Pubs Code and the Adjudicator

Anna Soubry Excerpts

Thursday 14th April 2016 Westminster Hall

[Greg Mulholland]

I thank the hon. Gentleman for his intervention, though I do not agree with him. With respect, I feel he has always been slightly confused on this issue. These are clear loopholes that could have very damaging consequences. I can tell the hon. Gentleman, the Minister and the House that pub companies are currently doing all they can to avoid the legislation and the code before 26 May. They are applying pressure on lessees to take up a rent review before 26 May, in advance of scheduled reviews, in order directly to circumvent the code and the market rent-only option specifically.

Some tenants are being coerced to relinquish long leases and take up five-year contracts that are not renewable, so that they are not subject to a market rent-only option. Some pubcos—I have seen one such case myself—are cynically issuing section 25 notices, ending existing tenancies or leases by 31 March to escape the impact of the market rent-only option. The Government must make it clear that the pubs code and the market rent-only option apply to all agreements that have renewal dates or rent reviews from 1 June 2016, because there is some confusion. I hope we will hear that from the Minister today.

Some tenants are also being bribed to sign an agreement without a market rent-only option. One tenant contacted the Save the Pub group to say that she had been offered a 20% drop in her dry rent if she signed a new five-year non-renewable tenancy, which therefore will not have the market rent-only option. It is funny, however, that the pub company did not mention that last bit. It simply presented the agreement to her and said, “Would you like to sign this very attractive new lease with lower rent?”

Is BIS aware of what is going on? It has not said so or responded. If it is aware, is it dealing with the problem, and how? We need a clear announcement that any agreements made from the date on which the pubs code comes in will be subject to the market rent-only option, and that the sort of behaviour that is going on is unacceptable. That is what we want to hear from the Minister today.

Before I move on to the Pubs Code Adjudicator, I will simply say that if the Minister and her Department make the two changes that have been requested, I will announce that we are happy and will praise the Minister, her team, the Department and the Government for getting it right and for listening. All we ask is for those two loopholes to be closed and for her to criticise the way in which pub companies are cynically trying to avoid the code before it even comes in.

[The Minister for Small Business, Industry and Enterprise (Anna Soubry)]

Will the hon. Gentleman make it clear whether there are three things he would like me to do, or two?

[Greg Mulholland]

By the end of my speech, the Minister will be clear about exactly the things I wish her to do. Two loopholes must be removed from the code, and she must deal with the current cynical behaviour. She must clearly criticise that today, in this Chamber, and say that it is unacceptable.

[Anna Soubry]

indicated dissent.

[Greg Mulholland]

The Minister scoffs as if she does not accept that that behaviour is happening. I suggest that tied tenants around the country drop her a line to tell her that it most certainly is.

[Anna Soubry]

As I am sure you would agree, Sir David, it is important that nobody ever thinks there is any form of coercion, and I will do what I feel is right. In this Chamber, as in the main Chamber, we speak freely, so I do not think it is good for Members to put down conditions that say, “Ministers must condemn,” and “Ministers must do this, otherwise we will criticise.” We will have a good, free debate and then we will all make our comments accordingly.

[Greg Mulholland]

What a quite extraordinary comment, in the mother of all Parliaments, that somehow we are not allowed to challenge a Minister to condemn bad behaviour—what an extraordinary comment, even from the right hon. Lady. Quite remarkable.

The next thing that the Minister and her team must do is on the Pubs Code Adjudicator. Representatives from all sides of the pub sector noted as long ago as 2013 that to ensure impartiality, it would be sensible for the post to be taken up from outside the pub sector, if the role were to gain industry-wide confidence, credibility and acceptance. That is clearly the basic, essential nature of this role, yet BIS has clearly and demonstrably failed to ensure that.

Let me lay before the House the very serious issues as to the clear flaws and untenability of this appointment. The appointee, Mr Paul Newby, is a chartered surveyor and a director and shareholder of Fleurets. He clearly has a conflict of interest, and it is clearly a disqualifying conflict of interest. Fleurets is the largest surveying practice operating in the very sector that the pubs code is being introduced to regulate. Of course, the reason for that is to protect tenants from abuse by their pubco freeholders.

Mr Newby’s CV, which is publicly available—although, interestingly, it has been taken off the Pubs Independent Rent Review Scheme website—openly advertises for whom he acts. Let me list the six companies that Mr Newby is required to regulate: Enterprise Inns, Punch Taverns, Marston’s, Greene King, Heineken—which is Star Pubs & Bars—and Admiral Taverns. Who do he and his firm currently, and boastfully, say they act for? Enterprise Inns, Punch Taverns, Marston’s, Greene King, Heineken and Admiral Taverns. He clearly is conflicted and biased. Of course the Minister will say, “But he has also operated and acted for tenants,” but actually, given the nature of this appointment, that equally would mean that he is conflicted.

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[Grahame M. Morris (Easington) (Lab)]

I appreciate you calling me early, Sir David, and it is a pleasure to serve under your chairmanship. I know that we should never start a speech with an apology, but may I apologise to the promoter and the respective Front Benchers? I am afraid that I will not be able to stay until the end of the debate. No disrespect is meant but I must be somewhere else in the House at 3 o’clock, so I do apologise. May I also acknowledge for the record that I chair the Unite group in Parliament? Many of our members work in the industry as tenants and in brewing.

