I beg to move,
That this House
has considered the Pubs Code and the Adjudicator.
It is a pleasure to serve under your chairmanship, Sir David. I thank the Backbench Business Committee for granting this important debate. I also thank colleagues. This is very much a cross-party motion, with its lead Members being the hon. Members for Lincoln (Karl McCartney), for West Bromwich West (Mr Bailey) and for Isle of Wight (Mr Turner), but it is also supported by a large number of Members from across the House. Sir Peter Bottomley, who is one such Member, cannot be with us today, but he asked for his support to be recorded,
“not just because I am a life member of CAMRA but because better practice reduces exploitation, promotes better hospitality and allows fairer rewards to those who work hard building good pubs around the country.”
In my parliamentary experience, this issue is quite unique in how it has united Members from across the House irrespective of party or political perspective. It has united Liberals, the left, the right, Conservatives and Labour Members and, whether we look at the social, economic or personal argument, there is broad agreement over the need for a statutory code that works and for an adjudicator who enjoys the confidence of publicans in addressing the historical imbalance of power between pubcos and their tenants.
It is a pleasure to serve under your chairmanship, Sir David, and it is great that we are having this debate. On the Pubs Code Adjudicator, does the hon. Gentleman agree that it is vital that all sides, and particularly pubco tenants, have confidence in the adjudicator? Such is the nature of adjudication, and many tenants in my constituency have expressed concern about getting actual fairness and not more unfairness.
The hon. Gentleman expresses the views of his tenant constituents. Tenants’ organisations and tenants throughout the country have expressed that same view. I will come on clearly to lay out why the appointment of the pubs adjudicator is simply untenable.
The hon. Gentleman is right to pay tribute to the cross-party nature of the campaign. I am someone who voted with him in 2014 and am very much on his side, but, in fairness, to balance things out, does he concede that our coalition Government between 2010 and 2015 realised the necessity of a new code and regulatory framework to address the issues that he has raised over many years?
The hon. Gentleman is absolutely right. I want to thank him personally because he has been a real champion for pubs in Peterborough and his support of the Save the Pub group and the Fair Deal for Your Local campaign has been warmly welcomed. Today is precisely about trying to finish a job that dates back to Select Committee inquiries, the first of which was in 2004—that is how long the issue has been on the political agenda. We are finally getting to the stage of a statutory code of practice, but that, still, is flawed and contains loopholes.
In the spirit of the hon. Gentleman’s intervention, that is an issue about which tenants have asked: is this conspiracy or cock-up? I am clear that what has happened is a cock-up. There was an excellent leading article in the Publican’s Morning Advertiser on
“The Government has not covered itself in glory throughout this entire process. From accusation by campaigners of acting in bad faith by removing or amending parts of the legislation, to U-turns over the original omission of parallel rent assessments, the latter part of this saga has been particularly fraught. And that’s before we even consider the furore from some over the appointment of Paul Newby as the pubs code adjudicator”.
I say to the Minister that this is not personal, but the change of civil servants at the Department for Business, Innovation and Skills after the election has clearly led to mistakes being made and a lack of understanding of some of the complexities and technicalities of this legislation, to the extent that in a meeting with a group of tenants, one of the people who has been involved in drafting the pubs code and was on the panel that interviewed the adjudicator said, “I don’t really know much about this.” That being the case, how can tenants possibly have confidence in the Department? I have also been informed that one of the civil servants who had previously worked on the code and who did have experience and the confidence of tenants was brought back in to work on it.
Mistakes have been made, and those mistakes must now be rectified—that is all that we are asking for today —so that, when the pubs code comes in on
I will address the concerns about the pubs code, the first draft of which was published on
The first loophole in the draft code is that, as it is currently written, any tenant seeking to take the all-important market rent-only option that we voted through the House on
The second loophole is an extraordinary one that allows a waiver in exchange for investment for people who have not even taken on a tenancy or lease. There has been much discussion about investment, but I think many hon. Members fail to understand the reality of pubco investment. A Federation of Small Businesses survey of its licensee members found that 68% had not had any investment from their pub companies in the past 12 months. Indeed, the costs of investment presented by pubcos are often inflated. Many tenants report that they have had cheaper quotes from other suppliers but are forced to use the contractors that the pub company insists on. There is a problem with allowing a waiver for people who have not yet taken on a pub. We accept that there will be a waiver to allow for investment—it must be limited, substantial and genuine investment—but we strongly say that it should not come in until someone has been in a lease or tenancy for two years.
The reality is that when pubs are vacant, frequently because of a failure of a previous tenant due to the tied pubco model, there is a need for repairs and basic investment simply to make the pub fit to let to someone else. If someone is forced or encouraged to sign a waiver before they have even taken on that pub, there is a real danger that that will be used and abused, with people able to say, “We have invested in this pub that you are about to take, and therefore you have to give up your right to an independent rent assessment for another five years.” That would be the case, and they would therefore not get that assessment for 10 years. There is also a great danger of encouraging pub companies to seek to force out sitting tenants who have the right to a market rent-only option, in favour of someone new who will sign away their right to it.
The hon. Gentleman is making a strong, detailed and comprehensive argument. He will know that paragraph 127 of the impact assessment produced by the Department specifically references a non-gaming caveat. Rather than waste valuable time and energy and the efforts of civil servants and others, including hon. Members, down the track in producing secondary legislation to amend the code, is it not better that we identify the gaming loopholes now before the code comes in on
The hon. Gentleman is correct. That is why we are doing this. The British Pub Confederation and other organisations have clearly written about these two glaring loopholes. In the wording of the pubs code, BIS must ensure that any waiver is limited, reasonable and entered into willingly by both parties. The code must also restrict waiver-free investment to a tenant who has been in a substantive agreement, not a tenancy at will, for two years, and must clearly forbid any waivers for investment for new tenants.
I have brought the attention of the Minister and her Department to pubco gaming and some of the behaviour at the moment, and have not really had any response. Paragraph 127 of the impact assessment says:
“Some specific risks include…That pub owning companies find a loop hole in the statutory code that allows them to continue acting as they do currently. To mitigate this risk the rules will be written in terms that are difficult to game. The code, which is likely to be set out in secondary legislation, will be amendable in certain circumstances which will allow it to reflect new developments in the industry and close any loop holes that are found.”
We have already identified these two loopholes, which must now be closed if people are going to have confidence in the code, and if it is going to work in the intended way.
I am certainly a supporter of this code, but I note that codes like this can have unintended consequences. One unintended consequence might be that pub owners would be put off from investing if they were discouraged by the changes that the hon. Gentleman recommends. Would it not be wiser to allow the code to bed in and then review it? The risk is that gaming and unintended consequences could occur, which we would need to monitor anyway.
I thank the hon. Gentleman for his intervention, though I do not agree with him. With respect, I feel he has always been slightly confused on this issue. These are clear loopholes that could have very damaging consequences. I can tell the hon. Gentleman, the Minister and the House that pub companies are currently doing all they can to avoid the legislation and the code before
Some tenants are being coerced to relinquish long leases and take up five-year contracts that are not renewable, so that they are not subject to a market rent-only option. Some pubcos—I have seen one such case myself—are cynically issuing section 25 notices, ending existing tenancies or leases by
Some tenants are also being bribed to sign an agreement without a market rent-only option. One tenant contacted the Save the Pub group to say that she had been offered a 20% drop in her dry rent if she signed a new five-year non-renewable tenancy, which therefore will not have the market rent-only option. It is funny, however, that the pub company did not mention that last bit. It simply presented the agreement to her and said, “Would you like to sign this very attractive new lease with lower rent?”
Is BIS aware of what is going on? It has not said so or responded. If it is aware, is it dealing with the problem, and how? We need a clear announcement that any agreements made from the date on which the pubs code comes in will be subject to the market-rent-only option, and that the sort of behaviour that is going on is unacceptable. That is what we want to hear from the Minister today.
Before I move on to the pubs code adjudicator, I will simply say that if the Minister and her Department make the two changes that have been requested, I will announce that we are happy and will praise the Minister, her team, the Department and the Government for getting it right and for listening. All we ask is for those two loopholes to be closed and for her to criticise the way in which pub companies are cynically trying to avoid the code before it even comes in.
By the end of my speech, the Minister will be clear about exactly the things I wish her to do. Two loopholes must be removed from the code, and she must deal with the current cynical behaviour. She must clearly criticise that today, in this Chamber, and say that it is unacceptable.
The Minister scoffs as if she does not accept that that behaviour is happening. I suggest that tied tenants around the country drop her a line to tell her that it most certainly is.
As I am sure you would agree, Sir David, it is important that nobody ever thinks there is any form of coercion, and I will do what I feel is right. In this Chamber, as in the main Chamber, we speak freely, so I do not think it is good for Members to put down conditions that say, “Ministers must condemn,” and “Ministers must do this, otherwise we will criticise.” We will have a good, free debate and then we will all make our comments accordingly.
What a quite extraordinary comment, in the mother of all Parliaments, that somehow we are not allowed to challenge a Minister to condemn bad behaviour—what an extraordinary comment, even from the right hon. Lady. Quite remarkable.
The next thing that the Minister and her team must do is on the Pubs Code Adjudicator. Representatives from all sides of the pub sector noted as long ago as 2013 that to ensure impartiality, it would be sensible for the post to be taken up from outside the pub sector, if the role were to gain industry-wide confidence, credibility and acceptance. That is clearly the basic, essential nature of this role, yet BIS has clearly and demonstrably failed to ensure that.
Let me lay before the House the very serious issues as to the clear flaws and untenability of this appointment. The appointee, Mr Paul Newby, is a chartered surveyor and a director and shareholder of Fleurets. He clearly has a conflict of interest, and it is clearly a disqualifying conflict of interest. Fleurets is the largest surveying practice operating in the very sector that the pubs code is being introduced to regulate. Of course, the reason for that is to protect tenants from abuse by their pubco freeholders.
Mr Newby’s CV, which is publicly available—although, interestingly, it has been taken off the Pubs Independent Rent Review Scheme website—openly advertises for whom he acts. Let me list the six companies that Mr Newby is required to regulate: Enterprise Inns, Punch Taverns, Marston’s, Greene King, Heineken—which is Star Pubs & Bars—and Admiral Taverns. Who do he and his firm currently, and boastfully, say they act for? Enterprise Inns, Punch Taverns, Marston’s, Greene King, Heineken and Admiral Taverns. He clearly is conflicted and biased. Of course the Minister will say, “But he has also operated and acted for tenants,” but actually, given the nature of this appointment, that equally would mean that he is conflicted.
Mr Newby may be an exceptionally gifted and talented man to have appointed, but does the hon. Gentleman agree that just the appearance of a conflict of interest is difficult? In this respect, it would circumscribe due process on those occasions when he was required to act in his official capacity. In that sense, it is not fair on him or the taxpayer, or on all the other stakeholders in this situation.
The hon. Gentleman is absolutely right. I actually believe that Mr Newby has been let down in this process, because clearly his application was never tenable and should never have been proceeded with.
The Minister will say, “Oh yes, Mr Newby has represented tenants,” but does she realise that some tenants are actually pub companies themselves? It says that in Mr Newby’s own CV. I was in such a pub last night—the excellent, award-winning Eagle Ale House in Battersea. The award-winning licensees there lease it from Enterprise Inns, but Enterprise Inns are themselves tenants of a property company, so some of the “tenants” that Mr Newby has represented may well be pub companies.
