Lord Whitty
Main Page: Lord Whitty (Labour - Life peer)Enterprise Bill [HL]
Lord Whitty Excerpts
Lord Whitty
“Report on the Pubs Code
(1) If the Pubs Code Adjudicator identifies a pattern of cases of pub-owning businesses selling tenanted pubs in order to exempt their business from the Pubs Code to the detriment of the tenant, the Adjudicator shall write a report to the Secretary of State outlining recommendations of action to be taken.
(2) The Secretary of State shall issue a statement within three months of receiving any report under subsection (1) outlining what action he or she intends to take to protect the tenant and if none is to be taken the reasoning for that decision.”
Lord Whitty (Lab)
My Lords, we are about to move not to the gym but to the pub. After my previous exertions on this matter, I had hoped that I could resume my normal relationship with pubs as a consumer rather than going into the details of tenancy arrangements. However, I am afraid that the Government have forced me to bring it up again in this Bill.
To understand the context of these amendments I need to take the Committee back to the related predecessor Act—the Small Business, Enterprise and Employment Act, passed only earlier this year, and in particular to the proceedings of the Grand Committee in this Room on 28 January. There is unfinished business here concerning the relationship between large chain pub companies and their tied tenants. This is often quite a fraught relationship. Sometimes it is quite happy but it is always pretty unbalanced. The 2015 Act led to the establishment—or should have—of a Pubs Code and the Pubs Code Adjudicator. When I tabled the first two amendments in this group, my intention was simply to give the Government a gentle nudge. I was trying only to work out why it had taken 11 months for any proceedings on the Act’s provisions to come forward to fulfil the changes agreed at that time. However, only on Thursday of last week, all that changed. The department issued a consultation document which purported to be the basis for bringing forward the intention of the previous Act to provide a market-only rent option and a process for assessing the choice for tenants, as had been promised in Committee and later stages of the then Bill in this House. However, the consultation document that emerged last week is a complete travesty. It dilutes and distorts the Act’s intentions and goes directly against assurances given by Ministers, including those given in this Room. It is such a distortion that my charge against the Government is not just one of delay but the rather more serious one, I am afraid, of a degree of bad faith.
I need to take the Committee back to the history of the earlier Bill. It is quite an unusual history because during the Bill’s passage through the House of Commons, the Commons included in it the then Clause 42 establishing the right of a tied tenant of a large pub chain to move to the market rent only form of tenancy free of tie. The clause was proposed by a Liberal Democrat Back-Bencher but had widespread support on the Back Benches of all the major parties. It was opposed in the Commons by the Government but the Government were defeated. It seems to me that the Government have not got over that defeat, although we have a slightly different Government now.
When that Bill came to the Lords, the department and Ministers argued that the Commons clause was unworkable as it stood. They said that the Government accepted the principle of the clause, which the Commons had supported, but that it would need to be substantially redrafted and put into effect by secondary legislation. In Committee in this Room on 28 January, they tabled a complex series of amendments to replace the Mulholland clause. I think that the discussion on those amendments went on for even longer than did the discussion on the previous amendment this afternoon. No doubt the noble Baroness remembers it.
It has to be said that campaigners and the proponents of the then Clause did not initially agree with the position of the Government on this issue. However, the Government argued strongly that they accepted the principle, and that therefore their amendment reflected the principle more accurately and was more workable, and that the provision to introduce secondary legislation would achieve exactly that—make it more workable. Some of us in this Committee—the noble Lords, Lord Stoneham and Lord Snape, and my noble friend Lord Berkeley, who is not in his place, and, indeed, my own Front Bench—expressed concerns about that position. Others, however, to put it gently, probably represented more the views of relatively large brewing chains.
For my own part, on that day I went into the Committee thinking that I would oppose the Government’s amendment and shout “Not-Content”. That is quite an unusual thing to do in Grand Committee but I felt that strongly about it. Therefore, the relevant amendments would have fallen and the Mulholland amendment would have stood. However, that day, the assurances which were given by the Minister herself of the Government’s good intentions, which she beguilingly argued, convinced me that I ought to accept the Government’s good faith, as well as the fact—there was another fact, of course—that if we did not accept the Government’s amendment they might have removed the whole clause at a later stage, and we would have been slightly over a barrel. Nevertheless, I came out of that meeting thinking that there was good faith all round. Indeed, in the early stages thereafter there were discussions between the department and the various industry and tenants’ organisations and so forth, and that faith seemed justified.
