Pubs Code 2016

Debate between Lilian Greenwood and Adrian Bailey

Wednesday 24th January 2018 Westminster Hall

[Mr Bailey]

My hon. Friend raises an important point. I know that many tenants feel that this procrastination over resolution is playing into the hands of the pub companies, and that it is, in some cases, deliberately designed to drive up expenses and deter anybody from making such applications.

[Lilian Greenwood (Nottingham South) (Lab)]

I congratulate my hon. Friend on securing this debate. I want to ask a question on behalf of the Nottingham branch of the Campaign for Real Ale and its pub protection officer, who wrote to me about this issue. The point they make is that the process of obtaining a market rent only option is massively complicated and virtually impossible for an unsupported tied tenant to use without expensive legal support. Does my hon. Friend agree that if the legislation is to be useful, it must be easily accessible?

[Mr Bailey]

My hon. Friend makes an important point. That is one of the complaints, and I will be discussing some of them in a few moments.

Prior to the implementation of the legislation, subsequent Committees sought the industry’s agreement on a voluntary code, but subsequent inquiries demonstrated that the pub companies, despite paying lip service to a voluntary code, were actually not conforming to it and not making any progress on it. It was then in exasperation—almost desperation—that the Select Committee decided that enough was enough, and that it was time to implement legislation. Subsequently, the legislation materialised.

The key issue, above all else, is tied tenancies and the market rent only option. The argument is that tied tenants have to pay a disproportionate amount of money for their stock and other services, and that, as a result, the pub company gets a disproportionate share of the income arising from the premises. If a tenant seeks to go free of tie, the pub company will implement conditions in the negotiations that remove any financial advantage from that course of action. The legislation, by giving tenants the option of applying for a market rent only option, is designed to overcome that handicap. The way in which the process is being implemented is a matter of huge concern, and it needs further consideration by the Pubs Code Adjudicator and the Government.

The Pubs Code Adjudicator report in July 2017—bearing in mind that the legislation came in one year earlier, in July 2016—said that there were two overarching principles in the code. The first was “fair and lawful” dealings in relation to tied tenants. The second, which I have touched on, was the “no worse off” principle, which sets out

“that individual tied tenants should not be worse off than they would be if they were free of the tie”.

Eighteen months after the introduction of the pubs code and the Pubs Code Adjudicator, it is time to take stock and assess whether the objectives set out in the pubs code—I just defined them—are being met, and, if not, what needs to be done.

Before I do that, I have to touch on the controversy that raged over the appointment of Paul Newby as the Pubs Code Adjudicator. I will not dwell on the whole catalogue of concerns, but it is well known that there are accusations of conflicts of interests arising from his past employment with the valuers and surveyors Fleurets, because it had extensive interests with the pub companies, and from his personal investment in it. I said in the debate last January that unless he divested himself of that particular investment, then in no way should he be the Pubs Code Adjudicator because he had an obvious and transparent conflict of interest. He has not done so. Given that confidence in his commitment and impartiality is crucial to earning the trust of pub tenants, that must be of huge concern. I will come back to this issue in a moment.

He has had opportunities over the past 18 months to demonstrate his effectiveness; however, looking at his performance, we see that it is possibly a slight understatement to say that the implementation and the progress made under his supervision fall short of the level needed to achieve the legislative objectives. The first concern is the slowness of the adjudication process. Between July 2016 and March 2017, arbitration awards were made in only 15 of the 119 cases accepted for arbitration. In the cases specifically relating to the market rent only option, the figure was 12 out of 104. Later in the year, in August, the adjudicator published a market rent only verification exercise report, which demonstrates that of the total of 497 market rent only notices, only 11 were actually converted into agreed market rent only tenancies. Of the 130 arbitration cases listed on 31 July 2017, 79 had been delayed for more than three months, and 12 for more than six months.

Now I will come back to the point that I was making earlier. The slowness of arbitration is not the only issue; impartiality is also a problem. The Chartered Institute of Arbitrators has upheld four of the 12 challenges made by pub tenants to the adjudicator’s decisions. That demonstrates the lack of confidence of tenants in the industry in the robustness and impartiality of the way in which he is exercising the code. To have a one-third failure rate in such a key, sensitive position is absolutely unacceptable.