Small Business, Enterprise and Employment Bill

Grahame Morris Excerpts

Wednesday 16th July 2014 Commons Chamber

[Vince Cable]

That is a choice I would rather not have to make.

I entirely agree with my hon. Friend the Member for Solihull (Lorely Burt), who makes a useful point and we will reflect on its practicality. She also mentioned pre-packs. She will have noticed that there are measures in the Bill to deal with bad pre-packs. Of course, many of them provide satisfactory outcomes, but some do not. We are going to try to differentiate them in a more structured way.

The final issue in relation to transparency is the insolvency regime. We are going to introduce measures to give greater confidence to the regime when companies enter insolvency. We will remove administrative burdens, which I hope will save creditors substantial amounts of money. We are talking about having a less complex system of regulation. I think there are eight or nine separate regulatory bodies in the insolvency area, and there are issues regarding insolvency fees and fairness. It is a complex bit of legislation, but an important one.

Moving on to help for small business, I will start with an area that has preoccupied a lot of people in the House, namely pubs. There are 20,000 or so sole traders and small businesses that run tied pubs across England and Wales. In recent research, the Campaign for Real Ale found that 57% of tenants who are tied to large pub companies earn less than £10,000 a year, compared with just 25% of tenants who are free of tie, and 80% of them earn less than £15,000 a year. In other words, a very large number are taking home less than the minimum wage. Through the Bill, we want to address the imbalance in bargaining power between pub companies and their tied tenants, to ensure they are treated fairly by their pub-owning companies.

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

rose—

[Vince Cable]

Bearing in mind Mr Deputy Speaker’s comments, I will take a limited number of interventions, although I am sure there will be a lot of interest in this particular issue.

[Grahame M. Morris]

I am grateful to the Secretary of State for giving way and I will be brief. Although many of the proposals are welcome, may I ask him a simple question? Why does the Bill not give the tenants of large pub companies the right to a fair, independently assessed rent-only option? That was the recommendation of the cross-party Select Committee and it was the outcome of the consultation. Why is it not being offered by the Bill?

[Vince Cable]

I will explain in a moment our proposal in relation to rents. The hon. Gentleman will know that a considerable variety of views emerged from the consultation. I know there are strong views that we should perhaps have done more—there will be plenty of opportunity to air them—but we have taken a big step forward. Let me briefly describe what it is.

The Bill will introduce a statutory code of practice, which I think has been the House’s basic demand over the years, to govern the relationship between companies and tied tenants. It will establish an independent adjudicator to enforce the code that will build on the experience of the groceries code adjudicator, which is building a track record in addressing similar problems. That should result—this is our objective—in getting transparency, fair treatment and the right to request a rent review for all tied tenants if they have not had one for five years, and the right to take a dispute to an independent adjudicator under the enhanced code.

--- Later in debate ---

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

I want to follow on from some of the issues that have been raised, not least by the hon. Member for Burton (Andrew Griffiths), although I take a rather different view. I am speaking not for the brewers, but rather for my own union, Unite, and for Save the Pub, CAMRA and Fair Pint. I want to make a couple of brief points, having listened to some of the earlier contributions, particularly in relation to the levels of unemployment and the triumphalist claims from Government Members about how wonderful the situation is. I emphasise that the recovery—such as it is—is uneven, and there are huge regional disparities. I advise the Minister and Government Members that in my region unemployment is 129,000, and rose by 5,000 between last December and May this year. That needs addressing, and I was hoping for rather more practical measures to deal with those problems.

The main point I want to raise is about pubs, and I pay tribute to the hon. Members for Leeds North West (Greg Mulholland) and for Romsey and Southampton North (Caroline Nokes), who are also officers of the all-party save the pub group. Pubs, and indeed working men’s clubs, are vital community hubs, but they are closing at an alarming rate—10,000 pubs in 10 years, which is 26 a week. I fear that the measures in the Bill will not adequately address the problems faced by our pubs.

I welcome the introduction of a statutory code of practice for large pub owning companies, and we have already rehearsed the arguments about the difference between those large pub companies and smaller regional brewers. Such a code is long overdue and much needed to address the fundamental problems created by pubcos, which I believe have done so much damage to pubs.

I do not believe that the current problems properly address that matter, and neither do they deliver on the Government’s commitment to the two core principles that the Secretary of State told us about in his opening remarks: a fair and lawful deal to ensure that the tied licensee is not worse off than the free-of-tie licensee. We know how many pubs are closing—26 a week—and for too long, large pub company chains have been giving landlords a raw deal. It is clear that large companies take too much profit from pubs—profit that would go into expanding those small businesses, employing more staff, offering longer hours, and boosting the local economy. That fundamental problem is acknowledged by the industry, and I hope that the Government will address it in Committee.

The Government have said that they will not introduce the market rents only option, and instead they have the principle that no landlord should be worse off than if they were free of tie. The reforms in the Bill aim to ensure that the tied licensee is not worse off than the free-of-tie licensee, but as the hon. Member for Leeds North West indicated, there is no effective mechanism to deliver that.

There is a strong economic argument to end the abuse by pubcos which unfairly exploit tied tenants, and there is lots of survey evidence that 90% of tied tenants would take a free-of-tie option with an independently assessed—that is important—fair rent, if that were on offer. More than half confirm that the rent they pay to pub owning companies is higher than the open market rent. I find it strange when some hon. Members say that such a measure would be a backward step and lead to wholesale pub closures, as I do not think that is the case. I have indicated where I think the extra profit would go in terms of additional staff, and under the proposed scheme licensees would be granted the right to ask their pubco to show them how much their rent would be under a free-of-tie scheme. Those calculations would be made by the pubcos, however, which obviously have an interest in providing the highest possible estimates. There are some problems with the Bill, and I hope we can explore them in more detail in Committee.

[Several hon. Members]

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