Tied Pubs (Scotland) Bill

The Convener

Agenda item 2 is consideration of the Tied Pubs (Scotland) Bill. I am pleased to welcome our first panel of witnesses: Tom Stainer, chief executive of the Campaign for Real Ale; Keir Greenaway, GMB Scotland organiser; Jamie Delap, Scotland regional director of the Society of Independent Brewers; Paul Waterson, Scottish Licensed Trade Association; Greg Mulholland, campaign director of the Campaign for Pubs and chair of the British Pub Confederation; and Chris Wright, head of the Pubs Advisory Service.

We are constrained by time today as we have two busy panels and we will also take evidence from the Minister for Business, Fair Work and Skills, so I ask members and witnesses to keep their questions and answers succinct. Unfortunately, we had to move the panels around. I apologise to our witnesses that there was an oversight in informing some of you, but we had to do that in order to ensure that we get adequate evidence from everybody.

I will invite each member to ask their question and I will then go to the relevant witness and, where possible, allow other witnesses to respond. The member will then get a chance to follow up on their question. I will not be able to ask every witness to respond to every question, but if witnesses indicate to me that they wish to comment, I will do my best to ensure that they get the chance.

The first question will be from Alison Harris.

Alison Harris (Central Scotland) (Con)

Good morning. Does the existing voluntary code protect the rights of tied tenants? I am happy to take answers from whoever feels most strongly about that.

Tom Stainer (Campaign for Real Ale)

Good morning and thanks for the opportunity to speak to you.

It is important to understand that the system in Scotland is not regulated by legislation. That creates a power imbalance as the pub companies have a monopoly on supply and cost of tied products. The voluntary code is simply not working. A voluntary code was tried in England and Wales before the introduction of the pubs code and the Pubs Code Adjudicator—it ran for about 10 years, and there were six versions of it. The English and Welsh Governments decided that it was necessary to bring in legislation—a pubs code and the adjudicator—because the voluntary code was not working.

The voluntary code does not rebalance the relationship between licensees and tenants. The surveys that you have seen show that licensees in Scotland believe that the Government needs to act to ensure that the protections that are enjoyed by licensees in England and Wales also apply in Scotland, which seems fair. Some 74 per cent of respondents to a 2014 survey considered themselves to be worse off because of the tie, which again suggests that the voluntary code is not working, and 96.5 per cent believed that paying a reduced rent did not fully take into account the higher prices that they have to pay for beer, which can be 50 per cent more than prices on the open market.

The experience in England and Wales shows that voluntary codes seem not to work, and the same situation applies here. The voluntary code is being administered by the same organisations that administered it in England and Wales, which is why the bill is important.

Greg Mulholland (British Pub Confederation)

Thank you for inviting us and for fitting in this important session. Put simply, the voluntary code in Scotland, much like the one in England and Wales, was deliberately devised by the large pub companies and their trade association to appear to be taking some action on some of the concerns that had been expressed by committees at Westminster and in Scotland and by members of the Scottish Parliament.

Cleverly and deliberately, the voluntary code does not deal with the fundamental problem. It may be useful if I say at the outset what the problem is. The problem is that the large companies operate an unfair model whereby they take too much of pubs’ profit, leaving the tenant—the small business—unable to make a living. Often, we are talking about the large company taking 80 to 90 per cent of the profit, which is why so many tenants are on such low incomes despite their pubs having reasonable turnover and profit.

Of course, no voluntary code will do anything about that. Voluntary codes deliberately exclude any mechanisms to deal with it, which is why the market-rent-only option is crucial—the option for an independent rent assessment and the right to take that assessment. No voluntary code will include that; it is a question of rearranging the deckchairs to look like something is being done, but avoiding the fundamental problem. That is why legislation was essential in England and Wales—even though, sadly, I can tell you at first hand that it was botched.

We are looking to the Scottish Parliament to do it properly—to do it more cleanly and effectively. Legislation is essential in Scotland too, to give Scottish tenants rights to not be exploited and to take a fair share of the profit that they make from their pubs.

The Convener

Chris Wright and Paul Waterson also wish to comment. As the question was our introductory question, I will allow you all to speak.

Chris Wright (Pubs Advisory Service Limited)

Good morning and thank you, convener. The voluntary code that has been in operation has been proved not to tackle important issues relating to unfairness, especially risk and reward, which is one of the key planks of the bill. The voluntary code cannot offer MRO to tenants. In committee sessions at Westminster, the British Beer & Pub Association has said that the profitability of tenants was not of any concern for BBPA members.

Self-regulation is not universally loved and there is often low take-up. Before the Groceries Code Adjudicator came into being, there were zero complaints through the former self-regulation for groceries code, yet Scotland still approved the groceries code for suppliers. We are looking for parity. It is important to make that point—you have already agreed that there should be a groceries code, and there should be parity, so there should be a pubs code.

Paul Waterson (Scottish Licensed Trade Association)

On a point of detail, I note that the pub code in Scotland is now governed by the Pub Governing Body. As you probably know, the pub code was introduced in July 2016. The SLTA knew nothing about the Pub Governing Body until we got an email in 2019 telling us that we were on the governing body. One of the problems has been that tenants do not know about procedures and how the pub code works. People such as us did not know anything about it and we were on the panel, so it is easy to see why the pub code has not worked.

Nothing was done about that until October 2019. The first meeting should have been in March or April this year, but it was cancelled for obvious reasons.

The Convener

Alison, do you want to follow that up?

Alison Harris

No. I am happy with the responses, convener.

Gordon MacDonald (Edinburgh Pentlands) (SNP)

I have a question about what Paul Waterson said about the voluntary code. It is concerning that you did not find out about that until October 2019 and that the first meeting has not taken place yet because of the pandemic. Has there been an opportunity for the code to be tested? I believe that there have been no rent reviews under the code.

Sixteen licensees have submitted written evidence directly to the committee, 10 of whom are against the bill. We asked the licensees of the 750 tied pubs to take part in a survey and 39 responded. We asked seven licensees to speak in a focus group last week and only three turned up. If there is really a problem in Scotland, why have we not heard from the licensees?

Paul Waterson

We have tried to co-ordinate people responding to different things as much as we can. The biggest problem that we have is that tenants are genuinely concerned that they will be victimised if they answer any of the questions or if they get involved at all, even anonymously.

It is such an unfair system, and it is a terrible situation when tenants are telling us that they do not want to say anything publicly. They are in a difficult position. Usually, when they end up leaving the pub, we completely lose contact with them. Therefore, what you refer to is not a reason not to look positively on the bill. We have seen what happened in England and we know that there is a problem here and that people do not want to get involved publicly. We hear that all the time. That is why there seems to be a dearth of complaints.

Regarding the pub code, half of the tenants that we have spoken to do not even know that there is a pub code in Scotland. To go back to my previous point, if we did not know that we were on the panel, what chance do tenants have? Pubs are insular places and the world ends at the front door. People tend to stay involved in their own businesses and not look outside for help. That is part of the culture of pubs.

The Convener

I will bring in Chris Wright and Greg Mulholland quickly, as it is an important issue.

Chris Wright

I agree with Paul Waterson, but I also want to ask whether the 10 people who are against the bill are actually tied tenants. I saw an article in a Scottish feature a few months ago, and the person who was opposing the bill was not a tied tenant who would be affected by the bill. They were in a joint venture with a pub company, so they were outside the scope of the bill. It would not affect them, yet they were coming forward to say that they were against it, even though it has no bearing on their business model. The bill is not there to stop people who want to enter a joint venture. I do not see why anyone who is in a joint venture would oppose it. It has nothing to do with them.

The other reason that most tenants have given me for not coming forward is that they fear having benefits taken from them. We must remember that many of the so-called tied benefits are operated on a whim by the regional managers and business development managers. They are not in the lease and they can be taken away at the discretion of the pub company, which is a key issue. People fear having the little bit of support that they have, which is not in the lease, removed from them for speaking out or for attending a campaign or saying something on social media.

09:15  

Greg Mulholland

I absolutely understand why Gordon MacDonald asked his question. One reason that we have found for not getting responses is that the past four months or so have been the most awful period for licensees in Scotland, England, Wales and many other places, as the committee will know. It has been a desperate time with people worrying about the closure of businesses.

Pub code tenants have had to pay rent through the Covid period. To give you a sense of the discrimination against tenants who exercise their right in England and Wales—I hope that the committee will bear this in mind—I note that tenants who managed to get a market-rent-only lease, or a free-of-tie lease, are being discriminated against, including by Star Pubs & Bars, which is owned by Heineken. As you will have Lawson Mountstevens on the next panel, you might wish to ask him about that. Tenants who have exercised their legal right to have a market-rent-only lease are being charged full rent through the entire Covid period. That gives you a sense of why tenants are anxious and why they do not want to speak out.

On the 10 people who wrote in, I note that, for the Westminster legislation, one of the large regulated pubcos sent its tenants template responses and asked them to insert their details and send those in saying how happy they were and how unnecessary the legislation was. I am afraid that that is rife.

There are far fewer tied pubs in Scotland. There are fewer pubs in Scotland as a whole. However, why should a tenant of Star Pubs & Bars, Greene King or one of the other companies who is two miles north of the Scotland and England border have no right to go free of tie and have no statutory protection, when someone who is just the other side of the border, in England, can? They should have the same rights. As tenants’ submissions state powerfully, the fact that people do not have the same rights has consequences. It puts Scottish tenants and Scottish pubs in an unfair position. I hope that MSPs, the Scottish Parliament and the Scottish Government will seek to rectify that.

The Convener

Tom Stainer also wants to comment. We are running over our time for this question, but it concerns a key issue, so I will bring him in.

Tom Stainer

In our 2014 survey of 200 tied tenants, 99 per cent felt that the Scottish Government needed to act to ensure that Scottish licensees were afforded the same protections as licensees in England and Wales. A Scottish Parliament committee’s statistics showed that 93 per cent of tenants felt that legislation was necessary in order to strengthen their hand in their relationship with their pub-owning business, and 63 per cent felt that the bill would improve their relationship with their pub-owning business. Furthermore, 94 per cent welcomed the provision in the bill for a right to request a market-rent-only lease, again because they felt that it would improve their position in their relationship with their pub-owning business.

The Convener

Thank you, Tom. We have run over time on that by quite a lot, but I think that that has set the scene with regard to why the witnesses feel that we need a bill. Colin Beattie has question 2.

Colin Beattie (Midlothian North and Musselburgh) (SNP)

Thank you, convener. On investment in pubs, the committee has heard that one impact of the bill might be that pub tenants increase investment in the pubs that they lease as a result of being able to negotiate a better deal with their pub-owning company. Given that the tenant does not own the underlying asset—the pub—is there a risk that this investment would be limited and short term? Perhaps Jamie Delap could answer that.

Jamie Delap (Society of Independent Brewers)

Thank you for inviting us to be a part of the forum to discuss the bill. Broadly speaking, at the Society of Independent Brewers, our members are suppliers to pubs. Few of our members operate a significant number of pubs. We are cautious about that matter. On the investment question, there is the potential for unintended consequences. Two forms of tie exist in the market. There is the property tied to beer, which is what the bill addresses, but there is another model, which has investment and loans tied to beer. In a perfect world, we would like to see that property is property, finance and investment are investment, and beer is beer. The three things should be considered separately as far as is possible. However, there are many different funding models in the market, and there have been many different sources of investment in the market. One would hope that the market would adjust and find the right routes to put investment into the right pubs, but I would be cautious—

Colin Beattie

How is that going to happen?

Jamie Delap

As I said, being totally honest about our limitations, we do not run pubs. Where that investment would come from is not an area where we have direct expertise, as we said in our evidence.

The Convener

We have several witnesses who, presumably, can give some answers on that. Greg Mulholland, Tom Stainer and Chris Wright might want to come in.

Greg Mulholland

It is a key question, and it is one that the pub companies and the trade association, the Scottish BBPA, will always trot out as a reason why the tied model is of such value. However, the reality of what they term “investment” is that it is just a form of loan, and it is crucial to understand that. I have challenged pub company bosses, and I have worked directly with tenants, as have some of the other witnesses here. When a pub company says that it will invest in a pub, the reality is that the person who pays for that investment over time is the tenant, the lessee, because it is added to their rent or their “wet rent”—the huge mark-up that tied tenants have to pay for beer.

There is also a myth here, because it is important to remember that there are plenty of tenants who are free of tie. There are smaller companies that operate free of tied tenancies. Some community pubs and some individuals who own pubs operate free of tied tenancies, and it is equally possible to invest in pubs on a free-of-tie basis. The issue is whether the pub is successful, and pubs are generally more successful if they can offer what customers want. However, in England and Wales, we have seen that, where licensees have been freed and they are paying a fairer rent and are no longer having to pay these hugely inflated beer prices, they can invest, finally, in their pub business with the confidence that they will be able to make a living. The biggest factor that prevents investment in pubs is licensees struggling and not making a living. That is why pub company pubs have been so underinvested in over the years.

Colin Beattie

How does it work if they do not own the asset and they are making significant investments in the asset? Surely they will limit their investment to the terms of their outstanding lease, so there are risks involved in that.

Greg Mulholland

It is a model that balances risk and reward, or it is supposed to balance risk and reward. That is the point, and it is the point of the Tied Pubs (Scotland) Bill. Without going through the history, United Kingdom tied pubs—well, pubs in Great Britain, certainly, as Northern Ireland has a different operating model that is more similar to pubs in the Republic of Ireland—moved from short tenancies on brewery leases, where the brewery had a direct interest in selling beer and invested in the pub. It was the beer orders that were botched and allowed the larger pub companies to set up. They then moved tenants onto these 25-year, full repairing and insuring leases, and put all the risk onto the pub companies.

If you speak to the likes of Greene King and Marstons and Star, which are hugely profitable, they will have a manager and they will take all the profit. With more marginal sites, they will put in a tenant and the risk goes on to the tenant. The problem with that type of model is that that does not allow the licensee to make a fair living, because of the huge amount extra that they have to pay for beer. I am sure that the committee has seen price lists comparing brewery prices—genuine free house, free-of-tie prices—with the tied prices. There is a huge mark-up on every single keg, which makes it very difficult to make a living. If you are free from that, you can make a living. Licensees want to continue to operate, they want a good relationship, and they want to continue running pubs. However, they can do that only if they are making a living. The way that large companies operate the tie makes that impossible.

Therefore, even where there is investment, tenants do not see the benefit because, in too many cases, they cannot afford the rent and they throw back the keys and have to move on. We must stop that cycle, because it is very damaging for pubs and publicans, and, of course, we see more pubs closing.

The Convener

Tom Stainer wants to come in. Please be brief, Tom.

Tom Stainer

I will do my best. To build on what Greg Mulholland has just said and to give you some perspective, in the survey that we did of 200 tied tenants, 54 per cent said that their annual take-home earnings were between £10,000 and £15,000, and 10 per cent of respondents earned under £10,000. I think that that gives some perspective on how little money is being made by these licensees and, therefore, how little money they have to invest in their business.

I think that it is important to remember that, like a lot of retail business where you rent the premises, you make a business decision about investment. You might not own the bricks and mortar, but you invest in your business, and that does not have to be in the bricks and mortar. It can be in staff, employing local people, offering a better service, and therefore making your business more attractive to customers. Therefore, a tied pubs bill and a market-rent-only option would give licensees the ability to sustainably invest in their businesses in the right way, increase their profits and reinvest money in local economies.

The other side of that coin is that it will encourage the pub-owning businesses to give great offerings to these licensees. Therefore, the people who own the bricks and mortar, the pub-owning businesses, will need to have a very attractive offer to ensure that licensees do not want to go for the MRO option. That means giving them the investment and the support for their businesses to show licensees that it is worth staying with them.

Another statistic from the committee survey that I referred to earlier is that 62 per cent of licensees said that they had received no investment in the pubs that they had rented or that, if anything had been offered, it had been offered on the terms of loan agreements, which, as Greg mentioned, were not acceptable to them. Therefore, we are not getting the investment into the sector that we need now, and that is because of the lower earnings and the inability of licensees to build successful businesses.

Chris Wright

One of the so-called benefits of being tied is access to capital investment. Most pub companies—including the largest one in the United Kingdom, Enterprise Inns, or Ei Group—say that that is a benefit of being tied. As you can see, it is operated on a whim. Tom Stainer just pointed out that most tenants do not get access to that. It is not in the lease, which is another crucial point. It is not the type of benefit that you can rely upon; it is operated on a whim. There is no competition in lending. High street banks and other independent sources of funding do not want to touch tied tenants. As soon as a tenant is free of tie, they have access to the whole of the market, which is clearly a beautiful and lovely competitive situation that we would all desire in business.

09:30  

Tied tenants are basically left with one lender, their landlord, who operates on a whim at incredibly onerous rates. When I did a study of this some years ago, the capex, which was the investment that was added to the rent, worked out at 24 per cent APR, which is the same as pay-day lending rates. That is ridiculous. If you go to the free market in Scotland and seek to borrow money from, say, Tennent Caledonian, as a free trader, you are probably looking at 4 per cent above the base rate. A tied tenant is looking at rates of interest that are seven times higher than what they could get in the free market.

So, it is a myth to say that pub companies invest. They invest at incredibly high rates that are not competitive and which often weigh down the publican with too much debt commitment, which they cannot resolve, and therefore, often, they decline and fail. There is an awful lot of money loaned to free houses. In the tied trade, it is incredibly restrictive, and the bill proposes to rebalance risk and reward.

The Convener

Thank you. Finally on this question, I will bring in Paul Waterson.

Paul Waterson

It is worth illustrating the difference in the prices that tied pubs are paying. A keg of beer could be anywhere from £35 and £40 dearer for a tied tenant to buy from the pub-owning company. Therefore, for every 1,000 kegs that they sell, there is about £35,000 floating about that they do not get, which goes directly to the pub-owning company. If the pub-owning company is a brewer, it has profits all the way down the line. We are talking about money and investments, but there is £35,000 taken straight from the tied tenant, which is totally unfair. That does not give them the same basis to work on as the free trade, and the bill tries to address that.

The Convener

Thank you. We will move to the next question now, which is from Richard Lyle.

Richard Lyle (Uddingston and Bellshill) (SNP)

Thank you, Convener. My question is for Jamie Delap. The Society of Independent Brewers operates Beerflex, which some tied tenants can utilise to stock local beers outside of the beer tie. To what extent would a statutory guest beer right change the situation for tied pub tenants and small brewers, and is this necessary?

Jamie Delap

The situations that our members face are varied. The experience for someone who runs a larger brewery, such as mine, is different from the experience of many of our smaller members. Looking across the trade, we estimate that, on more than 90 per cent of all the lines in Scotland, we are unable to make a commercial offer to service those lines. We face very restrictive competition. Therefore, across the whole sector, where there is a small independent business running a bar, in 90 per cent of cases, our members are unable to make a commercial offer to supply that line. Beerflex provides an element of access—we acknowledge that—but it is relatively small at under 5 per cent of the sales of all our members across the UK, and in Scotland it is probably about half that, partially because there are far fewer tied pubs in Scotland than there are south of the border.

We would broadly welcome anything that enables fair competition, to allow our members to make commercial offers to what are, effectively, independent businesses. The proposal for a guest beer option, as well as the market rent option, potentially makes it more flexible for tenants in such a way that they can put on a range of beers and craft their offer to suit the audience for their bar, rather than having a fairly standard range of products that would be the same in any other English pub or any pub on the high street. I hope that that answers your question.

The Convener

Greg and Chris want to come in, and then I will come back to you, Richard.

Greg Mulholland

I think that Tom wanted to come in. I do not want to jump in front, if Tom wants to go first.

The Convener

I missed Tom. Do you want to come in first, Tom?

Tom Stainer

Thank you, Greg. That is very kind. Jamie said just about everything that I wanted to say, but I would add that it is important to bear in mind that, when we are talking about guest beer rights, we are talking about draft beer. We need to be careful that we provide the right support. Scotland has a great choice of brilliant breweries now, and we need to ensure that a guest beer right is for draft beer from local breweries and that it gives licensees flexibility that they do not currently have by allowing them to offer customers the great beers that they want to drink and enjoy.

Greg Mulholland

It is important to realise that the market-rent-only option, which would give tenants the right to an independent assessment and then to go free of tie, is the best way to allow for the many wonderful brewers that there are now in Scotland. I had three very happy years in Scotland 20 years ago, and I have watched the wonderful proliferation of Scottish brewers and beer over that time—it is an absolute joy—and Jamie Delap’s brewery is one of those. It is staggering to think that 90 per cent of the beer lines in Scotland are tied. When you consider that the biggest beer brand in Scotland, Tennent’s lager—[Inaudible.]—there are many tenants now—[Inaudible.]—to stock that their customers want—whether it is Tennent’s lager or one of Jamie Delap’s beer’s, such as Jarl, or beer from some of the small microbrewers, because people do want local choice. That is because of the dominance of the larger tied pubs.

Therefore, a guest beer right would be welcome, but, to go back to something that Tom Stainer said earlier, in the end, if we rebalance the risk and reward and allow people to take a fair share, the pub companies would be forced to come back with fairer offers, if they really wanted people to stay tied. They would then offer tied deals and part-tied deals, but you would see a better negotiating position for tenants, as well as the right to go free of tie. In the end, the best way to do it is to have more pubs able to buy directly from local breweries at fair prices, because that is better for the pubs and the publicans and the viability of pubs, but it also means that—[Inaudible.]—breweries—[Inaudible.]—pub companies. At the moment, small breweries are forced to sell at very low prices, and then the pub companies sell at hugely inflated prices. Therefore, in both cases, it is the small brewer and the publican losing out and being exploited by the big pub-owning company.

The Convener

Finally on this question, Chris Wright wants to come in.

Chris Wright

Thank you. It was wonderful to hear a senior member of SIBA describing and calling out anti-competitive issues to MSPs here today. That is clearly beyond the scope of the bill, but I hope that committee members will now make a call for a competition inquiry into the wholesale beer market. We have not had one since 1989, and, from what Jamie Delap has just said, I think that it is long overdue. I hope that members of the committee will take what he has said and push that forward, because it is clearly much needed.

The Convener

Richard, do you want to add anything?

Richard Lyle

No, for the sake of time, convener, I am happy. Thank you.

Willie Coffey (Kilmarnock and Irvine Valley) (SNP)

My question is on an issue that is mentioned in the policy memorandum to the bill. There was a suggestion by a small number of respondents to the consultation that the bill could lead to some pubs closing, and the member proposing the bill acknowledges that. Do the witnesses have a view on that? Is it a risk worth taking to introduce a bill that leads to pubs closing in Scotland?

Greg Mulholland

One thing that we had to deal with in Westminster was the consistent scaremongering by the British Beer & Pub Association—the pubco trade association—and the pub companies that, somehow, the legislation would be disastrous and would close pubs. That is nonsense, because the issue that so many tied pubs face in Scotland, England and Wales is that the publican cannot make a living. You will see “To let” boards outside pubs, where the tenant has failed and moved on, and then a new tenant is sought. That is very damaging, and it is what has led to many pub closures.

If you allowed the sitting tenant to make a fair living from the pub and to take a fair share of the profit, which is surely what should happen in every case, you would have far fewer pub closures. The only threat that the pubcos have is that they sometimes say that if they cannot make as much profit as they would like, they will shut the pub and sell it for alternative use. That is simply a threat, and planning protection is needed to deal with that. Pubs are sustainable only when the publican makes a fair living from the pub. Therefore, the proposed legislation will actually mean far fewer temporary closures and, in the longer term, as more sustainable pubs can deal directly with breweries, it will mean far fewer pub closures overall.

The Convener

Thank you, Greg. We have turned off your camera so that we can hear your audio properly.

Chris Wright

Could Mr Coffey explain whether, when he uses the word “closure”, he means it in the sense that the pub would be closed completely and moved to an alternative use, or does he just mean that it would be closed off for a tenant taking the pub but that it would still be a pub?

Willie Coffey

I have the policy memorandum in front of me. Paragraph 101 refers to pub businesses closing and the member proposing the bill acknowledging that that is a risk. Therefore, the idea that that is just scaremongering needs to be challenged. I would appreciate your response to that.

Chris Wright

When the word “closure” is used, people can conflate the issue of a pub physically disappearing from the community and a pub being taken back by the owners. When the pub is taken back, that is often at the end of a lease and is done under section 25 of the Landlord and Tenant Act 1954. Under ground (g) of section 30 of that act, a landlord can take back a pub for their own use. I am sad to say that that has been a feature of the legislation since the 1950s, and the bill does not aim to reform that. However, if it can be shown that the provision is being abused by landlords, I am up for reform of the 1954 act as well.

There is little to say other than that, if a property owner wants to take back a site and lose their own money, and to have their own style of operation and manager, they are at liberty to do so. The positive element is that at least the manager of a pub company running that pub will have a decent wage, income and rights, as opposed to an exploited tied tenant, who is living off tax credit and has no savings or pension.

It would cost pub companies huge amounts of money to take back pubs. The companies would have to pay compensation and refurbish the pubs, and they would lose wet rent and the rent from the tenant. They would have to take account of the staff, and there is all the hassle with recruitment and training, which has obviously been an issue in Scotland as well.

The issue is sometimes a little overplayed. Some sites are taken back by their landlords, but that involves a separate piece of legislation and not one that the bill is trying to reform.

09:45  

Paul Waterson

Regarding the comments by the author of the bill, he went on to say that the bill would help to sustain or increase pub numbers, so the comment about closures may have been taken a bit out of context. He also said that the risk does not outweigh the need for action. That is the important part. To give tenants, who are the most vulnerable because of their financial situation, the opportunity of the proposed protections will help them in many ways, as we have heard. It will certainly help to increase the number of viable pubs rather than result in pubs closing.

Jamie Delap

SIBA’s primary interest is to see a healthy and thriving pub sector, which should be our guiding principle, particularly after the challenging months of the Covid crisis. In many ways, we see the most important word in the term “market-rent-only option” as “option”, because it is about providing information so that tenants and landlords can share information and clearly understand the benefits or otherwise of the tied model. We hope that that information leads to happier tenants and better landlords and that the two can coexist and thrive equally well. We are not arguing against the tie, per se. We hope that the bill provides the opportunity for the Government to put in place a structure that will assist the tenant-landlord relationship and improve it for the future.

Tom Stainer

I thank Paul Waterson, who, like me, spotted paragraph 102 in the policy memorandum. As Paul said, that points out that the member responsible for the bill acknowledges the potential risk but

“believes that the Bill could help to sustain, or increase, pub numbers.”

The memorandum goes on to state:

“His view is that it is pub-owning businesses’ reaction to the Bill which will determine any likely pub closures, and that it is in the interests of pub-owning businesses to ensure that their businesses are successful and that the sector is as healthy as possible.”

Therefore, there may have been a bit of selective quoting from the memorandum in relation to the claim that it will lead to pub closures, and we do not believe that that will be the case.

The Convener

Willie, do you want to come back on that?

Willie Coffey

My question was a fair one to ask, because the issue is raised in the policy memorandum, but the witnesses have given thorough responses.

On the previous conversation about guest beers, what is to prevent the guest beer from simply becoming an alternative high-volume lager? There is nothing in the bill that would prevent that.

If the witnesses do not answer that now, perhaps they could include it in their comments or answers to other members. I am happy for us to move on, convener.

The Convener

Thank you. If the witnesses have taken that question on board, they can perhaps pop it into their next answers. We will move on to Andy Wightman.

Andy Wightman (Lothian) (Green)

My question is to Greg Mulholland, but others can pick it up if they wish. In your opening remarks, you said that you hope that the Scottish legislation would be an improvement on the English and Welsh legislation. That has been in place for some time now, and we have some experience of it. Could you be more explicit about the extent to which the bill improves on the English and Welsh legislation?

Greg Mulholland

I was directly involved in campaigning for the legislation for England and Wales and in some of the discussions with ministers and civil servants about that. It is important to say that what is on the statute book is not what we campaigned for. It is not the simple and clear market-rent-only option that we called for. It is a fudge and a botch, I am afraid. The English and Welsh pubs code then overcomplicated the process and threw in the ability for pubcos to force arbitration for everything. To put it simply, I recommend that the Scottish Parliament ensures that there is a simple market-rent-only option, which means the right to an independent rent assessment. Once that is triggered, the tenant must have the right to pay that rent, and only that rent with no other changes to the lease, as they are not necessary, within a set time. The original suggestion in England and Wales was 90 days.

In England and Wales, people are applying for the market-rent-only option, and then, either the pub company is chucking in unreasonable terms, which leaves the tenant having to go to arbitration, or the level of rent that is set by the pub company leads to arbitration. Some of those arbitration processes are going on for up to two years, which is a farce and is denying people their legal right. Therefore, some strengthening of the market-rent-only option in the bill is needed, and I have said that to Neil Bibby. There is a much cleaner and simpler way to achieve the aim.

That said, the bill has learned some lessons. We have had problems in England and Wales with the adjudicator, who many tenants feel was not appropriate for the job and had conflicting interests. I hope that the Scottish legislation would avoid that situation.

Compared to the legislation in England and Wales, the bill is better and simpler and gives a clearer right to tenants, but further clarification of the market-rent-only option is needed to ensure that it is a right, and a simple right. To go back to Jamie Delap’s point, it should be a simple right to go free of tie on what would be the commercial free-of-tie rent on the pub in the current trading conditions versus a tied deal. The tied deal then has to be attractive for people to want to take it. Otherwise, the legal right to go free of tie must be there. It must be a legal right that can be taken within a set time, and it should not need any changes to the lease, other than to the rent and the tie. In England and Wales, pub companies are putting people on shorter leases and putting in detrimental terms, such as insisting on people paying quarterly up front and various other things. That was not supposed to happen under the legislation, but it has.

Therefore, my simple message is that Scotland can do it much better and more cleanly and simply. In the end, that will give everybody clarity, which, in the longer term, is in everybody’s interest.

Andy Wightman

If the bill were to become law broadly in the way that it is framed, what is the future for the tied pub sector? There are only 750 tied pubs in Scotland. We have heard that many tenants are earning poor amounts of money. If the bill were to be enacted, would there be a growth in tied pub arrangements or would the numbers remain relatively stable, or is the long-term future bleak either way?

Chris Wright

While I am absorbing that question, I will comment on the issue of improvement on the English and Welsh legislation. I probably speak from the most experience, because I have been involved in about 40 arbitrations in England and Wales, so I have first-hand knowledge of how the code in England and Wales does not work.

The advantages of the bill for Scotland are clear: it introduces the rebalancing of risk and reward, which we do not have in the English code as a principle. That is vital. In England and Wales, there have been long drawn-out arbitrations, with endless appeals and cost threats to the tenants. The provision in the bill would be self-policing. It would enable the tenant to simply opt to go free of tie. If the tenant gets it wrong, they will go out of business and hand the pub back to the pub company. That is self-policing, and there is no cost to the Scottish Government at all.

Tom Stainer pointed out the incredibly low earnings, which the member just commented on. Enterprise Inns—or Ei Group, as it is now called—said in its annual accounts that it makes £83,000 per pub in its tenanted estate, whereas the tenants make about £17,000. The bill is vital, as it would rebalance the risk and reward. The tenant makes 20 per cent of what the pub company makes from the same pub. It is vital that the bill goes through to rebalance that. That is the key difference, and that is why we need it in Scotland.

Tom Stainer

To echo what Greg Mulholland and Chris Wright have said, the bill is a chance for the Scottish Government to learn from the English and Welsh experience and to show how things can be done better, for reasons that have been outlined, which are about clarity of process, the right communication to licensees, giving the adjudicator teeth and ensuring that the adjudicator has the independence that gives licensees confidence in the decisions that are taken and confidence that they can go to the adjudicator to sort out problems.

On the second question, we must remember that the tied pub system is important, because it enables good licensees, who perhaps do not have the resources to buy a pub outright and go free trade, to access the pub market and run successful businesses. Our hope is that, if you can rebalance the risk and reward and make it a viable or sustainable business, more people will be interested. People are put off because of the horror stories that they hear about the way that licensees can be treated, how difficult it is to make money, the convoluted contract that they have to enter into and the restrictions that are placed on their entrepreneurial ability to run successful pubs. If the bill goes forward, and if it is right—I am sure that it will be, because you can learn from the experience of England and Wales—you will create a much more vibrant market and a more attractive business proposition for people looking to get into the pub trade at entry level.

Paul Waterson

Tom Stainer has said what I was going to say. We must remember that the model, in its original form, worked very well. It let people get into the business who did not have large sums to invest. Therefore, there is a place for that model. We are trying to make it viable. As Tom rightly says, we are trying to attract more people, because people are being put off. We have an opportunity to look at problems with the English situation, and we can definitely do better and make tenancies a lot fairer on all sides.

The Convener

I remind witnesses that we are tight for time, so if you basically want to agree with the previous speaker, you can use the event chat. You can comment there, rather than speak.

Greg Mulholland

One of the exciting things that we are seeing now in England and Wales—partly due to the legislation and partly due to market forces—is pubs that were previously owned by the large pub companies being bought freehold by small entrepreneurial pub companies. They operate a very different model—not a tied model, but often a managed model and sometimes a free-of-tie tenanted model. Many of the new breweries are buying pubs. There are two in my town that were pub company pubs that have just been bought—one by a local restaurateur and the other by a local brewery. They are now thriving, and they have had significant investment.

There is a real opportunity for the many entrepreneurs in Scotland. Because there are fewer tied pubs in Scotland anyway, there is an opportunity for some of the pubs that have been struggling for years under the yoke of the pubco tie to be bought by more responsive owners, be they the small pub companies that already exist in Scotland, entrepreneurs or some of the fabulous Scottish breweries, which are able to buy the freehold of a pub, invest in it and make it a wonderful pub again. If the pub companies do not want those opportunities and do not want to invest in the pubs, that would be the best future for those pubs.

