Official Report 1133KB pdf
The next item of business is a debate on motion S5M-23343, in the name of Neil Bibby, on the Tied Pubs (Scotland) Bill. I invite members who wish to speak in the debate to press their request-to-speak buttons now.
17:10
I refer members to my entry in the register of members’ interests.
It is a critical time for pubs and all those whose livelihoods depend on the licensed trade. The Tied Pubs (Scotland) Bill would give much-needed hope to tied publicans that the sector can build back better, and that overdue reform is almost here.
A tied pub is a pub that is required to buy at least some of its products from its pub-owning company. Evidence that the model skews against tenants led to a campaign for reform. That campaign brought about change in England and Wales with legislation in 2015, and it did so with cross-party support. The purpose of my bill is to bring that change to Scotland.
As campaigners told the lead committee, the problem is that pubcos take too much of pubs’ profits, leaving the tenant—the small business—unable to make a living. In written evidence to the committee, a publican from Renfrewshire said that the
“tenant has no real control over the prices and share of profits ... the Pub co ... restrict the opportunities for tenants to develop a viable and profitable business.”
A publican from Aberdeen said:
“Everyone that works in the building gets a wage but there have been times where we don’t have wages for ourselves as the expenses are too high.”
He estimates that he would be £35,000 to £40,000 better off if he did not have to pay excessive mark-ups on tied products.
A survey by the Campaign for Real Ale of 200 Scottish tied tenants found that 74 per cent believe that they were worse off due to their tie, and 96.5 per cent believed that a lower dry rent did not fully take into account higher costs. Only 3 per cent had a positive sentiment about their tie. Two thirds were earning less than £15,000 per annum, and 99 per cent believed that the Scottish Government had to act. That is why I decided to introduce the Tied Pubs (Scotland) Bill.
The bill would require ministers to create a pubs code to govern the relationship between pubcos and tied tenants, and an independent adjudicator. The code would be based on three principles: fair and lawful dealing by pub-owning businesses towards tied tenants; tied pub tenants to be no worse off than if they were not tied; and tied agreements to offer a fair share of risk and reward.
Part 4 of the United Kingdom’s Small Business, Enterprise and Employment Act 2015 was the starting point for my bill, but it was only a start. Where possible, I have sought to improve on the 2015 act and learn from where it fell short. For example, the fair share of risk and reward principle is not on the statute book at Westminster. I included it in my bill because I believe that it would better protect tenants from profit extraction.
In common with the 2015 act, my bill would give tenants a market rent-only option. That option would involve the right to break the tie and pay a fair market rent, but without the complex trigger points that are in the UK act. In the bill, market rent-only rights are simpler, cleaner and automatic, and would eliminate the need for long arbitrations.
My bill includes guest beer rights, which would mean that tenants could stock at least one product of their choosing, thereby helping them to respond to demand, maximise their takings and support Scotland’s brewers.
The bill would require the Parliament to approve the adjudicator, and prevent anyone with recent involvement in the industry from being appointed, and therefore keep our pubs code adjudicator free from conflicts of interest.
Should the bill progress, I will work with the Scottish Government and other parties to seek consensus on further improvements. I thank the minister, Jamie Hepburn, for listening to the voices of Scotland’s tied publicans, consumers, small business groups and unions over recent weeks, and for his time in discussing how to progress the bill and deliver much-needed change.
The committee commended the intent behind the bill, but it was disappointing that only a minority of members recommended legislation. In the report, that minority notes that the bill is supported by the majority of those who responded to the committee’s call for evidence. That is right: the overwhelming majority of evidence supported legislation, including submissions from the Scottish Licensed Trade Association, the Federation of Small Businesses in Scotland, GMB Scotland, and the Society of Independent Brewers, to name just a few.
The committee’s anonymous survey of tenants also found that 93 per cent supported the bill. An independent Scottish Parliament information centre analysis of the survey states that
“tenants want to see a fairer split of risk and reward—currently there is a feeling that tenants take on most of the risk while pub-owning businesses take an outsized share of the reward.”
Many responses to my consultation were supplied anonymously or confidentially, as many tenants feared recrimination. Nonetheless, tenants participated in my consultation. Again, 93 per cent of responses supported legislation.
The committee expressed frustration at “polarised” arguments. There is no doubt that opinion is divided. However, the word “polarised” suggests that it is divided equally; it is not. On one side are the interests of tenants, workers, consumers and producers; on the other are the corporate interests of a few large pub companies, which want to remain unaccountable.
I also want to draw attention to two recent developments that mean that Parliament and committee members must look at the issue in a new light.
First, the Pubs Code Adjudicator for England and Wales issued Heineken-owned Star Pubs & Bars with an unprecedented £2 million fine for breaching the pubs code. That was just weeks after Lawson Mountstevens, its managing director, told the committee:
“We are absolutely an honourable company.”—[Official Report, Economy, Energy and Fair Work Committee, 18 August 2020; c 52.]
Star’s headquarters is here in Scotland, but Scottish tenants have no adjudicator to protect them. The adjudicator said that Star
“did not engage frankly and transparently with its tenants”,
and went on to say that
“The company must change its mindset and become proactive in its approach to compliance.”
How can Parliament trust such companies to voluntarily regulate themselves?
Secondly, the UK Government published its review of the code for England and Wales. Far from recommending a return to deregulation, ministers said in writing to the Pubs Code Adjudicator:
“retain evidence you may come across where ... your existing powers are insufficient ... This will allow ... consideration of”
the
“case for strengthened powers as part of the next statutory review”.
Not only is there a regulatory gap with England and Wales, but if we do not act that gap will grow. Tenants of large pub companies in England and Wales have the protection of a code, while tenants of those same pub companies here in Scotland do not. The bill seeks to address that injustice. Fairness is the principle at the heart of the bill, and I ask the Parliament to support the general principles of the bill.
I move,
That the Parliament agrees to the general principles of the Tied Pubs (Scotland) Bill.
I call Gordon Lindhurst to speak as convener on behalf of the Economy, Energy and Fair Work Committee.
17:16
Presiding Officer,
“This work is dedicated to the abomination of all that restricts travel.”
That sounds almost contemporary, but so reads the dedication to the book “The Thomas Cook Story”, 1954 edition, by John Pudney. What does that tale of the Thomas Cook travel company have to do with pubs? Quite a lot, actually. Thomas Cook originated as a temperance—non-alcoholic beverage—travel company, in the wake of the Beerhouse Act 1830, which was intended to establish free trade in beer.
Pudney wrote that the results of the act
“were soon apparent. Even the poorest might keep a beerhouse, or let the beer house keep them, the more so when some brewers were willing to pay the two guineas for the licence and supply stock if the house were ‘tied’. Thirty thousand new beer houses were opened at once ... Certainly as the Act intended, more beer was drunk ... Those who had favoured the measure were aghast. Sydney Smith reported: ‘The new Beer Bill has begun its operations. Everybody is drunk. Those who are not singing are sprawling.’”
From that, we see that it is well recognised from history that parliamentary measures that relate to beer, pubs and tied pubs need very careful consideration indeed, for the consequences of such legislation can be far reaching—in ways far beyond those that were imagined by proposers, promoters or opposers alike.
However, before I turn from Pudney’s account, I mention the son of Thomas Cook and his wife, Marianne. They named him John Mason—[Laughter.] I kid you not. Pudney wrote:
“The child was something of a phenomenon ... The progress of the little John Mason must have been watched with especial interest.”
