MP's support for statutory code on fair rents in tied pubs in Parliamentary debate welcomed by GMB.
The key point is that to achieve the principle the tied tenant shall be no worse off than the free of tie tenant the only way is to offer a free of tie option in the code says GMB.
GMB, the union for tied pub tenants, responded to the debate in Parliament yesterday 9th January 2013 on the need for a statutory code to deal with setting rents for tied pubs. See notes to editors for Hansard record of the debate.
Dave Mountford, GMB branch secretary and spokesperson for tied tenant members, said “The debate yesterday showed the level of support that there is now in Parliament to get a constructive solution to this long running economic dispute between the bondholders in offshore tax havens and tied pub tenants, their customers and local communities. This is very welcome.
The damage already caused by the greed of those who securitised the rental income from tied pubs has been very severe for decent hard working pub tenants and for the wider community. The solution now has to be “greed proof” to stop the damage once and for all.
The next stage of the process is consultations with the industry starting soon. I will advise members as soon as I have the timetable.
We will no doubt be invited to prepare information for what needs to go into the statutory code. GMB will consult directly with members and with other bodies representing tied tenants on this. GMB political staff will keep in close touch with Labour MP’s and others to influence how the industry is regulated.
The powers of the adjudicator are already quite far reaching and the RICS guidance is also covered by the principle that "the tied tenant shall be no worse off than the free of tie tenant" . As someone who runs a free of tie pub I can demonstrate the actual levels of gross profit that should be achieved.
The key point is that to achieve the principle, the only way is to offer a free of tie option - there is no other alternative to achieve the desired result.
Maximum vigilance is now needed to stop powerful vested interests hostile to a statutory code scuppering the process or wrecking it by securing vague and meaningless small print in the code. There must be protection against any frantic asset stripping that will no doubt go on as the consultation process plays out.
Guest beer option is an immediate offer that will assist tenants struggling now.”
Contact: Dave Mountford 07794 021 212 or 01629 258 083 or 07916 154359. GMB Press Office 07921 289 880 or 07974 251 823
Notes to editors
Text from Hansar
Pub Companies - Opposition Day Debate
Organisation: House of Commons
Source: House of Commons - Commons Chamber Debates Date: 09.01.13
[Relevant documents: The Second Report of the Trade and Industry Committee, Session 2004-05, Pub Companies, HC 128, the Fourth Special Report of the Trade and Industry Committee, Session 2004-05, Pub Companies: Government Response to the Committee's Second Report on Pub Companies, HC 434 , the Seventh Report of the Business and Enterprise Committee, Sessio n 2008-09, Pub Companies, HC 26, the Third Special Report of the Business and Enterprise Committee, Session 2008-09, Pub Companies, HC 798, the Fifth Report of the Business, Innovation and Skills Committee, Session 2009-10, Pub Companies: follow-up HC 138, the Eighth Report of the Business, Innovation and Skills Committee, Session 2009-10, Pub Companies: follow-up: Government Response to the Committee's Fift h Report, HC 503, the Tenth Report of the Business, Innovation and Skills Committee, Session 2010-12, Pub Companies, HC 1369, and the Government's response, CM 8222, and the o ral evidence taken before the Business, Innovation and Skills Committee on 6 December 2011, HC 1690-i of Session 2010-12. ]
Madam Deputy Speaker (Dawn Primarolo): I have to inform the House that Mr Speaker has selected the amendment in the name of the Prime Minister.
Toby Perkins (Chesterfield) (Lab): I beg to move,
That this House notes the motion on pub companies passed by this House on 12 January 2012; recognises that a wide body of experts share the view that only a statutory code of practice which includes a free-of-tie option with an open market rent review and an independent adjudicator will resolve the contractual problems between the pub companies and their lessees; and calls on the Government to bring forward a timetable which will lead to that statutory code being enshrined in law as soon as is practicably possible and before the end of 2013 at the very latest.
The whole House knows the importance of the Great British pub to both our economic prosperity and our national identity. It is not every week that, in the time between the Opposition laying out the wording of a motion and the debate on it, the Government announce that they will comply with most of the detail and accept entirely the spirit of it. We agree with, and are pleased with, the Secretary of State's acknowledgment that the self-regulatory policy that the Government introduced in November 2011 has failed, and that a statutory code is indeed the answer to the vexed issue of pubcos.
The Government's announcement yesterday that they would consult on a statutory code will give hope to all those who have called for statutory regulation for nearly two years. It would be churlish not to recognise that the Secretary of State has had the courage to admit that the Government got it wrong. We may never know whether his decision was made in an attempt to stave off an embarrassing rebellion in this debate, whether the response to his call for evidence finally convinced him that the game was up, or whether he simply reflected that the Labour party, the industry and-let us be honest-just about everybody has been right all along. However, if this chance is seized, maybe no one will really mind why it happened.
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John Healey (Wentworth and Dearne) (Lab): I pay tribute to my hon. Friend for pressing for this debate. Does he agree that it is a good example of Parliament-all-party groups, Select Committees and the Labour Opposition-playing a part in getting the Government to do the right thing in the end? I hope that they will be toasting Toby Perkins in pubs across the country tonight.
Toby Perkins: I am grateful to my right hon. Friend for those comments, and he is entirely right. The potential exists for this to be a really significant moment, but I do not think we can go any further than that yet.
The Secretary of State's call for evidence was certainly enthusiastically answered. He wrote to seven different organisations to ask for their views on how self-regulation was working, and he received 19 responses. That is a return rate of 271%, which is the sort of extraordinary and implausible statistical feat that we generally expect to see in a Liberal Democrat "Focus" leaflet, but there we have it, right at the heart of Government.
Before I get into the detail of how we can ensure that the Government's announcement makes a meaningful difference, I will reflect briefly on why the debate is so important to so many Members, their constituencies and constituents and the economic and social fabric of our great country. Pubs are synonymous with our great island story, from fictional boozers brought to life, like the Rovers Return in "Coronation Street", to pubs that have gone down in history such as Ye Olde Cheshire Cheese, famously frequented by Samuel Johnson and where Mrs Perkins and I had a very pleasant lunch just a few weeks ago.
In almost every village, town or city in the land, and indeed in every Member's constituency, there will be pubs that make us proud of our localities and say much about our areas, and which our constituents wish to see thrive. Britain's pubs are not only important as key hubs in the community, they are economically vital. Last year, beer and pubs contributed £21 billion to UK GDP, and the Campaign for Real Ale has estimated that the average pub employs 11 people and contributes £80,000 to the local economy.
However, CAMRA recently revealed that around 18 pubs are closing every week, and countless more are fighting for their lives. As we know, when pubs close the cost of failure is felt not just in social terms but in economic terms, at a time when our faltering economy can afford it least. There are now 2,582 fewer pubs than in 2010, equating to 200 jobs lost for each week of the year.
Andrew Griffiths (Burton) (Con): I agree with the hon. Gentleman that 18 pubs closing a week is too many. He will know, however, that under the previous Labour Government pubs were closing at a rate of 54 a week-four times as many. Will he apologise for the Labour party having let down pubs so badly?
Toby Perkins: That is a frankly disappointing contribution from the hon. Gentleman. One key point that people may reflect on is that there are now 2,582 fewer pubs than in 2010.
Andrew Griffiths: Will the hon. Gentleman give way?
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Toby Perkins: Let me respond to the hon. Gentleman's first point before he makes a second one. Using his logic, we could eventually have only 15 pubs left and he would say that was a great success because only 15 have closed this week. As the overall stock reduces there have obviously been fewer closures. Nevertheless, there are now 2,500 fewer pubs than in 2010.
Mr Andrew Turner (Isle of Wight) (Con): Will the hon. Gentleman give way?
Toby Perkins: I will give way, but let me make a little progress first. I myself am an enthusiastic intervener and I want to give opportunities to Members to intervene, but I know that this debate is considerably over-subscribed, so I must try to strike a balance.
An opportunity for fairness now exists in the industry, and I pay tribute to all those who kept believing and making the case for the historic opportunity that we are considering today. The Sunday Mirror has been a loyal friend to Britain's publicans with its invaluable "Support Your Pubs" campaign. I also place on record my thanks to Simon Clarke of the Independent Pub Confederation, Dave Mountford and the GMB, Steve Corbett of Fair Pint, and CAMRA for the work they have done to dispel the myths propagated by some in the industry.
I will refer in due course to the work of the Business, Innovation and Skills Committee, but I first want to acknowledge the excellent leadership on this issue from the Committee's former Chair, the hon. Member for Mid Worcestershire (Peter Luff), and the current Chair, my hon. Friend the Member for West Bromwich West (Mr Bailey). The hon. Member for Leeds North West (Greg Mulholland) and the hon. Member for Northampton South (Mr Binley), who is sadly not present in the debate, have made a massive contribution to this issue, and my right hon. Friend the Member for Torfaen (Paul Murphy) has steadfastly warned about the problems caused by a compulsory beer tie. As well has having wonderful judgment, my right hon. Friend the Member for Wentworth and Dearne (John Healey) and my hon. Friend the Member for Cardiff West (Kevin Brennan) have also played a significant role.
There are currently around 50,000 pubs in Britain and around 28,000 are pubco pubs.
Mr Andy Slaughter (Hammersmith) (Lab): My hon. Friend has rightly named the heroes of this debate but he should also name the villains-the pubcos and companies such as Punch Taverns. He will be familiar with my constituents Joe and Betty Hynes, who had to close one of their pubs-the other is under threat-because of the predatory activities of Punch Taverns. Had the statutory code come in earlier, many pubs, including theirs, might not have closed. Are the Government responsible for the delay that has taken place?
Toby Perkins: My hon. Friend understandably feels incredibly passionate about the experiences of people in his constituency and the impact that this issue has had on real people's lives and his community. That is why we are having this debate and so much research has gone into it, and why we are now in a more positive position than a couple of months ago. He is right to raise that point. The evidence suggesting that how the industry was operating was wrong is unanswerable.
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There are 28,000 pubco pubs that operate on a tied arrangements, and approximately another 10,000 are owned by pubcos and breweries on a different basis. They are the overwhelming majority of the industry. Of course, many things have placed stress on the industry. In recent months we have had debates about the level of taxation, but the increasing cost of living, wage stagnation, the effects of the recession and the continued lack of growth in our economy, and the competition for the leisure pound, have all had an impact on the industry.
Mr Andrew Turner: May I commend the Opposition on bringing forward these proposals and commend the Government on doing so as well? Will the shadow Minister please inform the House what the cost implications will be to the Government of allowing pubs to transfer from a tied to a tie-free licence?
Toby Perkins: That is a valuable question and one of the things we will be investigating in more detail during the consultation. I think, however, that the costs will be minimal in comparison with the massive loss to the Government from revenue going out of the industry as all these pubs close. If we recognise-as many of us do-that the way in which pubcos have constituted their business model is having a dramatically damaging effect on the industry, we will see that the cost of those closures will dwarf any cost to the Government from such a transfer.
Greg Mulholland (Leeds North West) (LD): The hon. Gentleman will be aware that many pubco lessees are receiving considerable amounts of tax credit because despite having a big turnover they are not earning enough. The taxpayer is currently subsidising the pub companies, which is outrageous.
Toby Perkins: That is a typically excellent and important point from the hon. Gentleman. Evidence shows that more than 50% of landlords with tied pubs earn less than £15,000 a year. That is shocking to many people who know the huge hours that many publicans put in.
I have already mentioned some challenges facing the industry, and although the health benefits of the smoking ban are widely accepted, we must recognise that it had an impact on many pubs. We have seen aggressive pricing from supermarkets as the off-trade increased its market share. As if that was not enough, the trade is now reeling from the news that I am on the wagon for January. I have not touched a drop for eight days, 13 hours and about 37 minutes.
As my right hon. Friend the Member for Wentworth and Dearne mentioned, pub companies have been the subject of four Select Committee hearings in seven years, and on each occasion the big pub company lobby said that this time the steps they would put in place would really make a difference. The scrutiny that the Committee has given the issue, and the tempered and responsible way in which it has attempted to work with the industry, demonstrates our Select Committee system at its very best.
The previous Government deserve tremendous credit for their empowerment of the Business, Innovation and Skills Committee on this issue. They recognised the expertise and diligent consideration that went into the reports and trusted the Committee to judge whether a
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statutory code was the answer. It is worth reminding ourselves that throughout Labour's time in office, the Committee's recommendation was to give self-regulation time to work. Its verdict that the final chance for self-regulation to work had passed came in summer 2011, but until that time it never called for regulation to be brought in. Therefore, any claim that this issue should have been dealt with years ago is unreasonable because the Government were working on a cross-party basis with the Committee and the all-party save the pub group. Everyone attempted to give the industry every possible opportunity to put its house in order before going down the route of regulation.
Sir Peter Bottomley (Worthing West) (Con) rose -
Andrew Griffiths rose -
Toby Perkins: I will give way to the hon. Member for Worthing West (Sir Peter Bottomley), and then I will give the hon. Member for Burton (Andrew Griffiths) another stab.
Sir Peter Bottomley: I declare that I am a member of CAMRA. Without getting into party politics, can we agree that to compete effectively, people running a pub must be able to buy their supplies at market price, not a rigged higher price, and they must pay market rents rather than rigged rents that are higher?
Toby Perkins: We absolutely can agree on that. I hope Ministers hear that message-it is precisely the principle of the motion on which we will vote shortly, and I welcome the opportunity to see the hon. Gentleman in the Division Lobby. He makes the point very well.
Andrew Griffiths: I recognise what the hon. Gentleman says-that the Business, Innovation and Skills Committee did not call for statutory regulation in its reports-but does he not think that the Labour Government needed to have done something in their 13 years in government, when more than 9,000 pubs closed?
Toby Perkins: Many challenges, to which I have alluded, faced the industry during the previous Government's term. In the last two or three years of the Government, we had the recession and people were stretched, and in times before the recession, people's habits were changing. Pubcos were operating in the way I have described, but the Labour Government attempted to give them the opportunity to put their house in order. I believe that the hon. Gentleman is of the view-I apologise if I am wrong-that the pubcos should have been given longer. That was his view when we debated pubcos about a year ago. Members on both sides of the House accept that pubcos were part of the problem and that the previous Government attempted to give them the chance to do things right, so it is difficult for him to criticise the previous Government for doing so.
Martin Horwood (Cheltenham) (LD): I acknowledge that the deadline for self-regulation was June 2011, but in the spirit of giving cross-party credit, will the hon. Gentleman acknowledge the contribution to those campaigns made by Liberal Democrats, including me,
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as the promoter of a private Member's Bill on pubcos, my hon. Friend the Member for Leeds North West (Greg Mulholland), as the leader of the all-party save the pub group, and the Ministers-the Secretary of State for Business, Innovation and Skills and the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the hon. Member for East Dunbartonshire (Jo Swinson)-who preside over this happy occasion, when it looks very likely that the statutory code will be introduced?
