Pubs Code 2016

Drew Hendry Excerpts

Wednesday 24th January 2018 Westminster Hall

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Robertson. I congratulate the hon. Member for West Bromwich West (Mr Bailey) on bringing to the Chamber an important debate that affects many people’s lives.

Having managed bars during my career, I want to say a few words for the people who work in pubs and the hospitality industry. It can be a difficult and demanding job, but also very rewarding. All those people put in a shift and a half on many occasions, and do us proud, regardless of which nation of the UK they work in.

The hon. Member for West Bromwich West talked about difficulties with the adjudicator in England and Wales. He went into welcome detail about the challenges for operators—unfair expenses and difficulties in getting market rent. There were many things for the Minister to respond to. The impartiality of the operation is also an important factor to take on. The hon. Gentleman mentioned the onerous conditions placed on publicans, which I think will ring true for people who have been in such a difficult position.

The hon. Member for Chesterfield (Toby Perkins) said that the imbalance between powerful pub companies and people who are trying to run pubs is an historic market failure, which it is.

[Toby Perkins]

Obviously, we have introduced the code of practice—the hon. Gentleman has heard about some of the issues with its implementation, which hopefully Scotland can learn from. He will be aware that in the 2010 to 2015 Parliament, Scottish National party MPs voted for that code, because even though it was England-only legislation, they hoped that a similar provision might be introduced in Scotland. Will the SNP support the private Member’s Bill when it reaches the Scottish Parliament?

[Drew Hendry]

I intend to cover that point, and will answer it fully in a moment or two.

I congratulate the new Minister for pubs on his remit. If he listens today and is able to make the required changes, I am sure many people will raise a glass to toast his appointment. It is pleasing to be able to agree for a change with the hon. Member for Berwickshire, Roxburgh and Selkirk (John Lamont). It is a rare occurrence. He mentioned a private Member’s Bill in Scotland—I will return to that—and rightly said that the pub landscape in Scotland is different from that in England and Wales. He mentioned the importance of pubs in the community, and again I agree. In areas where pubs are successful, they make a vibrant offering to the economy. He also mentioned Burns. As he will be aware

“gude ale comes and gude ale goes”—

wise words indeed. The hon. Member for Strangford (Jim Shannon) made an important point about who audits the auditors, which the Minister should address. He also made a point about community.

On the private Member’s Bill, there is cross-party support in Scotland for looking into a statutory code, and to back that up the Scottish Government commissioned a study to look at various pub models. Work on that is ongoing, but it is looking at whether pubs in the tied sector are more unfairly treated than those in other sectors. The conclusion of the initial investigation was that, as I said earlier, it is difficult to compare the market in England and Wales with that in Scotland, because they are so different due to Scotland’s independent free trade model. The Scottish Government are currently looking into whether such legislation is required, and I understand that discussions have been continuing right up to the minute about how to take that forward.

Since the Minister for pubs is here, I wish to underline that pubs need support. In Scotland, the SNP Government are working closely with public bodies and the industry to support jobs, infrastructure and the hospitality sector. Interestingly, the introduction of minimum unit pricing, which targets very cheap alcohol, could help the pub economy in Scotland because it will prevent people from buying cheap drinks in supermarkets, and allow them to spend more time in the controlled environment of a pub. The alcohol minimum pricing is set at 50p a unit. The chief executive officer of the Scottish Licensed Trade Association, Paul Waterson, has said:

“Cheap priced alcohol has turned Scotland into a nation of stay-at-home drinkers. Some 72% of total alcohol sales in Scotland are off-sales; 80% of this total, is sold by supermarkets. When people drink in uncontrolled environments, alcohol-related problems increase significantly.”

The brewing and pub industry in my constituency has had considerable success. Cairngorm brewery is nearby, as is the Black Isle brewery. The oldest bar in Inverness is Gellions, which was formed in 1841, and the Best Bar None awards have just declared through their best bar scheme that 22 venues in Inverness have won awards for outstanding efforts in helping to create a safer environment for the public. Will the Minister look into the small business bonus that has operated successfully in Scotland? Two out of five pubs now pay zero or reduced rates thanks to that bonus, which helps their viability.

[John Lamont]

Does the hon. Gentleman recognise that, because of the reforms to business rates introduced by the Scottish Government, many pubs, including many in my constituency, have seen their business rates go through the roof? The basis on which rates are now calculated means that many businesses are paying much more than they were under the previous regime, yet they are not seeing any additional income and many pubs now face closure.

[Drew Hendry]

The hon. Gentleman is trying to make a point. He will also be aware that the Scottish Government have acted to restrict the increase in rates for the hospitality trade, and put measures in place to ensure that pubs and other small hotels and businesses are not disproportionately affected.

In conclusion, the Minister has an opportunity to make a big difference to the pub industry and I hope he will listen to the points raised by hon. Members about the situation in England and Wales. I also hope that he will consider other measures to support the licensed trade, and ensure that the pubs in our communities are viable.

--- Later in debate ---

[Bill Esterson]

I will pass on that message from the Minister.

Given that I follow the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry), I will point out that my constituency includes the oldest pub in Lancashire, the Scotch Piper Inn—there is a link there of some sort. We have three microbreweries and two micropubs, the Beer Station and the Corner Post. The hon. Member for Strangford (Jim Shannon) made a good point about the importance of pubs as community hubs, and I agree with his other comments about the need for accountability in the implementation of the code.