I commend the hard work and terrific speech of the hon. Member for Leeds North West (Greg Mulholland), who set out the arguments in such a cogent and readily understandable way. Unusually for me—for the first time ever, I think—I found myself agreeing with the hon. Member for Peterborough (Mr Jackson), who I had always assumed was a free marketeer, but he seems to recognise that there are faults, whether by accident or design, that need to be remedied before the code can be implemented.

The Minister asked what we, collectively, are asking for. This is not necessarily a partisan issue, although obviously there are strong interests. I thank my union, Unite, and its pub landlords section. I also thank the GMB, Justice for Licensees, the Fair Deal for Your Local campaign, the Fair Pint campaign and Mr Simon Clarke, who has been a stalwart defender of the interests of licensees in ensuring that they receive justice.

The things that we are asking for are not unreasonable, given that Parliament has debated and considered this issue at length and, on a cross-party basis, has agreed a way forward. We want to see the legislation implemented and the pubs code reformed. The hon. Member for Leeds North West identified specific concerns about the adjudicator, to which I will refer in a little while. The Government have an opportunity: to enforce the legislation that was passed with such overwhelming support; to close the loopholes that have been identified by the hon. Members for Peterborough and for Leeds North West; to protect tenants from being coerced or browbeaten into giving up their rights; and to restore confidence in the office of the adjudicator.

I mean no disrespect to Mr Newby—like other Members, I suspect, I have not met him—and I do not mean to impugn his personal integrity. I am sure he is a lovely chap, but there are issues of confidence and of conflicts of interest that must be addressed if we are to enjoy the confidence of the whole industry, not just the pub companies but the tenants and the people who rely on the adjudicator to act impartially so that there are no real or perceived conflicts of interest.

We have had many years of consultations—the former Chair of the Select Committee on Business, Innovation and Skills, my hon. Friend the Member for West Bromwich West (Mr Bailey), and members of the Select Committee will, no doubt, elaborate on that—negotiations, debates and inquiries, but we would not be where we are without the co-ordinated efforts of the various organisations that have come together in the British Pub Confederation. Given that we are so close to the introduction of the new pubs code and the adjudicator, changes that have been long fought for, I am a little disappointed that Government Members have implied that nothing happened prior to 2010, which is not quite true. We had the first pubs Minister, and a lot of the groundwork was done in advance. I would like to think, although it is just supposition, that had the outcome of the 2010 general election been different, the pubs code and the adjudicator would have been implemented much more quickly. I cannot substantiate that but, having had conversations with many people in the know, I suspect that that may well have happened.

The changes have been a long time coming and, unfortunately, I regularly see figures in the trade press that 27 pubs a week are closing—that figure may be accelerating. Too many viable pubs and, indeed, working men’s clubs in communities such as mine have had to call last orders not just because of broader pressures within the economy but because of unfair and unsustainable rents, ties and profit-sharing arrangements, all of which should be addressed by the code and, if necessary, by referral to an independent adjudicator.

All we are asking, and it is nothing unreasonable, is that tenants should be able to secure a fair income. Given the time commitment that they give, it seems bizarre that the tenants of even very successful pubs—the hon. Member for Leeds North West mentioned the Eagle, and I know a number of others—that, on the face of it, are incredibly popular seem unable to secure a decent living. Many tenants are struggling. When their income is aggregated and divided by the number of hours they work, in many cases they are actually working for less than the minimum wage. I have met a number of former tenants and landlords whose mental and physical health has been absolutely broken by their experiences.

We all know that the repercussions of pub closures are felt across communities, which lose not only vital community assets but the jobs and the contributions that such businesses make to the local and wider economy. I do not denigrate that contribution. Many of my union’s members work in the pub sector—in the pubs, in the breweries and in delivery, such as on the drays—and I understand that the sector contributes £22 billion to the UK economy. Taking into account the multiplier effect, and not just the people working directly in the pubs, the sector sustains nearly 1 million jobs, particularly providing opportunities for younger adults to find employment, so the sector is important. Links in the supply chains include retail, agriculture and brewing.

The product is the essence of what we are about, of Englishness. Dare I admit it? Is it a secret that I love to have a pint of beer and to socialise? The problem is that the business model operated by the pub companies has weakened, rather than strengthened, the industry. Our hope is that the new pubs code and the adjudicator will address the inherent unfairnesses in the exploitative practice of the pub company model, but it should be a step that strengthens the industry, ensuring: that tenants receive a fair living reward for all their hard work; that viable pubs can remain open; and, hopefully, that we can halt the decline that has seen significant numbers of pubs close over the last 10 or 20 years.

I would like to think that the pub companies are acting in good faith but, as has been alluded to, there is evidence to the contrary and that they are working to circumvent the pubs code and the legislation even before it comes into force. If the Government and the Minister are not aware of that, I hope that she and her officials will make themselves aware of it by looking at the evidence that is out there. The appointment of Paul Newby as the Pubs Code Adjudicator has not endeared the Government to tenants or won any trust from them. Concerns remain that loopholes in the new draft pubs code could undermine the legislation, and if Parliament is to fulfil its promise to tenants, those loopholes must be removed before the final version of the code is implemented.

