Statutory Pubs Code and Pubs Code Adjudicator

Debate between Iain Wright and John Healey

Thursday 26th January 2017 Commons Chamber

[Mr Wright]

The issue has attracted enormous interest, not just from our Select Committee but from predecessor Select Committees, which helped to change the law. As Chair of the Select Committee, I maintain that, given the hard-working and determined members of the Select Committee such as the hon. Gentleman and the hon. Member for Cannock Chase, the issue will not go away, but continue to command our attention. We want to put pressure on the Government to look again and reopen the appointments process so that this important appointment is seen as fair and impartial, and that is not happening.

I want to touch on an issue that came up in the Select Committee’s consideration. Simon Clarke is a tied tenant and a surveyor, and both he and Mr Mountford expressed surprise and concern that Mr Newby, as a chartered surveyor, even applied for the job. Both said that someone from outside the industry was needed. Mr Mountford told us that they had said to the Department that the post required

“a judge, a retired lawyer or somebody with legal experience. We definitely said it should not be a surveyor.”

Mr Clarke said that it definitely should not have been a chartered surveyor, because there would always be a conflict of interest as surveyors would, in all likelihood, have advised one of the parties.

That brings me to the central concern about Mr Newby’s appointment. Before becoming the Pubs Code Adjudicator, Mr Newby was a director of Fleurets, a firm of business property valuers and surveyors. As the hon. Member for Leeds North West mentioned, in giving evidence to the Select Committee Mr Newby said that about 20% to 23% of the firm’s fee income—a material amount—derived from advice provided to the large pubcos. That alone lends itself to accusations of potential and perceived conflicts of interest. However, Mr Newby also continues to have financial interests in the company. He gave evidence to the Committee in May and then clarified some of his self-confessed inaccuracies in a letter to me in November—at, he said, the instigation of the Minister. Mr Newby has both shares in Fleurets Holdings Ltd and debenture loan notes owed to him by the company.

The Committee asked Mr Newby if he would provide a clean and definable break with his old firm by divesting himself of those financial interests. He stated in his November letter to me that the company is unwilling to do so in order to avoid putting

“undue strain on capital resources”—

it is probably more accurate to call it the firm’s cash flow. That is very serious and really undermines the ability of the adjudicator to command the trust and respect of all sides of the industry. He has a significant financial interest in shares and loans from the company, which derives a significant part of its revenue from large pubcos, but he cannot alter that situation because that would put strain on cash flow. In other words, he retains an ongoing financial interest, and it is in Mr Newby’s interest for the firm to do well to secure the moneys owed to him. That could mean that his judgments would assist large pubcos that have commissioned Fleurets to advise on tenancy arrangements so as to maintain the firm’s cash-flow position and profitability, and thus allow payments to be made to Mr Newby.

When Mr Newby came before the Committee, he said:

“I have taken off my previous hat and thrown it away.”

But he has not: the ongoing financial interests mean that he is still clearly wearing that hat. There is a clear perception of conflict of interest. This is like a referee officiating at a football match between Chelsea, who are top of the premiership, and Newport County, who are bottom of league two—

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

Or Hartlepool.

[Mr Wright]

They are not bottom just yet. It would be like a match between Newport and Chelsea, with a huge imbalance in skills and experience—perhaps that is a subject for a different debate—only for fans to discover that the referee owned shares in Chelsea’s shirt sponsor. It is as close a relationship as that. Perceptions of conflict of interest would have started immediately on appointment, and as I said to Mr Newby at the Select Committee, he cannot possibly win. Any judgment he makes will now always be accused of being unfair and partial—like that referee, who would not be seen as independent. This is a serious failing in the ability of the pubs code to operate effectively.

A vivid contrast was brought home to me in the Select Committee when I asked tenants and landlords and then executives from large pubcos whether they had confidence in Mr Newby and his appointment. The large pubcos said that they did not have a problem. The tenants were clear that they did not believe that judgments would be fair and impartial. That contrast shows that the code cannot operate effectively. The pubs code has broken down before it has even begun, and the Minister needs to intervene to ensure the code starts to work.

I am disappointed that the Secretary of State rejected our calls to reopen the appointment process. I hope the Minister accepts that this case demonstrates a serious perceived conflict of interest, and that perception is stopping the code working effectively. To ensure the viability of the pub industry and to protect the interests of tenants, which have not been addressed for many years, will she look again at reopening the process and have an adjudicator that is, and is seen to be, completely impartial and independent?