As far as I am aware, he is no relation, but we have of course our own John Mason, both in the Parliament and, often, in our committee, plying witnesses with perceptive questions and thoughts for which we are grateful.
As convener of the committee that considered the bill, but someone who was not a member during that time—and given my appreciation of the benefits of the temperance movement of which Thomas Cook was part—I am personally placed in a somewhat invidious position in this debate. To be clear—a modern favourite political catchphrase—I speak here in my capacity as convener on behalf of the committee, and on this occasion perhaps more so than at other times.
The committee’s consultation on the bill landed at a time of economic and practical difficulty for everyone—no less so for pub owners and tenants. The committee is appreciative of everyone who took the time to engage with us despite these trying Covid times. The committee heard from a range of people in response to its call for views in its online survey, focus groups and oral evidence sessions. It heard from tenants who supported the bill and those who did not. It heard from pub membership bodies, tenant membership bodies, campaigners, consumers, large and small brewers and the unions. The committee is deeply grateful to all those who shared their views.
Presenting a bill to a committee, as Neil Bibby has done, involves a great deal of work. Members who seek to introduce good bills are to be commended for doing so. My predecessor, Michelle Ballantyne, who was convener of the committee when the bill was introduced in February and during the evidence taking on the bill, should also be thanked for her good work on the committee.
Evidence for and against the bill was presented robustly. “Robust” is of course another current political catchphrase, but views were genuinely passionate and polarised, and no doubt diverging views will echo around the chamber today as in committee, where majority and minority views were expressed.
A majority of the committee felt
“frustrated by the polarised arguments and the lack of complete, robust and independent data”
that was presented by either supporters of the bill or those who opposed it. That majority was also unconvinced that there was enough evidence to suggest that there were large-scale issues in the tied pubs sector that would justify legislation. A minority of the committee felt that an “imbalance” between pub tenants and landlords exists and that the bill would help to redress it.
A majority of the committee commended the intention behind the bill, but did not support its general principles. I abstained, and in those circumstances, I will leave it up to others to go into the detail of the bill. Presiding Officer, I apologise to the chamber as I need to leave after my speech, which I think you are aware of.
That is breaking news to me, but I believe you.
17:23
I begin, sadly, not with the literary flair of the committee convener, but by thanking Neil Bibby for introducing the bill and encouraging and fostering discussion of what are clearly important issues concerning the operation of the pub sector in Scotland. I congratulate him on advancing the bill to this stage and on the engagement that we have had.
The Scottish Government has sought evidence on the matter in the past. In 2016, we commissioned independent research on the subject. The evidence that we gathered at that juncture was limited; accordingly, we determined that it would be an area in which we would not introduce legislation. Nonetheless, Mr Bibby has done so, as is his right and the right of any elected representative here, so it is incumbent on us to consider it.
I will begin by setting out the Scottish Government’s support for a successful pub sector in Scotland. As Mr Bibby and Mr Lindhurst have already done, I acknowledge the challenges that are being faced by the industry. We are providing what support we can to ensure that we can continue, when we emerge from the coronavirus crisis, to enjoy the benefits and social opportunities that are offered by pubs.
I know that Neil Bibby has been concerned for a number of years about what he considers to be an imbalance in the relationship between landlords and tenants in the pub sector, and he laid that out when he opened today’s debate. Others have also flagged up those concerns, and he has sought to address them with a bill that follows the example of England and Wales by introducing a statutory pubs code and adjudicator in Scotland. It goes further; the provisions in the bill would impose new requirements on pub companies that are responsible for about 750 pubs that operate on the tied pub model.
The policy memorandum confirms that the numbers of arbitration cases and market-rent-only requests that would result from the bill would, likely, be low. Fundamentally, as a Parliament we need to be convinced that legislation that puts demands on business is necessary before we commit to taking it forward.
Throughout the process, I have been clear that the Government supports the broad intention of the bill, which is fair and equitable treatment within commercial agreements. We aim to support that across businesses in all sectors. Therefore, I have been interested to see and listen to the arguments that have been presented during the stage 1 process. I thank the committee for its work in assessing the evidence and presenting a clear and thorough report.
I acknowledge the commitment of those who engaged with the stage 1 evidence process and I understand the sometimes strong views, but I share the committee’s frustrations about the polarised nature of the evidence. It has been difficult to come to a view, when opinions are so firm on both sides of the argument.
I have carefully considered the committee’s report and note its conclusion that, although it commends the intent behind the bill, it does not agree that legislation is required and does not support the general principles of the bill.
However, I have been listening carefully and I have engaged with stakeholders in order to get first-hand advice. I have also taken a keen interest in developments including the UK Government’s review of the pubs code adjudicator in England and Wales.
The challenge for any Government is to balance the scale of the problem against the required response. The polarity of views and—to be frank—the lack of independent evidence identified by the committee has made the Government’s decision on the bill one of fine margins.
There are many strong landlord and tenant relationships in the pub sector; those will continue, and no one suggests that there is no place for tied pubs in the overall marketplace. However, there are concerns and, ultimately, we need to ensure fairness. I am not convinced that the balance is right or that the voluntary code approach is working. Indeed, the lack of awareness of the voluntary code is of concern to me, because it should be a useful governance tool.
The decision has been challenging but, on balance, my conclusion is that the Scottish Government should support the bill at stage 1. However, our continued support is contingent on securing amendments to the bill, which I have already discussed with Mr Bibby. The amendments that I seek involve issues such as lengthening implementation and review timescales for the code, which I believe is essential so that the process of implementing a code is transparent, fair and properly consulted on, particularly in the context of the Scottish Government and industry still dealing with Covid-19.
I also seek amendments to ensure the removal of elements of retrospection, so that past tenants cannot raise cases long after they have left the sector, as well as amendments to ensure that levies on pub companies are proportionate. I want to ensure that the bill works for all parts of the sector.
On that basis, I will support the Tied Pubs (Scotland) Bill at stage 1, but, going forward, that support will be contingent on amendments. I look forward to continuing to discuss those matters with Mr Bibby.
17:29
I accept that the Tied Pubs (Scotland) Bill has been introduced with good intentions, although the manner in which the member has sought to progress the bill has been inappropriate. Neil Bibby has said of the Economy, Energy and Fair Work Committee that its
“report flies in the face of the evidence placed before them.”
That is not true. The only study that was conducted in Scotland on the issue before the member introduced the bill was the independent CGA study that was commissioned by the Scottish Government, which was quite clear that no sector was significantly disadvantaged when compared with others. Neil Bibby says that 93 per cent of respondents to his survey agree with him, but it was not a statistically robust survey and was flooded by responses from fellow Labour politicians and members.
Neil Bibby also said that
“Tory and SNP MSPs inexplicably want to leave tenants in Scotland with no rights at all.”
That is factually incorrect. However, it reflects a vexatious narrative. That stands in vivid contrast to the approach of Daniel Johnson in introducing his member’s bill.
The bill intends to extend to tied tenants in Scotland similar provisions to those that are in place in England and Wales. However, there are significant concerns about the bill—primarily because the markets are dramatically different. For example, tied pubs make up 36 per cent of the English and Welsh market, whereas tied pubs account for just 17 per cent of the market in Scotland. The bill will be inherently narrow in scope, which raises the question whether there is enough of a problem for it to address.
The committee’s report raised that very point. It said:
“The majority were unconvinced that sufficient evidence was presented to the Committee to suggest that the problem described was large-scale or that there were adequate grounds to warrant legislative interference in contractual agreements.”
