Ed Davey
Main Page: Ed Davey (Liberal Democrat - Kingston and Surbiton)(12 years, 4 months ago)
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Greg Mulholland (Leeds North West) (LD)
I echo my earlier comments commending the Select Committee on its excellent work. The all-party save the pub group has been delighted to work with the Committee and support its work. I am disappointed that we have to have this debate. As has already been made clear, in the past 18 months we received unanimous, cast-iron commitments from Front-Bench spokesmen of all three main parties that, if self-regulation failed by June 2011, a statutory code of practice would be introduced, including the all-important genuine free-of-tie option.
If people ask why this should be reviewed in the autumn, the simple answer is that it has been going on for seven years and generated four Select Committee reports. The last attempt at self-regulation was supposed to be the final one, which makes the Government’s response even more baffling. The sad reality is that their response simply does not deal with the fundamental issue, which is that the big pub companies take too much from each pub and it makes it difficult or impossible for those licensees to make a living, and that also shuts pubs. The Government’s response does nothing whatsoever to address that.
I am afraid that the Government have also been sold a pup. The immediate improvements outlined in their response are illusory. First, there are no substantive changes in the new framework code of practice produced by the British Beer and Pub Association. Secondly, and even more worryingly, the whole idea of putting the new codes on a legal footing is a mirage. The BBPA’s own legal advice—let us all be clear that it is the representative organisation of the pub companies—based on a legal authority that goes back 100 years, the Carlill case, has made it clear that, if we are to rely on that case, those codes are already binding. A letter was sent to pubco lessees over Christmas that worried them considerably. It suggested that the 2010 company code of practice would become binding if they sought to use it in any case, which is clearly an offer to ensnare them in further obligations to their landlords not already covered in the lease.
The first question to the Minister is this: how on earth can anyone be seeking to put on a legal footing codes that he himself has said are inadequate? He has written to the Select Committee Chair, stating:
“In some case, primarily where the letter was sent in advance of the new code being agreed, the link to the industry Framework Code led to the former version rather than the enhanced version, of the code; however, this will be superseded by the new version of the code once it has been agreed.”
The simple problem is this: which code and which offer? There are so many codes floating around, it is an absolute mess. The Minister needs to know that many licensee organisations believe that the Government, accepting the advice of the BBPA that it is a good idea to make the codes legally binding, will actually make the situation worse for licensees, not better.
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Davey)
For the sake of clarity, it is the industry framework code that will be legally binding, and it is the strengthened industry code as agreed with the Federation of Licensed Victuallers Associations and the BBPA on 22 December last year.
Greg Mulholland
Not only was that code opposed by all the other organisations, but it was the old company codes that were mentioned in the letter, and the Minister has not adequately addressed that point.
Greg Mulholland
Sadly, I am afraid that the explanation appears to be clear from the freedom of information request submitted by the save the pub group: the so-called Government response is basically the BBPA’s own report, with some passages and commitments taken word for word—indeed, there is even a typo in the BBPA report presented to Ministers that was directly cut and pasted into the Government’s response. I am afraid that the evidence is damning, which is why many organisations are saying that the Government should halt their entire proposal for reform in its tracks.
Greg Mulholland
I apologise to the Minister, but I have given way twice. He will have plenty of time to respond.
This is clearly not an industry solution. I am afraid that the Minister has been misled by the BBPA, because its report, which was copied into the Government’s response, clearly stated that the Association of Licensed Multiple Retailers and the Guild of Master Victuallers had agreed to be part of the pub independent conciliation advisory service. However, the chairman of GMV has stated:
“We as an organisation have neither agreed to, or been presented with, any proposal in respect of our participation in PICAS at this time.”
The Minister needs to ask why he has been misled by the BBPA and then answer to the House.
Let us be clear that the Government’s proposals for reform are not industry proposals. They are not supported by the Independent Pub Confederation, the GMV, the Federation of Small Businesses, the Forum of Private Business, the ALMR, CAMRA, Fair Pint, Justice for Licensees, Licensees Unite or the all-party save the pub group. Why on earth did the Minister suggest throughout the Government response that it is an industry proposal? It is not even the Government’s response, but the response of the pubcos trying to avoid the self-regulation that he agreed was necessary.