Let me deliver this message as clearly as I can. Let me tell the House about the Fleurets website, and I would urge hon. Members to look at it. Fleurets widely advertises, including on its website and in trade publications, that it acts for all six of the large pubcos to be regulated, and that these are all clients that Fleurets and Mr Newby, as a director and shareholder, derive a substantial part of their income from.
The British Pub Confederation asked in a letter to the Secretary of State what proportion of the number of cases that Mr Newby has acted in have been on behalf of pubcos, and what proportion have been for tied licensees. The Government refused to answer that question in the letter of response, so I ask it again, and we must have a reply. And what is the proportion of income that Fleurets and Mr Newby make from pub companies and from tenants? We know the answer. Companies House records show that Mr Newby has been a director of Fleurets Ltd since 1995 and of Fleurets Holdings since 2009. He owns 100 ordinary A shares in Fleurets Holdings, amounting to 11.79% of the ordinary share capital in the company. Fleurets Holdings Ltd wholly owns Fleurets Ltd.
The Fleurets website makes it plain that the thrust of the company is to market its services to corporate entities, not to individual tenants. The logos of Fleurets’ corporate clients appear on various pages of the site but there is no mention of tenant clients. There are quotes from satisfied clients. The only ones from the tied pub sector are from Star Pubs & Bars—owned by Heineken—Fuller Smith & Turner, Marston’s, J.W. Lees and Daniel Thwaites. None of the CVs of the nine directors on the website shows any specialisation in acting for individual tied tenants or mentions doing so. Mr Newby’s own CV does not mention his acting for any individual tenants. His CV that was on the PIRRS website—strangely, now taken down, as I said—confirmed that for the last five years, he has worked most closely with Enterprise Inns, Marston’s and Punch Taverns. In 2008, when Martin Willis, the current chairman of Fleurets, was questioned by the Business and Enterprise Committee over a conflict of interest, he said:
“I think we represent just about every pubco”.
That is clearly very true today.
Interestingly, I noticed that among the logos of companies that Fleurets has represented was that of Criterion Asset Management, the director of which is Theo Osborne, brother of the Chancellor of the Exchequer. Did the Minister and her team know that? Mr Newby’s company website provides an interesting indication of the preferences of Mr Newby’s firm in relation to the pros and cons of the tied model, which he is now expected to regulate. In 26 pages of news and information articles on the Fleurets website, as of yesterday, there was no criticism at all of the tied model. In contrast, the website is effusive in its promotion of that very business model, the one practised by so many of Mr Newby’s clients—the very companies that he is supposed to regulate.
Let me read some of the headlines. Under “Leasehold pubs are an Attractive Option”, the article states:
“There are some excellent businesses on offer from most Pub Companies”.
Under “The Leasehold Pub—The route to success”, the article states:
“With very little capital needed, tied and free of tie leasehold pubs offer the opportunity for passionate people to build spectacular businesses”.
Under “How Do I Go About Getting Into The Pub Trade?” the article states:
“Whilst getting into the licensed trade can seem quite daunting it must be remembered that breweries and pub companies are continually on the look-out for enthusiastic new partners to run their pubs...For the first time operator this route can often be the best as it comes with various support and training packages and it is invariably the lowest cost of entry”— that is something that many tenants who have struggled with the tied pubco model would strongly dispute.
Another interesting article, and something that has been missed entirely by BIS in this process, is headlined, “Pubs sold for alternative uses in 2014 by Fleurets”. The truth is that Fleurets is not only a surveyor, but the estate agent of choice in the big pubco sell-off. The indebted companies, who got themselves into billions of pounds of debt through their own recklessness and their acquisition spree, are now asset-stripping their estates, often selling for non-pub use, sometimes against the wishes of licensees and often against the wishes of local communities. Fleurets is doing that for them and profiteering from it—and so, currently, is Mr Newby. Did BIS realise that? It does not appear so, because there has been no mention whatsoever of Fleurets’—or Mr Newby’s—role and financial links in that respect.
I will give a powerful example of why tenants cannot and will not accept Mr Newby as the adjudicator. This morning I had an email from a former director of the British Institute of Innkeeping—an organisation that the Minister was keen to quote from, citing it as a licensee organisation. I need to correct the record because it is not; it is a charity rather than a representative licensee body. I think she was indicating somehow that it supports this appointment. Well, that former director is now an adviser to publicans and other small businesses, but during his years with the BII he worked closely with larger surveyors, specifically naming Fleurets. He has described the relationship between these chartered surveyors’ firms—again, specifically naming Fleurets—and their pub company customers. He says—I quote from that email—that it is “a gravy train”. He explains that there are chartered surveyors in the sector who use valuation methods that advantage their pub company customers, and explains how surveyors and pub companies work together, using what he says are—I quote again—“questionable” practices, to ensure the best outcome for the pub company and not for the pub tenant, because of course most of the surveying work and most of the income comes from pub companies, not tenants—which is inevitable when tied tenants are running a pub and can barely break even.
We need to put to bed the idea that somehow this situation is acceptable because Mr Newby has represented a few tied tenants in his time and has potentially even won some cases for them. Very interestingly, there was an admission at a roadshow by Fleurets that it delegates tenant cases to less experienced and less expensive surveyors—something that Mr Newby very clearly is not.
When we were going through the process, we were told that the Pubs Code Adjudicator would be like the Groceries Code Adjudicator and that the Department for Business, Innovation and Skills would follow similar principles. It has clearly and demonstrably failed to do so. Paragraph 1 of the Groceries Code Adjudicator’s conflicts of interest policy and register of interests refers to ensuring
“that no conflict arises, or could reasonably be perceived to arise, between the official position of the Adjudicator and private interests, financial or otherwise”.
The hon. Member for Peterborough has said clearly that that is not the case with Mr Newby’s appointment because he has a prejudicial financial interest. Paragraph 6 states:
“A conflict may arise whenever an outside interest might influence, or be perceived to be capable of influencing, a person’s judgment.”
The extraordinary thing is that the reply to the British Pub Confederation’s letter states simply, “We don’t think there is a conflict of interest.” When asked whether Mr Newby declared his clear conflicts of interest, the reply was: “We asked him about his conflicts of interests at the interview and were told that there weren’t any and we accepted that.” That is extraordinary and should never have happened.
Let me share with the Chamber paragraph 18 of the Groceries Code Adjudicator’s policy and register of interests:
“Financial interests will generally arise from the ownership of assets (or other investments or sources of income) such as shares (whether bearing a right to vote or not)”.
“I understand that Mr Newby will continue to hold a number of non-voting shares in Fleurets, as security whilst monies owed to him are repaid”.
The situation is serious. Someone will be allowed to continue to have shares in a company that profits from the work of the very companies that he will be regulating. You could scarcely make it up.
This week, the Prime Minister has been keen to tell us that he divested himself of all shares before becoming Prime Minister, but that has not got him out of the hole he has found himself in during the last few weeks. Yet we are seriously discussing a statutory adjudicator with a quasi-judicial role and the Department seems to think it is fine for him to hold shares in such a company. That is quite extraordinary.
Just this week, the Premier League, which has much higher standards than the Department for Business, Innovation and Skills, removed Kevin Friend as a referee for Tottenham Hotspur’s game against Stoke on Monday because he lives near Leicester and supports Leicester. That was a good decision by the Premier League to avoid any feeling of bias. Yet the clear perception of bias in Mr Newby’s appointment is being ignored. With respect, simply to say, “We don’t think tenants are concerned,” when tenants’ associations have written to make clear their concern, is extraordinary.
Fiona Woolf was unable to preside over the child abuse inquiry simply because she had had dinner with someone who at that stage might have been of interest to the inquiry. Yet in Mr Newby’s case, the Department for Business, Innovation and Skills has simply brushed under the carpet his clear professional and financial links to the very companies he is supposed to regulate. How can the Minister possibly say that tenants can and will have confidence in Mr Newby, given that he will continue to receive share dividends from a company that has pubcos as its majority customer base?
Part of what the Minister will say today and part of what she has already said relates to her former career and profession of barrister, a profession I strongly admire. My sister and brother-in-law are barristers and I have huge respect for the work that barristers do. The Minister therefore knows that barristers are obliged to operate under the cab rank rule and to represent a client who comes to them with a legal problem in their area of expertise. As advisers, they are expected and mandated forcefully to advocate their client’s position. The role of adjudicators and judges is different.
The Minister has stated that a surveyor is like a barrister and simply takes cases. That completely misses the point. Surveyors do not operate under the cab rank rule. Mr Newby and his company, Fleurets, actively market themselves to pubcos, including two of those he is supposed to regulate in a matter of weeks, boasting on his company’s website of his expertise in representing them. If the Minister is under any impression that there is some equivalence between the way barristers operate under the cab rank rule and how a director and shareholder of a commercially active chartered surveying company would act, she is missing the reality of surveying, particularly in the pub sector.
The point is that Mr Newby will not be like a barrister. He will be like a judge. He will no longer advocate for his clients, but will adjudicate like an ombudsman or a judge, in this case like a jury and executioner. Why are the standards of public confidence, which our excellent judiciary regard as essential to their legitimacy, not applicable to Mr Newby in his new rule as statutory adjudicator, which is a quasi-judicial role? He will be judging contentious legal issues that would otherwise see the parties concerned in front of the judiciary.
Part of the problem—the British Pub Confederation has taken legal advice on this—is that there is a lack of protection in contract law for tenant publicans who may enter into tied lease arrangements naively or when the realities of their new circumstances have been misrepresented by pubco representatives. That is precisely why we are legislating. It is impossible for Mr Newby with his current position and links to be able to fulfil that quasi-judicial role.
I have mentioned the 11 licensee groups that form part of the British Pub Confederation. They all oppose this appointment. The Minister has suggested that some licensee organisations support the appointment, but I am not aware of any and certainly the British Institute of Innkeeping, a trade charity, does not. The Campaign for Real Ale, which she mentioned, has not welcomed the appointment and has said it will scrutinise Mr Newby’s activity. It is a consumer group and does not, as she wrongly said in the main Chamber, represent licensees. It is a consumer, campaigning group.
The Association of Licensed Multiple Retailers—which could be an organisation the Minister is talking about—represents multiple tenants, some of whom are individuals and some which are companies, including Greene King, one of the companies the adjudicator will regulate. The Association of Licensed Victuallers Associations is run by a former Enterprise Inns employee and its 2015 dinner and AGM was sponsored by Enterprise Inns. I am afraid the Minister is kidding herself in saying that tenants’ groups support the appointment.
Let me say clearly that British Pub Confederation licensee groups and their licensee members have made it clear that they will not accept Mr Newby adjudicating on their cases. They have a clear right to do that, which means he will be unable to act in a large proportion of cases, which will need to be dealt with by someone else, presumably a deputy adjudicator. What a farce. What a mess.
I am not the only one saying that. According to the guidance on conflicts of interest and the arbitrator’s code of conduct of the Royal Institution of Chartered Surveyors, in the majority of cases brought before Mr Newby, either party will be able to stall the process by citing his conflict of interest as a reason not to accept him as adjudicator. The adjudicator cannot be a surveyor, particularly not one from the pub sector.
On that, I can do no more than read to the House what the Royal Institution of Chartered Surveyors told the Government in its response to the 2013 consultation on the adjudicator:
“Whether or not the Adjudicator is a chartered surveyor, he/she will require assistance from other specialist Chartered Surveyors…It is likely that many will have a conflict of interest having advised one of the parties on a range of matters”.