The hon. Member for Peterborough highlighted one particular loophole. The Government would undermine the fundamental principle of the pubs code, that tied tenants are no worse off than free-of-tie tenants, if they allow pubcos to force tenants to relinquish long-term leases should they opt for a market rent-only option. That is one specific thing that perhaps the Minister and her officials will take away. The loophole undermines the assurances offered by the Department for Business, Innovation and Skills that tenants who take the market rent-only option should not be subject to discrimination by the pubcos. The Government should also make it clear that if a tenant chooses a market rent-only option, they will be entitled to the same length of agreement, terms and conditions as their old tenancy—the hon. Member for Leeds North West raised that issue—otherwise the right to trigger the market rent-only option would be undermined and such tenants would be discriminated against by the very nature of the agreement.

Another loophole that I would like the Minister to look at is the market rent waiver in exchange for investment. The hon. Member for Peterborough also mentioned that, and it is a real concern. I do not want to labour the point, because I do not want to be repetitious, but I can think of a number of pubs in my constituency—I will not namecheck them—where the tenant has gone to their pubco and said, “I want to develop my business. I want to convert the rooms upstairs into a bed and breakfast and to knock a doorway in that wall”—not that wall, but a wall in the pub—“to create access to the beer garden,” and the pubco says, “Yes, that’s a great idea, but you’ll have to pay for it. When you’ve done that, we are going to increase your rent.” That cannot be termed investment from the pubco. In a way, it is coercion. We have to close the loopholes on the definition of investment and on what can and cannot be referred to the adjudicator.

I do not want to repeat points made earlier, but pressurising tenants to take up rent reviews, in advance of any scheduled review, before the implementation of the code is unacceptable. Coercing tenants to give up long leases and take up new five-year contracts with no market rent option at the end and no renewal rights is not acceptable either. It is unacceptable to effectively bribe tenants with short-term reduced rents—the hon. Member for Leeds North West referred to a 20% reduction—to sign new agreements with no market rent option, to seek to force tenants into five-year non-renewable tenancies or to threaten to offer only such agreements to avoid triggering tenants’ legal rights to the market rent-only option. The pub companies are doing so while telling us that they want to move forward and draw a line under past disagreements, and that it is not their intention to exploit their tenants. I am afraid that the evidence does not really support that, so I am rather sceptical about the assurances that we have received.

I will refer to Mr Newby, if I may. We must ask ourselves what his intentions are, for after he leaves his role as the adjudicator. If he intends to return to the industry where he has fashioned his career and undoubtedly been incredibly successful, would a reasonable person not assume that the decisions that he makes while in post will inevitably bear on his future employment prospects within pubcos? If that is not a potential conflict of interest, I do not know what is. I am concerned that because of those links, every decision in which he agrees with a pubco will be questioned, even when legitimate, as will the fairness of his judgment. That is likely to happen as a result of his long-standing connection to pub companies.

I feel sorry for Mr Newby. He should never have been placed in that position, whether by accident or by design; I forget the exact terminology. What is more concerning—the Minister must take some responsibility for this—is that throughout the entire appointment process, the Department for Business, Innovation and Skills has seemed oblivious to the reaction that such an appointment would create. I was in the Chamber when the Minister made the statement, and there was uproar in the House at the nature of the appointment.

[Anna Soubry]

No there wasn’t.

[Grahame M. Morris]

I was there, Minister, with all due respect. I thought it was a rather heated and fractious exchange. The fact that it was not anticipated does not reflect well on the Department. If the Government insist on appointing Mr Newby, I fear that, intentionally or not, they will undermine the office of the Pubs Code Adjudicator from the day that he starts work.

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

It is an unalloyed pleasure to serve under your chairmanship, Sir David. I congratulate the hon. Member for Leeds North West (Greg Mulholland) on securing this debate and on his long-standing and tenacious involvement with the issue, which has played a vital part in bringing this legislation to the statute book.

My own relatively minor and insignificant involvement with the legislation stems from my involvement on the Select Committee on Business, Innovation and Skills pre-2010, under the chairmanship of Sir Peter Luff, and subsequently as Chairman between 2010 and 2015. Significant parts of the legislation are based on our recommendations. Overall, I am absolutely delighted that we have got this far, as it has been a long and hard battle. Having got this far, not to get it all right would be a tragedy. This debate is particularly relevant in assessing where we are with it, the potential consequences of not getting it right and what we can do to ensure that we do.

Although I did not mention them, there were two previous inquiries into the issue even before my involvement, under the chairmanship of Sir Peter Luff. These issues have been debated for well over 10 years in successive Select Committees, and three broad themes have emerged from all the inquiries. The first is the huge imbalance in advantage between the pub companies and the tenants who run their pubs: the plight of tenants, their low income and the churn of tenancies that has played a significant part in the decrease in pubs in our country and in local communities. We must not forget the often harrowing tales of some individuals who have been ruined as a result.

The second theme is the appalling relationships between many tenants and the pub companies and the climate of fear that has prevailed. I conducted a survey prior to the last election on the proposed legislation, and on the incomes and conditions of some of the tenants operating in the pubs in my constituency. I got probably a 50% response and what was significant was that not one of those who responded said who they were or what pub they were in. One person specifically said they were not prepared to respond because they feared some sort of retaliation. To me, that was perhaps more representative than almost anything else of the climate that pub tenants have to work under.

