Economy and Fair Work Committee [Draft]

Meeting date: Wednesday, June 5, 2024

Official Report 761KB pdf

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Subordinate Legislation

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Scottish Pubs Code Regulations 2024 [Draft]

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Tied Pubs (Fees and Financial Penalties) (Scotland) Regulations 2024 [Draft]

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Scottish Pubs Code Adjudicator (Miscellaneous Listings) Order 2024 [Draft]

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Scottish Pubs Code Adjudicator (Duty to Publish Certain Information) Regulations 2024 [Draft]

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Tied Pubs (Scottish Arbitration Rules) Amendment Order 2024 [Draft]

Good morning, and welcome to the 18th meeting in 2024 of the Economy and Fair Work Committee. We have received apologies from Colin Beattie and Brian Whittle.

Our first item of business is an evidence-taking session on five Scottish statutory instruments relating to the Tied Pubs (Scotland) Act 2021. I welcome Tom Arthur, the Minister for Employment and Investment. He is joined by officials from the Scottish Government. Aileen Bearhop is head of industry growth in the food and drink division, Deborah Cook is food and drink policy manager and Mairead McCrossan is a solicitor.

Before I invite the minister to address us, I note that the minister wrote to the committee on 30 May with reference to some concerns from the sector about the code. The letter also noted the minister’s intention to lay amending regulations to address the points that were made by the Delegated Powers and Law Reform Committee in its report. That amending Scottish statutory instrument will also extend into 2025 the date on which the Scottish pubs code comes into force.

I invite the minister to make a short opening statement covering all five instruments.??

Good morning. As, I am sure, you can all appreciate, it has been a difficult balancing act to arrive at a Scottish pubs code that fulfils the intention of the 2021 act and meets the regulatory principles while, at the same time, fully addressing the concerns of stakeholders who, on certain matters, are not in agreement.

The task has been made more difficult by the legal challenges to the act, including the interim interdict orders that were in place, which meant that further targeted consultation has not been possible over an extended period of time. The legal challenge concluded only in March 2024, when the United Kingdom Supreme Court refused the petitioner’s application for permission to appeal.

As you know, stakeholders have concerns about the regulations—in particular, about the Scottish pubs code. I have been made aware of real concerns among tenants and pub companies about varying aspects of the code. That concerns me greatly.

I want to be clear that, had it not been for the legal requirement for Scottish ministers to lay the code by the deadline that is set out in section 4 of the 2021 act, which now requires me to lay the code as soon as is reasonably practicable, I would have withdrawn the regulations. I am not able to do that, so I have decided to create space and time for further dialogue on the Scottish pubs code within the tied pubs sector. I will do that by bringing forward an amending instrument, which I intend to lay this week, which changes the coming-into-force date of the code to 2025. That will provide time for Scottish ministers to carry out a further focused and targeted consultation on the Scottish pubs code. I intend to then introduce a further SSI making amendments to the Scottish pubs code.

I will keep the delay to a minimum and will engage with stakeholders to ensure that we can bring the legislation into force as soon as possible. I have already committed to introducing an amending SSI in response to technical issues that were raised by the Delegated Powers and Law Reform Committee.

My intention is to engage fully with stakeholders on specific matters, so that the code delivers more effectively the improvements that the sector wishes to see. The purpose of the code is to improve the position of tied pub tenants. Therefore, it must not be—or be perceived to be—to the detriment of tenants. I should be clear, however, that I need the sector to work with me on this and to do so pragmatically. The Scottish pubs code needs to be fair and proportionate. My aim is for consensus, as far as that is possible.

The shape of the code has largely been predetermined by the 2021 act, which was approved unanimously by Parliament. We will not be reopening policy debates on what the act should have contained or whether legislation should be in place, or, indeed, on the full content of the code. I want to focus on key areas of concern.

I apologise to the committee for the somewhat unorthodox approach that we are having to take. However, I want to give my commitment on the official record that my officials and I will work with representatives of tied pub tenants and pub-owning businesses to improve the Scottish pubs code over the coming months, with a view to a revised code coming into force as early as possible. I expect that to be no later than early 2025.