The Prime Minister rightly talks about dealing with crony capitalism, and I absolutely agree with him on that. In 2010, after shares in Enterprise Inns collapsed—they fell from 770p in 2007 to 26p in January this year, a decline in value of 96.6%—Mr Ted Tuppen awarded himself a 50% pay rise of £412,000, taking home £1.22 million, including a bonus of £558,000. At the same time he was closing pubs and making things impossible for tenants. I am sorry to say that the Government’s response has backed the pub companies and crony capitalism in the worst sense.
We now need the statutory code of practice, including the genuine free-of-tie option. That was promised by the Minister, the Secretary of State and the Prime Minister before the election. We have waited long enough. We will wait until the autumn, but no longer.
Peter Aldous (Waveney) (Con)
I am grateful to the Backbench Business Committee for granting this debate and to the hon. Member for West Bromwich West (Mr Bailey) for securing it.
Before I came to this place, I spent 27 years as a chartered surveyor. During that time, I carried out rent reviews on most types of business properties, although my experience with licensed premises was peripheral. Underpinning most rent review valuations is a requirement to assess the open-market rental value. That is the best way of establishing a rent that is fair to both parties, providing landlords with a fair return on their investment and tenants with a reasonable opportunity to build a sustainable business into the long term. If the two parties are unable to agree, the matter is referred to an arbitrator or an independent expert.
It is bizarre that a procedure that is routine for the vast majority of business people who lease premises is not available to a particular group: pubco tenants. Research produced by CAMRA shows that such publicans are at a considerable disadvantage compared with non-tied operators. They are worse off financially and work harder for a lower return, normally burning the midnight oil, tackling red tape and filling in the dreaded VAT return.
The tied system has some advantages in that it can provide an opportunity for people to set up their own businesses without having to raise large amounts of capital, and it continues to form an important part of many family brewing businesses. However, it should have the potential to act as a stepping-stone, with people then moving on to own their own businesses, as we heard from my hon. Friend the Member for Staffordshire Moorlands (Karen Bradley); it should not drive people out of business altogether.
The tied system was devised in a different era, which is long since gone, when the pub market was dominated by many family brewers, who wanted to ensure that their pubs sold their beer. Those brewers had a vested interest in ensuring that their pubs were well run, and landlords duly received support. In return, they bought their beer directly from the brewers, with no middleman in between. Many of those breweries were household names, but they have long since gone. Tollemache, Cobbold, Lacons, Bullards and Manns owned pubs across Suffolk and Norfolk. Today, only Greene King and Adnams remain, along with micro-breweries such as Green Jack in Oulton Broad in my constituency. Greene King and Adnams continue to run their tied houses well and successfully, but the market is now dominated by pubcos, which do not brew their own beer; they are middlemen taking their margin, and they have different business objectives from the family brewers. Given those changes, it is appropriate that the tied system should be reformed, and the proposals in the motion appear sensible and logical.
As we have heard, there are other issues that need to be addressed: the taxation of beer; the reform of licensing laws, which, since 2003, have made it more difficult to play live music; and the below-cost sale of alcohol by supermarkets. However, for me as a chartered surveyor, there is one other subject that needs to be addressed: the rating system. Many publicans scratch their heads over how the Valuation Office Agency has arrived at such a high rateable value assessment for their properties. The art of rating valuation has, I am afraid, become totally abstract and distant from reality. Town centre drinking barns, which are subject to a different rating regime, seem to have an unfair advantage over community pubs. That anomaly needs to be addressed, but that is a debate for another day.
Mr Davey
I wanted to intervene on the hon. Gentleman before he finished his remarks, because he is a chartered surveyor. I therefore invite him to welcome the fact that, in our negotiations with the BBPA, we secured a strengthening of the industry framework code, which will specify that all rent review assessments must comply with Royal Institution of Chartered Surveyors guidance, and that rent assessments for new full repairing and insuring leases must be signed off by a RICS-qualified individual.