The third theme has been the attitude of the pub companies in responding to the very reasonable and moderate recommendations of successive Select Committees that they sort their own house out and introduce codes of conduct and standards of behaviour on a voluntary basis. It is fair to say that those successive Committees were met with resistance, obstructiveness and, in one classic case, downright abuse. Some long-standing Members may remember Ted Tuppen, the former chief executive of Enterprise Inns, describing the members of Sir Peter Luff’s Business, Innovation and Skills Committee as all being morons. I can take being called a moron; what I am concerned about is that if we do not get this right we might start being called low-achieving morons, and I really would object to that.

Because of the obstructive attitude of some in the industry and the snail’s pace of reform on a voluntary basis, there has even been some reluctance in Parliament. Indeed, the hon. Member for Leeds North West and others will know what a difficult job it was to move the previous coalition Government from their position on voluntary reform to taking the necessary steps to legislating for it. It was only when it became crystal clear that voluntary reform was just not going to work that the Government were prepared to introduce legislation. I give all credit to those involved for accepting that it was not going to work and then taking the necessary steps to introduce legislation.

Having got so far—to a point where we are actually looking at the code—it is crucial to get the code right, because all the history of the involvement of the pub companies shows that they will do whatever they can to find ways of subverting the will of Parliament and what is appropriate to get a fair and equal balance between themselves and the tenants. I will not reiterate comments about the loopholes that have appeared, because they have been thoroughly, effectively and comprehensively articulated by the hon. Member for Leeds North West. However, it is crystal clear that unless amendments are made to the code, there could be ways in which this group—these pub companies—will subvert the long- stated will of Parliament on these issues. I look to the Minister’s response to hear exactly how the Government intend to engage and address the concerns that have been quite properly raised. If they do not, then locking tenants into a statutory framework that fails to address the underlying principle that the Government have articulated—that tied tenants should not be worse off than free-of-tie tenants—will mean an opportunity lost, which could present more and more problems in future.

Let me just say a few words about the appointment of Mr Newby. I do not like getting dragged into issues about individuals and personalities, and I certainly do not like prejudging somebody’s performance. However, I must make a number of general points about the appointment. The first is the crucial strategic importance of getting the appointment right. Whoever is in this post has a pivotal role, not only in interpreting and delivering justice for the parties involved in any dispute, but in transforming, in the years ahead, the confrontational and aggressive culture that exists between the parties, which could be really significant in the future development of this particular industry.

For that to happen, there must be total confidence on both sides of the historic divide, but it is quite obvious that the stated levels of interest of this person have given rise to serious concerns. I know that my hon. Friend the Member for Sefton Central (Bill Esterson) has written to the Minister and I believe there has been a response that sought to allay those concerns, but subsequent remarks by the hon. Member for Leeds North West indicate that there is still huge concern about the perceived level of conflict of interest of the person in this particular position.

[Steve McCabe in the Chair]

My other query on this issue, and perhaps the Minister will allay my fears, is about the accusations—I would not pretend to know just how valid they are, but they appear to have come from a BIS source—that this particular person has been involved with the drafting of the code of conduct.

[Anna Soubry]

indicated dissent.

[Mr Bailey]

I am quite happy for the Minister to intervene.

[Anna Soubry]

It is a pleasure to serve under your chairmanship, Mr McCabe. May I make it absolutely clear that Paul Newby has not been involved in the drafting of the code? To allay the hon. Gentleman’s concerns, let me say that the only dealings he has had with officials in BIS since the announcement of his appointment, which was made in the House in a speech—without any comment, if I may say so; there might then have been some fractious discussions as a result of an urgent question—have been in relation to the setting up of his office.

[Mr Bailey]

I thank the Minister for that intervention. I cannot remember her exact words, but I think that in her reply in Parliament she said something about helping the Department—

[Anna Soubry]

indicated assent.

[Mr Bailey]

I suppose there is a dividing line—where does helping start and finish?—but no doubt the Minister will want to elaborate on that.

[Anna Soubry]

Let me make it absolutely clear that there has been no help at all in the drafting of the code. The only help has been in the setting up of the office.

[Mr Bailey]

It is very helpful to have that on the record. I am sure that the Minister will understand, as I do, that often in politics perception can become reality, and if these rumours are going round, obviously that has considerable significance and could underlie or even reinforce the level of suspicion that exists about the proposed impartiality—

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[Bill Esterson]

I am not sure what the ethics of such a proposal would be, so I shall move on, but I would be happy to share a pint with my hon. Friend in that week.

There is real consumer appetite for quality, locally-produced real ale. The monopoly on beer sales for pub companies and the breweries they own really does not reflect what consumers want to buy. The landlords of pubs in my constituency, including the Corner Post, Stamps and the Freshfield, are seeing booming custom and will back me up because they are serving some of the beer that I mentioned from the breweries that have recently started up. We have heard many stories, not only today but over the years, about how pub tenants have been ruined or promises of investment have not materialised because of the actions of the pub-owning companies. That is why it is so important that we get this absolutely right.

Market rent-only is only an option. If the pub companies and brewers run a robust and positive business model, they have nothing to fear from the alternative. If pub companies feel that they are giving tied tenants the best option, they should be willing to put the options for their tenants on the table and convince them that beer ties are a sensible business decision.