10:00  

Jamie Delap

We absolutely think that the tied model is valid and that it has its place in the market. Therefore, we hope that the purpose of the bill is more about improving the relationship between landlords and tenants and helping them to understand how they can put together an offer that reflects what their customers want, looking to develop as varied an offering as possible. We hope that, as a result of the bill, we will not necessarily see a significant decline in tied tenancies because, as was said, to our understanding, it is a valid route into the market for many potential tenants. Overall, we hope that the bill leads to development in the market.

I would like to address Willie Coffey’s question about the guest beer, because it is important. The wording of that provision, if it is to be included in the bill, will be incredibly important. If it just leads to another macro lager being offered on the bar, which is being brought in at a cheaper price, that will simply devalue the tied tenancy and therefore alter the economics, but it will not enhance the offering. It would be important to word the provision in such a way as to avoid serious unintended consequences that could be very damaging.

Gordon MacDonald

Before I ask my questions, I would like Jamie Delap to clarify how many Scottish brewers and how many pub-owning businesses in Scotland are members of Beerflex, because I want to get an understanding of the position.

Jamie Delap

I do not know exactly. SIBA has 60 members in Scotland, all of whom would be eligible to use Beerflex, if they chose to. Off the top of my head, I think that there are about four pub groups in Scotland that use Beerflex, but I would have to get back to you with better numbers.

Only about 1,000 barrels of beer a year are sold through Beerflex into Scotland, so it is not a huge feature of the market. Pub companies such as Star and Greene King buy other SIBA members’ beers through other routes, so Beerflex by no means provides the entirety of the supply to those estates. There is no method of influencing how well that works. It is a very tricky relationship for us to navigate commercially, and that is easier for a large brewery, such as mine, to do than it is for many of our small members.

Gordon MacDonald

In England, the legislation covers only pubcos that have a certain number of pubs, but there is no threshold in the Tied Pubs (Scotland) Bill. Given that six of the 10 pubcos that operate in Scotland have fewer than 50 pubs, should there be a threshold in the bill? Perhaps I could hear from Paul Waterson on that.

Paul Waterson

We have always said that we do not think that there should be any threshold. If landlords are running their pubs properly, they should have nothing to fear from the pub code or the new bill. Everybody should have the opportunity to be treated fairly, and if they think that they are not being treated fairly, they should have recourse to somebody who can try to sort that out for them.

Therefore, there should not be a threshold. It is really important that everybody who is tied in whatever way has such recourse and is protected by the bill. As was rightly said, we have a different framework from the one in England and Wales. As far as we are concerned, that threshold just would not work up here. I repeat that if people have nothing to fear as a result of how they are running their businesses, they have nothing to fear from the bill.

Greg Mulholland

It is important to point out that the limit in Scotland was deliberately devised to exclude the medium-sized so-called family brewers that operate in England. That was partly a political decision, because of the influence that they have with politicians in Westminster. However, the situation in Scotland is very different.

It is worth considering the Covid crisis. The Campaign for Pubs is calling for the right to an independent rent assessment for all publicans, because rents are being left in place for all types of pub, and that is hugely damaging when trade is down. There is a need for an independent rent assessment for many publicans and for tenants, whether they are tied or free of tie. They should have the right to find out whether their rent is fair, based on the current trading conditions. Many publicans are struggling with trade, which is hugely reduced compared with this time last year, yet it is all too easy for their landlord, whether that is a pub-owning company or a commercial landlord, to simply leave the rent as it was. That is unsustainable.

Given that there is a very different marketplace in Scotland, we would argue that all pub tenants, tied or free of tie, should have the right to pay a fair rent. In the end, if it is a fair rent, no one has anything to argue with. If a tied model is fair and offers a considerably lower rent than that independently assessed rent for the price of paying exorbitant tied prices, so be it, and that is a decision that the licensee can take. However, we think that all tenants need the right to a fair rent, so that should apply to all.

The Convener

Gordon, do you want to come back on that?

Gordon MacDonald

The running costs of the adjudicator and their salary are estimated to be about £375,000, which is not a great deal of money in the scheme of things. However, when you calculate it per pub, it works out at roughly £500 per tied pub in Scotland. Pubcos, like any business, will want to recover from their customers any additional costs that they incur. Will that make the tied pub rent situation worse, because the pubcos will try to recover the additional cost from their own customers, because they have no other option for recovering it?

Chris Wright

I think that it is a small price to pay. We must understand that what is proposed in the detail is that, with this levy, as Mr MacDonald correctly identified, the polluter will pay. In the case of the groceries code, the levy that is charged is apportioned based on the number of complaints that companies receive. Therefore, it is a fair system, rather than the cost being divided evenly, on a pro rata basis, among all the companies. That is a good system to look at.

Members of the Scottish Parliament must acknowledge that the cost of the model going wrong falls on the Scottish taxpayer. When tenants leave tied pubs, they are often homeless and have to be rehoused; they are often reliant on benefits, as they have no savings and no pension. If we can rebalance risk and reward correctly, people will not fall back on the state for support when their pub deal goes wrong. It is important to acknowledge that there is a cost that is being paid at the moment, and good legislation, such as the bill, will avoid that cost to the Scottish taxpayer.

The Convener

Tom Stainer and Greg Mulholland want to come in. As two members still have questions to ask, I ask them to be very succinct.

Tom Stainer

As Chris Wright said, it is possible to ensure that the legislation protects licensees from having to stump up the cost of the adjudicator. It is right that it should be funded by pub-owning companies. We think that, because the number of tied pubs is lower than in England, the cost should not be as high in Scotland. The adjudicator might need only to be a part-time position, which would bring the cost burden down. Slightly cheekily, I will suggest that, if the voluntary code is working as well as people suggest it is, we will have next to no complaints for the pub adjudicator to look at.

As Chris Wright said, it is a price worth paying. It is not a huge price, and you can ensure that the right people pay it.

Greg Mulholland

The whole point of having the right to the market-rent-only option is to then have the right to an independent rent assessment and to pay only that to the pub-owning company. That mechanism will stop the ability of the pub-owning company to dump any cost on to the tenant, which is what currently happens, because the independent rent assessment will give the market rent, which the tenant then has the legal right to pay.

Secondly, it is important to get the market-rent-only option in the bill right, to make it a simple right to an independent rent assessment and to have a set period of time—we recommend 90 days—because that will avoid the administrative chaos that exists in England and Wales, where there has been years of unnecessary arbitration and thousands of pounds in costs for tenants, for pub companies and for the adjudicator’s office. If you get the market-rent-only option right and allow people to take it within a set period, without the pub company getting in the way, you cut down the work of the adjudicator and their office hugely, which will keep the costs down.

The Convener

Thank you. Rhoda Grant will ask the next question.

Rhoda Grant (Highlands and Islands) (Lab)

The market-rent-only option and an independent rent assessment deal with the issues of rent and inflated beer prices, but they do not deal with the issue of the cost of investment. We have heard that interest can be charged at up to 24 per cent APR. Having to pay that level of interest on an investment that is already outstanding could be crippling for someone who is paying a market rent. Some companies say that they provide professional and business advice that would not be available under the market-rent-only option. I am keen to hear the views of Chris Wright and/or Greg Mulholland on that.

Greg Mulholland

That cuts to the heart of the issue and the lie that is peddled by those who favour the existing model. I am not talking about the tie, per se, but the way in which it is operated by the large companies, which is exploitative.

We have already dealt with the investment point: tenants are freer to invest if they can make a fair living from their pub. That is the basis of the market-rent-only option. The point is a simple one. If the market-rent-only option is available, it gives the right to an independent rent assessment to establish whether it is better to be tied on the current terms or to go free of tie.

A complete myth that is peddled is that, somehow, if a pub-company-owned pub moves to a free-of-tie basis, the pub company will suddenly have no interest in it. There are pub companies that operate free-of-tie tenancies, and they still have business development managers and they still offer the same professional support. The idea that that professional support should be available only if the tenant is forced to pay exorbitant prices for beer is complete nonsense. The provision of such support is perfectly sustainable, and there are pubs in England and Wales that are operated on free-of-tie tenancies where the tenants get support from the pub owner.

10:15  

It is also a myth to say that it is a low-cost entry only if the pub is tied. Tenancies are a low-cost entry to the market, regardless of whether they are tied or free of tie. It is still a tenancy; the tenant is still paying rent. The difference is between paying only a dry rent to the pub-owning company and paying a dry rent and a wet rent through the marked-up prices that must be paid for product. That is the discussion to be had, but there is no reason why tenants should not get support and investment. That is a threat that the pub companies hold, but they give the impression that, somehow, if a Star Pubs & Bars pub goes free of tie, suddenly the pub company does not have an interest. It still takes a rent and it still makes a considerable amount of profit from the pub. Therefore, it should still support the tenant.

It is important to debunk that myth, but the bill is about having the opportunity to have a fair, independent rent assessment and to then be able to make the decision as to whether to be tied or to go free of tie.

The Convener

Chris Wright and Tom Stainer want to come in. Do you have anything different to add?

Chris Wright

Yes. I want to point out that the up-front business advice that the pub companies promote is often gerrymandered. There is a pre-selected panel of accountants and business planners.

I can give a live example. A very experienced operator whom I know in Newcastle presented three business plans from his own adviser to the pub company, and all three were rejected. When he asked why, he was told, “You need to use that panel guy.” The operator went to the pub-company-approved panel guy, who produced a business plan, which was then accepted. I looked at the four business plans. There was nothing wrong with the first three; they were realistic and totally appropriate. The fourth plan was unreliable and unsustainable. It is awful. I see many projections and business plans that are not fit for purpose.

Suffice it to say that that is an on-going problem for tenants. Regulation is needed of Royal Institution of Chartered Surveyors qualified surveyors, who are specialists in the area of renting pubs and setting the profit and loss. I have seen so much evidence of unsustainable rents and projections of gross profits within food and drink that mean that the publican can never make any money. The bill is not trying to fix that issue, but I agree that the up-front business information is critical. That must be something that the regulator looks at, investigates and rules on, because it is often a gateway to ruining a deal.

Tom Stainer

The figure of 24 per cent APR that was mentioned in the context of investment relates to the situation in which licensees are unable to access any other money for investment, due to the way in which the tie system works. The bill could fix that.

Secondly, with regard to support for licensees, as we have heard already, the bill would encourage pub-owning businesses to be much more competitive in the package that they offer licensees, because if they want them to stay tied in the traditional sense, they will have to make it worth the while of the licensee, because he will have the choice to weigh up his business decision and strategy in deciding whether to stay tied or to go for the market-rent-only option. It would put the onus on pub companies to deliver a quality experience for licensees to convince them that staying tied is the way to go.

The Convener

Thank you. Rhoda, are you content with those answers?

Rhoda Grant

Yes, thank you.

The Convener

In that case, I will bring in Maurice Golden with the final questions. Maurice, have you previously declared any interests to the committee?

Maurice Golden (West Scotland) (Con)

Yes.

The Convener

That is fine. Please go ahead with your questions.

Maurice Golden

Thank you, convener. I will ask my questions together, in the interest of time. Most of them require only a one-word answer, which I am sure you will be delighted to hear.

Paul Waterson mentioned that there is no evidence from tied pub managers because they are frightened to come forward. Is there any evidence of that? If there is, we would like to have that on record.

Tom Stainer mentioned that there had been a failure in the voluntary code. Has there been enough time to come to that judgment? Secondly, you mentioned the 2014 survey, but do you think that the market and economic conditions are the same now as they were in 2014, such that you can make that assessment on the survey?

Would any of the witnesses prefer investment to come through commercial bank loans, rather than from pub companies that are regulated by a voluntary code? Is the pub market in Scotland the same as that in England and Wales? That question, too, is for the whole panel.

The Convener

The first question was for Paul Waterson. It was a yes-or-no question, so is the answer yes or no?

Paul Waterson

There is anecdotal evidence of victimisation. It has been the case for years that people will not put their heads above the parapet. They feel that they will be victimised, and we have heard that their leases could change and that they are put under great pressure. We are seeing that a lot in England, as Greg Mulholland rightly said.

The Convener

There were several other questions in Maurice Golden’s list. Does anyone want to address any of those?

Tom Stainer

I can answer, and others can possibly come in as well. I was asked whether there has been enough time for the voluntary code to be assessed. I say that there has, because you do not have to consider only the experience in Scotland; you can also look at the decade of experience of a voluntary code in England and Wales, which we assert proved to be unsuccessful. That is why there is a need for the pubs code in England and Wales.

I was also asked whether we think that anything has changed since the 2014 survey. If you had asked me that three or four months ago, I would have said no, because the situation was very similar, and we see no reason why attitudes would have changed. However, we have had the Covid crisis since then, which has had a massive impact on licensees and the fortunes of pubs, as you would expect. Sadly, any change to the circumstances of licensees is likely to be more negative, which again stresses the need for the bill, to help them to recover and to have as good a chance as possible of running viable businesses over the next few years.

The Convener

After we have heard from Jamie Delap, Greg Mulholland and Chris Wright, I will have to wind up the session, as we are already over time. I will finish by bringing in Keir Greenaway. As he has managed to remain silent throughout, I will give him the last word.

Jamie Delap

One of the questions was whether there are differences between the Scottish and English markets. We recognise that there are far fewer tied property tenancies in Scotland, whereas the model under which there is a tie between investment loans and the supply of beer is much more prevalent. There are two models, both of which we regard as restricting access for many of our members.

However, there is definitely a distinction between the markets. That leads to the question of whether we would prefer to see a vibrant business lending market, distinct from beer, available to the pub trade. We absolutely would—that is our preferred option. As we said, we would like to be able to compete with other brewers on the basis of our beers, our offering, our commercials and what those do for a pub’s individual, distinctive offering on the high street, in the village or wherever it is.

All the elements should be separate, such that investment is investment, property is property and beer is beer. We would love to see a much more vibrant financing market for the pub trade, in the same way as there is for the restaurant trade. Restaurants manage to invest a lot of money in their premises and to grow and develop thriving businesses. We are sure that pubs can, too, with independent sources of finance that are clearly priced.

Greg Mulholland

Maurice Golden asked two good questions. On whether pub tenants—it should be tenants who make the decision—would rather take a commercial bank loan or investment from their pub-owning company, the majority would like the opportunity to choose and to compare. In many cases, the reality is that a commercial bank loan would be on better terms than the current so-called investment that is being offered by the pub companies. However, that may change if people have the market-rent-only option. Tenants are the entrepreneurs; they are the people running the businesses, so let us give them the flexibility and unlock the sense of entrepreneurship that we see in the free trade in Scotland and allow our pubco tenants to have it.

On whether the Scottish and English markets are the same, they are not—they are very different. There is already more freedom in Scotland than there is in England and Wales, because, thankfully, you do not have as many pubs owned by the large companies. Therefore, the position is different, but we still have a situation in which those 750 tenants do not have the same rights as their English counterparts, and that is unfair. That situation cannot be allowed to continue, because it does not allow them to deal directly with Scottish brewers, and that disadvantages the entrepreneurial Scottish brewers as well. Therefore, although we are talking about a smaller number, Scottish tenants deserve the same rights and opportunities as their counterparts in England and Wales.

Chris Wright

Exploitation of small business owners has no border. Heineken was under investigation for allegedly misleading publicans on how much profit they made selling beer. The City of Edinburgh Council’s trading standards department investigated Star Pubs & Bars months ago after being alerted to online adverts that showed false turnover figures related to cask ale in the leasing agreement. As a result of the investigation, Heineken changed its adverts. That is clear acknowledgement of wrongdoing. Heineken also remains under statutory investigation in England and Wales.

On Mr Golden’s point about the voluntary code, he said that it was enforceable, but it has no statutory force; it is operated on a whim. As Mr Waterson explained, he was not told about how it operated years after he had apparently been on the panel. Having a statutory code does not rebalance risk and reward. The difference is that, in Scotland, you can do something tangible instead of upholding the status quo, because all that the status quo has delivered is huge information asymmetry, low rewards and a poor consumer experience. The bill is the chance to do something different, and I recommend that members support it.

The Convener

For the final comment, I turn to Keir Greenaway, who has been with us as a witness, but who has managed not to speak so far. Keir, you have heard everything; do you have anything to add from the GMB’s point of view?

Keir Greenaway (GMB Scotland)

Thank you, convener. The other witnesses were better placed to answer some of those questions.

From our perspective, we see the proposed legislation as increasing volume for Scottish brewers in Scottish pubs, which will benefit Scottish workers. Our main presence is within Tennent Caledonian, and the bill would result in more of its volume going into Scottish pubs, which is what Scottish consumers want. The bill would address a power imbalance, and we do not think that responsible landlords have anything to fear from statutory regulation.

The Convener

That was nice and succinct—thank you, Keir.

That completes our questions and concludes our evidence session with our first panel of witnesses. We ran over time slightly, but I hope that you all feel that you had an adequate chance to put your point of view. I thank you all for taking part.

I now suspend the meeting for a couple of minutes.

10:29 Meeting suspended.  

10:33 On resuming—  

The Convener

I am pleased to welcome our second panel of witnesses on the Tied Pubs (Scotland) Bill. Lawson Mountstevens is the managing director of Star Pubs & Bars, Emma McClarkin is the chief executive officer of the British Beer & Pub Association and Edith Monfries is the chief operating officer of Hawthorn Leisure.

We move to questions from members. If anyone has anything that they want to add, they can put a message in the event chat, where we will all read it.

Alison Harris

How has the creation of the pubs code in England and Wales affected levels of investment in tied pubs? I will direct that question first to Lawson Mountstevens.

The Convener

Lawson, can you hear us? We are struggling to find Lawson, so we will go to Emma McClarkin.

Emma McClarkin (British Beer & Pub Association)

Good morning from a bright if not sunny Glasgow. I will step in on that question while we find Lawson Mountstevens. More investment has come up to Scotland as a result of the legislation in England and Wales, which has put investment at risk. More money has come into the Scottish pub sector, and that is at risk in the shadow of the proposal.

We already know that £10 million of investment has been held back in Scotland while we wait to see what happens with the proposal. I hope that the evidence from this session will prove that there is no case for a statutory code. As we know, the Government’s economic study said that no part of the pub sector was at a disadvantage. We need to base our action on evidence. The evidence is that more investment is coming to Scotland, and that would be at risk if a code came into play in Scotland.

Do we have Lawson Mountstevens now, or should I keep going?

The Convener

Keep going if you have more to say.

Emma McClarkin

I will take a moment to paint a picture of the pub partnership, which has been critical to the survival of pubs, particularly through the Covid crisis. The beer and pub sector in Scotland has been devastated because it had to be closed for four months. Many pubs survived only with the support of the pub partnership. The discounts and the rent concessions to the tune of millions that were given sustained pubs through the crisis. That is proving to be the strength of the partnership; it is very strong. It is of mutual benefit for the success of such businesses coming together. The partnership allows people to know that their businesses are future proof.

Yesterday, I was in the Thornwood Bar in the west end of Glasgow, and the landlord, Mark, said, “The deal that I have—the tied partnership—future proofs this pub’s future. The support that I get helps this pub to remain here, and it helps me to keep it going through this crisis.” The bar received more than £300,000 of investment. It is a beautiful bar, which is bringing back a whole area of the west end. It is phenomenal to see that. That is what is being put at risk.

Investment of £15 million a year comes into the sector, and that real investment gives consumers what they want. Ultimately, we have a successful, vibrant and thriving pub sector by giving consumers what they want.

There is not a strong case for the pubs code. There is certainly no evidence for it. Only 7.8 per cent of businesses in the sector responded to the survey, and only 37 of 750 pubs said that there needed to be some action. That is a very small percentage of people on which to base the creation of a whole system and code to deal with what could be only 11 cases a year. I feel strongly that the voluntary code in Scotland can deal with that. We now have the Scottish pubs governing body, which can deal with those cases. There are other resources in Scotland, such as the Pubs Independent Rent Review Scheme, which looks at the independent review of pubs, and the Pubs Independent Conciliation and Arbitration Service. We have in place a code and procedures to deal with such cases.

The Convener

We will go to Edith Monfries. I ask Alison Harris to pop her question in the event chat so that Lawson Mountstevens can catch up on what he missed.

Edith Monfries (Hawthorn Leisure Limited)

I thank the committee for enabling me to speak on behalf of Hawthorn Leisure and other pub-owning companies and to explain why the bill is such a threat to our potential future in Scotland.

I will speak to Alison Harris’s question about investment. Investment needs certainty of outcome. If the proposals in the bill are introduced, and for the length of time that the shadow of the bill is on us, we cannot have any certainty about the future of our potential investments in Scotland. For that reason, we would have to seriously consider what we did with our investment.

As a pub-owning company, we intended to invest about £2 million in Scotland prior to the shadow of the bill. That has been reconsidered for two reasons: the first is the shadow of the bill, and the second is the terrible events that have resulted from Covid.

Covid is bad in many ways, but it has shown that the relationship between pub-owning companies and their tenants is not as exploitative as people have been led to believe. It is very much a partnership model. It is in our interest to ensure that all our tenants open safely. In fact, almost all of our 96 pubs in Scotland are open; I think that only five pubs are closed in the whole of our Scottish estate. Many of our tenants have welcomed the support that we have given them.

None of them are paying rent for July and August. To enable them to get back on their feet, we have put more than £1 million of support into our tied model. That does not sound to me like an exploitative model. We also offer excellent entrepreneurial opportunities. It is not an onerous relationship; it is a consultative, partnership relationship that is in the mutual best interests of tenants and pub-owning companies. We want to make a profit. However, for us to make a profit it is essential that our tenants make a profit and that the relationship is sustainable and long-term. We invest in that and in the future of those businesses. We enable men and women in Scotland to start businesses from a position that they could not otherwise be in.

We have a bar in Dunfermline. I spoke to its landlord, Andrew, yesterday. In February, we invested £100,000 in that bar. It is a Campaign for Real Ale award-winning pub, and therefore it has quite a lot of choice. In fact, it stocks some of Jamie Delap’s beers; it has a Fyne beer on tap and has six taps with different craft beers, which illustrates that there is choice in the tied model. We put product ranges behind the bar on the basis of consultation with our partners, the tenants.

Our mantra at Hawthorn is “putting people first”. Those people are the ones in our organisation and, indeed, our tenants whom we seek to protect through these difficult times. We welcome and foster that relationship. We welcome the voluntary code. All of our tenants are fully aware of it, and as are all tenants of all pub-owning companies, because that information is provided to them.

The Convener

I think that Lawson is now back. Can he answer that question too, please?

Alison Harris

I will read the question again for Lawson. How has the creation of the pubs code in England and Wales affected levels of investment in tied pubs?

The Convener

Lawson, I do not think that your microphone is on. Please check that the light on it is white.

Hang on a minute, we seem to have silence again. Lawson, I am afraid that we do not seem to be receiving any audio from you; we can see you, but we cannot hear you. We have to move on. I will come back to you later.

Alison, did you want to come back to your question?

Alison Harris

No, thank you. The other two witnesses stepped in nicely and gave comprehensive answers.

Richard Lyle

The market-rent-only lease has been highlighted as a source of uncertainty that would result in reduced investment in the Scottish pub estate. As the underlying asset, the pub would still be owned by the pub-owning company, so is there not still value in investing to improve the quality of that and drive up the value of the market rent?

Emma McClarkin

In the first year that the statutory pubs code came in in England and Wales, we had 17 cases in which market rent only was activated, and we saw the number of tenanted and leased pubs reduce by 161. That is what happens: managed houses are created. There was an increase in those of 150. The pub-owning companies put a lot on the line in those relationships. There is no guarantee that they will get the return on that investment. Many then switch to a managed relationship.

That could happen in Scotland. We do not have as many managed houses in Scotland. There are already many independent free-trade pubs in Scotland. It is a very different market, and that solution is not necessary.

The proposals in the bill do not provide a solution for any problem. The bill creates more uncertainty for the market, and given the pandemic and the recovery that is needed, we do not need any more uncertainty.

10:45  

The Convener

We still do not have sound for Lawson Mountstevens. That is very unfortunate.

Richard Lyle

I have a supplementary question for Emma McClarkin or Edith Monfries.

It has been put to me that, because of the pandemic, most pubs were closed for a number of months and their beers were not sold. They had to dump beer, and they were restocked by their brewer, or whoever they were tied to or were the tenants of. That saved the tenants of the tied pubs a lot of money. Do you agree with that comment? Was that the case? Do you know what happened when pubs reopened?

Edith Monfries

Yes. It was a massive piece of work, which we co-ordinated on behalf of all our tenants.

The destruction of beer is a complex process; it cannot just be chucked down the drain. Over our whole estate, we assisted our tenants to destroy 700,000 gallons of beer, which will be painful for any beer-drinking colleagues among you to hear. Because of our relationship with the brewers, we were able to ensure that that destruction happened safely, in an environmentally friendly way—that is obviously extremely important—and that the credits were applied to the tenants, so that they are not out of pocket for any kegs that they had to destroy. That has worked really well.

Equally, we have had to work hard with the brewery companies to ensure supply to our pubs and enable them to open with beer on the taps, ready to go. We worked night and day with our distribution partners—in Scotland, C & C Group plc—to ensure that that happened. We still face some challenges when it comes to cask ales and the smaller independent breweries, but we are working hard to ensure that we have what we need on the taps, to fulfil customer demand, so that our customers have their favourite beer. We are managing to achieve that. It is a great result, and we are really proud of it.

Richard Lyle

At the end of the day, being tied to a brewer helped, did it not?

Edith Monfries

Absolutely, yes. In particular, during these challenging times, it is not just that we have been able to give help with the beer and the rent, we have also constantly been able to provide advice.

It has been a fast-changing environment, with the regulations which have come from the Government about how we can open safely and what needs to be done, and we have had to react to the situation in which we find ourselves. We have been on the phones to our pubs and we have issued guidance, signage and personal protective equipment, enabling everybody to open. That is why all our pubs opened on the first weekend.

All our BDMs in Scotland were out throughout that weekend, and we visited all our pubs. We spent hours on the phone throughout lockdown supporting landlords, enabling them to apply for Government grants and helping them to understand the complexities of the furlough arrangements so that they could look after their staff and people did not suffer more than was unavoidable in these terrible times.

The Convener

I will try Lawson Mountstevens again. We will see whether we can get some sound.

We still cannot hear you, I am afraid. Have you tried your slider, to make sure your volume is up?

I am afraid Lawson’s sound is still not working. Does Emma McClarkin wish to add anything to what has just been said?

Emma McClarkin

Absolutely. It was a Herculean task to ensure that we could dispose of the 70 million pints that we had, which had to be disposed of in an environmentally safe way. This shows the strength of the tied relationship. Because of it, pubs could get credit notes put back on to their accounts. We created a platform with the Beer and Pub Association, called Returnyourbeer.com, to make it easier for our tenants to log all the beer that they were disposing of.

Tenants get support through that collaboration, and it is that support upon which the model is based. They have a lower rent, plus they get business support, plus we have the arrangement whereby they will get access to investment, which is so critical—and there is no more critical a time than right now.

Willie Coffey

Good morning. Perhaps we could ask Lawson Mountstevens some questions and he could answer them by holding up yes and no cards. That might be helpful.

The Convener

It is worth saying, Willie—and Lawson, if you are listening—that the event chat button may be used. Although we cannot hear you at the moment, Lawson, if you want to enter comments using the event chat button, members will see that, and they will be able to pick up those comments and respond.

Willie Coffey

I want to ask the first question that I asked the first panel, which possibly touched a raw nerve. As is referred to in the policy memorandum, there is a perception that the bill could lead to pub closures. While that was acknowledged by the member in charge, in fairness, he said that the advantages of the bill would outweigh that risk. I would like to hear the views of the panellists whom we can hear on that. What justification is there for the proposals? I put that to both Emma McClarkin and Edith Monfries.

Emma McClarkin

Thank you for that question. It is really worrying to note how many pubs were closing before the crisis. Given the crisis that is happening now, we are expecting many more closures.

Turning to the facts right now, twice as many independent free-trade pubs will close, or have closed, as pubs that are leased and tenanted under a tie. That is just a fact—you cannot dispute that. Pubs are being put at risk at a time when they are already under extreme pressure. When pubs close, they often close for good, and we do not want to see that happening. The relationship can sustain them. That is why I mentioned the comment from the landlord I spoke to yesterday: the arrangement, with that level of support in place, future proofs their pub and their business.

This is of real concern to me. Closed pubs do not contribute jobs to their community—they do not contribute anything to the economy. The reality is that they are losing their social value. That is not a price that I want to see being paid anywhere in Scotland. The Beer and Pub Association in Scotland is doing everything to support as many pubs through the crisis as we can.

Edith Monfries

I would reinforce that comment. We understand that, in the face of the crisis, this is a long game. The advantage for our tied tenants in particular is that we can afford to play the long game with them.

We are delighted at the buoyancy with which trading has returned now that pubs have reopened, but we also recognise that a rocky road lies ahead and that there might be tougher times. As a business, we have committed to continuing to support our tenants through the crisis, however long it takes. We are in a position to do that.

Small independent operators do not have the wherewithal and find it harder to play a longer game. They are more reliant on external lenders with more onerous repayment arrangements. We do not give loans to our businesses; we work in partnership with them so that they succeed in the future. We will stick with them through this crisis. If we need to give them more rent support then we will do that, and if we need to support them with more PPE and advice, we will continue to do that throughout the crisis. We can do that for our tenants. We are in partnership with our tenants: if they succeed and do not close their pubs, then our pubs remain open, and that is in our mutual best interests.

That is the whole point of the tied arrangement—there is mutuality of interest. It is an entrepreneurial and partnership arrangement, particularly in Scotland, where only 17 per cent of the market is tied, so people have a choice and do not have to enter into a tied relationship—they could choose from the 83 per cent of the market that is not tied if they felt that that was the better thing to do.

Yesterday, Andrew, one of my tenants, said to me, “I’ve worked in my bar for 17 years. I could never have taken this on if it weren’t for this arrangement. Yes, I pay a wee bit more for my beer, but you know what, it’s completely fair, it’s completely transparent and I understand how it all works and I couldn’t have managed without the support of my BDM.”

Emma McClarkin

I just wanted to mention the pub closures and the pressures on the industry before the crisis. When we look at the number of free trade pubs that are closing—and at greater volume—we can see other pressures that need further attention, rather than a problem with the tied pub model. There are pressures such as VAT and the high tax burden—we pay 11 times more beer duty than people pay in Germany—and our business rates are astronomical and disproportionate for the beer and pub sector. There are many other priorities in relation to the pressures that businesses face that we could focus on to prevent closures, rather than focusing on this proposal.

Willie Coffey

Convener, I am wondering whether Lawson Mountstevens’ connection is back. I would like to hear from him, if that is at all possible.

The Convener

Let us try him again.

Lawson Mountstevens (Star Pubs & Bars Limited)

Can you hear me now?

The Convener

Yes! Excellent.

Lawson Mountstevens

It is wonderful to be here and it is a great relief that you can hear me. It was not a great moment for the sound to crash. Thank you for your patience.

Willie Coffey

There is a suggestion in the policy memorandum that, if successful, the bill could lead to pub closures. That was disputed by the first panel. What is your view on that?

Lawson Mountstevens

Our view is that the leased and tenanted pub sector is one of the operating models that exist out there. Successful and vibrant pubs need motivated operators to run them and they also need inward investment from people like us at Star Pubs & Bars. If we bring those two things together we create a vibrant pub ecosystem.

It is a partnership model: we are in it together. We let the pubs on a transparent basis and everyone understands what they are entering into. Look at what has happened with Covid—as Emma McClarkin and Edith Monfries have mentioned, the way in which we have conceded and offered rent concessions right the way through the crisis is the ultimate demonstration of partnership. Star is still offering significantly discounted rents, even though the pubs are now reopening, because we want to see people phasing back to whatever normal looks like and enabling those pubs to survive in the future. If we cut the umbilical cord, our prognosis is that more pubs will close.

Willie Coffey

Thank you for that.

11:00  

Andy Wightman

I would just like to pick up on a few points that Edith Monfries made. First, she said that the existing model shows that the tenants make a profit as well as the landlords, but we heard in previous evidence that some tenants are earning as little as £10,000 a year. Will she clarify that?

Secondly, she said that her company does not make loans. Again, witnesses in the previous panel said that some investment is made in the form of loans from landlords.

Edith Monfries

I am very pleased to respond to and clarify that point. I can speak for Hawthorn and I am sure that Lawson Mountstevens will request to speak on behalf of Star. We are representing the pub-owning companies. Obviously, I cannot give details about other pub companies but I can certainly give details about my own.

Under our model for tied pubs, we seek minimum earnings for our tenants of at least £25,000. We put the numbers in our submission to the committee, to illustrate the difference between a tied model and an untied model. I therefore dispute the level of profit that was talked about during the earlier evidence session. It is not the experience of our company. I agree that that level of earnings is inappropriate and far too low; it is not the right level of earnings. We would not seek to perpetuate a relationship in which the tenant was getting as little out of it as that. That would be in nobody’s best interests and would not create a sustainable business model. It is not what we are about.

The earlier witnesses also talked about loans, and although they might not have meant it in this way, there was an implication that, in addition to the tied model, in terms of the wet rent and dry rent, we make separate loans and charge interest on them. That is simply not the case and I do not believe that it would be the case for any pub company.

We recoup our investment in a number of ways. Yes, we often increase the rent, but only in conjunction with going through a detailed business model with the tenant prior to the investment, so that everybody is fully aware and the investment is fully transparent. The rent will often increase in steps, but everybody will see exactly the journey. It is predicated on increased levels of trade—and those increased levels of trade will give the pub-owning company more profit as well as giving the tenant more profit.