Peter Aldous
I am grateful to the Minister for giving that clarification.
In the meantime, let me conclude by saying that although there are other issues that need to be addressed to enable pubs to compete on a level playing field, we have an opportunity to address an iniquity that, in many respects, is leftover from a bygone age. I therefore support the motion.
John Pugh (Southport) (LD)
I begin by paying full tribute to the Select Committee for its work, particularly for the sterling work done by the hon. Member for Northampton South (Mr Binley) and my hon. Friend the Member for Leeds North West (Greg Mulholland)—usually the quietest and most self-effacing of men. They have clearly been angered by this issue.
This seems to be a debate about two solutions to a commonly recognised problem—the unfair trading practices associated with the tie, and the relationship between tenants and the pubco. The problem is not one of competition, and it is not one of competition failure or consumer choice. It is connected with associated issues, which hon. Members have mentioned, such as the decline of community pubs, the decline of community cohesion and so forth—generally regarded as a social ill, except perhaps in temperance circles. What we are debating now is not necessarily connected with that problem, however, as free houses are also closing, disappearing and depriving their community of their benefit.
At its simplest, the issue is about the running of the tied pub and how it can be made uneconomic for tenants through unfair and non-transparent terms of trade. It has been suggested that this is not an unwelcome outcome so far as the pubcos are concerned, because they are short of capital and in some cases anxious to sell off. That the terms of trade are penal, non-transparent and arbitrary is simply not in dispute anywhere in the Chamber. It has been demonstrated by the turnover of tenants, who are coming and going all the time, by the Select Committee’s reports, and by the Government’s own undertakings to do something about what they have clearly identified as a problem. The issue that divides the House, if indeed it does divide it, is how to find a way out.
The Government are arguing for a non-statutory code, for fairly straightforward reasons. They dislike regulation in principle—they have said as much—they prefer effective self-regulation, and they believe that a non-statutory code represents a quicker fix. It clearly does not help that their favoured solution is also the favoured solution of the accused—the pubcos, in this instance—and that there has obviously been collusion in the refining of the suggestion, but that in itself does not invalidate the solution.
John Pugh
I refer the Minister to the speech of my hon. Friend the Member for Leeds North West, who presented a fair amount of prima facie evidence that I think impressed the House. However, I want to do the Minister a favour here. It could be argued that the consent and co-operation of the pubcos will make any solution more workable—just as restorative justice is often preferable to sheer penal justice—especially if a self-regulatory code is given some legal significance, although, as other Members have pointed out, a statutory code would lead to more compliance and less legal recourse. That sounds pretty reasonable, apart from the fact that the Government clearly promised something else and have lost trust, and the fact that the pubcos have a dismal record of keeping to commitments, as the Select Committee’s report made clear.
Overall, the Government’s response represents the triumph of hope over experience, or of realpolitik over trust. There is a long and—as must not be forgotten—sordid history of a connection between politicians and the brewing industry over the ages, dating back to the time of Gladstone and before, with the tenant often perceived by the Liberals as the victim. Ultimately, this is the Government’s call. If they ignore the Select Committee’s advice, they will risk being considered untrustworthy; I think that that is inevitable now. They gamble on the good faith of the pubcos, but what if they are wrong? That is my main question to the Minister. If this is not a solution but in fact an evasion, statutory regulation must be the only conceivable answer.
Damian Hinds
The motion does in fact specify a “free-of-tie option”. Many pub-owning companies would say that some sites are appropriate for leases—where the partner can build the value of the lease by building up the food business, for example—whereas others are more appropriate for a traditional tenancy-type business. The motion as stated would conflict with that approach.
In addition to that false implicit impression, there is a confusing conflation of tenants and lessees. On the one hand, we seem to be saying that this is only about very large pub companies that run leases; yet a number of those who have spoken in favour of that proposition have referred to the people in question as tenants. I am not entirely sure where the cut-off point of 500 sites comes from. It is possibly intended to target just a couple of companies, but frankly, coming up with a regulatory package for the whole industry is probably not the best way to do that. I fear that that would pull in a couple of other companies it is perhaps not intended to target.