We await the publication of the pubs code. When she responds, I hope the Minister will tell us when it is going to be published. It needs to be published soon, so that the industry has the time to analyse it properly and to address the weaknesses we have heard described today—I will come to some of those later—before it goes live on 1 June. Suspicion has often been raised about how the code has been handled and we need to see the final version to allay those concerns. Let us remember that it took an amendment tabled by the hon. Member for Leeds North West for the market rent-only option to be included in the Small Business, Enterprise and Employment Act 2015. That amendment received wide, cross-party support. To their credit, the Government accepted the will of MPs and peers and made the commitment to include market rent-only options and parallel rent assessment to go alongside them.

Parallel rent assessment matters because it offers a side-by-side comparison, so that pub tenants can determine whether to remain tied or to go free of tie. Pub tenants need parallel rent assessment so that they can make an informed decision, so having market rent-only without parallel rent assessment simply made no sense. That is why there was so much concern when the initial consultation that was published in autumn 2015 appeared to exclude parallel rent assessment. But, after a lot of fuss, including during exchanges with the Minister on the Floor of the House at BIS questions, the mistakes in the consultation were rectified. The Minister deserves some credit for her response on that occasion.

What a great pity, then, that doubts still remain about the effectiveness of the pubs code so close to its implementation. The Government say that the market rent-only options will be offered to landlords at rent review or lease renewal. They also say that the trigger will be the rent review or lease renewal itself, rather than, as seemed likely at one point, only in the event of an increase in rent. However, there are two interpretations as far as tied tenants are concerned. One is that the effective date for rent review is the date of implementation; the other is that it is the date on which the notice is issued and when the review process starts, which is six months earlier.

The market rent-only option will be enforceable only from 1 June this year. Only rent reviews or lease renewals made after that date will entitle a tied tenant to a market rent-only option. When she responds, will the Minister clarify whether renewal notices issued before 1 June will allow pub companies to avoid offering the market rent-only option, even when the reviews are agreed after 1 June?

Then there is the pubs code itself and the concerns raised by the British Pub Confederation and others. The draft code appears to allow pub companies to force tenants to surrender a long lease for a much shorter one in exchange for the market rent-only option. The problem with that is that a tenant who takes a short lease will face uncertainty about what will happen at the end of it. Running a business of any kind requires certainty, and when the building itself is so crucial to the business—in fact, in this case the building is the business—not knowing whether a lease will be renewed dramatically reduces the attractiveness of market rent-only. This approach certainly appears to be the very opposite of creating the level playing field that I think we are all trying to achieve.

The draft code also suggests a waiver of the right to the market rent-only option for prospective new tenants, so pub companies could decide to let pubs only to tenants who waive their rights. Our concern about the loopholes that have been discussed today is that the combined effect of the two proposals in the draft code could mean business as usual for the pub companies, because tenants who want the market rent-only option will not have their tenancies renewed, while only those who accept the tie will be allowed to take on leases. Will the Minister clear this up and say whether those provisions will be included and whether the loopholes will be removed from the final version of the code? If they are not, pub tenants might start to think that the pubs code is not actually going to change very much at all.

All that brings me to the appointment of the Pubs Code Adjudicator. Like other Members, I think the hon. Member for Peterborough (Mr Jackson) made an excellent speech. I agree with pretty much everything he said. He made the points that, for a free market to operate effectively, it needs to be a fair market—I agree wholeheartedly with that—and that unless the code is drafted correctly, it will be unworkable. He also talked about conflicts of interest, which I will come to shortly.

In a number of our exchanges, not least when my hon. Friend the Member for West Bromwich West (Mr Bailey) was on his feet, the point was raised about whether the newly appointed adjudicator, Mr Newby, had been involved in the drafting. I think the Minister was trying to clear that up. Mr Newby may well have been involved in setting up his office, which of course is entirely proper; the problem is that the Business Secretary’s letter to the British Pub Confederation says that

“he shared his professional insights”

when the draft pubs code was discussed with him. I do not know whether that counts as setting up his office or as helping to draft the pubs code, but there seems to be some blurring between where setting up an office ends and helping to draft a code begins. In the end, I am not sure we are much further forward on what his role has been so far.

On the point about conflicts of interest, the Fair Pint campaign’s submission to the Small Business, Enterprise and Employment Bill Committee was clear: do not appoint a surveyor to the post. Any surveyor with experience of the field will have potential conflicts of interest. They will have acted for the big pub-owning companies and will not be seen to be impartial in arbitrating as the adjudicator between pub companies and tenants.

[Anna Soubry]

My right hon. Friend the Secretary of State for the Department for Business, Innovation and Skills said in his letter:

“I can confirm that Mr Newby has not been involved in the drafting of any part of the Pubs Code. My officials met Mr Newby after his appointment to provide him with a high level briefing on Part 4 of the Act and some areas of the draft Pubs Code in order to familiarise him with the key aspects ahead of him taking up this important role. During the course of this briefing there was a discussion of some technical aspects of the MRO arbitration process—for example, the length of time it takes to appoint an independent expert—where he shared his professional insights.”

Does the hon. Gentleman agree that that is a correct reading of the full paragraph, which, I would suggest, he slightly misquoted?

[Bill Esterson]

I used the end of the quotation, which states that

“he shared his professional insights.”

