Lord Stoneham of Droxford
Main Page: Lord Stoneham of Droxford (Liberal Democrat - Life peer)Small Business, Enterprise and Employment Bill
Lord Stoneham of Droxford Excerpts
Lord Whitty (Lab)
My Lords, I too have some amendments in this group. The House may be surprised, but I agree with the first remarks of the noble Lord, Lord Hodgson, that we have seen a clear response from the Government to the anxieties on this section. While there was some concern that the Government had come up with a whole new clause to the Bill rather than the one that was passed in the Commons, and a fear that the Government were under some pressure to dilute the effectiveness of the amendment carried in the Commons, the Minister and her officials, in the amendments they are proposing, have seriously recognised that danger and have responded admirably in general to fulfilling the intent of the Commons’ Motion while making it less subject to doubt or indirect unforeseen consequences.
It is quite a complicated amendment in the first place, and the additional amendments which, under pressure, the Government have added today make it more complicated. Nevertheless, it is a basis on which we can all move forward. Certainly most of the campaigning groups in the area recognise that this is a huge step. There are, however, three anxieties which these and my later amendments address in part.
The first is that by leaving quite a lot of this to secondary legislation, it is probably inevitable that the actual right to the MRO will not come into force until about a year later. That is a disappointment. Nevertheless, I understand the reasons for it. I also have some problems about the threshold, which I shall come to in a later group. In this group, my main anxiety and that of other noble Lords and those who have met the Minister is that one of the triggers for the MRO, which was clearly required under the Greg Mulholland proposition and relates to the point of the MRO still being available after sale, is greatly reduced as a result of the government amendments. I agree with some of the amendments tabled in this area by the noble Lord, Lord Stoneham, as I do with some of the others.
I am sorry about the complication here, but my Amendments 33AW, 33AX and 33AY are themselves amendments to the fairly long government Amendment 33AV. They deal with a situation where the pub is sold in the course of a rent agreement to an owner who is not covered by the code. All the protections in the lease seem to move over, but the right to the MRO does not. The Government have addressed this in part by ensuring that the restructuring of companies will not be a way around the provision. In other words, the large pub companies cannot break themselves up so that they fall under the threshold. However, it is still the case that if a non-large brewer or pubco takes on a tied pub, while all the other protections in the code will apply the MRO option will not.
The Government have said that the option will apply for the duration of the lease, but that is not much comfort to those who are nearing the end of their lease. My first two amendments therefore deal with giving a bit more certainty to people who are faced with the sale of their pub, generally speaking over their heads, when they are not at the end of their lease. In other words, they suggest that there should be a 10-year period. I am not absolutely wedded to 10 years, but there should be a period during which whoever is the new owner, this one aspect of the rights of the tenant should be carried over with the lease in the same way as all other rights are carried over. The two amendments assume a period of 10 years. As I say, if the Government want to come up with a slightly different formulation, I will be happy to consider it.
The final amendment, Amendment 33AY, relates to the drafting of government Amendment 33AV, which seems to drive a coach and horses through the interaction of proposed new subsections (2A) and (2E). They would both restrict the availability of the MRO post sale to a non-qualifying company and dilute the role of the adjudicator in relation to the new circumstances. There may be a more subtle way of doing this, and the Government may say that there already is one, but I cannot see it in their amendment. A tenant who has the lease and by the clear will of the House of Commons now has the right to an MRO ought to continue to have that right under a new owner for a period of time and to have the right to enforce the MRO option by right of access to the adjudicator. Taken together, my three amendments would do that.
The Government may have a better way of doing this, and if they do we would like to hear about it either now or at Third Reading. Indeed, I remind the Minister that the point of sale issue was one of the great many contentions put forward by Greg Mulholland in the Commons and was clearly one of the triggers which the House of Commons voted for. If that is pulled away, the will of the Commons will not be fully represented in that respect. I repeat that I pay tribute to the Minister and her officials for respecting the other aspects of the Commons amendment. I would be interested in what the Minister has to say on this point, but I think that my amendments would actually help the situation.