Toby Perkins: I was with the hon. Gentleman for a bit. I have referred to one of his hon. Friends, but if he is disappointed that I did not mention him, I apologise. I do not mean to be ungallant, but the Under-Secretary's first contribution to the debate was to tell the House that self-regulation was working and there was nothing else to say on pubs.
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson) rose -
Toby Perkins: I do not know quite how the Under-Secretary has got into the position of taking credit, but we might be about to find out.
Jo Swinson: It might be helpful to the House to clarify that I did not make the contribution the hon. Gentleman describes to the House or anything else. I am not sure where he gets his information.
Toby Perkins: I will be talking about the quotes attributed to the Under-Secretary by the Morning Advertiser. She is welcome to take the paper to court if they are not true, but it says that she said that, so I was working on that basis.
The hon. Member for Cheltenham (Martin Horwood) referred to the role of the Secretary of State, who made it clear when appearing before the Business, Innovation and Skills Committee on 20 July 2010 that he would honour the previous Government's commitment. I have no idea why he did not honour that commitment-it should have been honoured 18 months ago. Perhaps it was naivety or a generosity of spirit that does him credit-the belief that, this time, the pubcos would know that the Government were serious. I do not know, but we should be clear that the delay has been costly for the industry and catastrophic for some victims.
Let no one say that the pubcos were not given long enough or that there has been a rush to legislate. Make no mistake: when the Committee said that statutory regulation was needed, it was the reluctant conclusion of Members who had taken every possible step to avoid making that recommendation. Given the breadth of support for the Committee's stance, it is hardly surprising that there was dismay when the previous Minister, the right hon. Member for Kingston and Surbiton (Mr Davey), decided instead a year ago to give the pubcos yet another final chance.
Dan Rogerson (North Cornwall) (LD): I hope the Morning Advertiser has a robust legal department, because the hon. Gentleman might want to discuss how he was quoted in December 2012 on the Labour party's lack of commitment to legislate-if self-regulation had been proved to have failed-before the general election. I am
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not clear whether the Labour party's position has moved swiftly since December, but I agree with him, Ministers and all hon. Members that we want regulation. We are going to get it, so I wish he would stop trying to attack individual Ministers who have been working to get something delivered.
Toby Perkins: Perhaps we could have a group hug at the end of the debate, but it is important at this stage to lay out the history of what has happened. I do not intend to attack Ministers. I put on record at the time and continue to hold the view that a considerable mistake was made 12 to 18 months ago. At the same time, I give credit to the Secretary of State for being big enough to admit that and to come to the House and say, "We got it wrong; now we will get it right." Every Government in history have made mistakes. At least the Secretary of State has had that courage. That is a balanced view.
Gloria De Piero (Ashfield) (Lab): I am glad my hon. Friend says that, because the debate is not about playing party politics, but about agreeing a course of action to save our pubs. In the past five years, we have lost nine pubs in Kirkby and Sutton, and I do not want to lose another nine in the next five years, so I am pleased the House has come together to agree measures. One pub, the Red Lion in Bagthorpe, was particularly important to me last year-it was where my partner proposed to me.
Toby Perkins: There is barely a dry eye in the House. If I am any judge, the fact that my hon. Friend is spending more time in Ashfield is considerably good news for the pub industry close to her.
Several hon. Members rose -
Toby Perkins: I am going to crack on.
In summing up the debate a year ago, the former Minister claimed that he had come up with the toughest self-regulatory regime imaginable. Whatever hon. Members' perspective, surely none can believe that that was true. The code did not include the free-of-tie option, which is consistently cited as the most significant factor. It did not include the principle of tied lessees being no worse off or an independent adjudicator, and it did not deliver an advisory service. The organisations that were formed were hopelessly compromised. How could anyone possibly believe that that was the toughest regime imaginable?
In case anyone believes the House did not do its duty, let us recall the House's view at the time. I said in the debate a year ago that there was a cross-party consensus in that Members of all parties agreed that the Government were wrong. To a man and woman, not a single Member dissented to the motion that only a statutory code with a free-of-tie option and an open-market rent review would resolve the problem.
That is exactly the same request that the Opposition respectfully make today. The right hon. Member for Kingston and Surbiton did not vote against the motion, and nor did the Secretary of State, the Prime Minister or any Member of the House, yet despite the vote, the Government seemed to believe that that was that. On 20 October 2012, the Under-Secretary declined in an interview in The Publican's Morning Advertiser-so it is alleged-to take action, saying that self-regulation was working and that the Government had delivered on all their commitments. Two weeks later, she received
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notification of Department for Business, Innovation and Skills questions to be answered on 8 November and saw that four of my hon. Friends had tabled questions on pubcos and the Government's failure to live up to the motion passed by the House. Between Monday and Thursday of that week, the Secretary of State chose to conduct his call for evidence. On 20 December, the Labour party gave notice of its intention to call this debate. Yesterday, less than 24 hours before the debate, the Government made the announcement that we are discussing. That is the recent history.
Sir Tony Cunningham (Workington) (Lab): Will my hon. Friend give way?
Toby Perkins: I have come to an entirely natural breaking point, so I am delighted to give way.
Sir Tony Cunningham: All hon. Members welcome a statutory code, but I hope my hon. Friend agrees that there is no point having one unless it has teeth. A statutory code must have the requisite teeth.
Toby Perkins: That is an excellent point-it is so good that I intend to make it myself shortly. I agree entirely with my hon. Friend.
You will note, Madam Deputy Speaker, that I have thus far been unremittingly positive in my contribution, but even I have my limits. Even my naturally sunny disposition cannot conceal the painful truth of the challenges that the Secretary of State faces if his optimistic announcement is to deliver change. The stipulation of the principle that a tied licensee should be no worse off than a free-of-tie licensee will inform the interpretation of decisions made by the Royal Institution of Chartered Surveyors. The advice that guidance should be interpreted in the light of the principle is an extraordinarily welcome step. Beyond rents, however, it is hard to see how that principle can be assured without the freeing up of the market that would happen if a free-of-tie option were offered to all new or renewed contracts. Surely, it is only the combination of fair rents and freedom to buy where the landlord chooses-tied if they wish, free if they do not-that frees the industry from the shackles of the pubcos.
Let me make it clear, we are not calling for the end of the tie. We support the Government's decision to restrict these measures to companies with more than 500 pubs, and recognise that some pubcos use the tied arrangement responsibly. We also value the small family breweries and recognise the important role the tie plays for them. That is why we support a genuine free market option for the major pub-owning companies that allows for a free-of-tie option, with fair rent or a tied option, to be chosen by the landlord. It is impossible to see how the Secretary of State's proposals will not be compromised without that.
In the initial press release issued at 1.40 pm yesterday, note 7 read:
"The Code will not mandate, as some campaigners have suggested, a 'free of tie option with open market rent review'. Neither will it abolish the beer tie. Evidence strongly suggests that the tie itself is not the issue-it is in fact a valid business model and its removal would significantly harm the British brewing industry. It is the abuse of the tie in certain circumstances that is causing the problem. The Code will ensure that pub companies use the tie responsibly."
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By 4.37 pm, less than three hours later, an amended press release had omitted note 7 and there was no mention of the free-of-tie option. This is no way to run a whelk stall, much less take crucial decisions on a vital and struggling industry. The central part of this whole issue was ruled out at 1 o'clock, but by 4.37 pm was apparently back on the table.
Andrew Gwynne (Denton and Reddish) (Lab): My hon. Friend is absolutely right to push this crucial issue. He is also right to say that the issue is not necessarily about pubcos, and that for some pubs it is a viable business model. The real worry, however, is that without a free-of-tie option, irresponsible pubcos will just continue to use this business model as nothing short of a savings-stripping exercise.
Toby Perkins: I could not agree more with my hon. Friend, who makes the point extremely well.
I appreciate that yesterday was a bit of a day for the Secretary of State, but we could do with clarity on the free-of-tie issue. Assuming that the new version is right, why was note 7 there in the first version? Is the industry supposed to have confidence that the Secretary of State has not made his mind up when the thoughts in his mind, wildly at odds with the view of this House and all established thought in the industry, are so clearly exposed? I am assuming that it was not a typo, and that a monkey did not arrive at his keyboard and randomly tap away 81 words in what appear to be an order. If it is not a mistake, someone wrote them and wrote them for a reason. I hope the Secretary of State will respond to the point and say why that note came out initially.
There are other significant challenges with the way the system is currently operating. On independent advice, the British Institute of Innkeeping advice service, which was promised for July 2012, still does not exist, and there would be questions about its independence if it did. Meanwhile, the truly independent Pubs Advisory Service, a voluntary organisation, is under-resourced and steps must be taken to strengthen awareness of it and to retain its independence. The Pubs Independent Conciliation and Arbitration Service is not viewed as independent at all. It is funded and dominated by the big pubco lobby. It is also there to see if the pubcos are adhering to the entirely inappropriate and inadequate codes that currently apply.
I met Alan Yorke yesterday, the first person to go through the PICAS process. He described it as shambolic, intimidatory and not remotely independent. He tells me that he felt that it was entirely beholden to the pubco with which he was in dispute, and, despite his winning the case, the successful attempts by the pubco to delay the process resulted in him losing the pub before the case was heard. He is now being pursued through the courts for back rent from the pubco, despite its never completing the task that he had originally sought action on. With all the problems that the Secretary of State has identified, how can he possibly be satisfied with PICAS? Yet yesterday he described it as working well, with two of the three cases that have gone in front of it winning their case. Mr Yorke's case is one of those that won; sometimes winning does not feel so great.
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The Pubs Independent Rent Review Scheme is similarly discredited. Of the five independent reviewers in London, it appears that four have clear conflicts of interest as businesses that provide services to the big pubcos. I can provide the Secretary of State with specific details of their links, if he is unaware of them, but suffice it to say that there is considerable room for improvement. The BII's own financial position is described as "pretty grim" by its chairman, and its dwindling membership suggests distrust about its relationship with pubcos and the potential reliance on them. We understand that the proposed overarching body that will look after each of those organisations will be similarly compromised. The Guild of Master Victuallers and the Association of Licensed Multiple Retailers were apparently being offered places on the organisational board in return for signing up to the discredited original framework code.
The Secretary of State laments that the measures taken 14 months ago have not led to a culture change in the industry. How did anyone possibly think that they would do so when they required so little of the pubcos? We should remember that the Secretary of State claimed that his solution would be quicker, could be just as effective, and would ensure that pub companies changed their mode of operations.
I have here the code of Enterprise Inns. Members will be interested to know that it has various provisions that were cited by the British Beer and Pub Association to the Department for Business, Innovation and Skills as "immediate improvements" to the version 5 framework code. They were copied and pasted by the Department into the Government response in December 2011. There is abolition of upward-only rent reviews; training availability; access to information on the pub-letting details, trading information, rent calculations and time scales for taking up occupation. There is availability of the price list. All those steps were supposed to be the big improvements that the Minister had wrung out of the pubcos. However, that is Enterprise's code from 2002. All that is already there-not "immediate improvements" at all. The previous Minister also said that the code would rebalance risk and reward within the industry. Members will be aware that at the meeting of the all-party save the pub group the balance of risk and reward between the pubcos and their lessees was not, in the view of the BBPA, something in which it had any role.
The challenges facing the Secretary of State are significant if he is to deliver the real change that Labour is calling for in this debate. He has made a start. If, having started, he continues to follow the courage of his convictions, he will find that Her Majesty's Opposition will do everything they can to help to get a meaningful code on the statute book as quickly as possible. We will work with the Government, but their response must pass three simple but key tests. First, will the statutory code include a free-of-tie option and a guest beer right? Secondly, will it deliver fair rents? Thirdly, will the independent adjudicator and the independent advice service work properly? It appears from comments made by the Secretary of State that there is real potential for delivery on the rents and the adjudicator and the advice service. However, there is a lack of clarity on the beer tie and a guest beer right, both of which are central standards that a whole range of organisations will be asking the Government to meet.
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Let me make it clear that if the Government shirk their responsibility and the situation remains as it is today, when the next Labour Government come to power in 2015 we will introduce the regulation. However, this Government should introduce what we have called for today. The British pub stands on the precipice. The industry has failed the fairness test and it falls to this Government-or to the next Government-to have the bravery to do what is right. We will not fail the British pub; we hope the Government will not either. I commend the motion to the House.
The Secretary of State for Business, Innovation and Skills (Vince Cable): I beg to move an amendment, to leave out from "House" to the end of the Question and add:
"recalls its Resolution of 12 January 2012 on pub companies; recognises that a wide body of experts share the view that only a statutory code of practice and an independent adjudicator will resolve the contractual problems between the pub companies and their lessees; calls for a statutory code, which would enshrine in law both an overarching fair dealing principle and the fundamental principle that a tied licensee should be no worse off than a free-of-tie licensee; and believes that the consultation will establish how best to do this, as well as producing proposals for a strong adjudicator with the power to arbitrate disputes, investigate breaches of the code and impose sanctions, including financial penalties for the most severe breaches, as soon as is practicably possible."
I welcome the opportunity to debate this issue, which I think many of us come to as constituency MPs. We have pubs in our constituencies, many of which have had serious difficulties with pubcos, and have faced real hardship and loss. We also recognise that this is an important industry for the economy, with 50,000 small businesses employing several hundred thousand people, many of whom are very badly paid. For many of us, pubs are an important community asset. That is the context in which we operate.
Our approach was triggered in October, when I appeared before the Select Committee on Business, Innovation and Skills. The members of the Committee raised their concerns about how the self-regulatory approach was working. As a consequence of that discussion, I immediately wrote to the industry for evidence on what was happening. Several things have clearly changed. The approach adopted last year had produced some results. The independent arbitration service, PICAS, had been set up and, as the hon. Member for Chesterfield (Toby Perkins) described, in two of the three cases referred to it, it found against the pubcos, and version 5 of the industry framework code was incorporated into contracts at the end of 2011.
It was clear, however, from the evidence-the 19 submissions-that the changes had not gone far enough. For example, very little effort had been made to notify tenants and lessees about their rights under the new system. That was an example of the lack of implementation under the voluntary code. After consultation with colleagues, therefore, I wrote yesterday to the Chair of the Select Committee to inform him that I wished to establish a statutory code and to proceed with public consultation.
Peter Luff (Mid Worcestershire) (Con): I join the chorus of approval for the decision the Secretary of State just outlined to the House, and in the spirit of the intervention from the right hon. Member for Wentworth and Dearne (John Healey) and of my favourite proverb, "Success has many fathers, but failure is an orphan",
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I would like to say that this is a victory for Parliament, for the Select Committee system and, above all, for pubs themselves.