I think it goes further than what the Minister said earlier about the work he carried out, because to me, if he is being asked to provide feedback on the code in a professional manner, that is very close to sounding like he is being involved in drafting the code.

[Anna Soubry]

To remind the hon. Gentleman:

“Mr Newby has not been involved in the drafting of any part of the Pubs Code…During the course of this briefing there was a discussion of some technical aspects of the MRO arbitration process—for example, the length of time it takes to appoint an independent expert—where he shared his professional insights.”

[Bill Esterson]

It seems to me that if he is sharing his professional insights, he is giving observations and helping to draft the code. We can split hairs over this all afternoon, but I am sure others will draw their own conclusions about what his involvement has been in preparing for his office.

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[The Minister for Small Business, Industry and Enterprise (Anna Soubry)]

I congratulate the hon. Member for Leeds North West (Greg Mulholland) on securing the debate, I thank everyone who has contributed to it and I pay tribute not only to the hon. Gentleman, but to other hon. Members who have for many years been campaigning to ensure that the great British pub has a genuine, sustainable future.

I have to put on record a number of things. One of the things that has annoyed me all my life is any form of stereotyping. I object to it, so I object to anyone who thinks that because I am a woman I do not like pubs or ale—although I am not suggesting that anyone present has said any such thing. Throughout my life, I have enjoyed drinking ale in great pubs. By way of example, I name the Crown Inn in Beeston, the Horse and Jockey in Stapleford and the Nelson and Railway—a particularly exceptional pub—in Kimberley, all of which are in my constituency.

I confess that I started enjoying pubs at the age of 16 and I well remember, with great fondness, the many happy bonds with my school friends that were forged in the Old Ship Inn in Worksop and that have continued all the way through my life. As for so many people, those bonds were formed in pubs. We could also go on to debate all that pubs bring to our communities and to individuals, and the role that they play in the lives of so many people, which they have done for many centuries.

We all agree that we want to ensure that our great British pubs have a genuine, sustainable future. We want to ensure a fair deal for tenants, and for too long they have not had that fair deal in too many instances. Equally, we want a sustainable industry. Unlike some, I do not want pubcos to go out of business. I want them to invest in the future and I want them to act responsibly. It is a question of balance.

If there is one thing that I have learned since being appointed last May—the hon. Member for West Bromwich West (Mr Bailey) mentioned this, and he has been at it longer than I have, if I may say so—it is that there is a lot of noise and aggravation, distrust and, in some instances, anger about this. Sometimes there is also a lot of unpleasantness, but unfortunately that is a feature of modern political life. I have been the subject of abuse on Twitter from some tenants groups and tenants, and it all gets a bit tedious. However, we have to try and calm everything down and work together, so that we get the right balance and fairness to secure a proper future for our great British pubs. That is what I seek to do.

I mentioned stereotyping, and I also get a little—some might say overly—excited about the notion that, as a Minister, I am not fully aware of my duties in making appointments, or in all matters, of course. I have served in a number of Departments as a Minister, so I have made a number of appointments in my time. My duty is to ensure that I get the right candidate—to go through the proper process, with rigour and fairness, to get the right person into the job. I object to any suggestion that I appointed Mr Newby because I thought he was a lovely man.

I took my decision with great care. Three candidates were placed before me, all of them eminently appointable. I took the view that Mr Newby was the best of the three. Those other two people are real human beings, and they were exceptionally good candidates, but he shone out. The idea that I did not consider whether his appointment might please some more than others is frankly rather patronising. I wanted to appoint someone who I believed had the skills, ability and, most importantly, integrity to ensure that there was a level playing field and fairness—in particular, if I may say so, for tenants. If anyone suggests otherwise, I will take a very robust view with them.

[Mr Jackson]

For all I know, Mr Newby might be a lovely man. It is important to put that on the record.

May I also correct the record? I erroneously stated that the appointment was made under the auspices of a statutory instrument. I now know that that is not the case.

I think it is quite reasonable for key stakeholders to say that for a new group of Ministers and civil servants dealing with a complex, dense, difficult and contentious area, to err is human and there may have been genuine mistakes. I do not think that anyone is impugning the Minister’s integrity.

[Anna Soubry]

I am very grateful to my hon. Friend for his wise words. I take objection to the idea that the civil servants, in the most difficult of circumstances—they really are up against the clock—have not acted with total integrity. They have done a great job. I think that we sometimes forget that civil servants are professionals and human beings. With few exceptions, they serve us extremely well and do a good job.

Make no mistake: I do not have any complaints about the rigour of this place’s questioning and probing, and I am grateful to my hon. Friend for his comments. I hope he knows that I always act with complete integrity and would weigh up all the matters in favour of and against the appointment of anyone to ensure that we get the right person. I do not know whether Mr Newby is a lovely person, but I do know that he brings the requisite skills, ability and experience, and I am confident that he will act with integrity and do a good and fair job.

As I made clear on 10 March, Mr Newby is an excellent candidate. He was appointed in accordance with the code of practice for ministerial appointments to public bodies. As I did then, I take exception to any allegation that I or, indeed, anyone else has acted improperly or with complicity, and I have no doubt that he has all the necessary skills and experience of the pubs trade.

[Bill Esterson]

Will the Minister give way?

[Christian Matheson]

Will the Minister give way?