There was also a lot of talk about the huge difference in prices of a keg of beer. That is also not as simple as it was purported to be. The pricing, the product mix and the discounts that we offer are all about creating a sustainable business model with our partners.

Our pubs are at the heart of the community and have served the community throughout this crisis. That does not stop at the pub door. The pub is a community asset and that is what we are investing in, for the long-term trade and future of the business. It is in our interests that people make a living income so that they trade with us in partnership.

This is our tied model; it is not a joint-venture model. For the avoidance of doubt, it is what will be covered by the legislation if the bill goes ahead. The lack of certainty that the MRO option would introduce would give us a real problem for our investments. It would mean that we could not have sufficient line of sight to work with the tenant on earning back our investment. We earn that back through a combination of the wet rents and the dry rent, or the pure rent, in collaboration with the tenant, who also benefits.

Lawson Mountstevens

The key point to clarify is that, as Edith Monfries said, these are not loans. Minimum earnings are set in a very transparent way through a process of setting the rent model, where people understand their ingoings and outgoings, they are jointly agreed and there is absolute transparency about the minimum that the tenant should earn out of the pub. As Edith said, the key is to grow pubs and make them more successful and fit for the future. Investment is key if we are to do that.

We all know that consumers want different things. They have higher expectations for the pub environment, and pubs need to adapt. To do that, we invest openly and collaboratively—otherwise we would not find motivated operators to run them with us. It is about growing the profit pool of a pub, so that it is more profitable and sustainable. There must be visibility. Yes, the rent goes up, but the profit potential goes up, too. That is how the model works—openly and transparently.

We are competing for the best operators. It often gets lost in the debate that we are not forcing people to take on our pubs—far from it. We want to work with motivated individuals who see the potential for a pub. That is where the entrepreneurship of the model comes in, and we can recruit brilliant people at the heart of communities, invest with them and create great and sustainable pubs. It is a competitive market for great operators.

Andy Wightman

Obviously, there is an imbalance of power in any relationship between a landlord and a tenant, and we routinely regulate that relationship by varying degrees in statute across the board.

Edith Monfries and Lawson Mountstevens mentioned partnerships, negotiating what the terms will be when making an investment, the consequences for the rent, and all the rest of it. However, if a tenant is not happy with the outcome, they do not have a great deal of leverage. Is it not reasonable for there to be access to arbitration or adjudication to ensure that a fair settlement is reached and that there is—this is one of the adjudication principles—a better balance of “risks and rewards”?

The Convener

Does Lawson Mounstevens want to respond to that?

Lawson Mountstevens

Yes, I am happy to respond.

That balance in the relationship is absolutely needed. Our view is clear: the voluntary code in Scotland works really well. That has been enhanced with the setting up of the Scottish pub governing body. That is in its early days and Covid has caused delays, but we firmly consider that the access to information through the voluntary code is enough. That will free us from the burden of more bureaucracy and legislation, and allow us to focus on recruiting, working with great operators and investing in our pubs.

Emma McClarkin

On Andy Wightman’s earlier question, the average income from the tied pub model is £38,000.

On the question of bringing forward the review, in the four years since the creation of the Scottish pub governing body, only one complaint has been received. Of course, we have the Pubs Independent Rent Review Scheme and the Pubs Independent Conciliation and Arbitration Service dealing with the rent review, the independent pub review and the court and arbitration part. As Edith Monfries mentioned, we have repeatedly made people aware of the code of practice and how they can utilise it if they have any problems.

The Convener

Are you happy with those answers, Andy?

Andy Wightman

Yes. I have a few other questions, but I will leave it there, as I know that time is pressing. I will come back in at the end of the session.

Rhoda Grant

I have a quick supplementary question for Edith Monfries. She mentioned tied pubs having a two-month rent holiday during the pandemic. Does that include market-rent-only tenants and joint venture tenants? What payment holiday has her organisation had from its lenders over that period?

Edith Monfries

First of all, we do not have any joint venture arrangements, so that is not applicable in this case.

We have very few market-rent-only pubs in Scotland, and we have given rent support where required. I cannot comment on the specific nature of the rent support for those individual pubs, as I do not have the information in front of me, but I know that we have provided support to all our tenants.

You asked me about holidays in respect of our own banking arrangements. We have not had those in any shape or form.

Rhoda Grant

We have heard that, when the profits of a tied pub go up, so does the rent. Where is the incentive for the tenant to build the business if they will lose part of that profit to the pubco? My question is for Lawson Mountstevens.

Lawson Mountstevens

I am not sure that that was quite clear in the previous session, and that is not quite how we would position it. As I said, we enter into a rent-setting process: we advertise the pub at a certain rent and we then go through an open process in which the rent is agreed and contractually locked down. The important thing is that the rent is then fixed and, in the majority of our agreements, does not vary with turnover. Therefore, if someone grows the business, they also grow the profitability.

It is not the case that someone would be disincentivised from growing their business. We want people to exceed their business plan. That is the key driver of the business. If someone exceeds the business plan, they are performing well, employing people and building a sustainable business. The challenge then is to retain those people in the pub and agree a sensible renewal with them, if that is what they want. The rent is fixed, they grow their turnover, and they grow their profits.

Rhoda Grant

I must have misunderstood Lawson Mountstevens previously, because I thought that he said that, if a pub’s profits increase, there would be a share in the profits between the pubco and the tenant, meaning that the pubco would take a greater share of those profits in rent. Is that not right?

Lawson Mountstevens

The pub’s profitability is assessed at the start of the letting process. That is based on the assumption of what we think the pub will make—say £10,000 a week. That is pro-rated with all the costs, which will drive a profit number, which leads to an agreed rental number. That is the tenant’s rent—it is agreed and fixed. Therefore, if the pub performs ahead of that, it is great news and the tenant will be making more profit.

Gordon MacDonald

I want to ask about the extent of the tie with your partners. Pubs serve a wide range of products—wines and spirits, soft drinks, draft beer, bottled beer, alcopops and so on. What proportion of your tenants are fully tied and how many are partially tied? What types of products tend to be in the tie?

Lawson Mountstevens

We talk about tied pubs, but it is interesting to see the reality of how restrictive the supply contracts are. About 80 per cent of our Scottish pubs are free of a tie on wines and spirits—and that is in a market in which spirits are a high proportion of the choice. Our core supply contract is around beer and cider, which we supply directly. There is also flex and opportunity for regional craft and cask ales, either directly through us or via the SIBA scheme, which was talked about in the previous session.

11:15  

The important thing is matching the offer to the pub and seeing how to maximise each opportunity. We have a couple of great examples. There is The Winking Owl in Aviemore, which is let to the Cairngorm Brewery. It has our beer and cider range alongside its beer range, and that works fantastically well. When we are back to normal, if anyone were to walk across the road to the Kilderkin, which is near Holyrood, they would see a huge range of beers. That pub has a free-of-tie deal on Holyrood ales and free-of-tie casks. There is lots of flex in our supply contracts.

Edith Monfries

What I will say is quite similar to what Lawson Mountsteven said. Only 2 per cent of our tied pubs have a full tie; it is not what we would normally do. The vast majority—98 per cent—of our tie is partial and is applied to beer only, while spirits and minerals and, obviously, wines are free of tie. The most commonly drunk beer in Scotland is Tennent’s. The second most commonly consumed drink is vodka, and the third is lemonade. Vodka and lemonade are free of tie, while Tennent’s is tied.

We offer the opportunity for the pubs to buy available craft beers if they want to for their product mix. Those pubs can choose from a wide range to give their customers choice. Some of our pubs stock Musselburgh Broke, Alchemy Brewing’s Ritual and Orkney Brewery’s Red MacGregor. Those are all independent brewers with interesting products to give the customer the choice that they want.

We respond to customer demands on a pub-by-pub basis. In every pub that we have in Scotland, the product mix and what is available at the bar are set in discussion with the tenant in response to what their customers want to drink. At the end of the day, the customers drive the business and the profits for us and the tenants. That is what we want to see, and that is what creates a sustainable business.

Gordon MacDonald

Emma McClarkin mentioned pub closures. I noted that, since 2001, 20 per cent of pubs in Scotland have closed. In Edinburgh, the figure is closer to a third. How has the size of pubs and bars changed over the past 20 years in Scotland? Has that increased or decreased the size of Hawthorn Leisure’s estate?

Edith Monfries

[Inaudible.]—has owned Hawthorn Leisure since 2018. We have not been operating in Scotland for that length of time, but our estate in Scotland is growing, and we would like to see it grow further. We have plans for growth in Scotland. We think that Scotland offers a fantastic opportunity to create, grow and develop the community pubs that we love so much. We want to be able to do that in Scotland.

The business as a whole has invested £97 million in Scotland since 2009. As well as our 96 pubs, we have local shopping centres and retail parks, and we want to continue to invest in Scotland. However, the bill is putting that at risk, and that saddens and worries us. The uncertainty that the bill brings makes it very difficult for a business to plan for the future, particularly in these difficult times.

Lawson Mountstevens

To build on that, we are a Scotland-based business and a significant employer in Scotland. Our entire back office is based in Edinburgh, and we employ around 700 people. We have the Caledonian Brewery, as well. With the acquisition of Punch in 2017-18, our pub numbers have increased in Scotland.

Like Edith Monfries, we see a vibrant future across Scotland for well-invested local pubs that are run by local operators. Last year, we invested £5 million in our pub estate in Scotland, because the opportunities and the great entrepreneurs are there, and we want to create local jobs, which is what well-invested pubs do. To labour the point, the bill, with the uncertainty within that framework, would put that in question—there is no question about that. We absolutely want to continue to grow our pub business in Scotland.

The Convener

Emma McClarkin is waving at me; I think that she wants to come in.

Emma McClarkin

I want to make a point about the pressures on businesses of closures. Across the whole United Kingdom, three or four pubs were closing every week before the crisis. A lot of policy changes had been made, including bans on happy hours, changes to the drink-driving law, the smoking ban and changes to workplace pensions. We do not dispute the basis of a lot of those policy changes, but they all impact on how someone runs a hospitality business. Those issues have not gone away. We then had Covid and its impacts.

We have to look at what is necessary to support the sector at this time, and at this time there is no need for a statutory code that provides no solutions. There are other priority areas, such as business rates and taxation, that could be looked at to help to sustain hospitality businesses across Scotland and lead to the investment that will be vital to the survivability of businesses. Getting that cash and investment flowing back into the pub sector will mean that it can stabilise itself and move on to growth and job creation.

Colin Beattie

Everything that I have heard in this discussion has been about risk and reward and how it is shared or balanced between the tenant and the pub-owning company. We are looking at hard facts, and the data shows that, between 2010 and 2019, 852 independent pubs closed in Scotland, while 330 tenanted and leased pubs closed. There must be wider factors having an impact than those that we are discussing. What might those factors be? Are they the result of any particular operating model? I ask Emma McClarkin to start off.

Emma McClarkin

The elements that I mentioned in my previous answer are the ones that we need to target. They were putting pressure on the sector previously and we can see that pressure during the pandemic, too. How we recover from the pandemic in the next six to 12 months is critical, so the proposals in the bill cannot move past this stage. The proposed legislation would add another level of uncertainty without providing any solutions, and the sector does not need that right now.

We need to consider the tax burden on the sector. We pay 11 times more duty on beer than is paid in Germany or Spain and we need to redress that. We need to invest in our domestic businesses to ensure that we have strong Scottish brewers, so that we can make the offer available to consumers, and to ensure that our pubs, which are the main outlet and route to market, can pass that on. One pound in every three that is spent in a pub goes to the tax man. We need to redress those issues.

Pub businesses also pay disproportionately more in business rates versus our turnovers. That needs to be addressed. There has been a VAT cut to incentivise people into going back to Scottish pubs, and that was very welcome, but, in the long term, we will also need to examine VAT in the sector.

We can do many things to tackle the problems and make it more efficient to run a business and create jobs. That is the ultimate aim, and investment is key to that. We cannot put in jeopardy any of the cash flow or investment that needs to go into the sector at this time in order to sustain jobs and, hopefully, create more of them.

Colin Beattie

You have not addressed the question about the wider factors that are driving the disparity between the number of independent pubs closing and the number of tenanted or leased pubs closing.

Emma McClarkin

That is because they have business support—they have people to help them through and guide that business model. The model is more successful and sustainable, because they share the risk. Our pub-owning members also benefit from their membership of the Beer and Pub Association. It is important to give that advice, to make sure that somebody advocates for the sector and to ensure that the members’ voices are heard in the debates on the issues, as they are being heard today. It is enormously important in the model that risk is shared. That is the whole point, and it is why the tied pub is so successful and has been for more than 100 years.

Colin Beattie

Would anyone else like to comment on that? That has silenced them.

I will ask one other question on the back of that. Obviously, we already have a voluntary code. If there is an issue with rent—and rent seems to be a big issue for some—tenants can seek independent adjudication, and the pub company agrees to be bound by that. With regard to the voluntary code, how many tenants take part in the adjudication process and how many tenants does it find in favour of?

Edith Monfries

First, I will go back to the previous question—it was thought that nobody wanted to say any more about that, but I simply did not get my request to speak in on time.

On the structural issues that might have led to pub closures—and the disproportionality between the independents and the L and T model—we all recognise that we need to reinvigorate our local communities. That is a priority and, as we come out of Covid, it will be an even bigger priority.

In terms of independents versus the leased and tenanted model, I agree with Emma McClarkin that it is all about the support and guidance that we can offer, particularly to our tied tenants under the L and T model that we operate, and we will continue to offer that. Consumer demand keeps pubs open; reinvigorated local communities keep pubs at the heart of those communities, serving the men and women who live and work there.

Those are the structural issues that we need to address in our society in order to reinvigorate the pub sector and ensure that it succeeds and thrives, which is what we seek to do.

Can you repeat the second question?

Colin Beattie

It was about the voluntary code. I am trying to get a feel of how often it is used and how successful it is. Obviously, the pub company agrees to be bound by the results, but does the code answer most of the concerns of tenants who have a problem?

Edith Monfries

The concerns that tenants have should be largely met before it gets to the point at which they would want to appeal under a code, whether it was statutory or voluntary. The voluntary code is communicated clearly to the tenants; they know that it exists. However, in most cases companies and tenants have a successful relationship and have no reason to invoke it.

From my experience, and from talking to all our tenants, including our 10 tenants who wanted to put their submissions to the committee to say that they oppose the bill and that they consider that the relationship is a positive risk-and-reward sharing partnership, the majority of them have no need to invoke the voluntary code. That further underpins the view that there is no need to go beyond the code. It is there if people need it. If they do not need it, there will not be many appeals to it, because we resolve situations long before they get to that point.

We set rents that are sustainable and we have a business model that we work on with our tenants to ensure that their businesses are sustainable and future proof. The Scottish Government’s independent report in 2016 concluded that there was no need for legislation in that area. I believe that that is even more true today.

Lawson Mountstevens

Edith Monfries has summarised the situation well. The answer is that few people go through to the voluntary code process. We do not have the exact numbers to hand; we should all commit to getting those numbers to the committee, so that members can see and understand the scale of it.

However, the key point is that it is in our vested interests to agree with the tenants and avoid that process. I think that the headline numbers will show that—the numbers are not big, although they are not leaping to mind. We have an interest in resolving issues and in maintaining positive commercial relationships with great operators. That is because if we do not have great operators running great pubs there is no business. That is the driver of what we are all about.

11:30  

Emma McClarkin

I mentioned earlier that only one complaint has been brought under the code since 2016. I think that that is because we have a good relationship between the pubcos and our tenants, but it is also because the Scottish market is different—it is much smaller, so there are fewer complaints. That is the reality of the scale of the issue. There are only 750 tied pubs in Scotland, so the percentage of those who have felt that they had a dispute, or needed resolution, is also very small. That is why we do not consider that we need a statutory code in Scotland.

Maurice Golden

I have three questions, which I will ask at the same time. They are for any of the witnesses.

First, Chris Wright, one of our earlier witnesses, mentioned that investment decisions were taken “on a whim”. Will you clarify whether you make decisions to invest in your pub estate without any due diligence, without any corporate investment structure and, as was mentioned several times, “on a whim”?

Secondly, Greg Mulholland, another of the earlier witnesses, made the claim that the pub companies are exploiting tenants and making them pay full rent during the Covid crisis. I would appreciate hearing about any evidence that you have on that.

Thirdly, more generally, will you explain the impact of the Covid crisis on pubs? What support have pub companies provided? If possible, will you contrast that with the pubs that are free of tie?

Lawson Mountstevens

I will take the questions in turn.

Star Pubs & Bars is part of Heineken, the global brand. We bid for capital to invest in the UK and in Scotland. One does not get access “on a whim” to the £190 million that we have invested in pubs over the past five years—nothing could be further from the truth.

We have a very structured process, which, in effect, assesses every pub in our estate. We work our way through a proper estates review process. We have a plan for every pub, which shows where the investment opportunities are and where it is right to invest. We are constantly assessing changing demographics and changing consumer needs. That drives our investment process plan, in a five-year outlook, and that crystallises into what we plan in any given year.

For example, last year, as I have said, we invested £5 million in Scotland. We would have been working on that investment in the two years leading up to it. Those are very involved big capital projects of more than £250,000, which create a massive supply chain of jobs in the set-up and delivery of a pub, which are on-going in the successful delivery of that pub. I hope that that shows that there is rigour around the process.

I turn to rent. The Covid period is, without doubt, the biggest challenge that the industry has ever faced. We have had to close businesses to people. Let us hope that we never experience that again. I firmly believe that Covid has crystallised the benefits of the tied pub model. We immediately suspended rent, as we assessed the situation. We issued a series of significant rent concessions for the closed period, which were either 50 per cent, 75 per cent or 90 per cent. We extended the concessions for the first two months of opening, and, last week, we committed to additional support for September and October, with continued rent concessions, as people build their businesses back up. In Scotland, that is a £2 million-plus investment from us to support pubs.

Most important, we are giving people surety and understanding in a period of massive uncertainty. To reopen a pub in Covid is hugely challenging. We acknowledge that there are increased staff costs and complexity, and an increased onus on the operators to focus on delivery. They do not want to be worrying about the rent, and we have made commitments in that regard.

Alongside that, we have packaged all the support and interpretation of Government guidance to make it simple and accessible, together with a plethora of point-of-sale and “how to” guidance. That has enabled significant numbers—90-odd per cent—of our pubs to open and trade in this very challenging period. Let us be clear: there are more challenges to come over the next six to 12 months as we rebuild trade back.

Emma McClarkin

I will be brief, because Lawson Mountstevens said everything that needs to be said.

On the specific instance of somebody being asked to pay full rent, there was a universal rent deduction, which was made across the board, and support was reviewed on a case-by-case basis. The pubs have received concessions to help support and sustain them through Covid. If a business is in a tied model, they will have that support, which is able to zone in on and understand the business. That is the kind of support that they have to see them through these moments in time.

We do not invest millions—up to £15 million a year that we are investing in Scottish pubs—“on a whim”. I reassure Mr Golden that such business decisions are based on the certainty of the environment, the quality of the investment and how we will make sure that we get the return on it. It is a business decision that is taken in partnership with our tenants. That investment will continue only if we can do it in the full knowledge that we will be able to recoup the extra costs in the future.

Edith Monfries

I will reinforce what Lawson Mountstevens and Emma McClarkin have said. As a responsible company, we would never invest money “on a whim”; that would be anathema to us and very irresponsible, and we would not put our shareholders’ money at risk in that way. We take investment decisions in the way that Lawson Mountstevens described—we work with tenants to put together a business model so that we understand how it will all work, and we monitor it closely post-investment to ensure that what we thought would happen does happen.

In 2019, we invested £500,000 in our Scottish pubs. Pre-Covid, we had plans to invest another £2 million in 2020. Obviously, we have had to review that in the light of Covid and, particularly, in the shadow of the bill, the outcome of which remains uncertain. The sooner that we have certainty and the sooner that the shadow of the bill can be lifted, the better it will be for our pubs in Scotland, as we will be able to proceed at pace with the investment that we want to make, in order to create more vibrant pubs within our local communities.

I was saddened by the comments of the earlier panel. Much was made about the exploitative nature of the relationship that we purportedly have with our tenants. I have seen no evidence of that and I do not believe that we have such a relationship. I have endless emails from tenants who are grateful for the level of support that we have provided not just through Covid, but throughout our relationship with them. One of the submissions to the committee was from the Victoria Bar. John in the Victoria Bar has been working with us for 13 years and he says that we are “great to work with”. Collette in the Braes has worked in pubs for 30 years; our tied tenancy was the first one that she had taken. Because of Covid, the pub closed 27 days after it opened, and the other day, she phoned me in tears and said, “I do not know what we would have done without you.” That does not sound to me like exploitation—exploitation is not the more than £1 million that we have provided in rent concessions and other support.

We are encouraging breweries to provide free umbrellas and chairs to enhance outdoor space, which will allow safe drinking outside and ameliorate the trade in pubs. We are also ensuring that we are on top of all the guidance that we provide and that we can comply with all the latest recommendations, in order to keep our pubs safe so that our customers can return to enjoy their much-loved pints with their friends in their much-loved pubs. We want to be able to continue to do that without the dreadful shadow of this legislation. I thank the committee for listening to us—it has meant an awful lot to us and, I am sure, all the tenants in our pubs in Scotland.

Willie Coffey

Lawson Mountstevens was talking about delaying rent payments during Covid. Did you mean that that rent would be foregone, or will you be recouping it from the tenants at a later stage?

Lawson Mountstevens

To be absolutely clear, that rent is foregone. It is cancelled, it is no longer due and it is no longer payable on the concessions that we have agreed across our pub estate, which amount to rent discounts of 50 to 90 per cent. That is where I got the £2 million-plus number. I am absolutely transparent on that.

The Convener

In the first evidence session this morning, we heard the accusation that the relationship is not a good balance of power. It was said at one point that there is a grocery code in Scotland, so why not a pub code? There was a feeling that a pub code would give parity between the different sectors.

There were comments about the reasons why we had not heard complaints from tenants. It was suggested that there would be concerns about a backlash from the pubcos, that benefits that are individually decided by the pubcos for tied tenants might be changed or removed, and that in cases where tied tenants had exercised their legal rights to challenge the arrangements, they would get no support down the line.

Those are pretty significant accusations. Would any of you like to comment on them?

Lawson Mountstevens

Those are anecdotes and do not reflect the business that we operate, or how pubs and tied pubs operate in 2020. There are a lot of distant and historical references there that are not based on fact.

We spend a huge amount of time surveying, talking to and engaging with our operators right across Scotland. We care how they feel and how we are perceived. We want motivated people, in a transparent commercial relationship, running our pubs. Given the churn and costs that come with pubs closing, there is no commercial benefit whatever in seeing people fail. That is not a business model that I recognise or am part of.

On whether we need something in Scotland that we have in England and Wales, we come back to the fact that the Scottish market is fundamentally different. We are talking about 17 per cent of pubs across Scotland—it is a much smaller proportion than in England and Wales.

In addition, I refer to all the things that we said about the voluntary code. The voluntary code, combined with the Scottish Pub Governing Body working well and functioning, is the framework under which we need to operate and go forward. That will lead to us all remaining committed to investing in a very healthy and successful Scottish pub landscape.

11:45  

Emma McClarkin

There is a bit of confusion, because the grocery code does not have anything to do with rent.

I emphasise the scale of the marketplace and of the perceived problem. Even in the committee’s survey, 59 people partially responded and 39 fully responded, 37 of whom said that they felt that the bill should go forward. That represents 7.8 per cent of tied pubs. Therefore, 92 per cent of people had absolutely no reason even to respond on the issue, which I presume is because they are happy with the arrangement that they have.

We are trying to support our Scottish pub sector and our beer sector so that they can survive through the current crisis. We need to focus on what we can do that will impact on the majority of people and not on the minority of voices who have a perceived problem with the situation. We have the voluntary code that deals with that, and people can appeal to the Pub Governing Body in Scotland. Under the code, people can go to the Pubs Independent Rent Review Scheme, or PIRRS, and the Pubs Independent Conciliation and Arbitration Service, or PICAS, to get any reviews that they want. That is an independent process. Mechanisms are already in place to deal with issues.

There is an issue of scale. We are dealing with a different situation from that in England and Wales, where 39 per cent of pubs—that is more than 20,000 pubs—are tied. We have only 750 tied pubs in Scotland. We need to focus on how we can bolster the whole sector and what would impact on the whole sector. I have alluded to the issues that should be a priority if we are to have legislation.

The Convener

So you can say categorically to the committee that there is no backlash, no loss of benefits and no removal of support for those who have complained or given evidence suggesting that the current approach is not right and that there should be statutory changes.

Edith Monfries

I was surprised by a lot of what the witnesses on the first panel said today. I did not recognise our business or how we operate our 96 pubs in Scotland in the business that was described earlier. I can say categorically that there is no fear in the relationship with our tenants. It is a collaborative and partnership relationship, because that is in everyone’s best interests. I can say categorically that benefits would not be unilaterally withdrawn if somebody said something that we did not like. That is not the sort of business that I run, and I would never run a business like that.

Tom Stainer made much of the survey that was, I think, carried out in 2014 and that predated the Scottish Government’s independent survey, which found that there was no need for legislation. I disagree with Tom. I think that the world is a very different place in 2020. We have had six years of pub businesses recognising the importance of good relationships with tenants and that that drives the best future for our mutual business interest. Certainly, all the evidence that I have from going out to my pubs is that people are supportive, happy and comfortable. If there is an issue, they bring it to our attention.

When I or my chief executive officer, Mark Davies, pop into pubs, people have plenty of opportunity to say that they are not happy with their business development manager or that they think that they are not getting a fair deal. We actually go in and ask questions about those issues—that is why we go out to our estate all the time in Scotland. None of the people on the earlier panel gave many specific examples. We can give specific examples, as can Lawson Mountstevens, because we are living and breathing our Scottish businesses every single day and supporting them every step of the way, and we want to continue to be able to do so.

The Convener

Before I come to Andy Wightman with the final question for this panel, I want to let members know that we have let this panel run on slightly because we have been trying to get the minister’s connection working so that we can move on to the next panel.

Andy Wightman

I want to pick up on the evidence of the Beer & Pub Association, particularly the claim that £10 million of planned investment has been paused since the bill was introduced.

First, perhaps not in this oral session but by written follow-up, will you give us more clarity about the nature of that £10 million—that is, what it was for and when it was due to be invested? Secondly, we heard from Lawson Mountstevens that his companies invested £5 million in the past year. Presumably, therefore, there has been no pause on behalf of Star Pubs & Bars. We also heard from the British Beer & Pub Association that it has invested an average of more than £70,000 per pub in the past two years. Is that £10 million real, and do the figures of £5 million and £70,000 per pub predate the introduction of the bill?

The Convener

Who would like to go first? Emma is waving her hand at me.

Emma McClarkin

Something popped up on my screen blocking the chat.

It is key that we get investment right. I will give the committee some examples of what that investment could go into. It could go into a pub that does not have a kitchen, so that it can make a food offer. The kitchen that we put in upgrades the pub, lifts its profitability and increases its offer to its customers. That is one thing that we could do. We could also do a complete refit of a whole premise, which could—as I mentioned earlier—run into hundreds of thousands of pounds. In fact, I am off to see Spateston Inn this afternoon, in which there is going to be up-front investment to the tune of £400,000 for a complete renovation project.

That investment could be anything. It could even be investment to make sure that our pubs not only are up to date with maintenance and compliant with regulations, but are competitive and have a good offer to put to their customers. That is enormously important.

We can certainly provide a written response to the committee detailing where that money is coming from. The committee has already heard from me about the £2 million that Hawthorn was going to be putting in, and that it now has on hold. There are figures out there that would substantiate that, and that is why we alluded to that in our submission.

May I make one final point in case this is the last time that I get to speak?

The Convener

Certainly.

Emma McClarkin

57,000 jobs are dependent on the pub sector in Scotland. Those are people’s livelihoods, and we need to be very aware that anything that we do that impacts on the pub sector may put those jobs at risk.

Over the next six to nine months, the main thing that we need to focus on is anything that touches on that business model—anything that hampers or burdens it or slows it down. We need to get cash flow and investment into the pub sector to make sure that we can survive through this crisis, which is the biggest crisis to hit the industry in its existence.

We really need to focus on the things that will see the businesses through and retain those 57,000 jobs here in Scotland, as well as those 4,200 pubs, which we want to see alive and thriving in their communities, so that they can be the beating hearts of towns, city centres and villages all across the country.

The Convener

Thank you, Emma—that was heartfelt.

Edith, do you want to make a final comment and respond to Andy Wightman’s question before I go to Lawson?

Edith Monfries

Yes. I think that Andy was asking about how specific the investment that is on hold is. The £2 million is not a figure that we picked out of the air and it is certainly not a figure that we arrived at “on a whim”. It was very much pulled from the detailed work that we do through our estates review, which is done on a pub-by-pub basis. Quite a large number of those projects would have been costed and ready to go, but clearly we cannot enter into investments when we do not have certainty of outcome and when there is a risk that, at any time, there may be no line of sight ahead because of the shadow of the bill or, if it goes ahead, the implementation of the bill.

That is why we are so keen to see the bill quashed at the earliest opportunity. That would enable us to get on with the investment in Scotland that our pubs so badly need and that our partners are so much looking forward to. Where we have already invested, it has gone so well. For example, we invested £100,000 in the Commercial Inn in Dunfermline just before lockdown in February. It has opened and it is absolutely buzzing, which is fantastic. It has signed up to the “Eat out to help out” campaign, it has got its cask beers back on tap and its customers have come back in droves.

We want to see that in every single pub in Scotland that we are responsible for, and we believe that the bill will put a complete end to the sort of vibrant recovery that we are currently witnessing in the wake of Covid and the easing of restrictions. We wish to continue to see that recovery and to continue to invest in Scotland.

Lawson Mountstevens

The £5 million was our investment in pubs in 2019. We are absolutely an honourable company. As I discussed in relation to the estates review process, these things take time, and it is absolutely about us honouring the commitments that we made in 2019 and in the first part of 2020. However, as we said, we need to be clear that the shadow of the bill will force us to pause and reflect on investing in Scotland. It poses too much uncertainty and ambiguity and it removes the framework for businesses to invest in the long term.

We therefore urge that that bill be parked and that it sees no more daylight. We need to focus on working with and investing in pubs and on getting the right support for all our pubs, right across Scotland, during what will be a very challenging 12 to 18 months. If we get that right, there will be a fantastic and vibrant future for pubs in Scotland. We see that and we want to invest in them and create local jobs, but we need to do that within the surety of a framework. The framework within which we currently operate is the right one and is fit for purpose.

The Convener

That brings us to the end of this evidence session. I thank Lawson, Emma and Edith for taking part in this meeting. I say to all our witnesses this morning that if you want to follow up on anything that has come out of the session, you can write to the committee and we will take it into account. That was a useful session and I thank you.

We have been having a few problems with the connection to the minister, so I will suspend the meeting for a couple of minutes to check the connection and see whether we are able to continue.

11:57 Meeting suspended.  

12:03 On resuming—  

The Convener

Welcome back. I am pleased to welcome our final panel for the Tied Pubs (Scotland) Bill evidence session, from the Scottish Government: Jamie Hepburn, Minister for Business, Fair Work and Skills; Aileen Bearhop, head of good food nation, public and third sector team; and Dr George Burgess, deputy director of food and drink.

We have had some connection problems with the minister this morning, so we might have to turn off his video, but hopefully we will get through the session.

I invite the minister to make a short opening speech.

The Minister for Business, Fair Work and Skills (Jamie Hepburn)

Thank you, convener. As I said a few moments ago, turning off the video might have a multitude of advantages as far as I am concerned.

Thank you for inviting me to speak to the committee on Neil Bibby’s bill. There were some problems with connection in the previous session, but hopefully that will not happen in this session. The Scottish—[Inaudible.]—commercial agreements, we are keen—[Inaudible.]

The Convener

We are having problems with the minister’s connection. I will ask broadcasting to turn off his video and we will just go with the sound.

Jamie Hepburn

Can you hear me?

The Convener

Yes, we can hear you. Go ahead.

Jamie Hepburn

[Inaudible.]

The Convener

We could hear you earlier, minister. Try again.

I think that we might have lost the minister. I will ask broadcasting to confirm whether that is the case.

Jamie Hepburn

I can hear you, convener.

The Convener

You are back. Try again.

Jamie Hepburn

You can maybe hear me, but not see me. I apologise—[Inaudible.] Can you hear me?

The Convener

No, you are coming and going. Unless we can improve the connection, I do not think that it will work. I will ask business information technology staff for advice. I do not think that we have any sound at all now.

Jamie Hepburn

I am here.

The Convener

Your voice is breaking up.

Jamie Hepburn

Unfortunately, I cannot hear you now, convener.

Marie McHugh (Scottish Parliament)

Convener, this is Marie McHugh from BIT. I have been on the phone to the minister and we have established his network again, but it keeps dropping out. I do not think that there is anything that we can do from a technical point of view.

The Convener

Under the circumstances, it will be extremely difficult to take evidence from the minister today. Unless the minister feels otherwise, I suggest that we postpone the evidence session.

I apologise to Dr Burgess and Aileen Bearhop, but we do not have a clear line to the minister. We will look to reschedule the session with him. I thank everybody who took part and who watched today’s evidence-taking session.

12:08 Meeting continued in private until 12:50.  

The Deputy Presiding Officer (Christine Grahame)

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  

Neil Bibby (West Scotland) (Lab)

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.

The Deputy Presiding Officer

I call Gordon Lindhurst to speak as convener on behalf of the Economy, Energy and Fair Work Committee.

17:16  

Gordon Lindhurst (Lothian) (Con)

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.

The Deputy Presiding Officer

That is breaking news to me, but I believe you.