Most importantly, there is little evidence that I know of that traditional, smaller, integrated brewers have any difficulty with the tie, which suggests to me that there is no problem with the tie per se.
Damian Hinds
The Minister is correct, and that is indeed in the Government response. Unfortunately, the BIS Committee report, which is a fantastic report and to which we are to some extent referring, does not make that distinction quite so clearly.
What should we do if the tie is not the answer? Let me start with what we should not do. The Government response puts it rather well:
“Government should not intervene in setting the terms of commercial contractual relationships”
where, according to the OFT, there are no competition issues that significantly affect consumers; and
“whether or not a lease or tenancy includes a tie is a commercial decision on the part of both parties.”
Lorely Burt
Indeed, but the Office of Fair Trading report found that there was not detriment to the consumer in response to the tie. The pubs I go to tend to have all sorts of guest ales as well, so there is still that possibility.
Toby Perkins
I am afraid I do not have time.
The hon. Member for Bristol North West (Charlotte Leslie) felt that on balance there needed to be some regulation. She defied those who think that a Member cannot make a serious speech wearing a scarf—something that may catch on.
My hon. Friend the Member for Sheffield Central (Paul Blomfield) talked about how, because of their flawed business model, the big pub companies are squeezing out unreasonable returns. My hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) said that the Prime Minister was dodging his round at the bar. The hon. Member for Nuneaton (Mr Jones) reminded us of the role of the pub in uniting couples over the years. He reflected on the good fortune of Mrs Jones to have been drinking in the right pub at the right time.
There were interesting contributions from my right hon. Friend the Member for Torfaen and my hon. Friend the Member for York Central (Hugh Bayley). The hon. Members for North Swindon (Justin Tomlinson) and for East Hampshire (Damian Hinds) spoke about alternative ways in which pubs might choose to improve themselves.
Today we have heard a lot about the history of this issue, but it is worth reminding ourselves that we have had seven reports and there have been four inquiries by the Business, Innovation and Skills Committee. The Government’s response has many flaws, which other Members have exposed, but I want to talk about two specifically.
On the issue of pub closures, which was exposed by the hon. Member for Pendle (Andrew Stephenson), the Minister has swallowed the big pub company line that free-of-tie pubs are more likely to close. He must know that in general tied pubs do not close permanently, because, as the hon. Member for Brighton, Pavilion (Caroline Lucas) pointed out, they have a history of churning through huge numbers of landlords who try and fail—another business going under, another life unfairly ruined. One pub company had a churn rate of 65%, so although the hon. Member for Solihull (Lorely Burt) says that people should go into such arrangements with their eyes open, that does not reflect the reality experienced by many tenants and lessees. Like the hon. Lady, my hon. Friend the Member for Edinburgh South (Ian Murray) was previously a landlord—for Enterprise—and has strongly made the point that many people’s lives were ruined because they were not aware of what they had let themselves in for.
In March 2010, a Federation of Small Businesses survey found that 84% of tied businesses believed that their relation with the pubco did not allow them to compete effectively, 90% believed that the arrangements meant that they could not make a fair profit, and 87% indicated that they wanted to be free of the tie. Despite that evidence, the Government say in their response, as my hon. Friend the Member for Wrexham (Ian Lucas) pointed out, that the debate over tied or free-of-tie status is a distraction. We think that is entirely wrong.
The FSB is not the only organisation to study the issue. The Institute for Public Policy Research also questioned tenants and lessees, and its findings showed that free-of-tie landlords manage pubs longer, are more optimistic about the future, are less likely to be struggling financially, and earn more. According to that study, 46% of tied publicans earn less than £15,000 a year. The hon. Member for Cheltenham (Martin Horwood) noted that the IPPR found that 88% of publicans who claim to be struggling financially identified the beer tie as one of the most significant factors in their financial problems.