Vince Cable: That is absolutely right. I am not sure that being tribal about this is very helpful. My hon. Friend chaired the Select Committee when it produced a succession of highly creditable reports that were subsequently built on by the work of the hon. Member for West Bromwich West (Mr Bailey) and his colleagues. Indeed, Members across the House, whether Conservative, Labour or Lib Dem Members, including my hon. Friends the Members for Leeds North West (Greg Mulholland) and for Cheltenham (Martin Horwood), and others have all played an important part.
I realise that, given that this is an Opposition day, the Opposition spokesman could not resist a bit of politics, but I would make two simple points to him. I think he entered the House in 2010, along with many of his Front-Bench team, and I get the sense sometimes that for some people 2010 is year zero, when history began. There is a tendency to forget what happened before. As he acknowledged, the Select Committee first investigated this subject in 2004, and despite his contempt for the self-regulatory approach, the last Government persisted with it for six years. They decided in February 2010, shortly before the election, that stronger action was needed, but it was too late to do anything.
I know the Opposition think that people will be swinging their Toby jugs on the basis of the speech by the hon. Member for Chesterfield, but he had the unfortunate experience, which several of us have had, of being misquoted-possibly-by The Publican's Morning Advertiser, when he told it on 13 December that he could
"not commit to a manifesto pledge.until 2015, and only if the self-regulation agreement has failed".
So the hyperbolic tone of his speech does not reflect where he was as little as a month ago.
None the less, we are where we are. As my hon. Friend the Member for Mid Worcestershire (Peter Luff) said, great credit should be given to the parliamentary system. We all now understand the need for stronger action through a statutory code. The culture change that we all wanted did not happen, and the simply fact is that although some pub companies have behaved well-it is important to acknowledge that-in too many cases there has been exploitation and a squeezing of tenants and lessees, causing real hardship. It is worth noting that many of the small businesses involved-about half of tied tenants-are existing on incomes of £15,000 or less.
Heather Wheeler (South Derbyshire) (Con): I congratulate the right hon. Gentleman on yesterday's press releases and the great announcement. This is a hugely difficult topic. South Derbyshire, which is next to Burton, is enmeshed in the brewing business. Indeed, my husband worked for brewers for 40 years, so it has been a lifelong journey for us. We have seen fantastic pubs, such as the Old Talbot in Hilton, going under because of these difficulties with the tie, but I am grateful to hear that the statutory consultation will relieve pubcos with fewer than 500 pubs. Family pub companies work this very well. It is a model that ought to work; it is the extremes that need to be dealt with. Perhaps that can be tweaked in the consultation.
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Vince Cable: Yes, that is an extremely good, balanced statement of the factors we have to take into account here. The hon. Lady is right that we propose to deal with the larger pub companies-those with more than 500 pubs. We will be consulting on that, but that is the approach we intend to adopt.
Greg Mulholland: I congratulate my right hon. Friend warmly on this wonderful announcement for Britain's pubs. I urge him to emphasise, however, that there are many small pub companies doing well, taking on pubs, employing people and expanding, which shows that the problem is not with the pubs or companies, but with the giant lease pub companies that have abused both the model and their position.
Vince Cable: Yes, my hon. Friend is absolutely right. I shall say more about this later, but the microbreweries and innovative breweries are a major growth industry, expanding well and offering a more varied service. They are a great success story and we do not want to do anything with this new approach that will undermine them.
John Healey: I welcome the Secretary of State's commitment to a statutory code of practice, but would he also accept that the viability of hundreds of pubs is damaged by high and escalating beer duty? Will he ensure, in his Department's budget submission, that BIS Ministers also argue for an end to high beer tax and inflation-busting increases and for an end to the system that favours foreign-produced wine over British-brewed beer?
Vince Cable: The right hon. Gentleman is right that, as the Opposition spokesman acknowledged, a variety of factors have hit the pub industry, besides the structure of ownership. I do not know whether the right hon. Gentleman was a Treasury Minister in 2008 when the beer duty escalator was introduced.
John Healey indicated dissent .
Vince Cable: The right hon. Gentleman shakes his head. Nevertheless, many of us in the House voted for those beer duty increases, so I cannot disown them at this stage. They are an important source of revenue, as his Government, as well as ours, realised.
Sir Gerald Howarth (Aldershot) (Con): I cannot confess to being a great beer drinker, although I supported the Shoulder of Mutton in Assington, Suffolk, where I spent Christmas with my daughter-so I did my bit for the economy to make up for the hon. Member for Chesterfield (Toby Perkins), who clearly has not done his bit to support the industry. In response to the right hon. Member for Wentworth and Dearne (John Healey), I would like to say that the escalator was introduced by the last Government. This Government are continuing it, however, and it is unquestionably doing serious damage to something that everyone in the House really values in our communities, whether rural or urban. Fuller, Smith and Turner, a fantastic family-owned business, tells me that, out of a turnover of £304 million a year, £114 million -37%-goes in tax of one form or another. Will my right hon. Friend address that matter with the Chancellor?
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Madam Deputy Speaker (Dawn Primarolo): Order. This is a very short debate and many Members wish to speak, but some of them are repeatedly intervening on the Secretary of State. It would be good if, first, interventions could be short, and secondly, those wishing to speak could be a little more disciplined, given that there is already a five-minute time limit on Back-Bench speeches. At this rate, that is going to go down.
Vince Cable: I am afraid that I cannot offer the hon. Gentleman the assurances he wants on beer duty. I supported the Government's approach to the taxation. On his drinking habits, I will only say that, like several of us, I am still haunted by having signed the temperance pledge aged 11.
John McDonnell (Hayes and Harlington) (Lab): I apologise to the Secretary of State, because I will have to leave for another debate soon. There is a sense of urgency in my constituency about his matter, however, so will he give an indication of the time scale for the introduction of a statutory code?
Vince Cable: We want to get on with this as quickly as possible. We have to launch a consultation, receive the results and then act on them, hopefully over the spring. That is the time horizon we are looking at.
Andrew Griffiths: I am mindful of your remarks, Madam Deputy Speaker, but I want to ask a simple question. The press release says that this will apply to companies with more than 500 tied pubs. There are 52,000 pubs in the country and hundreds of companies, brewers and businesses that own pubs. Out of all of those, to the nearest two, will the Secretary of State tell me how many companies this legislation will affect?
Vince Cable: I am not going to guess, but it is a rather small number.
Jeremy Corbyn (Islington North) (Lab): Basically, the problem in London-certainly inner London-is property values. Many pubs close because pub companies and others make a great deal of money out of selling them and moving on into residential accommodation. My borough council is trying to introduce a planning policy that does not allow an automatic change of use. Is there anything the Secretary of State can do to preserve what are very important community assets from property speculation, beyond what is already happening to the pub industry through this lack of regulation?
Vince Cable: As I understand it, there is in any event a specialist use class under the planning regime, which, as it currently stands, provides a degree of protection. We have a programme, which one of my ministerial colleagues introduced a month ago, for supporting community pubs; I do not know whether the hon. Gentleman's local council and community are taking advantage of that.
Toby Perkins: Further to the question that the hon. Member for Burton (Andrew Griffiths) asked, can the Secretary of State clarify whether he is taking purely about pubcos with more than 500 pubs or about pub-owning companies with 500 pubs?
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Vince Cable: I have just checked the numbers: it was not two, but six companies that are likely to be affected under the current proposal.
Let me go back over some of the salient facts that led us to this position.
Toby Perkins: With respect, the Secretary of State did not get the opportunity to answer my question. Are we talking about pubcos or pub-owning companies?
Vince Cable: I think we are talking essentially about the latter-although most of the abuses have happened in the relatively small number of pubcos that happen to have a particular business model-but as I have said, we will define the precise range of companies that will be covered in the consultation.
There has been a contraction of the industry, as the hon. Gentleman acknowledged, from 70,000 pubs in 1980 to 50,000 today. The financial crisis brought into stark relief the slow process of sectoral decline. At present, 18 pubs are closing every week-that is, 18 net; some are opening. Various factors have aggravated the problems of the industry-we have discussed one or two already. The beer duty escalator is one and the outlawing of smoking is another. Many of us supported that measure on public health grounds; none the less, it drove away a certain amount of the clientele. Having voted for those things, I would not criticise them, but we all have to acknowledge that the problems of the pub industry are multiple, and the structure of the industry, which is what we are concerned with in this debate, is only one of those factors.
However, it is undoubtedly the case that the activities of the pubcos, with their highly leveraged business model, have intensified the crisis. These companies were established in the 1990s and started to attract comment and criticism a decade ago. Like an awful lot of other business models that were constructed in the long, artificial, debt-based boom, there did not appear to be a great many problems at the time. With the banking collapse and subsequent recession, the weakness of companies with high debt-to-equity ratios has been rather brutally exposed. What we have seen in recent years is the pubcos trying to retrieve their financial position at the expense of their tenants. We are all familiar with well managed, popular pubs in our constituencies being driven to the wall by, frankly, exploitative financial practices.
Mr Gerry Sutcliffe (Bradford South) (Lab): Enterprise Inns announced over Christmas that it would go from 6,000 pubs to 5,200 over the next three years. It will be important to get the code of practice in place quickly, because some of those will be the tied pubs.
Vince Cable: They will, and the terms of sale under which that pubco, along with others, is disposing of those pubs is another important element in the protection that we now propose to offer.
The pattern of behaviour we see in this area-where there is a serious imbalance between the contracting parties in the business relationship-is not unique to the pub industry. We see something similar with the banks and small business, as has been exposed by the derivatives scandal, and in the relationship between supermarkets and the farmers who supply them. In both cases, Parliament and Government have accepted
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the need to act to protect the weaker parties. That is precisely the position we have now reached with the pubcos. We took the view in 2011 that they should be put on probation, with a strengthened voluntary code. We gave them every chance, but we concluded that there was not enough progress. We therefore decided to establish, subject to consultation, the statutory code and an independent adjudicator, as I have described. I am disappointed-the Labour party probably is too-that a long period of trying to get a voluntary process has not worked sufficiently. I stress that we are not starting from the standpoint of a competitive market; rather, we are often talking about relationships that are almost feudal in character. We want to introduce a relationship that is genuinely market based, where there is genuine competition and a genuine choice for people entering the industry.
Let me describe more specifically how we envisage the code operating. It will draw on the existing framework code-we are currently on version 5 and there is a discussion about version 6-but be strengthened to include an overarching "fair dealing" provision and the fundamental principle that a tied tenant should be no worse off than a free-of-tie tenant. I recognise that those concepts, especially the first, will need legal clarification.
Mr Chuka Umunna (Streatham) (Lab): Can the Secretary of State explain why the Government have taken the view that the new code will not contain the requirement for there to be a "free of tie" option, as opposed to the formulation he has just expanded on?
Vince Cable: We have not come to a final view on that. That is something the consultation process can elicit. As I will set out, and as I think the hon. Gentleman's spokesman said too, there is no fundamental problem with the tie-there are other ways of dealing with rental exploitation, for example. The question whether to give that offer and build it into the code is a perfectly good question-there are strong arguments on both sides-and I want the consultation to help us to come to a conclusion on it.
The position I have set out will be particularly significant for rent, because the consultation will propose that the guidance issued by the Royal Institution of Chartered Surveyors must be interpreted in the light of the principle I have described. The code will also need to be strengthened on areas such as gaming machines, but that is something else we can explore in the consultation.
Andrew Bingham (High Peak) (Con): I welcome yesterday's announcement, but will the Secretary of State concede that there are other issues where the relationship between the pubco and the tenant is biased one way? They include, for instance, portable appliance testing-or PAT testing-of electrical equipment in pubs and insurance, all of which are forced through by the pubco at above the market rate. I am concerned that the pubcos might inflate those things to cope with cuts in other areas of their income.
Vince Cable: The hon. Gentleman is right. One of the problems that has occurred in the past is that any concession on beer prices would be offset by rent or vice versa. He is right that areas such as insurance are important elements of the package, and they would certainly be covered by the adjudicator.
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The proposed adjudicator will be based on the model of the groceries code adjudicator, which was approved by the House recently. I propose that the adjudicator will have the following powers and functions: to arbitrate disputes between large pub companies and their licensees; to carry out investigations based on complaints received; to have wide-ranging powers to require information from pubcos during an investigation and, when an investigation finds that a pub company has breached the code, to impose sanctions on it, including financial penalties in the case of severe breaches; to publish guidance on when and how investigations will proceed and how the enforcement powers can be used; to advise pub companies and licensees on the code; and to recommend changes to the code. The consultation will propose that the new adjudicator, like the groceries code adjudicator, be funded by an industry levy-in this case on the pubcos-with those who breach the code paying a proportionately higher levy. In order to place the most proportionate burden on business, my current thinking is that the new regulatory regime should apply to all pub companies with a tied estate of more than 500 tied pubs. As I have indicated to the House, we are currently talking about six operations.
Ian Lucas (Wrexham) (Lab): Just to be clear, will the funding come from a levy only on the pub companies to which the code applies?
Vince Cable: Yes, that is the intention. Our approach would target the companies with the greatest buying power and exempt smaller companies, about which very few complaints have been received. This, too, is a matter we want to pursue in the consultation.
One issue that I would like to clarify relates to the beer tie. Some campaigners, and the motion under debate today, suggest that in order to be effective, we must mandate that all pub companies must offer a free-of-tie option with open market rent review. As I have just indicated to my opposite number, we have an open mind on that matter and will be happy to look at it during the consultation.
Toby Perkins: The Secretary of State must recognise that the fact that the original press release ruled out the free-of-tie option will cause some to believe that he is not approaching this matter with an entirely open mind. Will he explain how that happened?
Vince Cable: All I can say is that the final version, which I approved and sent out, is the correct statement of where my colleagues and I stand on this.
The evidence suggests that the tie, in itself, is not the issue. It is a valid business model that is used responsibly by companies large and small. It is clear, however, that in some cases the tie is being abused, just as many other business practices can be abused, and it is that abuse that we need to tackle, rather than the tie itself.
There are good grounds for believing that the tie, as such, is not the problem. First, the number of pubs has been declining steadily. The Beer Orders in 1989 and the pubco consolidation in the 1990s resulted in relatively little change in the rate of decline. Secondly, the figures from the past three years, 2008 to 2011, show that the
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closure rate was lower in tied pubs than in free-of-tie pubs. That is the case regardless of whether we look at the gross or net closure rate, the latter of which takes into account churn by pubcos. Thirdly, the tie does not harm consumer choice. In fact, it sustains and supports the British brewing industry, a successful export industry that has more than doubled since the year 2000.
Martin Horwood: I echo what my right hon. Friend is saying about the tie. It has been a valuable source of investment for some pubs in my constituency, including the Royal at Charlton Kings and the Tivoli. The problem is in the power relationship between local landlords and the big pubcos. The "no worse off" principle is an interesting point of debate, but I would still advocate the free-of-tie option, and I strongly welcome my right hon. Friend's openness to considering that option during the consultation.
