Enterprise Bill [HL]

Lord Berkeley Excerpts

Wednesday 4th November 2015 Grand Committee

[Lord Hodgson of Astley Abbotts]

Certainly. The noble Lord is a businessman to his bootstraps. He knows perfectly well that if you are running a public company, you will be required and encouraged by your shareholders to take on a certain level of gearing. He would; I am sure that he does in his own businesses, which no doubt he looks after splendidly. The idea that somehow a business should be run with a completely different model because it happens to be in the pub sector does not hold water. It is bound roughly to march to the beat of the same drum that applies to public and private companies generally.

I promised the noble Lord, Lord Snape, that I would get to the specific amendments, of which there are three. Amendment 53ZD is obviously concerned with introducing all pubs. That really has absolutely nothing to do with anything that the Minister has said or any part of our discussions earlier in the year. Managed pubs are an entirely different matter and are run in an entirely different way. They are run by employees, who have a bonus system and a wage system. To say that this is a way of gaming the system, as was said by the noble Lord, Lord Whitty, is not accurate at all. If the amendment were passed, some companies that have no tied pubs at all would be caught, so the tied pub area would not even be further dealt with. I cannot see that Amendment 53ZD has any relevance to what has gone before, to what the Minister said, or to tackling the basic problem that we have been considering.

Amendment 53ZC has exceptionally vague wording. One important aspect of maintaining pubs is for there to be some effective secondary market. Pub companies rebalance their portfolios where they have too many pubs in one part of the country and want exposure in others. To be perfectly honest, some pubs will operate better with individual ownership and should therefore be sold to individual proprietors. An acceptance of this amendment, with its broad powers and imprecise determinations, would freeze up that secondary market and make it almost impossible for new entrants to come to the market, or indeed for existing pubcos to operate effectively.

Amendment 53ZF is about parallel rent assessments. Although the noble Lord has specified Section 43(5) I think that he means Section 42(5), but we do not need to worry about that. As I understand it—if my noble friend does not support me on this, I shall go down in flames—when the market rent option is triggered, there will be an opportunity for the PRA to be introduced. That is provided for in the consultation. Therefore, no tenant undertaking the MRO route can be precluded from the parallel rent assessment. He or she can make a judgment as to which is the best route to follow. That answers the point about the dangers of the PRA being unduly sidelined.

Finally, I think that the noble Lord, Lord Snape, believes that somehow big pubcos want to close pubs. I was the director of an integrating brewery; we wanted to sell our beer. We wanted good pubs because that meant that we managed to sell more beer. We wanted to find every way to make our pubs do better. The same may not be true of the pure pubcos that do not have brewers in them, but I urge noble Lords to be careful what they wish for. There is now the concept of a real estate investment trust, or REIT. It would be perfectly possible for a pubco to create a REIT to remove all the support from their pubs. They would make quite a lot of money in the short run because quite a lot is spent on supporting their pub chains. Over time, some or many pubs would fail and they would close them down and sell them off. They could do so within the very tax advantageous structure of a REIT.

We have not even reached the stage of implementing the results from the last set of consultations and already people are starting to think about how things should be tightened up, changed and altered. We should at least allow some time for the structure to settle down so we can see how things develop. Creating further uncertainty in a sector that is under extreme pressure, as I have explained, would be a grave error. It would not help all of us who would like to see the maximum number of pubs maintained in a way that is fair to all parties.

[Lord Berkeley (Lab)]

The noble Lord said he wanted to have good pubs and that he was worried about uncertainty in the sector. I recall that in the Committee and Report stages that my noble friend referred to, the noble Lord repeated that but could not answer the questions of so many landlords who are working very long hours for very little money. There seems to be a turnover of landlords in many pubs of not much more than a year or 18 months. That does not make a good pub and it creates uncertainty. There may have been one or two cases when landlords were not performing but probably the financial pressures from the pubcos were so high that they could not cope. Does the noble Lord not recognise that that is at least as much of a problem as the one he is talking about?

[Lord Hodgson of Astley Abbotts]

Of course I understand the pressure on tenants. But the noble Lord must agree that the pressure on the sector is terrific. If your primary product can be bought down the road at 25% of what you sell it for you are under pressure. You will find it exceptionally difficult to buy a pint of lager for less than £3 in a pub. But I will take the noble Lord out, when Committee ceases to sit this evening, and we will find lager at 75p a pint within two miles.

--- Later in debate ---

[Baroness Neville-Rolfe]

My Lords, I think that we have been through the arguments. I understand the disappointment. Noble Lords need to understand that the Government are trying to do this in a way that is less bureaucratic and more effective. That is the basis of the consultation. However, I understand the strength of feeling that has been expressed today. We want to get the implementation of the Pubs Code, the adjudicator and the provisions right. We are genuinely consulting on the proposals that we have put forward. There will be a meeting of representatives of tenants’ groups and pub companies as early as next week to discuss the proposals in detail and to take them through our thinking. This subject is on the table, so it can be discussed. I very much hope that by Report we will have satisfied the obviously genuine concerns raised today. In the mean time, I hope that in the light of my comments noble Lords will feel able to withdraw the amendment.

[Lord Berkeley]

The noble Baroness has talked an awful lot about the consultation that has gone on this summer with the different groups. Did any of them express a view on PRA and whether they wanted it or not, particularly the tenants, or was it not discussed?

[Baroness Neville-Rolfe]

My Lords, my understanding is that PRA was not discussed but I will engage further in the process and ensure that it is discussed in the context of the consultations going forward next week. As I pointed out, it is mentioned in the consultation paper, so obviously it can be on the agenda of the discussions taking place this month.

--- Later in debate ---

[Lord Snape]

I am as anxious as ever to help the Minister out but I put the same question to her as I did to my noble friend: do the conditions that the Government have attached to MRO under these proposals not mean that a tenant could apply for a rent review only if he or she received a rent increase, and that they could not apply on the basis of the existing rent?

[Lord Berkeley]

Or if the price of beer goes up.

[Lord Snape]

Or if the price of beer goes up.