The Minister, in his written response, built a man of straw, claiming that the critics were calling for the tie to end completely. He must know that that is not the case. All the critics are saying is that if the traditionally tenanted arrangement is such a good deal, why can the big pub companies not offer both tied and free-of-tie options, and let their tenants decide?
The Select Committee discovered that at every turn the big pubcos had failed to take the actions they had promised. In desperation, the Committee said in March 2010 that it would give the industry a final chance to prove that self-regulation could work. It was supported by a sympathetic Government who promised to back its findings. When there is such knowledge and such commitment and when the industry has been given every chance to put its house in order, how can the Minister possibly write that the issue is more complicated than the critics realise?
What the critics may have failed to understand is not the issue surrounding pubcos but the developing relationship between the pubcos, the BBPA and the ministerial team. As the hon. Member for Leeds North West said, the save the pub group has discovered, through freedom of information requests, that throughout the process the referee was getting changed in the same room as one of the teams.
Toby Perkins
The Minister’s colleagues, the hon. Members for Southport and for Leeds North West, were deeply uncomfortable about the relationship. The findings of the save the pub group, through freedom of information requests, show that parts of the BBPA’s report—including the typing errors—were just cut and pasted into the Government’s response. I do not know whether the Minister is still listening to me. It is difficult for him to say that there is no evidence when Members who sit on the same side of the Chamber as him feel that the relationship is deeply unhealthy.
It transpires that before the Select Committee report came out the Minister had made up his mind that he would not consider legislation. As I said, the Government’s response to the report is, in substantial part, the BBPA’s own report. As my hon. Friend the Member for West Bromwich West said, it is now clear that the Minister has had no independent legal advice on the legality of the framework, and instead has relied on legal advice provided by the BBPA. It has become clear that his officials were assisting the BBPA with the wording of a press release as early as October, when as far as interested bodies were concerned the Minister was still sticking to his commitment to push through legislation. In fact he was merely paving the way for the BBPA’s preferred option. That is just what we know. Other information requested by the save the pub group has been hidden by the Government. How much worse can it be?
The verdict of the all-party save the pub group is damning. It says that the Minister has not been naive; the action is deliberate and, at best, a lazy response by him in the hope of clearing his desk. The verdict of the Federation of Small Businesses is equally clear. It is extremely disappointed by the Government’s response to the Select Committee inquiry and extremely concerned that this agreement appears to have been negotiated with the BBPA and the larger pubcos without substantial consultation with interested parties.
If a Minister were able to come to the House and create a policy that united opinion throughout the House, including the Select Committee, and among the numerous groups referred to by the hon. Member for Leeds North West, we would call him a genius. I have no idea what the word is for the opposite of a genius, but the Minister appears to have achieved the absolute opposite of that united opinion. Who else is calling for the Government to legislate on this issue? Who else does the Minister think simply does not understand its full complexities? Alongside the Select Committee, the Federation of Small Businesses and the all-party save the pub group, there is CAMRA, the Independent Pub Confederation, Fair Pint, the GMB, the Association of Licensed Multiple Retailers, the Guild of Master Victuallers, Unite, the Society of Independent Brewers and the Forum of Private Business. If the Minister could leave the Chamber and come up with a policy that united all those people in his favour, he would take a huge step forward in his career.
As has been declared, this was an opportunity to take steps to resolve the problems faced by the 87% of landlords who indicated that they wanted to be free of the tie. The Minister has wilfully and deliberately set out to avoid living up to that commitment. He says in the Government’s response that the industry will waste no time in living up to these demands, given the parliamentary interest in the matter. As the hon. Member for Eastbourne (Stephen Lloyd) made clear, that is a risible claim, as all the evidence we have seen from the pub companies over the years demonstrates.
Who has the Minister let down? He has let down the Select Committee, which worked so hard and which he promised to back, and all those who contributed to its hearings. He has let down the small family brewers who have been shut out of many pubs as a result of the pub companies’ market domination. He has let down the Federation of Small Businesses, which campaigned so strongly, and let down CAMRA and the Fair Pint campaign. He has let down the 25,000 publicans across Britain who run tied pubs. Most of all, he has let down the customers who were relying on him to secure a fairer balance between landlords and the pub companies.
