Small Business, Enterprise and Employment Bill

Lord Newby Excerpts

Wednesday 28th January 2015 Grand Committee

[Lord Newby (LD)]

My Lords, these amendments relate to Clause 60, which will enable the adjudicator to levy funds on pub-owning businesses to contribute to the adjudicator’s expenses, with the Secretary of State’s consent. Amendment 90B would change “may” to “must”, making the power a duty. We have had many similar debates on a number of subjects during my time in your Lordships’ House. I remember with affection the noble Lord, Lord Barnett, trying to get us to put “must” into various banking Bills, with no success. As I said then, and as I am sure the noble Lord, Lord Hodgson, realises, “may” in reality often means “must”. I assure him that in this case the amendment is not necessary.

The amendments would together require the adjudicator to impose a levy not only on the pub-owning companies in scope of the code but on any pub-owning company with tied pubs. I hear what the noble Lord says about the code becoming the industry standard for everybody, but that is by no means clear at this point. It is certainly not a requirement of the Bill. To the extent that pubcos not covered by the Bill did not use the code, this amendment would go against the “polluter pays” principle. The Government are clear that funding the adjudicator through a levy on pub-owning businesses covered by the Pubs Code is the right approach. The conduct of the large pub-owning businesses has led to the need for the adjudicator, so it is appropriate that they should cover the costs. This approach is in keeping with the funding of the Groceries Code Adjudicator by the large retailers in scope of the Groceries Code.

It would be unfair for companies such as the family brewers, whose tied tenants would not have the protections of the Pubs Code—at least initially—nor the ability to refer disputes to the adjudicator, to contribute to the levy. The representative body for some of these smaller companies, the Independent Family Brewers of Britain, has committed to continuing the current voluntary arrangements. This includes funding industry dispute resolution services to continue to provide protections for their tied tenants, so the amendment would require them to pay twice. The Government intend to fund the set-up costs of the adjudicator—but, once it has been established, it is only right that the expenses are met by that part of the industry whose conduct has led to the need for the adjudicator. The existing drafting of Clause 60 provides for this.

The amendments would also require the adjudicator to impose a levy every financial year. This would be the case even if, however unlikely, the money was not required that year—a situation which could arise if there was sufficient money left unspent from the previous year. It is therefore right to allow this flexibility for such circumstances. I hope that I have been able to persuade my noble friend that he should not press his amendment.

[Lord Hodgson of Astley Abbotts]

My Lords, my noble friend has brought us back to the extraordinary aspect of the parliamentary draftsmen, where “may” equals “must”. Who else in this country would believe that “may” equals “must”? He is quite right to remind us that this is one of the quirks of parliamentary draftsmanship. If, as he points out, the polluter should pay—and if the code becomes widely used by smaller companies below the 500 limit—all I would like to know is whether there is a possibility that, at that stage, the cost of the code could be extended to cover the people using the code, because that is the “polluter pays” principle that he referred to. I hope that the Government will think about that, but, in the mean time, and particularly given the hour, I beg leave to withdraw the amendment.

--- Later in debate ---

[Lord Hodgson of Astley Abbotts]

My Lords, Amendment 93 could be called, in shorthand terms, the “shopping around clause”. My noble friend the Minister may have spoken to this earlier; I hope that she will be able to reassure me in fairly short order that my amendment is no longer needed with the new provisions.

Clause 67, to which this amendment refers, defines inter alia the term “tied pub tenant”. It does so in respect of prospective tenants at subsection(1)(b), which says,

“who is a party to negotiations relating to the prospective tenancy of or licence to occupy premises which are, or on completion of the negotiations are expected to be, a tied pub”.

That is a very loose definition. An individual might make a casual inquiry—even by telephone—about taking on a tied tenancy but may be without any serious intent, at least initially, of eventually signing up. However, the pubco does not know that when the telephone call is received. As such, under this wide definition in the new regime, it will have to go through considerable administrative procedures at some cost at this early stage.

My Amendment 93 would narrow the definition to people who are getting close to signing up and making an arrangement by inserting the words,

“who is party to negotiations which have reached the stage of a provisional trading agreement for the prospective tenancy of a premises which are, or expected to be, a tied pub ahead of any final terms of the agreement being agreed”.

This has the effect of requiring serious administrative effort to be made only once the tenant has shown himself to be of serious intent. It in no way weakens his position; it merely ensures that he is likely finally to take on a tenancy before he qualifies as a tied pub tenant, with all that that implies under the code. I beg to move.

[Lord Newby]

My Lords, I hope that I can reassure my noble friend Lord Hodgson on this point. Evidence from the Government’s consultation in 2013 and correspondence we have received from tenants shows that many such prospective tenants appear to have been given insufficient information, or have even been misinformed, by large pub-owning companies about the pub that they are negotiating to take on. The Pubs Code will ensure that prospective tenants receive the information they need to make a considered decision on whether the deal they are being offered is fair and right for them.

I completely understand the concerns that my noble friend raised. As he said, we clearly need to avoid the situation where any casual enquirer is entitled to all the code’s protections. That would be unnecessary and onerous for the pub companies. At the same time, we need to ensure that prospective tenants receive the information promised by the code early enough in their negotiations with the pub company to influence their decision. That is why we have carefully phrased Clause 67(1)(b) to restrict these rights to those who are,

“a party to negotiations relating to the prospective tenancy”.

If there have been no negotiations, there would be no right to the details. The pub-owning company would not be in breach of the Pubs Code for failing to supply them. We will consult on the code before it is finalised, which will allow us to ensure that we will draw the line in the right place, in a way that takes account of the procedures that different pub companies use to recruit and take on new tied tenants. I hope that that gives my noble friend the reassurance that he seeks.