Vince Cable: My colleague is absolutely right to say that this is about power relationships and how we can prevent them from spilling over into abuse. As I have said, I have an open mind about the precise legal mechanisms that we shall use.
Greg Mulholland: Will my right hon. Friend look again at the Save the Pub document, which shows that the figures on pub closures are extremely misleading? He must recognise that they were paid for by the pubcos' association, the British Beer and Pub Association. Many pubs have been reclassified on closure as being free of tie, having in some cases never operated as such. The figures clearly show that there are more free-of-tie pubs now than there were, and that tied business failure is huge-
Madam Deputy Speaker (Dawn Primarolo): Order. We must have brief interventions. Time is ticking on.
Vince Cable: I would not want to cross swords with my colleague on the statistics, which he knows extremely well. He makes a compelling point.
Returning to the issue of the success of the industry, and particularly the small companies, the Office of Fair Trading found in 2010 that the market share of microbrewers had increased between 2004 and 2008, and that the volume of sales had grown by something in the order of 50% in that period. We found out recently that the number of breweries in Britain had topped 1,000, which is the highest level since the 1930s. Furthermore, as well as the tie being essential to family brewers such as Charles Wells or Fuller's, the OFT also found that large pub companies that owned tied pubs also bought a considerable volume from microbrewers and regional brewers. Accordingly, the Government's proposals are designed to address abuses of the tie, through enshrining in the code the principle that a tied tenant should be no worse off than a free-of-tie tenant, while not impinging on the business practices of companies that are using the tie responsibly, as many do.
This is an industry in which many companies behave well, in which seven out of 10 licensees would sign up again with their pub company and in which there are real examples of pub companies, brewers and tenants working together to invest for the future. Unfortunately, parts of the industry have acted irresponsibly in squeezing their tenants, resulting in considerable personal, as well as economic, hardship for those who lose out.
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That is why the Government are now going to consult on the strong, decisive step of introducing a strengthened statutory code that will address the balance of risk and reward, as well as an independent adjudicator who can investigate on behalf of tenants and impose sanctions on pub companies that persistently breach the code. As I said to the hon. Member for Hayes and Harlington (John McDonnell), I intend to publish the consultation soon. We hope that it will be completed in the spring and that it will be strongly welcomed by the House, as well as more widely by all those who work in, use or benefit from the pub industry.
Several hon. Members rose -
Madam Deputy Speaker (Dawn Primarolo): Order. There is a five-minute time limit on all Back-Bench contributions, from now.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op): Thank you, Madam Deputy Speaker-
Madam Deputy Speaker: Order. I beg your pardon, Mr Bailey. We need to be sure what we are talking about. The original Question is on the Order Paper, since when an amendment has been proposed, as on the Order Paper. The Question is that the original words stand part of the Question. In my haste to get the debate started, I omitted to say that.
Mr Bailey: Thank you, Madam Deputy Speaker. I will do my best to ensure that I know what I am talking about.
I welcome the debate and thank the Secretary of State for his letter to me yesterday and for his statement to the House. I want to clarify why we have reached this position and to give the House the history of the matter. There have been four Select Committee reports on this issue since 2004, and the one produced by my predecessor, the hon. Member for Mid Worcestershire (Peter Luff), was key to our reaching the current position. It stated that the industry was not making the progress to which it had previously committed itself to making, that it should be given a further year and that, if it had not made sufficient progress after that time, we should introduce a statutory code that would include provisions for the free-of-tie option and the open market rent review.
Peter Luff: I pay tribute to the hon. Gentleman for the way in which he has carried forward the flame so effectively in this Parliament, following on from his membership of the Select Committee during the previous one. Does he agree that the proposals we are debating today illustrate what can happen when Select Committees return to a subject again and again, rather than simply producing a report and letting the matter drop? His determination has paid dividends.
Mr Bailey: The hon. Gentleman makes a valuable point. One of the most effective ways in which Select Committees can operate is to consider an issue, then monitor the Government's performance and commitments on it time and again, so that at the end of the day, sheer pester power can prevail in getting the Committee's
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objectives addressed. I want to make it clear that my Committee will certainly exercise such pester power in this instance.
My Committee decided that insufficient progress had been made on this issue, and that a statutory approach was the only way forward. The Secretary of State had previously undertaken to accept the Select Committee's proposals, and we were rather disappointed when we were rebuffed with the token gesture of an offer to place the existing code on a statutory basis. The Committee decided that that was insufficient, that it would not realise our objectives and that it would not address the problems we had identified.
I subsequently applied for a debate through the Backbench Business Committee, which was heard almost exactly a year ago. I was tempted to go for a confrontational approach, but decided that we might command more support across the House if we gave ourselves a chance to see how the voluntary code was working. The House duly obliged by passing a resolution to the effect that, after so many months, a committee would be set up to review the working of the code. That was ignored by the Government, but I made it quite clear that the Select Committee would not ignore the matter. Indeed, when we questioned the Secretary of State in October, this issue was raised and he was questioned very forcibly about the progress that had been made. I give credit to him for acknowledging that the hoped-for progress had not been made and saying that he would take steps to look at the matter again. The commitment we have secured today is the outcome of that particular process. Let me repeat that this demonstrates what a Select Committee can do if it continues to apply pressure.
All this is not due just to the role of the Select Committee, as a number of Members have shown a degree of commitment and tenacity on the issue to ensure that it never goes away. I mention the hon. Members for Leeds North West (Greg Mulholland) and for Northampton South (Mr Binley)-my colleague on the Select Committee, who unfortunately cannot be here today-and indeed the hon. Member for Cheltenham (Martin Horwood). That is to name just a few of a large number of Members who have continually lobbied on the issue.
In congratulating ourselves on getting to this point, it is important that we do not assume that getting a statutory code of practice will solve all the problems. Some problems that the industry faces are beyond solving in any statutory code. None the less, such a code will go a long way to dealing with some of the sense of injustice felt about the unfair balance of the relationship between the pub companies and licensees. The key question is whether today's proposals will deal adequately with that problem.
Much has been said about the balance of risk and reward and the free-of-tie option. I am interested in the concept floated by the Secretary of State about the fair deal provision. It is very important that this is defined and well understood. Within the industry and among the licensees, there is a deep suspicion that a closeness with the Royal Society of Chartered Surveyors and sometimes the pub companies has led to artificially high rents, which has removed any advantage that the free-of-tie option might otherwise have had. This comes down again to the issue of getting a fair deal and the balance of risk and award. Without a transparent and
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accepted basis for rent reviews, the advantage of free of tie disappears. We could end up with a balanced relationship between tied and free of tie, with both being profoundly unfair when it comes to the balance between the pub companies and licensees.
I welcome the opportunity for the Select Committee to contribute to dealing with those issues, and I welcome the Secretary of State's commitment to be open-minded about the possibility of having a free-of-tie and open market rent review, but I come back to the point that we must have a transparent and robust process for rent reviews that can be accepted across the industry. This particular piece of legislation will not solve everything, but it will go a long way to doing so.
Sheryll Murray (South East Cornwall) (Con): The pub industry is exceptionally important to the British economy, contributing around £21 billion to the UK's GDP and supporting about 1 million jobs. Pubs are often the only social hub for residents across the country, and they are often at the heart of local villages in my South East Cornwall constituency. I have kept in regular contact with the pub tenants in my constituency, and it is clear that they have struggled. Some pubs have already closed.
One pub that has struggled is in my local village-the Devon and Cornwall inn in Millbrook. It was at this pub that I became the first Cornish MP to pull a pint during the all-party group's campaign last year, and it is a prominent part of local village life. The former licensee, Mr Russell Ham, had to surrender his lease in May last year and be released from his trading obligations. Part of the reason for him surrendering his lease was that the Devon and Cornwall inn was tied to and on lease from one of the national pubcos, which applies to about half of UK pubs.
Mr Henry Bellingham (North West Norfolk) (Con): I congratulate my hon. Friend on the role she has played in this campaign. Will she join me in paying tribute to CAMRA, which has been tireless in supporting the campaign, and to individuals such as Jeff Hoyle in my constituency who have been lobbying MPs, making the same strong case that she is reiterating?
Sheryll Murray: Absolutely. CAMRA has done a superb job in highlighting the issue to all politicians from all parties.
About half of UK pubs are owned by pub companies-large property companies that lease pubs out to tenants to run as their own businesses. These pubs are contractually obliged to buy their beer only from the pub company, preventing pub licensees from buying on the open market, thus creating a monopoly. Russell Ham, the licensee at the Devon and Cornwall, was forced to pay a price for the alcohol he sold that was as much as 50% higher than he could have paid if it was sourced elsewhere-but the pubco insisted that he purchased it from them. However, the situation seems to be improving gradually. The voluntary code of practice is operational and the gap between those pub companies and some of the smaller more independent pub companies has been closing.
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I congratulate the Government on yesterday's announcement about a new statutory code and an independent adjudicator to investigate disagreements between pubs and their owners. This is needed to ensure fair play among the biggest players in the industry, as the code will apply only to pub companies with more than 500 tied publicans. This ensures that small independent breweries are not unintentionally caught within the scope of the code. If Mr Ham were still running his pub, he might have been able to stay in business and even perhaps make a profit. In this way, the Government may well be able to save the livelihoods of thousands of people, including constituents of mine, so I would like to say thank you to the Secretary of State.
However, we need to look at the business ethos of these large pub companies. It would be good for pub companies to operate like another of my constituents, Mr James Staughton, who is the managing director of the St Austell brewery. He operates a different business model to the pub companies, allowing his tenants to be a lot more flexible. He puts more emphasis on protecting and nurturing family breweries and traditional tenancy agreements. This is a genuine business partnership: even though it is still a business, it would not think twice before reducing the rent or even offering premises rent-free to a hard-working licensee who is genuinely struggling. Mr Staughton also operates a renewable three-year tenancy agreement that is a relatively low-cost way of setting up a business, and it requires less capital investment. Furthermore, a licensee can give him notice at any time and with no financial penalty. That is different from the large pub companies which offer long leases that are mostly much more expensive. If a landlord or tenant wants to sell the business, they will have to find a buyer mostly on the open market and agree a premium that is often far less than was originally paid.
I understand that the changes were too late for Russell Ham, but it would be good for pub companies to operate with a more human face-like the St Austell brewery. Its pubs are thriving in comparison to others, and that is because of the genuine relationships with the licensees, which is what the larger pub companies are lacking.
I also want to take this opportunity to congratulate the Government on putting small business at the very foundation of Britain's economic recovery. In his recent autumn statement, the Chancellor announced that thousands of pubs will continue to benefit from paying no business rates, or a discounted rate, for another year, as the small business rate relief holiday has been extended to April 2014. That will be of great help to our local pubs, which we all want to succeed.
Mr Gerry Sutcliffe (Bradford South) (Lab): I am delighted to be taking part in this important debate. The beer and pub industries are an integral part of the DNA of the country and our heritage past and future, and pubs and clubs are part of our history. Personally, I see myself as more a practitioner than a theorist in these matters: I made my first visit to a pub at the age of 14, and as I approach my 60th birthday, I think that I have a wealth of experience on pub-related issues.
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I must caution the hon. Member for Burton (Andrew Griffiths), the chair of the all-party parliamentary beer group, against being too partisan. I believe that both the Secretary of State and my hon. Friend the Member for Chesterfield (Toby Perkins) have set out fairly the history relating to the difficult problem of pub companies, which has been caused by only a small number of them.
There are many reasons for the closure of pubs over a number of years and, in particular, during the last few years. It has been largely due to the change in drinking habits and, indeed, the role of the supermarkets. We have yet to deal with the problem of the availability of cheap supermarket booze, which the last Government did not manage to sort out. People pre-load and then end up at the pub, causing problems. When pubs and clubs remove those people, they may be faced with a bill from the police, and may also find themselves with a reputation for inappropriateness that is, in fact, unfounded.
Let me return to the subject of the pubcos. On Monday I received an e-mail from a constituent, who wrote:
"I'm planting a seed of real concern re the future of the George & Dragon as a pub in Great Horton."
Great Horton is in my constituency.
"The decision by Enterprise Inns to sell was announced over Christmas. The current licensees, who've been there over 25 years, are leaving end of January. It's a grade 2 listed building. I read that Enterprise are in the process of reducing their number of pubs from 6,000 down to 5,200 over the next 3 years. Is there anything that can be done to keep this pub open, such an invaluable part of the fabric of life in Great Horton? I have been a resident of Great Horton for the past 30 years and a regular customer at the pub."
That is the real issue that we need to address. Pubs are continuing to close, and the pubcos will use the cover of time scales, consultations and the outcome of those consultations, which may require further action. Perhaps the Minister will be able to tell us whether primary or secondary legislation will be needed. It is important for us to know what process will be required for the introduction of a code of practice. Time is of the essence if we are to resolve this matter.
Nic Dakin (Scunthorpe) (Lab): My hon. Friend is setting out the issues very clearly. There are 63 pubs in the towns and villages of my constituency, and I am keen to keep them there. Does he think that the action proposed by both Front Benches will be strong enough to prevent further closures?
Mr Sutcliffe: I hope so. As has already been said, pubs close for more than one reason, but I am hopeful that the united approach that Members have taken today, and the pace at which the Secretary of State wishes to operate, will send the pub companies the clear message that we are watching what is going on and will take a dim view of any tactics that expedite matters before we can bring about the resolution that we want.
When I was the licensing Minister, I worked on Cabinet Sub-Committees with my right hon. Friend the Member for Wentworth and Dearne (John Healey) in trying to find ways of stopping pub closures and-through planning legislation, for instance-supporting community pubs, particularly those in rural areas, because they were hubs that people needed for social activities. We must to try to retain as many pubs as possible, but there
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are difficulties involved. I met many tenants who had been abused by pub companies-that is the only way in which to describe it-and left debt-ridden by their excesses. If we can introduce fair rents, fair operations and free, without-tie opportunities, we shall be taking an important step forward.
There are many successful pub company models: we need only look at Wetherspoon and Brewers Fayre. We must deal with the issue of binge drinking, but I believe that that is linked to pre-loading and supermarkets. There are responsible licensees and responsible brewing pub companies that operate ties properly. Such companies are many and varied in Yorkshire, Theakston being an obvious example. There are micro-breweries such as Saltaire and Salamander, in my constituency, which offer a wide choice of market opportunities.
Urgency is the order of the day if the Department is to make progress. It is right that there should be consultation, but, as a former Minister, I know that time scales can slip, and that officials and others can come up with barriers and ways of halting the progress that politicians want to make. I hope that that will not happen in this case. I believe that the work of the Select Committees, the all-party beer group and the Save the Pub Campaign has brought us where we are today, and that today is a day for rejoicing. However, there is still a job to be done, and I hope that we can do it together as quickly as possible.