Never before has there been such a concern about crony capitalism or such an expectation that the Government should stand up for small businesses. This issue confirms what we have always suspected: beneath the warm words, what we are getting from the Government is business as usual. They are on the side of the rich and the powerful, standing up for large vested interests and leaving publicans to fight for themselves.
Ultimately, this issue set three tests for the Minister. Would the Government intervene to ensure a fair relationship between big pub businesses and small business people? Would they keep their word and do what was right, even when a big, powerful lobby asked them not to do so? Would they listen to the voice of the people, the voice of small businesses and the publicans at the coal face of the industry or, when they were needed, just back down? On all those tests, the Government have failed.
This is not a party political issue. Everyone agrees that the Government have got it wrong, as we heard today from Conservative and Liberal Democrat Members. A huge opportunity has been missed and the pub lobby will not believe that this House is serious about action, but it is not too late. Members must ensure that the industry is held to account by supporting the motion, ensuring that an independent body is allowed to come in and monitor what actually happens. Only then will there be any chance of people having a serious hope that the House will take action. I commend the motion to the House.
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Davey)
It might surprise the House to learn that I am very grateful for today’s debate and for all the contributions made by hon. Members, not least because our deliberations will be read by the industry, including the pubcos, and because there is agreement on a number of issues. We all agree that, while we want to enable businesses to generate growth and jobs, we also want them to operate fairly. There is no doubt that the Business, Innovation and Skills Committee identified a number of concerns about how the pub industry is operating. I strongly agree with the importance the Committee and hon. Members attached to the role of pubs in communities the length and breadth of this country.
Before addressing some of the specific issues raised today, I would like to outline the reforms that the Government recently secured from the industry so that no one is in any doubt about them. The reforms deliver on our promise to take action and are much more significant than many Members have suggested today. The industry framework code is to be made legally binding, and I can tell the House that all six of the big pubcos, as well as a number of the smaller family operators, have already declared publicly on their websites that they are legally bound by this code and sent letters to their licensees setting out an open and unlimited offer to this effect. That already represents over 70% of the tied trade and 100% of the large pubcos.
A pub independent conciliation and arbitration service—PICAS—is to be set up. It will provide mediation and arbitration on any matter relating to the framework or company codes and the results will be binding on both parties. That will be done by the end of next month. There will be a three-yearly re-accreditation process for company codes, administered by the British Institute of Innkeeping benchmarking and accreditation scheme through examination of annual compliance reports and spot checks. A new pubs advisory service—PAS—will provide an initial offering of free advice to all prospective and current tenants and lessees. There will be a strengthened framework code, with a particular focus on full repairing and insuring leases and on issues such as rent, insurance, transparency and pre-entry training. This strengthened code was agreed between the BBPA, the BII, and the FLVA, which is a licensee organisation, on 22 December. Those reforms have the potential to deliver real change for tenants and lessees across the country, and they are being brought into effect far more quickly than legislation could achieve.
There have been suggestions of collusion, with allegations that in the process the Government listened only to the BBPA and were deaf to the voices of licensees. That is simply not true. I have met CAMRA three times over the past year; I have met my hon. Friend the Member for Leeds North West, the chair of the all-party save the pub group, four times over that period; I have met the Independent Pub Confederation; and I have met representatives of the Association of Licensed Multiple Retailers, a licensee organisation, with which we were in detailed discussions while negotiating with the BBPA.
Toby Perkins
Did any section of the representations from the groups that the Minister has just mentioned find its way directly into the Government’s response, or was it simply the BBPA’s representation that turned up there?
Mr Davey
I heard the concerns of those organisations and the problems in the industry, and that is why we have taken action. The hon. Gentleman tried to say that this was not a party political issue, but he made it into one. He and his hon. Friends had 13 years to take action, but they took none.