Addressing such a fundamental question must be a priority as the bill progresses, or we risk losing investment and jobs. That is to be avoided at the best of times, but especially during the current crisis, when the Scottish pub sector is on its knees.
The provision for market rent only, without qualifying circumstances, is an intrusion into contract law. It is hard to imagine that that would be accepted in other sectors. It could be a serious disincentive for pub companies to invest. We already know what that looks like: following the introduction of the pubs code in England and Wales, UK-wide investment from pub companies flowed to Scottish pubs—it almost doubled from 6.53 per cent to 11.66 per cent. Unfortunately, early signs of investment flight have already appeared in Scotland. An estimated £10 million of investment has been put on hold until the bill is decided on. I hope that not one penny of that investment will be lost, if the bill progresses. If investment is lost, Neil Bibby will have a lot to answer for.
I appreciate that such an outcome is not the intention of the bill. The current voluntary Scottish pubs code offers a model to avoid conflict by giving tenants many of the rights that are included in the bill, including access to independent arbitration, but—crucially—the code does that without risking jobs or investment.
We have seen the essential support that pub companies have provided during the pandemic, including support with stock maintenance, wellbeing checks and millions of pounds in rent concessions to allow pubs to survive. In contrast, independent landlords have, at best, offered mortgage or rent deferrals. If we want more pubs to survive and more pubs to open, the tied pub model offers a route into running a pub that would otherwise require significant financial resources. Pub companies are incentivised—[Inaudible.]—to attract tenants.
Numerous tied tenants from across Scotland have contacted me. From Bearsden to Dundee to Clydebank to Edinburgh, they are living in fear of the bill progressing. Their voices must be heard. If the bill progresses, I expect Neil Bibby to get each and every tied pub tenant to support the bill—even if that is done privately to the committee. If Neil Bibby’s assertions are correct, that should not be a problem.
The Scottish Conservatives recognise the merit in exploring such issues further, so we will vote for the bill at stage 1. However, if the bill is to pass future stages, the bill’s proponents have a responsibility to address the real and pressing concerns that are being raised by businesses and tenants.
17:35
I thank Neil Bibby, his team and the non-Government bills unit for the huge amount of work that they have done to get us to the stage 1 debate. I also thank all those who gave evidence to the committee in advance of its report.
The minister said that we need evidence that we need the bill. He is absolutely right. That should be the case with every bill that we pass in the Parliament. For me, there is an incredibly straightforward set of principles behind the bill and a strong argument for agreeing to its general principles today.
Moreover, we are playing catch-up, because tied pub tenants in England and Wales have had rights for four years, after cross-party agreement was reached in the UK Parliament. In its evidence to the committee, the Federation of Small Businesses clearly stated:
“We see no reason why tied tenants in Scotland, who form a key part of an industry that contributes £1.7bn to the economy per year, should not be afforded the same legal protections as those in England and Wales.”
That is a key principle. We can benefit from the experience in England and Wales. Neil Bibby’s bill is not identical to the bill that was passed in the UK Parliament with cross-party support. There is the opportunity to make changes at stage 2.
As the Scottish Trades Union Congress and the Scottish Licensed Trade Association have said, the bill is in the best interests of Scotland’s workers and businesses. The Campaign for Real Ale put the case for Neil Bibby’s bill very clearly, saying:
“The current tied system in Scotland is unregulated by legislation and is creating an imbalance of power as pub companies develop a monopoly over the supply and cost of tied products, leaving licensees paying increasingly high prices for a restricted range of stock.”
Therefore, there is a case for legislative action.
As I said, the bill is not identical to the UK legislation. There has been the opportunity to learn from experience. As has been mentioned, there is an arbitration process that should be shortened and simplified to enable disputes to be raised by tenants and pub-owning businesses.
Maurice Golden raised concerns, but I am glad that he said that the Conservatives would support the bill being taken to stage 2. It is important that we look at the evidence and at what Neil Bibby’s proposed bill contains. It includes the principle that tied agreements should provide a fair share of risk and reward. That is absolutely appropriate. The bill says that the proposed adjudicator requires parliamentary approval to ensure that the Parliament is confident that there is no conflict of interest. There are some key legislative principles that we should be able to support.
Over recent months, Scottish Labour has been campaigning for practical support to be given to our small businesses in the hospitality sector. It is a devastating time for publicans who have built up their business from scratch, invested their energy in serving their customers and had to invest everything that they have to keep their business afloat.
I found it shocking to read that a survey by CAMRA showed that three quarters of Scotland’s tied tenants were worse off because of the tie and that 96.5 per cent believed that their reduced rent did not take into account the higher prices that they paid for their tied products, so we have evidence. There was also the Heineken decision just a few weeks ago.
We need to think about the wider impacts on the Scottish economy. We need to think about not only the pubs but the small brewers who are not able to access the tied pub sector, given the minimum volumes that are needed and the discounts and logistics that are required by large wholesale pub-owning companies.
There is time for people to sit down together to look at what is in the bill and make it work. We should consider the principles, including the principles of fairness. The bill would also give consumers greater choice, because tied tenants would be able to stock beer of their choosing.
The evidence to the committee was overwhelming, but we can also consider the organisations that support the bill: the SLTA, Tennent Caledonian Breweries, the Society of Independent Brewers, the Scottish Tourism Alliance, GMB Scotland, the FSB, the STUC, the Pubs Advisory Service, the Campaign for Pubs, the British Pub Confederation and the Forum of British Pubs. That is really important support.
The FSB’s comment about the impact that coronavirus has had on pubs is a timely reminder of the fragile business conditions. That is why we support the bill. It is the second time that Scottish Labour has introduced a bill to improve the lives of people in Scotland and I am delighted that the SNP Government is going to work with Neil Bibby and the committee.
It is important that we get this legislation, accept a vision for change and stand by the tied pubs that deserve a fairer deal and aspire not only to survive the pandemic but be part of the build back better idea that we in the Parliament should all support.
I hope that we agree to the principles of the bill today, and that there is a constructive approach to stage 2, because the bill can transform opportunities in the sector. It will help with jobs in the supply chain in Scotland, create jobs in the brewery industry and give better choice for consumers.
Scottish Labour and the Scottish Co-operative Party support the bill because we want to ensure that the Parliament seizes the opportunity with both hands, listens to the evidence, acts on it and learns from the experience of the UK legislation that was passed four years ago. That legislation has worked, but we can craft the bill to meet our conditions in Scotland. That should be what we do next.
17:40
I, too, commend Neil Bibby for introducing the bill, which the Scottish Greens believe provides for a proportionate and fair intervention in the relationship between pub companies and tied tenants. As a member of the committee that scrutinised the bill at stage 1, I thank all those who gave evidence to the committee and those who have sent briefings during the last few weeks.
As others have said, pubs are part of the social fabric of our communities across Scotland. There has been a marked increase in pub closures in the last few decades, and this year that will only be exacerbated by the on-going pandemic.
The committee heard from pub owners, tenants, drink suppliers and various trade bodies. The opinions of those who gave evidence to the committee were polarised, with those in favour believing that they are not getting a fair deal, and those against believing that the bill will damage the pub industry in Scotland.
Some tied tenants are happy with the current set-up and it is unlikely that those tenants will want to take advantage of any of the provisions in the bill, although I am sure that they will be pleased to have the backstop protection of a statutory code.
There are, however, also those who are not happy. Neil Bibby directly articulated some of their evidence. They are seeing low returns for the time and effort that they put in and are being forced into poverty as a result. In far too many cases, there is a great deal of risk for the tenant and very little for the owners.