Was the Minister aware of that advice from 2013? Also, a pub sector surveyor might well wish, intend or need to return to their career surveying and acting for the pub companies and selling off pubs for them after their term as adjudicator, so there would always be the suspicion that they were worried about annoying the people from whom they would then seek to again be taking the majority of their income.
BIS was warned in 2013 by tenants groups. Simon Clarke of the Fair Pint Campaign and the secretary of the Independent Pub Confederation wrote:
“It would be catastrophic if the Adjudicator were a Chartered Surveyor” because
“specialist Chartered Surveyors active in the market may have conflicts of interest and should not be put in positions where perception of independence or impartiality is a requirement of the parties”.
Mr Clarke is himself a chartered surveyor, a RICS member, so he knows what he is talking about. He knows that he could not be the adjudicator—the pubcos would certainly be screaming had he been appointed—but Mr Newby cannot either.
I hope that, having heard what I have shared with the House today, the Minister will reflect and realise that this appointment is untenable. However, let me make it clear: if Mr Newby is not removed from post, an initial early legal opinion taken by the British Pub Confederation is that there are indeed strong grounds for the decision—one that the Department has clearly made on a flawed basis, not taking into account the reality of the situation—to be judicially reviewed. I hope that the Minister will listen and accept that this was a mistake. We do not believe it was anything more than a mistake, but a mistake it certainly was—one that did not follow the previous knowledge that the very same Department had.
To conclude, I urge the Minister to listen at this late stage to people who have been involved in this issue for five, 10, 15 or 20 years—to experts in the sector. The pubs adjudicator cannot be someone from the sector, for the very reasons that I have laid out. It has to be someone who is impartial and has the confidence of all sides, or it simply will not work. The pubs code must be changed. The two loopholes must be removed. I urge the Minister not to make the mistakes that the Conservative Government made with the 1989 beer orders. That was very courageous and correct legislation to give consumers better choice in pubs, but there was lobbying by the large companies, which saw the opportunity to sell off pubs to their friends, giving golden handshakes and setting up the very pubcos that we are now talking about. We must not make the same mistake again. We must close the loopholes and we must see a proper adjudicator, so that we can finally have confidence that this long-running saga will come to an end and so that tenants can have confidence in both the code and the adjudicator.
It is a pleasure to serve under your chairmanship, Sir David. I am sure that you have visited many pubs over the years in your constituency.
In many respects, the debate that we have been having ever since 2014, when we considered the Bill that became the Small Business, Enterprise and Employment Act 2015, is a microcosm of what it is to be a good, diligent Member of Parliament, because we have two jobs of course. One is to represent all that is best in our constituencies, and pubs are part of that social and business fabric. The other is to scrutinise, oversee and assist in the production of good legislation. I think it is only fair that we pay tribute, as I said in an intervention, to the previous Government for taking the action that was certainly necessary at the time and remains necessary, to address some of the very clear infringements and unfairnesses in the legal, operational and commercial relationship between tenants and pubcos.
As a Conservative, I understand—I think we all understand; certainly my right hon. Friend the Minister, as an experienced parliamentarian and Minister of the Crown, understands—that all markets have to be regulated. We cannot just let the market have free rein. There has to be some paradigm, some rules that govern the market. The previous Government, of which the Conservative party was part, accepted that and understood it very carefully. The legal framework needed to be put in place, and followed on from the Report stage of the Bill in November 2014.
The context was a dysfunctional market, and a dysfunctional market is not good for anyone. It is not good for the taxpayer; it is not good for the consumer; and ultimately, in terms of reputational damage, it is not good for the owner, the landlord, the big business. We therefore needed to address that. We had market distortions. One might even, if one were being pejorative, say that it was an example of crony capitalism. As a Conservative, I do not favour crony capitalism. That oligopolistic behaviour of the pubcos needed tackling, and it is to the credit of the previous Government that they tackled it. They needed to do that because we did witness, and are witnessing now, potential abuse of section 25 notices and full repairing and insuring leases and other loopholes that Greg Mulholland mentioned. I was remiss in not paying tribute to him for bringing this issue to the House today and for being a doughty champion over many years on it. I know that he has not always endeared himself to Ministers—this Minister or her predecessors—but he is not in the business of doing that. He is in the business of doing what he thinks is right and representing his constituents in Leeds, and he has done a fine job in that respect.
That dysfunctional market was the challenge we had. Of course, on a wider level, we were defending diversity, customer choice, fairness and individual decisions. We were right to take those steps, so essentially what we are doing now, as the hon. Gentleman said, is finishing the job. It will not be perfect. It will always be subject to legal challenge and to tweaking in its execution. Nevertheless, I agree with him that we are looking at cock-up rather than conspiracy. I do not know Mr Newby; I have never met Mr Newby. I am sure that if I were in a pub, he would buy me a fine flagon of ale and talk about life and the universe and put everything to rights. But that is not the point. I think this has been a cock-up, and part of the job of being an MP is to point out where a Department might be going wrong and to accept the basic premise of the policy, but try to tweak it to improve it. On that basis, it is right that the Backbench Business Committee granted this debate today.
Before I go any further, I should say that there are some superb pubs in my constituency—I will be in trouble otherwise. Most notable, and not far from where I live, is the Hand & Heart in Highbury Street in Peterborough. I would be remiss if I did not also mention Andy Simmonds, the landlord of the Ploughman at the Werrington centre in the north of Peterborough. But I will not go through all the licensed premises in my constituency.
That is the background to why we are here. I do not want to recapitulate the very erudite, comprehensive and well researched remarks of the hon. Member for Leeds North West, but I do want to raise the issue of investment. That was one of the loopholes that he identified—the waiver of the market rent option for investing in pubs. If it were as simple as that—a symmetrical, rather than an asymmetrical, relationship—it would be all fair and good, but I do not think it is. One anecdotal fact that has come out of experiences over the past few months and years is that the burden of investment to keep a licensed premises going and to keep it viable falls disproportionately on the tenant. On that basis, it is quite demonstrably, obviously and self-evidently unfair.
Paragraph 141 of the Department’s impact assessment of the pubs code and adjudicator noted that
“a FSB survey of their members found 68% hadn’t had any investment from their pub company in the last 12 months.”
As we know, the cost of investment that the pubco presents is often inflated. Many tenants report that they have much cheaper quotes from other suppliers but are forced to use the contractors insisted upon by the pubcos, which use their buying power to get low prices but, as with beer, on-charge it as a mark-up to their tenants.
Often, the investment is not an investment in any true meaningful sense. It is a de facto loan that the tenants are compelled to comply with as part of a contractual relationship. Any pubco money that is spent on a pub is often spent when the pub is vacant, in order to get the business back on its feet. Pubco money is not often spent to support a sitting tenant. Churn tenants—those who have to move—are often pursued through litigation over dilapidation clauses in the lease.
The concept of investment as a quid pro quo for waiving the rights that are established in legislation on the face of the Small Business, Enterprise and Employment Act—or, certainly, in secondary legislation—is not as simple as it may seem. On that basis, it is an area that needs to be looked at. I referred to paragraph 127 of the impact assessment earlier. It is better to finesse and nuance the code to deal with the loopholes and problems that have been identified, rather than to wait for 12 months or two years to introduce secondary legislation to do that or, indeed, to have to defend the code in the courts if there is a judicial review. There is no hidden agenda. In the same way that the loopholes are possibly a cock-up, there is no conspiracy among hon. Members to do down what we agree is a superb piece of legislation that rights some longstanding wrongs. We just want to improve it.
I will not take up too much more of the House’s time, but I want to further develop the point about the Pubs Code Adjudicator. I was going to raise the issue of the comments of the Royal Institution of Chartered Surveyors, but I will not go into them now. The comments are pretty strong evidence from observers who do not really have a vested interest. I have had dealings with RICS, and it is a professional organisation. In this respect, it has been asked its honest, reasoned opinion as to whether something will give rise to problems in the future, and it has given it. That is something we should take very seriously.
The appearance of impropriety and of a conflict of interest is the Achilles heel of the appointment of the adjudicator. If we are discussing the methodology of the appointment, it is not good enough just to say, “Well we had a nice chat and a robust interview. We all got on famously. Everything’s tickety-boo. He’s essentially a good egg. Job done.” [Interruption.] I exaggerate for effect, as the Minister knows, before she gets too concerned. The point is that the hon. Member for Leeds North West was quite right to make the distinction between and comparison with the supermarket adjudicator.
If the Department is to develop a methodology for important appointments, it has to be consistent. It is a serious issue when there is almost unanimous opposition and potential threat of a legal case, and when an individual is put in the difficult position of being unable properly to discharge his duties—the duties incumbent on him, which Parliament has given him—because the code circumscribes the workload and gives rise to potential problems.
Not everyone is as decent and honourable as everyone else. If people can find a way of winning a case by alleging that the adjudicator is biased or has a vested interest, they may very well seek to hold up legal proceedings and bring the whole thing to a juddering halt. We do not want that because we want the market to work effectively. I gently say to my right hon. Friend the Minister, who I have known for many years, that that is a consideration that she would be exceedingly unwise completely to dismiss out of hand.
The example we are debating probably supports the suggestion of many hon. Members that we need to move towards confirmation hearings before Select Committees or specially convened Standing Committees of the House to confirm the appointment of very senior people to regulatory roles. However, that is a bigger issue and we will not meander down that particular avenue of joy and excitement now.
In conclusion, we are right to have this debate because it is imperative that the Minister addresses the issues, and I am sure that she will do so in her customary combative but eloquent way. The hon. Member for Leeds North West has made some very strong points. My plea to the Minister is to think again about the Pubs Code Adjudicator and the loopholes. We still have a number of months—or weeks, at least—until the code is formally published. I urge her to give it consideration, listen to the debate and make the legislation as efficient as it could be in righting the wrongs and bringing fairness to the market because it is something on which there is consensus and around which we can all unite.
I appreciate you calling me early, Sir David, and it is a pleasure to serve under your chairmanship. I know that we should never start a speech with an apology, but may I apologise to the promoter and the respective Front Benchers? I am afraid that I will not be able to stay until the end of the debate. No disrespect is meant but I must be somewhere else in the House at 3 o’clock, so I do apologise. May I also acknowledge for the record that I chair the Unite group in Parliament? Many of our members work in the industry as tenants and in brewing.
I commend the hard work and terrific speech of Greg Mulholland, who set out the arguments in such a cogent and readily understandable way. Unusually for me—for the first time ever, I think—I found myself agreeing with Mr Jackson, who I had always assumed was a free marketeer, but he seems to recognise that there are faults, whether by accident or design, that need to be remedied before the code can be implemented.
The Minister asked what we, collectively, are asking for. This is not necessarily a partisan issue, although obviously there are strong interests. I thank my union, Unite, and its pub landlords section. I also thank the GMB, Justice for Licensees, the “Fair Deal for Your Local” campaign, the Fair Pint campaign and Mr Simon Clarke, who has been a stalwart defender of the interests of licensees in ensuring that they receive justice.
The things that we are asking for are not unreasonable, given that Parliament has debated and considered this issue at length and, on a cross-party basis, has agreed a way forward. We want to see the legislation implemented and the pub code reformed. The hon. Member for Leeds North West identified specific concerns about the adjudicator, to which I will refer in a little while. The Government have an opportunity: to enforce the legislation that was passed with such overwhelming support; to close the loopholes that have been identified by the hon. Members for Peterborough and for Leeds North West; to protect tenants from being coerced or browbeaten into giving up their rights; and to restore confidence in the office of the adjudicator.