17:23  

The Minister for Business, Fair Work and Skills (Jamie Hepburn)

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  

Maurice Golden (West Scotland) (Con)

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  

Sarah Boyack (Lothian) (Lab)

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  

Andy Wightman (Lothian) (Green)

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  

Willie Rennie (North East Fife) (LD)

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.

The Presiding Officer (Ken Macintosh)

We move to the open debate.

17:49  

Colin Beattie (Midlothian North and Musselburgh) (SNP)

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  

Daniel Johnson (Edinburgh Southern) (Lab)

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.

Jamie Hepburn

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.

Daniel Johnson

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  

John Mason (Glasgow Shettleston) (SNP)

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  

Stewart Stevenson (Banffshire and Buchan Coast) (SNP)

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  

Graham Simpson (Central Scotland) (Con)

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  

Sandra White (Glasgow Kelvin) (SNP)

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  

Bob Doris (Glasgow Maryhill and Springburn) (SNP)

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.

The Presiding Officer

We move to closing speeches.

18:18  

James Kelly (Glasgow) (Lab)

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  

Dean Lockhart (Mid Scotland and Fife) (Con)

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.

Daniel Johnson

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?

Dean Lockhart

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  

Jamie Hepburn

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.

Daniel Johnson

Will the minister give way?

Jamie Hepburn

Perhaps this is the beginning of it.

Daniel Johnson

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.

Jamie Hepburn

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.

Andy Wightman

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.

Jamie Hepburn

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  

Neil Bibby

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.

The Presiding Officer

That concludes our debate on the Tied Pubs (Scotland) Bill.

The Presiding Officer (Ken Macintosh)

We turn to decision time. The first question is, that amendment S5M-23481.2, in the name of Rachael Hamilton, which seeks to amend motion S5M-23481, in the name of Shirley-Anne Somerville, on making Scotland equally safe: marking the annual international day for the elimination of violence against women, be agreed to.

Amendment agreed to.

The Presiding Officer

The next question is, that amendment S5M-23481.1, in the name of Rhoda Grant, which seeks to amend motion S5M-23481, in the name of Shirley-Anne Somerville, on making Scotland equally safe: marking the annual international day for the elimination of violence against women, be agreed to.

Amendment agreed to.

The Presiding Officer

The next question is, that motion S5M-23481, in the name of Shirley-Anne Somerville, on making Scotland equally safe: marking the annual international day for the elimination of violence against women, as amended, be agreed to.

Motion, as amended, agreed to,

That the Parliament welcomes the global 16 Days of Activism against Gender-Based Violence and the Annual International Day for the Elimination of Violence against Women; is concerned that the COVID-19 pandemic has seen an increase in referrals to services for domestic abuse and violence against women and condemns violence against women in all its forms; commends the work of frontline support services that have worked tirelessly to redesign services during the pandemic and ensure that women and children can still access support; notes the important work of women’s refuges, which continued to help women during lockdown; understands that, during the COVID-19 pandemic, two-thirds of women in abusive relationships have suffered more violence, 7.6% more than in the previous 12 months, and that, tragically, nine women were killed by abusive partners in 2019; encourages anyone experiencing violence to access the support that they need; notes the effective local response and collaborative approach between national and local government on this issue; reaffirms its support for Equally Safe, Scotland’s strategy to prevent and eradicate all forms of violence against women and girls; reflects on the advancements made and key achievements to date and welcomes the publication of the last progress report for Equally Safe; calls on communities everywhere to stand shoulder to shoulder in sending a clear message that violence against women and girls is never acceptable and that now more than ever people must stand together against it; urges everyone in Scotland to continue to challenge violence and abuse, hold perpetrators to account for their behaviour and work together to build a Scotland where everyone can live equally safe, and believes that the Scottish Government should consider whether a special-alert system in pharmacies should be introduced in Scotland, similar to other European states, as well as other concrete safe-guarding measures to help protect women and children from all forms of violence.

The Presiding Officer

The next question is, that motion S5M-23343, in the name of Neil Bibby, on the Tied Pubs (Scotland) Bill, be agreed to. Are we agreed?

Members: No.

The Presiding Officer

There will be a division. I suspend the meeting for a few minutes to allow members to access the voting app.

18:41 Meeting suspended.  

18:47 On resuming—  

The Presiding Officer

We move to the division on motion S5M-23343, in the name of Neil Bibby, on the Tied Pubs (Scotland) Bill. Members may cast their votes now. This will be a one-minute division.

The vote is closed. If any member believes that they were not able to vote, please let me know by making a point of order, either in the chamber or online.

For

Adam, George (Paisley) (SNP)
Adamson, Clare (Motherwell and Wishaw) (SNP)
Allan, Dr Alasdair (Na h-Eileanan an Iar) (SNP)
Arthur, Tom (Renfrewshire South) (SNP)
Baillie, Jackie (Dumbarton) (Lab)
Baker, Claire (Mid Scotland and Fife) (Lab)
Balfour, Jeremy (Lothian) (Con)
Beamish, Claudia (South Scotland) (Lab)
Bibby, Neil (West Scotland) (Lab)
Boyack, Sarah (Lothian) (Lab)
Briggs, Miles (Lothian) (Con)
Brown, Keith (Clackmannanshire and Dunblane) (SNP)
Burnett, Alexander (Aberdeenshire West) (Con)
Cameron, Donald (Highlands and Islands) (Con)
Campbell, Aileen (Clydesdale) (SNP)
Carlaw, Jackson (Eastwood) (Con)
Carson, Finlay (Galloway and West Dumfries) (Con)
Chapman, Peter (North East Scotland) (Con)
Cole-Hamilton, Alex (Edinburgh Western) (LD)
Constance, Angela (Almond Valley) (SNP)
Corry, Maurice (West Scotland) (Con)
Crawford, Bruce (Stirling) (SNP)
Cunningham, Roseanna (Perthshire South and Kinross-shire) (SNP)
Davidson, Ruth (Edinburgh Central) (Con)
Denham, Ash (Edinburgh Eastern) (SNP)
Dey, Graeme (Angus South) (SNP)
Doris, Bob (Glasgow Maryhill and Springburn) (SNP)
Dornan, James (Glasgow Cathcart) (SNP)
Ewing, Annabelle (Cowdenbeath) (SNP)
Ewing, Fergus (Inverness and Nairn) (SNP)
Fabiani, Linda (East Kilbride) (SNP)
Fee, Mary (West Scotland) (Lab)
Findlay, Neil (Lothian) (Lab)
Finnie, John (Highlands and Islands) (Green)
FitzPatrick, Joe (Dundee City West) (SNP)
Forbes, Kate (Skye, Lochaber and Badenoch) (SNP)
Fraser, Murdo (Mid Scotland and Fife) (Con)
Gibson, Kenneth (Cunninghame North) (SNP)
Gilruth, Jenny (Mid Fife and Glenrothes) (SNP)
Golden, Maurice (West Scotland) (Con)
Gougeon, Mairi (Angus North and Mearns) (SNP)
Grahame, Christine (Midlothian South, Tweeddale and Lauderdale) (SNP)
Grant, Rhoda (Highlands and Islands) (Lab)
Gray, Iain (East Lothian) (Lab)
Greene, Jamie (West Scotland) (Con)
Greer, Ross (West Scotland) (Green)
Griffin, Mark (Central Scotland) (Lab)
Harper, Emma (South Scotland) (SNP)
Harris, Alison (Central Scotland) (Con)
Harvie, Patrick (Glasgow) (Green)
Haughey, Clare (Rutherglen) (SNP)
Hepburn, Jamie (Cumbernauld and Kilsyth) (SNP)
Hyslop, Fiona (Linlithgow) (SNP)
Johnson, Daniel (Edinburgh Southern) (Lab)
Halcro Johnston, Jamie (Highlands and Islands) (Con)
Johnstone, Alison (Lothian) (Green)
Kelly, James (Glasgow) (Lab)
Kerr, Liam (North East Scotland) (Con)
Kidd, Bill (Glasgow Anniesland) (SNP)
Lamont, Johann (Glasgow) (Lab)
Lennon, Monica (Central Scotland) (Lab)
Leonard, Richard (Central Scotland) (Lab)
Lockhart, Dean (Mid Scotland and Fife) (Con)
MacDonald, Angus (Falkirk East) (SNP)
Macdonald, Lewis (North East Scotland) (Lab)
MacGregor, Fulton (Coatbridge and Chryston) (SNP)
Mackay, Rona (Strathkelvin and Bearsden) (SNP)
Macpherson, Ben (Edinburgh Northern and Leith) (SNP)
Maguire, Ruth (Cunninghame South) (SNP)
Martin, Gillian (Aberdeenshire East) (SNP)
Mason, Tom (North East Scotland) (Con)
Matheson, Michael (Falkirk West) (SNP)
McAlpine, Joan (South Scotland) (SNP)
McArthur, Liam (Orkney Islands) (LD)
McKee, Ivan (Glasgow Provan) (SNP)
McKelvie, Christina (Hamilton, Larkhall and Stonehouse) (SNP)
McMillan, Stuart (Greenock and Inverclyde) (SNP)
McNeill, Pauline (Glasgow) (Lab)
Mitchell, Margaret (Central Scotland) (Con)
Mundell, Oliver (Dumfriesshire) (Con)
Neil, Alex (Airdrie and Shotts) (SNP)
Paterson, Gil (Clydebank and Milngavie) (SNP)
Rennie, Willie (North East Fife) (LD)
Robison, Shona (Dundee City East) (SNP)
Ross, Gail (Caithness, Sutherland and Ross) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Rumbles, Mike (North East Scotland) (LD)
Ruskell, Mark (Mid Scotland and Fife) (Green)
Sarwar, Anas (Glasgow) (Lab)
Scott, John (Ayr) (Con)
Simpson, Graham (Central Scotland) (Con)
Smith, Elaine (Central Scotland) (Lab)
Smith, Liz (Mid Scotland and Fife) (Con)
Smyth, Colin (South Scotland) (Lab)
Somerville, Shirley-Anne (Dunfermline) (SNP)
Stevenson, Stewart (Banffshire and Buchan Coast) (SNP)
Stewart, David (Highlands and Islands) (Lab)
Stewart, Kevin (Aberdeen Central) (SNP)
Todd, Maree (Highlands and Islands) (SNP)
Tomkins, Adam (Glasgow) (Con)
Watt, Maureen (Aberdeen South and North Kincardine) (SNP)
Wells, Annie (Glasgow) (Con)
Wheelhouse, Paul (South Scotland) (SNP)
White, Sandra (Glasgow Kelvin) (SNP)
Wightman, Andy (Lothian) (Green)
Wishart, Beatrice (Shetland Islands) (LD)
Yousaf, Humza (Glasgow Pollok) (SNP)

Abstentions

Beattie, Colin (Midlothian North and Musselburgh) (SNP)
Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
Mason, John (Glasgow Shettleston) (SNP)

The Presiding Officer

The result of the division on motion S5M-23343, in the name of Neil Bibby, on the Tied Pubs (Scotland) Bill, is: For 107, Against 0, Abstentions 4.

Motion agreed to,

That the Parliament agrees to the general principles of the Tied Pubs (Scotland) Bill.

The Presiding Officer

The final question is that motion S5M-23500, in the name of Graeme Dey, on behalf of the Parliamentary Bureau, on committee membership, be agreed to.

Motion agreed to,

That the Parliament agrees that—

Rhoda Grant be appointed to replace James Kelly as a member of the Justice Committee;

Alex Rowley be appointed to replace Rhoda Grant as a member of the Economy, Energy and Fair Work Committee; and

Anas Sarwar be appointed to replace Alex Rowley as a member of the Finance and Constitution Committee.

Meeting closed at 18:47.  

The Convener

Under agenda item 2, the committee will consider the Tied Pubs (Scotland) Bill at stage 2. I welcome to the meeting Neil Bibby, who is the member in charge of the bill and who will speak to and move his amendments. I also welcome the Minister for Business, Fair Work and Skills, Jamie Hepburn, and fellow MSPs Jeremy Balfour, Michelle Ballantyne, Rachael Hamilton and Alexander Stewart.

I ask non-committee members not to use the dialogue box during voting. However, any member who wishes to catch my attention otherwise—for example, to speak during the debate on a group of amendments—should type “R” in the BlueJeans chat function. If members experience technical problems, please contact me and the clerks via the usual means. If need be, we can suspend the meeting until we regain connectivity.

Section 1—Scottish Pubs Code

The Convener

Amendment 15, in the name of Maurice Golden, is grouped with amendments 16 and 17. I will call Maurice Golden to move amendment 15 and speak to all the amendments in the group. Thereafter, I will call Richard Lyle to speak to amendment 16 and the other amendments in the group and Jeremy Balfour to speak to amendment 17 and the other amendments in the group before we come to the minister and the member who is responsible for the bill. I call Maurice Golden.

Maurice Golden

Thank you, convener.—[Inaudible.]—approaching the bill. It is unhelpful to take a Marxist view of tenants versus landlords or multinationals versus tenants with respect to the legislation. From hearing what members said at stage 1 of the bill, I believe that every member wants a fair and proportionate system. I also believe that we can achieve the system that every member wants through discussing the amendments in this group and the other groups.

I was a tenant in retail—that is part of my background. I was subject to arbitrary rent increases, and a multinational retailer put up a large complex just 500 yards up the road from my business. I understand the needs of tenants, and it is with that understanding that I approach amendment 15 and all the proposed amendments to the bill.

Amendment 15 would enable rather than require the Scottish ministers to make a statutory code that would capture all pubs in Scotland that operate under the tied partnership model. It would also remove any time limits for the introduction of a code.

The Tied Pubs (Scotland) Bill is a solution to a problem either that does not exist or that we, as a committee, are entirely unsure of the extent of. Amendment 15 would do several things. Most important, it seeks to strike a balance between giving the Government all the powers that it would require to introduce a statutory code for Scotland’s tied pubs and the respective pub-owning businesses, and not dictating the extent of the code or—most important—including the strict and, in many cases, totally unworkable parameters that it sets into primary legislation. I believe that it is a sensible, worthwhile and consensus-seeking amendment that shows that both the proponents and the opponents of the bill have been listened to.

As all members of the committee are aware, there is very little evidence to point to a major problem with Scotland’s approximately 750 tied pubs that the bill would address. First and foremost, the only detailed and qualitative study of the tied pub sector in Scotland came in 2016. That study was produced for the Scottish Government by APS Group Scotland and CGA. It can be viewed via the Scottish Government website, and we can be sure of its independence and unbiased view.

The study was carried out

“to help Scottish Ministers to decide whether legislation on the operation of pub companies in Scotland needs to be introduced.”

The “overall aim” was

“to provide a robust evidence base to assist Ministers in coming to a view as to whether legislation on the pub sector in Scotland is required, and where the parameters of that legislation should apply.”

The study noted—quite significantly, in my opinion—that, until that report,

“Scottish Ministers received no robust representations which took account of all benefits of particular pub models to highlight whether any particular model was significantly disadvantaged in Scotland.”

The report’s outputs aimed

“to help inform future policy direction on better regulation for the Scottish pub sector whether using a voluntary or regulatory approach.”

The report stated:

“The original research design required the data collection to be made over two phases. The first step, the Scoping Study, aimed to use empirical evidence to assess if any part of the pub sector was unfairly disadvantaged based on case studies from all parts of the sector. This initial exercise also looked to inform whether there was a need for further investigation through follow on research. The second stage aimed to expand upon the key results of the initial case study through a robust quantitative assessment of the market via a wider sample survey of pubs.”

The report also stated:

“The Scoping Study was designed to be representative of the different pub types across Scotland; i.e. Fully Tied, Partial Tied (Leased/Tenanted), Managed and Independent Free Trade.

To provide as broad an evidence base as possible CGA used a combination of qualitative and quantitative analysis to help understand the scale of any issues within the Scottish pub tie model, and the rationales behind them.

The research undertaken included a literature review, semi-structured in-depth interviews, case study data collection and triangulation of data by contrasting internal CGA data, Companies House information (when available) and data collected through interviews.

In order to assist with the research, a Sounding Board was established. The Sounding Board comprised of key stakeholders from the Scottish Licensed Trade, relevant trade associations and related businesses. The group—”

which included both opponents and proponents of the bill—

“was instrumental in assisting CGA with defining both the requirements of the research and in providing access to key contacts.”

According to the report,

“A number of pubs volunteered to participate in the case study research programme. These pubs were verified against Outlet Index and had been continuously present in the database for at least two years. The sample set was a random sample across tenure type and trading style of outlets to a pre-set quota provided in the project brief.”

The context is important for the amendment. The report stated:

“CGA retained control of the sample base at all times to maintain complete anonymity and made the final decision, regarding those outlets selected for the study, on an entirely confidential basis.

The confidentiality of all case study and survey data was paramount to the project. CGA used all reasonable means to ensure strict adherence via the Data Protection Act, Market Research Society (MRS) Code of Conduct, CGA Internal Confidentiality Policies and Non-Disclosure Agreements.”

The report went on to state:

“Independent free trade (IFT) are those pubs that are wholly operated by the licensee and free to purchase all drinks from independent sources.

Within the tenanted pubs, those Fully Tied represent pubs that are Leased/Tenanted with a total tie to their Pub Company for drinks.

Pubs that are Partially Tied are defined as those pubs that are Leased/Tenanted with a partial tie to their Pub Company for drinks (some agreed drinks can be purchased outside their agreement).”

09:15  

It is important that we know the context. The report stated:

“CGA produced three structured bespoke questionnaires for each type of pub interviewed”.

It noted that there was a disappointing response from individual tenants. Nevertheless, it concluded:

“The on trade is currently a very testing market in which to operate a retail business, and has been for some time. There are financial difficulties driven by significant social, legislative and economic long-term changes.”

The result of that research is increasingly important.

That concludes my remarks. I would like to listen to the views of other members.

I move amendment 15.

The Convener

Willie Coffey would like to make a point of order.

Willie Coffey (Kilmarnock and Irvine Valley) (SNP)

On a point of order, convener. I want to get your guidance on how much time you will allow for members to make their points.

Maurice Golden spoke for more than 10 minutes on one point, most of the content of which I do not recall having been made during the committee’s deliberations on the bill. If that is the way that he plans to proceed, we will never get through stage 2 proceedings on the bill today. What discretion might you apply to asking members to make their points in a timely fashion?

The Convener

My notes suggest that he spoke for seven minutes and not 10. However, the record will show how long it was. The reason for allowing Maurice Golden some leeway is that we are at the opening remarks stage. The same courtesy will be extended to Neil Bibby—if he wishes it—and, perhaps, the minister. As we get into the amendments, I hope that members will be much briefer in their comments.

However, that is the reason why Maurice Golden spoke for as long as he did. I hope that that is sufficient for your purposes, no matter which of us was watching the clock correctly.

Willie Coffey

Thank you, convener.

The Convener

Bearing that comment in mind, I turn to another member of the committee. Richard Lyle, you will start at 09:17, according to my clock.

Richard Lyle (Uddingston and Bellshill) (SNP)

Am I going to be timed?

During the pandemic, it has been evident that the hospitality industry has arguably suffered the most. With lockdowns, strict restrictions and limited support, the sector has been brought to its knees. The Tied Pubs (Scotland) Bill appears to want to damage the industry further by imposing levies on businesses that are already struggling; the countless small businesses that they support will also be affected.

The Scottish market is substantially different from that of England and Wales, with one of the major differences being the number of tied pubs in each region. Tied pubs account for around 39 per cent of the market in England and Wales, which is nearly 20,000 pubs. In comparison, in Scotland, only 17 per cent of the market—750 pubs—is tied. Those statistics demonstrate multiple issues.

At stage 1, the committee was clear that, on the balance of the evidence presented, we did not believe that there was sufficient evidence to progress the bill and all that it entails. The written evidence that we collected and the oral sessions that we held with representatives from all sides of the debate allowed us to be confident in our conclusion. Indeed, that was consistent with the Scottish Government’s 2016 study, which concluded that no one part of the sector is disadvantaged over any other.

However, we are of course now at stage 2, so it is incumbent on us all to ensure that legislation enacted in this area is proportionate. It is vital that the bill does not lead to a large waste of taxpayers’ money and, crucially, that it does not further undermine the pub sector, which is currently on its knees, and prevent it recovering from the devastating impact of the pandemic. We must protect investment in the livelihoods of the many operators and individual licensees who rely on the support of pub companies in running their businesses and pubs.

Why reinvent the wheel, and why invent a new code that has unworkable and potentially damaging provisions, when the voluntary code of practice, which was specifically designed to reflect the Scottish pub market, already exists and operates well?

The intent of amendment 16 is to avoid all sorts of complicated factors with the bill and to develop a new code by first putting the existing code on a statutory footing. When the existing United Kingdom-wide voluntary code was adapted in 2016 as a Scotland-specific code, the minister at that time noted that that was very positive.

The Scottish Arbitration Centre, which is located in Princes Street in the heart of Edinburgh, was opened in March 2011 by Fergus Ewing MSP, who was the Minister for Community Safety at that time. The centre promotes arbitration in the Scottish business community as an effective alternative to legislation, and promotes Scotland to the world as a place in which to conduct international arbitration. It is an independent, non-profit company, limited by guarantee. In its distinguished legal tradition and innovative legislation, and in having the Scottish Arbitration Centre, Scotland is well placed to compete globally as an attractive, cost-effective venue for arbitration.

The bill is, in effect, a mishmash of the 2016 English regulations and the old Thatcher beer orders. It is not proportionate and, because of that, it is bound to be struck down by any legal test. Tenants of more than one in five pubs that are impacted—more than 150 premises—have written to the First Minister, desperately pleading with her not to let the bill go through. That should not be news to anyone. Before we voted at stage 1, one tenant said that the news that the matter was being discussed, coming at a time when their businesses were on their knees and they were still completely in the dark about when they could open again, made them want to cry.

Why are we progressing the bill? It reflects badly on the committee and the Parliament that the bill could still become law. The voluntary code already exists and, as members can see, is extremely comprehensive. It guarantees fair and lawful dealing with tenants. Ingoing tenants are as prepared as they can be; they have total clarity in their agreement and in exactly what it entails. Ultimately, there should be no surprises.

I do not know how long I spoke for, convener.

The Convener

We need not worry too much about that. It was brief and to the point, as always.

I have two points to make. First, I have been advised by the clerks that, technically, in committee, we have points not of order but of clarification, so I correct myself. Secondly, reference was made to legal tests on whether the bill can stand up. That is not a matter for us at this point, because it is not the issue that we are considering today. I therefore ask members to refrain from legal argument and to leave that to the courts.

Alex Rowley and Graham Simpson want to come in on what Richard Lyle has said. Jeremy Balfour will speak to amendment 17 and other amendments in the group, and then I will bring in Mr Rowley and Mr Simpson, in that order.

Jeremy Balfour (Lothian) (Con)

Good morning. My amendment 17 recognises that the process has been rushed and that we lack a solid evidence base. It would require more dialogue between the Government and those who will be impacted by the bill. It would create a consultative period of a minimum of 24 months before the code could be introduced. The reason for that is, I think, obvious. As well as the lack of evidence, we must take due cognisance of where we are at the moment with the pandemic and the impact that it is having on the hospitality industry.

When the proposal for the bill was floated by the member back in 2016 and when it was formally intimated in January 2020, none of us could have foreseen what was about to hit our country and our world. As we all know, the pandemic has changed our lives and impacted everything. The fact that we are meeting virtually is testament to that.

The pandemic has absolutely devastated the hospitality industry and, in the past 12 months, regardless of whether they are tied or independent free trade, managed or free of tie, pubs have spent the majority of the time under forced closure. Grants and support from both the United Kingdom and Scottish Governments have been instrumental in keeping such businesses afloat and we hope to provide as many as possible with a bridge to the other side of the pandemic. Even with that, however, figures from CGA have shown that a further 4 per cent of pubs in Scotland closed for good between December 2019 and December 2020 and, unfortunately, further business failures are expected.

We have had representations from groups on both sides of the debate and I have read those with interest along with the committee’s report and the Official Report of the stage 1 debate. Everyone is clear that the hospitality industry will continue to face pressures, even after the pandemic. Obviously, pubs want to open sooner rather than later, but they are realistic. They know that we need to support the national health service and save lives. Until we have clear guidance about when pubs may open, the pressures will continue. It will be a long road back even when they do open, and unfortunately some pubs and other businesses will not make it beyond the pandemic.

If the committee and indeed the Parliament burden such businesses with further regulation, cost and bureaucracy at this time, it will compound those pressures and make it likely that we will see fewer pubs reopening when they are allowed to.

The proposed legislation affects only a small proportion of the market, but those businesses have arguably received more support from the pub-owning companies than those who operate in independent free trade or under another agreement. The vast majority of pub-owning companies have committed themselves to reviewing rents once businesses have reopened. There is a common understanding that trading might be at a lower level because of social distancing and that pubs may require different support, with reduced payments. That commitment comes on top of the cancellation of any built-in rent increases that were due before the pandemic hit.

I have had the opportunity to speak to different pub-owning businesses, particularly in my region, and they have illustrated that the support through rent reductions has been based on the individual circumstances of businesses. That prioritisation of support by pubcos has meant that businesses that received nothing in grant payments from the Government last year—those businesses with rateable values over £51,000—have been given a fighting chance of survival.

The point is that the bill was written before any of that happened. All those factors need to be considered when the committee decides on the bill that is before it today. We must listen directly to the operators who will be impacted. One such tenant, Andrena Bowes, who runs several pubs across Edinburgh, said:

“The coronavirus has devastated the pub sector and politicians should be focused on that, not wasting time on proposals which aren’t wanted and definitely not needed.”

My second major point—I will make it more briefly if I can, convener—is about the number of pubs that we are talking about and the impact that the bill will have on them. Several of them are in my region. I will not read out all their names because of time, but at least 10 to 15 of them are concerned about the bill. We must heed the warnings from those tenants because, after all, they are the ones who are meant to benefit from the bill.

We must also analyse the data that the member in charge of the bill, Mr Bibby, used to back up his reasons for introducing it. The consultation that he carried out on his proposal received a very limited response from the tenants that it will impact. If we look again at the evidence that he took, we see that only nine tenants of pubs responded. More Labour MSPs responded to the consultation than people in the sector, yet the takeaway or the headline was that 78 per cent of respondents were in favour of the bill. That gives equal weight to MSPs and people who run pubs, which is not correct. Surely we must listen to those whom the bill would most impact—those whose businesses would be impacted, and especially those whose businesses are meant to benefit.

Amendment 17 would allow further scrutiny of the proposals and time for the industry to recover from the pandemic. It would help to ensure that we and the Government did not take a huge misstep that would only result in further hardship for the sector, further pub closures and more job losses. I urge the committee to back my amendment.

09:30  

Alex Rowley (Mid Scotland and Fife) (Lab)

You will be pleased to know that I do not intend to speak to every group of amendments, convener. The committee has a responsibility, which I wrote to the convener and committee members to set out last night. We have until Friday to see stage 2 through. Given the agenda that is before us, brevity will be important.

I intend to vote against amendments 15 to 17. Richard Lyle and I are—amazingly—on the same page on many things in politics, but I disagree with the point that he and Jeremy Balfour made. If anything, I suggest that we have the opportunity to see the bill through and ensure that we build back better, which will include the industry.

I enjoy a pint and going to my local pub, and I am aware of the difficulties that pubs face. I got an email yesterday from the Kingdom of Fife branch of the Campaign for Real Ale, which said:

“We are a consumer organisation representing thousands of pub-goers and beer drinkers in your constituency and across the country. I am writing to ask you to support the Tied Pubs Bill without it being watered down at Stage 2, and to make sure that it reaches Stage 3 and ultimately becomes law.”

I will certainly support that.

The organisation said:

“This Bill would deliver improvements in the quality of the tied pubs sector, helping to make community pubs more sustainable as well as increasing variety and choice at the bar for consumers.

We have serious concerns that not progressing this legislation (or amending it so that its main principles along with the right to a Market Rent Only lease option are watered down or removed in order to make the legislation ineffective) will mean that the existing problems and unfairness in the tied pubs model remain.

Not only would this be a missed opportunity for the industry to build back better after the COVID-19 crisis, it would have devastating consequences for consumers and tied pub tenants in Scotland who deserve at least the same protections as their counterparts in England and Wales.”

I agree with that.

I hope that we will make the progress that we need to make and that members will restrict their comments. We all know where we are with the arguments. I say to my fellow committee members that we have a responsibility to the Parliament to get through stage 2. I hope that we will do that today, but we certainly must do it by the end of Friday.

Graham Simpson (Central Scotland) (Con)

A number of members have discussed how we should approach the amending stage. Having dealt with a number of bills in the current parliamentary session, I believe that it is incumbent on us to do our job properly. That involves scrutinising legislation, and amending bills is a very important part of that. All the amendments—I know that there are a lot of them—are important and it is important that arguments are presented.

The three amendments in the group—amendments 15 to 17—are entirely sensible and the members who lodged them have set out the case very well. With the background of the pandemic, the sector has been decimated. I am a real ale fan just as much as Alex Rowley is, and I am concerned about what will be left at the end of the pandemic.

Other members including, I think, Richard Lyle have mentioned that there are only 750 tied pubs in Scotland, which represents just 17 per cent of the market. In England and Wales there are 20,000 tied pubs, which represents 40 per cent of the market there. We are in an entirely different situation in Scotland.

Maurice Golden mentioned the independent study from 2016, which was commissioned by the Scottish Government. It showed that there was no case for legislation. It stated clearly:

“The evidence collected did not suggest that any part of the pub sector in Scotland was unfairly disadvantaged in relation to another.”

I also note that the tenants of 151 Scottish pubs have written to the First Minister about the bill, saying that it should be either disregarded or amended so that it does not damage their businesses.

I support amendments 15 to 17.

The Minister for Business, Fair Work and Skills (Jamie Hepburn)

I am here today to set out the Government’s views on amendments to the bill. I stress that it is, of course, not a Government bill, but Mr Bibby’s member’s bill.

Like Mr Golden, I want to see a successful tied pub sector in Scotland with a level playing field in the relationship between the tied pub tenant and their landlord. I say to Mr Golden that I certainly do not approach the issue from a Marxist perspective. It is essential that the bill works as well as possible for everyone who is involved in the sector.

The Scottish Government does not support amendments 15 to 17. Amendment 15 would remove the statutory requirement to produce the code and make the power conferred on the Scottish ministers permissive rather than obligatory in nature. Given the central nature of the code to the bill, the Government’s position is that it will be introducing a code and, as such, making it optional to do so is unnecessary. It would also provide a lack of certainty for the sector on how we might move forward.

Amendment 16 would result in pub-owning companies needing to comply with a hitherto voluntary code of practice. We know from the stage 1 evidence that there are concerns about the voluntary code’s effectiveness, although it will be a useful basis on which we can inform the consultation that we will undertake.

On amendment 17, I fully agree that comprehensive consultation is required before any code is produced, but I do not agree with the requirement for the consultation period to last for at least two years. I am committed to a meaningful consultation in the development of a Scottish pubs code, but that duration strikes me as being unnecessarily long and it would only serve to delay the implementation of the code.

In any event, the amendment is not required as the Government will consult as a matter of course on the detail of the code and it will of course comply with the existing requirements to produce impact assessments.

I ask members not to support amendments 15 to 17.

The Convener

Before Neil Bibby winds up on the group, I want to ask the minister about the proposal in subsection (c) in amendment 17 that the Scottish ministers must

“have regard to the law of landlord and tenant in Scotland more generally.”

One of the criticisms of the bill, rightly or wrongly, is that it is an English solution to something that is not a problem in Scotland. Is there a reason why the Government would not want to have regard to the law of landlord and tenant in Scotland?

Jamie Hepburn

Of course not, convener—

The Convener

[Inaudible.]—I think that a contrast is drawn out there between Scottish law and English law.

Jamie Hepburn

I beg your pardon, convener. I did not hear part of what you said. However, my perspective is that we clearly have to have regard to those matters. Anything that we pass has to be placed in the context of wider Scots law. We do not have any fundamental concerns about that element of the provision. My concerns are the wider ones that I set out, and they are the reason why I urge members not to support the amendment.

The Convener

Thank you, minister. We come to Neil Bibby, who is the member in charge of the bill.

Neil Bibby (West Scotland) (Lab)

Good morning. First, I respectfully say to the committee that the purpose of stage 2 is not to reopen the debate on the general principles of the bill, as Mr Lyle and Mr Golden seem to have done. We have not arrived at this point by accident. Parliament agreed to the general principles of the bill at stage 1. The bill has Government support, albeit with caveats, and I thank the minister for his on-going engagement with regard to it.

I note members’ comments about the stage 2 proceedings happening during a pandemic, but the bill was voted on at stage 1 during the pandemic, and it will help the pub sector and publicans to recover, as Alex Rowley said. I hope that the bill will help them to build back better after the pandemic.

The bill is supported by evidence from pub tenants across Scotland and by the evidence that the committee took. Ultimately, that was strong enough to persuade Parliament to endorse the bill at stage 1. The bill is aimed at supporting small businesses. I take a pro-small-business view, not a Marxist view or a Thatcherite view. It is a pro-small-business bill.

I note that Mr Golden signed the final proposal for the bill and voted for the bill at stage 1, so I am disappointed that his amendment 15 would change the arrangement for the establishment of a Scottish pubs code from a requirement to an option for the Government. That would completely undermine the purpose of the bill as set out in the long title and the general principles of the bill as agreed by Parliament at stage 1. I therefore urge the committee to reject amendment 15.

Richard Lyle’s amendment 16 would do likewise by requiring an existing code of practice—presumably, it would be the voluntary code—to be provided for in regulations, rather than a Scottish pubs code being introduced, as is provided for by the bill. Like Mr Lyle, I would have preferred the voluntary code to be sufficient, but unfortunately it does not have the confidence of tied pub tenants. I therefore ask Mr Lyle not to move his amendment 16; otherwise, I urge the committee to reject it.

