Small Business, Enterprise and Employment Bill

Grahame Morris Excerpts

Tuesday 18th November 2014 Commons Chamber

[Jo Swinson]

I am saying that we have had plenty of negotiations and discussions about all the different options, but specific round tables have not been reconvened with the industry since the Committee stage. We know where the industry stands on this. My officials are in regular contact with the industry and with campaign groups, who have been making their cases fervently. Many Members represent tenants and also have pub companies and family brewers in their constituencies. Ministers have had many discussions with those hon. Members on behalf of their constituents who have raised these issues over the past couple of weeks since the Committee stage. Indeed, we also had such extensive debates in Committee. There has been plenty of consultation.

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

In relation to the Minister’s discussions with the Federation of Small Businesses, it estimates, according to the information that I have, that implementing the market rent only option would boost the economy by £78 million, and that over 90% of pubco tenants would have much more confidence to invest in their businesses, helping local economies to grow.

[Jo Swinson]

The hon. Gentleman makes a powerful point. As I have said, a range of different of views and issues have been raised and it is impossible to please everybody. Although some of the larger companies oppose the introduction of a market rent only option, organisations such as the FSB, as the hon. Gentleman points out, are campaigning to implement it.

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[Andrew Griffiths]

Once again the hon. Gentleman talks about big business as if it is a bad thing. I like big business. I like small business. I like successful business. Just because a business is big does not mean it is acting inappropriately.

[Grahame M. Morris]

The hon. Gentleman is speaking for big brewers and I understand his perspective, but what about consumers? If a tenant is paying 60% or 70% more for the product, surely the consumer is getting a bad deal as well?

[Andrew Griffiths]

The hon. Gentleman has read up on this subject. I refer him to the Office of Fair Trading report of 2009 and its recent interventions in this debate—it has said this has had no impact on consumer costs and the price the consumer is paying for a pint. In fact it could be argued that, because of the big distribution models, beer is actually cheaper. The statistics show that beer across the country is cheaper in a tied house than in a free house. I hope I have answered the hon. Gentleman’s concern.

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[Andrew Griffiths]

I think I found a question in the hon. Gentleman’s intervention. Given that he spoke for only 40 minutes earlier, I quite understand why he wanted to have another go.

I should like to get back to the point made by my hon. Friend the Member for Tewkesbury (Mr Robertson) that people often find they have signed up for things that they did not expect. They find that they have been hoodwinked because they were not given all the details, and that they have not got a fair deal. That is what we want to outlaw. I want briefly to consider what, under this legislation, someone wanting to take on a tenancy today would have to do. First, they would have to have a business plan, which would have to be assessed. They would have to have an accountant and a lawyer, and they would be told what they are paying for their rent, their beer, their whisky and for everything else. They would also be told how many barrels of beer and bottles of whisky the pub sold in the past year, in the previous year and in the past five years. All that information would have to go before their accountant before they could sign. I do not know what other Members think, but I think these people are grown ups and business people. If they are provided with all that information calmly and clearly so that they can make a decision, it is not for government to intervene to tell them they cannot engage in a business agreement that is perfectly legal.

[Grahame M. Morris]

rose—

[Andrew Griffiths]

I have given way enough, so I will move on, because I want to make the following point to allow colleagues clearly to understand what new clause 2 would do. Let us suppose I am a tenant with Marston’s in my constituency, a company that brews magnificent beer and would be affected by this legislation. Let us suppose I go to Marston’s asking to become one of its tenants and I go through all the procedure—it could take up to six months to do the due diligence on me—to take on that pub. Let us suppose I do all that and sign on the dotted line. Under new clause 2, I could then say to Marston’s, “Excuse me, Marston’s, I have changed my mind and decided I don’t want to sell Marston’s beer. I want to sell Greene King beer so I would like to go free of tie. Not only am I not going to sell your beer, but I would like the Government to tell you what rent you can charge me.” That is what is being proposed. To all those who have signed new clause 2 and are thinking of backing it, I say that that does not sound like a Conservative proposal to me. I do not know what some of my colleagues think, but it does not sound like a very Conservative approach to business. I want protection and clarity, but I do not want mummy state interfering and telling people how they can run their businesses. That is very important.

We have heard a little about people being able to buy their beer elsewhere under new clause 2, so let me just enlighten the House as to what it would do. New clause 2 states that brewers could still stipulate the sale of their brands but the tenant must be free to buy them from someone else. I could stipulate that people had to buy Marston’s, but they would be able to buy it from anywhere. In essence, Marston’s would no longer be able to sell its beer at a lower rate to large wholesalers who are buying 10,000 barrels than to the Dog and Duck which is buying 10 barrels—and this would come with full brewery technical support and reduced dry rent. This new clause is a serious market intervention; we would be interfering in a market in a way unlike anything that happens in any other industry in this country. These are the unintended consequences that colleagues need to consider when they vote for this new clause.

