Small Business, Enterprise and Employment Bill

Viscount Ridley Excerpts

Monday 9th March 2015 Lords Chamber

[Lord Berkeley]

I am grateful for that clarification. I do not know whether the noble Lord is aware that a dozen or so tenants of Punch and Enterprise Inns have gone public today, listing all the defects that have not been corrected by their owners—including unsafe gas appliances, leaking roofs, unsafe fire exits and so on —with the companies claiming that they have done the work and having put up the rents to some extraordinary degree to cover that when they have not actually done it. It confirms that something is seriously wrong and needs to be put right.

[Viscount Ridley (Con)]

My Lords, I declare an interest in that I own two properties that are operated as pubs but they are not beer-tied pubs. I congratulate my noble friend on guiding us through the complexities of these amendments. I have to say, I found the topic of mitochondrial heteroplasmy two weeks ago much easier to understand.

On the whole, I subscribe to the revolutionary idea that people should be free to come up with any commercial arrangements between consenting adults that they wish to, but I certainly recognise that there is a clear wish in this House and the other place for some version of a pub code and a market rent only option. I welcome the Government’s sensible and measured approach to bringing all sides together in this but, as my noble friend Lord Hodgson said, the key question is whether this will keep pubs open.

The industry is clearly warning us that the Bill, unamended, could cost a lot of money—maybe £20 million a year—and could result in the closure of hundreds of pubs. This is confirmed by an independent study by London Economics. It may be wrong and it may be crying wolf, but if it is not, the Bill will have done precisely the opposite of what we all want: it will have closed pubs and thereby damaged communities. It behoves us to tread carefully.

The Government have listened carefully to all sides of this debate and made, as the Minister said, a proportionate and targeted response. They have made important changes to the MRO which will make it more workable, less open to legal challenge and fairer to all stakeholders, while maintaining its spirit. Without the government amendments, there is a risk that we would see less investment. It is a simple fact that many beer-tied pubs have received significant investments. Without the safeguards, the MRO would create uncertainty that deterred investment. We would thereby also lose a low-cost entry into the sector: tenants without the capital to invest in a free-of-tie pub would not necessarily come forward at the same rate—we have heard something on that already. It is crucial that if tenants want to go to an MRO and find investment outside they can do so, but if they want to defer MRO to the next rent review in exchange for investment they should be able to do that, too.

The one law that we keep passing in this House is the law of unintended consequences. Can my noble friend give the House some reassurance that these complicated amendments will minimise the risk of widespread pub closures?

[Lord Snape (Lab)]

My Lords, I join noble Lords on both sides in welcoming the government amendments and particularly the amendment proposed by my noble friend Lord Whitty—I cannot say the same about the amendment proposed by the noble Lord, Lord Hodgson, but that will not surprise him given our discussions during the passage of the Bill.

As I understand my noble friend’s amendment, he seeks to ensure that if a pub is to be sold, a tied tenant can take action to ensure that the tie terms are not used by a future owner to restrict choice of products or unreasonably increase tied product prices. I think that that would be the effect of the Government not accepting the amendment. I would be grateful for the Minister’s comments.

I have some concern about the emasculation of the adjudicator as far as any code protection is concerned and the events which I have just outlined taking place. I wonder why the Government have decided in the way that they have as far as the adjudicator’s powers and duties are concerned.

The noble Lord, Lord Hodgson, as ever, warned us all of the consequences of what we are doing, as did the noble Viscount. I appreciate the view expressed on the law of unintended consequences—it has happened on lots of other occasions, particularly in the pub business. Nowhere did it operate in greater detail than in the case of the Conservative Government’s beer orders back in the 1990s. I thought that they were a good idea at the time, but the law of unintended consequences meant that, instead of brewers owning pubs, pubcos owned them. If we could turn the clock back, I think that we would prefer to rely on the charity of the brewers, although that might in itself be a fairly inexact term, rather than rely on the pubcos.

The noble Lord, Lord Hodgson, told us again that the pubcos would look elsewhere for investment if some of the provisions of the Bill were to go forward. I have to say that the pubcos have been looking for alternative investment for very many years. If one looks at the investment that they have made in their pubs compared to the money that they have taken out from the sale of their properties—I could give the House the figures—one sees that far more has been taken out in the form of sale of buildings by pubcos than has ever been invested. Indeed, I could give the noble Lord a list of deeply unhappy tenants who have been promised and have expected investment in their property from the pubcos which has either turned out to be pretty shoddy or has never materialised. If the noble Lord is going to try to frighten us all during the remaining stages of this Bill, he will have to do a bit better than he has done so far.

I would be interested to hear the Minister’s view about the noble Lord’s Amendment 33L. I hope that she will reject it as the ploy that it is it on behalf of the pubcos to, if not maintain the status quo, undermine the decisions taken by the other place, which, by and large, have been welcomed by both sides of your Lordships’ House.