Greg Mulholland
Main Page: Greg Mulholland (Liberal Democrat - Leeds North West)(12 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Bailey
I need to make a little progress, as I am conscious that many people want to speak. If I have time, I shall take further interventions.
For the reasons I have outlined, the BIS Committee and its predecessor have held no fewer than four inquiries into the issues surrounding the trade. The previous report in 2010 under the chairmanship of the hon. Member for Mid Worcestershire (Peter Luff) gave the industry a year to get its house in order or have statutory legislation. That was agreed by the Labour Minister in 2010. Subsequently, after the general election, when the Secretary of State for Business, Innovation and Skills was asked whether he would uphold the previous Government’s position, he confirmed he would.
The current BIS Committee held an inquiry in 2011 and came to the unanimous conclusion that pub companies had not met the requirements of the previous Committee’s recommendations and that a statutory code with an independent adjudicator should be introduced. It also recommended that any code should have within it the option for a publican either to be tied to the pub company or to be free of such a tie and instead pay a rent to the pub company, which would be determined by a general open market review by a suitably qualified assessor.
The Government’s response to the Committee’s recommendations has been totally inadequate. The Minister’s pledge fails to meet the aspirations of virtually all sections of the industry apart from those of the pub companies and reneges on the pledge given previously by a Minister. In the time available, I cannot deal with every point of variance between the recommendations of the Government and those of the Committee, but I know that many of the issues will be teased out in subsequent speeches.
Greg Mulholland
I thank the hon. Gentleman for giving way and I pay tribute to his work and that of the Committee. He mentions the clear commitments given by Ministers. Is he aware of the e-mail from the office of the right hon. Member for Witney (Mr Cameron) to Justice for Licensees on 13 April 2010, saying:
“The Conservative Party support the idea that should the industry fail to deliver self-regulation by June 2011, the Government . . . should end up consulting on putting the Code of Practice on a statutory basis”?
Mr Bailey
No, I was not aware of that e-mail, but I am sure it will illuminate subsequent discussions.
I cannot deal with every issue that has arisen, but it is possible to summarise some of the key issues, the first of which is the statutory code of conduct and an adjudicator. Instead of doing as the Select Committee recommended and introducing a statutory code, determined after consultation with all sections of the industry, the Government have said they will make the existing codes between pub companies and their licensees legally binding. That might sound like a very subtle distinction, but most pub companies believe that their existing contracts with their licensees are legally binding anyway. This approach simply legalises and regularises a situation that is the source of the problem in the first place, and makes very little change.
The second key issue concerns the legal advice that the Government seem to have obtained in reaching their conclusion on the best way forward. On pressing this issue, it became clear to the Committee that the legal advice taken by Government was actually that given to the British Beer and Pub Association—the trade association of the pub companies. They do not seem to have taken any independent legal advice whatever.
Ian Lucas
I shall come on to that, and I reject that decision entirely. I accept that the OFT has investigated the matter on a number of occasions. Like many Members of the House and publicans in my constituency and across the country, I have for many years been completely mystified by the inactivity of the OFT and by the conclusions it has reached. We all know that pubs in our constituencies are in crisis and that the beer tie is part of the problem.
Greg Mulholland
The hon. Gentleman will be aware that the OFT said clearly that the imbalance in the relationship between tenants and pub companies was not within its remit. It did not even comment on the substantive issue that we are debating today, so its report is not relevant.
Ian Lucas
Absolutely. The inequality in the bargaining power of pub companies and publicans is a central issue. We see that month after month in our constituencies. It is part of the crisis that is happening in town centres and high streets across the country. We must view the debate in the context of the important challenges that we all face, no matter what type of constituency we have.
I looked at this issue in detail before the last general election, when I surveyed publicans throughout my constituency on how their business could be improved. They were vociferous in responding, and one of the overriding themes was the existence of the beer tie. I am therefore astonished that the Government’s response to the Select Committee states that
“the Government therefore considers the debate over ‘tied’ or ‘free-of-tie’ to be largely a distraction. There is nothing in itself that causes the tie to be fundamentally wrong—and, in fact, in some instances, the tied model may be essential to the preservation of small British brewers and local beer—and, with them, British businesses and jobs.”
We have already touched on the position of small brewers. The inequality in the bargaining power of large pub companies and the publicans on our high streets is a central issue.
I was a Minister for regulatory reform before the last general election, and my view is that regulation should be a last resort. As far as I am concerned, this is the last resort, and this case desperately calls for regulation because we have to balance out the unequal bargaining power that is removing real choice from consumers on our high streets. When consumers go to their local pubs they are prevented from purchasing beers that they want because of the existence of the beer tie.