My hon. Friend the Member for West Bromwich West set out the key issues with his usual forensic accuracy, and he mentioned the concerns about the appointment and continuation in post of Mr Newby. I raised concerns about conflicts of interest in the debate two years ago, and such concerns have continued. Sadly, the predictions about Mr Newby’s difficulty in obtaining the trust of pub tenants have been all too well demonstrated. The cases against him by the Chartered Institute of Arbitrators—that he has continued to arbitrate and has not accepted the decision, and that he is in breach of the code of conduct for a body of which he is a member—have not helped, and they continue to give the impression that all is not well with the implementation of the pubs code.

My hon. Friend the Member for Chesterfield (Toby Perkins) was modest in not mentioning his role in securing cross-party agreement on amendments to the Small Business, Enterprise and Employment Bill in 2015. The cross-party agreement had a lot to do with his work, as well as that of Greg Mulholland and other Members across the House. We had the insertion of the market rent only option, but the delivery of that is missing, as is any assurance on the intention that tied tenants should not be worse off than they would be if they were free of tie. My hon. Friend made those points extremely well. As he said, it is vital that we make this work. That is why it is so important that we are having this debate.

I will go through three points for the Minister, who I welcome to his new role. His brief is interesting and exciting, and it is important for many people across the country. I hope he is able to get to grips with the real challenges and concerns that remain. Three questions have been brought to my attention in preparing for this debate. They have been covered, but I will attempt to summarise them. First, the Government may make the point that the code is complicated and will take time to bed in. That is true, but it is overly complicated and completely unnecessarily so. As other Members have said, that complexity has allowed pub companies to use their resources and their power in the relationship—my hon. Friend the Member for Chesterfield made this point—to make it difficult for pub tenants to challenge them and achieve the fair market approach that they should be entitled to. Because of the size of the legal bills, it is simply not possible for pub tenants who attempt to use the code to come up with the necessary resources.

The second point that the Government may make is that the Pubs Code Adjudicator, through the Government, was not prepared for the huge take-up. Few staff were in place at the start, and there was a delay in putting in place a deputy adjudicator, despite the overwhelming evidence of abuse. There were 15 years of inquiries by Select Committees, as my hon. Friend the Member for West Bromwich West set out in his opening speech. The system was not set up in the right way, and it should have been.

The third point that the Government may make is about whether there has been an improvement in the financial balance between the pub-owning companies and pub tenants. Ballpark figures suggested to me are that a pub company would typically earn £90,000 from an average pub, which possibly breaks down to £20,000 in rent and £70,000 from tied products. The tenant earns just £10,000. Because of the process, the delays and the inaction from the adjudicator, it is difficult to do anything about that; but for those who try, there has been something of a change, as my hon. Friend the Member for Chesterfield alluded to. There may be a slight improvement, with a £5,000 or £10,000 reduction in the rent and an increase in the tenant’s income to £15,000 or £20,000, but that is still not a realistic living wage for someone running a pub, and the pubco is still earning £80,000 or £85,000.

The point is that legislation was supposed to leave the tenant no worse off than they would be if they were free of tie, not marginally better off than poverty levels. That is the point being made by the campaigners. I pay tribute to all the campaigners who have lobbied so hard over the years—including for this debate—advocating for pub tenants. I include in that Liverpool CAMRA, which has been in contact with me a number of times over the years.

On their own, the three areas that I have set out are grounds for the Minister in his new role to make an early commitment, today or after he has considered the debate, to carry out a proper review of the application and implementation of the pubs code and how the adjudicator is operating. If he can address that and the other points made by my hon. Friends, we will make some real progress.

I am tempted to say—so I will—that the right hon. Member for Chipping Barnet (Theresa Villiers) demonstrated a certain failure by a Government of which she was a member for some years to support a pub in her constituency. I can assure her that the next Labour Government will stand up for pub tenants in a way that so far has not happened under this Government, and that will not happen unless they make the changes touched on in this debate. I was grateful to the hon. Member for Berwickshire, Roxburgh and Selkirk (John Lamont) for pointing out that in Scotland, Labour is at the forefront of introducing a pubs code north of the border.

[Drew Hendry]

It is a cross-party position.

[Bill Esterson]

Well, there is a Scottish Government of one minority party. Perhaps they will learn from what has happened here and get the implementation right.

We want to hear from the Minister, so I will make only a few further remarks. Tenants’ experience has revealed the process to be drawn out and complicated. Many have to turn to professional legal support, which is expensive and time-consuming. Most worryingly, there have been suggestions that the pubcos are knowingly gaming the code to make it more difficult for tenants to achieve market rent only. That essential plank of the pubs code sought to redress the balance between pubcos and pub tenants.

The adjudicator’s own independent report on the allegations suggested that pub-owning businesses may be operating the code in a way that makes it hard for tied pub tenants to access their MRO rights. It revealed the shocking lengths to which some pubcos go to wear down tenants, including intimidation, bullying and antagonistic, delaying and frustrating behaviour. Tenants are often given terms that make MRO appear as unattractive as possible, such as being arbitrarily forced to provide six months of MRO rent up front. Some pubcos have refused to allow the deed of variation of lease, thus forcing tenants who want MRO to agree a new lease under unfavourable terms. That is pretty damning. I give credit to the adjudicator for carrying out that review, but it is what he does with it and how quickly he acts that matters.

There is identified failure in the full implementation of the code, and Parliament’s intentions have so far not been followed. I look forward to hearing what the Minister has to say, and I thank Members for their comments. I hope he can give us a proper assurance that there will be the action that is needed, and not just words.