I also urge the committee to reject Jeremy Balfour’s amendment 17, which would require a consultation on a draft code for a minimum of two years, meaning that the code would not be in place for several years. Amendment 17 would also provide other hurdles including a requirement for the publication of economic and human rights assessments, which I do not consider appropriate or necessary.

The Convener

I ask Maurice Golden to wind up and press or withdraw amendment 15.

Maurice Golden

Thank you, convener. If the bill is passed and the Scottish Government has the same composition by the time the act is in place, my amendment 15, which changes the word “must” to “may”, would have no effect. As we heard from the minister, the Government intends to press ahead with introduction of a code, so my amendment would have no effect.

However, my amendment would provide Parliament and a future Scottish Government with a different composition with an opportunity either to explore further evidence or to introduce a code, as the current Scottish Government intends to do. With regard to the pubs code, I think that amendment 15 is a reasonable amendment to make, so I will press it.

09:45  

The Convener

The question is, that amendment 15 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)

The Convener

The result of the division is: For 3, Against 5, Abstentions 0.

Amendment 15 disagreed to.

The Convener

Does Richard Lyle wish to move amendment 16?

Richard Lyle

I listened with interest to the comments that were made about my amendment and I have taken them on board. I will not move the amendment. I am sure that Mr Rowley will be very happy.

Amendment 16 not moved.

Amendment 17 moved—[Jeremy Balfour].

The Convener

The question is, that amendment 17 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)

The Convener

The result of the division is: For 3, Against 5, Abstentions 0.

Amendment 17 disagreed to.

Section 1 agreed to.

Schedule 1—The Scottish Pubs Code

The Convener

Group 2 is on the Scottish pubs code: information and certain terms of agreement. Amendment 18, in the name of Michelle Ballantyne, is grouped with amendments 19 to 29. I point out that amendment 26, which is further on in the group, pre-empts amendment 27, so if amendment 26 is agreed to, I will not be able to call amendment 27.

Michelle Ballantyne (South Scotland) (Reform)

As has been discussed, the Parliament agreed to the general principles of the bill at stage 1. I believe that our job today is to make sure that it is fit for purpose for both sides. It is important that publicans who have tied leases feel that they are being fairly treated and that they have all the necessary protections in the bill. However, it is also important that the pubcos—those who own the buildings—can get a fair return on them. If the bill does not result in a win-win situation for both sides, there will be a decline in the opportunity for people who wish to become publicans to enter the market. Tied pubs are often the first stage in that process. Through my amendments, I am keen to ensure that such a win-win situation exists.

My amendments in this group—amendments 18, 24 and 29—are quite simple. They aim to ensure that there is fairness for both sides. Amendment 18 would allow information to be provided electronically or in hard copy. With amendment 24, I want to make sure that any methodology accords with industry practice, otherwise there will end up being conflicts between the bill and the realities of commercial practice. I also want to ensure that there is balance in respect of the difference in the size and resources of the parties and a recognition that tied publicans probably do not have huge resources, so that they can fight on an equal footing if there are any disputes.

My amendments are quite simple, and I hope that the committee will see fit to agree to them.

I move amendment 18.

The Convener

Thank you. I call Graham Simpson to speak to amendment 19 and the other amendments in the group.

Graham Simpson

I will be brief, as I have only three amendments in this group.

Amendment 19 deals with the requirement for pub-owning businesses to provide information. It is a simple amendment that would require assignees of tenants—in other words, people appointed to act for them—to be provided with the information. The amendment is straightforward, and it aims to be fair.

Amendment 23 would ensure that any requirement that is imposed by the code on a pub-owning business should be “fair and reasonable”. I invite committee members to agree that amendment 23 is just that—fair and reasonable.

The provision of the bill that is covered by amendment 28 relates to the restriction on enforcing certain terms of agreements. Amendment 28 says that the code

“may specify circumstances in which a pub-owning business is not prohibited from enforcing a term of an agreement of a kind described in sub-paragraph (2).”

Therefore, my amendments are fairly straightforward.

The Convener

I call Rachael Hamilton to speak to amendment 20 and the other amendments in the group.

Rachael Hamilton (Ettrick, Roxburgh and Berwickshire) (Con)

First, I refer members to my entry in the register of members’ interests. I should have alerted the clerks to this interest earlier, and then the convener could have invited me to declare it before proceedings started. I have a pub in the Borders, but it is not a tied pub.

I have four amendments in this group—amendments 20, 21, 22 and 25. Amendment 20 seeks to remove the need to supply information to the adjudicator. Information could still be supplied if there was an issue with any agreement; however, there is no foreseeable reason why such information would need to be supplied up front. The code should not mandate that information be supplied for every agreement, even if there are no issues or it is not required by the adjudicator.

Amendment 21 would remove the words “For example” from paragraph 1(2) of schedule 1, to ensure that the requirement is entirely open ended.

Amendment 22 relates to when the code should require information pertaining to rental assessments to be provided. The amendment would ensure that the requirement applies

“only in the circumstance where there is an increase of 2% above RPI in the price of a product or service which is subject to a product tie or service tie that the tenant has a contractual obligation with”.

That would ensure that only those arrangements whereby there was a significant increase in charges to the tenant were captured, which would help to ensure consistency and clarity for the tenant and the pub-owning business.

Similarly, amendment 25 is aimed at giving protections to tenants. It would do so by granting a right of appeal, should the following conditions be met:

“an event had occurred which is beyond their control ... the rent assessment was not reasonably foreseeable when the tenancy was granted or when the rent was last assessed ... there has been a significant impact on the level of trade that could be reasonably expected to be achieved by the tied-pub,”

or should there be

“any other matter as specified in the code.”

That would help to ensure that appeals were correct in nature and were not frivolous.

Alexander Stewart (Mid Scotland and Fife) (Con)

Good morning. I am delighted to be here. Amendment 26 seeks to remove the discretion of the Scottish ministers to decide what terms are unenforceable. The bill gives no guidance as to the basis on which the Scottish ministers are to decide on that issue.

No issue is taken with the provisions of paragraph 3(1)(b) of schedule 1, which prohibits penalty clauses when a tied pub tenant seeks to enforce the code and upwards-only rent reviews. However, the effect of that provision is that it will create huge uncertainty as to what terms may or may not be permitted until any code is brought in. It might mean that pub-owning businesses decide not to grant any further leases until they know what terms are lawful and what terms are not.

Furthermore, because the Scottish ministers have the power to amend the code using secondary legislation, a term in a lease could be enforceable at one point in time but could later be declared to be unenforceable. That would have the effect of retrospectively rendering terms that would otherwise be lawful unlawful, and it is therefore objectionable as a matter of principle.

Jeremy Balfour

I will be slightly briefer than I was the last time. Amendment 27 would ensure that terms that are reasonable that are outside the provisions of the code are not automatically unenforceable. It is not appropriate—indeed, it might prove impossible—for the Scottish ministers to produce a definitive list of terms that are considered objectionable. Much would depend on the circumstances of each case. Therefore, I would argue that laying down hard-and-fast rules is not the way to proceed, and that it will make the legislation less effective.

However, if such a provision is to be included, it is important that the Scottish Parliament gives guidance to the Scottish ministers, the adjudicator and, ultimately, the courts as to how reasonableness is to be determined.

Maurice Golden

I think that the amendments in this group reflect fairness and accordance with industry practice, and that they would provide the balance that we would want to see from the bill. Ultimately, they are pro-small-business amendments that would provide the Scottish ministers with reasonable guidance as to how tests on the application of the requirements of the bill can be made, and I urge committee members to support them.

10:00  

Jamie Hepburn

Amendments 18, 19, 20, 23 and 24 all relate to pub-owning businesses being required to provide information under the code. It is the Government’s view that those amendments are unnecessary or could have the effect of preventing the legislation from working well.

The bill does not currently restrict the format in which information can be provided to prospective tenants. It makes provision for the code to set out requirements for how information is to be produced.

I support the principle behind Mr Simpson’s amendment 23, which seeks to ensure that information requirements are fair and reasonable. I gave the amendment close consideration but concluded that there is no need to include such a provision in the bill, given that the Scottish ministers must use their best endeavours to ensure that the code is drafted consistently with the principles of fair and lawful dealing, and that it will be subject to various impact assessments before being introduced through secondary legislation. The effect of the bill as drafted already accounts for the concerns that Graham Simpson has raised.

As I mentioned earlier, I support full and thorough consultation on the draft Scottish pubs code, which I think is at the centre of Ms Ballantyne’s amendment 24. I believe that that will be accounted for by the process that we take forward.

Amendment 20 would simply prevent the adjudicator from carrying out investigations effectively, as it would mean that it could not require information to be provided. That also goes to the root of a later amendment from Ms Hamilton—namely, her amendment on the removal of the office of adjudicator altogether—and it might be considered in that light.

Amendments 21, 22 and 25 on rent assessment are, in my view, equally unnecessary. I am not clear why we would want to restrict the rent assessments to a few situations when the code has not yet been developed and appropriate consultation with stakeholders has not taken place.

Amendments 26, 27, 28 and 29, on enforcing certain terms of agreements, would reduce the operational effectiveness of any Scottish pubs code. Paragraph 3 of schedule 1 is a key lever to ensure compliance with the code.

I therefore ask members not to support the amendments in this group.

Neil Bibby

I, too, refer members to my entry in the register of members’ interests. I did so at stage 1 with regard to the support that I have received in relation the bill, and I do so at stage 2 as well for full transparency.

Many of the amendments in the group seem to be aimed at significantly weakening the code and placing unnecessary or unreasonable hurdles in the way of its effective operation.

I welcome Michelle Ballantyne’s comments about being constructive and thank her for meeting me last week. However, I consider amendment 18 unnecessary. Although it is well intentioned, I do not believe that there is a need for the bill to be so specific about the method by which information should be provided. That issue can be considered if it comes up in consultation on the code.

Amendment 19 seeks to add prospective assignees of tenants of tied pubs to the list of those to whom the pub-owning business may be required to give information, which I am not convinced is necessary.

Amendment 20, in the name of Rachael Hamilton, would remove the possibility of the code requiring pubcos to provide information to the adjudicator, which is an unhelpful and counterproductive measure that would undermine the effectiveness of the code and the role of the adjudicator, and reduce transparency and openness—principles that the drafting of the bill reflects. I urge the committee to reject amendment 20.

Rachael Hamilton’s amendments 21 and 22 deal with the possibility of the code requiring pubcos to provide rent assessments and seek to limit and to make very specific the circumstances in which a rent assessment would be required. I do not support such a restriction and urge the committee to reject those amendments.

Amendments 23, 24 and 25 relate to the requirement to provide information. It is not necessary or normal to specify in the bill that the requirements that the code may contain should be fair and reasonable or that any methodology that the code may contain should have regard to guidance that is issued by other bodies. In providing for an appeal mechanism for a tenant who has been subject to a rent assessment, amendment 25 makes that subject to a number of substantial and uncertainly expressed hurdles.

Amendments 26 to 29 deal with restriction on enforcing certain terms of an agreement. All those amendments would significantly weaken the provisions in that part of the bill and would introduce additional qualifying factors. I therefore urge the committee to reject them.

The Convener

I ask Michelle Ballantyne to wind up and to press or withdraw amendment 18.

Michelle Ballantyne

Thank you. I hear what the minister and Neil Bibby, who is presenting the bill, have said, but it is important to ensure that the bill sets out that things must be fair and reasonable to both parties, that it accords with industry practice and, particularly, that it takes account of the different resources of both parties. Therefore, I press amendment 18.

The Convener

The question is, that amendment 18 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)

The Convener

The result of the division is: For 3, Against 5, Abstentions 0.

Amendment 18 disagreed to.

Amendment 19 moved—[Graham Simpson].

The Convener

The question is, that amendment 19 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)

The Convener

The result of the division is: For 3, Against 5, Abstentions 0.

Amendment 19 disagreed to.

The Convener

I call amendment 20, in the name of Rachael Hamilton, which has already been debated with amendment 18. I ask Rachael Hamilton to move or not move—[Interruption].

There is some noise in the background somewhere. I am not sure whether someone has a radio on or something, but they should turn it off.

Rachael Hamilton is not on screen. Does Maurice Golden wish to move amendment 20, in the name of Rachael Hamilton, on her behalf?

Maurice Golden

I believe that Rachael Hamilton is moving amendments in another committee at the same time, such are the vagaries of the online system. I am happy to move amendment 20 on her behalf.

Amendment 20 moved—[Maurice Golden].

The Convener

Thank you. If members are attending another committee online, they should ensure that we do not hear it in this committee.

The question is, that amendment 20 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)

The Convener

The result of the division is: For 3, Against 5, Abstentions 0.

Amendment 20 disagreed to.

Amendment 21 moved—[Maurice Golden].

The Convener

The question is, that amendment 21 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)

The Convener

The result of the division is: For 3, Against 5, Abstentions 0.

Amendment 21 disagreed to.

Amendment 22 moved—[Maurice Golden].

The Convener

The question is, that amendment 22 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)

The Convener

The result of the division is: For 3, Against 5, Abstentions 0.

Amendment 22 disagreed to.

Amendment 23 moved—[Graham Simpson].

The Convener

The question is, that amendment 23 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)

The Convener

The result of the division is: For 3, Against 5, Abstentions 0.

Amendment 23 disagreed to.

Amendment 24 moved—[Michelle Ballantyne].

The Convener

The question is, that amendment 24 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)

The Convener

The result of the division is: For 3, Against 5, Abstentions 0.

Amendment 24 disagreed to.

Amendment 25 moved—[Maurice Golden].

The Convener

The question is, that amendment 25 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)

The Convener

The result of the division is: For 3, Against 5, Abstentions 0.

Amendment 25 disagreed to.

Amendment 26 moved—[Alexander Stewart].

The Convener

I remind members that if amendment 26 is agreed to, I will not be able to call amendment 27, because of the rule on pre-emption.

The question is, that amendment 26 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)

The Convener

The result of the division is: For 3, Against 5, Abstentions 0.

Amendment 26 disagreed to.

Amendment 27 moved—[Jeremy Balfour].

The Convener

The question is, that amendment 27 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)

The Convener

The result of the division is: For 3, Against 5, Abstentions 0.

Amendment 27 disagreed to.

10:15  

Amendment 28 moved—[Graham Simpson].

The Convener

The question is, that amendment 28 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)

The Convener

The result of the division is: For 3, Against 5, Abstentions 0.

Amendment 28 disagreed to.

Amendment 29 moved—[Michelle Ballantyne].

The Convener

The question is, that amendment 29 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)

The Convener

The result of the division is: For 3, Against 5, Abstentions 0.

Amendment 29 disagreed to.

The Convener

The next group of amendments is on the Scottish pub code’s requirement to offer guest beer. Amendment 30, in the name of Maurice Golden, is grouped with amendments as shown in the groupings. I point out that amendment 30 pre-empts amendments 31, 32, 32A, 32B, 33, 33A, 33B, 34 to 40, 40A, 40B, 40C, 40D, 41, 41A, 41B, 41C and 42 to 44.

I also point out that amendments 40A, 40B and 40C are direct alternatives, as are amendments 41A, 41B and 41C. Direct alternatives are two or more amendments seeking to replace the same text in a bill with alternative approaches. In the case of this group, as I have already noted, there are two areas where that arises. On amendments 40A, 40B, 40C and 40D, for example, a vote will be taken on all four amendments in the order in which they appear in the marshalled list. If all four were to be agreed to, each in turn would succeed the other and it would be the last of those amendments that would appear in the bill as amended.

I call Maurice Golden to move amendment 30 and speak to all amendments in the group.

Maurice Golden

In speaking to all the amendments, I will be as brief as I can, but I hope that members recognise the number of amendments that I have to go through.

Amendment 30 would remove the need for a guest beer provision to be included in the code. It is my opinion, and that of key stakeholders in the industry, that the introduction of the guest beer provision has the potential to hinder rather than help the local producers that the member believes it is intended to help, as it could lead to a situation in which large breweries are given greater access to bar taps despite already holding a monopoly on the market.

I do not dispute the reasoning for the inclusion of the proposal. However, the intention of a guest beer provision, although admirable, appears to be ill thought out and has the potential to have the opposite impact to the one that is intended. We believe that the provision is aimed at encouraging more products from local, small breweries into pubs, but that will not happen. Instead, the consequence would be a race to the bottom on price, meaning that larger multinational brewers would be able to outprice smaller domestic brewers, crowding them out of the market and removing the opportunity for consumers to enjoy fantastic, locally produced beer.

There has been a brewing renaissance in Scotland over the past number of years, and the number of breweries has skyrocketed. There are now estimated to be more than 150 active breweries in Scotland and, the effects of the pandemic aside, it has been a fantastic success story, which we should seek to support and not hinder with further misguided interventions in the sector. If the guest beer provision were to be included, unamended, as the member responsible has indicated that he would like to happen, a race to the bottom would occur. Amendment 32 also includes provisions to ensure that any guest beer arrangement cannot be unreasonably refused by the pub-owning company, and it would satisfy other criteria in the code.

Amendment 32A would place a cap on the size of brewer that could supply a guest beer. Provided that the committee believes that there needs to be a guest beer provision, the amendment would ensure that such a provision does what it is intended to do, which is support local Scottish brewers. As I have highlighted already, the provision as drafted would see smaller, local Scottish brewers unable to compete with the larger multinationals, simply due to scale. The provision in amendment 32A would set the cap at 30,000 hectolitres. I am relaxed on where exactly the cap would be set, and I note that other committee members and other MSPs who are equally concerned about the bill have lodged amendments that would set the cap at a different level. I am eager to hear their reasoning, and I will listen to the debate with an open mind, but we must ensure that the stated goals of the provision and the bill are what the legislation would actually do.

Amendment 39 is largely a consequential amendment that would ensure that the provision makes specific reference to “small brewery” beer in that context. That is relatively uncontroversial, and I trust that the committee will accept it, assuming that it believes that the provision should be retained in the bill.

Amendment 40B is an amendment to amendment 40, which is in the name of Graham Simpson. It increases the distance from which a tied tenant can seek a guest beer, from 5 miles, as proposed in amendment 40, to 10 miles. Again, I would appreciate hearing other members’ views on what the limit should be set at.

Amendments 42, 43 and 46 are also to ensure that any guest beer is produced by a small brewery, as defined under the Alcohol Liquor Duties Act 1979. They would ensure that guest beers benefit small breweries as opposed to permitting a tenant to buy large volumes of beer from a national brewer. Small brewers benefit from a tax advantage through small brewers relief, and that is what has been used to define the sorts of beer that would be subject to guest beer agreements. Again, I imagine that that was the true intention of the provision—as opposed to providing an outlet for large-scale brewers—and I have lodged the amendments to clarify and assist in that regard.

I move amendment 30.

Alexander Stewart

I will speak to amendments 31, 33, 34, 38, 40A, 44 and 45. Amendment 31 would still allow for the inclusion of a guest beer provision but would not compel its inclusion. The amendment would require the Scottish Government to carry out further scrutiny and, importantly, consultation with representative bodies from the tied pubs sector before including a guest beer provision in the code. Proper consultation and scrutiny are required when seeking such a dramatic intervention in private commercial arrangements. For that reason, at the very least, further scrutiny is needed. Amendment 31 would not prevent the inclusion of a guest beer provision in the code; it merely allows time for greater consultation and study before setting strict parameters in legislation that might have hugely detrimental direct impacts on a significant number of businesses in the pub and hospitality sector, as well as down through the supply chain.

I believe that amendment 33 is necessary to avoid unintended consequences from the proposed provision, if it is included in the future statutory code. It would ensure that there are protections for domestic producers which, I have already highlighted, could be negatively impacted by the bill.

As you have already heard, limits have been proposed and amendment 33 would include a provision for a 50,000 hectolitre cap on brewers that are able to take advantage of the provision, thereby ensuring some protections for domestic brewers. I strongly believe that a limit is needed, but what it is should be open to consultation and will always be controversial. Fifty thousand hectolitres is 25 per cent of the maximum output for a brewer to qualify under the EU’s definition of “small brewer”.

Amendment 34 sets definitions around guest beer provisions, which would give some protections if previously highlighted amendments fall. It is also aimed at ensuring that the provision is not misinterpreted, by providing clarity on when a guest beer agreement cannot be applied for. That includes when the tied pub tenant is already permitted to sell a guest beer in their current agreement.

My other amendments are mostly housekeeping amendments that ensure that the bill will be clear and concise and will give tied pub tenants and the pub owners greater clarity. Amendment 40A, which is an amendment to amendment 40, places a geographic restriction on the provision of guest beer. Graham Simpson has proposed a limit of 5 miles, but I feel that 7.5 miles is more suitable given that the boundary would be larger. However, I am willing to listen to the arguments on a more restrictive limit.

Amendment 44 stipulates that a guest beer is

“subject to the approval of the pub-owning business”.

There are legitimate reasons for that, and there are limitations to it. It would ensure some protections for the pub-owning businesses whose continued operation of the tied model is inherently linked to the wet rent of any premise.

We have heard from consumers about consumption and amendment 34 ensures that guest beers are taken account of in any provision under the new statutory rules. As we have also heard, the issue of choice is one of the main factors. My amendment sets the limit at 10, which is higher than the current average in tied pubs, which is nine, and is 20 per cent higher than the average in the free trade.

Amendment 44 helps to ensure that there are opportunities for future generations to start and run their own businesses and amendment 45, in a similar vein to amendment 44, seeks to give protections to the tied model in Scotland. It takes into consideration the bespoke arrangements that many operators have with their landlords around sourcing guest beer.

The Convener

I notice that Mr Rowley wants to come in; I propose, unless he indicates otherwise, to bring him in before the minister comes in. I see that he is nodding in agreement with that.

Graham Simpson

I have three amendments in group 3 and, as you have heard already, this is an important group, so, if you will excuse me, I will speak for a while, although I will cut down dramatically what I had planned to say.

The amendments in my name seek to give protections to the smallest Scottish producers and those in the local area to the pub. A completely unrestricted guest beer provision would have a number of unintended consequences, which we must be alive to. I thank the previous speakers for highlighting those in detail. I share with them the concern that, if that provision proceeds, there will be detriment to many parties. Not only will we see larger players who operate in Scotland take advantage by driving prices down, the lack of restriction could see further multinational operators enter the Scottish on-trade market with the sole purpose of crowding out the growing number of excellent Scottish brewers, which is a great thing; those brewers continue to go from strength to strength.

In Scotland, we are rightly proud of our whisky industry, but we also have a deep and rich history of brewing that is similarly illustrious and inspiring. Brewing in Edinburgh dates back to the 12th century, when monks at Holyrood abbey took advantage of the natural springs underneath what is now our Parliament. Some might say that what was produced on the site then is far better than what is produced now—but that is for another day. As I was not around in the 12th century, I cannot really say who is right.

10:30  

I could go on to give you a history of brewing in Scotland at this point, which may well be of interest, but I will not do that. I will just say that the small revolution that has taken place in brewing in Scotland in recent years should be celebrated and supported.

The Conservative Government at Westminster has done that by ending the disastrous beer duty escalator that was introduced by Gordon Brown in 2008, under which beer duty increased by an eye-watering 42 per cent over five years. That was damaging for brewers and community pubs throughout the UK. The Conservative Government reversed that policy and cut beer duty by 2 per cent in three budgets. Since then, it has frozen beer duty every year since, apart from a single inflation increase in 2017. That has led to a return of confidence in British and Scottish brewing, with pubs that we should celebrate. We look forward to celebrating them again once they are allowed to reopen.

It is crucial that we do not undermine any recovery. When considering the proposed legislation, we should all be conscious of the need to protect our local producers. My amendment 40 would ensure that pubs can access the guest beer provision only in the local area. The introduction of a geographical restriction on the guest beer provision helps to ensure not only that smaller producers—those that are meant to be helped—benefit from the legislation, as Neil Bibby has previously outlined but that consumers can experience and support producers in their local area. It would mean that pubs would be able to utilise the guest beer provisions to stock a beer only if the beer was brewed within 5 miles.

I accept that the stipulation of 5 miles might seem strict, and I am willing to explore the other options presented through amendment 40A from Alexander Stewart, which sets the limit at 7.5 miles, amendment 40B from Maurice Golden, which puts it at 10 miles, amendment 40C from Rachael Hamilton, which sets the limit at 20 miles, and amendment 40D from Jeremy Balfour, from whom we are yet to hear, which sets the limit at 50 miles—way further than what I propose.

One of the reasons why I have suggested 5 miles is that there are already measures in place to ensure that a beer from any distance is allowed if there is agreement between the tied pub tenant and the pub-owning company. Maintaining a 5-mile zone around each respective pub will still give opportunities for local producers, perhaps giving them an advantage over non-local products while still allowing for the sourcing of products from outside the 5-mile zone through the channels that are currently available. That could involve the SIBA BeerFlex scheme from the Society of Independent Brewers, which has beers from a growing number of Scottish brewers. I could list them all, but I will not do that, as it is quite a long list; suffice to say, there is no shortage of choice under BeerFlex. Even for those brewers that are not part of that scheme, the beers are still often available to operators.

If there is a clear demand for a product, the operator or tied tenant will approach their business development manager and ask for that product, because they believe that they can make a profit from it. As it is in the pub-owning business’s best interests that the tied tenant is successful, it will support that choice by providing bespoke arrangements to access the desired beers, ensuring that the tied tenant, the consumers and the pub-owning businesses succeed.

Placing a geographic limit on a guest beer does not limit those from outside from selling their beers inside any pub—far from it. However, it ensures that the most local brewers would have favourable conditions in their local communities.

Amendment 32B would amend amendment 32, in the name of Maurice Golden, which, as we have already heard, provides for the pub-owning business to source the desired guest beer. Amendment 32B would reduce the limit of 30,000 hectolitres that is proposed in amendment 32A to 10,000 hectolitres. I point to the well-established routes into tied pubs through existing channels, which do not preclude beer from any brewer of any size in any location from being sold in a tied pub. What is proposed provides protections for pub-owning businesses and the smallest of brewers.

Furthermore, amendment 32B specifically states that

“it is not unreasonable for a pub-owning business to refuse an application”,

but that does not prevent brewers producing more than 10,000 hectolitres from being accessed using the guest beer provision. If it is in the mutual interests of the pub tenant and the pub-owning company, the guest beer can still be sold.

Amendment 41A is an amendment to amendment 41, in the name of Jeremy Balfour. It changes the proposed cap in amendment 41 from 100,000 hectolitres to 5,000 hectolitres, which is the current rate under which producers receive a 50 per cent discount in excise duty. It is a natural limit as it is already an established line.

I urge members to back the amendments should they be required.

Richard Lyle

Before I turn to amendments 33A and 33B in my name, I think that it is important to note how similar the guest beer provision in the bill is to the dreaded beer orders of the 1980s. In 1989, licensing legislation that was passed by Margaret Thatcher’s Conservative Government made it possible for a tied pub to stock at least one guest beer from a different brewery. The Monopolies and Mergers Commission was concerned that the market concentration of the big six breweries, at 75 per cent, represented a monopoly situation. The Supply of Beer (Tied Estate) Order 1989, better known as the beer orders, allowed publicans the freedom to buy non-beer drinks from any source, not just the controlling brewery, and to sell at least one draft beer from a different brewery.

In addition, many of the larger brewers were forced to sell off many of their pubs, with the intention that they should become free houses or be passed on to smaller brewers, thus increasing choice and free trade. The unintended consequence of the legislation was that brewers sold off their less profitable pubs. However, following a review in 2000 by the Labour Government, the beer orders were revoked by early 2003.

Does Mr Bibby really want to reintroduce a policy of the Thatcher Government that was overturned and removed by a Labour Government? The beer orders were disastrous for pub-owning companies and tenants alike. Tied pubs and pub-owning companies have nowhere near the 75 per cent market concentration that the Monopolies and Mergers Commission believed justified the orders. As Phil Mellows said in a 2013 miniseries on Thatcher’s alcohol legacy in The Morning Advertiser, it was

“arguably the largest state intervention in industry in recent British history.”

Are we going to repeat the same mistakes as before? Imposing Thatcherite policies on the people of Scotland is not often welcomed. I am sure that Mr Bibby, as a Labour Co-operative MSP, would agree on that point.

In the debate on an earlier group of amendments, we heard from Maurice Golden about the 151 tied tenants who wrote to the First Minister because they are as concerned about the bill as I am. They are particularly concerned about the provisions on MRO, but it is obvious that there are also concerns about the guest beer provision.

Amendment 33A would set a provision on guest beer whereby a pub-owning company could refuse an application in respect of a guest beer only if that beer was

“brewed by a producer which has brewed in excess of 200,000 hectolitres of beer in the previous 2 years.”

Its aim is simple: it is intended to encourage producers that are not large multinationals to put more Scottish beer into Scottish pubs. It would also help to prevent a potential race to the bottom on price.

From evidence that has been provided to the committee we know that there is already more choice in tenanted and leased pubs in Scotland than in the independent free trade, so there is no issue in respect of choice. We also know that it makes commercial sense for pub companies to offer a full range of the beers that their tenants’ customers would like to drink—from lagers to bitters and stouts.

In 2010, the Office of Fair Trading found no evidence that the beer tie results in competition issues that cause harm to consumers. It concluded that, given the competitive nature of the market, with pubs typically operating in areas with a large number of rival operators, any attempt by the pubcos to restrict choice or raise prices would not be sustainable, as consumers would simply go elsewhere. The OFT therefore found no evidence of market power.

However, it might be that a pub would like to support a local brewer, or an up-and-coming Scottish brewer from further afield, that its customers have inquired about. I believe that it is not correct to take a size threshold that is used across Europe to make a distinction between large and small breweries in relation to the provision on guest beer.

The Convener

I call Rachael Hamilton, who has rejoined us, to speak to amendment 35 and other amendments in the group.

Rachael Hamilton

I will speak to three amendments in this group.

Amendment 35 seeks to provide many of the protections that my colleagues have already highlighted and which will be desperately needed if the relevant provision in the bill is not to have negative consequences.

A race to the bottom on price would only work to the detriment of small domestic brewers. Amendment 35 would offer protections for pub-owning businesses, by giving them the opportunity to source desired products, and for the smallest producers, by including an effective cap of 20,000 hectolitres. The reason for having such a cap is well documented. It would ensure protection for the smallest producers and would give them an opportunity that simply would not exist if the proposal were to go through unamended.

However, amendment 35 could be pre-empted by amendment 30, in the name of Maurice Golden, which would remove the provision in schedule 1 entirely. As Maurice Golden and Graham Simpson have highlighted, the reasons for removing that provision in its entirety are well founded. There are already numerous routes to market, of which the SIBA Beerflex scheme is one; other companies also already offer bespoke arrangements. In many cases, if a tenant asks for a specific beer it will happily be provided to them by the pub-owning business. Amendment 35 would retain a right of first refusal on supplying.

At previous meetings of the committee, Mr Bibby spoke about Scottish beer being underrepresented in pubs. I have yet to see any evidence that that is the case. In my experience, most Scottish pubs have Scottish beers available. I would be interested to hear whether Mr Bibby could name just one that does not. Even if we were to accept his assumption, given that there are only 750 tied pubs in Scotland that represents just 17 per cent of the market. There must be a greater issue with domestic producers being able to be properly represented in our pubs. If one of the central arguments for including the provision is that it will support Scottish brewers in gaining access to pubs, there would be no underrepresentation in the off-trade.

From the CGA statistics we know that, on average, a greater range of beers is on offer in tied pubs in comparison with that in independent free-trade pubs, which make up almost half the market in Scotland. That does not stack up.

10:45  

We know that things can be difficult for small producers, regardless of place of origin. Many Borders brewers, for example, treat their local market as covering both sides of the Tweed. Given the scale of production and their inability to compete on price, including a completely free-ranging guest beer offer would encourage a race to the bottom on price and would only see those small and medium-size brewers crowded out further.

Amendment 40C would increase any geographic restriction on the guest beer provision to 20 miles and amendment 41C would set any cap at 50,000 hectolitres.

The Convener

I call Michelle Ballantyne to speak to amendment 36 and other amendments in the group.

Michelle Ballantyne

I have three amendments in this group: 36, 37 and 47. Amendment 36 aims to tidy up the drafting and make it more precise. It would change

“sell to the pub’s customers”

to

“offer for retail sale on the premises”.

That change is important, because the wording is more meaningful.

Amendment 37 would remove the expression

“at a price of the tenant’s choosing”,

which I believe serves no purpose. The pub-owning business does not control pricing where a guest beer is concerned, so amendment 37 is a tidying-up amendment.

I will not move amendment 47. I have had communication with SIBA, which feels strongly that membership of the organisation should not be a requirement to produce a guest beer. The paragraph in question is a bit problematic and could do more harm than good. I have listened to the arguments that other members have made around their amendments. I live in the Borders—as Rachael Hamilton does—where we have a number of small breweries; even sitting where I am, one of the well-known breweries is 34 miles from me. We need to be careful about mileage; I am sure that anybody in the Borders would consider anything that is brewed in the Borders as a local beer, so I am wary about distances.

The Convener

I call Jeremy Balfour to speak to amendment 40D and other amendments in the group.

Jeremy Balfour

Amendment 40D would increase the 5-mile geographic restriction that is proposed in amendment 40 to 50 miles; it would give a more Scottish approach to the matter, which would be helpful.

My amendment 41 would set a cap of 100,000 hectolitres and make it

“subject to the approval of the pub-owning business”.

We have had an interesting debate and I share many of my colleagues’ concerns regarding the inclusion of the provision at all for the reasons that have been set out, which I will not rehearse. However, should it be the desire of the committee that a provision must be included, my amendment presents an option that would safeguard against the unintended consequences that have been mentioned.