[Anna Soubry]

I will in a minute. There has been a very positive response to the appointment of Paul Newby as the Pubs Code Adjudicator. I am grateful for the briefing supplied by the House of Commons Library and the comments on 16 March from the Royal Institution of Chartered Surveyors, which we have heard a lot about and heard some quotes from. Its statement regarding the appointment of Paul Newby as Pubs Code Adjudicator went as follows:

“By the very nature of the role, the adjudicator’s office will need someone with past experience in this field of valuation and Paul’s professional history has seen him represent both pubcos and tenants at various junctures in his career. As Paul Newby will no longer continue in his role with Fleurets, there should not be a risk of this posing a conflict of interest in his execution of his new post.

An RICS spokesman has said: ‘Chartered Surveyors are expected to demonstrate the highest professional standards and act within the RICS Code of Conduct at all times. We have no reason to believe that Paul Newby is failing to meet these standards. On the evidence that we have seen to date, this does not appear to be an issue of conflict.’”

[Bill Esterson]

Will the Minister give way?

[Greg Mulholland]

Will the Minister give way?

[Anna Soubry]

I will continue with these comments by people who have paid tribute to Mr Newby, and then I will give way.

The British Institute of Innkeeping’s licensee of the year, Mr Keith Marsden, has said that Mr Newby has “fantastic integrity” and will be “both feared and respected” by pub companies. Others have also welcomed his appointment, highlighting that he has worked on both sides of the industry. I support the view of Ed Beddington, editor of the Publican’s Morning Advertiser, who said that Mr Newby should be “judged on his actions”. Punch Taverns has written that as well as acting for it on a couple of occasions, Mr Newby has

“acted against Punch on one occasion, on behalf of a tenant acting against us…To our mind, this gives him good experience from all angles of what will be a challenging role.”

[Greg Mulholland]

It is rather extraordinary that the Minister is giving an endorsement from Punch Taverns—one of the companies that Paul Newby is supposed to regulate—as if that is a good thing. But on the RICS point, I have seen that same correspondence to a RICS surveyor and I must point out that the RICS statement was only on the evidence seen “to date”. That was then challenged, and the fact is that it had not had any submissions before the one it had from the RICS surveyor who has complained. So I am afraid that is far from a RICS endorsement, and its own clear guidance shows that Paul Newby’s appointment is inappropriate. If we need to write to RICS further, then we will.

[Anna Soubry]

I shall continue.

[Bill Esterson]

rose—

[Anna Soubry]

Does the hon. Member for Sefton Central (Bill Esterson) want to intervene? Let me say a few words and then I will take an intervention.

As the Pubs Code Adjudicator, Mr Newby has a duty to set out arrangements to deal with any specific conflicts of interest. He will do so in the normal way and, as part of that, he will publish a register of interests. Contrary to the British Pub Confederation’s campaign, he has a wealth of experience on rents, rent reviews, lease renewals and landlord and tenant issues. It was that experience that I found particularly attractive in his CV and then when I met and interviewed him, as I did all three of the final candidates.

Mr Newby has also been involved in dispute resolution in those areas as an expert witness, arbitrator and independent expert for many years. In one case he represented a tenant who had significantly overpaid rent to a large pub company. That required sustained effort by Mr Newby to recover the overpaid rent. That is just an example of his work for tenants, certainly not of being in the pocket of large pub companies.

We have had reference to my former profession as a barrister. I do not want to fall out with the hon. Member for Leeds North West, but I do not think he quite remembered what was said. I was trying to make a point about professionals. The hon. Gentleman for—I have forgotten his constituency in Scotland; that is very rude of me.

[Richard Arkless]

Dumfries and Galloway.

[Anna Soubry]

Dumfries and Galloway. Excellent—I know exactly where he represents: Kirkcudbright. He made that point about when he was a solicitor. I do not know what work he did, but the point I was trying make was that certainly at the English Bar, and I think it is the same in Scotland with the advocacy system north of the border, a barrister may act for someone—I will be frank: I have acted for people who have been exceptionally unpleasant, usually because they had been accused of vile offences against children—and put forward their case, but that is not to endorse it in any way. Actually, the barrister might think they are some of the most despicable human beings.

Of course, that is not the position that Mr Newby will have as the Pubs Code Adjudicator. The clue is in the title: he will adjudicate, based on his experience and particularly because he has been able to see both sides of arguments. He brings great skills to the role. He will take up his appointment on 2 May to enforce the pubs code with independence and impartiality.

In answer to the proper comments made by a number of hon. Members, as it happens, on 10 May he will appear at 9.30 am in front of the Business, Innovation and Skills Committee. There is a good debate to be had as to whether public appointees should effectively have their appointments endorsed by Select Committees. I know that some are and some are not, but I do not think this is the time for that debate and I truly do not think that would have made any difference to Mr Newby’s appointment. He will also meet representatives from both sides of the industry in May and I hope that the hon. Member for Leeds North West will be pleased to know that Mr Newby is keen to meet him and representatives of the British Pub Confederation in his first weeks as the Pubs Code Adjudicator.

Today—very soon, I hope—I will place the Government’s response in the Library and lay the pubs code regulations. Time is of the essence, because we now know when the House will prorogue, so to get the pubs code up and running on 27 May we will lay the regulations today.