Greg Mulholland (Leeds North West) (LD)
I echo my earlier comments commending the Select Committee on its excellent work. The all-party save the pub group has been delighted to work with the Committee and support its work. I am disappointed that we have to have this debate. As has already been made clear, in the past 18 months we received unanimous, cast-iron commitments from Front-Bench spokesmen of all three main parties that, if self-regulation failed by June 2011, a statutory code of practice would be introduced, including the all-important genuine free-of-tie option.
If people ask why this should be reviewed in the autumn, the simple answer is that it has been going on for seven years and generated four Select Committee reports. The last attempt at self-regulation was supposed to be the final one, which makes the Government’s response even more baffling. The sad reality is that their response simply does not deal with the fundamental issue, which is that the big pub companies take too much from each pub and it makes it difficult or impossible for those licensees to make a living, and that also shuts pubs. The Government’s response does nothing whatsoever to address that.
I am afraid that the Government have also been sold a pup. The immediate improvements outlined in their response are illusory. First, there are no substantive changes in the new framework code of practice produced by the British Beer and Pub Association. Secondly, and even more worryingly, the whole idea of putting the new codes on a legal footing is a mirage. The BBPA’s own legal advice—let us all be clear that it is the representative organisation of the pub companies—based on a legal authority that goes back 100 years, the Carlill case, has made it clear that, if we are to rely on that case, those codes are already binding. A letter was sent to pubco lessees over Christmas that worried them considerably. It suggested that the 2010 company code of practice would become binding if they sought to use it in any case, which is clearly an offer to ensnare them in further obligations to their landlords not already covered in the lease.
The first question to the Minister is this: how on earth can anyone be seeking to put on a legal footing codes that he himself has said are inadequate? He has written to the Select Committee Chair, stating:
“In some case, primarily where the letter was sent in advance of the new code being agreed, the link to the industry Framework Code led to the former version rather than the enhanced version, of the code; however, this will be superseded by the new version of the code once it has been agreed.”
The simple problem is this: which code and which offer? There are so many codes floating around, it is an absolute mess. The Minister needs to know that many licensee organisations believe that the Government, accepting the advice of the BBPA that it is a good idea to make the codes legally binding, will actually make the situation worse for licensees, not better.
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Davey)
For the sake of clarity, it is the industry framework code that will be legally binding, and it is the strengthened industry code as agreed with the Federation of Licensed Victuallers Associations and the BBPA on 22 December last year.
Greg Mulholland
Not only was that code opposed by all the other organisations, but it was the old company codes that were mentioned in the letter, and the Minister has not adequately addressed that point.
Kevin Brennan
Is the hon. Gentleman surprised at what has happened, given that before the general election we worked closely together, he as a Back Bencher and I as a Minister, as did the Select Committee and the Front Benches, to come to an agreed position? Does he have any explanation for why the Government have taken this stance?
Greg Mulholland
Sadly, I am afraid that the explanation appears to be clear from the freedom of information request submitted by the save the pub group: the so-called Government response is basically the BBPA’s own report, with some passages and commitments taken word for word—indeed, there is even a typo in the BBPA report presented to Ministers that was directly cut and pasted into the Government’s response. I am afraid that the evidence is damning, which is why many organisations are saying that the Government should halt their entire proposal for reform in its tracks.
Greg Mulholland
I apologise to the Minister, but I have given way twice. He will have plenty of time to respond.
This is clearly not an industry solution. I am afraid that the Minister has been misled by the BBPA, because its report, which was copied into the Government’s response, clearly stated that the Association of Licensed Multiple Retailers and the Guild of Master Victuallers had agreed to be part of the pub independent conciliation advisory service. However, the chairman of GMV has stated:
“We as an organisation have neither agreed to, or been presented with, any proposal in respect of our participation in PICAS at this time.”
The Minister needs to ask why he has been misled by the BBPA and then answer to the House.
Let us be clear that the Government’s proposals for reform are not industry proposals. They are not supported by the Independent Pub Confederation, the GMV, the Federation of Small Businesses, the Forum of Private Business, the ALMR, CAMRA, Fair Pint, Justice for Licensees, Licensees Unite or the all-party save the pub group. Why on earth did the Minister suggest throughout the Government response that it is an industry proposal? It is not even the Government’s response, but the response of the pubcos trying to avoid the self-regulation that he agreed was necessary.
The Prime Minister rightly talks about dealing with crony capitalism, and I absolutely agree with him on that. In 2010, after shares in Enterprise Inns collapsed—they fell from 770p in 2007 to 26p in January this year, a decline in value of 96.6%—Mr Ted Tuppen awarded himself a 50% pay rise of £412,000, taking home £1.22 million, including a bonus of £558,000. At the same time he was closing pubs and making things impossible for tenants. I am sorry to say that the Government’s response has backed the pub companies and crony capitalism in the worst sense.
