Small Business, Enterprise and Employment Bill

Greg Mulholland Excerpts

Tuesday 24th March 2015 Commons Chamber

[Greg Mulholland (Leeds North West) (LD)]

It is a pleasure to speak at the final stage of this important Bill. I shall of course speak about the pubs code. I am delighted that there is a string of amendments from the other place which I and my colleagues on the all-party parliamentary save the pub group and the Fair Deal for Your Local campaign can support and welcome.

I thank all Members from all parts of the House who voted for the market rent only option on 18 November 2014, which will go down as a historic day for the British pub. I thank the hon. Member for Chesterfield (Toby Perkins) for bringing his side firmly behind that proposal. I especially thank the Government Members who had the courage to defy their Whip in what was the only defeat of the Government Whip in this Parliament.

I warmly welcomed it when the Government said that they would accept the will of the House. However, as most right hon. and hon. Members know, it appeared that that would not to be the case a few weeks ago. I and others expressed concern when, at the Grand Committee stage in the House of Lords, we no longer had a workable market rent only option that would definitely be introduced at a certain trigger point. We had to get that back into the Bill and we did.

I thank my right hon. Friend the Secretary of State for Business, Innovation and Skills, the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for East Dunbartonshire (Jo Swinson), and all the other Ministers, including the Minister for Business and Enterprise. I thank the whole team who have worked on this issue. It has been a challenge for all of them to balance the different views. In the end, they have achieved that. They have achieved something remarkable: a proposal that people accept will be the future of the tied pub sector.

I must express a few notes of concern because this is not the end of the matter. I was not sure whether to raise a pint this evening or next week when the Bill has gained Royal Assent, so I have decided to do both. This is not the end of the matter, because we still have the passage of the statutory instruments and the consultation over the pubs code, which will take a year. I and others will certainly be engaged in that. We understand and support the principle, but we must get it right.

Let me say firmly that there must not be any watering down of the fundamental principle in the Bill—[Interruption.] As the hon. Member for Hartlepool (Mr Wright) said, that would be as disgraceful as watering down the beer, and just as illegal. We must ensure that that principle is honoured, whoever is in government after the election—a question that none of us can answer at the moment.

I wish to say quite forcefully that we must not be fooled by the idea that somehow the beer orders were the problem; it was the watering down of the beer orders as a result of industry lobbying that led to the tragedy and disaster of the beer orders. That watering down happened in the House of Lords, and I am delighted that this time we have collectively managed to stop it. It was precisely that watering down, with large companies saying, “Okay, well you’re going to legislate the beer orders, but give us that loophole and allow us to have that freedom if we don’t brew beer”, which led to the problem, although I believe we have avoided it this time.

A number of changes have been made to the clause, but it does not apply to all tenants of large companies as we intended it to. If someone exercises their right to take the market rent only option, they suddenly exclude themselves from any protection under the code, which seems strange and perverse. Despite all the sound and fury, the market rent option is only the right to an independent rent assessment on a free-of-tie basis, and the right to pay that. There is no logic in saying that it should apply only to tied or part-tied tenants, and not to any tenant who believes that they may be being exploited at their rent review.

The loopholes in the beer orders are the problem, and an obvious loophole—a new vehicle for some of the large, less scrupulous companies to exploit—allows companies to have excessive rental only agreements and excessive costs for insurance. There is an insurance scam in parts of the industry whereby people are forced to pay considerably more for insurance to their pub-owning company, even on a free-of-tie basis, than they would if they got insurance on the open market. The Government must be aware of that.

Clearly we would have liked the sale of a pub to be a trigger, but I welcome the fact that the Government have sought to deal with the issue. We shall look further at the detail of the measure because there is a problem with companies, including developers, buying pubs and using the terms of tied agreements to force people out of those pubs so that they can get vacant possession and develop a site. There is a danger that large companies will seek to use the loophole to put themselves deliberately into administration, restructure and form smaller companies that would come under the limit, and then carry on business as usual.

Investment is clearly a big issue, and I have had helpful and sensible discussions with Heineken, Greene King and Marston’s—all sustainable companies that will continue to survive and thrive. As I have made clear, it was never our intention to stop or discourage investment in pubs, and one of the biggest problems of the tied pubco model was the grotesque lack of investment—those scruffy pubs with the threadbare carpets that people could tell were Punch Taverns or Enterprise Inns pubs. Investment was left to the tenants, but they were not able to invest anything in their pub. James Baer of Amber Taverns said that the large companies were walking around with as much debt as Lance Armstrong had dope in his arm, and that that was one of the biggest problems in the pub sector—stopping investment in pubs.

The intention behind our clause was always that if two partners agreed an investment, there would be a new rent and therefore no need for a rent review for another five years. We must avoid any sense that the market rent only option can or will be waived for investment that happens before a tenant signs an agreement, or signs up to one during a tenancy at will. Often the previous tenant asked for that investment but it was refused, even if it should have been made anyway to keep the pub in a fit state to let in the first place. That is not the kind of investment we should be talking about.