One pub company, Hawthorn Leisure, identified £25,000 as an acceptable annual income for pub tenants. Pub tenants are often a couple—in many cases that is the preferred arrangement for pub companies—and they will often work every day. There is a real danger that some of those tenants are not currently able to pay themselves even the minimum wage. In contrast, in 2019 Hawthorn Leisure Ltd reported a £21.2 million profit. There is a power imbalance between tenants and landlords, and it is legitimate for the Parliament to alter that relationship in favour of either of the parties; in this case, the weaker one.
In his speech, Maurice Golden said that we should not interfere with private contracts. However, there are few, if any, contracts in the developed world that are not agreed within a statutory framework. We legislate in those frameworks all the time, whether it is about the contract between a landowner and farming tenant, a landlord and tenant in a house, company law, contracts, and licenses entered into between regulators and utility companies. It is a normal thing to do.
Pub tenants are personal guarantors for their businesses. They often have to put up their home and other assets. They are then charged rent and an inflated product price with little freedom to choose their own stock.
The proposed requirement for ministers to establish a Scottish pub code would address that imbalance. Providing people with fair work that provides them with an acceptable standard of living should not be up for debate. It should be one of the key principles for the code when it is designed, and I support the regulatory principles as drafted in the bill.
The member has taken note of the loopholes that were exploited when the Small Business, Enterprise and Employment Act 2015 was brought in in England and Wales, and has ensured that this bill is robust and not able to be exploited in the same way.
I regret that the committee’s stage 1 report recommended against the general principles of the bill. Most committee members took the view that, because evidence was sometimes in conflict, they were not persuaded that the legislation was needed.
The job of MSPs is to take evidence and apply their judgment. Where the evidence is contradictory, it must be assessed, weighed and used to form a judgment that is based on the merits of the proposals. That is what I did. It is why I am pleased that the minister is not persuaded by the committee’s recommendations and that he is willing to support the bill at stage 1 and to work with the member to find a way forward.
The Greens will support the bill.
17:45
I cannot let this go without comment. I commend Maurice Golden for his contribution. He attempted to demolish the bill before indicating that he will endorse it at decision time. It was an extraordinary contribution that we should all dwell on for a moment.
Pubs are community assets. They are important employers that must be protected and must get a fair deal. They also play an important role in showcasing the world-class products that Scotland makes.
We have come to value pubs even more during the pandemic as we have been deprived access to them. In the words of Joni Mitchell:
“You don’t know what you’ve got till it’s gone.”
I fear that many pubs could be gone as a result of the pandemic. Whatever we do with the bill, this must not be the last word on pubs.
I hope that members will forgive me for blowing the Liberal Democrat trumpet for a moment. Former Liberal Democrat member of Parliament Greg Mulholland, championed the sector for many years and it was through his hard work and diligence that the landscape of the pub sector in England and Wales changed. That was backed up by my colleagues Vince Cable and Jo Swinson in government, who introduced the pubs code and the adjudicator. That governed the relationship between the large pub-owning companies and their tied tenants in England and Wales. That has changed the landscape for the better.
I praise Neil Bibby for his enthusiasm. I expect to find him hiding round every corner every time I come to the Parliament: that is how enthusiastic he is about the merits of the bill. We will support the bill, not only because of that enthusiasm, but because of the merit of exploring this further.
It is important that we look at the relationship between tied tenants and their pub companies. It is true that the profile of the sector is different in Scotland and that there are fewer tied pubs. The tie may provide a way for new tenants in the sector to hone their skills and knowledge and to climb the ladder to having their own pubs. However, the support that the bill has received is an indication that there could be a significant problem. The support from a range of trade organisations and trade unions cannot be ignored. Neil Bibby’s powerful evidence and the statistics that he provided about the financial challenges mean that it is important for us to take the bill further.
Giving tenants more freedom to be creative and have a better standard of living must be objectives worth supporting. To have a pub code adjudicator and automatic right to pay only the market rent, and for that to apply to all tied pubs seems to be a package worth exploring further.
Sometimes the sign of a good law is that it is not often used. I am not convinced by the argument that the fact that the adjudicator in England and Wales has not been used very much means that it is not worth while. That ignores the change that has been introduced to the sector as a response to the presence of that adjudicator.
Look at the changes that Neil Bibby has already managed to achieve in Scotland by launching the bill. There is already a voluntary code of practice, which is led by the industry, but there is also a new Scottish governing body with representatives from tenants and pub companies. There is also a low-cost arbitration process that will now be properly promoted to Scottish tenants. Those changes have already happened without legislation in place.
We must look at the bill. We must consider whether we can go further and change the balance between the companies and their tenants. Of course we should be careful, and I welcome the minister’s offer to work with the member to make the bill better.
We will support the bill at decision time.
We move to the open debate.
17:49
I am pleased to have the opportunity to take part in the debate on Neil Bibby’s Tied Pubs (Scotland) Bill. I congratulate Mr Bibby and his team, and I thank them for their work in introducing the bill.
As a member of the Economy, Energy and Fair Work Committee, I have obviously had a fair bit to do with examining the evidence on the legislation. Along with others on the committee, I was extremely sympathetic to the purpose of the bill. It was clear that the intention was to create a level and fair playing field for all participants in an important sector of our hospitality industry. It is an industry that creates substantial value to the economy and employs a significant number of workers. There are around 4,000 pubs in Scotland, of which 750—about 17 per cent—operate on a tied model.
As members will be aware, the committee took a majority decision not to support the general principles of the bill. It did, however, commend the intention behind the bill. From the beginning, I felt that some members of the committee, such as me, were ambivalent as the evidence taking progressed. The reason for that was, quite simply, that it quickly became clear that there were two sides to the debate on the bill. Both sides deployed information and statistics from their own sources, and often that information seemed to be in direct contrast and even contradictory to the other party’s position. Members of the committee were sometimes left uncertain as to which information had greater validity and which revealed the correct position.
The lack of independently produced or auditable information was extremely disappointing. It added to the reservations that some members held about the true situation. Lacking that information, the majority of members felt that the bill lacked a sound basis on which to be supported. I think that some members also felt that, before lending their support to something as important as the bill, it was necessary for them to have strong evidence that it was the right step to take.
Some effort was made to draw comparisons with the situation south of the border, where a somewhat similar situation had existed and legislation had been introduced along the lines of the bill. Closer analysis did not, however, support clear comparisons, due to there being different market practices and a different basis for legislation.
Notwithstanding those issues, some members of the committee were concerned about evidence that was presented on a variety of subjects, including reports that 10.5 per cent of tenants were surviving on incomes of only £10,000 a year or less, whereas 54 per cent were reported as having incomes of between £10,000 and £15,000 per annum. Clearly, that is an unacceptable income level that does not recognise the hard work that pub tenants put in to make their businesses viable; however, it was not possible to drill down into those figures in order to make sense of them and the context in which they were couched.
It was suggested that moving to a market-rent-only relationship would improve income levels for pub tenants while increasing the choice of beers and other pub offerings for customers. However, given the alleged income levels that I just stated, it is difficult to see how that might benefit pub tenants on such limited income levels. Their access to capital would appear to be limited by the resources at their disposal.
Pubcos made a strong pitch that their financial strength and willingness to invest in tenants’ pubs provided support for businesses, which the tenants might not be able to resource themselves. However, there were complaints that consumer choice was constrained due to a lack of choice of products in tied pubs, and both sides deployed arguments seeking to confirm their positions.
