Draft Pubs Code etc. Regulations 2016

Greg Knight Excerpts

Wednesday 13th July 2016 General Committees

[The Minister for Small Business, Industry and Enterprise (Anna Soubry)]

I beg to move,

That the Committee has considered the draft Pubs Code etc. Regulations 2016.

I can already see and hear that there is an outbreak of people being a bit demob happy as we reach the final stages of what has been, by any standard, an interesting—sometimes rather difficult—few months. May I say how sorry I am that we were not able to implement the pubs code by the original deadline of 26 May? As some hon. Members will know, a small number of technical drafting errors were identified in the regulations originally made in April, which meant that some tied tenants would not have had a right they were absolutely entitled to under the Small Business, Enterprise and Employment Act 2015, which was passed not without some controversy in the previous Parliament. We were clear that we wanted the group of tenants covered by the Landlord and Tenant Act 1954 to have the right to the market rent only option. We felt that was important.

Frankly, we could have pressed on, though that would have been out of order and, if anything, somewhat dishonest. Even though it meant there would be a delay, we were adamant it was important that all tenants who should be included in the regulations were included. We were not prepared to introduce the regulations knowing that there was that flaw only to have to come back in a few months’ time to rectify it. Therefore, with regret, we pulled the regulations at that stage.

The Secretary of State and I had a meeting with the various pubco businesses—the big brewers and owners of many pubs—and we also met with representatives of the tenants. I really want to pay tribute to them, because in the meeting I had with them I thought they were so good, so fair and so reasonable in listening as we explained why we kept having to pull the regulations.

We had to amend the regulations in a number of ways, which we have now done. We have corrected the error in relation to the 1954 Act, which would have affected regulation 30 in particular. The regulations now refer to “protected tenancies”, which means tied tenancies where certain rights under the 1954 Act in relation to renewal of a tenancy apply. The drafting ensures that those tenants have and will retain a protected or contracted-in status once they have chosen the MRO option.

We also took the opportunity to add some clarification to the regulations and to improve the mechanism for assessing what constitutes a significant increase in price for the purposes of triggering the right to request the market rent only option. The changes to that significant increase in price are expected to give greater clarity on how calculations are carried out and reduce the potential for unintended consequences. Specifically, we have replaced the Office for National Statistics’ producer price index with the consumer prices index. I was really grateful to the tenants, who were so helpful when we met them, and I went through and explained what we wanted to do. Many groups and representatives said in particular that CPI was the right way forward. Changes were also made to exclude excise duty and temporary promotions from the calculation of price changes, which again is important; increase the tolerance in the “alcoholic drink other than beer” category from six to eight percentage points; and ensure that any products that are the same and sold in the same units are compared as like for like.

Other changes to the regulations following their withdrawal were mainly in response to comments and queries received from the Joint Committee on Statutory Instruments and its legal advisers. Again, I thank that Committee. We struggled, because unfortunately its Chair was unwell. It was rightly concerned, as you would expect, Mr Hanson, about this secondary legislation, and it wanted to make sure we get it right. I pay tribute to everybody who has looked at the regulations to make sure they are right while doing everything they can to expedite them so we can give tenants the rights that we as Parliament said they should have as swiftly as possible.

[Sir Greg Knight (East Yorkshire) (Con)]

Paragraph 12 of the explanatory memorandum, which the Minister’s Department produced, says that there will be a review and that the first review period will end on 31 March 2019. I note what she says, but if the regulations turn out to have an unanticipated undesirable effect, is there a mechanism in place to allow her to review the code earlier than 2019?

[Anna Soubry]

I see no reason why not, unless somebody from my excellent team says otherwise. I pay tribute to all the people who sit next to me; they have worked remarkably hard. The Government and I, as the lead Minister, have been absolutely adamant that we must do the right thing by everybody. We are doing what Parliament clearly intended should be done in that controversial decision. We are reflecting what Ministers and Back Benchers from both sides of the House said. That has been absolutely at the heart of what my officials and I have done. We want to be sure we are true to the will of Parliament. That is incredibly important.

It is also important that we are fair to both sides. Unfortunately—I would like to think that this is no longer the case—there have been two sides: the pubcos on the one side and the tenants on the other. We have been absolutely clear that we must do the right thing for both sides. Once Parliament accepted MRO, we had to get on with it. Frankly, the pubcos have got to grasp the reality and do the right thing by the tenants. I am happy to report that we will keep the code under review. I give my word that, if I am still in this job in the forthcoming months, I will make sure we do that.

Other changes to the regulations following their initial withdrawal were mainly made in response to the JCSI’s comments and queries, for which I thank it. I confirm that the regulations deliver the requirements of the provisions of the governing legislation—part 4 of the 2015 Act. They reflect the commitments made by Ministers at the time and the will of Parliament.

As the regulations suggest, the relationships between tied-pub tenants and pub-owning businesses are not always straightforward. Let us be honest: they have not always been fair. I believe that the pubs code is proportionate and balanced in its approach, and that it will allow pubs to operate in a fair environment so they can thrive. They are all, of course, small businesses, and as the Minister for Small Business I want them to do well—[Interruption.]