Pubs Code and the Adjudicator

Grahame Morris Excerpts

Thursday 14th April 2016 Westminster Hall

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

I appreciate you calling me early, Sir David, and it is a pleasure to serve under your chairmanship. I know that we should never start a speech with an apology, but may I apologise to the promoter and the respective Front Benchers? I am afraid that I will not be able to stay until the end of the debate. No disrespect is meant but I must be somewhere else in the House at 3 o’clock, so I do apologise. May I also acknowledge for the record that I chair the Unite group in Parliament? Many of our members work in the industry as tenants and in brewing.

I commend the hard work and terrific speech of the hon. Member for Leeds North West (Greg Mulholland), who set out the arguments in such a cogent and readily understandable way. Unusually for me—for the first time ever, I think—I found myself agreeing with the hon. Member for Peterborough (Mr Jackson), who I had always assumed was a free marketeer, but he seems to recognise that there are faults, whether by accident or design, that need to be remedied before the code can be implemented.

The Minister asked what we, collectively, are asking for. This is not necessarily a partisan issue, although obviously there are strong interests. I thank my union, Unite, and its pub landlords section. I also thank the GMB, Justice for Licensees, the Fair Deal for Your Local campaign, the Fair Pint campaign and Mr Simon Clarke, who has been a stalwart defender of the interests of licensees in ensuring that they receive justice.

The things that we are asking for are not unreasonable, given that Parliament has debated and considered this issue at length and, on a cross-party basis, has agreed a way forward. We want to see the legislation implemented and the pubs code reformed. The hon. Member for Leeds North West identified specific concerns about the adjudicator, to which I will refer in a little while. The Government have an opportunity: to enforce the legislation that was passed with such overwhelming support; to close the loopholes that have been identified by the hon. Members for Peterborough and for Leeds North West; to protect tenants from being coerced or browbeaten into giving up their rights; and to restore confidence in the office of the adjudicator.

I mean no disrespect to Mr Newby—like other Members, I suspect, I have not met him—and I do not mean to impugn his personal integrity. I am sure he is a lovely chap, but there are issues of confidence and of conflicts of interest that must be addressed if we are to enjoy the confidence of the whole industry, not just the pub companies but the tenants and the people who rely on the adjudicator to act impartially so that there are no real or perceived conflicts of interest.

We have had many years of consultations—the former Chair of the Select Committee on Business, Innovation and Skills, my hon. Friend the Member for West Bromwich West (Mr Bailey), and members of the Select Committee will, no doubt, elaborate on that—negotiations, debates and inquiries, but we would not be where we are without the co-ordinated efforts of the various organisations that have come together in the British Pub Confederation. Given that we are so close to the introduction of the new pubs code and the adjudicator, changes that have been long fought for, I am a little disappointed that Government Members have implied that nothing happened prior to 2010, which is not quite true. We had the first pubs Minister, and a lot of the groundwork was done in advance. I would like to think, although it is just supposition, that had the outcome of the 2010 general election been different, the pubs code and the adjudicator would have been implemented much more quickly. I cannot substantiate that but, having had conversations with many people in the know, I suspect that that may well have happened.

The changes have been a long time coming and, unfortunately, I regularly see figures in the trade press that 27 pubs a week are closing—that figure may be accelerating. Too many viable pubs and, indeed, working men’s clubs in communities such as mine have had to call last orders not just because of broader pressures within the economy but because of unfair and unsustainable rents, ties and profit-sharing arrangements, all of which should be addressed by the code and, if necessary, by referral to an independent adjudicator.

All we are asking, and it is nothing unreasonable, is that tenants should be able to secure a fair income. Given the time commitment that they give, it seems bizarre that the tenants of even very successful pubs—the hon. Member for Leeds North West mentioned the Eagle, and I know a number of others—that, on the face of it, are incredibly popular seem unable to secure a decent living. Many tenants are struggling. When their income is aggregated and divided by the number of hours they work, in many cases they are actually working for less than the minimum wage. I have met a number of former tenants and landlords whose mental and physical health has been absolutely broken by their experiences.

We all know that the repercussions of pub closures are felt across communities, which lose not only vital community assets but the jobs and the contributions that such businesses make to the local and wider economy. I do not denigrate that contribution. Many of my union’s members work in the pub sector—in the pubs, in the breweries and in delivery, such as on the drays—and I understand that the sector contributes £22 billion to the UK economy. Taking into account the multiplier effect, and not just the people working directly in the pubs, the sector sustains nearly 1 million jobs, particularly providing opportunities for younger adults to find employment, so the sector is important. Links in the supply chains include retail, agriculture and brewing.

The product is the essence of what we are about, of Englishness. Dare I admit it? Is it a secret that I love to have a pint of beer and to socialise? The problem is that the business model operated by the pub companies has weakened, rather than strengthened, the industry. Our hope is that the new pubs code and the adjudicator will address the inherent unfairnesses in the exploitative practice of the pub company model, but it should be a step that strengthens the industry, ensuring: that tenants receive a fair living reward for all their hard work; that viable pubs can remain open; and, hopefully, that we can halt the decline that has seen significant numbers of pubs close over the last 10 or 20 years.

I would like to think that the pub companies are acting in good faith but, as has been alluded to, there is evidence to the contrary and that they are working to circumvent the pubs code and the legislation even before it comes into force. If the Government and the Minister are not aware of that, I hope that she and her officials will make themselves aware of it by looking at the evidence that is out there. The appointment of Paul Newby as the Pubs Code Adjudicator has not endeared the Government to tenants or won any trust from them. Concerns remain that loopholes in the new draft pubs code could undermine the legislation, and if Parliament is to fulfil its promise to tenants, those loopholes must be removed before the final version of the code is implemented.