We looked at statistics on pub closures, but without more detailed supporting information it was difficult to assess whether the closures were caused by reason of the pubs being tied or because of market and pandemic forces. There were allegations that, for tied tenants, the price of stock, particularly beer, was inflated by pubcos. There seemed to be some evidence of that, but, again, more information would have been helpful.
Those are just a few of the reasons why I believe that the bill is not quite ready, although the sentiment behind it is definitely genuine.
Where does that leave us? The result seems to be firmly in the not proven area rather than coming down clearly on one side or the other. So, I stand here somewhat ambivalent and possibly a little uncertain. The bill is clearly well intentioned but lacks the definitive and decisive information to make it absolutely clear in my mind that it should be backed unreservedly. I welcome the Scottish Government’s commitments to lodge amendments to the bill, which I trust will address my remaining concerns.
17:44
I congratulate Neil Bibby on bringing forward a very well-thought-through bill. I know, obviously, that it takes a great deal of effort to get a bill to this stage. I would make the general comment that, in recent weeks, we have discussed a number of members’ bills, and our strong system of members’ bills demonstrates the strength of this place. They can lead to more interesting policy making and give parties a true opportunity to come together in consensus to make better policy.
I take issue slightly with the Government—not because I do not welcome its support for the bill, but because it confirmed that support only yesterday. I have had to rapidly change my speech, which was full of condemnation and cries of injustice, but which now acknowledges its support. The minister knows that I struggle to say good things about him—in public or in private—and having 24 hours’ notice to rewrite my speech put me under quite some time pressure.
I was not aware that Mr Johnson spoke about me in private, but I hope that my approach to the bill encourages him to approach such matters with a more open mind.
I will bear that in mind. The minister might want to ask some of his colleagues about the things that I say in private about him.
In all seriousness, I think that the minister’s comments at the start of the debate were important. It is not always the case that survey results or simple consultation responses point unequivocally to where good legislation should take us, and he is absolutely right that policy is sometimes about making judgments and about principle. The bill is about the principles of what is required in terms of how markets operate and how small business owners are able to run their businesses.
That brings me to Maurice Golden’s comments. He said that only 17 per cent of the market is tied pubs, but I suggest that the bill is incredibly important to that 17 per cent. On well-functioning businesses and markets, if Maurice Golden thinks that restrictive supplier arrangements are a good way for businesses to run and to have a flourishing market, he needs to look a little bit harder at what it takes to run a business. As someone who has run a small business and has had to negotiate relationships with suppliers, let me tell him how incredibly difficult that is. It is incredibly difficult for someone to run a small business when they are up against much bigger businesses and the only advantage that they have is their ability to be flexible, to make quick decisions and to make available different products by choosing the suppliers whose products they sell in their business in order to offer something distinctive.
It is incredibly unfair to have practices that restrict small businesses’ ability to choose different products and offer something new and distinctive, but that is very much the situation in which tied pubs and small business owners find themselves. There are hundreds of pubs in restrictive leases. As a former shopkeeper, I find it incredible that, by dint of its lease, a business can be restricted in the suppliers whose products it can buy. That seems simply unfair. In fact, as someone coming from one type of business and looking at another, I find that unthinkable.
Indeed, the fact that the products that they supply are 50 per cent more expensive makes the case for change. Willie Rennie made the point well. The issue is not necessarily how frequently legislation is used but the fact that it can be used. I think that allowing for an opt-out would change the negotiating position between the tenants and their landlords, and it would dramatically change the situation for those businesses.
17:58
The issue first came to my attention when I was in the UK Parliament in England. I must say that I was impressed by the work of the Lib Dem MP Greg Mulholland, who has been mentioned. He pushed for such legislation and was instrumental in its introduction down south.
The question is whether we need a similar bill in Scotland. I think that it has been agreed that there is a problem here as well but that the scale is much smaller than it is in England. One school of thought is that England is bigger and better than us, so we should copy anything that it does. I think that, to some extent, that is what happened with the legislation on lobbying, which was not so much of a problem in Scotland but we did not want to be left out.
The Scottish Government carried out research that was published in 2016, which concluded, among other things, that no part of the pub sector in Scotland appeared to be unfairly disadvantaged over others. So, all through the process and for a number years, there seems to have been a lot of uncertainty.
I was not a member of the Economy, Energy and Fair Work Committee when it took evidence and did most of its work on the bill, but I came in as it was working on its report, and it became evident to me that the claims that were being made by both sides were wildly conflicting and that the committee had struggled to find out what was really happening.
On one hand, the pubco model seems to work in some instances. A couple of pubs in my constituency were previously really scruffy. Significant investment was then made in them by Heineken’s Star Pubs and Bars, with the active participation of the tenants, and both pubs have improved tremendously. I do not know whether that would have happened under a different model.
However, the committee heard from tenants who felt that they were caught in a trap, with no way out. I also see pubs in my constituency with no Scottish beer at all despite the fact that we have the West and Drygate breweries in the east end of Glasgow. As a beer drinker, I see that as a problem. However, the question is exactly why it is happening, and we are not clear what the answer is.
One of the areas of contention among witnesses was what the income of tied pub tenants actually is, which the committee considered in paragraphs 28 to 38 of its report. Phrases such as “income”, “earned” and “take-home pay” can mean different things to different people. Alison Harris and I asked whether there were definitions of those phrases, but the committee did not receive any. Neither was it provided with audited accounts or similarly independently verified financial statements to substantiate the various claims.
Overall, it seems to me that the case for the bill is not proven—to adopt a phrase that Colin Beattie used. It is true that there is a problem to some extent, but committee members, including me, were not convinced that the problem is on a sufficiently large scale to warrant introducing legislation. In passing, I say that that is why we need the not proven verdict in the courts for cases in which there is not enough dependable evidence to say who is guilty and who is innocent.
Given the lack of conclusive proof, as far as I could see, the question is which way the Parliament should go on the matter. Often, we would not legislate on a matter in which the need was as uncertain as it is here. However, there is clearly a lot of support for the bill and I understand that it is likely to get enough votes tonight to enable it to proceed. I remain somewhat sceptical, though. Given my involvement in the production of the committee’s report, I will abstain from voting on the bill at decision time.
18:02
I express my empathy for the bill’s principles. My grandfather will be spinning in his grave at a high rate of knots because he was a member of the Independent Order of Rechabites, which a long time ago was a home for people who were teetotallers and campaigned against the evils of drink.
However, I have significant issues with the way in which the bill is drafted. I have come to it relatively late. My starting point is always to look at the bill itself. The first point that I address is a straightforward and simple one that could easily be remedied. On page 1 of the bill, the regulatory principles are stated to include
“the principle of fair and lawful dealing by pub-owning businesses”.
It is extraordinary that a piece of legislation should legislate to say that people must obey the law, so I would simply take those words out.
That is a comparatively trivial matter, but bigger issues emerge when we consider the definitions of “tied pub” in section 20 and “tied-pub tenant” and “pub-owing business” in section 21. I am taken back to what happened after the Agricultural Holdings (Scotland) Act 1991 was passed, when we saw the introduction of the limited partnership as a way of bypassing the provisions of that act, meaning that the owner of the land could terminate the relationship at any time. The way in which the bill that is before us is drawn would present similar difficulties if we were to have pub-owing businesses that wanted to act in a certain way.
For example, it might be possible to say that, if someone wants to operate a pub that is owned by someone else, they will have to become a shareholder in a shared company. That would not create the relationship of landlord and tenant on which the bill relies, but it would still create the opportunity, within the company organisation that had been established, to create a dependency such that people had to buy their beer from a particular source.