I mean no disrespect to Mr Newby—like other Members, I suspect, I have not met him—and I do not mean to impugn his personal integrity. I am sure he is a lovely chap, but there are issues of confidence and of conflicts of interest that must be addressed if we are to enjoy the confidence of the whole industry, not just the pub companies but the tenants and the people who rely on the adjudicator to act impartially so that there are no real or perceived conflicts of interest.
We have had many years of consultations—the former Chair of the Select Committee on Business, Innovation and Skills, my hon. Friend Mr Bailey, and members of the Select Committee will, no doubt, elaborate on that—negotiations, debates and inquiries, but we would not be where we are without the co-ordinated efforts of the various organisations that have come together in the British Pub Confederation. Given that we are so close to the introduction of the new pub code and the adjudicator, changes that have been long fought for, I am a little disappointed that Government Members have implied that nothing happened prior to 2010, which is not quite true. We had the first pubs Minister, and a lot of the groundwork was done in advance. I would like to think, although it is just supposition, that had the outcome of the 2010 general election been different, the pub code and the adjudicator would have been implemented much more quickly. I cannot substantiate that but, having had conversations with many people in the know, I suspect that that may well have happened.
The changes have been a long time coming and, unfortunately, I regularly see figures in the trade press that 27 pubs a week are closing—that figure may be accelerating. Too many viable pubs and, indeed, working men’s clubs in communities such as mine have had to call last orders not just because of broader pressures within the economy but because of unfair and unsustainable rents, ties and profit-sharing arrangements, all of which should be addressed by the code and, if necessary, by referral to an independent adjudicator.
All we are asking, and it is nothing unreasonable, is that tenants should be able to secure a fair income. Given the time commitment that they give, it seems bizarre that the tenants of even very successful pubs—the hon. Member for Leeds North West mentioned the Eagle, and I know a number of others—that, on the face of it, are incredibly popular seem unable to secure a decent living. Many tenants are struggling. When their income is aggregated and divided by the number of hours they work, in many cases they are actually working for less than the minimum wage. I have met a number of former tenants and landlords whose mental and physical health has been absolutely broken by their experiences.
We all know that the repercussions of pub closures are felt across communities, which lose not only vital community assets but the jobs and the contributions that such businesses make to the local and wider economy. I do not denigrate that contribution. Many of my union’s members work in the pub sector—in the pubs, in the breweries and in delivery, such as on the drays—and I understand that the sector contributes £22 billion to the UK economy. Taking into account the multiplier effect, and not just the people working directly in the pubs, the sector sustains nearly 1 million jobs, particularly providing opportunities for younger adults to find employment, so the sector is important. Links in the supply chains include retail, agriculture and brewing.
The product is the essence of what we are about, of Englishness. Dare I admit it? Is it a secret that I love to have a pint of beer and to socialise? The problem is that the business model operated by the pub companies has weakened, rather than strengthened, the industry. Our hope is that the new pub code and the adjudicator will address the inherent unfairnesses in the exploitative practice of the pub company model, but it should be a step that strengthens the industry, ensuring: that tenants receive a fair living reward for all their hard work; that viable pubs can remain open; and, hopefully, that we can halt the decline that has seen significant numbers of pubs close over the last 10 or 20 years.
I would like to think that the pub companies are acting in good faith but, as has been alluded to, there is evidence to the contrary and that they are working to circumvent the pub code and the legislation even before it comes into force. If the Government and the Minister are not aware of that, I hope that she and her officials will make themselves aware of it by looking at the evidence that is out there. The appointment of Paul Newby as the Pubs Code Adjudicator has not endeared the Government to tenants or won any trust from them. Concerns remain that loopholes in the new draft pubs code could undermine the legislation, and if Parliament is to fulfil its promise to tenants, those loopholes must be removed before the final version of the code is implemented.
The hon. Member for Peterborough highlighted one particular loophole. The Government would undermine the fundamental principle of the pubs code, that tied tenants are no worse off than free-of-tie tenants, if they allow pubcos to force tenants to relinquish long-term leases should they opt for a market rent-only option. That is one specific thing that perhaps the Minister and her officials will take away. The loophole undermines the assurances offered by the Department for Business, Innovation and Skills that tenants who take the market rent-only option should not be subject to discrimination by the pubcos. The Government should also make it clear that if a tenant chooses a market rent-only option, they will be entitled to the same length of agreement, terms and conditions as their old tenancy—the hon. Member for Leeds North West raised that issue—otherwise the right to trigger the market rent-only option would be undermined and such tenants would be discriminated against by the very nature of the agreement.
Another loophole that I would like the Minister to look at is the market rent waiver in exchange for investment. The hon. Member for Peterborough also mentioned that, and it is a real concern. I do not want to labour the point, because I do not want to be repetitious, but I can think of a number of pubs in my constituency—I will not namecheck them—where the tenant has gone to their pubco and said, “I want to develop my business. I want to convert the rooms upstairs into a bed and breakfast and to knock a doorway in that wall”—not that wall, but a wall in the pub—“to create access to the beer garden,” and the pubco says, “Yes, that’s a great idea, but you’ll have to pay for it. When you’ve done that, we are going to increase your rent.” That cannot be termed investment from the pubco. In a way, it is coercion. We have to close the loopholes on the definition of investment and on what can and cannot be referred to the adjudicator.
I do not want to repeat points made earlier, but pressurising tenants to take up rent reviews, in advance of any scheduled review, before the implementation of the code is unacceptable. Coercing tenants to give up long leases and take up new five-year contracts with no market rent option at the end and no renewal rights is not acceptable either. It is unacceptable to effectively bribe tenants with short-term reduced rents—the hon. Member for Leeds North West referred to a 20% reduction—to sign new agreements with no market rent option, to seek to force tenants into five-year non-renewable tenancies or to threaten to offer only such agreements to avoid triggering tenants’ legal rights to the market rent-only option. The pub companies are doing so while telling us that they want to move forward and draw a line under past disagreements, and that it is not their intention to exploit their tenants. I am afraid that the evidence does not really support that, so I am rather sceptical about the assurances that we have received.
I will refer to Mr Newby, if I may. We must ask ourselves what his intentions are, for after he leaves his role as the adjudicator. If he intends to return to the industry where he has fashioned his career and undoubtedly been incredibly successful, would a reasonable person not assume that the decisions that he makes while in post will inevitably bear on his future employment prospects within pubcos? If that is not a potential conflict of interest, I do not know what is. I am concerned that because of those links, every decision in which he agrees with a pubco will be questioned, even when legitimate, as will the fairness of his judgment. That is likely to happen as a result of his long-standing connection to pub companies.
I feel sorry for Mr Newby. He should never have been placed in that position, whether by accident or by design; I forget the exact terminology. What is more concerning—the Minister must take some responsibility for this—is that throughout the entire appointment process, the Department for Business, Innovation and Skills has seemed oblivious to the reaction that such an appointment would create. I was in the Chamber when the Minister made the statement, and there was uproar in the House at the nature of the appointment.
I was there, Minister, with all due respect. I thought it was a rather heated and fractious exchange. The fact that it was not anticipated does not reflect well on the Department. If the Government insist on appointing Mr Newby, I fear that, intentionally or not, they will undermine the office of the Pubs Code Adjudicator from the first day that he starts work.
The hon. Gentleman is making a good speech. Does he agree that this debate also gives an opportunity for the Minister to clear up the confusion about whether the adjudicator has helped design the code since December? There have been mixed messages from BIS about whether he is coming in clean from May or whether he has been complicit, to use a pejorative term, in the construction of the regulatory regime. That is an important issue.
Once again—for the second time in one Parliament—I agree with the hon. Gentleman. It is a completely reasonable question, and I hope that the Minister will be able to clear it up in her response.
There seems to be no doubt that the pub companies see Mr Newby as their man. Worse still, the tenants seem to agree. More than a dozen stakeholder groups have come together under the auspices of the British Pub Confederation. Collectively and individually, in the representations that I have received, all of them see Mr Newby as not independent. I am not saying that that is correct; I am just saying that it is their perception. I worry that the Minister cannot see that the situation is untenable. If she truly wants the pub code to work, she will need to appoint an adjudicator who can command confidence across the industry. Regrettably, I think that she should apologise to Mr Newby and rerun the recruitment process.
In conclusion, the pub and brewing industry makes an immense contribution to our local communities and our economy. I love pubs; I love the industry, and I want to see it flourish. I want community pubs to thrive and tenants and landlords to have successful businesses. The drive behind the pubs code and the role of the adjudicator is to strengthen the industry. It should be seen as a step towards addressing the decline and closure of pubs over the past 20 years. It is in the hands of the Minister to listen to the concerns expressed by hon. Members from all parties, and to take the issue forward in a positive way that addresses them all.
It is an unalloyed pleasure to serve under your chairmanship, Sir David. I congratulate Greg Mulholland on securing this debate and on his long-standing and tenacious involvement with the issue, which has played a vital part in bringing this legislation to the statute book.
My own relatively minor and insignificant involvement with the legislation stems from my involvement on the Select Committee on Business, Innovation and Skills pre-2010, under the chairmanship of Sir Peter Luff, and subsequently as Chairman between 2010 and 2015. Significant parts of the legislation are based on our recommendations. Overall, I am absolutely delighted that we have got this far, as it has been a long and hard battle. Having got this far, not to get it all right would be a tragedy. This debate is particularly relevant in assessing where we are with it, the potential consequences of not getting it right and what we can do to ensure that we do.
Although I did not mention them, there were two previous inquiries into the issue even before my involvement, under the chairmanship of Sir Peter Luff. These issues have been debated for well over 10 years in successive Select Committees, and three broad themes have emerged from all the inquiries. The first is the huge imbalance in advantage between the pub companies and the tenants who run their pubs: the plight of tenants, their low income and the churn of tenancies that has played a significant part in the decrease in pubs in our country and in local communities. We must not forget the often harrowing tales of some individuals who have been ruined as a result.
The second theme is the appalling relationships between many tenants and the pub companies and the climate of fear that has prevailed. I conducted a survey prior to the last election on the proposed legislation, and on the incomes and conditions of some of tenants operating in the pubs in my constituency. I got probably a 50% response and what was significant was that not one of those who responded said who they were or what pub they were in. One person specifically said they were not prepared to respond because they feared some sort of retaliation. To me, that was perhaps more representative than almost anything else of the climate that pub tenants have to work under.
The third theme has been the attitude of the pub companies in responding to the very reasonable and moderate recommendations of successive Select Committees that they sort their own house out and introduce codes of conduct and standards of behaviour on a voluntary basis. It is fair to say that those successive Committees were met with resistance, obstructiveness and, in one classic case, downright abuse. Some long-standing Members may remember Ted Tuppen, the former chief executive of Enterprise Inns, describing the members of Sir Peter Luff’s Business, Innovation and Skills Committee as all being morons. I can take being called a moron; what I am concerned about is that if we do not get this, right we might start being called low-achieving morons, and I really would object to that.
Because of the obstructive attitude of some in the industry and the snail’s pace of reform on a voluntary basis, there has even been some reluctance in Parliament. Indeed, the hon. Member for Leeds North West and others will know what a difficult job it was to move the previous coalition Government from their position on voluntary reform to taking the necessary steps to legislating for it. It was only when it became crystal clear that voluntary reform was just not going to work that the Government were prepared to introduce legislation. I give all credit to those involved for accepting that it was not going to work and then taking the necessary steps to introduce legislation.