The hon. Member for Peterborough highlighted one particular loophole. The Government would undermine the fundamental principle of the pubs code, that tied tenants are no worse off than free-of-tie tenants, if they allow pubcos to force tenants to relinquish long-term leases should they opt for a market rent-only option. That is one specific thing that perhaps the Minister and her officials will take away. The loophole undermines the assurances offered by the Department for Business, Innovation and Skills that tenants who take the market rent-only option should not be subject to discrimination by the pubcos. The Government should also make it clear that if a tenant chooses a market rent-only option, they will be entitled to the same length of agreement, terms and conditions as their old tenancy—the hon. Member for Leeds North West raised that issue—otherwise the right to trigger the market rent-only option would be undermined and such tenants would be discriminated against by the very nature of the agreement.

Another loophole that I would like the Minister to look at is the market rent waiver in exchange for investment. The hon. Member for Peterborough also mentioned that, and it is a real concern. I do not want to labour the point, because I do not want to be repetitious, but I can think of a number of pubs in my constituency—I will not namecheck them—where the tenant has gone to their pubco and said, “I want to develop my business. I want to convert the rooms upstairs into a bed and breakfast and to knock a doorway in that wall”—not that wall, but a wall in the pub—“to create access to the beer garden,” and the pubco says, “Yes, that’s a great idea, but you’ll have to pay for it. When you’ve done that, we are going to increase your rent.” That cannot be termed investment from the pubco. In a way, it is coercion. We have to close the loopholes on the definition of investment and on what can and cannot be referred to the adjudicator.

I do not want to repeat points made earlier, but pressurising tenants to take up rent reviews, in advance of any scheduled review, before the implementation of the code is unacceptable. Coercing tenants to give up long leases and take up new five-year contracts with no market rent option at the end and no renewal rights is not acceptable either. It is unacceptable to effectively bribe tenants with short-term reduced rents—the hon. Member for Leeds North West referred to a 20% reduction—to sign new agreements with no market rent option, to seek to force tenants into five-year non-renewable tenancies or to threaten to offer only such agreements to avoid triggering tenants’ legal rights to the market rent-only option. The pub companies are doing so while telling us that they want to move forward and draw a line under past disagreements, and that it is not their intention to exploit their tenants. I am afraid that the evidence does not really support that, so I am rather sceptical about the assurances that we have received.

I will refer to Mr Newby, if I may. We must ask ourselves what his intentions are, for after he leaves his role as the adjudicator. If he intends to return to the industry where he has fashioned his career and undoubtedly been incredibly successful, would a reasonable person not assume that the decisions that he makes while in post will inevitably bear on his future employment prospects within pubcos? If that is not a potential conflict of interest, I do not know what is. I am concerned that because of those links, every decision in which he agrees with a pubco will be questioned, even when legitimate, as will the fairness of his judgment. That is likely to happen as a result of his long-standing connection to pub companies.

I feel sorry for Mr Newby. He should never have been placed in that position, whether by accident or by design; I forget the exact terminology. What is more concerning—the Minister must take some responsibility for this—is that throughout the entire appointment process, the Department for Business, Innovation and Skills has seemed oblivious to the reaction that such an appointment would create. I was in the Chamber when the Minister made the statement, and there was uproar in the House at the nature of the appointment.

[Anna Soubry]

No there wasn’t.

[Grahame M. Morris]

I was there, Minister, with all due respect. I thought it was a rather heated and fractious exchange. The fact that it was not anticipated does not reflect well on the Department. If the Government insist on appointing Mr Newby, I fear that, intentionally or not, they will undermine the office of the Pubs Code Adjudicator from the day that he starts work.

[Mr Jackson]

The hon. Gentleman is making a good speech. Does he agree that this debate also gives an opportunity for the Minister to clear up the confusion about whether the adjudicator has helped design the code since December? There have been mixed messages from BIS about whether he is coming in clean from May or whether he has been complicit, to use a pejorative term, in the construction of the regulatory regime. That is an important issue.

[Grahame M. Morris]

Once again—for the second time in one Parliament—I agree with the hon. Gentleman. It is a completely reasonable question, and I hope that the Minister will be able to clear it up in her response.

There seems to be no doubt that the pub companies see Mr Newby as their man. Worse still, the tenants seem to agree. More than a dozen stakeholder groups have come together under the auspices of the British Pub Confederation. Collectively and individually, in the representations that I have received, all of them see Mr Newby as not independent. I am not saying that that is correct; I am just saying that it is their perception. I worry that the Minister cannot see that the situation is untenable. If she truly wants the pubs code to work, she will need to appoint an adjudicator who can command confidence across the industry. Regrettably, I think that she should apologise to Mr Newby and rerun the recruitment process.

In conclusion, the pub and brewing industry makes an immense contribution to our local communities and our economy. I love pubs; I love the industry, and I want to see it flourish. I want community pubs to thrive and tenants and landlords to have successful businesses. The drive behind the pubs code and the role of the adjudicator is to strengthen the industry. It should be seen as a step towards addressing the decline and closure of pubs over the past 20 years. It is in the hands of the Minister to listen to the concerns expressed by hon. Members from all parties, and to take the issue forward in a positive way that addresses them all.