[Greg Mulholland]

rose—

[Anna Soubry]

I have some very good news for hon. Members, but if the hon. Gentleman wants to intervene, I will give way.

[Bill Esterson]

I thank the Minister for answering the question about when the regulations will be laid, but it would have been extremely helpful to have them in advance of the debate, so that we could discuss them today. Earlier, she said at least twice that serious allegations had been made about her having a conflict of interest in Mr Newby’s appointment. Will she say who made those allegations and what they have been? Using parliamentary privilege, she can name the person right here and now.

--- Later in debate ---

[Anna Soubry]

I get the impression that somehow I have acted with impropriety in appointing Mr Newby, and I want to make it clear that I have not.

I want to talk about the regulations we have laid today. There is some bad news: I have not agreed to the pub companies’ request for a six-month transition. The pub companies saw our draft regulations late last year. The requirement to provide a rent assessment is not new for them. We have staggered the points at which they have to provide MRO, to allow at least two months’ preparation. I know that they are, to put it mildly, less than pleased at that decision, but I take the firm view that they are able to implement the pubs code. They have had long notice of the code coming in, and frankly I just want to get on with it and get the code up and running, so that we can do the right thing by tenants.

I am grateful to everyone who responded to the consultation on the pubs code. I understand the frustration of the hon. Member for Leeds North West that we were unable to discuss his two amendments, but I will tell him about the view I have taken. I want to put it on the record that these are decisions I make. I often frustrate my officials because I do not always agree with the advice they give. I am not some sop who goes along blindly with the officials, as they would often testify. I did not need any persuading on this, because a series of options was put to me.

This is my decision. I can confirm that the pubs code will include transitional measures, which means tied tenants can access their MRO rights at rent review in the first six months. I can also confirm that the right to MRO at renewal of a tenancy will exist from the day the code is enforced. From that date, once a tenant or a pub company issues notices related to the renewal, the tenant will have the right to request MRO. The pubs code will set out that when a tenant chooses MRO, the MRO-compliant tenancy should be at least as long as the previous tied tenancy; that is important.

This is really important, and I am pleased that I might actually get a thank you from the hon. Gentleman. We listened to all that was said. I know that the British Pub Confederation has been briefing MPs that the pubs code will contain an investment waiver—actually, we are calling it an investment exception—that reduces MRO rights before a tenant signs on to a pub. I can confirm that that is not the case. The investment exception will not apply to investments made in empty pubs.

I agree that pub company gaming, which my hon. Friend the Member for Peterborough (Mr Jackson) mentioned, could be an issue, where a tenant’s rights to MRO are avoided, perhaps via an investment. The best insurance is to get the pubs code in place. The Government accepted an amendment to the Enterprise Bill that places a duty on the adjudicator to report cases of unfair business practices that are aimed at avoiding the code. It will open to the adjudicator to make recommendations to the Secretary of State to address any unfair business practices. I know I have upset the pubcos; I will be up front about that because I know I have not given them what they wanted. I have, I hope, satisfied the proper concerns communicated by tenants, and we are going to work on that.

In response to the hon. Gentleman’s point about previous ministerial commitments, the pubs code and regulations will honour the commitments made in Parliament. My guiding message to my officials—I have probably driven them mad—is that we have just got to be true to what we said we would do when the Small Business, Enterprise and Employment Act 2015 went through Parliament. Those commitments were on key issues such as the right to consider a tied tenant in parallel to an MRO offer; the extension of code protections in the event of a sale of a pub to a non-code company; an exemption for pub franchise agreements from the MRO and rent provisions in the code; and deferral of the MRO option of up to seven years in return for significant investment by the pub-owning business. On significant investment, I will probably upset the pubcos and some of the tenants’ groups by saying that the proposal of CAMRA—which is a cracking organisation—of 200% of dry rent is the right one.

My aim is to strike the right balance and to ensure we get a fair deal for both sides in what should not be an argument. We are moving in the right direction. I hope the hon. Gentleman will join me in welcoming the fact that we are very close now to having the pubs code in force. It will provide fairness to more than 12,000 tied tenants, which I know he and many others have wanted for some time.

As I draw my remarks to a conclusion, I am helpfully told that the regulations have been laid. I want to put on record my thanks to the officials. The clock has been ticking against us, and they have worked exceptionally hard to comply with the requirement to get the regulations laid in time for 27 May. At one point today, we thought that that might not happen; I will not trouble Members with the reason why. We were determined to get the code into practice. I have full confidence that Paul Newby will be an excellent adjudicator. The regulations are not in the Vote Office yet for Members to pick up after the debate, but a version should go online within the hour.

I very much hope that that will please the hon. Gentleman, although I have an awful feeling that I will never be able to please him. My hon. Friend the Member for Peterborough made a good point: if we get this right from the beginning, we will not have to keep going backwards and forwards. The regulations setting out the pubs code are subject to parliamentary scrutiny at any time, so we can amend them, but he is right that we must get them right from the outset. The legislation also provides for a review every three years.

I always say to everyone involved that my door is open. My door has not been always open in all of this, because it has been imperative that we do the right thing for both sides of the argument. I hope that everyone will welcome the pubs code and that our pubs can now have a new age and a new dawn, so that they continue to be wonderful, uniquely British places, so that we have an element of fairness for the tenants, who are very important, and so that we get the right investment and have a sustainable pub industry in our country.