Small Business, Enterprise and Employment Bill

Viscount Younger of Leckie Excerpts

Monday 9th March 2015 Lords Chamber

If one goes into a Wetherspoon house in any high street, one is immediately aware of who is the proprietor. Enterprise Inns and Punch never use their own names on the front of their premises. They are always, in theory at least, run by landlords and are therefore independent businesses. The noble Lord, Lord Hodgson, knows as well as me that the flow of investment out of the pubs business over the years, particularly as far as the two main pubcos, Punch and Enterprise Inns, are concerned, has been all one way. For every pound they have invested in their pubs—most of them not as going concerns—or the buildings that they own, which is perhaps a more accurate description, they have taken £1.30 or so out of the business in sales of properties countrywide. That is the reality of the relationship between pubcos and their tenants at the present time. For those reasons and for reasons of common sense, I hope the Minister will reject the amendment.

[Viscount Younger of Leckie (Con)]

My Lords, I shall speak to Amendments 33M and 33W.

In Committee I supported my noble friend Lord Hodgson in proposing an exemption from an MRO for a tenant in return for an investment by a pub-owning company. It is necessary for the companies to have reassurances that investments—some of which are significant—made in their pubs are realised in both financial and non-financial returns. The latter would include good will and more intangible aspects such as reputation, quality of service and better atmosphere, which all serve to draw new customers in over a longer period of time. My noble friend the Minister was not minded to accept an exemption but I am pleased that she has been willing to engage with all after Committee and the word “deferral” seems to have replaced “exemption”.

Like my noble friend Lord Hodgson, I have some sympathy with many of the inserts proposed by the noble Lords, Lord Mendelsohn and Lord Stevenson, in their Amendment 33M, which, essentially, seeks to place considerable detail in primary legislation in the Bill by seeking clarification of the regulations, the Pubs Code and guidance. However, the noble Lords would place too much information in the Bill and the detail is more suited to secondary legislation and proper debate at this stage.

For example, subsection (2)(f) of the proposed new clause states that regulations and guidance shall include an investment agreement as a trigger for MRO. This is too vague and there is no substance in the timescales attached. Equally, in Amendment 33M subsection (3) of the proposed new clause states:

“Any investment agreement must recognise the different nature and size of pubs and relevant investment requirements”.

This is an aspiration but it is too short on detail. Finally on Amendment 33M, in subsection (2)(b) of the proposed new clause, the noble Lord, Lord Mendelsohn, cites that the maximum deferral period of an MRO in return for an investment should be five years. My noble friend Lord Hodgson alluded to this. That is too prescriptive and further work is required to determine the length of deferral time in relation to the amounts invested.

However, the overall tenor of Amendments 33M and 33W, tabled by my noble friend Lord Hodgson, I hope will go some way to persuade and encourage the Minister to commit to giving more thought to the details in a review—or is it called a consultation?—and to debate it thoroughly as secondary legislation.

There remain important unanswered questions, including what constitutes a major or minor investment, over what periods these investments might be considered to be reasonable to allow a decent rate of return and how one might describe “decent” and how it should be defined. Perhaps my noble friend can give the House further reassurances here on Report as to the process of how the details will be debated and presented.

[Baroness Wheatcroft (Con)]

My Lords, it is clear that pub companies need to be encouraged to invest in their estate: it is an obvious thing to do. The pubcos claim that they invested £200 million in their properties over the past two years and so, although there are complaints from tenants, there must be some happy ones out there.