We now need the statutory code of practice, including the genuine free-of-tie option. That was promised by the Minister, the Secretary of State and the Prime Minister before the election. We have waited long enough. We will wait until the autumn, but no longer.
Paul Murphy
I agree entirely with my hon. Friend. He and I have drunk in many pubs together over the years, and understand the importance of that.
I entirely support the recommendations and conclusions of the Select Committee, including a statutory code of practice, a free-of-tie option and an open market rent review with an independent adjudicator. What comes through in the report is the frustration and loss of patience of Committee members with the pub companies. I hasten to add that we are talking not about our family brewers, such as Brains in south Wales, which are respected and good employers with good public houses, but about companies that lack transparency in what they do, and did not impress the members of the Select Committee when they gave evidence. A cursory glance at the evidence given to the Committee shows how the pub companies tried to evade and wriggle out of the important issues.
Greg Mulholland
Does the right hon. Gentleman find it odd that the first response of the Department for Business, Innovation and Skills to this wonderful Select Committee report was to rush out an invitation to the pub companies to a meeting to talk about how to circumvent the report?
Paul Murphy
I was not aware of that. I know that the hon. Gentleman has done a great deal of work on these important issues using freedom of information requests and so on. It is obvious that the Government must speak to the trade association—it would be daft if they did not. However, there is a difference between speaking and listening to the members of that association and engaging in one of the biggest acts of plagiarism that we have seen in responding to the Select Committee. The Government appear to have put into their sloppy response the wishes of the pub companies in their entirety, including the typing errors. That was a great disappointment, because it was clear that all Front Benchers agreed that there should be a statutory code of conduct and with all the other issues that the Select Committee put forward.
I have been looking at this matter for three to four years in my constituency. Every Member will have examples of tenants, landlords and publicans in their constituency who have come to the end of their tether with the way in which they are treated by the pub companies. In my constituency, Mr Phil Jones, the landlord of the Open Hearth public house in Pontypool, has been a doughty fighter on this issue. He has given evidence to the Business, Innovation and Skills Committee and its predecessor. He has shown how shamefully the companies have treated their tenants. It is about time that changed. Like many of his colleagues up and down the country, he has shown Members of Parliament the personal tragedy and misery caused by the way in which those systems operate.
The Government have to change their mind. Outside in the country, there is a genuine desire for tenants and publicans across the country to be treated fairly and properly. There is no doubt, as my hon. Friend the Member for East Lothian (Fiona O'Donnell) has said, that public houses play a tremendous part in our national life and a huge integrated part in our communities. I hope that the Government will listen to Members across the House, change their mind and implement the recommendations of the Select Committee.
Charlotte Leslie (Bristol North West) (Con)
I congratulate the Backbench Business Committee on bringing the debate forward. It is massively important, because as I think we all agree, pubs play an incredibly important role in our society. If we are to talk about the big society, we should recognise that an awful lot of charity ventures and community groups and activities involve a pint, whether of beer or orange juice, at the local pub at some point.
The subject is massively important also because pubs are a place for social, intergenerational drinking rather than the isolated drinking that very cheap supermarket alcohol can often encourage or the antisocial behaviour caused by preloading—kids drinking a lot before they go out. Pubs are important for all sorts of reasons, as I know we all agree.
The issue of the beer tie is one part of the equation that is leading to many of our pubs closing. Although we must recognise the importance of that, we must also recognise the other factors in the closure of pubs, which have already been mentioned. Cut-price supermarket alcohol is a massive one and social changes are another, and there may also be things that we can do about business rates and licensing to help to create a level playing field for pubs.
Greg Mulholland
Of course there are a number of factors affecting pubs, but when we compare a tied pub and a free-of-tie pub, we see that the fundamental difference that shuts a tied pub is the pubco’s unreasonable terms.
Charlotte Leslie
I thank my hon. Friend for that, and I am just coming to the role of the pub tie and the pub companies.
It is a shame that there seems to be a lot of distrust among the various factions about how the Government’s response to the Select Committee has come about. I know that figures have been put forward stating that non-tied pubs close faster than tied pubs, but those figures are in dispute because tied pubs tend to be sold to developers before they close down, so they are not listed as tied pubs by the time they close down. There is also the issue of large businesses reporting business failures. There are therefore doubts about the statistics on whether a pub is better off being tied or non-tied.
Greg Mulholland
To be clear, the CGA Strategy figures, which no one disputes, show that between December 2008 and June 2011, the number of tied pubs fell by 3,216, and that in the same period the number of free-of-tie pubs increased by 425. Does the hon. Lady agree that it is baffling that the Department for Business, Innovation and Skills simply accepted the British Beer and Pub Association's misleading representation of those events, which, as she says, omitted transfers that happen, in some cases deliberately to distort the figures?