Let us examine past experience. In 2004, the UK Government considered extending the maximum threshold to benefit from small brewers relief—originally set at 30,000 hectolitres in 2002—but decided not to extend it all the way to the European Union maximum of 200,000 hectolitres. The Government was keen, but it was the small brewers that benefited from the relief.

I am sure that my fellow committee members know, as I have learned recently, that 200,000 hectolitres is equivalent to 35 million pints per year, so that threshold is arguably of concern more at regional level than to a local brewer. The UK Government decided instead to increase the maximum threshold to 60,000 hectolitres.

Therefore, a cap of 100,000 hectolitres—or, if you do your maths, 17.5 million pints per year—would allow pubs to access beer from a larger number of local and regional brewers. For that reason, I move amendment 41 in my name.

The Convener

May I just clarify, Mr Balfour, whether you are moving amendment 40D as well as amendment 41?

Jeremy Balfour

Amendments 40D and 41.

The Convener

My apologies—I think that you should just be speaking to the amendments at this stage. No doubt we will tidy that up in due course.

Alex Rowley wants to speak on those various amendments.

Alex Rowley

I think that Michelle Ballantyne said that this provision was a bit problematic—as I certainly think those amendments are. I agree with her.

Maurice Golden proposed both restricting guest beer agreements to small brewers and removing guest beer agreements entirely from the bill. I am not sure that small brewers would support the proposal that guest beer agreements be removed entirely. Contradictions run through the amendments.

I can sympathise with those who want the guest beer agreements to be used as a vehicle for bringing more products from small brewers into tied pubs. However, there is also a strong case for allowing publicans to decide which guest beers to stock and how to respond to consumer demand.

The bill as drafted will allow the minister to specify the scope of a guest beer agreement when drafting the pubs code, following consultation. That is a much more reasonable way to establish the detail of the guest beer agreement than amending the bill would be. That is why I urge fellow members of the committee not to support the amendments in this group.

Jamie Hepburn

I have listened with interest to members’ contributions on the amendments, and to the views of the various stakeholders whom I have met recently, including the Scottish Licensed Trade Association and the Scottish Beer and Pub Association, on the issue of guest beers.

I gave consideration to lodging amendments to this part of the bill on what I think is the central aim for many in supporting a guest beer arrangement: to ensure that a greater number of Scotland-based, smaller breweries can better get their product into the on-trade. Members will not be surprised to hear that the Scottish Government greatly supports that. However, I decided in the end that, on balance, it was better for the Government not to lodge amendments on the guest beer provisions. Those provisions are, of course, central to the bill, giving tenants more control over the beers that they sell and the returns that they receive from sales. The provisions also mean more choice for consumers, which I welcome.

The majority of amendments in the group seek to remove, replace or undermine the guest beer arrangements. Amendments 40 and 41 would remove the ability of the tenant to choose the beer, while amendment 37 would remove the tenant’s control over the price at which the beer may be offered. Those are just examples. Such fundamental changes to the provisions would severely limit a tied pub tenant’s opportunities and choice of products that are free of tie, and would mean that guest beer agreements would be of lesser value to tenants.

I have more sympathy with the sentiments behind the amendments that relate to ties of breweries that supply guest beers, because, as I have indicated, I would very much like pubs to supply more craft beers—local ones in particular. I am not sure that the bill as currently drafted will in and of itself achieve that; however, the amendments that have been lodged on that point seem muddled, and their detail strikes me as inappropriate for the bill.

In seeking to ensure greater access to the market for craft beers and smaller breweries, I am conscious that the bill presently defines a guest beer arrangement as an “agreement” that, among other things,

“satisfies any other criteria specified in the code.”

Alex Rowley made that point. As with much of what the bill enables, I believe that the detail on that matter would best be laid out in the code, rather than in an overly prescriptive fashion in primary legislation.

I am considering how the guest beer arrangements under the code might be shaped using the existing provisions in the bill. Any detail would be for the code and not for the text of the bill, and would be subject of course to wide-ranging consultation—to which, as I have set out, we are committed. Much of what has been raised by members today can inform that process.

It is the Government’s view that the amendments do not improve the bill. I therefore ask members of the committee not to support the amendments in group 3.

The Convener

I propose a brief break before we come to the member’s response to the amendments and to what the minister has said. I suspend the meeting, and then we will hear from Mr Bibby.

10:55 Meeting suspended.  

11:05 On resuming—  

The Convener

[Inaudible.]—amendments to the Tied Pubs (Scotland) Bill. Committee member Andy Wightman has joined us; he has been in another committee meeting until this point.

We return to the group of amendments on Scottish pub code: requirement to offer guest beer. I ask Neil Bibby, as the member who introduced the bill, for his response to the amendments in the group, which have been lodged by various members.

Neil Bibby

The amendments in this group seek to remove, restrict or otherwise change the provisions in the bill with regard to the code requiring a pub-owning business to enter into a guest beer agreement with a tenant. I reassure members that I believe that a guest beer agreement is a proportionate measure and an important part of the bill. I know that publicans, consumer organisations such as CAMRA and Scottish brewers have been calling for such a measure for a long time. I therefore urge the committee to reject amendment 30, which would remove the provisions completely.

I support tenants being able to choose which guest beer they sell, depending on their own circumstances and customer preferences, and I therefore oppose the amendments that seek to limit which beers can and cannot be chosen as guest beers. I do not think that it would be appropriate to put in primary legislation a limit on the number of hectolitres or the number of miles between the pub and the brewery.

I ask members to consider the possible unintended consequences of their amendments. For example, Graham Simpson’s amendment 40 would, if it was agreed to, mean that a brewer in Strathaven, for example, could not use the guest beer agreement to access pubs in East Kilbride, let alone pubs in Glasgow or Edinburgh. There are also problems with the other amendments in the group, and I ask the members who lodged those amendments to consider not moving them.

As Alex Rowley and the minister said, the bill requires the code to specify the circumstances in which the offer must be made, which I believe is appropriate. I believe that the code—and the consultation on it—rather than the bill itself, is the best place to consider such matters.

I have more sympathy with the amendments that seek to link the agreement to small breweries relief, as suggested by SIBA, but I suggest that that issue would be better addressed through the code than in primary legislation. I urge members not to move those amendments and, if the amendments are moved, I urge committee members to reject them.

The Convener

I ask Maurice Golden to wind up and indicate whether he wishes to press or withdraw amendment 30.

Maurice Golden

The debate has been helpful. There is great concern that the bill as it is currently drafted will, in reality—although this is not the intention—give a nod to large-scale, race-to-the-bottom, multinational brewers rather than supporting smaller, local Scottish brewers, which provide excellent beer and ale that we can all enjoy. I hope that committee members will take that on board and consider supporting a number of the amendments in this group. However, I do not intend to press amendment 30.

Amendment 30, by agreement, withdrawn.

Amendment 31 moved—[Alexander Stewart].

The Convener

The question is, that amendment 31 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Wightman, Andy (Lothian) (Ind)

The Convener

The result of the division is: For 3, Against 6, Abstentions 0.

Amendment 31 disagreed to.

Amendment 32 moved—[Maurice Golden].

The Convener

The clerks have reminded me that I must now call amendment 32A, which is an amendment to amendment 32.

I apologise for any technical mix-up on my part. There are two amendments to amendment 32. We must put the question on each of those before we can go to amendment 32. That is logical.

Amendment 32A moved—[Maurice Golden].

The Convener

The question is, that amendment 32A be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Wightman, Andy (Lothian) (Ind)

The Convener

The result of the division is: For 3, Against 6, Abstentions 0.

Amendment 32A disagreed to.

Amendment 32B moved—[Graham Simpson].

The Convener

The question is, that amendment 32B be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Wightman, Andy (Lothian) (Ind)

The Convener

The result of the division is: For 3, Against 6, Abstentions 0.

Amendment 32B disagreed to.

The Convener

The question is, that amendment 32 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Andy Wightman (Lothian) (Ind)

The Convener

The result of the division is: For 3, Against 6, Abstentions 0.

Amendment 32 disagreed to.

11:15  

Amendment 33 moved—[Alexander Stewart].

Amendment 33A moved—[Graham Simpson].

The Convener

The question is, that amendment 33A be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Wightman, Andy (Lothian) (Ind)

The Convener

The result of the division is: For 3, Against 6, Abstentions 0.

Amendment 33A disagreed to.

Amendment 33B moved—[Graham Simpson].

The Convener

The question is, that amendment 33B be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Wightman, Andy (Lothian) (Ind)

The Convener

The result of the division is: For 3, Against 6, Abstentions 0.

Amendment 33B disagreed to.

The Convener

The question is, that amendment 33 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Wightman, Andy (Lothian) (Ind)

The Convener

The result of the division is: For 3, Against 6, Abstentions 0.

Amendment 33 disagreed to.

The Convener

For the information of Andy Wightman, who has just joined us, I say that I am simply reading the names off the screen in the order that they appear in front of me—there is no particular reason for the order in which I am reading them out.

Amendment 34 moved—[Alexander Stewart].

The Convener

The question is, that amendment 34 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Wightman, Andy (Lothian) (Ind)

The Convener

The result of the division is: For 3, Against 6, Abstentions 0.

Amendment 34 disagreed to.

Amendment 35 moved—[Rachael Hamilton].

The Convener

The question is, that amendment 35 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Wightman, Andy (Lothian) (Ind)

The Convener

The result of the division is: For 3, Against 6, Abstentions 0.

Amendment 35 disagreed to.

Amendment 36 moved—[Michelle Ballantyne].

The Convener

The question is, that amendment 36 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Wightman, Andy (Lothian) (Ind)

Abstentions

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

The Convener

The result of the division is: For 0, Against 6, Abstentions 3.

Amendment 36 disagreed to.

Amendment 37 not moved.

Amendment 38 moved—[Alexander Stewart].

The Convener

The question is, that amendment 38 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Wightman, Andy (Lothian) (Ind)

The Convener

The result of the division is: For 3, Against 6, Abstentions 0.

Amendment 38 disagreed to.

Amendment 39 moved—[Maurice Golden].

The Convener

The question is, that amendment 39 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Wightman, Andy (Lothian) (Ind)

The Convener

The result of the division is: For 3, Against 6, Abstentions 0.

Amendment 39 disagreed to.

Amendment 40 moved—[Graham Simpson].

Amendments 40A to 40D not moved.

The Convener

I call Graham Simpson to press or withdraw amendment 40.

Graham Simpson

I was struck by the words of Neil Bibby when he mentioned the good example of Strathaven Ales. If amendment 40 were agreed to, it could prevent Strathaven Ales beers from being sold in premises in East Kilbride, which would be an awful shame. Therefore, I will not press amendment 40.

The Convener

Are you seeking to withdraw amendment 40 in the interests of the residents of Strathaven?

Graham Simpson

I am seeking to withdraw the amendment to help the people who live in East Kilbride and love Strathaven Ales. I include myself in that category.

Amendment 40, by agreement, withdrawn.

The Convener

[Interruption.] I can hear Mr Balfour, but I cannot see him. I had not got around to calling him yet. I have to call Mr Balfour to move or not move amendment 41 before I put the question on the amendment.

Graham Simpson

I think that Mr Balfour is taking part in another event. He is in the office next to mine, so I could alert him to the fact that he is required, if that would be helpful.

The Convener

Is another member in a position to deal with amendment 41 on Mr Balfour’s behalf?

Maurice Golden

I am happy to move the amendment.

Amendment 41 moved—[Maurice Golden].

The Convener

I remind members that amendments 41A, 41B and 41C are direct alternatives.

Amendments 41A and 41B not moved.

Amendment 41C moved—[Rachael Hamilton].

The Convener

The question is, that amendment 41C be agreed to. Are we agreed?

Members: No.

11:30  

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Wightman, Andy (Lothian) (Ind)

The Convener

The result of the division is: For 3, Against 6, Abstentions 0.

Amendment 41C disagreed to.

The Convener

The question is, that amendment 41 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)

Abstentions

Wightman, Andy (Lothian) (Ind)

The Convener

The result of the division is: For 3, Against 5, Abstentions 1.

Amendment 41 disagreed to.

Amendment 42 moved—[Maurice Golden].

The Convener

The question is, that amendment 42 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Wightman, Andy (Lothian) (Ind)

The Convener

The result of the division is: For 3, Against 6, Abstentions 0.

Amendment 42 disagreed to.

Amendment 43 moved—[Maurice Golden].

The Convener

The question is, that amendment 43 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Wightman, Andy (Lothian) (Ind)

The Convener

The result of the division is: For 3, Against 6, Abstentions 0.

Amendment 43 disagreed to.

Amendment 44 moved—[Alexander Stewart].

The Convener

The question is, that amendment 44 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Wightman, Andy (Lothian) (Ind)

The Convener

The result of the division is: For 3, Against 6, Abstentions 0.

Amendment 44 disagreed to.

Amendment 45 moved—[Alexander Stewart].

The Convener

The question is, that amendment 45 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Wightman, Andy (Lothian) (Ind)

The Convener

The result of the division is: For 3, Against 6, Abstentions 0.

Amendment 45 disagreed to.

Amendment 46 moved—[Maurice Golden].

The Convener

I apologise—I have a technical difficulty. I suspend briefly until I manage to get back into the meeting. Everyone can see and hear me, apparently, but I can neither see nor hear them at the moment.

11:35 Meeting suspended.  

11:37 On resuming—  

The Convener

Welcome back; the minor technical glitch has been sorted.

The question is, that amendment 46 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Golden, Maurice (West Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Simpson, Graham (Central Scotland) (Con)

Against

Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Wightman, Andy (Lothian) (Ind)

The Convener

The result of the division is: For 3, Against 6, Abstentions 0.

Amendment 46 disagreed to.

Amendment 47 not moved.

The Convener

The next group of amendments is on the requirement to offer a market-rent-only lease.

Amendment 48, in the name of Graham Simpson, is grouped with amendments 49 to 52, 5, 53 to 67, 67A, 67B, 67C, 6 to 8, 68 to 75, 77, 76 and 78 to 84. I point out that amendment 48 pre-empts amendments 49 to 52, 5, 53 to 67, 67A, 67B, 67C, 6 to 8, 68 to 75, 77, 76, 78 and 79; that amendment 53 pre-empts amendments 54 to 56; that amendment 57 pre-empts amendments 58 and 59; and that amendment 77 pre-empts amendments 76 and 78.

I invite Graham Simpson to move amendment 48 and to speak to all the amendments in the group.

Graham Simpson

This is a big group, although only seven of the amendments are in my name. Unfortunately for members, one of them is amendment 83, which is a bit of a whopper. It is the only amendment that I have ever seen that contains mathematical formulas. I will return to amendment 83 in due course.

The ability to serve an MRO notice at any time will have a significant commercial impact on pub-owning businesses. Brewers have told me that the very existence of the provision will be a disincentive to investment in Scotland. As we have heard, now more than ever, we can do without that. The last thing that the industry needs is more uncertainty. The road to recovery for what is left of the industry will be long and hard, and we do not want to add to its woes.

One option would be for us to remove the market-rent-only provision from the bill entirely. That would be the effect of amendment 48. As the convener has already said, if the committee were to agree to amendment 48, most of the other amendments in the group would fall, including Maurice Golden’s amendment 49.

Mr Golden does not go quite as far as I suggest, although he offers an alternative that he will undoubtedly explain. I suggest that members accept the reasoning behind amendment 48 and agree to it; nevertheless, Mr Golden’s alternative is a good one, not least because it contains the line:

“the pub will continue to be a pub”.

Who knew?

In amendment 67, Jeremy Balfour suggests that a tied pub tenant should be able to request an MRO only if they have been served with a notice of a rent review or if it is within one year of the expiry of a current lease and the pub-owning business has not served notice to quit. However, Maurice Golden is not too impressed with that—he suggests that the length of the period before expiry should be two years. Similarly, when Mr Balfour goes on to say that the tenant should have been a tied tenant of that tied pub for at least five years, Mr Golden says that it should be a longer period—he goes for seven years. Where Mr Balfour says that the tenant should not have been in receipt of a qualifying investment within the past seven years, Mr Golden goes for 10 years. Take your pick—I do not really want to hold the jackets in that fight.

My amendment 60 deals with what should trigger the requirement to offer a market-rent-only lease. It is linked to amendment 83, which I will come to in a bit. If the committee accepts amendment 60, the requirement to offer an MRO would kick in only when a tenant had notice of a significant increase in the price of a product or service supplied to them, or received a rent assessment proposal, or sent the pub-owning business a relevant analysis demonstrating that a trigger event had occurred.

The requirement in the bill as drafted to offer a market-rent-only lease to tied tenants would enable a tied tenant to ask for a free-of-tie lease at any time. That goes much further than the pubs code in England and Wales, where a tied pub tenant can serve an MRO notice only following a specific event. The rationale behind the broad provision in the bill is unclear. If an MRO option is to be included in the bill, it should go no further than the pubs code in England and Wales, and should specify the events that need to take place in order for an MRO notice to be served. Other amendments in the group provide for that.

Amendment 83, which I accept is novel and very long, essentially mirrors the provisions in the code that is used down south. It would mean that an MRO notice could be served only when there was a significant price increase in tied products, at the end of the tenant’s first contract, or at a contractual rent review.

11:45  

Amendment 83 deals with the question of what such “significant” events may be. It is taken from the provisions that are laid out in the equivalent law in England, on which Neil Bibby based his approach to the bill. The first part of the amendment sets out in detail what may be considered

“a ‘significant increase’ in the price of beer”

and of other drinks, which are listed. The amendment sets out various formulas for making that decision because, unless we define what is meant by “significant”, the legislation will surely be open to challenge. Law should be drafted as tightly as possible, so those mathematical formulas—while their presence may seem unusual, because it is—are to everyone’s benefit, even if we might need Carol Vorderman to explain them; as the committee will know, I am no Carol Vorderman.

Having dealt with the price of beer and other drinks, amendment 83 goes on to set out other conditions that would trigger an MRO provision. Richard Lyle’s very useful amendment 84 follows on from that; I hope that he will move and press one of his amendments. Should an MRO provision be required, it is my strong view that it should be introduced at a later date, once there has been a full and proper consultation on the details and a full economic impact assessment, and once the Scottish pubs code adjudicator’s office has had time to establish itself.

Amendment 69 would ensure that a code would be introduced only once the impact of the legislation, and how it fits with the existing landlord and tenant law, has become clear. There is a lack of evidence to support the need for Government intervention in the market, and a lack of evidence as to the impact of the measures on the economy. The human rights assessment that has been undertaken in support of the bill is, in my view, of poor quality. The legislation introduces a form of security of tenure through the back door, the effect of which is unclear. It is uncertain how that will interact with existing landlord and tenant law. Amendment 69 sets a minimum period of two years before the provision can come into force, and I invite members to agree with that approach.

Amendment 70 seeks to ensure that there is certainty as to whether a form of agreement is MRO compliant. That has been a particular issue in England and Wales, where the Pubs Code Adjudicator does not, despite requests from pub-owning businesses, have powers in that regard. There is real merit in such a provision, because it would provide certainty for the parties as to what can be offered, as well as providing consistency across the sector, and it would reduce substantially the number of disputes, and the range of issues in dispute, that the adjudicator would be required to deal with. In the light of the experience in England and Wales, it would be a significant advantage to have such an arrangement, but an express duty needs to be imposed on the adjudicator to exercise such a role.

I move amendment 48.

Maurice Golden

Amendment 49 would give the Government the power to include an MRO option in the code. However, it would not compel it to do that and, crucially, would allow greater consideration, ahead of the code, of all the challenges around such a provision. The amendment also sets out a list of parameters or triggers, which stipulate the conditions in which the MRO option could be offered to a tenant if it were to be included.

We have already heard some crucial points in respect of the particular challenges around an MRO option, so it is sensible not to mandate its provision in primary legislation. We should also address some of the fundamental points that proponents of an MRO option put forward. There needs to be some transfer of value from pubcos to tenants, and an MRO provision would achieve that. The use of an MRO option is a bargaining mechanism. However, Europe Economics, in its “Impact analysis of the Pubs Code” report, concluded:

“we believe that any figures provided”

in such an agreement

“should be assessed with caution and ensure that a complete range of values (also intangibles) are included.”

Amendment 68 would introduce an MRO waiver. Its purpose is to allow tenants and pub companies to agree an MRO waiver. Two parties enter into a commercial agreement in full knowledge of what is being taken on, so allowing one party to unilaterally break that agreement would be a poor precedent indeed. A waiver would be a valuable negotiating tool that would enable an incoming tenant to secure more favourable terms, as he or she would be guaranteeing to the pub company the surety of contract that is so important to companies when it comes to planning and investment and securing jobs in Scotland.

Does the tie create an unfair lock-in element? Europe Economics examined that in detail in its 2019 evaluation of the pubs code in England and Wales. It said:

“The characteristics of the tie make it such that once signed tenants cannot change their pubco for some time (although there are break options at different points in time). The IA”—

that is, the impact analysis of the legislation—

“believes that this ‘limits tenants’ ability to put pressure on pub owning companies’ and also ‘makes it difficult to judge whether tied tenants get a good deal or not’, as they cannot choose.”

Amendments 67A, 67B and 67C would increase the timeframe in relation to the triggers that Jeremy Balfour’s amendment 67 would introduce. Amendment 67A would increase the period in which tied tenants could trigger the MRO option from one year to two years. Amendment 67B would increase the period for which the person had to have been a tied tenant from five years to seven years. Amendment 67C would increase the proposed qualifying investment period from seven years to 10 years.

Amendment 71 would ensure that the bill captures only those pubs that are intended to be captured, by ensuring that managed operator agreements are excluded from the MRO option. Normally in managed operator agreements, someone operates the pub on behalf of the pub-owning company. The pub company typically holds the liability for property repairs and maintenance and pays all running costs and for all stock, and the operator is paid a management fee, which guarantees an income, as well as additional bonuses based on the business performance. There are also managed operator agreements in which someone is employed directly by the brewery or the pub company that owns the property, and the operator is paid a salary. The brewery or pub company employs everyone who works in the pub and has full responsibility for the management and upkeep of the property—the model is similar to a franchise model. I do not think that managed operator agreements were intended to be included in the bill, so I lodged amendment 71 in good faith, to ensure that there is clarity.

The Convener

I call Richard Lyle to speak to amendment 52 and the other amendments in the group.

Richard Lyle

I will speak to amendments 52, 55, 56, 59, 64, 72, 73, 75, 76, 78, 79, 82 and 84.

I concur with what was said about the MRO option, which does not deliver anything like parity between tenants in Scotland and tenants in England and Wales. It is nothing like the provisions that apply in England and Wales. It would be a disaster if it were allowed to proceed. At the very least, the proposed approach needs to be heavily amended, so I am glad that we are debating the issue.

An MRO agreement is based on a commercial model that is fundamentally different from a tied lease, with different obligations and responsibilities on each party. As such, flexibility is needed. In some respects, a deed of variation would make a lease so complex that it would be impossible to follow, and there would be tax liabilities and greater legal costs for both sides in the longer term. Changes to a lease via a deed of variation would potentially lead to significant costs for the licensee, including additional land registration fees and significant legal fees, as lawyers assessed lengthy and complicated historical leases. If a lease was amended via a deed of variation, it would be far harder to follow and open to misinterpretation in the longer term.

A new agreement would guarantee legal certainty, remove ambiguity and set up both parties with maximum clarity, openness and transparency. Everyone would be clear about what was agreed.

Following a number of arbitrations on that point, the PCA issued a statutory advice note in 2018, stating that the legislation allowed for an MRO agreement to be a new agreement or a deed of variation to an existing lease. Critically, it also confirmed that, although the terms of an MRO agreement had to be “reasonable”, they did not have to be the same terms as those of a tied agreement.

Those are crucial points, which recognise that an MRO agreement is not simply the same as a tied agreement with the beer tie removed. They reflect that an MRO agreement is much more akin to a standard commercial lease that does not necessarily include all the additional benefits and support that come with a tied agreement.

For those reasons, although an existing agreement could be changed by deed of variation, a new lease is likely to be much more appropriate because of the number of changes that would be required. That is the case in the vast majority of MRO agreements in England and Wales.

The amendments seek to set out in the bill the circumstances in which market-only leases could be sought, rather than leaving them to be determined in regulations.

The trigger events are based on the English pubs code; the tenant would be required to serve a notice in the prescribed terms when one of those events occurred. The amendments seek to reach a balance between providing sufficient certainty on when market-only leases could be triggered and leaving the fine detail of procedures to regulations. The amendments have been lodged to enable a pub-owning business to offer a new lease rather than modify an existing lease, which better suits Scottish practice.

The amendments propose three circumstances in which a tenant could serve notice to request a market-only lease. The first circumstance is when a tenant

“receives notification of a significant increase in the price at which a product or service which is subject to a product or service tie is supplied to a tied pub tenant”.

The meaning of “significant increase” is not defined in the amendments and would need to be defined in the code.

The second circumstance is when a tenant receives a proposal for an increase in rent following a rent review that is required under the lease or the code, and the

“investment exception does not apply.”

The latter recognises that it is not appropriate to trigger a right to request a market-only lease when the proposed rent increase is associated with an agreement to make an investment in works in the pub with a view to improving trade. The investment exemption has been tightly defined, based on the English pubs code.

The third circumstance is when a tenant demonstrates that a “trigger event” applies, which must meet a series of criteria. The event must be “beyond the control” of the tenant, it must not have been “reasonably foreseeable” and it must decrease the

“level of trade that could reasonably be expected to be achieved at the tied pub over a continuous period of 12 months.”

The relevant event cannot be an increase in rent or an increase in the cost of products or services that would otherwise allow the tenant to serve notice. Additionally, the event must not affect other pubs in the area or, if it does, a series of further criteria would apply, such as changes to the “local economic environment”.

The trigger points are necessary, at the very least, and the amendments seek to set out in detail how they would work, giving surety around investment and clarity on the Scottish market position for tenants and landlords. My amendments would achieve that, but we must also learn from the experience of five years of the English and Welsh statutory code to ensure that there are no unnecessary arbitrations, misinterpretations or challenges, as have been seen in England and Wales with the Pubs Code Adjudicator.

This is a hugely complicated issue, which we must get right, as other members have said. If the MRO option is to be included in the bill, please let us ensure that it is workable.

Jamie Hepburn

I apologise to members, because I must speak in some detail on this group of amendments, given the central importance of this part of the bill.

My amendments in the group, and those of other members, are designed to be constructive, focusing on some areas of the bill that must be amended to achieve the balance that we need. My amendments are pragmatic and aim to achieve the outcome that I set out at the start of our stage 2 deliberations of ensuring a level playing field between tenant and landlord, while respecting the intent of Neil Bibby’s bill.

I have met and listened to pub-owning companies, tied pub tenants and their representatives, and an issue that has come up time and time again is that of the market-rent-only provisions in the bill. Specifically, there is concern about how those provisions may present disincentives to businesses investing in their tied pubs, as there will be no guarantee of security of return. Equally, I have heard from those who represent tied pub tenants how important a straightforward MRO process is to creating more balance in the relationship between tenants and landlords.

12:00  

My amendments would allow the Scottish ministers to set out in the code the circumstances in which an MRO lease need not be offered. Importantly, though, given that the MRO provisions are a central part of the bill, my amendments do not demur from the default position that an MRO lease should, where appropriate, be offered.

I believe that change is also required in this area of the bill to make sure that it is compliant with rights under the European convention on human rights and to strike a better balance between the rights of pub companies and tenants. The majority of the amendments in this group try to alter that balance, but I believe that my amendments are the ones that set the right tone. They also allow for proper consultation and meaningful engagement on the topic, which is evidently required, given the variety of amendments under debate. I note that a similar approach is taken in Michelle Ballantyne’s amendment 80, but my amendments 5 and 6 would deal with that, and my other amendments 7 and 8, taken as a package, provide sufficient flexibility to cover the variety of arrangements in place in the tied pubs sector.

I must also make reference to Graham Simpson’s amendment 83 and Richard Lyle’s amendment 84, which set out what would constitute a trigger event for an MRO lease to be offered. First, I must congratulate Mr Simpson on the inclusion of some formidable equations in his amendments. It is the first time that I have seen such equations in any amendments to primary legislation. If they are agreed to, not only legal textbooks but an understanding of algebra will be required in interpreting the legislation. Mathematicians across the country might welcome the potential for unexpected business that Mr Simpson’s approach might bring.

However, although I recognise the need for the MRO arrangements to have appropriate safeguards, I believe that that level of detail is best left to secondary legislation—in other words, the code itself. Indeed, amendments 83 and 84 draw heavily on the provisions on MRO leases that are contained in the pubs code for England and Wales. Mr Simpson made that point himself. It is worth reflecting on the fact that the provisions in question come from the Pubs Code etc Regulations 2016, which are, of course, a piece of secondary legislation. I think that that proves the point that provisions in this area should be left to secondary legislation rather than being included in the bill, as amendments 83 and 84 seek to do.

I am also interested in Richard Lyle’s amendments on the Lands Tribunal for Scotland. However, I am not aware of Mr Bibby having had any conversations with that organisation; he could clarify whether that is the case. The Government has certainly not had any such conversations. I would question whether sufficient consideration has been given to whether the Lands Tribunal would have sufficient resources to deal with disputes under the code once it is introduced. I therefore ask Mr Lyle not to move those amendments.

The market-rent-only provisions are a central part of the bill and, if the bill becomes law, we must make sure that we get them right so that we can provide certainty for tenants and landlords as to the mechanism by which market-rent-only leases will function. My amendments will enable that to be determined through dialogue and consultation so that all parties can properly input into the process.

Accordingly, I urge members to support my amendments in the group and to reject those of other members.

The Convener

[Inaudible.]—to speak to amendment 53 and the other amendments in the group.

Is Rachael Hamilton there?

Rachael Hamilton

Yes. Can you hear me, convener?

The Convener

Yes.

Rachael Hamilton

I did not hear you. Did you say that I should speak to amendments 53, 54 and 77?

The Convener

I said that you should speak to amendment 53 and the other amendments in the group.

Rachael Hamilton

I lost you there, convener. I will speak to those amendments now.

Amendments 53 and 54 would prevent pub-owning businesses from having to modify the terms of an existing agreement, and amendment 54 stipulates that they should enter into a new agreement that is at least five years or for the length of the unexpired lease. Amendment 53 is another vital amendment if the MRO element is to be included, which, for all the reasons outlined so far, is a major issue with the bill.

Amendment 53 has two purposes. If other amendments seeking to make the MRO provision workable are not accepted, amendment 53 would recognise, as in England and Wales, that it would be entirely unjustifiable to offer an MRO agreement for any longer than the existing term of the current agreement. That is even more important in Scotland because, without the Landlord and Tenant Act 1985 and no right to renew, a company would be required to provide security of tenure beyond an existing lease term. For example, it cannot be right for a tenant to—[Inaudible.]—on a five-year or 10-year free-of-tie agreement—or whatever the company’s standard free-of-tie contract may be—when the tenant has, say, only two years left on an existing lease.

As we know, without any trigger points, a tenant could seek an MRO agreement with just a few months of a tenancy remaining. If amendment 53 is agreed to, it would ensure that pub companies are not bound to extend an agreement with a tenant to longer than the original agreement. That would avoid further legal complications. If a tenant is on a long tied lease with more than five years left, they would have the security of at least a five-year MRO lease. It might simply not be viable or sustainable for a company to offer leases longer than that for that particular pub.

Another key point that we must consider with the tied pub model is that, although it provides benefits for both parties, those benefits are not maximised at the same point during an agreement or an economic cycle. It is an asymmetric reward system, and that is crucial to understanding why the MRO element of the bill is so problematic. As we know, for the tenant, the tie means running a pub with fewer up-front costs in exchange for potential revenues. For the pubco, it means an initial transfer of income, which subsidises the initial investment, and then taking revenues when the pub is doing well. That was explained in the impact assessment accompanying the legislation in England and Wales. I will not go into that, convener, because it is too long and onerous, but you will know what I am talking about.

Through that mechanism, the beer tie helps to ensure an important return on investment for the pub company. That is because, by signing up a tenant for a fixed period, and with agreements around revenue shares through dry and wet rent, the pubco has an assured source of income for a given period, which can be used to justify and offset some up-front costs of investment. I have already talked about that. In that way, tied contracts can help to ensure on-going investment in the tenanted pub estate. If the tenant was able to change the terms of the agreement, particularly the wet rent, at any point of their choosing, the case for investment by the pubco could be significantly diminished.

The investment is crucial as a key driver of value for both the pubco and the tenant in the medium term by helping to sustain those pubs. We are talking about the sustainability and viability of those pubs—particularly community pubs—and generating increased sales and profits for both parties. There is risk and reward under the economic cycle.

One final benefit is derived from the profit-and-risk-sharing mechanism. The tie derives an asymmetric reward from selling the beer and its other operations, from food through to gaming machines. The reward for both parties is countercyclical. The pub company helps in times of low returns but takes part of the revenue in times of high returns—a more apt expression might be that the pubco gives and takes—which seems a perfectly acceptable model to me.

The relationship does not stop there. When faced with hard times, the tenant might want to ask for advice and help, including financial help, from the pub company. The pub company will be in a position to do that not only because of its financial strength, but because of knowledge that it might have acquired around the issues, which would allow it to explain any drop in revenue. I know that because I have visited some tied pubs in my constituency and had it explained to me by the tenants.

The UK Government’s initial impact assessment recognised that the expected benefits from good times are higher for the pub company. That means that pubcos have an extra incentive to help the tenant succeed—not fail, but succeed. I will not go into all that in any more detail—that would be too much, and I know that you will cut me off, convener—so I will go straight to amendment 77.

