Pubs Code and the Adjudicator

Debate between Bill Esterson and Lord Jackson of Peterborough

Thursday 14th April 2016 Westminster Hall

[Bill Esterson]

The hon. Gentleman described it earlier as a cock-up. Unfortunately, as with so many other aspects of the way the pubs code was drawn up and the way the level playing field was supposedly being created, the Government have not handled it well. There is clearly a contradiction between setting up an office and what the paragraph that the Minister read out states. As I said, others will make their own judgments about that.

I was talking about the Fair Pint campaign’s submission, which, by the way, was made before Mr Newby’s appointment was announced. It said that surveyors 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. What is more, it also points out that Royal Institution of Chartered Surveyors members who deal with pub valuations depend on pub companies for a large portion of their fee income. That is a clear conflict of interest. That warning was made before the adjudicator’s appointment was announced by the Minister and her boss the Business Secretary.

In RICS’s response to the consultation on the adjudicator in 2013, it said:

“We also have concerns in relation to how the Adjudicator process might work on a practical level…It is likely that many such specialists will have a conflict of interest having advised one of the parties on a range of matters or as an Independent Expert or Arbitrator.”

So RICS made the same point, well in advance of the appointment, that a surveyor is almost certainly going to be conflicted. Si Clarke from the Fair Pint campaign told the Minister when he met her that appointing a surveyor would be “catastrophic”. As he told me this morning, having an independent adjudicator can only mean not appointing a surveyor. He and others made that point extremely clearly to officials and Ministers throughout.

It is important to stress that the concerns about the adjudicator’s appointment are not a reflection on one individual. Nobody is suggesting that surveyors act in anything other than a professional way, with the utmost integrity. The concerns about the appointment of Paul Newby are not about Mr Newby. His integrity is not in question in any way. That has been confirmed throughout our discussions today and previously, and the hon. Member for Peterborough (Mr Jackson) made that point extremely well.

[Mr Jackson]

The hon. Gentleman is making a powerful point. It is unfortunate that the Minister has to defend this situation, which is, as much as anything else, about governance in her Department—indeed, in all Departments. In the absence of a confirmation hearing, the decision to go by statutory instrument rather than Standing Order and therefore to restrict the level of oversight and scrutiny by Parliament is regrettable. I gently say that the Government should reflect on the fact that we will continue to have instances when people say, “Is it cock-up or conspiracy?” and question individuals if the system sets its face against proper scrutiny.

[Bill Esterson]

I agree and echo the hon. Gentleman’s call for such appointments to be subject to Select Committee appointment hearings. That is the right way to go. The way he phrased it is a good way of emphasising that this is not about any individual. We are not questioning anybody’s integrity. I am glad he made that point, because it is important that we continue to stress it.

The problem is the conflict between Mr Newby’s work for Fleurets and his representation of the big pub companies over many years, and his ability to gain the trust of pub tenants. It is no good to say, as the Minister did, that he acted for pub tenants. As RICS pointed out, having advised either a pub company or a pub tenant could be perceived to lead to a conflict of interest. In any case, in examining the claim about Mr Newby’s having represented pub tenants, it is important to understand what that really means. Mr Newby’s CV, dated 10 February 2012, shows that he acted for the following pub tenants, among others: Enterprise Inns, Marstons and Punch Taverns. In other words, the same large companies can be pub owners and pub tenants, which raises questions about why his more recent CVs omit such detail.

We have not been able to get an answer to how many pub tenants whom Mr Newby or Fleurets has represented are the tied tenants of a single pub or the small number of pubs that they run. After all, with fees of £300 an hour or more for a firm such as Fleurets, it is rather doubtful whether any tied pub tenant with an annual income of £15,000 or less—or those with no income or those making a loss—would be able to afford such services.

When the Minister wrote to me, she told me that the appointment panel had satisfied itself that Mr Newby had no conflicts of interest. That is rather odd, given the RICS assessment of the same topic. I suggest to the Minister that had she said to me that the panel had found conflicts of interest, but had decided that they would not affect Mr Newby’s ability to do the job, that might have been a rather better case for her to make.

The point about conflicts of interest is that, by definition, they have the ability to undermine impartiality, to influence and to create doubt among those involved. The example of the Groceries Code Adjudicator’s conflicts of interest policy was mentioned earlier by the hon. Member for Leeds North West. The policy comments in some detail, recommending a two-year period before conflicts of interest start to diminish. It also states that they have the potential to be a “disqualifying interest”. When setting up the pubs code, why was a similar approach not adopted from the outset? Why are such rules not already in place? The pubs code conduct policy will be developed in time, but it would have made more sense to have it in place earlier. Had it followed the same approach as that of the Groceries Code Adjudicator, I suggest that it would have ruled out the appointment of surveyors, including Mr Newby.

Another thing that did not help was that the Minister chose to announce Mr Newby’s appointment during an intervention in a speech being made by the hon. Member for Leeds North West in the Third Reading debate on the Enterprise Bill. The way in which that was done, I am afraid, raised suspicions that not all might be well. She could have made the announcement in a statement to the House—she was forced to come back the next day anyway, to answer an urgent question—or in the Enterprise Bill Committee. Why did the Secretary of State not make the announcement during his speech on Third Reading? Why in an intervention, of all things? That was an odd thing to do and it raised suspicions.

Given the way the pubs code was drawn up—with the exclusion of parallel rent assessment from the consultation; with the need, in the last Parliament, for amendments to the Small Business, Enterprise and Employment Bill to protect pub tenants; with real, ongoing concerns about the way MRO could be avoided; and with the appointment of a surveyor with clear conflicts of interest, despite the advice not to appoint a surveyor—it is no surprise that pub tenants and the members of the British Pub Confederation are still deeply concerned about what is going to happen when the pubs code is implemented. In reality, as things stand, there is a strong possibility that the lack of a level playing field will remain and that tied pub tenants will continue to be denied a fair deal.

The Minister needs to get a grip, to ensure that the loopholes in the pubs code are slammed shut, and to go away and take a long hard look at the appointment of the adjudicator. I believe the Minister wants a fair market in pubs and beer, but she has a lot of work to do to get there and little time in which to do it before the 1 June deadline. The hon. Member for Leeds North West made a point in his opening speech about the need for confidence in the pubs code and the adjudicator. I ask the Minister: please listen to what has been said by Members today and by pub tenants, to ensure that the new pubs code delivers.