Vince Cable
Main Page: Vince Cable (Liberal Democrat - Twickenham)Department Debates - View all Vince Cable's debates with the HM Treasury
(10 years, 5 months ago)
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The Secretary of State for Business, Innovation and Skills (Vince Cable)
I beg to move an amendment, to leave out from “House” to the end of the Question and add:
“welcomes the opportunity to debate the issue of fairness in the relationship between publicans and pub owning companies; notes the concerns, acknowledged by the Government in January 2013, about the failure of pub company self-regulation to rebalance risk and reward between the companies and their tenants and lessees; recognises the excellent work and the four Reports that the Business, Innovation and Skills Select Committee and predecessor Committees have produced over the years on this issue; further notes that the previous Government failed to take any position on this important issue until February 2010, just two months before the dissolution of Parliament and the end of its term in office; further notes that this Government held the first ever consultation to explore how best to protect tenants and lessees through a statutory code of practice backed by an independent adjudicator; further notes that this consultation received a very large response and that it is right that the Government carefully considers the huge volume of the evidence received as part of this consultation before publishing its response as soon as it can in 2014.”.
I welcome the opportunity to debate, again, fairness in the relationship between publicans and pub-owning companies, on which, at least on the broad principle, there is a wide measure of agreement. Perhaps I might thank the hon. Member for Chesterfield (Toby Perkins) for what, by his standards, must rank as a calm and consensual introduction. I wrote down the word “statesmanlike” at one point, but that was probably a bit excessive, so we will save it for another occasion.
My own approach to the matter is slightly coloured by the fact that I have only just stepped off an aeroplane from a part of the world where tasting alcohol is likely to lead someone into prison, if they are lucky. Indeed, I spent yesterday evening in a bar where the most potent drinks on offer were “mocktails”. At least in this country we do value our pubs, not simply for the drinks but for the fact that this is a major industry, with a large number of small and medium-sized companies. The people who run them are hard-working and not well paid. Hundreds of thousands of people work in the industry, which, as the hon. Gentleman said, makes a contribution to the communities in which we live.
The central issue in the debate is not about the principles, which we have debated before and on which there is a lot of common ground, but, “Why the delay? Why have the Government not given a formal response?” Let me explain the point. We received a big response to the consultation, which, let us remember, was the first Government consultation on a specific set of proposals in the long period, under both Governments, during which the issue has been considered by the Select Committee and others. We had a formal consultation, to which there was a massive response. We received about 9,000 responses, more than 1,000 of which were very specific—they were often written communications with nuanced arguments, which we must try to address. We are trying to look at the evidence in an objective way. The evidence may well point in one direction, but there are competing studies; the London Economics survey has been mentioned, but another good study has been done by the Federation of Small Businesses. Such studies do give different arguments, which we must evaluate.
Let us also remember that the industry is a complex one, and it was not a simple “yes or no” issue. The consultation also covered a set of other issues, including flow monitoring, guest beer and the gaming tie, each of which must be examined properly, not to mention its open question, which was about the mandatory free-of-tie option and open market rent review. Everybody concerned with the matter knows that that is the core issue, on which, although there was a strong opinion, there was less unanimity. We must respond to those issues and try to come forward with a proposal that carries the House and as many of the stakeholders as possible. I am very conscious of the legislative timetable, and I can assure the hon. Gentleman that there is no attempt to delay on those grounds. We want to see action, but first we must provide a thorough and proper response to the consultation. Of course we have already released the evidence.
Simon Danczuk (Rochdale) (Lab)
There is a lot of cross-party support for this matter, but I get the impression that the Government are taking for granted my good nature and that of other hon. Members. Will the Liberals go into the next general election having done absolutely nothing on this important issue?
Vince Cable
The simple one-word answer is no, but we will wait to hear the Government’s response.
Vince Cable
As I have said, I cannot anticipate exactly what the Government will say in their official response, but the whole purpose of the consultation was to seek views on legislative action, and our response will be built around that set of questions.
Mr Laurence Robertson (Tewkesbury) (Con)
I have a lot of sympathy for what has been said in the debate so far, but I am a little troubled by suggestions that this problem arose only in May 2010. I had an Adjournment debate on the issue during the previous Parliament, and a number of other debates were also held, but nothing was ever done. My right hon. Friend was right to suggest that this is not a simple issue.
Vince Cable
I thank my hon. Friend, who remembers such things from his time in the House, for his reminder. We have, I think, had four Select Committee reports under different Governments. The matter has been actively debated for something in the order of eight years, and we have moved quickly on it in comparison with what went before.