However, then we all got tied up with an election, changes of ministerial responsibility within the department and changes in the civil servants responsible for this area, which of course I understand. Therefore there was a delay in producing the consultation, and communications with the tenants’ organisations and the campaigning organisations virtually ceased. Then, as I say, after some months of virtual silence and with no consultation on the text, two days after I submitted my first two amendments in the group, the consultation document was issued to an astonished world last Thursday—astonished, and pretty alarmed.
One person in all this context who has not changed, apart from some of my noble friends and others on this side of the Room, is the Minister herself, for whom I have great respect, even affection. She is in no way personally to blame for this, in the sense that she has never had the executive responsibility within the department for this area. Having been a Minister myself, I know that we sometimes have to take legislation through this House that has been concocted by our colleagues and which we may not entirely understand or indeed agree with. In this case, I understand that her colleague Anna Soubry is responsible for this area. Anna Soubry is marketed as the Small Business Minister, but in this context she appears to have acted entirely on behalf of the large brewery companies rather than the small businesses which the tied tenants represent. The fact remains that the Minister, on behalf of the Government, gave certain assurances on the 28 January proceedings.
To boil it down, there are two key ways in which the consultation document appears to negate the intention of the original Commons amendment. There are significant limitations on the triggers for a market rent option, and there is a complete deletion of the provisions for a parallel rent assessment, which would give the information to tenants of all sorts on which to base their decision as to whether to go for an MRO or not.
On the first of those, on that day in January, the Minister said:
“Our amendments will provide tied tenants with the right to a market rent only agreement at a number of trigger points, including at a rent review; at a lease renewal; when there is a significant and unexpected price increase; or if a local economic event occurs that is outside the tenant’s control”.
However, in the consultation document the Government limit this to when there is a rent change that increases the rent above inflation, or to a situation where tied beer goes up by over 5% or tied services and other products go up by over 30% or 40%. Clearly, this greatly limits the trigger points for the MRO to be sought, and is contrary to the assurances made.
In the same debate the Minister went on to say:
“Although prospective tenants will not have the right to the market rent only option, our amendments provide that they will have the protection of the parallel rent assessment—PRA—which will show them how their tied deal compares with a free-of-tie deal”.—[Official Report, 28/1/15; col. GC 92.]
However, in the consultation document, the PRA is deleted entirely. Its new, prospective or indeed long-standing tenants who are not affected by the limited triggers for MRO will not be able to find out if their rents are fair before they go down that road through the PRA process because that process is now dropped. This is a rather sorry state of affairs. Given that there is no easy place in the text of the Bill to hang these amendments, I hope that we can resolve this in some way before we end the proceedings on it.
My Amendment 53ZC, which of course was drafted before the consultation document appeared, would simply require the adjudicator to report on any manoeuvres of pub-owning businesses trying to circumvent the effects of MRO by selling off or otherwise disposing of pubs. Amendment 53ZD is in the same area, really; it revisits the discussion that we had last time on the threshold issue so that pubcos gaming the system to avoid inclusion in the MRO rights for tenants by changing the status of some of their pubs, to bring their total of pubs below the 500 threshold, would be changed by making the 500 threshold apply to pubs of any kind. On present numbers this would probably affect only one pub chain, but you could conceive that it could happen in future. Also, it may be only one chain but there are rather a lot of tenants involved.
My third amendment, however, goes to the heart of the matter. It reflects my concern at the consultation paper, and tries to reinstate and require the right to parallel rent assessment for all tenants and therefore restore the original intention of not only the Mulholland proposal but the final amendments that the Government put into the Bill in Committee and on Report in this House. I imagine that the Minister might have been advised to soft-soap us and say, “Well, all this is in the consultation and we can reply to it”. It is interesting, though, that while the consultation is long, as are many consultations, and we are asked to reply on 22 specified questions, not one of those questions refers to the PRA. The dropping of the PRA is simply stated. True, people can reply on the totality of the document, but most people’s responses will be based on those questions, not on the Government’s pre-emptive strike of saying that they are not going to proceed with part of the Act that they themselves put in.
There has of course been another change: a change of Government. There are no Liberal Democrats now in BIS. I have to take account of political realities, even here in the House of Lords, but it is a pity that consistency did not run through this, nor indeed does respect for the will of the House of Commons. I presume to advise the Conservative Party that it should not go back to a position that it very much held in the early years of the last century—namely, that it was essentially the political front of the large brewers. That is what this is about, because the balance of power between the tenants and the large brewery companies is very much in favour of the latter. The Mulholland amendment was designed to change that in an important way, and I and other noble Lords thought it had achieved a degree of consensus politically in both Houses. However, the Government, through their consultation paper, now appear to have sabotaged that.