Having got so far—to a point where we are actually looking at the code—it is crucial to get the code right, because all the history of the involvement of the pub companies shows that they will do whatever they can to find ways of subverting the will of Parliament and what is appropriate to get a fair and equal balance between themselves and the tenants. I will not reiterate comments about the loopholes that have appeared, because they have been thoroughly, effectively and comprehensively articulated by the hon. Member for Leeds North West. However, it is crystal clear that unless amendments are made to the code, there could be ways in which this group—these pub companies—will subvert the long stated will of Parliament on these issues. I look to the Minister’s response to hear exactly how the Government intend to engage and address the concerns that have been quite properly raised. If they do not, then locking tenants into a statutory framework that fails to address the underlying principle that the Government have articulated—that tied tenants should not be worse off than free-of-tie tenants—will mean an opportunity lost, which could present more and more problems in future.
Let me just say a few words about the appointment of Mr Newby. I do not like getting dragged into issues about individuals and personalities, and I certainly do not like prejudging somebody’s performance. However, I must make a number of general points about the appointment. The first is the crucial strategic importance of getting the appointment right. Whoever is in this post has an pivotal role, not only in interpreting and delivering justice for the parties involved in any dispute, but in transforming, in the years ahead, the confrontational and aggressive culture that exists between the parties, which could be really significant in the future development of this particular industry.
For that to happen, there must be total confidence on both sides of the historic divide, but it is quite obvious that the stated levels of interest of this person have given rise to serious concerns. I know that my hon. Friend Bill Esterson has written to the Minister and I believe there has been a response that sought to allay those concerns, but subsequent remarks by the hon. Member for Leeds North West indicate that there is still huge concern about the perceived level of conflict of interest of the person in this particular position.
My other query on this issue, and perhaps the Minister will allay my fears, is about the accusations—I would not pretend to know just how valid they are, but they appear to have come from a BIS source—that this particular person has been involved with the drafting of the code of conduct.
It is a pleasure to serve under your chairmanship, Mr McCabe. May I make it absolutely clear that Paul Newby has not been involved in the drafting of the code? To allay the hon. Gentleman’s concerns, let me say that the only dealings he has had with officials in BIS since the announcement of his appointment, which was made in the House in a speech—without any comment, if I may say so; there might then have been some fractious discussions as a result of an urgent question—has been in relation to the setting-up of his office.
Let me make it absolutely clear that there has been no help at all in the drafting of the code. The only help has been in the setting-up of the office.
It is very helpful to have that on the record. I am sure that the Minister will understand, as I do, that often in politics perception can become reality, and if these rumours are going round, obviously that has considerable significance and could underlie or even reinforce the level of suspicion that exists about the proposed impartiality—
In an effort to be helpful and for the avoidance of doubt, let me point out that the Minister said on
“already started work. He has been very helpful to my officials in making sure that we have the pub code up and running, and ready to come before this House.”—[Official Report, 10 March 2016; Vol. 607, c. 425.]
Therefore, with all due respect to the Minister, there was some room for ambiguity and I am pleased that she has clarified that matter now.
I thank the hon. Gentleman for his intervention, which demonstrates the source of the ambiguity. That is certainly something that needed to be clarified, because if there is any suspicion that the arbitrator is involved in the drafting of the code, that calls into question the future impartiality of its interpretation. His intervention also demonstrates how easy it is, in this rather long-standing antagonistic set of relationships, to set things going that could perhaps be remedied with a slightly different approach.
What is undeniable is the lack of trust from the tenants’ side on the appointment of Mr Newby. I do not like to prejudge that appointment. Mr Jackson mentioned having some kind of pre-appointment hearing for the adjudicator. That had crossed my mind as being something that, if the Minister is to go ahead and make this appointment, might go some way to satisfying everybody. I am in a slightly difficult position, because I am not on the Business, Innovation and Skills Committee—as its former Chair, I do not feel that it is my job to start recommending what it should be doing now—but it would certainly fall within the Minister’s remit to perhaps gently suggest that it would be helpful for the Department to have such a hearing. I know that often there are informal channels of communication between Departments and Select Committees, and their roles can be reinforced if those channels are used properly. I gently suggest that the Minister could look, if not at a BIS Committee pre-appointment hearing, then at some form of parliamentary scrutiny that would enable an adequate response to the questions that are circulating.
In conclusion, I reinforce this point. The legislation has been a long time coming and people have devoted so much work to it. A successful outcome is so important. Given its long gestation, we do not want the legislation to be damaged at birth. I stress the need for the Minister to listen to the comments that have been made today. She should take them on board and provide mechanisms and responses that will not only enable the wider participants—the tenants, the community pubs and the beer-drinking community—to be satisfied, but Parliament, too. Every opportunity should be given for scrutiny to deliver that satisfaction. The importance of the industry to the individuals within it, the communities they represent and the economy as a whole is so great, and we want to get the legislation right. This is a once-in-a-lifetime opportunity. I ask the Minister to listen to everyone to ensure that we get it right.
It is a pleasure to serve under your chairmanship, Mr McCabe. May I start by saying what an excellent introduction we have had to the debate. Indeed, Members from all parts of the House have spoken in this timely debate about how we move forward and the next stage of a long and important process. I put on record my interest as secretary of the Unite group in Parliament.
The Small Business, Enterprise and Employment Act 2015 was passed before I came to this place, so I thank colleagues for all their work in bringing forth the legislation over a long period of time to try to bring greater justice to the industry. That is obviously a welcome step forward. We are at the last stages of the process, and for Parliament to have a real function in that, it is important that our debates can change and influence things. I hope that today’s thoughtful debate will help move the situation to a happy conclusion for everyone. It is important to get it right, to ensure confidence in the process, and that we can sustain the industry to see good growth on all sides that serves all interests.
We have heard the statistic that 27 pubs are closing a week. Seventeen pubs have closed in my constituency, so I know that we have to get the issues right. From talking to tenants, I know that they are concerned about the future if we do not get the code right.
I am going to make a brief speech and will not repeat all the excellent points that have been made. First, I will talk about the impact on my constituency of York Central, which has 132 pubs. I am not going to name them, for obvious reasons, but they form a major part of our local economy. They provide jobs for 3,037 people, about a third of whom are young people. The pubs pay out £32.2 million in wages and bring in nearly £25 million to the Treasury. It is important for the economy, locally and nationally, that the industry is sustained in the future. The loss of community pubs shows how fragile the industry is and why it is so important to get the pub code absolutely right.
We have heard about some of the issues facing tenants, and they are reflected by the issues that tenants in my constituency face. Shorter leases bring instability for tenants who want to invest in their business for the long term. That lack of security destabilises their opportunities, so it is important that we ensure that the loophole is closed. We do not want to see shorter leases exchanged if people want to move forward with the market rent-only option. That option is important for tenants who want to use their expertise to develop their business in a way that they know can succeed, particularly in difficult times.
The point on waivers has been well made. If people are asked to sign waivers to address other issues, that cannot be right. We know from so many other pieces of our law that waivers can be abused. I can think of so many other instances. I ask the Minister to consider removing waivers as an option within the code. Can we tighten up on that issue?
I want to talk through what a landlord from York told me. He specifically asked not to be named, which speaks to the fear among tenants that my hon. Friend Mr Bailey described. He went through a recent rebidding process in which his pubco came to him with a new rent that was 100% higher. The pubco wanted to double the rent for his business. Following that, there was some horse trading with the Royal Institution of Chartered Surveyors. It was not possible to move the situation forward, so a third expert accredited surveyor was brought in from RICS, and they were able to reduce the rent by a third. It was a very expensive process for the tenant, and the outcome was unsatisfactory. One way forward would be for tenants to ask an adjudicator to oversee the process. The cost of appealing and taking the process further was prohibitive for the tenant. As we have heard, tenants often earn around £15,000 a year. They are on very low wages and we will see injustice unless we get the whole system right. That is why today’s debate is so important.
Given those issues, we need to ensure that pubcos cannot abuse the system. I have heard about the issuing of section 25 notices, ending leases just before the pub code comes in so that new terms can be set. That cannot be right. It is an abuse of the system. We should make the system watertight so that tenants have confidence in it and so that pubcos know what the rules are and where the lines are drawn and cannot exploit the system. We need rigour to be put back into the system.
It is important that the adjudicator has the confidence of all parties. When I think of comparable roles, that is so apparent. In fact, the adjudicator’s office states:
“the adjudicator acts as a fair and unbiased referee looking into complaints”,
so it needs to have people’s confidence. In so many other areas of arbitration—I have experience of ACAS—if people do not have confidence in the arbitrator, the arbitrator is changed. There is still an opportunity to make right this wrong and to ensure we get confidence behind the post.
I am not talking about the person. I am sure that Mr Newby is a man of integrity and probity. I do not know him and I certainly will not judge him, but it is important that we move forward with the confidence of all concerned, and I hope that Mr Newby will look at his own position if the Minster does not take steps to ensure that confidence can be built. It is absolutely crucial that this system works.
It is also important that future processes are scrutinised to ensure that such conflicts do not arise or can be detected at an earlier stage. Whether that is about clarity of the application process, or scrutiny of the appointment process, it is important for the integrity of the House that we get this right in future, and it is important that this is seen as a learning process to make sure that wrongs can be righted.
My constituents and tenants in York are concerned about the future of their industry. There is instability in their industry and they want to get the code absolutely spot on so that they can continue to build their businesses. We have an issue with drinking in York. Community pubs are the safest place that people can go to drink, but if the code is not right, those pubs could be vulnerable and we might see an escalation in the abuse of alcohol and the dangers that go with it. Even from a health perspective, it is important to get the code absolutely spot on. We have that opportunity. We have another six or seven weeks to go before the code is introduced. It is never too late to make things as tight as possible, and today’s debate is an opportunity to do that. We should make sure that the right person oversees the process and has the confidence of all concerned as he takes the code forward.
It is a pleasure to see you in the Chair, Mr McCabe. It is also a pleasure to follow my hon. Friend Rachael Maskell. I confess that I once went with a group of friends to York to sample the delights of the pub trade there, on the basis that we had been informed it had the highest number of pubs per square mile in the country. I can tell my hon. Friend that I was not disappointed. At least, I think I remember that I was not disappointed; my memory was slightly affected that day.
I join in the tributes to Greg Mulholland not only for securing this debate but, as other hon. Members have suggested, for the constant and never-failing campaign that he has led and for the way that he has maintained this issue at the forefront of hon. Members’ minds. I largely support the position that he has advanced today. I could talk about the appointment of the Pubs Code Adjudicator, but the hon. Gentleman’s case was so compelling, so comprehensive and so forceful and forensic that there is little point in my repeating it. Suffice it to say that my concern is that the credibility of the pubs code and its implementation will be damaged if the appointment continues. Like other hon. Members, I do not know the gentleman concerned personally. To the best of my knowledge, I have never come across him previously, but it would damage the credibility of the operation of the pubs code itself if the appointment continues.
If I may caution the Minister, there is a danger that the lack of credibility and the damage to credibility might also contaminate to an extent the credibility of the Department and Ministers who made the appointment. For the sake of the Ministers’ credibility, they might want to consider that. Somebody might wish to take Mr Newby out for a pint in one of the nice pubs and say to him, “Paul, it is not going to work. Think about perhaps withdrawing your name from the process and handing in your resignation. It’s not you but the circumstances.” That might be one way forward.