Andrew Griffiths (Burton) (Con): This is the second occasion in just a few months on which the House has discussed the plight of the brewing and pub industries, and as on the first occasion, some interesting and important contributions have been made.
When I spoke in the debate organised by the Backbench Business Committee, I argued strongly in favour of self-regulation. I wanted to give the industry more time in which to put its house in order and get its act together. Clearly my argument did not win the day, but I advanced it for a particular reason. I felt not only that certain strides were being made and that at least some pub companies were beginning to get their act together, but that the self-regulation that had been proposed previously would protect all tenants-everyone in the industry who was running a pub. I fear that we are proposing legislation to tackle the actions of one or two companies, and I think that that is dangerous.
I urge caution for two reasons. One is the fact that we are considering the creation of first-class and second-class pubs. We are considering intervening in the business model. We are proposing, through statutory regulation, to force "tied-lease" companies with more than 400 pubs to offer a fair deal. We are proposing to regulate the way in which their rents are set within their estates. However, another company with 380 or 450 pubs will not be regulated. I am not sure that the Government have thought this through in the context of competition and free markets. There are serious questions to be asked. If we want fair dealing for tenants, should we not offer fair dealing to all companies that own pubs? As I said earlier, there are 52,000 pubs in the country, and we are intending to introduce legislation that affects only some of them.
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Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op): The hon. Gentleman is expressing a principled and, perhaps, a minority view. Is he now suggesting that the threshold should be lowered from 500, as opposed to our not introducing statutory regulation at all?
Andrew Griffiths: The House is anxious not to overburden smaller pub companies, particularly family brewers, and I would caution against that. However, I do not think that we have fully thought through the consequences of what is being proposed.
Mr Bailey: Do not the issues raised by the hon. Gentleman apply equally to the legislation on the groceries code adjudicator? Did he support that legislation? If so, why can he not support the legislation that is being proposed now?
Andrew Griffiths: I do not think that family supermarkets are an issue in this context.
My second point relates to the self-regulatory code. What the Government are proposing is a two-tier system, with the big boys in the first tier. There is some confusion over what they mean by tied leases. The British Beer and Pub Association, for instance, thinks that this applies to two companies, Punch Taverns and Enterprise Inns. If the Government are talking about tied and tenanted leases, that is not what they set out in their press release yesterday, and it is not what the industry thinks that they are talking about. There is a need for the Minister to clarify what the Government are talking about.
All tenants can now go to arbitration, but the arbitration system is funded by the industry as a whole, and large companies such as Punch Taverns and Enterprise Inns are paying the lion's share of the cost of that self-regulatory body. Those companies will not be prepared to pay to be regulated twice: they will pay either for statutory regulation or for self-arbitration, but not for both, so I wonder what will happen to the self-regulation system. Have the Government talked to the industry about the implications of the big two or big six pulling out of funding the self-regulatory body? I also wonder how much pressure the industry will put on the smaller companies to sign up. I acknowledge that that is not such a big issue, but everybody has signed up to the self-regulatory code, and that pressure will dissipate if the Government's new system is introduced. Legislation is being proposed in order to tackle one or two problem companies, but have the implications for the rest of the industry been fully thought through? I urge the Minister to address those concerns.
There is another problem that our pubs and landlords face: the beer duty escalator. The amount of duty that brewers and publicans are paying is killing pubs and breweries. The biggest single thing we could do to help the industry is scrap the beer duty escalator. We have had a bit of a love-in with Opposition Front Benchers this afternoon, but it would be remiss of me not to point out the record of 13 years under a Labour Government. They increased beer duty by 60%.
Toby Perkins: I have in front of me a document from the House of Commons Library which shows the amount of duty as a percentage of retail price for each of the
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last 12 years. In 2000, 14.5% of the retail price of a pint of beer was duty, whereas the proportion is now 15.4%, so it has hardly gone up at all.
Andrew Griffiths: The hon. Gentleman must be the only person who does not think that the last Labour Government increased beer duty and introduced the beer duty escalator, and crippled pubs and the brewing industry as a result.
My time is almost up, but I urge the Minister to think about what I have said.
Ian Lucas (Wrexham) (Lab): I am pleased to follow the hon. Member for Burton (Andrew Griffiths), who made an interesting speech. He raised the issue of regulation, and the reason why this is a very important day is that the Government have finally decided to regulate in this area.
Ian Mearns (Gateshead) (Lab): Today is an important day, but it is not as important as Friday will be. My hon. Friend will be pleased to know that on Friday a pub in the town he grew up in, the Schooner, is to be reopened by me.
Ian Lucas: I am certain that that shameless piece of publicity for the good citizens of Gateshead will be fully reported by the Evening Chronicle. It is a great pleasure to be sitting beside my hon. Friend once again.
We will now be regulating in this area, but Governments of all political parties have tried all along to avoid regulation. I used to have ministerial responsibility for regulatory reform, and some Members on the Government Benches may be surprised to know that even among Labour Ministers there is great resistance to introducing regulation. In that post, I always held to the principle that regulation should be a last resort, and that wherever possible we should use non-statutory codes instead.
Where I beg to differ with the hon. Member for Burton is that I believe this is the time for us to regulate. The industry has had an enormous amount of time, and has been given every opportunity, to avoid regulation. It has failed to respond to the numerous opportunities that have been given. That is why the last Labour Government did not take the steps to regulate that this Government have suggested we should have taken. In passing, it is ironic that virtually the whole House of Commons is united with the honourable exception of the hon. Gentleman in favour of introducing regulation and legislation.
We agree that regulation needs to be introduced because the voluntary approach has failed. That is certainly what I have been hearing for a long time from licensees and tenants in Wrexham. Indeed, it was said at a meeting I held in Wrexham last summer with my good friend, my hon. Friend the Member for West Bromwich West (Mr Bailey), Chair of the Business, Innovation and Skills Committee. We met local licensees and were told about the failure of the voluntary code. We were gravely disappointed when the consensus reached in the House was not followed through.
The Secretary of State made a measured and sensible contribution today, which I welcome. The key issue is inequality of bargaining power between the pub companies
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and the licensees, and it is reasonable for Government to intervene. It is important that we encourage licensees and everyone else involved in the brewing industry to contribute to the consultation. Pubs are an important part of our local communities. There is strong demand for community meeting places, as the huge increase in the number of coffee shops in Britain over the past 10 or 15 years demonstrates. Pubs can meet that demand, too, if we get this framework right. We have all done a lot of work to get to the point we have now reached, but we must not lose hold of the ball; we must carry it over the try line and achieve a truly positive outcome.
Wrexham Lager is a microbrewery that produces excellent local ale. That ale is served at the Bridge End inn in Ruabon in a neighbouring constituency, and the pub has been CAMRA pub of the year. Local micro-economies can grow as a result of brewers setting up locally and working with local pubs to produce local produce for local people to consume with gay abandon. That is the model we want to see.
What is now happening is a great triumph for the House of Commons, and I pay tribute to everyone involved. This is a good day, and we should celebrate what has been achieved, but we must also make sure that we continue to take these matters forward.
Greg Mulholland (Leeds North West) (LD): Yesterday was a great day for tied publicans, pub customers and the great British pub. The issue we are discussing is about business, community and justice. I pay tribute to my right hon. Friend the Secretary of State and the Minister, my hon. Friend the Member for East Dunbartonshire (Jo Swinson), for showing the leadership and courage to announce yesterday that they will introduce a statutory and strengthened code of practice for pub companies and an adjudicator.
I also pay a very warm tribute to the hon. Member for West Bromwich West (Mr Bailey), and all the members of his Select Committee and predecessor Select Committees, including the former Chair, the hon. Member for Mid Worcestershire (Peter Luff), for the professionalism and leadership they have shown on this issue. I am sure that the hon. Member for West Bromwich West will agree that we should pay tribute to the Select Committee staff, who have done a remarkable job in uncovering the evidence and ensuring that Parliament has the information at its fingertips to make this sort of decision. I also pay tribute to the Department for Business, Innovation and Skills officials who, in a short time, have conducted the review that Parliament called for and have now come forward with the right solution based on the evidence. That is to be warmly welcomed.
Grahame M. Morris (Easington) (Lab): While welcoming the Secretary of State's announcement, what is the hon. Gentleman's view on the tie-free option with an open market rent review?
Greg Mulholland: I thank the hon. Gentleman for that intervention, and I pay tribute to him for his work as vice-chair of the all-party save the pub group. Our group should be very proud of what we have achieved; I tabled my first early-day motion five years ago, so I rather regret that I have only five minutes to go through this.
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Martin Horwood: May I join my hon. Friend in paying tribute to the hon. Member for West Bromwich West (Mr Bailey)? I am sure that the announcement will have come as some compensation for the shock defeat of Cheltenham Town by Everton earlier this week. One of the best things about the Committee's work has been its willingness to return repeatedly to this issue and to check on progress. Is that not a very good model for other Select Committees to follow on other similar issues?
Greg Mulholland: Indeed, it is an exemplary one and it shows the power of Select Committees.
Let us remind ourselves of the issue we are dealing with, because although it is often presented as complicated, it is a simple one: after years of self-regulation and twists and turns in this matter, the giant lease pub companies still continue to take far more than is fair or reasonable from pub profits. It is as simple as that; that is the issue that has to be dealt with. I will come on to address the point made by the vice-chair of the all-party save the pub group, the hon. Member for Easington (Grahame M. Morris), as to precisely how we should try to do that.
Let us remind ourselves of the incredible figure from the Select Committee survey: 67% of lessees with a turnover of more than £500,000 were earning only £15,000 a year or less-that is a 3% return. I know, as I am sure a lot of right hon. and hon. Members do, that some pubco tied licensees have a reasonable turnover yet are making nothing at all. That is a scandal and it is closing pubs. This is a Department for Business, Innovation and Skills debate, but we must also remember that between 2009 and 2011 Ted Tuppen, the chief executive officer of Enterprise Inns, gave himself an £848,000 bonus package over three years, at the same time as the value of his company collapsed by 80%. This is one of the worst examples of irresponsible capitalism that this country has ever seen, and yesterday must signal the end of it-I hope that it does.
We have recently seen the sale of Admiral Taverns. Has anyone noted that there has been a huge loss to the taxpayer, because of course that company had been bought by Lloyds TSB? The estimates of the loss to Lloyds, which is 43% owned by the taxpayer, are of up to £800 million. This is the economics of the madhouse.
Let us remind ourselves that the Association of Licensed Multiple Retailers survey said that for the first time tied rents overtook rents for free-of-tie leases. The whole basis of the tied system was supposed to be that where more was paid for the beer, a lower rent would be paid as a result. The Select Committee, the ALMR and others have shown that that is simply not the case and that licensees are being doubly ripped off, paying higher than reasonable rents as well as exorbitant beer prices. That is, simply, why they cannot make a living.
We need to be clear that the proposal being made is not red tape or bureaucracy; it is about freeing up the British pub sector. It is about freeing up small businesses to make the decisions to be able to succeed, and to get a reasonable living from their pub. It is notable that the proposal has had the full and professional support of the Federation of Small Businesses and the Forum of Private Business. I can name many examples of former pubco pubs around the country that have been taken on by smaller companies, by microbreweries and by individuals
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and are now succeeding. It has not been the pub that has not been viable; it has been the business model. Two such examples are the Horse and Farrier in Otley, a former Enterprise Inns pub that is now successful under the ownership of Market Town Taverns, an excellent Yorkshire-based pub company, and the Roebuck, just up the road, which is a pub that Enterprise Inns had run into the ground but is now a very successful pub run by local businessman Chris Payne. So it can be done and we want it to happen more. We want it to be a result of yesterday's announcement.
The pub companies we are discussing are zombie companies; they are not contributing to the British economy. Our concern should not be what happens to them; it should be what happens to the individual small businesses, because there is a huge growth opportunity in this sector if we can free up those licensees to be able to succeed because they employ people and buy things locally.
The response to the announcement from the British Beer and Pub Association-the pubcos association-and from the pubcos has been extraordinary, if unsurprising. Amazingly, the BBPA has said that it is "disappointing" that self-regulation has not been given enough time "to work". The reality is that the process has been as glacial as it had been when the Select Committee reported, the BBPA has been as impotent in getting self-regulation to work and there is still an impasse on those codes.
The final thing-the big challenge-is how the Government deliver the principle that the tied tenant should not be worse off than if they were free of tie. They are taking on a considerable challenge, but it is the right one. Whether or not this approach succeeds depends on the Government getting that right, because having a code and an adjudicator, on its own, will not change the fundamental issue if the code does not deal with that matter. I believe-the all-party save the pub group will continue to campaign on this-that the best and easiest way of doing that is through the free-of-tie option with an open rent review. If the Government have other ways of doing it, we look forward to listening to them. Either way, they have to stop the overcharging and they have to save the Great British pub.
Mr Deputy Speaker (Mr Nigel Evans): I must call time on you, Mr Mulholland-appropriately.
Paul Murphy (Torfaen) (Lab): I am delighted to be able to take part in this debate, and I congratulate the hon. Member for Leeds North West (Greg Mulholland) on playing a hugely significant role in ensuring that the whole policy of the Government has changed on this issue. My hon. Friend the Member for Wrexham (Ian Lucas) made the very good point that this is a good day for the House of Commons. All-party groups have had some poor publicity in the past few weeks, but groups such as the one chaired by the hon. Gentleman provide an excellent example of how parliamentarians from both Houses and from right across the political spectrum can come together to change the law on such issues. The Select Committee, and my hon. Friend the Member for West Bromwich West (Mr Bailey) and the hon. Member
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for Mid Worcestershire (Peter Luff), played an enormously important role in 2004, 2005, 2009, 2010 and last year, so that is important, too.
We must not forget that this is an Opposition day debate, and I pay tribute to my hon. Friend the Member for Chesterfield (Toby Perkins), who opened the debate with great skill and wit. He, too, has played a very important role in making sure that the decision has been changed-over the past couple of hours, not just the past couple of days.
The biggest tribute must go to the landlords, who have approached us, their Members of Parliament. They have suffered under the scandal of the tie not only for years but for decades. In my constituency, Mr Phil Jones of the Open Hearth public house in Pontypool contacted me on the issue three years ago. I was not aware of all the detail, but he explained that we are dealing not with the tie of old-it is not the tie of a brewery such as Brains, the family brewery in south Wales-but with a much bigger issue and a much greater scandal.
It is so important that MPs across the board have dealt with the issue, because the landlords who have come to us have shown great courage in putting their case. Today is a vindication of the work they have done as much as it is of that done by anybody else.
