Small Business, Enterprise and Employment Bill

Lord Borwick Excerpts

Wednesday 28th January 2015 Grand Committee

[Lord Whitty]

In that case, my noble friend and I are on exactly the same point in the ideological spectrum—as ever. We are discussing these as amendments to the pre-existing text that we received from the Commons. Government Amendment 89A effectively rewrites that proposition from the Commons.

At Second Reading the Minister said on behalf of the Government that there were things that needed to be done to ensure that the proposition was going to be workable and did not have unintended consequences. I understand that, and that means there are parts of the noble Baroness’s amendment that I would be in favour of. But under the amendment as we now have it—and we have not had it for very long; the fact that we are debating it today puts us in some difficulty given that the consultation hitherto, as I said earlier, has been somewhat attenuated—the Government’s changes in detail do a number of things. They delay the implementation because whereas the proposition adopted by the Commons set the situation on the MRO in primary legislation, therefore bringing it into effect at the earliest point when the Bill came into law, we are, instead, reliant on the drafting of the code and the bringing forward of secondary legislation.

The Government’s amendments also change a number of the trigger points, thereby diluting the effectiveness of the MRO proposition. Amendment 89A changes the threshold because it confuses the issue of tied pubs with all tenanted pubs. The Pubs Code ought to relate to all relationships between the pubcos and their tenants, whether they are tied or not. The MRO relates to the tied pubs but the threshold of defining who this applies to should be the size of the company as a whole, which includes all sorts of tenancies. Restricting it to tied tenancies lays open the possibility of them ending one or two ties to get below the 500 mark. I do not suppose I could prove it in a court of law, but there are indications that some of the pubcos are looking to split their company structure so they would not hit the 500 mark for tied tenancies. We ought not to lay that temptation before them. The Government’s proposition fails to recognise that there is a distinction between how a Pubs Code—which I think we are all in support of—operates and the MRO option, which relates only to tied tenants. I hope, therefore, that my propositions do a number of things. They separate out the issue of the code from that of the MRO. The code is set out clearly in Clause 41 and, at the beginning of Clause 42, the MRO coming into effect is not dependent on the code. The amendments in my name would also change the definition of the threshold, although most of that comes up in a later group, in relation to Clause 66.

I do not like the procedure on this Bill because the Government have misjudged the mood, not just in the Commons and among those tied tenancies and other organisations which have pressed for this. They have succumbed unnecessarily to pressure from the larger breweries. There is no need for some of the changes to the proposition that we have received. There is, therefore, a need to reinforce those rather than go in the opposite direction, which the Government’s amendments are doing. What came to us from the Commons was not perfect, but the Government are proposing to make it worse. For that reason, we all need to take a step back and look at what we agree on in the original proposition, the amendments we are discussing today and the Government’s proposed complete redraft. We need to see whether we could, in discussion with all sides of the industry, come up with something closer to an agreement in time for Report or, possibly, send it back to the Commons and let them sort it out.

We are in an unfortunate position today. This is a complex group of amendments and none of us understands all the issues. Whatever comes out of this is going to be pretty unsatisfactory and not a good basis on which to go to Report at this point in a parliamentary Session. This does need sorting: it needs to be workable and I agree with the noble Baroness that we do not want to see unintended consequences. However, we need to be clearer as to what the consequences are that have led to the propositions in the Government’s redraft.

I hope that the Government take a step back and talk to everyone concerned. The easiest way to do that would be to withdraw all the amendments today. If the Government will not do that, we are probably in for a fairly rocky time between now and Report. If we have not met at least the overwhelming spirit of what the Commons decided, the Bill will be back in the Commons and we are in for ping-pong on the Bill. I cannot believe that the Government’s business managers really want that. There is a way to deal with this quietly and consensually. It may not work, but it might, and it would get the Government out of an awful lot of trouble. As usual, I am trying to be helpful to the Government, and I hope that they heed my words and those of my noble friends.

[Lord Borwick (Con)]

My Lords, I want to speak to Amendments 82A and 83A and thereby take in my noble friend’s Amendment 88. Amendment 82A concerns the amount of time for the negotiation of the MRO. In the original Bill, it was stated to be 21 days, which I think is too short. The difficulty for identifying a time for any negotiation is that the time required at the beginning of the process, when it is new to both parties, will be different to the time to produce a market rent in a negotiation in, say, five years’ time, when everyone knows what the rules are. When the lawyers are helping both sides with their arguments, it could take substantially longer than 21 days.

My noble friend may say that that will come out in the detail of the Pubs Code and the statutory instrument, but how will that time be judged? Will it change from the beginning of the period and a few years’ time?

Amendment 83A concerns the problem that under the Bill and the government amendments, existing tenancy agreements would continue. So the lease would continue in all respects other than in the rental. That brings up the difficult subject of SCORFA—an acronym standing for “special commercial or financial advantages”, and is designed not to flummox the great people of Hansard but to refer to all the advantages given to the pub tenant, all the way down to providing glasses, ashtrays and beer mats.

If the lease is being changed to rent only, it is unreasonable to leave the landlord, the pub owner, in the position of providing those benefits when he is not providing the rent. My noble friend may say that all those points will be dealt with in the statutory instrument that forms the Pubs Code, but it will be subject to consultation. What if the result of that consultation is a mass of people saying that it should not be included? If so, will we have landowners subject to a lease that is not right, where one important clause has been removed?

Surely my noble friend will agree that a matter as reasonable and important as this should be in the Bill and bring forward government amendments to deal with the issue.