In my view, the best solution would be if the department decided quietly to jack this consultation paper and withdraw it. There is another stage of consultation to come on other parts of the Act, and the department could relatively easily present us with a different consultation paper. If it does not, although I cannot press these amendments today, this is something that we will have to find a way of returning to on Report. Meanwhile, I beg to move.
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.
Lord Whitty
The noble Baroness played an effective defensive game on a very sticky wicket with a fair amount of hostile bowling. However, I do not think that she actually scored any runs. She is in a difficult position, as we all recognise. The fact of the matter is that she has clearly admitted that there has been a change of policy. As far as I can see from her responses to the various questions from my colleagues, that change of policy was not conveyed to the participants in this industry. In effect, it changes the legislation, which certainly was not communicated to us as legislators. That is a failure on behalf not of the Minister but of the department. We are therefore faced with a rather difficult situation regarding this issue between now and Report on this new Bill.
In terms of my two amendments which relate to the threshold, yes, we have discussed this at great length before but I do not agree with the noble Lord, Lord Hodgson, or the noble Baroness. I put them down so that we could look at this again but they were at that point probing amendments. The real issue before us is the nature of the consultation document and the degree to which it differs from what our understanding was prior to the election—in this Committee, in this House on Report and in the House of Commons—and from the position that is reflected in the current legislation and the understanding of most of the parties in this industry.
The central issue here is not the economic state of the industry. We all deplore what faces most pubs. There are one or two pubs that I would not mind closing but I would prefer most pubs to stay open. Irrespective of the state of the industry, there is an imbalance between the individual tenant and a large brewer or pub chain organisation. This legislation was designed to redress that imbalance. Whatever view we may take, the MRO was seen as one way of redressing it. We would see the PRA and the MRO not as alternatives; they are complementary. However, what has happened with the consultation paper is that the triggers for the MRO have been limited, as has the availability of the PRA to those who might not necessarily want to go for the MRO but need to understand how the situation with their rent arrangements would compare with going for an MRO. It would therefore inform their discussions and relationships with their landlord.
That is fairly straightforward but we have limited the triggers and dropped entirely the provision for any tenant to get hold of that comparative information. That is a restriction on where we were under the previous Bill. It is a restriction on the discussions that we had just before the election involving all aspects of the industry to try to reach consensus. I understand why people feel betrayed. It is an emotive thing when people feel that the Government have not played straight with them.
Lord Snape
Is the position not even worse? How is a tenant able to request a rent review under MRO without a rent increase? Is it not presupposed under the Government’s proposed legislation that all current rents to tenants are fair and that only if they are increased can a tenant make this application under MRO? Am I right in thinking that? I asked the Minister but she did not give me a straight answer. Perhaps my noble friend can help me.
Lord Whitty
As I understand it, some of the triggers that were outlined by the Minister at the previous stage were dropped. Triggers remain if there is a rent increase, or if the price of the supplied tied goods goes up beyond a certain level. There are now therefore only two triggers, whereas we previously had four or five. If you add to that the drop in the PRA, then access to information by tenants of all sorts has been seriously limited.
Baroness Neville-Rolfe
My Lords, given the disappointment and concerns expressed and the lack of complete clarity as a result of my not having read the consultation paper in detail—I have tried to do so and my understanding is that there are actually four triggers—I suggest that we come back to some of these issues in a meeting, outside Committee and formal debate, between now and Report. In the mean time the discussion should continue at a technical level. We are trying to get a good outcome that will help tied tenants and will help the industry go forward in a prosperous manner. We have put out a consultation paper that was designed to try to do things in a simpler way. It is a genuine consultation. Noble Lords have raised concerns and we will obviously look at those. We will try to clarify the various points raised from the perspective of the concerns that have been expressed.
Lord Whitty
I thank the Minister for that. It would be useful if some of what she said was conveyed to us in writing. More importantly, it should be conveyed to the representatives of tenants, with whom her colleagues will be consulting over the next week or two. If there is misunderstanding about what the changes mean then we need to clarify that rapidly because there are some very hurt feelings out there, let alone among ourselves in this House. We can take it but they should not have to. We will have to think again about what we do between now and Report, and any information that the Minister could convey to us would be helpful.