Jeremy Corbyn: The way my right hon. Friend describes local pubs in his constituency is excellent. In my constituency, we have The Alma pub in Newington Green, an excellent gastropub that makes no money at all because of the pub companies' voracious appetite for money. Will it be possible to deal with the outstanding cases that the voluntary regulation system has failed under the statutory system?
Paul Murphy: One would hope so; I want to conclude on the question of how the consultation process will work.
If we are dealing with a statutory code of practice, which we must be, as the voluntary one has clearly failed, its only significance lies in what is in it. It might be statutory, but if it does not cover the right things, it will be unimportant and meaningless. It must deal with the free-of-tie option and the adjudicator-and, of course, it must address the issues of scandalously high rents and beer that is too expensive. It must deal with that combination.
How will the consultation process develop? The disappointing aspect of what the Government have done in the past-not of what they are doing or will do-is that they have effectively consulted only with the pubcos and have written out various documents that were effectively provided to them by the great pubcos. Clearly, that could not go on and the bilateral association between pubcos and the Government just was not right and proper. Now, the consultation must go much further. It must include the GMB, Unite, the Fair Pint campaign, CAMRA and, of course, the Federation of Small Businesses and others. It must not be simply a formal, paper consultation, either. It must be a proper consultation in which Ministers-not civil servants-sit down with all the organisations and take into account what they say and come up with something that will satisfy the points that Members across the House have put to the Minister today.
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I think everybody agrees that only a statutory code of practice will work. If it contains the sort of things that Members want and if the consultation is proper and valid, that will be good for pubs, good for our communities and good for our country.
Andrew Stephenson (Pendle) (Con): I was pleased to contribute to the Backbench Business Committee debate on this topic on 12 January last year and want to make a further brief contribution today.
I am a great fan of the British pub, as you know, Mr Deputy Speaker, and I live next door to a pub in my constituency-as you do in the neighbouring constituency. Since the general election, I have worked three shifts behind the bar in various pubs in my constituency to learn more about the challenges they face.
In my speech last year, I talked about the situation in Pendle over the past few years. We have seen seven pubs close in Brierfield, five in Barnoldswick, seven in Nelson, three in Colne and numerous others in the surrounding areas. In that debate, I said:
"I believe that there is increasing evidence that the beer tie, as operated by the large pub companies, plays a significant role in the decline of the pub trade. I point out explicitly that I am referring only to the behaviour of some large pub companies that own more than 500 pubs, not to family-owned breweries, which tend to act much more responsibly."
I concluded by saying that, although I normally always favour voluntary regulation over statutory regulation,
"I therefore have no hesitation in supporting the motion and calling on the Government to reconsider self-regulation and stop the large pub companies abusing their position."-[Official Report, 12 January 2012; Vol. 538, c. 367-8.]
Mr Bellingham: I congratulate my hon. Friend on the role he has played in this campaign. Does he agree that another initiative the Government should consider is scrapping the escalator in the 2013 Budget? That would save the Government money, because any loss in beer duty revenue would be offset by higher beer sales and increased revenue from employment taxes. Surely the Government should consider that, too.
Andrew Stephenson: I agree wholeheartedly with my hon. Friend. I was very pleased that when we came into office we scrapped the increase in cider duty arranged by the previous Government, but I am even more delighted that many hon. Members on both sides of the House are now urging the Government to go further and to scrap completely the beer duty escalator.
Bob Stewart (Beckenham) (Con): May I suggest considering another discrepancy-that supermarkets that sell beer should perhaps pay duty at a different rate? As my hon. Friend the Member for Burton (Andrew Griffiths) suggested earlier, in Ireland they are considering what they call a lid tax, which would encourage people to use pubs rather than preloading on cheap booze from supermarkets. Does my hon. Friend the Member for Pendle (Andrew Stephenson)agree with me?
Andrew Stephenson: I agree and think that idea should be considered. I am perhaps in a minority on the Government Benches, in that I support some of the proposals to consider minimum pricing for alcohol,
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because that would leave unaffected the prices charged in our pubs but tackle those charged by our supermarkets, many of which use alcohol as a loss leader to drive people through the doors. I have spoken to NHS bosses in east Lancashire who also agree with the proposals. Minimum pricing would boost public health and support the pub trade.
Hugh Bayley (York Central) (Lab): I, too, took part in the debate a year ago and I proposed a minimum price for alcohol. In my most recent survey of pubs in my constituency, I put the issue to landlords. Some 97% agreed; 48% thought that a level of 50p per unit was right; and 48% thought that that was too low.
Andrew Stephenson: I thank the hon. Gentleman for that intervention. When I talk to landlords across Pendle about the biggest impact on their business-whether the smoking ban or pub companies-they all say that it is supermarkets selling alcohol at below cost price. Although today's debate is important, we must not lose sight of other issues leading to a decline in the pub trade across the UK.
I warmly welcome yesterday's Government announcement, which will provide great support to those who have campaigned on the issue and give stability for pubs and tenants. It will be good for growth and the pub trade. I also welcome the fact that the Government are focusing just on large pub companies with more than 500 pubs; that is exactly what I argued for in my speech last year.
The Government have already done a lot to support the industry. They have appointed a Minister for pubs and introduced the community right to buy, so that residents can take over and save failing pubs, as happened with The Greyhound in Barnoldswick. I welcome the reform to licensing laws to make it easier for pubs to play live music and the action on business rates. There are issues on which we can go further, such as the beer duty escalator, but a lot of progress has been made. Those steps, along with those announced yesterday, will be welcomed by tied publicans across Pendle-especially the overarching fair-dealing provision in the new code and the principle that a tied licensee should be no worse off than a free-of-tie licensee.
The new statutory code for the industry will need to get the balance right. I am not against all pub companies or even the big ones; the beer tie is a valid business model with real advantages for many. However, the abuse of the tie has led to real problems so I warmly welcome the Government's action.
I conclude by paying tribute to CAMRA's work on the issue. I look forward to seeing several of the east Lancashire branch members at the ninth Pendle beer festival, which runs from 31 January to 2 February at the municipal hall in Colne. If any hon. Members want to come and try any of the huge variety of ales, such as Barlick brewery's Magic Badger, Reedley Hallows brewery's Old Laund bitter or the classic Moorhouse's Pride of Pendle, they will be more than welcome.
Susan Elan Jones (Clwyd South) (Lab): It is a great privilege to follow the hon. Member for Pendle (Andrew Stephenson) and speak in this hugely important debate.
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History was made on 29 October 2011 at the Buck House hotel in Bangor-on-Dee, when Wrexham lager was officially relaunched. Wrexham lager is Britain's oldest lager brew, first brewed in 1882. The company went through a huge array of changes until in 1992 it became part of Carlsberg-Tetley. Eight years later, the brew suffered from a faraway management decision that allowed Wrexham lager to continue being brewed, but nowhere near Wrexham. In 2002, the brew ceased totally. Its current incarnation is testimony to the work of a few dedicated individuals, including my predecessor, Martyn Jones, who was a microbiologist at the brewery.
It is vital that we encourage diversity in brewing and bring in the statutory code, because of small breweries such as the one that produces Wrexham lager. Today there has been much discussion about the number of pubs that have closed. One such is the Ty'n y Capel pub in Minera in my constituency, a hostelry with a heritage going back to the 13th century. The pub has now closed but people in that small village are determined to get it reopened. They have been awarded a lottery grant and local residents are busy purchasing shares. It is now our job, and the job of Government, to support them in reopening this vital community facility.
As the hon. Member for Pendle said, there is rightful concern about the abuse of alcohol and binge drinking. This concern is as valid today as it was in any previous generation. That is partly why this debate is so important, because only by supporting genuinely local community and family-oriented pubs can we tackle the most unpleasant aspects of the revolting all-you-can-drink subculture that has led to devastating consequences, not least domestic violence.
Mr Robin Walker (Worcester) (Con): The hon. Lady is making a very interesting point. Does she agree that some of the problems with the binge-drinking culture lie particularly with the very high-strength alcohols? Will she join me in urging the Government, who have already looked at differential duties, to consider a lower duty on ordinary beers that are sold in the pub and a much higher duty on the very highest-strength alcohols that often lead to some of the problems of domestic violence and binge drinking?
Susan Elan Jones: There is a very strong case for that; the hon. Gentleman makes an interesting and a good point.
I could not speak in a debate such as this, and I modestly have not yet done so, without mentioning with great pride the Bridge End pub in Ruabon, to which my hon. Friend the Member for Wrexham (Ian Lucas) referred. It was last year's CAMRA pub of the year, and it has just secured another prestigious award-it is now Welsh pub of the year for 2013. It has renowned quizzes and local brews, and it not only brings together our local community but has become part of the tourist experience for everyone who visits the uniquely beautiful part of north Wales that I feel privileged to represent. That is an amazing achievement for a pub that reopened only in 2009. It is a great tribute to the pub, to the McGivern family who run it, and to Ruabon.
It is because of the Ty'n y Capel, the Bridge End, Wrexham lager and the Buck House hotel, as well as the need to take alcohol out of the abuse zone, that we need
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to regulate the relationship between large companies and their tenants and licensees. It is vital that we do that now, and it is so good that the House has spoken on this issue.
Mr Mark Spencer (Sherwood) (Con): There are a few things that unite this House, such as national security, respect for the monarch, the bravery of our armed forces, and the great British pint. Nottinghamshire has a great tradition of pubs and brewing. The city of Nottingham boasts some of the oldest pubs in the country in the Salutation Inn and Ye Olde Trip to Jerusalem, but Sherwood has its own place in brewing history with Robin Hood and Friar Tuck, who was a noted brewer, so I feel very close to this issue. Sadly, though, Nottinghamshire has not been immune from the pub closures that we have seen across the country, and a number of great local hubs have disappeared from our villages and communities.
It is worth noting how important those establishments are to local communities. They are a great place not only to hold community events but to celebrate weddings and christenings and perhaps even to commemorate the passing of a close friend. More importantly, they are a place where people can share their woes and problems with friends and neighbours. They provide a great outlet for any social pressures that people may be feeling, in a location where there is a landlord to control the amount of alcohol they consume and to make sure they do not do it in a way that will cause them harm. We must recognise how important this great British institution is-and it is a British institution. Many Members will have gone abroad and seen how other countries attempt to recreate the British pub and how poorly they do it. It is something that we should be very proud of.
There are great examples of success in the pub industry. In my local communities there are not only great pubs but great miners' welfare and working men's clubs that have shown the way forward when they are given the freedom to operate successfully. It is worth noting that both the bottom and top clubs in Calverton have created a system in which they can operate, and the miners' welfare club in Blidworth has linked to a sports club. Those are great examples of how successful they can be when given the freedom to operate.
Successive Governments of all colours have not always helped the pub industry. Whatever the motivation behind the decision to introduce the beer duty escalator, it put pressure on some landlords and built in costs to the industry that it inevitably had to pass on to consumers, and that inevitably drove some of them away to drink at home rather than at a public house.
Mr Stewart Jackson (Peterborough) (Con): My hon. Friend is making a good contribution. Does he agree that, because of the prescriptive nature of the Licensing Act 2003, the proliferation of convenience stores-unlicensed premises-has meant that pubs have been disadvantaged, and that a new cumulative impact policy will mean that pubs will now have a fighting chance against convenience stores that sell alcohol?
Mr Spencer: I thank my hon. Friend for his intervention. I do hope that that will be the case. As I said in my initial comments, it is important that people are able to drink in a social environment where someone is there to
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keep an eye on what happens. That is a much healthier way of drinking than sitting at home in front of the TV drinking cans of lager. We should ensure that we continue to support public houses and landlords.
Governments have not offered assistance to public houses with other pressures, such as their rateable value. Some of the larger pub companies have used the value of a public house to increase the rents and the price of beer in a deliberate ploy to push out landlords and realise the capital value of that property, in order to knock it down and build housing or retail premises. I can only imagine the pressure felt by landlords when they are exposed to a deliberate plan to push them out.
Greg Mulholland: My hon. Friend makes a hugely important point-asset stripping has been a big issue. Does he agree that we also need to consider increasing protection in planning law for pubs, so that asset stripping does not continue? There is a danger, now that the pubcos know the game is up, that they may seek to sell more.
Mr Spencer: It would be worth looking at that. Some of the older public houses are of great historic and architectural value, so perhaps somebody should be looking at ensuring that they are protected.
There are some good news stories as well. The tied pub system offers an opportunity for people to become self-employed and set out on the career path of working for themselves. When it works well, it works very well, but we need to tackle those who are abusing the system. There is some discussion about how many companies are doing so. I want the Minister to consider, as part of the consultation process, lowering the threshold for the number of pubs held before they are brought into the realm of the proposed legislation.
Jessica Lee (Erewash) (Con): Will my hon. Friend give way?
Mr Spencer: I am very short of time, but I will give way quickly.
Jessica Lee: I am grateful to my hon. Friend for giving way. On self-employment, does he agree that the growth and resurgence of the microbrewery industry goes hand in hand with this debate? It is flourishing, particularly in Erewash and across Derbyshire.
Mr Spencer: I agree and it is a great success story. Lots of people are setting up microbreweries and they need marketplaces in which to sell those beers. If someone is in tied premises, their hands are tied and they cannot do that. Greater flexibility in the marketplace would be welcomed and would support those people.
There are a number of examples of landlords taking on a pub that has been run down and putting in a lot of graft and work by making food available on the premises, doing quiz nights and increasing the amount of alcohol and beer they sell, only to find their rents and beer costs being pushed up so that the more successful they are, the more costs are thrown at them. It has become counter-productive.
In summary, the Government have a pretty good track record of starting to address these problems. I pay tribute to the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for East
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Dunbartonshire (Jo Swinson), who is pushing the Groceries Code Adjudicator Bill through the House. A system similar to the groceries code to protect landlords will be welcomed. I welcome the consultation and look forward to greater protection for our pubs in future.
Fiona O'Donnell (East Lothian) (Lab): May I take the opportunity to wish you a very happy new year, Mr Deputy Speaker?
It is a pleasure to follow the hon. Member for Sherwood (Mr Spencer). I am sure that such a benign and jovial fellow is not usually given to conspiracy theories, and he was right to highlight some of the darker practices, such as tenants being deliberately forced out of a lease in order for the pubco to benefit. He was also right to highlight the positive role that good landlords can play in helping people to develop a healthy relationship with alcohol.
I pay tribute to Members on both sides of the House who have stuck doggedly with this agenda, even before many of us arrived in 2010, to get us to this point. In particular, I praise the role of the Business, Innovation and Skills Committee. I regret that the Scottish National party Member only popped into this debate for a short time, because there is a lesson for the Scottish Government in how effective genuinely empowered and independent Select Committees can be in promoting good governance. I hope that some SNP Members are watching the screens in their offices and will take that message to heart.