The second thing that one might do if one wanted to thwart the way in which the definitions currently operate might be to operate through a sub-tenancy, in that the tenant could be allowed to create sub-tenancies. It appears that, as the bill is currently structured, that might break the link on which it depends between the landlord being a pub-owning business and the tenant, because the tenant would not necessarily be a pub-owning business. Indeed, it would merely be a tenant of another company.
There are some practical difficulties, but that does not mean that we should vote against the principles of the bill if our judgment is that it is possible to amend the bill at stages 2 and 3 to remedy those difficulties and some other rather substantial difficulties that I think there are with the bill, because when I look at something and I find such straightforward ways of thwarting the means of the bill, I carry with me quite considerable doubt. However, my ingenuity as a non-legally qualified person is substantially less than that of others, so I hope that Parliament will look at the bill carefully as it proceeds through stages and 2 and 3, as I expect it will. I support the principles of the bill and I will vote for it, with some reluctance, at decision time.
18:06
We are having this debate against a backdrop of the most severe crisis ever to have faced our hospitality sector. Pubs are on their knees. In many parts of the country—including my own—people cannot even go to one if they wanted to and, when pubs are allowed to reopen, many people will not want to. For those of us who like the occasional pint and who like the variety that we have in the sector in this country, it is deeply depressing.
The bill was introduced in better times, but even then, pubs were struggling. I wonder whether Neil Bibby would have introduced the bill today. It is a well-meaning bill; there is no doubt about that. It follows the legislation in 2015 in England and Wales to create a pubs code and an adjudicator that would govern the relationships between some tied pub tenants and their pub-owning company landlords.
The Tied Pubs (Scotland) Bill aims to ensure that Scottish tied pub tenants have at least the same protections and opportunities as those covered by the 2015 act in England and Wales. It would seem that all that is fair enough, except that the tied pubs sector in Scotland is nowhere near the size of the sector in England—it is 17 per cent—so if there is a problem, it is a small one.
I commend the committee for its work on the bill. It has come up with a pretty fair summary of it in its report:
“The Bill will ensure that tied tenants have the option to request a ‘market-rent-only’ (MRO) lease. This means that a tenant can pay the going market rate to rent the pub without having to buy products or services from the pub-owning business, therefore ending the tied relationship. Even if a tenant remains tied, the Bill provides an opportunity to sell at least one ‘guest beer’. They will not be restricted to only selling the brands permitted by the pub-owning business.”
The bill has only got people excited recently—as we have headed towards this debate, really—if my inbox is anything to go by. It is finely balanced; it is not cut and dried. We can argue this either way. As the committee said in its report,
“Views on the Bill are polarised. Those who support the Bill argue that there is an urgent need for legislation to rebalance the risk and reward in tied tenancies. They believe that the pub-owning companies take too large a share of profits meaning that tenants struggle with low incomes ... Opponents think that there is no need for legislation and believe that the tied tenancy model already works well. Not only do they believe that legislation is unnecessary, they think it would actively damage the pub sector in Scotland. Those who oppose the Bill argue that it would harm investment in the sector and force pub-owning businesses to manage pubs themselves or sell them.”
That latter point was made quite forcefully as we headed towards the stage 1 debate. It was no surprise to me that the committee was divided on the bill because, as I said, it is not cut and dried. The comments of Neil Bibby when the committee report came out were not helpful. He said:
“The SNP-Tory majority on this Committee got it wrong. Their report flies in the face of the evidence placed before them.”
He went on:
“SNP and Tory MSPs have sided with big multinationals who are extracting profit from small businesses who need our support.”
Those comments were slightly insulting to members, who have sided with no one and who were wrestling with pretty serious issues. If the bill progresses to stage 2, the committee will have a big job to do, and I have every confidence that the committee will get it right.
18:10
I am not a member of the committee, but I take issue with the comments of Neil Bibby that Graham Simpson has just referred to.
My Glasgow Kelvin constituency covers Glasgow city centre, the west end and beyond, with many pubs in the area. The reason why I have a particular interest in the bill is that, a number of years ago, along with Neil Bibby and Greg Mulholland MP, I attended a number of events in the Scottish Parliament about tied pubs. At that time, the views were very mixed and they are still very mixed now. I come at the issue from the point of view of my constituents and the pubs in my area. As I mentioned, I represent an area with many pubs, from large to small. As well as other emails regarding the bill, last night I received 19 submissions from local publicans, all 19 of whom were against the bill. I just want to set that as the context.
Members have mentioned the protection that the bill would give to people running tied pubs. I take on board the issues that people have raised with me regarding costs of maintenance and perhaps repairs, and I accept that some protection might be needed, although that would need to be looked at. However, I understand that, as others have mentioned, Scotland has an independent dispute resolution mechanism, which, from what I read about it, appears to provide much of what is proposed in the bill.
Another issue that has been raised with me is the proposed establishment of an adjudicator paid for by a levy on pubs. That is a huge concern to me and it is certainly a concern for my constituents who run pubs.
I want to give some context to the bill. As members have mentioned, in Scotland, there are 750 tied pubs, which make up 17 per cent of the market. By comparison, in England and Wales, there are nearly 20,000 tied pubs, which make up 39 per cent of the market. The majority of pubs in Scotland—64 per cent—operate under the independent free trade model, 13 per cent are managed and 5 per cent are leased and tenanted with no tie agreement.
I am minded to support the bill at stage 1 so that we can look at more evidence but, if it is to go forward and if we are going to look at the issue properly, we must take into account the figures that I and others have mentioned. The argument is polarised, and people are either for or against. However, the majority of people from my constituency who have contacted me are very much against the bill.
I have a question for Neil Bibby or perhaps the minister. If the bill progresses and becomes law, I would like to be sure that no one will be compelled to change their arrangements if they find that the model that they have chosen—tied pub or otherwise—is effective for them. It is about the publican and their choice. I would like somebody to answer that either tonight or later and say whether that will be the case.
18:14
I was sympathetic to the bill, but I waited for the Economy, Energy and Fair Work Committee’s stage 1 report, which is finely balanced. Initially, it appeared to be a very straightforward bill, but as I took the time to read the briefings, it became clear to me that the position has become more complex and uncertain as the issues have been explored. I suspect that significant amendments will be needed at stage 2, should the bill progress at decision time.
I want to make a few observations. On the debate as to whether there is a need for the bill in the first place, I was struck by the anonymised survey of tenants of tied pubs that the Scottish Parliament information centre arranged. It found that
“The majority of ... respondents felt that the Bill would improve the relationship between pub-owning businesses and tenants.”
I can understand that; given the contractual relationship between tenants and pub-owning businesses, tenants are most likely to give a clear and frank response when the response is anonymous. Therefore, I place significance on those findings.
It was also interesting to see the significant variance in estimations of the income of tied pubs. Based on a telephone survey from 2014, the Campaign for Real Ale estimated that it could be as low as £10,000. I think that that figure is staggeringly low. In 2019, the British Beer and Pub Association estimated that the average income of tied tenants was about £38,000.
Hawthorn Leisure helpfully informed the committee that it aims for minimum earnings of £25,000 for tenants. It might be one of the better pub-owning businesses—I have no idea, and cannot comment on the others, either—but I note that 10 of its tenants contacted the committee to indicate that they oppose the bill. That might suggest that the views of tenants on the need for the bill will depend on how well they feel they are treated by the pub-owning business. Surely a reason for having a statutory Scottish pub code, along with arbitration and enforcement, is to ensure protection and good practice right across the tied pub sector.