Let me discuss the facts. They are that the industry is desperately concerned about the implications of new clause 2 and this free-of-tie provision. We are talking not only about the pubcos, which people might hiss at and not like, but about the family brewers, who will be exempt. We are talking about the microbrewers and the Society of Independent Brewers; the people who are not even affected by this legislation are concerned about the knock-on effects and the consequences for the industry and the market. We should be desperately concerned about that. The Minister will know that the Department for Business, Innovation and Skills commissioned a report from London Economics, which estimated that if we scrapped the tie and introduced something like this new clause, 1,800 pubs would close and 8,000 jobs would go. Nobody here wants to see that happen to our pubs. We saw what happened under the previous Government, when 52 pubs a week were closing and the hated beer duty escalator increased duty by 48%. We have seen the consequences of legislation for our industry. We should hold our nerve. We should vote for the statutory code and for the adjudicator, and we should give power to our publicans, but we should not throw the baby out with the bathwater—we should not vote for new clause 2.

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We have today raised the standards of the family brewers: the lion rampant of Camerons brewery in Hartlepool; the black swan of Donnington’s of Stow- on-the-Wold; the griffin of the Fuller’s brewery of Chiswick; and, most notably of all, the eagle of Charles Wells of Bedford. To these standards, to my Conservative colleagues, to the principles of family and small business, I say be steadfast and stand against Saruman. Let us ensure that our principles are firm and yield not one quarter in defence of family businesses.

[Grahame M. Morris]

I do not know whether I can take on one of the characters from “The Lord of the Rings” and better that finish from the hon. Member for Bedford (Richard Fuller).

I want to speak in support of new clause 2, and I declare an interest as vice-chair of the all-party save the pub group. I pay tribute to my fellow officers, the hon. Member for Northampton South (Mr Binley), the hon. Member for Leeds North West (Greg Mulholland), who has done such a sterling job of researching new clause 2, and the hon. Member for Romsey and Southampton North (Caroline Nokes). Like other Members, I acknowledge the important role played by Fair Deal for Your Local, the Campaign for Real Ale, the Fair Pint campaign, my union Unite, the GMB, various support groups for tenants and the Punch Tenants Network.

New clause 2 is about stopping exploitation by large pubcos of pub landlords up and down the country. The situation has not come out of the blue. We have been discussing the issue for some years now, and it has been known about for a long time. The hon. Member for Burton (Andrew Griffiths) gave an example from his constituency, and the point I sought to make, although there was not time for me to do so during his speech, was that I can think of many cases in my constituency where a tenant of one of the large pubcos has effectively invested their life savings, and often their redundancy money, in taking over a business and turning it around. They have built it up and taken on additional responsibilities, such as opening a restaurant or providing bed-and-breakfast rooms, but when the review of the tenancy has come around, the pubco has doubled the rent, so that it is not viable for those people to continue.

[Andrew Griffiths]

rose—

[Grahame M. Morris]

I will give way to the hon. Gentleman, even though he would not give way to me.

[Andrew Griffiths]

I think that I was pretty generous in giving way. The hon. Gentleman has done a lot for beer and pubs, and I acknowledge his support in scrapping Labour’s hated duty escalator. I agree that it would be absolutely unfair of a pubco to do what he has described, but does he not accept that under the statutory code, the tenant could take the case to the adjudicator, who could rule on whether it was fair, and get the decision overturned? The tenant would have protection under the code.

[Grahame M. Morris]

I think that the best protection is offered by new clause 2, with the market rent only option. Time is short, but I shall try to explain why. We have heard from the respected Chair and former Chairs of the Select Committee on Business, Innovation and Skills. We have had debates, and the all-party save the pub group is certainly aware of the four reports produced by the Committee that concluded that there had been abuse of the tied system, and that recommended time and again the market rent only option.

During her opening remarks, the Minister was harangued by Government Members with prophecies of doom about the consequences for local economies and regional brewers, but in truth the Federation of Small Businesses suggests that there will be a considerable benefit to the economy of offering this option. CAMRA estimates that large pub companies force their tenants to buy beer at prices that are inflated by as much as 50% or 70%; that is on top of rent that is already excessive. Anyone who believes in fairness would support new clause 2, which would correct that.

[John Healey (Wentworth and Dearne) (Lab)]

My hon. Friend makes a powerful case. Does he agree that tied tenants, such as those of the Monkwood tavern in Rawmarsh, The Crusty Pipe in Goldthorpe and The Bull’s Head in Cortonwood, simply want a fair basis on which to run their pubs as a business for them and their families?