During this process, I have read copious reports on and information about the concerns of licensees, and we have taken action to address their concerns when we have felt that action is appropriate. We will always listen—
Mr Iain Wright (Hartlepool) (Lab)
My hon. Friend is a former Business Minister.
Mr Davey
I will give way later on; I want to make some progress, because some serious allegations have been made.
Reference has been made to the freedom of information request, which is alleged to show that we just accepted the status quo and the views of the BBPA. The Government have now released more than 90% of the documents requested under the recent FOI request, and more than 500 pages of documentation can now be found on our website, including discussions and minutes of meetings with the BBPA, the ALMR and CAMRA. They show clearly that we listened to all sides and negotiated hard with the BBPA.
For example, there are the minutes of the meeting with the BBPA on 12 October, in which I laid down the conditions that any self-regulatory deal must satisfy. Otherwise, we would have had to consider regulation. The minutes show that the key conditions were those that I laid down—that the code must be legally binding, that the code must be strengthened and that there must be an independent dispute resolution service.
Following my initiative, the BBPA went away to write its report, which it sent to me on 20 October, and I can assure the House that in the meeting on 12 October the BBPA did not want to give the concessions that we wrung from it. Indeed, an e-mail on 20 October, which is in the FOI request, shows that my officials contacted the ALMR, a member of the IPC and a licensee organisation, within half an hour of receiving the BBPA’s offer in order to seek that organisation’s opinion. In the freedom of information request, there are e-mail exchanges in which we pressed the BBPA on how it was to make the code legally binding, and to give firm dates for implementing its commitments and establishing PICAS. That information is available on our website, and I am happy to place it in the Library.
Mr Davey
No, I want to make some progress. [Hon. Members: “Oh!”] I will give way to the hon. Gentleman in a bit, because in two and a half hours’ evidence to the Select Committee he quizzed me for an hour, so let us be clear that I have answered an awful lot of questions from him.
Why did we not legislate? Some in this Chamber wanted the Government to step in and regulate, and some even believe that we promised to do so, but we promised to take action, and that is what we have done. We have had to consider all the evidence and the action that we would take, and I believe that the action we have taken is appropriate and effective.
We did not legislate because, first, we wanted to act now, not in two or three years’ time. To legislate, we would have had to carry out a lengthy process of consultation, of drafting and of pre-legislative scrutiny, and after that we would have had to fight for a slot in the legislative Sessions. It is highly unlikely that such a slot could have been found quickly.
Secondly, this is a deregulatory Government. Additional regulation should always be a measure of last resort. For the Government to intervene in the commercial contractual relationships between two parties, they must have very good reason. That is in line with the Government’s top priority of achieving strong, sustainable and balanced growth, and generating a climate that supports enterprise and creates jobs.
Thirdly, the Office of Fair Trading found in October 2010 that there were no competition issues affecting consumers in this market. That is a critical point, but I am afraid that the Select Committee report did not discuss it. I am aware that in some circles, it is believed that the OFT is wrong. That is not a view that I share. As Minister with responsibility for competition, I have high confidence in the rigour and accuracy of the OFT. Without evidence of competition issues, the rationale for Government intervention is significantly reduced. That is in contrast to the situation in the groceries market, where the Competition Commission found evidence of competition issues. The Government have therefore committed to introducing a groceries code adjudicator as soon as parliamentary time allows to ensure that large retailers treat their suppliers fairly and lawfully.
Mr Davey
I will in a bit, but I want to make progress.
What we have delivered instead of regulation is a self-regulatory regime much stronger than we have had before. As a result of commitments made by the pubcos, they will be obliged to comply with the code and it will be delivered at least two or three years sooner than under an Act of Parliament. That is in line with the Government’s commitment to focus on delivering reform for small businesses right now, not in a few years’ time.