Once in place, the code will be monitored and enforced by the Scottish pubs code adjudicator. Furthermore, the 2021 act requires that the work of the adjudicator and the code be reviewed within two years, and every three years thereafter. We are obliged, therefore, to continue to ensure that the code is proportionate and in keeping with the obligations of the act.

I welcome any questions, but I hope that the committee will bear in mind my comments in my opening statement and the likelihood that I will be reconsidering points that you have raised.

As you have recognised, this is quite an unorthodox approach. It is not ideal that, this morning, we are dealing with regulations that come with an intention to amend them.

You said that there was a legal responsibility and that the deadline required you to produce the code as soon as is reasonably practicable. Is there an argument that “reasonably practicable” could be interpreted as meaning that you should produce the code once you have made the amendments or had the chance to do the focused consultation? Why are we having to deal with this process this morning, rather than leaving it until after recess?

I assure the committee that, along with my officials, I have considered these matters in considerable detail. As I set out in my statement, if the Government considered it to be possible to withdraw the regulations, that is the approach that we would take.

However, the position is that we have had to bring forward the regulations to comply with the requirements that are set out in the 2021 act. That was a decision by Parliament, and ministers are bound by statute. However, given the significant concerns that have been raised with me since I came into post, I think that it would be far more efficient, effective and, crucially, in the interests of tenants and pub-owning businesses—notwithstanding that we do not have the opportunity, in the view of the Government, to withdraw the regulations—for us to create further space to allow for focused and targeted consultation to seek to address those points, recognising that there is a strong divergence of views on certain issues between the relevant parties. We will seek to create the space to address those points and to build consensus, with the ultimate aim of bringing forward a revised pubs code that can command the confidence of both sides of the sector.

I reiterate my apologies to the committee. As I say, this is an unorthodox approach and is not one that I would have chosen. However, we are bound to comply with the terms of the 2021 act as passed by Parliament.

I have a couple of questions before I bring in other members. You referred to a further SSI. Can you give us a timescale for when you anticipate that being introduced?

I know that other members will want to ask about the concerns that have been raised, but you have recognised that there are quite strong views around the pubs code. Do you feel that the focused consultation will be able to resolve the situation so that we end up with a code that everybody is happy with? So far, that has not been achievable.

In response to your first question, the intention is that the amending regulations will be laid on Friday, so the committee will have sight of those.

On your second question, I will be consistent with the views that I have shared with the representatives of tenants and pub-owning businesses whom I have met prior to this morning’s session. I recognise that there are strong views on the pubs code. Given that concern has been expressed that the code, as it is proposed in the regulations, may well be—or is potentially perceived to be—to the detriment of the interests of tenants, I want, in the first instance, to address that specific point. All of us would want to ensure that the legislation that we pass is well understood and is perceived to be of benefit, including of practical benefit.

My approach will be to engage with both parties—I always seek to take such an approach. I am more than happy to engage with any members of Parliament who are interested in this matter, as well as with stakeholders more widely. I want to have further engagement, which will inform the process that we take with regard to a consultation. The intention would be to consult over the summer and to keep the process short, but long enough that we provide an opportunity for all parties to express clear views on the matter. We want that consultation to be focused on addressing the key issues.

The second aspect that I referred to is the fact that there is a requirement in the legislation to review the pubs code. That will afford an opportunity for further broader consideration. I am conscious that the legislation was passed by Parliament more than three years ago. There is a strong desire among stakeholders—especially tenants’ representatives—and on the part of Neil Bibby, who is the member who brought the Tied Pubs (Scotland) Bill to Parliament, for the legislation to be implemented, and I want to ensure that we can meet those asks.

As I said, in the first instance, my focus will be, through further engagement with the sector and any other interested parties, to understand their concerns fully and more deeply and to see whether we can identify some areas of common ground. After that, as you would expect, we will have a focused consultation. Once that consultation has concluded, we will be in a position to consider the feedback that we have received and to bring forward amending regulations for a revised Scottish pubs code. We recognise that, as per the statutory requirements for review, there will be an opportunity for further consideration.