Jim Shannon (Strangford) (DUP)
The failure of the pub companies to self-regulate underlines the need for an adjudicator, as does the fact that a number of pubs are closing. Does the Minister not feel that there is a sense of urgency in relation to bringing in legislation?
Vince Cable
As I will say later—we have covered the matter in earlier debates—we did try to encourage self-regulation. We drew the conclusion that the action had not been adequate, which is why we moved on to proposals for statutory regulation on which we are now consulting. We have been down that road; we have tried that.
Mr Henry Bellingham (North West Norfolk) (Con)
I agree with the Secretary of State that it is important that we get this right. I must impress on him that there is a degree of urgency now with the forthcoming Queen’s Speech. Does he agree that we should recognise the fantastic job that local organisations, such as the Campaign for Real Ale group, are doing? In my area, CAMRA has pioneered a number of pub salvations, working with the community to ensure that the King’s Arms at Shouldham and the Dabbling Duck at Great Massingham were able to survive.
Vince Cable
My hon. Friend is right to remind us that this is not simply a top-down campaign. It involves not just Parliament, but an enormous grass-roots campaign. I am talking about community organisations, and I will go on to develop that point in a moment.
Ian Lucas (Wrexham) (Lab)
The right hon. Gentleman is being very generous with his time. Will he confirm that he now believes that statutory regulation is necessary?
Vince Cable
That was the purpose of the Government consultation. Statutory regulation was necessary, and we consulted on how to do it. We are now evaluating the results of that process. The House will soon hear our conclusions on how to take the matter forward.
Let me repeat my appreciation for the work that has been done by Members from all parts of the House. I also thank the Business, Innovation and Skills Committee, whose Chairman is here, and the various campaigning groups for their work on the matter. It would not be amiss to single out Fair Deal For Your Local, which is the campaign that has been mobilised by my hon. Friend the Member for Leeds North West (Greg Mulholland). As part of his campaign, he has brought together CAMRA, the Federation of Small Businesses and the GMB union as well as various other groups. We are talking about local and national groups across industry and across the country.
Toby Perkins
I am grateful to the Secretary of State for giving way and for what he said about me being a statesman. If I may, I will press him on the timetable issue that has been raised. If he accepts that statutory regulation of some sort is necessary and the consultation overwhelmingly supports the majority of such aspects, will he at least commit to some sort of legislative action in the next Queen’s Speech, and will he say that we will not get to the end of this Parliament with nothing having changed?
Vince Cable
I cannot really add to what I have already said. The hon. Gentleman knows that we are following a process. I am conscious of the legislative timetable, and he will remember—indeed it is the whole purpose of this debate—that the Government did not consult in an open-ended way over this question; we consulted on a specific proposal to introduce statutory regulation, and that is what we are responding to. Although I am conscious of the legislative timetable, I will not give a specific date on which this report will be concluded.
Mr Robin Walker (Worcester) (Con)
As a member of the Select Committee, I urge the Secretary of State to take action as soon as possible, but I do understand the need to listen to the consultation. A moment ago, he mentioned some of the broad campaigning that has gone into this matter, and the organisation Fair Deal For Your Local, which I support. Does he agree that it is unfair of Opposition Members to suggest that this Government have done nothing for pubs when we have paid attention to the important campaign to end the unfair and job-destroying beer duty escalator?
Vince Cable
Indeed. I will go on to talk about some of the things that the Government have done to help the pub industry, the most important of which is the tax measure. The combination of the 1p cut and the abolition of the escalator is the equivalent of 4p on a pint. There have also been various other measures to support community pubs, of which my hon. Friend will be well aware.
Rushanara Ali (Bethnal Green and Bow) (Lab)
I have two points to make. One relates to the many pubs in my constituency and the curry industry, which is worth about £4 billion, and the other to the inter-relationship between beer and curry. What assessment has the Secretary of State’s Department made of the impact on pubs and the alcohol and restaurant industries of the increase in VAT to 20%?
Vince Cable
Just about every aspect of the fiscal and economic implications for this industry has been exhaustively reviewed, and I will try to find out the answer to that specific question from the various studies that have been done. I do not think that we have specifically analysed the interaction between beers and curries, but I am sure that there is a positive correlation.
Ms Margaret Ritchie (South Down) (SDLP)
Will the Secretary of State urge his colleague, the Chancellor of the Exchequer, to give full consideration in advance of the Budget to a reduction in VAT on the hospitality industry, as it is urgently required not only in Northern Ireland but by the British Hospitality Association?
Vince Cable
I have met the hospitality industry and it has set out its case for a VAT reduction. As the hon. Lady will know, I do not make the decisions on what goes into the Budget on tax measures. I am sure that there are many other claims on the Budget in terms of tax reduction and spending. Certainly, the hospitality industry has been very effective in making its case.