The hon. Member for Leeds North West mentioned two glaring loopholes. I absolutely support him on this. From what Mr Jackson and others have said—they obviously know quite a lot about the process—I suspect there were simply errors of drafting, but I am particularly concerned about the idea of the waiver of the right to market rent-only options. My hon. Friend the Member for York Central alluded to this. When there is an imbalance in power in a relationship, the organisation with the greater power has the potential for abuse. To force waivers on to tenants in this way distorts what I believe was the original intention of the code and of Parliament. It reminds me of when the working time directive was introduced. Jobs were offered to job applicants on the basis that when they signed their contract, they also signed a waiver to the working time directive. So what was intended to protect people was easily evaded and got around by unscrupulous employers. It has happened and will happen again, so I back the hon. Member for Leeds North West absolutely.
If the hon. Gentleman, who I support, will permit me, I want to give a perspective from the pubcos’ point of view. Admiral Taverns, which he mentioned in his speech, is based in my constituency where it is a large employer. Although the issues and problems that the hon. Gentleman has had with pubcos might extend to all those he has mentioned, he will not necessarily have Admiral in his sights for all his criticisms. I make that point because I was pleased that that company in my constituency, which I am therefore proud to support, has recently been crowned best leased/tenanted pub company of the year. It won the accolade from an independent survey of tenants, so it has a little more credibility than others.
I am enjoying the hon. Gentleman’s speech. I want to respond directly to him because I had a meeting recently with Kevin Georgel from Admiral Taverns. Kevin said that the difference that he perceives between Admiral and Punch and Enterprise is that Admiral does not have the catastrophic levels of debt that Punch and Enterprise do, on which basis Punch and Enterprise are continually overcharging and exploiting tenants on an industrial basis. That is what Kevin told me in a meeting, and I am happy to meet other people.
I am grateful for that intervention. Of course, the catastrophic debt built up by some of the larger pubcos as they built their empires based on debt is now being passed on to the tenants. The financial planning of the pubcos was catastrophically wrong. That completely wrong financial planning was not the fault of the tenants and landlords and it should not be passed on to them now in the way that my hon. Friend the Member for York Central described.
However, looking at it from Admiral’s point of view—from a pubco’s point of view—because I have sought advice from the other side, Admiral is concerned about the implementation of the pubs code, which it absolutely supports and wants to happen, but, in its words,
“the lack of any transitional arrangements is wholly unreasonable and will cause total chaos for pub companies, tenants and indeed the adjudicator”,
whoever they may eventually be, assuming that the Minister has listened to hon. Members today.
Admiral points out that at the moment there are no transitional arrangements relating to the implementation of the pubs code. It had hoped there would be a minimum of six months from the implementation date to the market rent-only agreement, simply because that would allow time for negotiations with tenants and landlords. Negotiations can be quite complex and can last several months before the new arrangements are signed off. If the market rent agreement is to be signed off and handled fairly, that will require training, and full information available to both sides. However, at the moment, as things stand with the pubs code, I do not believe it will come in until May, and pubcos are still not actually aware of what the final arrangements will be. Nor, therefore, I suspect, are the tenants and the landlords. There is the potential for a lack of transitional arrangements, and for upheaval without the time being built in for making the complicated arrangements; those involved are very keen for that to happen.
There is associated guidance from the adjudicator to consider, as well as the fact that tenants will have only a short window in which to get up to speed with the new legislation and apply for the market rent-only option. Such transition might also apply to other key aspects of the code, such as business development manager training obligations, code compliance officer appointments, and systems to deal with due diligence and the very substantial information requirements. I am pleased that the hon. Member for Leeds North West spoke to the chief executive, Mr Georgel, my constituent. He believes that it is in everyone’s interests to ensure that the much-awaited legislation is implemented effectively, rather than on the hoof with the resultant chaos that he predicts. I remind the House of what the hon. Member for Peterborough said about getting things right first of all rather than having to review the legislation later. The same applies to the implementation of the code. We need to get it right and give due attention to what is being asked of landlords and pubcos before it is implemented. My constituents’ plea would be to encourage the Minister to have proper transitional arrangements put in place to ensure the minimum of disruption.
The main point of my speech is to endorse the powerful and compelling case made by my hon. Friends and, indeed, the hon. Member for Leeds North West. There is still time for the Minister and her Department to consider how the credibility of the appointment in question might affect the operation of the pub code and, indeed, their own departmental credibility. I hope that they will take the time to do that, because, as hon. Members from across the House have said, the importance of pubs to communities and society should not be underestimated. It is a hard job running a pub. The hours are long, often for little return, and the pressure is constant. The hon. Member for Peterborough described pubs as important parts of our communities’ social fabric, and we need to make it as easy as possible for them to carry out their role and make our communities cohesive. I support the case made by the hon. Member for Leeds North West and I hope that his campaign will flourish and hit its goals.
It is a pleasure to serve under your chairmanship, Mr McCabe. I add my voice to the congratulations that have been offered to Greg Mulholland on securing the debate, and on his apparent and well documented tenacity over the past few years in keeping the issue at the front of hon. Members’ minds. His comprehensive, detailed and considered speech kicked off an enlightening debate. I must confess that before I attended the Chamber I was struggling to conceive how hon. Members could talk for three hours on this subject; boy, was I wrong about that.
I pay tribute also to Mr Jackson. Like Grahame M. Morris I found myself agreeing with him more than once or twice, which is a refreshing change. Of course, the hon. Member for Easington, who is no longer in his place, alluded to the concept of loving a pint as something peculiar about Englishness. I might agree with that, but I want to make it clear that he does not have the monopoly on liking a pint, and perhaps I shall relay that to him when I see him catching a fag on the Westminster terrace, over the next week or so.
Mr Bailey gave us an acute insight into the lengthy process that has been going on for the past few years. I am glad that he got to the bottom—with help from the Minister, of course—of the issues about whether the adjudicator was involved in drafting the code. That clarity was welcome in the circumstances and is helpful for today’s debate.
Rachael Maskell was right to identify confidence in the adjudicator as the crucial thing. If we do not have a regulator who has stakeholders’ confidence, the role may be a bit of a white elephant. I hope that that will not be the result at the end of the process.
Christian Matheson made the poignant point that running a pub is a tough job, and I can concur, given that—perhaps disclosing an interest of sorts—I was brought up in a pub. Thankfully it was on the right side of the bar; my parents were entrepreneurs, not overly active socialites. I understand how tough it is to run a pub. Normal practice was that I would barely see my parents for an hour or two each evening, and I did not see them at Christmas and Easter, because the trade moves when people are on holiday. That has a huge impact on family life, which should always be remembered when we think about publicans.
Pubs, codes and adjudicators are devolved to Scotland, so it is not my place to impart to the Minister my views on the loopholes that have been identified, or the code itself. Scotland is consulting on the question at the moment. We are looking and listening and will take on board what happens in this place. However, inequality of arms is a big issue. We can all see how such an inequality of arms would arise in negotiations between a powerful and perhaps wealthy brewery landlord and the tenant. If the need for the code is predicated on that, it seems sensible.
Beyond that, there is the question of the appointment of the adjudicator. I echo what the hon. Member for York Central said: of course Mr Newby may be a very competent, intelligent and capable individual, but that is not the issue. The issue is his position and his history, and whether his career had characteristics leading to a position of conflict. As a former solicitor—the fact that I am a former one is not because of any conflict of interest, I should say—I can say that conflict of interest is always at the forefront of a lawyer’s mind. I always remember the partner at the law firm where I trained, who taught me about conflict of interest. He said, “Richard, look—if it looks like a duck, quacks like a duck and walks like a duck, the chances are it’s a duck.” If, as the hon. Member for Peterborough so vividly set out, there is an appearance of a conflict of interest, that in itself, in my view, is the conflict of interest. There does not need to be a financial interest that pulls Mr Newby from an impartial adjudication position. There just needs to be a history of working for one side or t’other. I urge the Minister to take that on board, given her experience as a barrister. She will no doubt be aware of those points.
My comments have been intentionally brief. If we are to have an adjudicator and a code, I urge the Minister to treat it as essential that they should have the confidence of stakeholders. It does not appear from what I have heard this afternoon that that is the case. I would hope that through the lengthy process that has gone on we would reach a point where everyone would have confidence and the system could work.
It is a pleasure to serve under your chairmanship, Mr McCabe, as it was to see Sir David in the Chair earlier. I congratulate the hon. Members who applied to the Backbench Business Committee on securing this afternoon’s debate. It has been an excellent debate, and I want to mention Greg Mulholland in particular. It is nearly 30 years since I attempted the Otley run, much of which is in his constituency. I was a Leeds student then, and cannot remember it very well. We can all guess some of the reasons why my memory is not what it was.
I value the country’s pubs, whether they are in Leeds North West or my constituency. Members of Parliament have a duty to look after them as much as possible, particularly the ones that are run by pub tenants, because this is about a fairer deal at our locals. At a time when pubs are closing at a rate that has not been seen in more than 100 years, there is an urgency about doing what we can to support the great British institution of the local pub. A fairer market would help local communities and economies as well.
The prearranged monopoly, which is what beer ties amount, to locks microbrewers out of almost a third of the market. The Society of Independent Brewers showed a 25% increase in the choice of cask beer available in the UK between 2012 and 2015. That is 4,000 cask ales—a huge industry with incredible potential for many small and microbusinesses. Imagine the potential for sales and jobs in the industry if the market grew by up to 50%, and yet microbrewers are denied access to a third of pubs because of their ownership structures. I have three excellent new microbrewers in my constituency alone: Red Star, Neptune and Rock The Boat. Members will be able to sample some Red Star ale when it is on sale in the Strangers Bar in the week commencing
I am not sure what the ethics of such a proposal would be, so I shall move on, but I would be happy to share a pint with my hon. Friend in that week.
There is real consumer appetite for quality, locally-produced real ale. The monopoly on beer sales for pub companies and the breweries they own really does not reflect what consumers want to buy. The landlords of pubs in my constituency, including the Corner Post, Stamps and the Freshfield, are seeing booming custom and will back me up because they are serving some of the beer that I mentioned from the breweries that have recently started up. We have heard many stories, not only today but over the years, about how pub tenants have been ruined or promises of investment have not materialised because of the actions of the pub-owning companies. That is why it is so important that we get this absolutely right.
Market rent-only is only an option. If the pub companies and brewers run a robust and positive business model, they have nothing to fear from the alternative. If pub companies feel that they are giving tied tenants the best option, they should be willing to put the options for their tenants on the table and convince them that beer ties are a sensible business decision.
We await the publication of the pubs code. When she responds, I hope the Minister will tell us when it is going to be published. It needs to be published soon, so that the industry has the time to analyse it properly and to address the weaknesses we have heard described today—I will come to some of those later—before it goes live on
Parallel rent assessment matters because it offers a side-by-side comparison, so that pub tenants can determine whether to remain tied or to go free of tie. Pub tenants need parallel rent assessment so that they can make an informed decision, so having market rent-only without parallel rent assessment simply made no sense. That is why there was so much concern when the initial consultation that was published in autumn 2015 appeared to exclude parallel rent assessment. But, after a lot of fuss, including during exchanges with the Minister on the Floor of the House at BIS questions, the mistakes in the consultation were rectified. The Minister deserves some credit for her response on that occasion.