Lord Stoneham of Droxford (LD)
My Lords, I congratulate the Government on making significant moves with these amendments to deal with some of the problems that we identified in Committee. Obviously, one of our major concerns is that a lot is still to be decided by secondary legislation. We have to make sure that as far as possible we are precise at this stage about what that legislation is going to seek to do.
I accept all the points that the noble Lord, Lord Whitty, made about the point of sale issue. I would like to see stronger safeguards, but I also recognise the move that the Government have made, which I give them credit for, in ensuring that even though sale is not a full trigger point, the amendment will enable certain protections to still be in place, particularly that of the code.
I would also like to hear my noble friend spell out the timescale, because I share some of the concerns of the noble Lord, Lord Whitty, that we need some clarity on the timescale, although I suspect that 10 years is probably a little optimistic. I support the government amendments and ask for clarification on the point of sale issue.
Lord Berkeley (Lab)
My Lords, I support everything that my noble friend Lord Whitty said, but my main reason for rising is to challenge the noble Lord, Lord Hodgson. He said that there is a wave of money wishing to flood into the market—I hope I have got that right—but that the investors are not planning to do so at the moment.
Lord Stoneham of Droxford
My Lords, I do not want to detain the House too long on these amendments and have a long argument on the respective merits of “may” and “must”, as I understand there are certain legislative interpretations of that. However, as I said earlier, we are concerned that a lot remains to be decided in the secondary legislation. Therefore, we want to be as firm as we can about what the primary legislation lays down. If the Minister can confirm that “may” means “must”, I understand that there will be no problem. All I seek is clarity and to leave the draftsmen to draft what is appropriate in the circumstances in legislative speak, hoping that “may” equals “must” in a layman’s understanding.
However, Amendment 33AR is a more substantial and significant amendment as it seeks to align and clarify the definition of “tie”. Clause 68(5) defines “tie”, saying:
“Condition D … is subject to a contractual obligation that some or all of the alcohol to be sold at the premises”,
et cetera. Amendment 33AR seeks to widen that by inserting,
“product or service tie supplied or provided by”,
as other ties exist in pubs. We want to align this definition with the definition in Clause 43(4)(a)(ii), which states,
“does not contain any product or service tie other than one in respect of insurance in connection with the tied pub”.
We are seeking to clarify the definition of a tied pub. I beg to move.
Lord Mendelsohn
My Lords, I rise briefly in support of the amendments tabled by the noble Lord, Lord Stoneham, who has been an assiduous follower of the Bill. These are important tidying-up amendments that help correct and clarify some key measures in the Bill. In particular, Amendment 33AR is an essential requirement to make sure that there is consistency in the Bill. I hope that either the amendment will be accepted or the Government will agree to bring it back at Third Reading.
Baroness Neville-Rolfe
My Lords, I am afraid that I cannot agree to this amendment. I explained why we could agree to “must” elsewhere in the Bill but we are unable to agree to this amendment for reasons that I have also explained.
Lord Stoneham of Droxford
In that case, is my noble friend going to talk about Amendment 33AR? I will probably have to accept what she says about the other amendments, but I should like a definitive response on Amendment 33AR.
Baroness Neville-Rolfe
My Lords, I apologise for the confusion. There are a lot of different amendments here and perhaps I may have noble Lords’ patience. Perhaps the noble Lord could clarify to which amendments in which groups he seeks a response, because there are two or three different ones that relate to “must” and “may”. I explained where I was happy to accept “must”. If he is asking me to accept it in other places, there are reasons that I can go through.
My apologies to the House; we have moved on more rapidly than I could possibly have believed. I thank the noble Lord, Lord Stoneham, for his amendments. Amendments 33H and 33K would change two references to “may” in Clause 42. This would turn the powers in the Pubs Code to require pub companies to provide parallel rent assessments and give the adjudicator functions in relation to PRAs into duties. We have made a commitment to this House to introduce PRA. This commitment, together with the duty on the Secretary of State to produce the Pubs Code in Clause 42(1), means that the Government must deliver on these provisions in the secondary legislation one year after these provisions come into force, as I explained a minute ago. There can be no doubt that we will introduce these provisions.