Andrew Griffiths (Burton) (Con)
I thank my right hon. Friend for the measured way in which he is considering all the responses to the consultation. Does he understand the concerns raised by the Office of Fair Trading about the free-of-tie proposal as outlined in the consultation? It claims that it will increase rents and the price of beer and lead to the closure of more pubs.
Vince Cable
I have not seen those comments by the Office of Fair Trading, but I will certainly look for them. I am rather surprised by them because the whole purpose of that option is to increase competition and market forces. If my hon. Friend could send me the details, I would be interested to see the response of the competition authorities.
Mr Sheerman
As I own a pub, I have a great interest in this debate; I am chair of the John Clare Trust and we will be bringing this pub back to life through crowdfunding. The Secretary of State might not have control of the Budget, but he knows that there is a consultation on crowdfunding regulation. If we get that regulation wrong, it will stop a lot of community enterprises funding themselves, so will he ensure that it is appropriate?
Vince Cable
I am well aware of the importance of crowdfunding, and the hon. Gentleman might have followed the progress of the business bank, which is now actively engaged in, and supporting, crowdfunding, certainly through the peer-to-peer lending streams. I am aware of the issues with the regulation. Some incumbents, understandably, want their industry regulated, but we need to balance that against the fact that new companies coming into the industry might be less enthusiastic about regulation. Incumbents such as Funding Circle have made a very good case for sensible, moderate regulation.
Let me move on. As I said, we have had four Select Committee investigations into whether the tied model is at the root of the unfairness in the relationship. We have received an enormous amount of correspondence, quite apart from that received from the various action groups, from tenants about problems in their relationships with pub companies and from MPs. The response I have had in the past 10 to 15 minutes shows how widespread such concerns are.
Although pub-owning companies can and sometimes do treat their tenants well, the overall sense from those representations is that the tie arrangements with the pub-owning companies are unfair and that a lack of transparency causes a severe imbalance of negotiating power. That is the essence of the problem. There is an issue about what exactly we should do about it, which is what we are consulting on, but there is no doubt about the problems.
It has also been very clear from the discussions led by the Select Committee over the years that the problem is not so much the tied business model but the unfairness with which it operates. There is quite a lot of debate about the evidence on the speed of closures and how they operate in the tied sector and the non-tied sector. My understanding is that there has been a fairly steady rate of decline, from some 70,000 pubs in 1980 to 50,000 today. Depressingly, that is something in the order of 18 a week net. That decline has continued even after some of the big changes that have taken place in the industry—from the beer orders to pub company consolidation. I know that there is a debate among campaigners about whether tied pubs are more likely to close than pubs that are free of tie, but the evidence I have seen goes both ways. This is not fundamentally an argument about pub closures; it is essentially about the unfairness of and inequalities in the relationship.
Duncan Hames (Chippenham) (LD)
My right hon. Friend is right to broaden his critique beyond the tie itself, important though that is. In my constituency, the landlord of a pub in Melksham complains that Punch is in breach of its own code of practice and of the framework of the British pub industry. He asks where else he can go under the current arrangements, without statutory regulation, when he finds that he gets no joy from the self-regulatory system on a range of issues from dilapidation surveys to meetings that are not minuted.
Vince Cable
As I said earlier, there were more than 1,000 individual responses to the consultation. Many described very similar stories to the one that my hon. Friend has just mentioned.
Vince Cable
May I move on, as the hon. Gentleman has intervened once already?
Just as this is not primarily an issue about the rate of closures, I think we would all agree that it is not fundamentally an issue of consumer choice. Otherwise, the competition authorities would have been engaged a long time ago. It has already been shown that the share of microbreweries has increased over the period for which many pubs have been under a great deal of stress. The number of breweries now tops 1,000, the highest figure since the 1930s.
The conclusion that I think we have all reached is that there are issues with the beer tie, but that is not the fundamental problem in itself. The Business, Innovation and Skills Committee argued that it does not want to see the tie model disappear. Under proper conditions, it is a business model that can be used and it has been around in various forms since the 18th century. The abuses are a different matter and are due in part to the lack of transparency in the relationship between the pub-owning companies and their tenants, which is what I want to turn to.
Pauline Latham (Mid Derbyshire) (Con)
I was recently contacted by my constituent, Claire, who has been told by her landlords, Enterprise Inns, that the rent on her pub, the Pattenmakers Arms in Duffield, will increase by 42% in April. Claire loves her pub and has brought it from being a grubby and run-down pub to an award winner; she even worked while she was battling breast cancer. Does my right hon. Friend believe that the pub companies whose business practices force out committed publicans such as Claire will be dealt with effectively by some sort of adjudicator?