I have listened to campaigners on the issue of the tie, including the IPC, CAMRA and hon. Members. After careful reflection, I disagree with them. I say careful reflection because, like other Members, I have always been worried by the tie, primarily because I had assumed that it must be interfering with competition and was therefore against the interests of consumers. That is why, like others, I was keen for our independent competition authorities to consider the matter. The OFT’s investigation concluded that consumers are well served by British pubs, that there is choice and that a wide variety of beers is available. To override an independent competition authority would be a serious decision for a Minister to take and would require significant evidence that the authority had failed to deliver. As CAMRA decided not to challenge the OFT further, presumably it did not have further evidence; we certainly did not.
Mr Davey
No.
Secondly, when one examines where the relationships between pubcos and licensees have gone wrong, it quickly becomes clear that the major problem is not with the traditional tied tenancy, but with full repairing and insuring leases, which are mostly, but not exclusively, used by the pubcos. There are problems with pre-entry training, transparency and rent guidance not being followed, but not with the basic question of whether a pub is tied for beer. That is why my solution targets full repairing and insuring leases and leaves alone the traditional tied tenancy model, which is used successfully, and for the most part amicably, by local and regional brewers alike.
Thirdly, the market is driving a solution. The figures show that since December 2008, slightly more free-of-tie pubs closed than tied pubs. That is true whether one uses the gross closure rate or the net closure rate, which CAMRA says is more important as it takes account of churning. Furthermore, big pubcos are selling off hundreds of pubs a year, many of which are being bought by family brewers or converting to being free-of-tie. Since December 2008, three times as many free-of-tie pubs have opened than tied pubs and a further 1,300 pubs have converted from being tied to free-of-tie. Where the market is working, the Government do not need to intervene.
Mr Binley
I am most grateful to the Minister for giving way. I remind him that I asked the Secretary of State whether he would uphold the undertaking given by the previous Government that they would act on recommendations from the Select Committee if they were meaningful and in its report. Will the Minister confirm that the Secretary of State said that he would uphold that undertaking? Does he accept that that is the truth of the matter?
Mr Davey
My right hon. Friend the Secretary of State said that he would take action, and we have taken action. Let us be clear that what the Select Committee wanted was legislation to deal with the problem. Through negotiation and using contract law, we have got legally binding codes of practice that are in the spirit of what the Select Committee asked for. More than that, the Committee asked for an adjudicator, and we will have PICAS to adjudicate on the code by February. Not only are we tackling the issues that the Committee raised, we are doing so far more quickly than expected. I would have thought that the hon. Gentleman would welcome that.
Toby Perkins
It is one thing for the Minister to argue that what he is doing is better than what he undertook to do, but it is simply wrong for him to try to claim that he is doing what the Secretary of State and he undertook to the Select Committee to do. He must know that the commitment that the Secretary of State gave is not what he is delivering. Why does he not just be honest and say that?
Mr Davey
Throughout my speech I have shown that the hon. Gentleman was wrong in almost everything that he said to the House, and he is wrong again.
I recognise that some Members would want us to have gone further, yet our reforms, including the strengthening of the code, its establishment on a legally binding footing and the soon to be completed establishment of PICAS, will mean real change for licensees and tenants across the country.
Martin Horwood
I believe that Members can welcome the positive steps that the Minister has announced but still believe that they do not really tackle the key issues, which are not about compliance and competition but, as the debate has shown, more about the relationship between struggling small businesses and big pubcos. If we are to have one last drink in the last chance saloon, what time scale will he now unambiguously put on the self-regulatory regime before statutory action is taken?
Mr Davey
I am grateful to my hon. Friend. We do need to give the self-regulatory regime time to work, and I pay tribute to him, and even to my hon. Friend the Member for Leeds North West—[Hon. Members: “Even?”] I say “even” because we do not always see eye to eye on every measure. However, both my hon. Friends have campaigned very hard, and I can tell the House that in my meeting with the BBPA, my hon. Friends' campaigns and the Select Committee reports were critical to my being able to make it absolutely clear that, this time, the pubcos really had to come up with the toughest self-regulatory regime imaginable, or else Parliament would wish to take action. We have come up with the toughest self-regulatory regime imaginable, but it needs time to work. I commend our response to the Select Committee to the House.