So far, I have been in quite a jovial mood, considering that I am just 60 hours into nicotine withdrawal. The Secretary of State today showed that he has the sensitive underbelly of the Government. He did not seem happy that there was criticism of the time that it has taken to get to this point-like many Members, I stood here almost a year ago asking for effective regulation of this sector-but it really is his own fault. When he was a real Lib Dem-rather like the Campaign for Real Ale-he prided himself on calling for the quick introduction of stronger regulation of the banks. Whereas he would probably give himself a 10 for his foxtrot when it came to the banks, we might score him slightly lower on his gentle waltz towards the effective regulation of this sector. I hope that he has not left the Chamber because he was so sensitive that he was struggling to cope with the criticism.
I pay tribute to my hon. Friend the Member for Wrexham (Ian Lucas) for talking about the contribution that pubs make to so many of our communities. The Winton Arms is the only pub in the village where I live in East Lothian and it is very important. It is developing in the way that my hon. Friend spoke about. It now has space for a hairdresser, where beauty therapy is also available, and it hosts a coffee shop with home baking. Members can guess which of those two I tend to spend more time on. At new year, when little public transport was available, I was able to go there to see in the new year safely and walk home.
It has been a wasted year. In that time, many of us, including the hon. Member for South East Cornwall (Sheryll Murray), have seen landlords finally give up on a relationship that just was not working. That has happened at the Tyneside Tavern in Haddington in my
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constituency. The landlord, Neil Forbes, an ex-policeman who ran a superb operation, has finally given up. I have attended meetings with Neil and his wife, and have been copied in to an endless stream of e-mails. The experience reminds me of the cartoon "Tom and Jerry", in which Tom gets a bump on his head, he pushes it in and one pops out on the other side. Neil would make some progress getting fairer terms in one area, but then Scottish & Newcastle would suddenly introduce a charge in another area and set the situation back. Although I deeply regret that he is walking away from the business, I understand the effect that it was having on him and his family.
The Government were a little late in finally agreeing to make the Groceries Code Adjudicator Bill a real Bill with the power to deliver change. I hope that they will not be so reticent this time, but will realise that if we are to have fairness in this sector, we need comprehensive regulation with real teeth.
Justin Tomlinson (North Swindon) (Con): It is an honour to be the last Government Back-Bencher to speak-it is a bit like queuing for last orders. As a member of the all-party save the pub and beer groups, I welcome the debate. I have shown my hand at trying to run a pub, not particularly successfully, and like many Members who are present I have been known to frequent a pub.
It is a real credit to the Government that we now have a Minister responsible for pubs, and if he ever wishes to visit our local brewery, Arkell's, I will certainly make him welcome. I am a little concerned, however, because we have a passionate shadow Minister who supports pubs but has announced that he is teetotal for the month of January, and the shadow Minister in the February 2011 Westminster Hall debate, the hon. Member for Derby North (Chris Williamson), declared not only that he was teetotal but that he did not visit pubs. We need the other team to play their part. However, there is clearly cross-party concern about pubs, which are at the heart of our communities.
Although the number of pub closures has slowed, it is still somewhere in the region of 18 a week, which has to act as a wake-up call for all of us. The Government's decision is a credit to organisations such as CAMRA and the Federation of Small Businesses, and to the countless local residents who have e-mailed all MPs to raise the issue.
Mark Menzies (Fylde) (Con): My hon. Friend is a champion of pubs in Swindon, but may I urge him also to give some focus to rural pubs, which are under greater pressures than those in towns? I see that every day in Fylde.
Justin Tomlinson: I thank my hon. Friend for raising that important issue. That situation arises particularly because of the value of rural pubs if their owners transfer them to other categories of use. It is welcome that the Government are looking to tighten up the relevant planning rules, which will help protect a number of rural pubs. A few in my constituency need that protection.
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I welcome yesterday's announcement in principle. The new code will ensure fair practices on a number of issues, including rents and the price that publicans pay for beer. Crucially, the adjudicator will manage the matter of fairness, because it is often the big guy against the little guy, and just because someone is good at running a pub, that does not mean that they are a legal expert.
We must not forget the absolute need for transparency on costs, particularly when a publican signs up to their deal. It is a bit like having a franchise. Legally the deal says, "You will buy the product at this price," and as my hon. Friend the Member for High Peak (Andrew Bingham) said, it includes matters such as PAT testing of vending machines and insurance. It is not just about the beer.
I urge caution, and my hon. Friend the Member for Burton (Andrew Griffiths) made a good and sensible speech that brought some realism to the debate. We have to be careful not to throw the baby out with the bathwater. We must be careful about mandating a free-of-tie option with open market rent review, because the pubco tie is a good business model that allows people to become entrepreneurial small business owners without having to have huge savings to buy an expensive building. Just because some have abused the system, that does not mean that we should completely remove it. We just need to ensure that those who abuse it are dealt with and that others are given adequate protections.
We all have good examples of family breweries working with landlords, such as Arkell's in my constituency, which has just over 100 pubs. It is in breweries' interests to do so, because if their landlords succeed, they will continue to sell beer, which is what makes their business thrive. We have to look at the wider picture and be careful not to chase a cheap headline. I support the principle of what is proposed, but we must act on the consultation. Those with expertise, knowledge and first-hand experience should feed into it. The hon. Member for Wrexham (Ian Lucas) made that point, and I echo it.
We must also celebrate some of the examples of good news. Wetherspoon's continues to buck the market trend and expand. When I am having breakfast in a Wetherspoon's pub, I often admire how much money they probably take before the majority of other pubs open their doors at lunchtime.
The Government are considering the community right to bid, giving communities a fairer chance to bid to take over pubs. Again, that would be particularly useful in rural communities. They are launching a £19 million support programme to help community organisations; ensuring that planning policies provide for the use of pubs and guard against their unnecessary loss; and providing help with business rates. They have scrapped the previous Government's plan for a 10% rise in cider duties, but they now need to do the same in the case of the beer duty escalator. As we chase increased exports, let us take a moment to rejoice that 1.25 billion pints of beer were exported last year. That is something to which we can all raise a glass.
We are making it easier for pubs to play live music. I have carried out a number of surveys with local pub users, asking what makes a good pub. We know that society has changed and that more often than not, pure straightforward drinking pubs will struggle these days. Pubs need a combination of good food, good entertainment, live music and pub quizzes-going that extra mile to
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make it a destination for local communities. Moves to exempt pubs from unnecessary health and safety inspections would also be welcome. I urge people to get behind this issue, which has clear cross-party support, and engage with the consultation. Let us hope for a better year for the pub industry in 2013.
Simon Danczuk (Rochdale) (Lab): I thank my hon. Friend the Member for Chesterfield (Toby Perkins) for championing this cause and pressing for and securing this debate. Hon. Members may not be aware that I have spent a considerable amount of time researching this subject over many years-perhaps too intensely on some occasions-and I wish to draw on some of that research by telling a story about Mary Spence, a publican in Rochdale who runs the Hunters Rest just off Syke common. One reason I am telling Mary's story is because it addresses a point raised by Simon Townsend, the chief operating officer at Enterprise Inns. On 12 December he said in the Publican's Morning Advertiser that all he had ever asked was to be provided with
"clear evidence, which we can pursue to see whether we have done something wrong,".
Well, I believe the way Mary Spence is being treated is wrong and that Mary's story provides clear evidence that Enterprise Inns has little, if any, regard for customers at the Hunters Rest and indeed the wider community. I believe that Enterprise Inns is doing something wrong; it may not be illegal, but it is certainly wrong. I have been in the Hunters Rest on a few occasions and I can tell it is a well run pub. Mary and Tom work exceptionally hard; they start at six or seven in the morning and finish after midnight. They keep a smart, clean pub that provides bed and breakfast and pub food. Indeed, Hilary Devey, one of the entrepreneurial dragons on the BBC's "Dragons' Den", worked at the Hunters Rest while filming "The Secret Millionaire" for Channel 4, but even such an accomplished entrepreneur as she could not work wonders under the arrangements of Enterprise Inns and I will explain why.
Mary Spence is 16 years through a 25-year lease with Enterprise Inns and she has had enough. Enterprise Inns controls most of the business-it sets prices, determines what work should be done on the property, sets the rent and decides what beer should be sold. For example, Mary could buy a 22-gallon barrel of Foster's for £195 but she has no choice but to pay Enterprise Inns £291. She could buy Carling wholesale for £201 but has no choice but to buy it from Enterprise Inns for £303. That affects not only Mary Spence but her customers. Therefore, when Mr Townsend asks, "What's wrong?", it is that Mary Spence is paying around £500 a week extra for her beer.
Lilian Greenwood (Nottingham South) (Lab): Will my hon. Friend give way?
Simon Danczuk: I will not take interventions because I am conscious of the time. The other big problem with Enterprise Inns is that Mary has to maintain the property both inside and out. She had to pay for a fire escape to be fitted and for fire alarms throughout the building. She has invested her life savings in that pub over the past 16 years, but although the place is immaculate, what does she have to show for it? Enterprise Inns is
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doing all it can to ensure that she leaves the pub with as little financial return as possible. Mary pays an inflated rent but gets nothing done to the property. She pays inflated prices for beer but gets nothing in return. Last Friday, the regional manager of Enterprise Inns said that he could not even guarantee her a packet of beer mats! Mr Townsend asks what is wrong with his business model. Those are the things that are wrong with it.
I am pleased the Government have moved on the statutory code, but I have concerns about the tied option, which should be kept open, and about open market rent reviews, which the Minister should consider.
Hugh Bayley (York Central) (Lab): My wonderful city of York has been an important tourist destination for centuries. People are drawn to the city by its history and its wonderful buildings, including York Minister and the city walls, but also by the city's pubs, some of which date back to the 1400s.
When I meet York members of the Licensed Victuallers Association and York CAMRA, they always raise the problems of pub companies. Like other Members, I carry out a survey from time to time of pubs and clubs in my constituency. When I did so in 2009, I found that 41% of landlords blamed pub companies' unfair terms of trade for their falling profits, but last year when I carried out a similar survey, I found that the number of pubs complaining about pub companies had risen to 62%. The problem of the pub companies misusing their power is getting worse.
After conducting last year's survey, I wrote to the Treasury. I told the then Treasury Minister, the hon. Member for Norwich North (Miss Smith), that pub companies had not abided by guidelines and that the Government should consider introducing a statutory code to regulate pubcos' relationship with their tenants. In July, she replied:
"Regarding your comments on the relationship between pub companies and licensees.The Government does not.consider it appropriate to make a statutory intervention in setting the terms of commercial, contractual relationships."
I congratulate the Government warmly on changing their policy and agreeing to a statutory code of practice.
Pub companies came into existence after a previous attempt by the Government of the day to deal with the problem of tied pubs-I believe it happened following the beer orders of 1989. Breweries were instructed to sell off their tied pubs, which were bought by pub companies, but that did not solve the problem, because the pub companies imposed a tie of their own. The tie is the problem. In the new regime that the Secretary of State announced yesterday, the tie must go.
If a property company with a shop sought to lease it as a boutique, for example, with a term in the lease that it could sell clothes from a particular manufacturer or of a particular brand only-or sell clothes supplied only by the landlord-the Office of Fair Trading would rule it out of order pretty quickly, and yet that is exactly the relationship between a tied pub and a pub company. I congratulate the Business, Innovation and Skills Committee on its work. It has argued forcefully for a statutory code for pub companies to include a free-of-tie option, which the Labour party motion supports.
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Parliament needs to avoid making the mistake it made in 1989 when the brewers were required to sell their tied pubs. I am pleased to see the Secretary of State in his seat listening to the debate. The statutory code he proposes should start from the presumption that there is no tie. I hope that option is covered in the consultation. If we say to a relatively weak and powerless small businessman or woman that, under the code of practice, there should be an option of no tie, many will still be bludgeoned by big, tough multi-million pound pub companies into taking a tie. Therefore, the default should be that there is no tie unless it is opted for by the landlord. I hope we consult on that basis.
Andy Sawford (Corby) (Lab/Co-op): We are pressed for time and other hon. Members want to speak, so I will truncate my remarks on what is an important debate.
I want to mention the role of local breweries in my constituency. Dick Simpson runs the Nene Valley brewery in Oundle, which started brewing in 2011. He told me that pubcos make it very hard for pub owners to show initiative. If pubs start to make a handsome profit, the pubcos whack the rent up so the landlord sees little of the extra cash. Local breweries, such as the Nene Valley brewery, the Great Oakley brewery, Rockingham Ales and many others in my constituency, would benefit from being able to sell to all the pubs in my area. Indeed, everybody would benefit: the pubs, the consumers, the local brewers, the local economy, the environment-because it would reduce beer miles-and tourism.
In autumn last year, I was delighted to welcome my hon. Friend the Member for Chesterfield (Toby Perkins) to my constituency for some active research in my local pubs. He came to some of the rural pubs, such as a beautiful pub in Stanwick, and to the thriving pubs in Corby town. He also saw, however, that many of my local pubs are struggling. Some have closed down already; some may face closure in the near future. One reason for that, as has been said, is the profoundly unequal relationship between tenants and lessee landlords. In the past, if a pub owner was tied, he paid more for the beer but had the benefit of discounted rent. As we know, pubcos have increasingly put up both the rent and beer prices.
I will make my remarks even briefer than I intended. There are two critical issues on which I want to press the Front Bench. I recently sat on the Groceries Code Adjudicator Public Bill Committee, and we know that the role of the Bill's proposed ombudsman will only be as strong as the code itself. One of my questions relates to the power to fine, on which the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for East Dunbartonshire (Jo Swinson) gave a big concession on that Bill. The power to fine in yesterday's announcement is only where there are severe breaches. I would like to know how broadly the Government might define "severe breaches". If the definition is too limited, this code will not have sufficient teeth.
My concluding point is that I, of course, agree with the tests that my hon. Friend has set out, in particular the principle that a tied licensee should be no worse off than a free-tie licensee. That does not go far enough: I want a tie-free option.
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Mr Andy Slaughter (Hammersmith) (Lab): I am grateful to my hon. Friend the Member for Corby (Andy Sawford) for being collegiate. I wish other hon. Members had been. I will be as brief as I can.
My constituents, Joe and Betty Hynes, are observing the debate. They are also active in the all-party group, the Guild of Master Victuallers and the fair pint campaign. They are also known to the hon. Member for Leeds North West (Greg Mulholland), as well as hon. Friends on the Front Bench, because for 23 years they have lived and worked at the Old Parr's Head in Blythe road in my constituency, which is a very fine public house. In 1997, it was bought by Punch Taverns. A few years' ago, Joe and Betty Hynes acquired a second pub, the Chancery in Fulham. They did that because they wanted to be successful in business and to provide employment. Unfortunately, when they had to surrender the licence of that pub this year, Punch Taverns was taking 124% of their profits. Six years' ago, Punch Taverns was taking 48% of their profits on their existing pub. This year, save for any agreements that Punch Taverns will keep to, which it is not showing much sign of doing, it will take 91% of those profits. That will mean that Joe and Betty will effectively be living on less than the minimum wage. They have lost their life savings in one venture, because they have been forced out. They are now living on minimum income, yet have provided those two fantastic establishments for my constituents over a long period of time.
