Small Business, Enterprise and Employment Bill

Written evidence from Jo Swinson MP, Minister for Employment Relations and Consumer affairs and Minister for Women and Equalities (SB 84)

Following the public evidence sessions and in advance of the Committee’s consideration of the Pubs clauses on Tuesday, I thought it would be helpful to set out how the Government plans to respond to concerns that have been raised about the family brewers in particular.

A draft Code was published as part of the Government Response in June. Since then several honourable Members have expressed strong views about the need to minimise the costs that fall on smaller companies. Last week I met with Stephen Gilbert, and on Monday with Andrew Griffiths, Sheryll Murray and Sir High Robertson, who particularly highlighted the costs of compliance reporting, recording business discussions and the need to have rent assessments signed off by a qualified RICS valuer.

As a result I have concluded that changes are needed to the draft Code that was published, and I plan to publish a revised version of the Code after Committee has completed its consideration of the Bill. I thought it would be helpful to the Committee to set out the changes that I have already identified should be made to the Code, which I hope will address some of the concerns raised during the evidence sessions.

1. The requirement to produce an annual compliance report will be moved to the Enhanced Code and so will apply only to pub-owning businesses with 500 or more tied pubs. This is broadly equivalent to the existing Industry Framework Code where the requirement to produce an annual compliance report applies to pubs with 100 or more ‘leases’ (but not to pub sector ‘tenancies’). The legislation does not distinguish between leases and tenancies, as the two terms are interchangeable in law, but the effect of moving the provision to the Enhanced Code is much the same – the only difference is that two pub-owning businesses (Spirit and Trust Inns) own fewer than 500 tied pubs for the purposes of the Bill but more than 100 leased pubs under the Industry Code.

2. The requirement for Business Development Managers to record all business discussions and agreements with tenants and to provide tenants with a note of issues discussed within seven days, will be qualified. It will apply only to discussions about rent, repairs and matters impacting the tenant’s business plan. This addresses concerns raised by pub-owning businesses that the original drafting could be onerous in terms of recording every contract, and this was never the Government’s intention. The BIS Select Committee and the Government consultation highlighted considerable evidence of problems in relation to the communication between the tenant and their main contact with the pub-owning business. This provision is tended to be a safeguard and to avoid disputes which rely on different recollections of a discussion.

3. The information requirements in respect of both repairs and informing tenants who are ‘contracted out’ of the Landlord and Tenant Act that their renewal is due, will be redrafted so as to be a direct copy of the Industry Framework Code. Tenant representatives had expressed concern to us that the wording in the June draft of the Code inadvertently gave them less protection on these matters than the Industry Code currently provides.

4. The information requirements in respect of rent negotiations will be clarified to ensure that historic data which is provided to tenants is accurate, and projected data is reasonable. This will help tenants to make a properly informed decision about their rent offer and will ensure that, if tenants have been provided with misleading or inaccurate data they can take their case to the Adjudicator.

5. It will be clearer that disputes about repairs may be arbitrated by the Adjudicator, in line with our intention set out in the Government Response. The current self-regulation process arbitrates repairs disputes on the basis of company codes of practice; as these Codes are voluntary it is important that the Statutory Code contains this provision so as to safeguard the protection currently afforded to tenants.

6. The requirement for pub-owning businesses to tell the Adjudicator when they cross the 500 tied pub threshold for the Enhanced Code will be amended so that they must also inform their tenants of the change. This will ensure that tenants know which protections apply to them.

I am open-minded to further changes and I would like the new draft Code to be able to take account of the Committee’s deliberations on the Bill. In particular I am giving careful consideration to the suggestion that the requirements for a Code Compliance Officer and for rent assessments to be signed off by a qualified RICS valuer should apply only to those with 500 or more tied pubs. I am sympathetic to the idea that we should avoid placing unnecessary burdens on family brewers, and will be interested to hear the Committee’s views on these issues.

As you know, a consultation on a final draft of the Code will take place after the Bill has received Royal Assent, and the Code will then be introduced as a Statutory Instrument using the affirmative procedure. Any future changes to the Code will also be subject to the affirmative procedure.

I look forward to our discussions on Tuesday and I am copying this letter to members of the Committee.

October 2014