Although I have said that our aim is to bring a revised code into force no later than early 2025, I would, naturally, want that to happen sooner. What will determine whether that will happen sooner will be the progress that we make over the summer. We want to be in a position—I think that this is a shared view—to bring forward amending regulations as soon as possible, but we want to do so in a way that is consistent with providing an opportunity for targeted engagement and consultation.

You said that the amending SSI will be laid on Friday, but when will the further SSIs that will make amendments to the Scottish pubs code be introduced? Do you anticipate that you will be able to introduce them after recess? What is the timescale for introducing those instruments?

I cannot give you a specific timescale for that because, ultimately, that will be determined by the progress that we make with the consultation. I anticipate that we will consult over the summer and into the early autumn. That will be followed by the usual process that we go through with a consultation and the publication of a response. At that point, the regulations would follow. I hope to be in a position to introduce regulations in the late autumn. I do not want to overqualify every remark that I make this morning on the matter, but that will be contingent on the progress that we make.

Our aim is clear: we want to be in a position to bring a revised code into force early in 2025. I hope that that is an aspiration that everyone shares. Naturally, I would want to do that sooner, but I am conscious of the need to have focused engagement, because part of what has led us to the circumstances that we are in is the fact that we have not had the number of opportunities for further engagement that we would have liked to have had, because of the processes that intervened following the passing of the Tied Pubs (Scotland) Bill three years ago.

09:15  

We move to questions from members.

I have a brief follow-up to Claire Baker’s questions. What would the implications be if we did not approve the instruments that we are considering today? I suppose that that comes back to the question about the delay. I hear what you say about wanting to comply with the 2021 act, but what would the implications be if we waited, carried out all the consultation that you intend to do anyway and got it right first?

My understanding is that, if Parliament were to determine that it did not wish to approve the regulations that the Government is seeking approval of, such a decision would create a different dynamic, because we would not be working with regulations that we were going to amend.

In practice—to cut to the point—I would still embark on the process that I am proposing to take. That is how I would want to take things forward. For me, what is important is ensuring that we give effect to the will of Parliament. The 2021 legislation was passed unanimously. There is a strong interest among tenants’ representatives in its coming on stream. They want it to be proportionate and effective legislation that delivers on what they understand the policy intent of the act to be. We are not in that position right now because—to be perfectly candid with the committee—people do not have confidence that the regulations will deliver on the policy intent.

That is why I am asking the committee to endorse that approach. If the committee chooses not to approve the regulations, the view of Parliament will prevail. However, I will still seek to engage with the sector over the summer in order to be in a position to introduce a revised pubs code at the earliest possible opportunity, so that we can give effect to the legislation.

It is important to recognise that the bill was passed by Parliament unanimously and that it stipulated that the regulations should come before us within two years. It is helpful that the minister has confirmed that the delay was entirely due to unsuccessful legal challenges by a number of big pub companies that sought to thwart the will of Parliament. It is also important to recognise that, as a result of those challenges, publicans are missing out on the rights that their counterparts in England and Wales have had since 2016.

I understand that, prior to the regulations coming before the committee, you received representations from the Scottish Licensed Trade Association, which highlighted that the code, as it is currently drafted, does not adequately protect tied pub tenants or reflect what was stated in the act. I appreciate that you have noted that larger changes may necessitate further consultation, but the SLTA outlined four areas, including market-rent-only leases, gaming machines and flow-monitoring devices, in which amendments could be made now, given that there was sufficient focus on those areas in the original consultation.

Have you given consideration to those proposed changes? Why have you opted not to make amendments to the regulations before us or, at least, to publish—before today—regulations that would have dealt with those particular concerns?

I assure Colin Smyth and the committee that we gave very careful consideration to that. I was very grateful for the meeting that I had with the Scottish Licensed Trade Association and Neil Bibby two weeks ago. We gave detailed consideration to those matters, but it is the Government’s view that, given the nature and scale of the proposed changes and the interests involved, consultation would be required. That is why we have taken the approach that we have.

I had hoped to have been in a position in which we could identify a way forward so that the code could come into effect when it was originally intended that it would. However, I have arrived at the view that we need to do further consultation. I am sure that the committee appreciates the context in which we are operating, in which significant interests are involved, and the importance of ensuring that we have a robust process of consultation.