Amendment 77 seeks to remove the Scottish pubs code adjudicator from the bill. The financial memorandum predicts that the adjudicator would get only 11 inquiries in a year. Moreover, those 11 inquiries would be at the cost of pubs covered by the code. The set-up and operating costs of the adjudicator would be at the expense of the tied tenants.

If the adjudicator is to operate effectively, it would have to replicate broadly the infrastructure in England and Wales. However, we know that the setting-up costs there were drastically underestimated. As such, we do not support additional costs on pubs at a time when they are already struggling during the pandemic, following sustained periods of lockdown. We are therefore seeking to remove the adjudicator entirely from the bill.

The Convener

I call Alexander Stewart to speak to amendment 57 and other amendments in the group.

Alexander Stewart

Amendments 57, 74 and 81 would ensure that the code sets a prescriptive response time on the negotiations between an MRO being triggered and agreement being reached. Under the bill as introduced, there is simply an ability to include a prescriptive response time, not a requirement. The amendments would ensure that one is, indeed, set.

On the wider provisions proposed in this group, I share the concerns about including an MRO provision at all. Nobody is forced to run a tied pub. One of the major benefits of choosing a tied model over other models is that tied pubs can be operated by individuals and, if they choose to relinquish the role, they can simply post their keys back through the letter box of the premises. That model also allows low-cost entry into the market for those who wish to run a pub and start their own business, whereas other routes would prove to be much costlier.

Under the bill, the MRO provision pulls the ladder up from future generations of budding entrepreneurs. It does not give Scottish tied tenancies parity with English and Welsh tenants—which Mr Bibby repeatedly gave as a key reason for introducing the bill—but puts them at a huge disadvantage. Far from supporting the Scottish tied pub tenants, the MRO provision as drafted would cause irreparable harm, and I urge the committee to back my amendments in this group.

The Convener

I call Michelle Ballantyne to speak to amendment 58 and other amendments in the group.

Michelle Ballantyne

Much has already been said about MROs, so I will try not to repeat all the arguments—I am aware that this discussion is taking quite a long time.

I think, from listening to the debate, that there seems to be a bit of confusion about whether we are trying to achieve consistency with what is happening in England and Wales or whether—as was said earlier—there is no need to be consistent. However, from a business perspective, and in discussing how the arrangements operate across the whole of the UK, it is important to have some consistency. Several of my amendments—amendments 61 to 63 and 65—are all about ensuring that consistency and not falling out of step, which would make doing business in Scotland more difficult.

Amendment 66 is important, as it ensures that pub-owning businesses are not under an obligation to grant a longer lease than would otherwise be conferred on a tied pub tenant. By default, it would give a form of security by the back door.

Such matters have been taken to court. The problem was highlighted in the High Court, in the case of Punch Partnerships (PTL) Ltd and Another v The Highwayman Hotel (Kidlington) Ltd—there is a longer title than that; I am sure that members will look it up if they are interested.

12:15  

It is important that the MRO lease is consistent with a length of term that is reasonable. If we are not reasonable in what we do, the market will inevitably be decimated. We should not do anything that creates a back-door route to a secure tenancy, because then the pubcos will pull away from investing. The bill should not be an easy way of getting a cheap building.

I intend to move the amendments in my name. We have spoken to the minister about some of these matters. He lodged slightly different amendments, which he thinks cover the issues. However, they do not take exactly the same approach as ours, and members should consider the differences.

The Convener

I ask Jeremy Balfour to speak to amendment 67 and other amendments in the group.

Jeremy Balfour

The purpose of amendment 67 is to ensure that the MRO option can be triggered only under certain circumstances—that is, where the tenant:

“(a) has been served with a notice that the pub-owning business wishes to initiate a rent review,

(b) is within 1 year of the expiry of an existing lease and the pub-owning business has not served notice to quit,

(c) has been a tied-tenant of that tied pub for at least 5 years,

(d) has been served with a notice of a significant increase in the price at which a product or service which is subject to a product tie or service tie is supplied,

(e) has not have been in receipt of a qualifying investment within the last 7 years, and

(f) has not waived the right to request a market only lease.”

Amendment 67 would also require the code to specify what constitutes a “significant price increase” and a “qualifying investment”.

Convener, given your legal background, you will have noticed that three of my proposed triggers—the rent review, a significant price increase and a qualifying investment—are common in the England and Wales code. Given the level of detail that is involved, it is highly logical that those triggers are defined outside primary legislation and are set out in the statutory code.

Amendment 67 would introduce two further triggers, which address concerns about the highly questionable nature of an intervention in a market in relation to which no evidence of market failure exists, and which, ultimately, could lead to a party being able to break an existing contractual agreement, with no recourse for the other party.

The first such trigger is that the tied tenant must have been in situation for at least five years. That would ensure that the existing contract between pub company and tenant had surety for at least five years. Such surety is critical to forward planning and investment, and a tie benefits both parties—I will shortly explain why, as that is clearly not well understood by many members.

The second additional trigger is that the tenant must not have waived the right to request an MRO lease. Such a waiver should be allowed in the negotiation between the two parties at the start of the agreement.

The committee and the Parliament need to keep in mind that vertical restraints such as tied arrangements are entirely compatible with European Union competition law and have many benefits for both parties. I will not go into detail, but I can say that vertical restraints exist to address, for example, the hold-up problem, know-how, standardisation, economies of scale and capital markets.

Those issues are really important and are all features of beer ties. For example, pub companies invest in training prospective tenants in the key aspects of running pubs, such as licensing law, safety, the operation of beer dispensing systems and kitchen equipment, brand knowledge and specifications, line cleaning, planning law and—of course, in today’s world—the running of a Covid-safe pub. The transfer of knowledge and training is supplemented by wider business support, to maximise sales and grow the business. Once that support has been taken, it cannot be given back.

The upkeep of brewery branding, imagery and reputation is critical for the likes of Belhaven and Heineken. Indeed, all companies have shareholders and quality metrics that are vital to their reputation for attracting the best. Economies of scale allow tenants to benefit from the landlord’s purchasing power when it comes to insurance and utility costs, for example. Companies’ expert knowledge of the pub market and their tenants allows them to provide loans, credit and financial support that would not be available on the open market.

The ability to go MRO undermines all those crucial benefits not just for the existing tenant, but for the remaining tied tenants, because the pub company will be in a weaker position to support them.

Another important characteristic of the pub sector in Scotland and across the UK is that the beer tie co-exists with other types of contract, including free-of-tie options. That allows tenants to select the contract that accommodates their interest in the best way, and it allows pubcos to match the tenants to the business model that will best fit them—and provide greater benefits to the pubco.

I will summarise. It is critical that an MRO option is subject to specific circumstances. The point that we keep coming back to is that we risk undermining the tied pub market to such a point that that great model of partnership and entrepreneurship will disappear from the Scottish market, at a time when there are fewer pubs. I urge members to support amendment 67.

The Convener

The deputy convener, Willie Coffey, has a question.

Willie Coffey

What is the significance of the constants in the mathematical equations in amendment 83? Can you help us on that, Mr Simpson?

The Convener

Is Mr Simpson there? I am wondering whether this will be a long explanation.

Graham Simpson

I am here, convener. I will be happy to address Mr Coffey’s point when I wrap up the debate on this group of amendments.

The Convener

We look forward to that. However, we are out of time today and we need to discuss how we can progress stage 2. I thank the minister, the member in charge of the bill and all members who contributed today.

12:20 Meeting continued in private until 12:56.  

The Convener

Welcome back to the meeting. Agenda item 6 is our continued consideration of the Tied Pubs (Scotland) Bill at stage 2.

I again welcome Neil Bibby, who is the member in charge of the bill. He is present to speak to and move his amendments. I also welcome back the Minister for Business, Fair Work and Skills, Jamie Hepburn, and our fellow MSP Michelle Ballantyne.

I remind members to restate any declarations of interests. I do not know whether there is anything to be declared other than what was declared last week or whether there have been any changes in interests.

I see that there is nothing further to declare.

I ask non-committee members not to use the dialogue box during voting. Any member who wishes to catch my attention should type R in the chat box, and they should contact me or the clerks via the usual means if there are any technical problems.

Schedule 1

The Convener

We begin consideration of amendments by returning to the group on the requirement to offer a market-rent-only lease. We have heard from all members with amendments in the group, so we will now hear from Neil Bibby.

Neil Bibby (West Scotland) (Lab)

Good morning. I refer members to my entry in the register of members’ interests, as I did last week.

Before I speak to this group of amendments, I thank committee members, again, for their continued consideration of stage 2 amendments. I look forward to concluding the proceedings in a timely fashion. As I did last week, I will keep my contributions concise and to the point. I will not waste any of our time by speaking to amendments that ignore the Parliament’s support for the general principles of the bill at stage 1, such as those that would remove the role of the adjudicator and other fundamental provisions altogether.

First, I will speak to the minister’s amendments in the group. Providing for a market-rent-only option for tied tenants is a central and fundamental part of the bill. In drafting the bill, I paid careful attention to the MRO lease that is available to some tied tenants in England and Wales under the Small Business, Enterprise and Employment Act 2015, and to the many reports of the failure of its provisions. That failure seems to be due, in part, to the many complex trigger points and criteria that govern whether a tenant has the right to request that an MRO offer be made.

I am keen to avoid such problems in providing for an MRO lease in Scotland. Therefore, the bill gives tenants an unqualified right to request an MRO offer from their pub-owning business. I am acutely aware from my on-going liaison with tied tenants that they view the right to request an MRO offer as an essential part of rebalancing the relationship between tenants and landlords and addressing the vast difference in power.

I thank the minister for engaging me in discussions over a number of weeks on the amendments that he has lodged to allow the code to specify circumstances in which an MRO offer need not be made by a pub company, and for listening to my views and concerns. I was reassured by the minister’s comments last week. I do not believe that it is the Government’s intention to undermine the spirit of the fundamental right that is provided for in the bill that all tenants should be able to request an MRO offer. I acknowledge that there might be limited circumstances in which it would not be appropriate for a request for an MRO offer to be honoured, and that it would therefore be appropriate for the code to specify such circumstances. On that basis, and having heard the minister set out the Government’s intentions, I will support amendments 5 to 8.

The other amendments in the group, which I have considered carefully, all appear to weaken the MRO provisions that are set out in the bill and in the minister’s amendments. Many of them would add the trigger points and criteria that have caused confusion in England and Wales and led to the MRO provisions being deemed a failure. Some of the amendments appear to go even further. One of my central aims was to learn lessons from the legislation in England and Wales and to significantly simplify, where possible and appropriate, in the bill all such provisions, and particularly the MRO measures. Many of the amendments would greatly complicate the MRO process and render it unworkable and unusable.

We have heard from the minister that there will be a full consultation process to inform the drafting of the code. That consultation process is the right and proper place to consider the issues that are raised by some of the amendments. The issue is too important to risk including any of the amendments in primary legislation without proper consideration and without consulting those who will be affected most by the measures. I therefore urge the committee to reject all non-Government amendments in the group.

The Convener

I invite Graham Simpson to wind up, press or withdraw amendment 48 and to give any other indications that he wishes to at this point.

08:15  

Graham Simpson (Central Scotland) (Con)

I welcome Neil Bibby and, indeed, the minister back to the committee. Members are well aware that we had something of a marathon session last week. Our approach was to lodge a lot of amendments. We genuinely want the bill to work for everyone and for a sector that is really up against it right now.

Although I got the impression that Neil Bibby and the minister quite liked some of the amendments, it became obvious last week that none of them was going to get through. On that basis, Maurice Golden and I have decided to not move or withdraw all our amendments that are left to consider. We will work with Neil Bibby and—if he wishes—the minister in order to get the best bill possible at stage 3.

I will not speak to any of my amendments for the purposes of stage 2. I wish to not move or withdraw them—I will not press any of them. I really want to make progress.

The Convener

I thank Mr Simpson for his indication prior to the meeting regarding his intention not to move the amendments that he referred to. However, we will have to come to them in terms of the formal procedures as we move through the bill.

Amendment 48, by agreement, withdrawn.

The Convener

I turn to amendment 49, in the name of Maurice Golden. Although Mr Simpson has already given us an indication regarding that amendment, I invite Mr Golden to confirm that he does not intend to move amendment 49 and to comment on any further amendments, if he so wishes, at this point.

Maurice Golden (West Scotland) (Con)

I had a meeting yesterday with the member who is proposing the bill, Neil Bibby, and we agreed to work together constructively at stage 3. That offer would extend to other parties in order that we achieve the very best that the bill can provide for tenants and the pub sector. I echo the comments of Graham Simpson and confirm that I will not move amendment 49 or the other amendments in my name in the group.

Amendment 49 not moved.

Amendments 50 and 51 not moved.

The Convener

I call on Richard Lyle to move or not move amendment 52. He may, as other committee members have done, also give an indication about his other amendments.

Richard Lyle (Uddingston and Bellshill) (SNP)

Since consensus is breaking out all over the land, in keeping with the comments of my Tory colleagues, I am quite happy not to move my amendment either. Since they have decided to change their minds and withdraw or not move their amendments, I certainly agree to do the same.

Amendment 52 not moved.

The Convener

Does the minister wish to move amendment 5?

Jamie Hepburn

I hope that the committee will forgive me, convener, but I wish to move amendment 5.

The Convener

I do not think that we need to forgive you on this occasion.

Amendment 5 moved—[Jamie Hepburn]—and agreed to.

The Convener

Rachael Hamilton is not present at today’s meeting. She has indicated that she will not move amendments 53 and 54.

Amendments 53 and 54 not moved.

Amendments 55 and 56 not moved.

The Convener

Alexander Stewart is not present at today’s meeting and has indicated that he does not intend to move amendment 57.

Amendment 57 not moved.

The Convener

Does Michelle Ballantyne wish to move amendment 58?

Michelle Ballantyne (South Scotland) (Reform)

As has been said, it became apparent at last week’s meeting that there would not be support for amendments to the bill other than the ones that the minister has lodged. I exchanged emails with the minister and Neil Bibby and, on the basis of those emails, I will not move my amendments. However, that is not because I have changed my mind; it is because we must be realistic about whether there is support for the amendments that have been lodged. When it is clear that there is not, it is not a good use of everybody’s time to spend hours going through them all.

As we move to stage 3, I hope that there will be some meaningful discussions about the market-rent-only option in the bill, because, if we do not get that right, it will endanger the sector. I look forward to working productively with the minister and Neil Bibby to ensure that we have a win-win situation for tenants and the pub sector.

Amendments 58 to 66 not moved.

The Convener

Jeremy Balfour is not present at today’s meeting, but he indicated that he does not wish to move any of his amendments in this group.

Amendments 67 not moved.

The Convener

Amendments 67A, 67B and 67C therefore fall.

Amendments 6 to 8 moved—[Jamie Hepburn]—and agreed to.

Amendments 68 to 84 not moved.

Schedule 1, as amended, agreed to.

Section 2—Scottish Pubs Code Adjudicator

The Convener

The next group of amendments is entitled “Scottish Pubs Code Adjudicator and Scottish Ministers’ duty to seek to make code and appoint adjudicator”. Amendment 85, in the name of Richard Lyle, is grouped with amendments 85 to 99, 99A, 100, 103, 101, 102, 104 to 121, 9, 122 to 127, 129, 128, 131, 130, 130A, 130B, 132 to 142, 10, 11, 143 to 146, 1, 148 to 163, 2, 164 to 168, 3, 169 to 173, 178, 185, 196, 200, 213, 216, 224, 229, 234, 247, 250 and 259.

Amendments 85 and 86 not moved.

Section 2 agreed to.

Schedule 2—Scottish Pubs Code Adjudicator

Amendments 87 to 99 not moved.

The Convener

Amendment 99A falls.

Amendments 100, 103, 101, 102 and 104 to 121 not moved.

The Convener

I invite the minister to speak to amendment 9 and other amendments in the group.

Jamie Hepburn

I lodged amendment 9 because there is no provision in the bill to allow a right of appeal for businesses to challenge the imposition of or the amount of the adjudicator’s annual levy. The amendment will enable businesses to challenge levies that they consider to be unfair or unreasonable and to appeal to the sheriff court. That will be consistent with other appeal processes that are introduced under the bill if Neil Bibby’s amendments 12 and 13, which are to be debated in a later group, are agreed to. I say now, as I will say again later, that I support those amendments. Amendment 9 is valuable as it will ensure fairness for business.

Amendment 10 was lodged to clarify the responsibilities of the Scottish ministers when drafting the Scottish pubs code and to avoid uncertainty over the status of the code. The regulatory principles are fair in themselves and they underline the central tenet of the bill, which is fairness and balance in the relationship between landlords and tenants. However, the drafting of section 3(1) is subjective. It could undermine the code and create uncertainty for tenants and pub-owning companies alike. Amendment 10 will require ministers to “use their best endeavours” in exercising the power to make the code consistent with the regulatory principles. I believe that that is more appropriate and more legally sound.

Amendment 11 was lodged to ensure that a consistent approach is taken with regard to the application of the regulatory principles for the adjudicator.

I was going to speak to all the other amendments in the group, but I will be a bit quicker as I will speak only to those that were lodged by Mr Bibby. Amendments 1 to 3 relate to something that I set out as being important in the stage 1 debate—that sufficient time must be given to draft the code that the bill requires. I am grateful to Mr Bibby for the time that he spent discussing the matter with me. He will speak to his amendments, but I agree that we need two years rather than one to publish the code. We need time to do this properly. As I made clear last week, we need to consult stakeholders fully to ensure that we get the code right.

I also agree that to have a first review of the code after two years and a further review every three years thereafter is a sensible timescale that will allow time for any changes to bed in and avoid a constant cycle of review. I ask members to support amendments 9 to 11 as well as Mr Bibby’s amendments in the group.

I move amendment 9.

The Convener

I invite Neil Bibby to speak to amendment 1 and the other amendments in the group.

Neil Bibby

I thank those members who have agreed to withdraw or not move their amendments for doing so and for the spirit of their comments. As Michelle Ballantyne said, it was clear from last week’s meeting that the vast majority of those amendments were unlikely to gain support. It is preferable for the bill to be passed with as much consensus as possible, as I have said from the start of the process.

I am happy to continue discussions with members who have indicated that they want to do so before stage 3. I acknowledge the helpful discussion that I had yesterday with Mr Golden and his indication that a handful of amendments might return at stage 3. I am certainly happy to engage with him in order to agree, I hope, on the best way forward for Scotland’s tied pubs.

08:30  

I will speak to my amendments in the group and then to other, related amendments. The bill requires the Scottish Government to lay the regulations containing the code and appoint an adjudicator within a year of the day after the bill receives royal assent. The minister made it clear that, for various practical reasons, the Government’s view was that a longer maximum period should be provided for, both to take account of the challenges of current circumstances, such as dealing with the on-going Covid pandemic, and to ensure that the code is not rushed and is subject to full consultation. Amendment 1 will therefore increase the maximum period to two years.

The Government’s view is reasonable and I am encouraged by the minister’s comments that the Government will work to make the code and appoint an adjudicator as soon as is possible and practical. That will not necessarily take the full two years that are allowed for by the amendment. Two years is the maximum that should be available, so I do not support amendments 148 to 151, which propose longer periods of between three and six years.

I put on the record that concerns have been raised with me by the tenanted sector that a longer interim period between the bill being passed and the code and adjudicator being in place will open the door for pub-owning businesses to take steps to seek to avoid the code. I am considering whether steps could be taken, including an amendment at stage 3, to address those concerns, and I will continue my discussions on the matter with the industry and the minister.

My amendments 2 and 3 will extend the review periods in the bill. The bill requires Scottish ministers to carry out a first review of the code and the adjudicator’s performance as soon as is practical after 31 March in the year following the one in which the adjudicator is appointed, and further reviews to be carried out every two years. Those review periods were set to allow any problems with the code or the adjudicator to be identified and acted on swiftly.

However, the minister suggested that those review periods should be extended, and I agree that slightly longer periods would be beneficial. Amendment 3 will require the first period to be two years after 31 March in the year following that in which the adjudicator was appointed, and amendment 2 will require subsequent reviews every three years. I would have opposed the amendments in the group that propose longer periods or would have frustrated or altered the review process in other ways.

I turn to the minister’s amendments in the group. Amendment 9 will allow for the imposition and the amount of the levy on pubcos to be appealed to the sheriff. The bill contains the ability to appeal a financial penalty and recover the cost of an investigation, but it does not provide for an appeal against the imposition of the levy. I am not aware that the similar legislation in England and Wales provides for such an appeal and I am not aware of any examples in similar legislation such as the Groceries Code Adjudicator Act 2013. However, the minister has explained that the reason for lodging amendment 9 is that it is felt that it is necessary in order to ensure that the bill is fair, proportionate and robust.

The Convener

As no other member wishes to speak on the group, I ask the minister to wind up.

Jamie Hepburn

As Mr Bibby mentioned, the amendments that relate to the appeals process are designed to ensure that the bill is fair and proportionate, but also as robust as possible.

I could probably have made it clearer in my opening remarks that the two-year period for implementation is in effect a backstop, precisely as Mr Bibby laid out. If we can create the code and appoint an adjudicator sooner than that, we will of course do so.

I recognise the concerns of the tenants that Neil Bibby mentioned. Concerns have been raised with me about a longer timescale. Mr Bibby suggested that an amendment might be lodged at stage 3. We will, of course, give that consideration. Ultimately, however, it comes down to good, strong engagement with tenants and landlords alike. I am committed to that and to ensuring that they have strong engagement with each other on those concerns.

Amendment 9 agreed to.

Amendments 122 to 127, 129, 128, 131 and 130 not moved.

The Convener

Amendments 130A and 130B fall.

Amendments 132 to 141 not moved.

Schedule 2, as amended, agreed to.

Section 3—Duty to act consistently with regulatory principles

Amendment 142 not moved.

Amendments 10 and 11 moved—[Jamie Hepburn]—and agreed to.

Amendments 143 to 145 not moved.

Section 3, as amended, agreed to.

Section 4—Scottish Ministers’ duty to seek to make code and appoint adjudicator

Amendment 146 not moved.

Amendment 1 moved—[Neil Bibby]—and agreed to.

Amendments 148 to 158 not moved.

Section 4, as amended, agreed to.

Section 5—Review of the code and adjudicator’s performance

Amendments 159 to 163 not moved.

Amendment 2 moved—[Neil Bibby]—and agreed to.

Amendments 164 to 168 not moved.

Amendment 3 moved—[Neil Bibby]—and agreed to.

Amendments 169 to 172 not moved.

Section 5, as amended, agreed to.

Section 6—Ministerial guidance to the adjudicator

Amendment 173 not moved.

Section 6 agreed to.

Section 7—Unenforceability of contract terms

The Convener

The next group is on unenforceability of contract terms. Amendment 174, in the name of Michelle Ballantyne, is grouped with amendment 175.

Amendments 174 and 175 not moved.

Section 7 agreed to.

Section 8—Power to investigate

The Convener

The next group is on investigation by the adjudicator.

Amendments 176 to 178 not moved.

Section 8 agreed to.

Section 9—Enforcement action

Amendments 179 to 185 not moved.

Section 9 agreed to.

Section 10—Financial penalties under section 9

Amendments 186 to 189 not moved.

The Convener

Amendment 189A falls.

Amendments 191, 190 and 192 to 194 not moved.

The Convener

I invite Neil Bibby to speak to amendment 12 and other amendments in the group.

Neil Bibby

First, I will speak to my seven amendments in the group. The bill provides for two rights of appeal. Sections 9 and 10 will allow the adjudicator to impose a financial penalty on a pub-owning business following an investigation of an alleged breach that is upheld. Section 12 will allow the costs of an investigation to be recoverable from a pub-owning business if a code breach is found to have taken place.

The bill provides that appeals under sections 10 and 12 are to be made to the Sheriff Appeal Court. In evidence at stage 1, the Scottish Courts and Tribunals Service outlined its view that it would be more appropriate for such appeals to be made to the sheriff. I have since liaised with the SCTS and I am happy to be guided by it.

Amendment 12 provides that an appeal against a financial penalty is to be made to the sheriff rather than to the Sheriff Appeal Court. Amendment 13 will make the same provision for appeals against investigation costs. The amendments are purposely simple and they address the core concern that the SCTS expressed. I am satisfied that issues such as jurisdiction and procedure can be addressed satisfactorily via other legislation and the appropriate legal rules and guidance.

Amendments 225 to 227 relate to section 15, which deals with the submission of disputes to arbitration. As part of my discussions with the minister following stage 1, we discussed the arbitration process, which is open to both tenants and pub-owning businesses. It was noted that, although the bill sets out the circumstances in which a tenant may refer a dispute to arbitration—including that a referral may not be made until 21 days after the tenant notifies the pub-owning business of an alleged breach, or later than four months after the 21st day—it does not set a time limit within which a tenant must notify a pub-owning business of an alleged breach of the code.

It is therefore conceivable that, under the bill, an issue could be notified to a pub-owning business and then submitted for arbitration long after the alleged breach had occurred. That could lead to uncertainty for pub-owning businesses and difficulty in responding to potential disputes. Amendment 225 addresses that issue by providing for a six-month window for notification from the date of the failure to comply. Importantly, the clock will not start to run where a tied pub tenant was not aware of the failure.

Amendments 226 and 227 are consequential amendments that will ensure that the provisions that provide clarity on how the existing four-month periods will be calculated will also apply to the new six-month periods.

I move amendment 12.

The Convener

I invite the minister to speak on the amendments in the group.

Jamie Hepburn

In the interests of time and not detaining or delaying the committee, I simply note that Mr Bibby has articulated clearly the reasons for his amendments in the group. I support them and urge the committee to do likewise.

The Convener

I invite Mr Bibby to wind up.

Neil Bibby

I thank the minister for his support for my amendments and his constructive engagement on them.

Amendment 12 agreed to.

08:45  

The Convener

Amendment 195 has been pre-empted.

Amendment 196 not moved.

Section 10, as amended, agreed to.

After section 10

Amendment 197 not moved.

Section 11—Investigation report

Amendments 198 to 200 not moved.

Section 11 agreed to.

Section 12—Recovery of investigation costs

Amendments 202 to 210 not moved.

Amendment 13 moved—[Neil Bibby]—and agreed to.

The Convener

Amendment 211 is pre-empted by amendment 13.

Amendments 212 and 213 not moved.

Section 12, as amended, agreed to.

Section 13—Investigation policy

Amendments 4 and 214 moved—[Neil Bibby]—and agreed to.

Amendments 215 and 216 not moved.

Section 13, as amended, agreed to.

Section 14—Adjudicator’s duty to arbitrate or appoint arbitrator

Amendments 218 to 223, 217 and 224 not moved.

Section 14 agreed to.

Section 15—Submission of dispute to adjudicator

Amendments 225 to 227 moved—[Neil Bibby]—and agreed to.

Amendments 228 and 229 not moved.

Section 15, as amended, agreed to.

Section 16—Fees and expenses payable by pub-owning business

The Convener

The next group is on fees and expenses that are payable. Amendment 230, in the name of Graham Simpson, is grouped with amendments 231 to 233, 14 and 235 to 246.

Amendment 243 pre-empts amendment 244. As such, if amendment 243 is agreed to, I will not be able to call amendment 244.

Amendments 230 to 233 not moved.

The Convener

As those amendments are not moved, I therefore invite the minister to move amendment 14 and speak to other amendments in the group.

Jamie Hepburn

It appears that no other amendments in the group will be moved, so I will confine my remarks to amendment 14.

Section 16(1) of the bill imposes liability on pub-owning companies to pay the fees and expenses of the arbitrator. Amendment 14 allows the adjudicator some discretion to depart from the general rule where necessary for reasons of fairness.

I consider that the adjudicator requires flexibility to depart from or tailor that general position, where, for example, it would be unfair for the pub-owning business to be liable to pay all the fees and expenses if there has been no failure to comply with the code. Amendment 14 will allow a pub-owning business to ask the adjudicator to decide whether any of the liability of the pub-owning business to pay fees and expenses should be relieved, and if so, whether any or some of that liability should be borne by the tenant. On that basis, I ask members to support amendment 14.

I move amendment 14.

The Convener

As Richard Lyle, Rachael Hamilton, Maurice Golden and Jeremy Balfour have indicated that they do not wish to move the amendments in their name in this group, I invite Neil Bibby to comment on amendment 14.

Neil Bibby

The minister has clearly set out the reasons for amendment 14 and I am happy to support it.

The Convener

I invite the minister to wind up.

Jamie Hepburn

It would seem unreasonable and unnecessary to add anything further, convener.

Amendment 14 agreed to.

Amendment 234 not moved.

Section 16, as amended, agreed to.

Section 17—Fees and expenses payable by tied-pub tenant

Amendments 235 to 247 not moved.

Section 17 agreed to.

Section 18—Information about arbitration

Amendments 248 to 250 not moved.

Section 18 agreed to.

Section 19—Reports on avoidance

The Convener

The next group is on reports on avoidance. Amendment 251 is grouped with amendments 252 to 258.

Amendments 251 to 259 not moved.

Section 19 agreed to.

Section 20—Tied pub

The Convener

We now come to the grouping of amendments on interpretation. Amendment 260 is grouped with amendments 260A, 261 to 272, 272A, 272B, 272C, 272D and 273 to 277. Amendment 263 pre-empts amendment 264. Amendments 272A, 272B, 272C and 272D are direct alternatives and amendment 273 pre-empts amendment 274. Maurice Golden, Richard Lyle, Rachael Hamilton, Jeremy Balfour, Michelle Ballantyne, Graham Simpson and Alexander Stewart have indicated that they do not wish to move the amendments in their names.

Amendment 260 not moved.

The Convener

Amendment 260A falls.

Amendments 261 to 271 not moved.

Section 20 agreed to.

Section 21—Pub-owning business and tied-pub tenant

Amendment 272 not moved.

The Convener

Amendments 272A, 272B, 272C and 272D fall.

Amendments 273 and 274 not moved.

Section 21 agreed to.

Section 22—Other expressions

Amendments 275 to 277 not moved.

Section 22 agreed to.

Section 23—Ancillary provision

The Convener

The next group of amendments is on regulation-making powers. Amendment 278, in the name of Michelle Ballantyne, is grouped with amendments 279 to 281.

Amendment 278 not moved.

Section 23 agreed to.

Section 24—Regulation-making powers

Amendments 279 to 281 not moved.

Section 24 agreed to.

Section 25—Commencement

The Convener

The next group of amendments is on commencement. Amendment 282, in the name of Richard Lyle, is grouped with amendment 283.

Amendments 282 and 283 not moved.

Section 25 agreed to.

After section 25

The Convener

The next group of amendments is on the expiry of the act. Amendment 284, in the name of Maurice Golden, is grouped with amendments 284A, 284B and 285. Amendments 284A and 284B are alternatives.

Amendment 284 not moved.

The Convener

Amendments 284A and 284B fall.

Amendment 285 not moved.

Section 26 agreed to.

Long title agreed to.

The Convener

That ends stage 2 consideration of the bill. The clerks tell me that we have not missed any amendments, which is always positive for a committee. I thank the minister and Neil Bibby for attending the committee to complete stage 2 proceedings.

08:57 Meeting continued in private until 09:07.  

The Presiding Officer (Ken Macintosh)

We move to stage 3 proceedings on the Tied Pubs (Scotland) Bill. In dealing with the amendments, members should have the bill as amended at stage 2, the marshalled list of amendments and the groupings of amendments. As usual, I will sound the division bell and suspend proceedings for five minutes for the first vote. Each vote will last for one minute.

Section 14—Adjudicator’s duty to arbitrate or appoint arbitrator

The Presiding Officer

Group 1 is on the application of the Arbitration (Scotland) Act 2010 in relation to section 14. Amendment 2, in the name of Andy Wightman, is the only amendment in the group. I just heard Andy Wightman giving his valedictory remarks, but I call on him now to speak to and move amendment 2.

Andy Wightman (Lothian) (Ind)

Amendment 2 aims to ensure the operation of an effective statutory arbitration scheme. I am concerned that the scheme as proposed in the bill is not governed by the Arbitration (Scotland) Act 2010. As the bill stands, the scheme allows for the arbitration rules of any institution to be adopted and for arbitrations to be seated in England or elsewhere. There is also no appeals mechanism in respect of an arbitration, which seems unfair.

I take the view that any statutory arbitration scheme in Scotland should follow the Scottish arbitration system and rules, be seated in Scotland and have the proportionate appeal processes within that system. Parties should not be deprived of the benefit of the procedures that are set out in the 2010 act.

The 2010 act was designed to augment and enhance statutory arbitration, and section 16 has the effect that the act’s substantive provisions and the Scottish arbitration rules, which are set out in schedule 1, govern any arbitration that is carried out under a legislative provision. The rules set out a scheme that allows an arbitration to proceed from the appointment of an arbitrator to the final and binding determination of the dispute, including appeals to the court. All that is needed to attract the 2010 act is that legislation says that a dispute is to be resolved by arbitration, or words to that effect.

Almost 11 years on from royal assent, section 16 of the 2010 act is still not in force. That is a matter of regret, and I urge the Scottish Government to bring it into force as soon as possible.

Despite the delay in bringing that important statutory provision into force, drafting tools have been used by the Scottish Government and the United Kingdom Government to ensure that that approach to statutory arbitration can apply to new statutory schemes. Therefore, there is precedent elsewhere for the approach in amendment 2—for example, in the Food Safety Act 1990 as amended by the Food (Scotland) Act 2015. That illustrates that the Scottish Government has considered the approach important in new arbitration schemes in the context of previous bills.

I understand that the Scottish Government shares my concern about the approach to arbitration in the bill but has indicated that the issue can be fixed by subordinate legislation. I do not consider that to be an appropriate approach to the development of primary legislation, and my view is shared by Brandon Malone, the chair of the Scottish Arbitration Centre, and Lord Glennie, a recently retired judge of the Court of Session who is vice-chairman of the board of the Scottish Arbitration Centre.