What a great pity, then, that doubts still remain about the effectiveness of the pubs code so close to its implementation. The Government say that the market rent-only options will be offered to landlords at rent review or lease renewal. They also say that the trigger will be the rent review or lease renewal itself, rather than, as seemed likely at one point, only in the event of an increase in rent. However, there are two interpretations as far as tied tenants are concerned. One is that the effective date for rent review is the date of implementation; the other is that it is the date on which the notice is issued and when the review process starts, which is six months earlier.
The market rent-only option will be enforceable only from
Then there is the pubs code itself and the concerns raised by the British Pub Confederation and others. The draft code appears to allow pub companies to force tenants to surrender a long lease for a much shorter one in exchange for the market rent-only option. The problem with that is that a tenant who takes a short lease will face uncertainty about what will happen at the end of it. Running a business of any kind requires certainty, and when the building itself is so crucial to the business—in fact, in this case the building is the business—not knowing whether a lease will be renewed dramatically reduces the attractiveness of market rent-only. This approach certainly appears to be the very opposite of creating the level playing field that I think we are all trying to achieve.
The draft code also suggests a waiver of the right to the market rent-only option for prospective new tenants, so pub companies could decide to let pubs only to tenants who waive their rights. Our concern about the loopholes that have been discussed today is that the combined effect of the two proposals in the draft code could mean business as usual for the pub companies, because tenants who want the market rent-only option will not have their tenancies renewed, while only those who accept the tie will be allowed to take on leases. Will the Minister clear this up and say whether those provisions will be included and whether the loopholes will be removed from the final version of the code? If they are not, pub tenants might start to think that the pubs code is not actually going to change very much at all.
All that brings me to the appointment of the Pubs Code Adjudicator. Like other Members, I think Mr Jackson made an excellent speech. I agree with pretty much everything he said. He made the points that, for a free market to operate effectively, it needs to be a fair market—I agree wholeheartedly with that—and that unless the code is drafted correctly, it will be unworkable. He also talked about conflicts of interest, which I will come to shortly.
In a number of our exchanges, not least when my hon. Friend Mr Bailey was on his feet, the point was raised about whether the newly appointed adjudicator, Mr Newby, had been involved in the drafting. I think the Minister was trying to clear that up. Mr Newby may well have been involved in setting up his office, which of course is entirely proper; the problem is that the Business Secretary’s letter to the British Pub Confederation says that
“he shared his professional insights” when the draft pubs code was discussed with him. I do not know whether that counts as setting up his office or as helping to draft the pubs code, but there seems to be some blurring between where setting up an office ends and helping to draft a code begins. In the end, I am not sure we are much further forward on what his role has been so far.
On the point about conflicts of interest, the Fair Pint campaign’s submission to the Small Business, Enterprise and Employment Bill Committee was clear: do not appoint a surveyor to the post. Any surveyor with experience of the field will have potential conflicts of interest. They will have acted for the big pub-owning companies and will not be seen to be impartial in arbitrating as the adjudicator between pub companies and tenants.
“I can confirm that Mr Newby has not been involved in the drafting of any part of the Pubs Code. My officials met Mr Newby after his appointment to provide him with a high level briefing on Part 4 of the Act and some areas of the draft Pubs Code in order to familiarise him with the key aspects ahead of him taking up this important role. During the course of this briefing there was a discussion of some technical aspects of the MRO arbitration process—for example, the length of time it takes to appoint an independent expert—where he shared his professional insights.”
Does the hon. Gentleman agree that that is a correct reading of the full paragraph, which, I would suggest, he slightly misquoted?
I used the end of the quotation, which states that
“he shared his professional insights.”
I think it goes further than what the Minister said earlier about the work he carried out, because to me, if he is being asked to provide feedback on the code in a professional manner, that is very close to sounding like he is being involved in drafting the code.
To remind the hon. Gentleman:
“Mr Newby has not been involved in the drafting of any part of the Pubs Code…During the course of this briefing there was a discussion of some technical aspects of the MRO arbitration process—for example, the length of time it takes to appoint an independent expert—where he shared his professional insights.”
It seems to me that if he is sharing his professional insights, he is giving observations and helping to draft the code. We can split hairs over this all afternoon, but I am sure others will draw their own conclusions about what his involvement has been in preparing for his office.
As has just been demonstrated, the Minister has contradicted herself. She suggested that Mr Newby’s only involvement was in setting up the office, but then she read from a departmental letter or memo, which clearly stated that it was more than that. Does the hon. Gentleman agree with me and many tenants that it is because of precisely this kind of confusion that people simply do not have confidence in the Pubs Code Adjudicator and, frankly, in the Department?
The hon. Gentleman described it earlier as a cock-up. Unfortunately, as with so many other aspects of the way the pubs code was drawn up and the way the level playing field was supposedly being created, the Government have not handled it well. There is clearly a contradiction between setting up an office and what the paragraph that the Minister read out states. As I said, others will make their own judgments about that.
I was talking about the Fair Pint campaign’s submission, which, by the way, was made before Mr Newby’s appointment was announced. It said that surveyors will have acted for the big pub-owning companies and will not be seen to be impartial in arbitrating as the adjudicator between pub companies and tenants. What is more, it also points out that Royal Institution of Chartered Surveyors members who deal with pub valuations depend on pub companies for a large portion of their fee income. That is a clear conflict of interest. That warning was made before the adjudicator’s appointment was announced by the Minister and her boss the Business Secretary.
In RICS’s response to the consultation on the adjudicator in 2013, it said:
“We also have concerns in relation to how the Adjudicator process might work on a practical level…It is likely that many such specialists will have a conflict of interest having advised one of the parties on a range of matters or as an Independent Expert or Arbitrator.”
So RICS made the same point, well in advance of the appointment, that a surveyor is almost certainly going to be conflicted. Si Clarke from the Fair Pint campaign told the Minister when he met her that appointing a surveyor would be “catastrophic”. As he told me this morning, having an independent adjudicator can only mean not appointing a surveyor. He and others made that point extremely clearly to officials and Ministers throughout.
It is important to stress that the concerns about the adjudicator’s appointment are not a reflection on one individual. Nobody is suggesting that surveyors act in anything other than a professional way, with the utmost integrity. The concerns about the appointment of Paul Newby are not about Mr Newby. His integrity is not in question in any way. That has been confirmed throughout our discussions today and previously, and Mr Jackson made that point extremely well.
The hon. Gentleman is making a powerful point. It is unfortunate that the Minister has to defend this situation, which is, as much as anything else, about governance in her Department—indeed, in all Departments. In the absence of a confirmation hearing, the decision to go by statutory instrument rather than Standing Order and therefore to restrict the level of oversight and scrutiny by Parliament is regrettable. I gently say that the Government should reflect on the fact that we will continue to have instances when people say, “Is it cock-up or conspiracy?” and question individuals if the system sets its face against proper scrutiny.
I agree and echo the hon. Gentleman’s call for such appointments to be subject to Select Committee appointment hearings. That is the right way to go. The way he phrased it is a good way of emphasising that this is not about any individual. We are not questioning anybody’s integrity. I am glad he made that point, because it is important that we continue to stress it.
The problem is the conflict between Mr Newby’s work for Fleurets and his representation of the big pub companies over many years, and his ability to gain the trust of pub tenants. It is no good to say, as the Minister did, that he acted for pub tenants. As RICS pointed out, having advised either a pub company or a pub tenant could be perceived to lead to a conflict of interest. In any case, in examining the claim about Mr Newby’s having represented pub tenants, it is important to understand what that really means. Mr Newby’s CV, dated
We have not been able to get an answer to how many pub tenants whom Mr Newby or Fleurets has represented are the tied tenants of a single pub or the small number of pubs that they run. After all, with fees of £300 an hour or more for a firm such as Fleurets, it is rather doubtful whether any tied pub tenant with an annual income of £15,000 or less—or those with no income or those making a loss—would be able to afford such services.
When the Minister wrote to me, she told me that the appointment panel had satisfied itself that Mr Newby had no conflicts of interest. That is rather odd, given the RICS assessment of the same topic. I suggest to the Minister that had she said to me that the panel had found conflicts of interest, but had decided that they would not affect Mr Newby’s ability to do the job, that might have been a rather better case for her to make.
The point about conflicts of interest is that, by definition, they have the ability to undermine impartiality, to influence and to create doubt among those involved. The example of the Groceries Code Adjudicator’s conflicts of interest policy was mentioned earlier by the hon. Member for Leeds North West. The policy comments in some detail, recommending a two-year period before conflicts of interest start to diminish. It also states that they have the potential to be a “disqualifying interest”. When setting up the pubs code, why was a similar approach not adopted from the outset? Why are such rules not already in place? The pubs code conduct policy will be developed in time, but it would have made more sense to have it in place earlier. Had it followed the same approach as that of the Groceries Code Adjudicator, I suggest that it would have ruled out the appointment of surveyors, including Mr Newby.
Another thing that did not help was that the Minister chose to announce Mr Newby’s appointment during an intervention in a speech being made by the hon. Member for Leeds North West in the Third Reading debate on the Enterprise Bill. The way in which that was done, I am afraid, raised suspicions that not all might be well. She could have made the announcement in a statement to the House—she was forced to come back the next day anyway, to answer an urgent question—or in the Enterprise Bill Committee. Why did the Secretary of State not make the announcement during his speech on Third Reading? Why in an intervention, of all things? That was an odd thing to do and it raised suspicions.
Given the way the pubs code was drawn up—with the exclusion of parallel rent assessment from the consultation; with the need, in the last Parliament, for amendments to the Small Business Enterprise and Employment Bill to protect pub tenants; with real, ongoing concerns about the way MRO could be avoided; and with the appointment of a surveyor with clear conflicts of interest, despite the advice not to appoint a surveyor—it is no surprise that pub tenants and the members of the British Pub Confederation are still deeply concerned about what is going to happen when the pubs code is implemented. In reality, as things stand, there is a strong possibility that the lack of a level playing field will remain and that tied pub tenants will continue to be denied a fair deal.
The Minister needs to get a grip, to ensure that the loopholes in the pubs code are slammed shut, and to go away and take a long hard look at the appointment of the adjudicator. I believe the Minister wants a fair market in pubs and beer, but she has a lot of work to do to get there and little time in which to do it before the
I congratulate Greg Mulholland on securing the debate, I thank everyone who has contributed to it and I pay tribute not only to the hon. Gentleman, but to other hon. Members who have for many years been campaigning to ensure that the great British pub has a genuine, sustainable future.
I have to put on record a number of things. One of the things that has annoyed me all my life is any form of stereotyping. I object to it, so I object to anyone who thinks that because I am a woman I do not like pubs or ale—although I am not suggesting that anyone present has said any such thing. Throughout my life, I have enjoyed drinking ale in great pubs. By way of example, I name the Crown Inn in Beeston, the Horse and Jockey in Stapleford and the Nelson and Railway—a particularly exceptional pub—in Kimberley, all of which are in my constituency.
I confess that I started enjoying pubs at the age of 16 and I well remember, with great fondness, the many happy bonds with my school friends that were forged in the Old Ship Inn in Worksop and that have continued all the way through my life. As for so many people, those bonds were formed in pubs. We could also go on to debate all that pubs bring to our communities and to individuals, and the role that they play in the lives of so many people, which they have done for many centuries.