I was also interested to examine the debate on whether the bill should include a provision for tenants to have a market-rent-only option. I understand the nervousness of pub-owning businesses about that. If we remove the ties, offer tenants maximum flexibility and give them a greater chance to grow their business, strike better deals and improve their income, that might be at the expense of pub-owning businesses. Of course, pub-owning businesses will have issues with the proposal. However, the provision would provide a significant incentive for the pub-owning businesses to demonstrate to existing tenants the benefits of the tie. Therefore, even if very few tenants opted to consider a market-rent-only option, if that is progressed in the bill, it might still drive positive change.
Pub-owning businesses are also concerned about the idea of allowing tenants to source guest beers directly. SPICe indicated that if that beer was a “standard lager”, as it was termed in the briefing—I suppose that that means a house lager—it would constitute about 38 per cent of all beer sales in the pub. Being able to undercut lager that is supplied by the pub-owning business would, of course, boost income for the tenant and impact on the pub owner.
At the end of the day, I suppose that what the bill seeks to do is the right thing to do, so I support its general principles. I want to ensure that tenants have adequate rights, protections and—which is to be hoped for and is important—boosted incomes. Of course, we must ensure that the balance is right, and that if we extend protection to tied pubs, it does not stifle the advent of new entrants into the sector or the expansion of smaller businesses.
The levies and fees must be appropriate, and if the extensions of market-rent-only rights and guest-beer flexibilities are taken forward, that must be done in such a way that pub-owning businesses are partners in the process and it benefits the entire sector.
I absolutely support the general principles of the bill, but I suspect that there will be lots of work to do at stage 2.
We move to closing speeches.
18:18
There has been a lot of huffing and puffing in the debate. Some people have been sitting on the fence so long that they are likely to have splinters in sensitive parts of their anatomy. However, let us hope that we can move the bill through stage 1 tonight.
I begin by paying tribute to Neil Bibby for getting his bill to this stage. There is a lot of work involved in introducing a member’s bill. Members’ bills can make a significant difference in communities, and I believe that the Tied Pubs (Scotland) Bill will do that, so fair play to Neil Bibby and his team.
I also pay tribute to Jamie Hepburn for engaging with Neil Bibby, listening to his arguments and being, at least, prepared to let the bill progress through stage 1—subject to that being agreed in tonight’s vote.
Gordon Lindhurst set a test in asking what the consequences of the bill would be, and other members have spoken about the balance of power between the large pubcos and tenants. I think that that is the fundamental test in the debate.
I will give a practical example from a situation that I was involved in, close to where I stay. There was a pub that had been in a similar form for the best part of 50 years. It was a successful community pub that was well supported in the area. Like a lot of pubs, it had a local darts competition, which took place every Tuesday. On Wednesday afternoons it had bingo for the pensioners, and it had a pool room and so on. Those things were all well run and were well received locally.
Heineken’s Star Pubs & Bars, which has been mentioned in the debate, was the owner of the pub. It decided that it wanted a different model and a different tenant. It was going to reconfigure the pub as a pub and restaurant, but that was resisted by local campaigners. Heineken met them, with me, and essentially resisted the concerns of the campaigners, who did not want the local pub format to be lost.
I realised that what Heineken was interested in was profit. It thought that it could reconfigure the pub. It had modelled that based on the socioeconomic factors in the area, and it thought that it could get a different clientele in. I tried to persuade it that that business model would not work and that it really had to work with the existing business model and maybe modernise some aspects of it, but it ignored the campaigners and me. Heineken went ahead and—lo and behold—people went to another pub. Sadly, some people did not come back to the pub at all. As Willie Rennie said, such pubs are community assets. When I went by that new reconfigured pub of an evening, it was generally pretty empty. The model was unsuccessful.
I tell that story to illustrate that what Neil Bibby seeks to achieve—a fairer balance of power between tenants and pubcos—would better serve not only their local areas, but the local economy, because it has the power to make pubs more successful.
There is a lot of good in the bill. It would make a real difference to staff and customers, and make the pubs run better. I will be happy to support the bill at decision time, which is coming up shortly.
18:23
The debate on the Tied Pubs (Scotland) Bill has been lively—and not just here in the chamber, because it has generated a lot of strong views across the pub sector over the past couple of months. Although there is disagreement in the sector about the need for the bill, there is widespread recognition that the sector is facing severe challenges. Graham Simpson spoke about pubs being on their knees, and a number of members have highlighted their concerns about the future of the sector. Industry bodies have warned that two thirds of hospitality businesses could go to the wall.
However, when it comes to the merits of the bill, there are, as the Economy, Energy and Fair Work Committee heard, deeply polarised views on whether it would help the pub sector to recover from Covid or further damage the sector.
We have heard from those who argue in favour of the bill, including Neil Bibby, Daniel Johnson, Andy Wightman and Willie Rennie, that they want to ensure that tied tenants are treated fairly, that they enjoy a fair share of the rewards of the business and that they are no worse off than free-of-tie tenants. In particular, those who support the bill want to address concerns about the high cost of tied products, increased levels of rent, lack of transparency and examples of pub companies not complying with agreements.
Sarah Boyack highlighted the supply chain benefits that could arise if the increasing number of small independent breweries that are emerging in Scotland were put on a level playing field and could more easily get their products into the marketplace. It is clear that a number of organisations support the bill, including the SLTA, CAMRA and the Campaign for Pubs, among others.
However, those who are against the bill have also made a series of strong arguments. They have concerns that it will be costly and complex, and they point to the escalating costs of the pub code adjudicator’s office in England. They also point to the benefits of the existing tied pub model, which allows tenants access to their own pub for a relatively small investment, while benefiting from economies of scale and financial assistance, as we have seen during Covid lockdowns.
There are also benefits from the existing voluntary Scottish pubs code, which gives tenants many of the rights and protections that are set out in the Tied Pubs (Scotland) Bill, without any risk to jobs or investment.
Will Dean Lockhart acknowledge that landlords providing financial comfort to tenants through the crisis is not the exclusive preserve of this sector, that it has happened in the retail and other sectors, and that it is therefore a somewhat bogus argument to say that only that type of commercial arrangement provides landlords with the ability to provide comfort to tenants?
That is a fair point. However, if there is any risk that there would be a decline in landlords investing in pubs in Scotland in the future, that financial support might not be there in the future.
There are also concerns about the bill in relation to the market-rent-only option, which could give rise to significant levels of uncertainty about investment decisions in the future by making them harder to justify.
Given the conflicting views from the sector, it is no surprise that the Economy, Energy and Fair Work Committee did not come to a clear-cut view in its stage 1 report. Nonetheless, we need to progress the debate. That is why I will refer to the submission of the Federation of Small Businesses, which calls for a “win-win” outcome—which must be the focus of those who are involved in the bill.
If the bill is to work and to meet the needs of all the players in the pub sector, it will have to be revised to meet the following key objectives. It must deliver a fair level of protection for tied tenants. It must provide more security for long-term investment and avoid the pitfalls and costs of the system that has been introduced in England. Perhaps most important is that it must obtain buy-in from all parts of the sector, so that everyone can work together to help our pubs to emerge from the pandemic.
There is time between now and stage 2 of the bill to meet those objectives. We will support the bill at stage 1 in order to explore whether they can be achieved. I therefore urge Neil Bibby and the minister to begin that work now.
18:27
I will respond to as much of the debate as I have time to. However, I start with an apology to Daniel Johnson. I am incredibly sorry that I have not conformed to the low opinion that he holds of me, which I was hitherto unaware of. I am sure that we will get our relationship back on an even keel soon.