We had similar debates on a number of topics in Committee. As I set out then, it is standard legislative drafting to refer to provisions that “may” be set out in secondary legislation to preserve some flexibility. If we were to change these “mays” into “musts”, we would need to be aware of the possibility of overly restricting and restraining the use of these powers. For example, we have said that the adjudicator “may”, in the interests of fairness and administrative effectiveness, choose not to charge fees to smaller pub companies that have bought only one pub formerly owned by a pub company. These amendments would remove such flexibility and I hope my noble friend will recognise the undesirability of that. I can assure him that the Government will include all the provisions set out in the Bill in the statutory code, which will be made by secondary legislation and subject to parliamentary scrutiny by the affirmative procedure.
With noble Lords’ permission, I shall comment on Amendments 33AJ, 33AL and 33AP. Where the Bill provides that the Secretary of State “may” by regulations give the adjudicator functions in relation to dispute resolution and determining rent for market rent only, it is clear that the Government must set out these functions for the adjudicator in secondary legislation. Clause 42(1) sets out a clear duty on the Government to introduce the statutory code within 12 months of the Bill coming into force—14 months from Royal Assent, as I have said—and to establish an adjudicator to enforce the code. The code must include the market rent only option and the adjudicator must therefore be able to enforce the market rent only option.
I turn now to Amendment 33AR. The definition of a tied pub set out in Clause 68 determines the scope of the regime and deliberately focuses on the alcohol tie, rather than other product and service ties. This is because it is in the abuse of the combination of the alcohol tie and property rent that we have evidence of problems in the relationship between tenants and pub-owning companies. This has been documented in the evidence we received to the Government’s consultation, in the continued correspondence the department receives from tied tenants, and in the multiple reports into the sector carried out by the BIS Select Committee. These reports and the evidence we have received point to problems with the alcohol tie.
The requirements for a market rent only-compliant agreement set out in the Bill specify that an agreement made once the tenant has opted for MRO must not include any alcohol, product or service ties. This is to ensure, when a tenant opts for MRO, that he or she is offered a genuinely free-of-tie agreement. However, it does not follow that all pubs with any kind of tie should be brought into the scope of the code at the outset. Amending the definition of a tied pub in the way proposed is a different prospect, as this changes the scope and application of the measures as a whole. For example, this would mean that a pub with no alcohol tie but with a service tie of some description would be covered by the legislation. This would bring into scope a pub that is contracted to a pub-owning company for something like cleaning services, but is in all other respects free of tie and able to purchase beer and other products from any source. This is not the sort of pub where we have evidence of a problem, and I believe we must avoid inadvertently capturing free-of-tie pubs and creating greater uncertainty in the regime. Focusing these measures on those pubs that are tied for their beer and alcohol will ensure that we target that part of the market where we have evidence of a problem.
I hope that my noble friend Lord Stoneham has found my explanation reassuring. I know it is all very complex, but on the basis of my full explanation, which I think has explained why the Bill says “may” and “must” on different occasions, I hope that he will feel reassured and able to withdraw his amendment.
Baroness Neville-Rolfe
I am sorry; I think he is a friend on this occasion. The noble Lord, Lord Berkeley—I will have to go back to Lords school shortly. As I explained in my long reply, it is standard legislative drafting to refer to provisions that “may” be set out in secondary legislation. In practice, we will do all the things that I have described. Therefore, I feel that these “musts” are not needed.
Lord Stoneham of Droxford
I thank my noble friend for the reassurance that we will do these things. On my last amendment, Amendment 33AR, which I will be happy not to move, all I ask, in the final phases of looking through, is that the clauses I mentioned, Clause 68(5) and Clause 43(4)(a)(ii), coincide with each other.