MPs attack 'grave flaws' in pubs code proposals as Small Business Bill is debated

MPs lined up to stress that more needed to be done to protect the pub industry although there was often disagreement on what amendments needed to be made.

Business secretary Vince Cable, who presented the Small Business, Enterprise and Employment Bill to the house, admitted there were “strong views we should have done more” but insisted the Government had taken a “big step forward” in ensuring tied tenants were treated fairly.

In response to concern by Conservative member for Bedford, Richard Fuller, about the effects on family brewers Cable said the two-code system he proposed, with an enhanced code for pubs with 500 or more tied tenants and a core code for others, would protect them.

Shadow business secretary Chuka Umannu said Labour supported the bill but that he was “convinced that what is proposed does not go far enough”.

He said: “We are not convinced that the limited transparency that it is foreseen this bill will bring in will deliver the Government’s own principal that no publican would be worse off than if they were free-of-tie. We will also seek to ensure that the Secretary of State gets the right to introduce that mandatory rent only option for tied tenants in the near future if these reforms do not deliver.”

Flawed​

Lib Dem MP and chair of the Parliamentary Save the Pub Group, Greg Mulholland, said the proposals were flawed and insisted the powers of the adjudicator must be clarified. He stressed the adjudicator must have the power to impose new rents and said the market-rent only option (MRO) was the simplest solution to achieving fairness.

Brian Binley, president of the Save the Pub Group, attacked the Government’s proposals of parallel rent reviews, saying: “From a tenant’s point of view this mechanism is a time-consuming process allowing the pubcos to run a tenant into financial collapse long before they receive an adjudication determination. It’s potentially expensive for tenants, who will be required to employ the services of professionals to represent them. It is complex and it is totally unsupported.

He added: “I urge the minister to reconsider the option the Business, Innovation and Skills Committee (BISC) proposed in its report which initially the Secretary of State seemed to have accepted, and then I fear the treasury oar had an impact.”

Andrew Griffiths, the chair of the All Party Parliamentary Beer Group, said he believed the bill was a “good compromise and a workable solution” but that there was more to do.

Family brewers​

He said: “No one is suggesting the small family brewers have acted irresponsibly. One solution would be to move some of the more proscriptive and expensive regulatory issues from the basic to the enhanced code. Things like the RICS requirement and the need for a compliance officer.

“I think there is a need to look at tenancies at will. The suggestion of having a tenancy at will not covered by the code, up to a point of perhaps 12 months, would allow the necessary flexibility. I think franchises could be looked at. There is an argument that they should not be covered.”

Adrian Bailey, chair of BISC, praised the Government for eventually acting but expressed concern at “grave flaws” in the proposals.

He said: “The argument that is being used against MRO is that pub companies will just abandon their tied tenants and become real estate operators and that others may step in and try reproduce the model to the detriment of the existing variety of agreements and range of beers on offer in our pubs. I feel that is a hollow threat because under the Real Investment Trust legislation, 95% of rental income has to go to shareholders, which would render that impossible for the pub companies and 75% of income must come from rents, which would also be a barrier to that.”

Guest beer​

Justin Tomlinson, Conservative member for Swindon North, criticised calls for a guest beer option to be included in the proposals.

He said: “It would be telling a McDonalds franchisee that they could choose from the Burger King menu for their guest burger.

“What I do think is that we need to make sure the terms the tenants sign up to are absolutely crystal clear so that tenants know what they are signing up for. We should also do more to train the future generation of landlords. Looking at hospitality management, I think a lot more can be done, especially now food is so important to pubs.”

Summing up the debate, Shadow Pubs Minister Toby Perkins said: “Unless strengthened this bill will not provide the change we need for Britain’s pubs.

"To demonstrate the extent to which the bill has fallen short – it was welcomed by the honourable gentleman from Burton.“

Balance​

Business, Innovation and Skills minister, Matthew Hancock, was left to respond to the many detractors on behalf of the Government.

He said: “The crucial balance we are trying to achieve is between the need for changes and the need not to undermine the tied model as a whole because we do not want unintended consequences.

“Making sure this works for smaller pub companies and brewers is important.

“On the subject of franchises, most franchises also have ties, particularly with their beer arrangements.

“Some members asked about detail – we are consulting on the levels of the fines and will bring forward more details in due course.”  

The bill will now move to committee stage, where it will be discussed line by line.