Draft Pubs Code (Fees, Costs and Financial Penalties) Regulations 2016

Margot James Excerpts

Monday 18th July 2016 General Committees

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Margot James)]

I beg to move,

That the Committee has considered the draft Pubs Code (Fees, Costs and Financial Penalties) Regulations 2016.

It is a pleasure to serve under your chairmanship, Ms Ryan. The regulations, like the Pubs Code etc. Regulations 2016, which were debated last week, are made in exercise of powers under part 4 of the Small Business, Enterprise and Employment Act 2015, which regulates the dealings between pub-owning businesses and their tied tenants in England and Wales. The regulations are much shorter and less complex than last week’s regulations, and I will deal with them as briefly as possible. They have two purposes: to set fees and cost limits for arbitrations and market rent only disputes referred to the adjudicator; and to set a maximum penalty that the adjudicator may impose for a code breach following an investigation. I will take each area in turn.

On fees, the regulations set out the applicable fees payable by a tenant for referrals of pubs code breaches to the Pubs Code Adjudicator for arbitration, and by a tenant or pub-owning business for referrals of market rent-only disputes. They also make provision about the maximum amount that a tenant may be required to pay a pub-owning business following arbitration by the Pubs Code Adjudicator. Finally, the regulations regulate payments to be made by large pub-owning businesses—defined in the 2015 Act as those owning 500 or more tied pubs—and their tied pub tenants by way of fees and costs in relation to market rent only disputes and arbitrations of pubs code disputes.

The fees and costs provisions largely mirror the arbitration or mediation arrangements in the existing industry voluntary code and have therefore not generated much comment. The financial penalties are not an aspect of that voluntary code and may be imposed by the adjudicator only after an investigation. Financial penalties are just one form of enforcement available to the adjudicator following an investigation. Under the Act, he may make recommendations about what a pub-owning business should do to comply with the pubs code and the time by which it should do that. He may also require the business to publish information relating to the investigation.

Where the adjudicator imposes a financial penalty, the regulations specify what the maximum penalty should be. The adjudicator has complete discretion as to whether he imposes a financial penalty and in what amount, up to the maximum stipulated. The nature and effect of the breaches will inform the exercise of that discretion. Accordingly, we expect the maximum penalty to be applied only in extreme cases, for very serious breaches of the code. Where the maximum penalty is awarded, its purpose is clearly to have a marked and serious effect on the pub-owning business. It is therefore entirely appropriate that the maximum should be 1% of the UK turnover of the whole group to which the pub-owning business belongs, not just the turnover of the part of the group that owns tied pubs.

In summary, the regulations make provisions in respect of fees, costs and financial penalties that are fair and proportionate to the intended purpose. I commend them to the Committee.

[Ian C. Lucas (Wrexham) (Lab)]

May I compliment the hon. Lady on her presentation, congratulate her on her appointment and wish her all the best in Victoria Street? That is an excellent place for a Minister to be—I was there once. There is even someone behind her, supporting her, who was there when I was too.

[Margot James]

I thank the hon. Gentleman for his kind words, and know that I have a number of sources of advice if I require any, as I am sure I will over the coming months.

--- Later in debate ---

[Margot James]

I thank the hon. Gentleman for his kind comments. He asked whether the level of fees is set by the adjudicator. It is, in fact, set by the regulations, and the adjudicator has discretion within the regulated amount set out in the regulations.

The hon. Gentleman asked me to keep in mind the potential for pub-owning companies to fragment their business such that large sections fall just beneath the threshold of 500 or more tied pubs as set out in the regulations. In that respect, we will certainly keep the operation of the code under review. The adjudicator must report on cases of avoidance if he thinks that unfair practices are going on. There will be some protection by the fact that the level of fines—the 1% of group turnover—applies to the entire group, no matter how many small subdivisions the pub-owning company might establish.

Finally, the hon Gentleman mentioned the issue of resources for the adjudicator. I agree that there is no point having an adjudicator if he is not sufficiently resourced to tackle the many cases that might come before him. We think that the resources established will meet the likely demand, but that will be kept under review. I hope I have answered all the hon. Gentleman’s questions. If I have left one out, perhaps he would like to intervene.

[Bill Esterson]

indicated dissent.

Question put and agreed to.