Will the minister give way?
Perhaps this is the beginning of it.
I thank the minister for giving way. I confirm that my opinion of him is quite transformed; unfortunately, my poor sense of humour is not.
Clearly, neither is mine—I was only joking, Mr Johnson.
Andy Wightman welcomed that I was not persuaded by the committee’s recommendations, which is—I suppose—a fair observation in the absolute sense. However, I say to the committee that there was much in its report with which I had considerable sympathy, such as the point about the lack of independent and impartial analysis, which we tried to undertake as a Government back in 2016. However, trying to get underneath the skin of many of the issues that have been raised has been difficult, and I therefore understand the challenges that the committee faced.
Speaking of that 2016 study, I turn to turn Maurice Golden’s remarks, in which he suggested that it was evidence against the bill. However, what it demonstrated was the issue that I just laid out—that it was difficult to get underneath the skin of the issue.
We struggled to engage with that piece of work at the time. We reached the conclusion not so much that there was not a case for legislation per se, but that we would not introduce that legislation ourselves, and we did not. Mr Bibby did, however, and it is incumbent on us to consider his bill.
Maurice Golden raised—entirely genuinely, I believe—the concerns that the pub companies expressed around investment. Those concerns are serious indeed, so I want to set out that I am committed to continuing to generally engage with pub companies about issues that affect their sector, including those of investment and of any code that we would seek to develop, should the bill become an act of Parliament.
The minister mentions the investment issue, which is one of the issues that bedevilled the committee. For example, some of the investments that pubcos made—[Inaudible.]—is the discount on the beer, which is multiplied by the volume and called investment. It was unclear what pubcos’ investment levels were—not least the amount of investment, which was deemed to be withheld during the evidence on the bill.
That matter is of course part of the process of engagement with pub companies, but that engagement is not to the exclusion of that which we will have with tenants and others who are interested in this matter.
I pick up on the point that Sandra White raised. I have read the bill and, as far as I understand it, nothing in it compels any change in the nature of the tenure under which pubs currently operate. Had that been the case, the Scottish Government would not support it.
Willie Rennie said that, sometimes, the sign of a good law is that it is not used much. That observation might be felt to be counterintuitive but, in this instance, it is one with which I agree. One of the things that I found persuasive, which helped me reach the conclusion that I have in respect of the bill, was that some of the people with whom I spoke about their experience south of the border found that the system had helped drive an improved relationship between tenant and landlord, despite there being few requests for the market rent option and few matters referred to the adjudicator. Bob Doris made that point as well.
Graham Simpson was right to say that there is a fine balance of arguments on the bill. My judgment is that we should back the bill at stage 1 tonight. I reiterate that the Government’s on-going support for it is dependent on amendments at stage 2 to address the specific issues that I laid out in my opening speech.
I know that many tenants will welcome the conclusion that the Scottish Government has reached, but less so pub companies. It is important to acknowledge the latter’s disappointment, and through that acknowledgment, I commit to continuing to work—on the bill and generally—with them as well as with tenants, Parliament and Mr Bibby in particular to ensure that the pub sector in Scotland continues to be supported.
18:33
I thank members who have spoken today for their helpful and constructive contributions. I will try to deal with the points that were made and the concerns that were raised in the time that I have. I have always believed that a cross-party consensus on the bill was possible, and I still want to achieve it. I understand that the views of some members have evolved, or are evolving, and I hope to convince everyone to vote for the bill by the time we get to stage 3.
We all care about our pubs and our communities. As Willie Rennie said, pubs are important community assets. I am willing to work with all parties in the chamber to make the bill a success and to engage with the Scottish Government and all parties through the amendment stages to improve the bill in a way that is consistent with its fundamental aims.
I thank the minister for his remarks and understand the reasons why he took some time to reach a decision. The decision that he made was the right one and I know that tenants will warmly welcome it. With the leadership that he has shown today, I believe that statutory rights and protections for Scotland’s tied pub tenants are now in sight.
I want to respond to Maurice Golden, who reminded us that 93 per cent of responses to my consultation supported the bill.
I accept that it is not a scientific study, but, as Sarah Boyack and others said, we should look at who responded to the bill at consultation and committee stage: the Scottish Licensed Trade Association, GMB Scotland, the Federation of Small Businesses in Scotland, and CAMRA, to name just a few.
The point is that the majority of evidence to the committee supported the bill, too, including 93 per cent of those who took part in an independent and confidential committee survey of tenants.
Maurice Golden said that the only study conducted on tied pubs was the Scottish Government’s CGA study. That is wrong. CGA conducted the survey that I quoted in my opening speech—a study of 200 Scottish tenants, which found that only 3 per cent of tenants had a positive sentiment towards their tie. I also refer him and others to the evidence of the Scottish Licensed Trade Association, in which it said that pubs had insufficient reserves to deal with Covid precisely because of the tied model.
This might not seem the biggest issue to everyone; I accept that. However, as Daniel Johnson and others said, to those who have been exploited, to those who are still being exploited, and to the 750 tenanted businesses, the law that governs the tie is of fundamental importance. It is not just about numbers; it is about the principle. I argue that 750 tied pubs is a significant number of businesses in Scotland.
I have never claimed that the bill is a panacea. I have never claimed that the bill will solve all problems of all pubs. However, it will make a difference. I also want to make it clear, including to Sandra White, that if tenants are happy with a tied agreement, the bill will allow it to continue. Equally, if the tied model is as robust and fair as the pubcos say, there will be no reason for anyone to report them to the adjudicator.
My argument is not that the tie should be abolished in all cases, but simply that tied agreements must be fair. Tenants will not need to exercise market rent-only rights should they not wish to do so, and the proposed levy will fall on the pub companies, not on individual publicans.
Lawson Mountstevens, the managing director of Star Bars & Pubs, said in The Times today that the bill is “unwarranted”. Star Bars is owned by Heineken, the second-biggest brewer in the world, which made more than €800 million profit in the first half of the year—which is certainly more than our tied publicans made. He forgot to say that his company has just been fined £2 million for repeated breaches of the pubs code for England and Wales. Still pubco lobbyists say that the bill tries to solve a problem that does not exist. They speak with no credibility on the issue.
Opinion is divided. Scotland’s publicans want to know whose side the Parliament is on. Is it the side of tied pub tenants, the small businesses that are working day in and day out, the consumers who want choice at the bar and the workers who understand that reform can open tied pubs up to our brewing industry, or is it the side of the pubcos—the multinationals that extract more than their fair share from the Scottish economy?
In voting for the bill, Parliament will be siding with the creators, innovators and grafters who make our pubs so special. We are standing up for the little guy. We are standing up for small businesses and Scottish workers, not offshore pubcos, hedge funds and global brewing giants.
The other day, I read someone who was lobbying for the pubcos saying that the bill made them want to cry. What they are doing to publicans—who are putting their heart and soul into a business, and struggling to make the minimum wage, who are amassing mountains of debt because their tied deal unravels and who cannot make a decent living out of a profitable pub because so much wealth is extracted so unfairly—should make them want to cry.
The bill is fundamentally about fairness, choice and jobs—fairness for tied tenants, choice for consumers and action to protect jobs in Scotland’s pubs and Scotland’s brewing industries. It allows Scotland’s publicans to keep more of the profit that their pubs make in the Scottish economy and gives the leverage that they need to get a better deal. For all those reasons, I ask the Parliament to support the bill.
That concludes our debate on the Tied Pubs (Scotland) Bill.
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