from the shackles of the pubcos.

Let me make it clear: we are not calling for the end of the tie. We support the Government’s decision to restrict these measures to companies with more than 500 pubs, and recognise that some pubcos use the tied arrangement responsibly. We also value the small family breweries and recognise the important role the tie plays for them. That is why we support a genuine free market option for the major pub-owning companies that allows for a free-of-tie option, with fair rent or a tied option, to be chosen by the landlord. It is impossible to see how the Secretary of State’s proposals will not be compromised without that.

In the initial press release issued at 1.40 pm yesterday, note 7 read:

“The Code will not mandate, as some campaigners have suggested, a ‘free of tie option with open market rent review’. Neither will it abolish the beer tie. Evidence strongly suggests that the tie itself is not the issue—it is in fact a valid business model and its removal would significantly harm the British brewing industry. It is the abuse of the tie in certain circumstances that is causing the problem. The Code will ensure that pub companies use the tie responsibly.”

By 4.37 pm, less than three hours later, an amended press release had omitted note 7 and there was no mention of the free-of-tie option. This is no way to run a whelk stall, much less take crucial decisions on a vital and struggling industry. The central part of this whole issue was ruled out at 1 o’clock, but by 4.37 pm was apparently back on the table.

[Andrew Gwynne (Denton and Reddish) (Lab)]

My hon. Friend is absolutely right to push this crucial issue. He is also right to say that the issue is not necessarily about pubcos, and that for some pubs it is a viable business model. The real worry, however, is that without a free-of-tie option, irresponsible pubcos will just continue to use this business model as nothing short of a savings-stripping exercise.

[Toby Perkins]

I could not agree more with my hon. Friend, who makes the point extremely well.

I appreciate that yesterday was a bit of a day for the Secretary of State, but we could do with clarity on the free-of-tie issue. Assuming that the new version is right, why was note 7 there in the first version? Is the industry supposed to have confidence that the Secretary of State has not made his mind up when the thoughts in his mind, wildly at odds with the view of this House and all established thought in the industry, are so clearly exposed? I am assuming that it was not a typo, and that a monkey did not arrive at his keyboard and randomly tap away 81 words in what appear to be an order. If it is not a mistake, someone wrote them and wrote them for a reason. I hope the Secretary of State will respond to the point and say why that note came out initially.

There are other significant challenges with the way the system is currently operating. On independent advice, the British Institute of Innkeeping advice service, which was promised for July 2012, still does not exist, and there would be questions about its independence if it did. Meanwhile, the truly independent Pubs Advisory Service, a voluntary organisation, is under-resourced and steps must be taken to strengthen awareness of it and to retain its independence. The Pubs Independent Conciliation and Arbitration Service is not viewed as independent at all. It is funded and dominated by the big pubco lobby. It is also there to see if the pubcos are adhering to the entirely inappropriate and inadequate codes that currently apply.

I met Alan Yorke yesterday, the first person to go through the PICAS process. He described it as shambolic, intimidatory and not remotely independent. He tells me that he felt that it was entirely beholden to the pubco with which he was in dispute, and, despite his winning the case, the successful attempts by the pubco to delay the process resulted in him losing the pub before the case was heard. He is now being pursued through the courts for back rent from the pubco, despite its never completing the task that he had originally sought action on. With all the problems that the Secretary of State has identified, how can he possibly be satisfied with PICAS? Yet yesterday he described it as working well, with two of the three cases that have gone in front of it winning their case. Mr Yorke’s case is one of those that won; sometimes winning does not feel so great.

The Pubs Independent Rent Review Scheme is similarly discredited. Of the five independent reviewers in London, it appears that four have clear conflicts of interest as businesses that provide services to the big pubcos. I can provide the Secretary of State with specific details of their links, if he is unaware of them, but suffice it to say that there is considerable room for improvement. The BII’s own financial position is described as “pretty grim” by its chairman, and its dwindling membership suggests distrust about its relationship with pubcos and the potential reliance on them. We understand that the proposed overarching body that will look after each of those organisations will be similarly compromised. The Guild of Master Victuallers and the Association of Licensed Multiple Retailers were apparently being offered places on the organisational board in return for signing up to the discredited original framework code.

The Secretary of State laments that the measures taken 14 months ago have not led to a culture change in the industry. How did anyone possibly think that they would do so when they required so little of the pubcos? We should remember that the Secretary of State claimed that his solution would be quicker, could be just as effective, and would ensure that pub companies changed their mode of operations.

I have here the code of Enterprise Inns. Members will be interested to know that it has various provisions that were cited by the British Beer and Pub Association to the Department for Business, Innovation and Skills as “immediate improvements” to the version 5 framework code. They were copied and pasted by the Department into the Government response in December 2011. There is abolition of upward-only rent reviews; training availability; access to information on the pub—letting details, trading information, rent calculations and time scales for taking up occupation. There is availability of the price list. All those steps were supposed to be the big improvements that the Minister had wrung out of the pubcos. However, that is Enterprise’s code from 2002. All that is already there—not “immediate improvements” at all. The previous Minister also said that the code would rebalance risk and reward within the industry. Members will be aware that at the meeting of the all-party save the pub group the balance of risk and reward between the pubcos and their lessees was not, in the view of the BBPA, something in which it had any role.

The challenges facing the Secretary of State are significant if he is to deliver the real change that Labour is calling for in this debate. He has made a start. If, having started, he continues to follow the courage of his convictions, he will find that Her Majesty’s Opposition will do everything they can to help to get a meaningful code on the statute book as quickly as possible. We will work with the Government, but their response must pass three simple but key tests. First, will the statutory code include a free-of-tie option and a guest beer right? Secondly, will it deliver fair rents? Thirdly, will the independent adjudicator and the independent advice service work properly? It appears from comments made by the Secretary of State that there is real potential for delivery on the rents and the adjudicator and the advice service. However, there is a lack of clarity on the beer tie and a guest beer right, both of which are central standards that a whole range of organisations will be asking the Government to meet.

Let me make it clear that if the Government shirk their responsibility and the situation remains as it is today, when the next Labour Government come to power in 2015 we will introduce the regulation. However, this Government should introduce what we have called for today. The British pub stands on the precipice. The industry has failed the fairness test and it falls to this Government—or to the next Government—to have the bravery to do what is right. We will not fail the British pub; we hope the Government will not either. I commend the motion to the House.