Vince Cable
That is a truly awful case. I hope to see the details of that example, because although we have a lot of cases, it seems to be a particularly bad one. I guess that would be one of the factors that led the Government to conclude that the voluntary code approach was not satisfactory, as presumably it has already been used.
The voluntary approach did have some positive outcomes, such as the Pubs Independent Conciliation and Arbitration Service and the framework code, but the conclusion we came to at the beginning of last year was that the changes had not gone far enough and that problems persisted. To us, the essential point is best captured in the work done by CAMRA that suggests that 57% of tied tenants earn less than £10,000 a year. If we apply that to 35-hour week, 48 weeks a year, we are talking about less than £6 an hour, which means that people are working for considerably less than the minimum wage. Since many work much longer hours, that means that this is a very low-paid industry. Many publicans are struggling. In contrast, only 25% of those who are free of tie are on at the same income level. There is a striking disparity, which is at the heart of the question.
Mr Bellingham
The Secretary of State is being very generous in giving way. Does he agree that many of these disputes need to go to adjudication? Does he share my view and that of many colleagues that getting an adjudication system in place as soon as possible is essential?
Vince Cable
Indeed. That was the objective of the consultation. Let me briefly reveal the history, as we have been talking about it implicitly throughout these exchanges. We announced last January that it was time for the Government to step in and the consultation was launched along the lines envisaged by the Select Committee on a statutory code of practice and an independent adjudicator. That was the framework of the Government recommendation. We included an open question on the mandatory free-of-tie option with open rent review and we tried to underpin a specific intervention with a framework, a philosophy, a set of principles, the overarching fair-dealing provision and the core principle that a tied tenant should be no worse off than a free-of-tie tenant.
Julie Hilling (Bolton West) (Lab)
I thank the right hon. Gentleman for giving way, he is being very generous. Does he recognise that because of the relationship between the licensee and the pub companies, whatever the licensee does means in some circumstances that the pub company asks them for more money? If they put on food, for example, the pub company increases their rent. The relationship is fundamentally unequal and difficult.
Vince Cable
The hon. Lady is stating in her own way what I have already said several times and what I think is the consensus. There is an imbalance in the relationship, which is not equal. The market does not deliver a fair outcome, which is why we are considering how we can change it.
We did not want to reopen the fundamental issue about the pub tie, but to decide how to address the unfairness of it, and the consultation revealed the depth of feeling on the subject, which all the interventions that we have had so far have reinforced. The responses came not just from the pubcos and the tenants, but from supply chain companies, consumer groups and trade bodies, all of which fed into the consultation, and they were so many and diverse that we published them just before Christmas so that hon. Members were aware of what was being said before we came to a conclusion on how to respond.
As I have said already, we want to respond as quickly as possible. We fully understand the problems, not just because distressing cases are continuing but because people in the industry want clarity, and it is perfectly reasonable for people to want regulatory certainty. We do not want to rush into a decision. We want to get this right, but we realise that there is some urgency because people need to make investment decisions. We are trying to get this absolutely right and we want the intervention that we make to be proportionate and properly targeted.
Paul Blomfield (Sheffield Central) (Lab)
I thank the right hon. Gentleman for taking a further intervention and for all the others that he has taken. He makes the case for urgency, which is reflected across the House. Does he not accept that his failure to answer the question from the shadow Minister and the Chair of the Select Committee, together with the wording of the Government’s amendment, will be seen widely throughout the country as an attempt simply to kick this issue into the long grass? Will he reassure the House that that is not the case by giving a commitment that legislation will come forward in this Parliament?
Vince Cable
There is no attempt to kick this into the long grass. We are trying to do this properly. I can assure him that it will be dealt with in a timely way. We are not cutting corners. As I said at the beginning, we have a large number of responses and different strands of evidence that we are trying to reconcile and respond to properly. We must do this right.
The whole issue of the beer tie, the relationship with the pubcos, is crucial, and we must take action in the way that we have discussed, but it is not the only set of measures for the pub industry. We are sometimes in danger of losing sight of the bigger picture. Thanks to interventions from Government Members there was reference to the budgetary measures that have been taken, and I would add to that the action taken on business rates, including the capping of the business rate increase, the continuation of business rate relief, the £1,000 discount for retail outlets, which include pubs, and some of the action taken by my colleagues in the Department for Communities and Local Government, for example the pub is the hub scheme and the community right to bid to keep pubs open. A lot needs to happen and a lot is happening on a broad front, and I reassure the House of my commitment, which remains as strong as ever, to addressing the unfairness in the relationship between pub companies and their tenants.