Charlotte Leslie
It is very obvious—this is crucial to the debate—that there is a strong feeling that the response was unilaterally informed. I am not in a position to say whether that is the case, but it is difficult for the Government’s response to have authority, particularly on such an important issue, when there are allegations that it was overly unilaterally informed. I take my hon. Friend’s point. The dispute over the figures is very much a case in point. Another result of the beer tie is the substantially lower earning of the publicans who try to manage those pubs.
That is statistics, but anecdotally—we are all very aware of the limitations and strengths of anecdotes—we hear of people opting out of the beer tie to find their rent increasing. Publicans who have been in the business for a long time and who took on pubs under big companies 20 years ago report how much more restrictive pub companies have become in recent times. Given the upward slope that pubs face in making themselves viable, that seems a counter-intuitive direction for pub companies if they want pubs to succeed.
Other areas of distrust that are not at all helpful to the debate include disputed membership of the Pub Independent Conciliation and Arbitration Service, which my hon. Friend the Member for Leeds North West (Greg Mulholland) also mentioned.
I shall vote for the motion. Given the lack of success of self-regulation in the past, there is a question mark over whether it will work in future. I am not one to run for more regulation—there are lots of unintended consequences.
Caroline Lucas (Brighton, Pavilion) (Green)
I congratulate the hon. Member for West Bromwich West (Mr Bailey) on securing this important debate and commend the excellent Business, Innovation and Skills Committee report.
It is deeply worrying that the pub market in the UK has become so dominated by just a handful of companies. Tenants are being ripped off by those companies, which can overcharge for beer because the tenants are tied to them. The pub tie has been instrumental in hundreds of successful local pubs going to the wall, which continues.
Lessees can currently buy only a limited range of beer, often at inflated prices, which restricts pub goers’ choice, prevents small local brewers selling to such pubs and remorselessly accelerates the number of pub closures. That scandal must stop. The Chair of the Committee has reminded the House in both his motion and his speech that the Secretary of State promised action to save our pubs if the industry did not get its house in order, but neither the industry nor the Secretary of State has delivered. That is why this debate is so important.
I welcome the introduction of a new arbitration service, and requirements to follow rental guidelines and to publish national wholesale price lists, but the package as a whole will do little to stop pub closures or to provide meaningful support for sustainable local community pubs.
Greg Mulholland
Apart from concerns about the misrepresentation of PICAS, does the hon. Lady share licensees’ concerns that although PICAS is set up to be an independent arbitrator, it will be funded and controlled by the British Beer and Pub Association, and therefore the pub companies?
Caroline Lucas
That is a good point. I was trying to find something positive to say, but the hon. Gentleman is right that there are concerns about that aspect.
The Government’s response has failed to address the key issues of providing lessees with a genuine free-of-tie option. It will therefore not rebalance the relationship between struggling licensees and large pub companies. I am also concerned that even the limited package that has been announced will not actually be delivered, given the pub companies’ history of broken promises and abandoned commitments.
As other hon. Members have said, pubs are central to our communities. Chris Beaumont, the landlord of The Greys in the Hanover area of my constituency, tells me that his is the only pub in the area that has not closed and reopened in the last nine years. The London Unity has had three owners in two years, The Geese has changed hands four times in six years, and the Horse and Groom recently closed and reopened. In the pub trade, such closing and reopening is known as churn. Churn matters, because it means ruined livelihoods for the individual landlords and their families. It also means instability for our pubs and our local economy. It takes years to build up a great community pub. A high turnover of pub landlords as pubs regularly close and reopen sends out a negative message that times are not good and that it is difficult to survive in an area, which clearly does not help other local businesses. The tied scheme was a significant factor in all the closures I mentioned, but the pubcos would prefer that we did know about it: the data on pubs that close do not tell of pubs that close and reopen.
The other thing that pubcos are less than honest about is that when they sit down and negotiate with lessees, they claim that lessees can always be free of tied options, yet often fail to mention that they must pay a premium to qualify for that. On wines and spirits, the charge is between £4,000 and £5,000 extra per year. It is a similar amount for bottled beers. To put that into context, the typical annual rent for a pub tenant in Brighton is around £25,000 a year. Pubcos are therefore essentially extorting an additional 20% increase on the rent to free landlords from the tie. Furthermore, pubcos do not generally offer an untied option on draught beers or lagers.
The Government must listen to lessees such as Chris and the many others in my constituency represented by the Brighton & Hove Licensees Association. They are all deeply worried and believe as I do that it is high time the Government acted to protect community pubs and lessees. Pubs are pivotal to the economy and the tourist industry, so the health of the sector has a particular resonance in my constituency.