However, I assure Mr Smyth that I gave the course of action that he described serious consideration, and I hope that he understands and appreciates the reasons that I have set out as to why we were not able to proceed in the way that he suggests.

You have indicated that, as a result of that, the pubs code will not come in in October 2024, and that that is now likely to happen in early 2025. The SLTA raised concerns that that delay could result in pubcos seeking to end tied pub tenancies prior to the code taking effect next year, in order to avoid being tied to some of the provisions that are currently in the code and those that could be included as a result of further consultation. Do you recognise that point, and is there any action that you can take—other than seeking to bring in the code as quickly as possible—to avoid such unreasonable action?

First, I have been made aware of those concerns directly. I know that the member and the committee will appreciate that it is not for me, as a minister, to comment on the commercial relationships that exist in that space. That point gets to the heart of striking the balance between the desire for the code to come into effect as soon as possible and the need for the code to be understood and perceived by tenants as being of value, not of detriment. That concern has been expressed.

I recognise that what we have is far from an ideal set of circumstances. The path that I am trying to take is to give the certainty that the code will come into effect, but also to work intensely with stakeholders to address those particular concerns, including those that the Scottish Licensed Trade Association has articulated in its correspondence.

Good morning, minister. In addition to the correspondence from the Scottish Licensed Trade Association, to which Colin Smyth referred, the Scottish Beer and Pub Association has written to the committee, raising a number of concerns. As you will be aware, it did not support the legislation in the first place. Notwithstanding that, it has a number of detailed issues to raise in relation to the regulations that have been made. They include the lack of definition of what a tenant is. The Scottish Beer and Pub Association says that that does not include franchise agreements, managed operator agreements or tenancies at will. There is a lack of clarity there.

The association also has concerns about the onerous information requirements of regulation 10 of the Scottish Pubs Code Regulations 2024. It has further concerns in relation to regulation 12 and the amount of information that is required on rent assessments, which it says is too onerous.

The association has concerns around the guest beer provision, as it is unclear how eligibility could confidently be determined. It also has concerns around the lack of clarity on the investment waiver in relation to the charging of market rent only.

There is quite a lot of detail in that, as you will understand. I suppose that, given that you are doing further work on the various provisions, we are looking for an assurance that you will consider those points as part of that.

I am happy to give that assurance to Mr Fraser and the committee. I met representatives of the Beer and Pub Association on Friday of last week, and they have shared that correspondence. I can confirm that my officials will be engaged in detailed dialogue. As I hope the committee will appreciate, I would like to have time to consider those points and to have an opportunity to discuss them with both the associations and wider stakeholders before we bring forward proposals for consultation. I want to give the reassurance, however, that we will be engaging constructively and taking each of the points that have been made for detailed consideration.

There are no further questions.

The next agenda item is formal consideration of the motions to approve the draft instruments. I issue the reminder that only members and the minister may participate in this agenda item. I invite the minster to move the motions and to make any further comments that he wishes to make.

Motions moved,

That the Economy and Fair Work Committee recommends that the Scottish Pubs Code Regulations 2024 [draft] be approved.

That the Economy and Fair Work Committee recommends that the Tied Pubs (Fees and Financial Penalties) (Scotland) Regulations 2024 [draft] be approved.

That the Economy and Fair Work Committee recommends that the Scottish Pubs Code Adjudicator (Miscellaneous Listings) Order 2024 [draft] be approved.

That the Economy and Fair Work Committee recommends that the Scottish Pubs Code Adjudicator (Duty to Publish Certain Information) Regulations 2024 [draft] be approved.

That the Economy and Fair Work Committee recommends that the Tied Pubs (Scottish Arbitration Rules) Amendment Order 2024 [draft] be approved.—[Tom Arthur]

Motions agreed to.

I thank the minister and his officials for attending this morning. The committee is required to report to Parliament on whether the draft instruments should be approved, and a report covering all five instruments will be prepared. Given the tight timescale, do committee members agree to delegate approval of the report to me?

Members indicated agreement.