[Grahame M. Morris]

Absolutely. All we are arguing for is fairness—[Interruption.] The hon. Member for Burton asks from a sedentary position why this has not been done before. We have an opportunity to do something now, and I cannot be answerable for things that happened before I was a Member of this House.

As a result of excessive behaviour by the pub companies, an estimated 57% of tied landlords earn less than £10,000 a year. That is a disgrace. Anybody who, like me, frequents pubs regularly will realise what an incredible effort goes into running a public house—the hours put in bottling up after customers have gone home, the huge commitment it takes, and the toll it takes on the owners’ personal life. For them not to have the opportunity to earn a decent living is a disgrace.

[Mr Jim Cunningham (Coventry South) (Lab)]

Does my hon. Friend agree that the tied pub concept is old-fashioned and antiquated in the 21st century? We had the same issues with tied housing in the past. Surely big brewers inflicting on landlords a certain label of ale, for want of a better term, is one of the factors that led to the demise of the working men’s club. Those clubs ended up in a lot of debt.

[Grahame M. Morris]

The demise of the Club and Institute Union, and the working men’s clubs, is a huge issue, certainly for me. New clause 2 does not propose the end of the tie; rather, it seeks to make it work more effectively and fairly. If a pub landlord agrees to a tied arrangement in relation to the purchase of alcoholic drink from the pubco, they should get a lower rent, especially if they are paying as much as 70% over the top for those beverages. That is the way the tie should work. If the landlord does not want to be tied to a company in respect of beverages, they should pay the market rent, or have that option. I am not suggesting that the tied system should be done away with—just that it should work in a manner that is fair to both the pub company and the tenant. At the moment, it certainly does not.

Members have suggested that the impact is not huge, but there are lots of villages in my constituency of Easington, such as Hawthorn and High Heselden, where only a single pub is left. These communities are really feeling the effects. If landlords are compelled to pay as much as 70% more for their alcoholic beverages, despite what the hon. Member for Burton says, the tenant will be absorbing some of that cost, but when there is only a single pub in the village, it is basically passed on, and the customers pay a lot more than they need to.

It is no coincidence that thousands of pubs have closed in recent years. In some cases, profitable, popular pubs, beloved by local communities, have been sold off by big pubcos to developers and supermarkets. Pubcos have sought to cash in on the real estate or land value, with little or no thought for local people, or the effect of the loss of a community hub. As the hon. Member for Leeds North West pointed out, that is often because these pubcos have saddled themselves with huge debts. There is a suspicion that the rents they charge are deliberately high to get rid of landlords, so that it is easier for them to sell.

Those landlords who opt for the market only rent can purchase drink supplies from elsewhere, leading to better and fairer access to the pub market for smaller local brewers and cider producers. It would also increase the choice for all our constituents. I would like Members to support new clause 2 because it would help to deliver increased licensee profitability, increased investment in pubs, greater consumer choice and fewer pub closures. If avaricious pubcos are stopped from exploiting their tied landlords, hiking up rents and charging up to 70% more for a pint, the price of a pint can only fall. I am sure that I speak for all hon. Members on both sides of the House and their constituents—I certainly speak for myself and my constituents in Easington—when I say that such a move would be warmly welcomed. For that reason, for fairness and for the benefit of the economy as a whole, I commend new clause 2 to the House.

[Sheryll Murray]

I thank my hon. Friend the Minister for not pressing amendments 41, 43 and 44. However, I want to put on record my surprise that the amendments were tabled by the Secretary of State as recently as 14 November, and the explanation was:

“This amendment, and amendments 43 and 44, reverse amendments made at committee and bring pub-owning businesses with fewer than 500 tied pubs back into the scope of the Pubs Code.”

The Secretary of State has continually led the House to believe that it was his intention not to include small family brewers with fewer that 500 tied pubs in the statutory code. When the Bill appeared, it included those small family brewers, with top-heavy bureaucracy.

I thank my hon. Friend the Member for Newton Abbot (Anne Marie Morris), who is no longer in her place, my right hon. Friend the Member for Faversham and Mid Kent (Sir Hugh Robertson), my hon. Friends the Members for Bedford (Richard Fuller), for Burton (Andrew Griffiths) and for St Austell and Newquay (Stephen Gilbert), and the hon. Member for Chesterfield (Toby Perkins) and his colleagues on the Opposition Benches for seeing sense and supporting my amendment, which would simply have put back into the Bill what the Secretary of State has always led the House to believe he intended to have in the Bill.