The Secretary of State indicated that there have been many pressures on pubs, such as the beer duty escalator, the smoking ban and unfair competition. Trying to deal with those problems is bad enough. If, in addition, pubcos decide that they will take none of the risk or any cut in their profit and put all of that burden on to publicans, we end up in the situation we are in now, where people are being driven out of business and pubs are going bankrupt every week in my constituency. I will, of course, try to intervene as the MP, but it is sometimes difficult to do so in a contractual dispute.
I end on this point, and I wish I had more time to do justice to Joe and Betty's case. I hope, having seen delay and more pubs going to the wall than is necessary, that there will be the quick implementation of an effective statutory code so that this David and Goliath battle can be evened up and people like Joe and Betty can get the proper reward for a lifetime of work and service to their community.
Several hon. Members rose -
Mr Deputy Speaker (Mr Nigel Evans): Order. I apologise to Members who have not got in, despite having sat here throughout the debate, but we have to move on to the winding-up speeches.
Ian Murray (Edinburgh South) (Lab): I also apologise to the Members who have not got in, because they have an important contribution to make to the debate, particularly the hon. Member for Easington (Grahame M. Morris). To Members who have not had a night out with him, I can highly recommend it, and I was looking forward to his contribution. Perhaps we will find time
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later on. I also refer the House to my entry in the register of Members' interests, as a former licensee of a pubco and other companies. I will run through some of my own experiences shortly.
This afternoon's debate has emphasised the importance of the great British pub and the contribution that landlords and landladies make to our communities in every country of the United Kingdom. I would like to pay particular tribute to the hon. Member for Leeds North West (Greg Mulholland), who, since I have been in the House, has been a dogged campaigner on this issue, filling our inboxes on the subject. He deserves great credit for everything he has done, and today is a great triumph for him, as well as for everyone else in the House.
I also pay tribute to my hon. Friend the Member for West Bromwich West (Mr Bailey), the Chair of the Select Committee, who has continued to pursue the matter through the Select Committee, showing the power that those Committees can have in the House. I hope that other Chairs will take note. If anyone has time to read the contribution from the hon. Member for Northampton South (Mr Binley), who is not in his place, and his robust performance against the pubcos in the Committee, it is certainly worth looking at. And, of course, I pay tribute to my right hon. Friend the Member for Wentworth and Dearne (John Healey), who did a lot in this field as the former pubs Minister, and to the hon. Member for Mid Worcestershire (Peter Luff), the former Chair of the Select Committee.
I also add a special tribute to my Front-Bench colleague, my hon. Friend the Member for Chesterfield (Toby Perkins). By bringing this Opposition day debate to the Chamber, he rang the last orders bell on the Government to act. Without that determination to get this issue back on the agenda, I suspect we would not be here today with the progress that has been made. Despite his dry January, he does a lot personally to support the industry-although he could do a lot more by standing his round a little more often! Given that it is a dry January for him, however, I shall certainly be buying the drinks after this debate.
Just 12 months ago, we had a robust Back-Bench debate on this issue and the House agreed unanimously that the self-regulation approach should be reviewed and a statutory code considered. It is clear, however, that consecutive BIS Ministers have ignored the wishes of the House and have refused to listen to the broad coalition of groups calling for action. To give credit to the Secretary of State and his Ministers, however, on the eve of this debate, he said that the current system had failed and that he would introduce a new statutory code.
It is worth reflecting again on the scale of the issue: 46% of tied publicans earn less than £15,000 a year. Crucially, that includes more than 50% of lessees with a turnover of more than £500,000 per annum-a return of only 3%. The total number of tied pubs has fallen by more than 3,000 since 2008, which compares with an increase in the number of free-tie pubs. Furthermore, as many hon. Members have mentioned, including my hon. Friend the Member for Bradford South (Mr Sutcliffe), the Wetherspoons model demonstrates that profits and sales can continue to rise in what is a difficult market. It would seem that the abuse of the tied contract is the problem, as many publicans will already be paying rent at the market value or higher.
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I shall give some examples of my own experience. I was in discussions about a premises in Edinburgh, but was concerned that the same company had a managed house just around the corner that had been closed for some time. I was told that it was to have a full refit and reopen shortly, but would be a niche product and would not be in direct competition with my premises. When it eventually opened, it was an almost identical offering and was selling beer to the consumer at less than the value at which I could buy it from the same company.
In another premises, albeit with a different landlord, we asked if we could buy out of our bottled beer tie, because a supermarket had opened up next door and was selling the same products at a third of the price that we were contracted to buy them for. We were told that we could buy out of the tie, but at a cost of £1,600 per annum on the rent. Many hon. Members, including the hon. Member for Pendle (Andrew Stephenson), have raised the issues with off-trade and on-trade. That might be a subject for a useful future debate.
My last and probably most shocking example from that time-this issue has also been illustrated by my hon. Friend the Member for Corby (Andy Sawford) and the hon. Members for Sherwood (Mr Spencer) and for Leeds North West-concerns the major pubco that I rented a hotel from. We received a good deal for the hotel because the premises were up for demolition, but the pubco told us-and I quote-that any increase in our profitability or trade would be reflected in a regular, upward-only rent review. Crucially, the business development manager at the time used to brag about the list of tenants he was fining or about to fine for "buying out"-the term for purchasing products outwith the contract. He got a bonus for fining people. That was the reality of the situation at the time and shows just how much pressure tenants were under.
Let me quickly give the House another example. I did a bit of analysis today. I phoned up a supplier and, with no credit history, asked how much I could buy a 36-gallon barrel of standard lager for. I was quoted £356.73. The list price on Enterprise's current price list is £510.22, so it is quite clear where the problem lies.
I warmly welcome the new Minister to her place. She has changed her mind on a number of issues, including fining and the groceries code adjudicator. I am delighted that she has come with some proposals today that might make the situation better. We were on the verge of having a groceries code adjudicator without teeth. I hope that she has learnt that lesson and that we do not end up with a G and T with all tonic and no gin. I also want to challenge her on what "no worse off than a free-of-tie licence" means. Does it mean no worse off in terms of profitability, turnover, overall cash or, indeed, the whole package of measures?
I do not have time to run through the other issues, but I want to highlight some of the statements made by other Members. My hon. Friend the Member for East Lothian (Fiona O'Donnell) spoke of how her local pub had diversified into other things, such as a beauty salon, and challenged us to suggest whether she spent more time there or in the bar. Given her natural beauty, I would suggest she spent more time in the bar. My hon. Friend the Member for Hammersmith (Mr Slaughter) gave an interesting analysis of Punch Taverns, which is now taking 124% of profit, rather than the 41% from
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some time ago. The story of Mary Spence, which my hon. Friend the Member for Rochdale (Simon Danczuk) told us about, emphasises how bad the industry can get.
On the eve of this debate the Secretary of State panicked, but he has announced stuff that we will be accepting on this side of the House, although we will monitor the progress of the code's development closely to ensure that, as the Prime Minister would put it, it does exactly what it says on the tin. I am sure that many hon. and right hon. Members who have spoken today may be getting a free pint in their local pub, given the amount of free publicity they have given them. I am off to do a pub crawl around all those pubs after this debate and you are very welcome to join me, Mr Deputy Speaker.
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson): I thank all Members who have contributed to this afternoon's debate. We have heard speeches from 18 Members and interventions from many more.
I particularly thank the Chair of the Business, Innovation and Skills Committee, the hon. Member for West Bromwich West (Mr Bailey), and his predecessor, the hon. Member for Mid Worcestershire (Peter Luff), for the work they have done on this issue over many years, which is a good example of the effectiveness of Select Committees working in a persistent, constructive and responsible way. Many other Members have campaigned on this issue for many years, including the hon. Members for Northampton South (Mr Binley) and for Easington (Grahame M. Morris), my hon. Friend the Member for Leeds North West (Greg Mulholland), who made a typically powerful contribution to today's debate and has done so much with the all-party save the pub group, and my hon. Friend the Member for Cheltenham (Martin Horwood), who introduced a private Member's Bill a couple of years ago. I also thank the many thousands of constituents up and down the country who have taken an interest in this issue, whether as landlords or, as the hon. Member for Bradford South (Mr Sutcliffe) put it, "practitioners" of pubs.
In what was a generally consensual debate, the hon. Member for Chesterfield (Toby Perkins) proposed potential court action. I can reassure him that it is not necessary, because The Morning Advertiser corrected the article that had incorrectly attributed quotations to me. I can confirm to the House that I did not say that the self-regulatory approach was working.
Today we have heard stories from Members in all sorts of constituencies of publicans who have faced real injustice and unfairness-horror stories about rent hikes out of kilter with the market, about extra charges and add-ons that they did not know about when they signed up and about people who have been driven out of business. For me, one of the most shocking figures is the comparison between the incomes of tied lessees and of those publicans who are in non-tied leases. Almost half of tied lessees earn less than £15,000 a year. That is an astonishing figure, when we consider the long hours that people put into running their pubs, and the fact that that income is often shared by a couple. The figure
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for non-tied lessees earning less than £15,000 a year is 22%, or one in five. The Government will be acting on this, and I welcome the broad cross-party support for what we are doing.
We have heard some horror stories this afternoon, but there have also been some lighter notes in the debate. We have heard about pubs being the scene of a range of events. The hon. Member for Rochdale (Simon Danczuk) mentioned the "dragon", Hilary Devey, working undercover in a pub. My hon. Friend the Member for South East Cornwall (Sheryll Murray) talked about being the first Cornish MP to pull a pint in her local pub. My hon. Friend the Member for Pendle (Andrew Stephenson) talked about the three shifts that he had done as a barman in his local pubs, and told the House about the Pendle beer festival. I understand that you also have a pub as a neighbour, Mr Deputy Speaker. We heard from the hon. Member for Clwyd South (Susan Elan Jones) about the triumph of the Bridge End winning CAMRA pub of the year, and the hon. Member for Chesterfield told us about his drinking mineral water in his local pubs. Perhaps the most touching story was that of the romance and engagement of the hon. Member for Ashfield (Gloria De Piero).
The Chair of the Select Committee rightly said that what we are doing will not be a panacea, but it will help. Members raised a range of other issues, including the beer duty escalator, on which we had a debate in the House recently. That is a matter for the Chancellor, and I am sure that Treasury colleagues will be following this debate closely through Hansard.
Andrew Griffiths rose -
Jo Swinson: I am sorry. Owing to the lack of time, I must press ahead with my summation.
A differential beer duty was suggested, but it would not be possible to introduce such a scheme on the basis of where alcohol was being sold. However, the Government have already acted on a differential duty in relation to the strength of beer. In October 2011, the duty on high-strength beer rose and the duty on low-strength beer fell. My hon. Friend the Member for Pendle made an important point about minimum pricing, which could help pubs to regain an advantage when competing against low-priced supermarket booze.
My hon. Friend the Member for Burton (Andrew Griffiths) said that regulation might not be needed. That might not be a popular argument today, but I understand what he is saying. It is right that the Government should regulate only as a last resort, and that we should seek alternative solutions first. We have sought solutions, however. The industry was put on notice last year and, sadly, it has not delivered. My hon. Friend also mentioned his concern about a two-tier system. It is right that we should focus regulation on those with the greatest market power. That is proportionate because the evidence shows that the greatest problems are in that part of the industry.
As my right hon. Friend the Secretary of State mentioned, the consultation sets out that that regulation would relate to the six largest pub companies, with a threshold of 500 tied or tenanted properties. Those companies would be Punch, Enterprise, Marston's, Greene King, Admiral and Star. Our consultation will listen to views on what the right definition should be and what the threshold should be. I hear the point made by my
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hon. Friend the Member for Sherwood (Mr Spencer) that the threshold should be lower than 500. I encourage hon. Members who have a view on those issues to contribute to the consultation.
There has been much debate on the free-of-tie option this afternoon, and there are arguments on both sides. The hon. Member for York Central (Hugh Bayley) said that the tie must go, but I believe that the beer tie can be important, especially for small family breweries such as those mentioned by my hon. Friend the Member for South Derbyshire (Heather Wheeler). Indeed, in January 2011, CAMRA stated:
"Without the right to tie pubs, the Family Brewers wouldn't bring their beers to the bar. Closures amongst the smaller brewers would be inevitable. The tie is a viable way for them to run their pubs."
The problem is not the tie, as such, but the abuse of the tie.
Toby Perkins: Will the Minister give way?
Jo Swinson: I will give way briefly; I am conscious that I must respond to the debate.
Toby Perkins: There has been a great deal of cross-party agreement in the debate, and many people will be watching it on television. Will the Minister confirm that she will support our motion, so that we can all work together and ensure that we get to where we want to be?
Jo Swinson: I can confirm to the hon. Gentleman that we will support the amendment, which does something that his motion does not do-namely, it proposes the introduction of an adjudicator, on which the Government are going to consult. I believe that that is essential, but it is missing from the hon. Gentleman's motion. However, I welcome the fact that he has brought this topic forward for debate today.
"A new independent statutory code of practice should be imposed to uphold the prime principle-that the tied tenant should be no worse off than if free of tie".
Those are not my words, but those of the Independent Pub Confederation. That is the key principle on which the new statutory code should be based. This will be looked at across the board-taking into account the profits, the prices, the insurance, other benefits and the rents-and the adjudicator will be able to look at the whole picture. Having higher beer prices mitigated by lower rents and business support is a valid business model, but having higher beer prices and higher rents is just a rip-off. As the right hon. Member for Torfaen (Paul Murphy) said, the combination of the two is what causes the problems.
Let me deal briefly with the process and timetable. The Government propose a consultation of six weeks, and we will publish it as soon as possible in the spring. The adjudicator would have to be established by primary legislation, and we are keen to press ahead with the timetable. The House's support will be helpful in that regard. We will consult on the details in the consultation, and I encourage those interested to ensure that they set out their views. To respond to an earlier query, the consultation will include the future role of self-regulation and of the Pubs Independent Conciliation and Arbitration Service. The power to fine, which the hon. Member for
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Corby (Andy Sawford) mentioned, is certainly envisaged for severe cases, which will of course be decided by the adjudicator.
In conclusion, we want to build a stronger economy and a fairer society, and the Government's action on pubs will help to achieve both objectives. It will create a stronger economy because pubs are an important part of it, and this will help them to thrive. As for a fair society, pubs are also an important part of our communities and this action will help to put a stop to lessees being treated unfairly by large companies and to abuse of the beer tie. This is good for publicans, good for pubs and good for the public.