We all agree that we want to ensure that our great British pubs have a genuine, sustainable future. We want to ensure a fair deal for tenants, and for too long they have not had that fair deal in too many instances. Equally, we want a sustainable industry. Unlike some, I do not want pubcos to go out of business. I want them to invest in the future and I want them to act responsibly. It is a question of balance.
If there is one thing that I have learned since being appointed last May—Mr Bailey mentioned this, and he has been at it longer than I have, if I may say so—it is that there is a lot of noise and aggravation, distrust and, in some instances, anger about this. Sometimes there is also a lot of unpleasantness, but unfortunately that is a feature of modern political life. I have been the subject of abuse on Twitter from some tenants groups and tenants, and it all gets a bit tedious. However, we have to try and calm everything down and work together, so that we get the right balance and fairness to secure a proper future for our great British pubs. That is what I seek to do.
I mentioned stereotyping, and I also get a little—some might say overly—excited about the notion that, as a Minister, I am not fully aware of my duties in making appointments, or in all matters, of course. I have served in a number of Departments as a Minister, so I have made a number of appointments in my time. My duty is to ensure that I get the right candidate—to go through the proper process, with rigour and fairness, to get the right person into the job. I object to any suggestion that I appointed Mr Newby because I thought he was a lovely man.
I took my decision with great care. Three candidates were placed before me, all of them eminently appointable. I took the view that Mr Newby was the best of the three. Those other two people are real human beings, and they were exceptionally good candidates, but he shone out. The idea that I did not consider whether his appointment might please some more than others is frankly rather patronising. I wanted to appoint someone who I believed had the skills, ability and, most importantly, integrity to ensure that there was a level playing field and fairness—in particular, if I may say so, for tenants. If anyone suggests otherwise, I will take a very robust view with them.
For all I know, Mr Newby might be a lovely man. It is important to put that on the record.
May I also correct the record? I erroneously stated that the appointment was made under the auspices of a statutory instrument. I now know that that is not the case.
I think it is quite reasonable for key stakeholders to say that for a new group of Ministers and civil servants dealing with a complex, dense, difficult and contentious area, to err is human and there may have been genuine mistakes. I do not think that anyone is impugning the Minister’s integrity.
I am very grateful to my hon. Friend for his wise words. I take objection to the idea that the civil servants, in the most difficult of circumstances—they really are up against the clock—have not acted with total integrity. They have done a great job. I think that we sometimes forget that civil servants are professionals and human beings. With few exceptions, they serve us extremely well and do a good job.
Make no mistake: I do not have any complaints about the rigour of this place’s questioning and probing, and I am grateful to my hon. Friend for his comments. I hope he knows that I always act with complete integrity and would weigh up all the matters in favour of and against the appointment of anyone to ensure that we get the right person. I do not know whether Mr Newby is a lovely person, but I do know that he brings the requisite skills, ability and experience, and I am confident that he will act with integrity and do a good and fair job.
As I made clear on
I will in a minute. There has been a very positive response to the appointment of Paul Newby as the Pubs Code Adjudicator. I am grateful for the briefing supplied by the House of Commons Library and the comments on
“By the very nature of the role, the adjudicator’s office will need someone with past experience in this field of valuation and Paul’s professional history has seen him represent both pubcos and tenants at various junctures in his career. As Paul Newby will no longer continue in his role with Fleurets, there should not be a risk of this posing a conflict of interest in his execution of his new post.
An RICS spokesman has said: ‘Chartered Surveyors are expected to demonstrate the highest professional standards and act within the RICS Code of Conduct at all times. We have no reason to believe that Paul Newby is failing to meet these standards. On the evidence that we have seen to date, this does not appear to be an issue of conflict.’”
I will continue with these comments by people who have paid tribute to Mr Newby, and then I will give way.
The British Institute of Innkeeping’s licensee of the year, Mr Keith Marsden, has said that Mr Newby has “fantastic integrity” and will be “both feared and respected” by pub companies. Others have also welcomed his appointment, highlighting that he has worked on both sides of the industry. I support the view of Ed Beddington, editor of the Publican’s Morning Advertiser, who said that Mr Newby should be “judged on his actions”. Punch Taverns has written that as well as acting for it on a couple of occasions, Mr Newby has
“acted against Punch on one occasion, on behalf of a tenant acting against us…To our mind, this gives him good experience from all angles of what will be a challenging role.”
It is rather extraordinary that the Minister is giving an endorsement from Punch Taverns—one of the companies that Paul Newby is supposed to regulate—as if that is a good thing. But on the RICS point, I have seen that same correspondence to a RICS surveyor and I must point out that the RICS statement was only on the evidence seen “to date”. That was then challenged, and the fact is that it had not had any submissions before the one it had from the RICS surveyor who has complained. So I am afraid that is far from a RICS endorsement, and its own clear guidance shows that Paul Newby’s appointment is inappropriate. If we need to write to RICS further, then we will.
As the Pubs Code Adjudicator, Mr Newby has a duty to set out arrangements to deal with any specific conflicts of interest. He will do so in the normal way and, as part of that, he will publish a register of interests. Contrary to the British Pub Confederation’s campaign, he has a wealth of experience on rents, rent reviews, lease renewals and landlord and tenant issues. It was that experience that I found particularly attractive in his CV and then when I met and interviewed him, as I did all three of the final candidates.
Mr Newby has also been involved in dispute resolution in those areas as an expert witness, arbitrator and independent expert for many years. In one case he represented a tenant who had significantly overpaid rent to a large pub company. That required sustained effort by Mr Newby to recover the overpaid rent. That is just an example of his work for tenants, certainly not of being in the pocket of large pub companies.
We have had reference to my former profession as a barrister. I do not want to fall out with the hon. Member for Leeds North West, but I do not think he quite remembered what was said. I was trying to make a point about professionals. The hon. Gentleman for—I have forgotten his constituency in Scotland; that is very rude of me.
Dumfries and Galloway. Excellent—I know exactly where he represents: Kirkcudbright. He made that point about when he was a solicitor. I do not know what work he did, but the point I was trying make was that certainly at the English Bar, and I think it is the same in Scotland with the advocacy system north of the border, a barrister may act for someone—I will be frank: I have acted for people who have been exceptionally unpleasant, usually because they had been accused of vile offences against children—and put forward their case, but that is not to endorse it in any way. Actually, the barrister might think they are some of the most despicable human beings.
Of course, that is not the position that Mr Newby will have as the Pubs Code Adjudicator. The clue is in the title: he will adjudicate, based on his experience and particularly because he has been able to see both sides of arguments. He brings great skills to the role. He will take up his appointment on
In answer to the proper comments made by a number of hon. Members, as it happens, on
Today—very soon, I hope—I will place the Government’s response in the Library and lay the pub code regulations. Time is of the essence, because we now know when the House will prorogue, so to get the pubs code up and running on
I thank the Minister for answering the question about when the regulations will be laid, but it would have been extremely helpful to have them in advance of the debate, so that we could discuss them today. Earlier, she said at least twice that serious allegations had been made about her having a conflict of interest in Mr Newby’s appointment. Will she say who made those allegations and what they have been? Using parliamentary privilege, she can name the person right here and now.
I get the impression that somehow I have acted with impropriety in appointing Mr Newby, and I want to make it clear that I have not.
I want to talk about the regulations we have laid today. There is some bad news: I have not agreed to the pub companies’ request for a six-month transition. The pub companies saw our draft regulations late last year. The requirement to provide a rent assessment is not new for them. We have staggered the points at which they have to provide MRO, to allow at least two months’ preparation. I know that they are, to put it mildly, less than pleased at that decision, but I take the firm view that they are able to implement the pubs code. They have had long notice of the code coming in, and frankly I just want to get on with it and get the code up and running, so that we can do the right thing by tenants.
I am grateful to everyone who responded to the consultation on the pubs code. I understand the frustration of the hon. Member for Leeds North West that we were unable to discuss his two amendments, but I will tell him about the view I have taken. I want to put it on the record that these are decisions I make. I often frustrate my officials because I do not always agree with the advice they give. I am not some sop who goes along blindly with the officials, as they would often testify. I did not need any persuading on this, because a series of options was put to me.
This is my decision. I can confirm that the pubs code will include transitional measures, which means tied tenants can access their MRO rights at rent review in the first six months. I can also confirm that the right to MRO at renewal of a tenancy will exist from the day the code is enforced. From that date, once a tenant or a pub company issues notices related to the renewal, the tenant will have the right to request MRO. The pubs code will set out that when a tenant chooses MRO, the MRO-compliant tenancy should be at least as long as the previous tied tenancy; that is important.
This is really important, and I am pleased that I might actually get a thank you from the hon. Gentleman. We listened to all that was said. I know that the British Pub Confederation has been briefing MPs that the pubs code will contain an investment waiver—actually, we are calling it an investment exception—that reduces MRO rights before a tenant signs on to a pub. I can confirm that that is not the case. The investment exception will not apply to investments made in empty pubs.
I agree that pub company gaming, which my hon. Friend Mr Jackson mentioned, could be an issue, where a tenant’s rights to MRO are avoided, perhaps via an investment. The best insurance is to get the pubs code in place. The Government accepted an amendment to the Enterprise Bill that places a duty on the adjudicator to report cases of unfair business practices that are aimed at avoiding the code. It will open to the adjudicator to make recommendations to the Secretary of State to address any unfair business practices. I know I have upset the pubcos; I will be up front about that because I know I have not given them what they wanted. I have, I hope, satisfied the proper concerns communicated by tenants, and we are going to work on that.
In response to the hon. Gentleman’s point about previous ministerial commitments, the pubs code and regulations will honour the commitments made in Parliament. My guiding message to my officials—I have probably driven them mad—is that we have just got to be true to what we said we would do when the Small Business, Enterprise and Employment Act 2015 went through Parliament. Those commitments were on key issues such as the right to consider a tied tenant in parallel to an MRO offer; the extension of code protections in the event of a sale of a pub to a non-code company; an exemption for pub franchise agreements from the MRO and rent provisions in the code; and deferral of the MRO option of up to seven years in return for significant investment by the pub-owning business. On significant investment, I will probably upset the pubcos and some of the tenants’ groups by saying that the proposal of CAMRA—which is a cracking organisation—of 200% of dry rent is the right one.
My aim is to strike the right balance and to ensure we get a fair deal for both sides in what should not be an argument. We are moving in the right direction. I hope the hon. Gentleman will join me in welcoming the fact that we are very close now to having the pubs code in force. It will provide fairness to more than 12,000 tied tenants, which I know he and many others have wanted for some time.
As I draw my remarks to a conclusion, I am helpfully told that the regulations have been laid. I want to put on record my thanks to the officials. The clock has been ticking against us, and they have worked exceptionally hard to comply with the requirement to get the regulations laid in time for
I very much hope that that will please the hon. Gentleman, although I have an awful feeling that I will never be able to please him. My hon. Friend the Member for Peterborough made a good point: if we get this right from the beginning, we will not have to keep going backwards and forwards. The regulations setting out the pubs code are subject to parliamentary scrutiny at any time, so we can amend them, but he is right that we must get them right from the outset. The legislation also provides for a review every three years.
I always say to everyone involved that my door is open. My door has not been always open in all of this, because it has been imperative that we do the right thing for both sides of the argument. I hope that everyone will welcome the pubs code and that our pubs can now have a new age and a new dawn, so that they continue to be wonderful, uniquely British places, so that we have an element of fairness for the tenants, who are very important, and so that we get the right investment and have a sustainable pub industry in our country.