Amendment 2 would ensure that the arbitration scheme in the bill was, rightly, governed by the Scottish arbitration system, including that system’s fair appeals mechanism.

I move amendment 2.

The Minister for Business, Fair Work and Skills (Jamie Hepburn)

Let me briefly say how far we have come with the bill. At stage 2, more than 300 amendments were lodged, whereas at stage 3 we have 13 amendments to consider—I am sure that I am not alone in welcoming that.

The issue that amendment 2 seeks to address did not come up at stage 2. As Andy Wightman said—he is well informed—the Government does not support amendment 2. As we heard, it would apply the arbitration scheme as set out in the provisions of the Arbitration (Scotland) Act 2010 as if those provisions were in force. In the Government’s view, and in my view, having discussed the matter with Neil Bibby, the member in charge of the bill, amendment 2 is not necessary and would create rather than resolve issues when it came to conducting arbitrations under the bill.

One difficulty with amendment 2 is that it would apply the arbitration rules in the 2010 act without resolving potential clashes between provisions in the bill, such as those at sections 16 and 17 on fees and expenses, and provisions in the rules on that. Some of that may be resolved by section 16(3) of the 2010 act, which provides generally that the bill’s provisions trump the rules in some cases, but that sort of clash is what the power to modify legislation in section 17 of the 2010 act was designed to sort out.

The delegated powers in the bill and in the 2010 act will allow ministers to consider how the Scottish arbitration rules regime should most appropriately be applied in the context of the bill. That is in tandem with the process of drafting and consulting on the Scottish pubs code, which is where the detailed regulatory provisions will lie.

Appropriate arbitration is important for business and, as the Minister for Business, Fair Work and Skills, I recognise arbitration as a cost-effective, fast and flexible way of resolving disputes outside the courts. I am keen, therefore, that we get this right. I reassure members and any stakeholders who are watching, including the Scottish Arbitration Centre, that any issues can be worked through properly through consultation and engagement. That engagement will, of course, include the Scottish Arbitration Centre, whose knowledge and input is valued. The time for such engagement, though, is when the code is being developed and not when the overarching legislation is being discussed. I therefore call on members not to support amendment 2.

Neil Bibby (West Scotland) (Lab)

I refer members to my entry in the register of members’ interests and the support that I have received in relation to the Tied Pubs (Scotland) Bill. At the outset, I thank Andy Wightman for his interest in the bill and his contribution as a member of the Economy, Energy and Fair Work Committee. I congratulate him on progressing his own bill to stage 3 today.

Section 14(2) of the bill confirms that arbitration proceedings under the bill must be conducted in line with the rules of the Chartered Institute of Arbitrators or any other dispute resolution body nominated by the arbitrator. The purpose is to ensure that arbitrations are conducted in accordance with recognised sectoral rules and guidelines. However, amendment 2 would leave out that subsection entirely and would instead provide that, until the Arbitration (Scotland) Act 2010 is in force for any arbitration being carried out under section 14(1), the act is to be treated as applying as though it were in force for that arbitration.

I have concerns about the construction of the amendment. For example, it would leave out all of section 14(2) instead of seeking to add a further provision to those already included. I also think that there is a risk in seeking to put what the amendment proposes into the bill when ministers have up to two years in which to make the code and appoint an adjudicator. Could we be sure that what was agreed now would be fit for purpose by the time the code and adjudicator were in place? The 2010 act’s statutory arbitration provisions might be in force by the time the bill became operational law, in a couple of years, leaving the approach in amendment 2 unnecessary.

Like the minister, I think that it would be better not to agree to the amendment today. If, when the time comes, the Scottish Government feels that the bill needs to be linked to the 2010 act more effectively, it can use the power that is already in the bill to make ancillary regulations. I therefore ask Andy Wightman not to press amendment 2.

Andy Wightman

I thank the minister and the member in charge of the bill for their comments, and I note the points that they have raised. I acknowledge that perhaps the issue could have been raised earlier. I also welcome the minister’s acknowledgement of the Scottish Arbitration Centre’s expertise—indeed, it assisted me with the amendment.

In the light of the fact that, as I understand it, the Scottish National Party and Labour groups oppose amendment 2, I shall allow members to remain in their offices for a little longer by not pressing the amendment.

Amendment 2, by agreement, withdrawn.

After section 19

The Presiding Officer

Group 2 is on investigation into changes to pub leasing arrangements before the act is fully in force. Amendment 3, in the name of Neil Bibby, is grouped with amendment 10.

Neil Bibby

I have lodged these amendments to allow the adjudicator to tackle an issue that has been of concern to the industry and to me for some time, which has taken on new significance following amendments made to the bill at stage 2. The bill was amended at stage 2 so that the Government now has a maximum of two years—extended from the one year originally in the bill—in which to make the code and appoint an adjudicator. I have said before that I understand the very fair and legitimate reasons why the Government would wish that to be the case, not least because of the impact of Brexit and the Covid pandemic.

I thank the minister for his constructive engagement with me on this issue and on the bill more generally. I am also grateful for the minister’s confirmation that the two-year timeframe is not a target and that the code and adjudicator may well be in place sooner than two years after the bill is passed.

However, there are already concerns among tenants and representative organisations that some pub-owning businesses may use the period between the bill passing and the code and adjudicator coming into effect to take steps to avoid the code by creating agreements by other means that could take them out of the scope of the code and adjudicator. Those could include short-term agreements, self-employed management agreements and other forms of bogus self-employment. If that was to happen, it could have a significant impact on tenants’ rights, pubs and consumers.

I therefore lodged amendment 3 to require the adjudicator to start an investigation in the first year of their appointment into any changes that were made to contractual terms in the period between the bill receiving royal assent and section 7 of the bill coming into force, which relates to the unenforceable contract terms, if those changes resulted in agreements not being covered by the code. The amendment requires the report, which would include an explanation of the adjudicator’s findings, to be published and laid before the Parliament, which would allow for committees to scrutinise the report and ministers to give it full consideration.

Amendment 10 is a consequential amendment that allows the adjudicator to require a person on pain of prosecution to provide information in relation to that avoidance investigation by adding the investigation to the list of reasons for such information gathering that is set out in paragraph 4 of schedule 2.

I respect the right of businesses to manage and structure their business as they see fit, if that is done fairly and with good intent. However, most of us would agree that deliberately seeking to undermine the code before it is enforced is not desirable. For various reasons, it would not be possible for the bill to directly provide for such avoidance attempts, but I ask members to consider the amendment in my name and give the adjudicator the power to investigate such behaviour.

I move amendment 3.

Jamie Hepburn

I recognise and understand Mr Bibby’s worries about possible avoidance behaviour by pub-owning companies in the period before the code comes into effect. That issue has also been raised with me by the Scottish Licensed Trade Association. I reiterate my observation that it is inherently difficult to avoid a code that is not yet written, but I understand that the concerns are primarily about the timescale for the implementation of the code. I emphasise Neil Bibby’s point that the two years is very much a backstop; it is not, as he rightly said, a target and we are committed to putting the code in place as soon as possible with the appropriate consultation.

It is an area that is worthy of debate and discussion, so in that sense I am glad that Neil Bibby has lodged amendments 3 and 10 to give us the opportunity to debate them. As he laid out, the amendments place a duty on the adjudicator when first in office to begin an investigation into activities of pub companies in the period before the code comes into force. In the first instance, I am somewhat concerned that that might mean that the adjudicator would be diverted from their fundamental and important task of implementing the code as it applies to tied pubs in Scotland.

Moreover, I am concerned that the process of investigation that is required by amendment 3 could undermine the establishment of productive relationships between the adjudicator and the pub sector at their inception. We also need to establish a relationship of trust with all parties and, in that regard, I worry about the signal that that would send. Mr Bibby will recall that I have made that point directly to him.

I acknowledge the intentions behind amendments 3 and 10 and I thank Mr Bibby for talking them through with me, but I do not think that they are required, for the reasons that I have outlined. The amendment that I lodged at stage 2 that provided for the code to specify circumstances where a market-rent-only lease need not be offered and the proposals that we will shortly debate in group 4 are a better way to reassure pub-owning companies and encourage them to retain tied pubs. That is the fundamental concern that this set of amendments drives at.

The Government is committed to ensuring that the bill and the market-rent-only provisions are fair for landlords and tenants. I have been clear that the code will be subject to the fullest consultation, but it will also be informed by the behaviour of all parties in the intervening period before it comes into effect. I urge all stakeholders to recognise that and to continue to work constructively with one another and with the Scottish Government. On that basis, I ask Mr Bibby to consider withdrawing amendment 3.

18:00  

Neil Bibby

After lodging my proposal for the bill, I received numerous reports that pub companies would seek to avoid a statutory code by adjusting their operating model. Whenever Parliament chooses to regulate an industry, that industry will—inevitably—react. However, the only reason for pub companies to seek to avoid fair and proportionate regulation would be if they knew that at least some of their business practices were incompatible with the principles that underpinned such regulation.

Pub companies in England and Wales made similar threats, many of which turned out to be exaggerated. The tied model continues to be a feature of the sector there, albeit that tenants are now empowered to seek a better deal.

I am concerned about the possibility of so-called Uberisation in tied pubs. That might attract other regulators’ attention, but the Parliament and any adjudicator that we create should be aware of the impact of the gig economy’s extension into the sector, particularly between royal assent and commencement.

The coming months will shine a light on pub companies’ conduct. Will they be willing to engage with fair and proportionate regulation or will they disadvantage some of their tenants in a deliberate attempt to avoid it?

I have listened to the arguments and particularly to the points that the minister made. I thank him for his reassurances, particularly about timescales. I accept that we must proceed as far as possible on the basis of good faith, so I will not press amendment 3. I will watch developments closely.

Amendment 3, by agreement, withdrawn.

Schedule 1—The Scottish Pubs Code

The Presiding Officer

Group 3 is on the Scottish pubs code and a requirement to offer a guest beer agreement provided that the beer is produced by a small brewery. Amendment 4, in the name of Graham Simpson, is grouped with amendments 5 and 6.

Graham Simpson (Central Scotland) (Con)

These amendments would ensure that the guest beer provision could be used only by a small brewer and not by a larger multinational brewer, which would already have routes to market. The bill allows any brewer, regardless of its size or location, to take advantage of the provision. Amendment 4 is aimed at preventing a race to the bottom on price, which would result only in smaller domestic brewers being priced out.

At stage 2, Neil Bibby helpfully mentioned Strathaven Ales. Strathaven is near where I live, in East Kilbride, and I can attest to the fine produce of Strathaven Ales. I am applying the Strathaven Ales test to ensure that smaller breweries get a fair slice of the cake.

Without my amendments, far from encouraging more domestically produced beer into our pubs, we would have fewer opportunities for smaller brewers to access pubs, because pub-owning companies would need to compete in their own premises with larger brewers. Far from encouraging the provision of more Scottish beers in Scottish pubs, the bill without amendment would result in fewer domestic brands from smaller producers appearing in tied pubs. It would fail the Strathaven Ales test.

The bill could be seen to prevent the setting of further parameters on guest beers in the code because of the words:

“regardless of who produces it”.

Amendment 4 addresses that by stipulating that the beer would be

“provided … by a small brewery”.

Amendment 6 would grant the power to define a small brewery in the code. The amendments are all aimed at ensuring that the bill would do what I believe Neil Bibby intended when he introduced it.

I move amendment 4.

Jamie Hepburn

The guest beer provisions were the subject of considerable discussion at stage 2, when a number of similar amendments were lodged, voted on and defeated. I made it clear then and reiterate now that the Scottish Government is keen to encourage the supply of local craft beers in pubs, for the benefit of producers and consumers. In that sense, I am not unsympathetic to Mr Simpson’s aims and I recognise his good intentions with the amendments. I say to him that I have not yet had the good fortune to sample any ale from Strathaven Ales, but I look forward to doing so in due course.

As I said at stage 2, I am considering how the guest beer arrangements under the code might be shaped through the existing provisions in the bill.

My view was and remains that the details on the matter would be best laid out in the code, rather than in the bill, which could cause difficulties in implementation. As I have already said today, the detail of the code will be subject to wide consultation and, in that context, consideration will be given to how we support small breweries. That is the correct approach, in contrast to being prescriptive in primary legislation. On that basis, I urge members to reject the amendments.

Neil Bibby

The amendments in the group seek to restrict the guest beer right to beers from small breweries only, with the definition of “a small brewery” to be set out in the code. They would remove the freedom and flexibility as to the producer and provider of the guest beer as currently provided for in the bill.

As I made clear at stage 2 when various amendments were debated that sought to restrict the terms of the guest beer right, I have sympathy with the principle of looking to support and encourage small brewers and businesses in getting more Scottish pubs to stock local craft beers. However, I fundamentally support tenants being able to choose which guest beer to sell depending on their circumstances and customer preferences. That was the underlying principle on which I based the guest beer right as set out in the bill and that is why I oppose amendments that seek to limit which beers can be chosen as a guest beer.

The bill requires the code to specify the circumstances in which the offer must be made. That is appropriate: the consultation process and the code, rather than the bill, are the best places to consider such matters.

As it stands, the bill, including the market-rent-only provision, will benefit Scotland’s brewers and will protect Scotland’s small brewers. It will enhance opportunities for tied publicans to stock Scotland-brewed products, across the tied estate. The bill is a game changer in that regard. I urge members to reject amendments 4 to 6.

Graham Simpson

I have nothing further to add. On the basis of what has been said, I will not press amendment 4.

Amendment 4, by agreement, withdrawn.

Amendments 5 and 6 not moved.

The Presiding Officer

Group 4 is on the Scottish pubs code and the requirement to offer a market-rent-only lease. Amendment 12, in the name of Graham Simpson, is grouped with amendments 13, 8 and 9. If amendment 8 is agreed to, it will pre-empt amendment 9.

Graham Simpson

My amendments 12, 13 and 8 aim to provide clarity for pub-owning businesses and tied pub tenants, who have all raised concerns about the impact on investment in their businesses due to the current wording of the bill. My amendments would ensure that some parameters are set in the detail of the pubs code that will give a limited degree of confidence that investments in sites can continue at this crucial point in the sector’s recovery. As the bill is currently drafted, there can be no protections contained in the code and, crucially, no foresight, beyond the comments of the current minister.

That will create significant problems for pub companies in identifying funding and in conversations with lenders. Both landlords and tenants have said that they have real concerns about the impact on future investment, even if amendments 12, 13 and 8 are agreed to. A degree of uncertainty and investment risk in tied pubs is now inevitable, which is a real shame. At the very least, the amendments will ensure that there must be—not may be—some provisions to enable a return in investment made, without the risk of an MRO being triggered during that time. That is the only difference to the Government’s amendment 9, although the difference is critical.

Since the introduction of the code in England and Wales in 2016, Scottish pubs’ share of Great Britain-wide spend has doubled. If the amendments are not agreed to, that trend could be reversed, putting the Scottish tied-pubs sector at a competitive disadvantage in comparison to the rest of the UK.

As members well know, the whole hospitality sector is currently on its knees and investment will be crucial to aiding its recovery. My amendments seek to give the sector a limited degree of confidence at this time.

I move amendment 12.

Jamie Hepburn

I welcome the amendments in this group, which concern a part of the bill that is crucial to landlords and tenants. It is clear that that remains the case from the discussions that I have had with stakeholders since stage 2, so it is right that we are able to debate the issue this evening.

It is important that the market-rent-only provisions are fair for both landlords and tenants. That is why I lodged amendments at stage 2 to allow the Scottish ministers to set out in the code the circumstances in which a market-rent-only lease may not be offered. The development of the code will, of course, be subject to consultation but, as I have said, my strong inclination is that investment should be one of those circumstances. I want to reassure pub-owning companies that Scotland is open for business and welcomes investment in Scottish tied pubs. I want pub-owning companies to have confidence and to continue to invest in this important sector.

My amendment 9 will provide assurance to the sector that the Scottish Government is committed to protecting the position of pub companies with regard to investment. The amendment strengthens my stage 2 amendments on MRO leases and reflects the conversations that I have had with stakeholders—landlords, tenants and, of course, Mr Bibby—about this element of the bill. I believe that amendment 9 has strong support and will improve the balance of the bill.

My stage 2 amendment deliberately included the word “may”, before specifying the circumstances in which an MRO lease may not be offered. It provides flexibility in relation to when an MRO lease has to be offered. The default position remains that a pub-owning business will be required to offer an MRO lease.

Amendment 13 would make it a requirement for the code to set out the circumstances in which an MRO lease need not be offered. In my view, that would go too far and would remove the flexibility that the Economy, Energy and Fair Work Committee endorsed by supporting my stage 2 amendment. Although I welcome the fact that Mr Simpson has acknowledged and incorporated the wording of amendment 9 in relation to investment, I do not think that amendment 13 is necessary. Amendments 8 and 12 are consequential to amendment 13.

I do not support Mr Simpson’s amendments. I ask members to support my amendment 9.

Neil Bibby

Under the bill as introduced, the code required pub-owning businesses to offer a market-rent-only lease to a tenant who requested such a lease—there were no exceptions. As the minister has said, as a result of the amendments that he moved at stage 2 it is now possible for the code to specify the circumstances in which a market-rent-only offer need not be made by a pub-owning business.

Amendment 13 would go further by making it a requirement, rather than a possibility, that the code sets out circumstances in which an MRO offer need not be made. It also includes the example that an agreed investment may be a reason for an MRO offer not to be made. The investment example is also the subject of the minister’s amendment 9, which I will come to in a moment.

I remain satisfied that the minister’s amendments at stage 2 strike the right balance, so I will not support Graham Simpson’s amendments in the group. I therefore ask members not to support amendments 13 and 8. Amendment 12 is a consequential amendment, which will not be required if amendment 13 is not agreed to, so I will not support amendment 12 either.

As I have explained, the minister’s stage 2 amendment means that paragraph 5(3)(aa) of schedule 1 to the bill allows, but does not oblige, the code to specify

“circumstances in which a pub-owning business need not offer to enter into a market rent only lease with a ... tenant”.

Amendment 9 adds to that the example of circumstances

“where an agreement to invest in a tied pub has been entered into”.

The amendment does not change the scope or legal effect of the bill, and it might be helpful in providing an indication of the sort of circumstances that may be consulted on and considered for inclusion in the code. The amendment might also help to improve relations between tenants and pub companies. Such a measure could be beneficial for all involved—tenants and pub-owning businesses—so I will support amendment 9 for that reason.

The Presiding Officer

Mr Simpson, do you wish to press or to withdraw amendment 12?

Graham Simpson

I wish to withdraw it.

Amendment 12, by agreement, withdrawn.

Amendments 13 and 8 not moved.

Amendment 9 moved—[Jamie Hepburn]—and agreed to.

Schedule 2—Scottish Pubs Code Adjudicator

The Presiding Officer

Group 5 is on the Scottish pubs code adjudicator and the power to require information. Amendment 1, in the name of Neil Bibby, is the only amendment in the group.

Neil Bibby

Amendment 1 is a minor and technical amendment. Paragraph 4 of schedule 2 deals with the adjudicator’s powers to require information, and paragraph 4(2) lists the purposes for which the adjudicator may require information. Unfortunately, there is an error in paragraph 4(2)(b), which currently refers to a subsection of the bill that does not exist and also is not worded accurately. Amendment 1 corrects that error without changing the intention behind the provision. The amendment will ensure that the adjudicator can require information for the purposes of monitoring whether the requirement to comply with a direction given under section 9(2)(a) has been fulfilled, which has always been the policy intention.

I move amendment 1.

18:15  

The Presiding Officer

Minister, do you wish to add anything?

Jamie Hepburn

I will briefly commend Mr Bibby’s eagle-eyed nature and urge members to support the amendment.

Amendment 1 agreed to.

Amendment 10 not moved.

The Presiding Officer

Group 6 is on the Scottish pubs code adjudicator and assistance from the Scottish ministers. Amendment 11, in the name of Andy Wightman, is the only amendment in the group.

Andy Wightman

Amendment 11 relates to the staffing of the new adjudicator. It would allow for the Scottish ministers to “ensure the provision of” staff in respect of the adjudicator, allowing greater flexibility in the approach to staffing and supporting the adjudicator. I am concerned that the provisions on staffing are restricted to ministers directly providing staff or the adjudicator seconding staff from other bodies. My amendment would ensure that ministers can work with the adjudicator on the appropriate mechanism for staffing, which might include a contract for service with another body.

The wording in the amendment is used in the Schools Consultation (Scotland) Act 2010, as amended by the Children and Young People (Scotland) Act 2014. That allows ministers to work with the convener of the school closure review panels to ensure that there is a contract for service in place to administer that body and support the panels. I consider that amendment 11 will provide ministers and the adjudicator with wider scope for staffing and supporting the work of the adjudicator.

I move amendment 11.

Jamie Hepburn

The amendment concerns the powers for the Scottish ministers to provide assistance to the adjudicator, including for staff, services or facilities, with or without charge. I do not think that the amendment is necessary, particularly as the levels of assistance that will be required are expected to be low. For example, we do not expect the adjudicator to need many staff, and any assistance from the Scottish ministers in that regard is likely to be provided directly by the secondment of Scottish Government staff, which is already explicitly provided for in the bill. Moreover, the bill already contains sufficient powers for the adjudicator to enter into contracts with other parties or for the Scottish ministers to enter into contracts on the adjudicator’s behalf.

Simply put, the concerns that Mr Wightman has raised are already accounted for in the bill. Consequently, I ask members not to support amendment 11.

Neil Bibby

Amendment 11 seems to be aimed at ensuring that the Scottish ministers can help to contract services with other bodies to provide support to the adjudicator. The amendment is no doubt well intentioned, but it seems to be misconceived and would serve no practical purpose. There is no need for the words “may provide” to be supplemented by

“or ensure the provision of”.

If the adjudicator wants to contract with others for staff, for example, it already has powers to do that under paragraph 24 of schedule 2. Paragraph 11 of schedule 2 is a provision to empower ministers, not the adjudicator. Should the adjudicator want the sort of support with contracting that the amendment seems aimed at, ministers can already provide that, given the flexibility for them under paragraph 11 to provide “other assistance”. I therefore do not support amendment 11 and I ask Mr Wightman to consider seeking to withdraw it.

Andy Wightman

I note the comments from the minister and Mr Bibby and I will not press the amendment.

Amendment 11, by agreement, withdrawn.

The Presiding Officer

That ends consideration of amendments. As members may know, at this stage in proceedings, I am required under standing orders to decide whether in my view any provision of the bill relates to a protected subject matter; that is, whether it modifies the electoral system or franchise for Scottish parliamentary elections. The bill does no such thing, and therefore it does not require a supermajority to be passed at stage 3.

The Presiding Officer (Ken Macintosh)

The next item of business is a debate on motion S5M-24271, in the name of Neil Bibby, on the Tied Pubs (Scotland) Bill at stage 3.

18:19  

Neil Bibby (West Scotland) (Lab)

It gives me great pleasure to open today’s stage 3 debate on the Tied Pubs (Scotland) Bill. I lodged the draft proposal for this member’s bill more than four years ago and, if the bill is passed today, it will be the result of an entire session’s worth of work. I thank all those who have played such a vital part in getting the bill to this stage.

I thank the Scottish Licensed Trade Association, which has consistently championed the rights of leased and tenanted publicans and small businesses in the licensed trade, and the Campaign for Real Ale, which represents many pub lovers and has campaigned for more choice for consumers. I thank our trade unions, particularly the GMB and the Scottish Trades Union Congress, which represent workers in the brewing sector. I thank Greg Mulholland MP, who was instrumental in ensuring cross-party support for tied pub reform in England and Wales. I also thank campaigners such as Chris Wright and the wider and powerfully persuasive coalition formed by the Scottish Co-operative Party, Tennent Caledonian, the Federation of Small Businesses Scotland, the Society of Independent Brewers and many more, which has supported tied pub reform.

I also recognise the work of Nick Hawthorne, Neil Ross and Kate Blackman and all at the non-government bills unit, and that of other parliamentary staff and Scottish Government officials. I thank my own staff, Joe Fagan and Emma Hyndman, for their invaluable support and their work in the past few years.

In particular, I thank the minister for his interest and engagement and for his role in ensuring that the bill has proceeded with Government support. Jamie Hepburn has shown leadership that will be recognised by the licensed trade and pub tenants. I recognise that his work today and over the past few months has made the progress of the bill possible.

Tied pubs have been around for a long time. The basic idea is sound: a pub is owned by a business and leased to a tenant to manage. That tenant will pay below the going market rent for the pub but, in turn, must buy alcohol from the business at a higher rate than would be the case on the open market. The business is expected to provide other support and assistance to the tenant, although, as the committee heard, that support is not always specified in the tied agreement.

Over the years, that basic model has eroded. Rents have increased, as have the mark-ups on alcohol, and many tied tenants have found themselves locked into unfair contracts. That has resulted in far too many tenants barely earning a living, despite often working long hours in a demanding job. According to a survey last month by the SLTA, 60 per cent of tenants earn less than the minimum wage when the hours that they work are taken into account. It has become clear that the sector cannot regulate itself fairly and that action is needed.

In 2015, the United Kingdom Parliament passed the Small Business, Enterprise and Employment Act, which created a tied pubs code and adjudicator for England and Wales. Thousands of tied tenants there now benefit as a result of that legislation. It is true that not everything in the 2015 act has worked as well as was hoped, due in no small part to some of the pubco-backed amendments that tied down the code and the adjudicator.

The bill does not replicate the UK legislation; it improves on it, simplifying it where possible. It may have taken six years, but I am delighted that, should the bill be passed, tied tenants in Scotland can look forward to having a Scottish code and statute, and a Scottish adjudicator to govern and enforce the code. The code and the adjudicator will give companies that own tied pubs in Scotland and their tenants a clear, fair and proportionate framework to operate in and abide by—a framework that will allow the sector to flourish.

I thank the minister and his team for the collaborative approach that they have taken since stage 1 in working with me on the bill. That approach led to the lodging of 18 amendments at stage 2—I lodged some and the minister lodged others—that we both supported. The amendments introduced a number of provisions. One allows a longer period for the Government to create the code and appoint an adjudicator. Another allows longer review periods, so that the impact and effectiveness of the code can be properly assessed. Another ensures that investigations into alleged breaches of the code take account of tenants’ behaviour. Another includes time limits. Perhaps the most significant amendment allows the code to set out the circumstances in which a market-rent-only offer need not be made by a pub-owning business.

The MRO option remains a central part of the bill. I watched with frustration as the MRO option in England and Wales became bogged down in a morass of complicated rules and barriers. The MRO provision in the bill is simpler and clearer. However, to encourage positive relationships, it is right that the code can set out situations in which the MRO option is not open, such as when a pub-owning business has made a significant investment in a tied property.

The aims of the bill remain those that are set out in the three principles found in section 3: fair and lawful dealing; tenants no worse off because of the tie; and tied deals that provide a fair share of risk and reward. Passing the bill will realise those aims.

Although I hope that today will be the end of the bill’s long journey, it is only the start of a new chapter for the sector. In the next session of Parliament, the Scottish Government will consult fully, meaningfully and thoroughly on a draft code. It will be vital for the future of the sector to get that code right.

The regulations that will contain the final code must gain parliamentary approval, so there will be an opportunity for detailed scrutiny by the committee and the wider Parliament. The selection of the first adjudicator, which is an appointment that the Parliament must approve, will also take place next session.

It is my hope that, after today, pub-owning businesses and tenants, and their representative bodies, will put aside any differences and work together, collaboratively and constructively, to ensure the success of the code, which will benefit many people in Scotland.

I move,

That the Parliament agrees that the Tied Pubs (Scotland) Bill be passed.

18:25  

The Minister for Business, Fair Work and Skills (Jamie Hepburn)

I am very pleased to be speaking on behalf of the Government in this final debate on the Tied Pubs (Scotland) Bill. Of course, as I have been at pains to emphasise throughout the process, it is not a Government bill; nonetheless, I thank my officials for their efforts in supporting me through the process.

I commend Neil Bibby for reaching this stage today. It is not easy to progress any bill in any circumstances, but that is particularly the case without the full support and assistance of the civil service. I congratulate him on getting his bill to this stage.

As we have heard, the bill will promote fair and equitable treatment in commercial agreements. It will also rebalance the relationship between pub-owning companies and tied pub tenants. The bill is an important step forward for the tied pub sector in Scotland and, as we have heard, it is the culmination of many years of work by Mr Bibby, who first proposed the bill towards the start of the parliamentary session. As we come to the end of the session, it seems fitting that we are considering whether to pass his bill.

I would like to thank Mr Bibby and his team for working closely with me and my officials, and for his on-going dialogue and openness. I would also like to thank the Economy, Energy and Fair Work Committee for its comprehensive consideration of the bill at stages 1 and 2.

I arrived at a different conclusion from the committee at stage 1, after giving a great deal of thought to the merits of the bill. Nonetheless, I appreciated the committee’s clear and thorough report and examination of the evidence and views at both stages1 and 2, which helped to influence the Government’s approach to the bill.

Whether we would support the bill’s progress was a balanced decision, but engagement—fairly late in the day—from a number of tied pub tenants led me to conclude that, if we were to follow the committee’s recommendations and undertake more investigative work, we would have concluded, in all probability, that we would need to introduce similar legislation.

Having mentioned that engagement, I would like to thank the sector, their representatives and the tenants who took the time to meet me during the bill process. Their approach has helped to influence our approach, too. In so far as I will be involved, I am keen for that spirit of co-operation between interested parties to continue into the bill’s implementation, should the Parliament pass it at decision time.

I have had an open-door policy because I have been keen to understand the issues across the industry as I considered Mr Bibby’s bill. I have listened carefully to all views and concerns. I hope that all parties see that approach reflected today in the amendments that have been agreed to. I have sought to ensure that the bill is fair and balanced for both landlords and tenants, for example through the amendments on MRO leases. Those not only preserve the tenant’s right to request an MRO lease but provide safeguards for pub companies, particularly in relation to investment. That balance for landlords and tenants is crucial for the bill and for the sector.

I understand that this is an extremely challenging time for everyone involved in the pub sector, which has been particularly hard hit by the pandemic. I have heard about the support provided to many tenants by their pub companies during this time. That clearly shows that the tied pubs model has tremendous value and an important place in the pub landscape. It also provides a low-cost entry point for people who are looking to take that first step into business. However, although I have heard both those points from tied pub tenants, the picture across the sector is not uniform. I have also heard from some tenants that they have not had that level of support and believe that change is required.

I want to preserve the benefits of the tied pubs system, which I recognise is an important model of tenure. I also want to ensure that there is a better balance in landlord-tenant relationships, and a proportionate approach.

If the bill is passed, the code will require to be implemented by whoever forms the Government after the election. The current Government is certainly committed to full and meaningful engagement if development of the code falls to us. The code will govern the relationship between pub-owning businesses and their tied tenants, and it will need to be created within two years. If that work falls to us, we will look to do it as soon as possible.

I would like to continue to work closely with stakeholders to ensure that the code works well for the whole sector. I want to see the sector recover and flourish; I hope that we all approach the bill in that spirit.

Once again, I congratulate Mr Bibby on reaching this stage.

The Deputy Presiding Officer (Lewis Macdonald)

I remind members at the back of the chamber that their voices carry.

18:30  

Graham Simpson (Central Scotland) (Con)

We are near the end of the parliamentary session—we have only a day to go—and all of us have been clearing out our offices to get them ready for the next occupant. Those of us who are standing again and are lucky enough to return may end up back in the same room, or we may not.

I am not a great hoarder, but, while I was clearing my office, I came across an unopened bottle of beer with a label that urged me to support the tied pubs bill. Goodness knows how it stayed unopened and forgotten about, but it did. It was dated February 2018. That shows how long it can take for a member to get a bill through the legislative process, if they are lucky.

I had my own abortive attempt at a member’s bill on the protection of buyers of new homes, and I found that immensely frustrating. I had come from the fast-paced newspaper industry, and I realised that I needed to show a little more patience.

I commend anyone who gets to the stage that Neil Bibby has arrived at, and I say well done to him. He has been along a rocky road, but he got there in the end. He put in a fair shift prior to stage 1 in trying to drum up support. It then all went quiet for a bit. Some of us thought that he had dropped the whole thing, but he got to stage 1. When the committee, which I was not on at the time, reported, it did not look good for Mr Bibby and his bill. The committee was divided, but the majority did not support its general principles.

Members of my party and the Scottish National Party members thought that, on balance, the bill should go no further. However, there is a lesson for all those who get to that point: do not give up, because funny things can happen. That happened with Monica Lennon’s Period Products (Free Provision) (Scotland) Bill. I see that Monica Lennon is here. We and the SNP were against that bill, and it looked sunk. My party’s stance then suddenly changed and the SNP’s stance did, too. A hurdle was crossed, and the bill went on to its ultimate conclusion.

The same has happened with the Tied Pubs (Scotland) Bill. We have changed our stance, and the SNP has fallen into line, too. Funny things happen. Mr Bibby has made it, and I say well done to him.

I have never had strong feelings about the Tied Pubs (Scotland) Bill one way or the other. It could be argued both ways—the committee’s stage 1 report reflected that. We are prepared to support the bill, but I have to admit to having some reservations about it. I wonder what will happen to the hospitality trade, which has been hollowed out by lockdown. I fear that the good intentions behind the bill may—I stress “may”—lead to some pub companies deciding that it is not worth investing in Scotland, or they could change their business models and remove the tied option, which can be a route into the licensed trade for some. Mr Bibby mentioned that earlier. That would be a shame, but it could happen. It could easily be argued that the time is not right for the bill, if it ever was. I know that a number of colleagues share those concerns, and there must be some SNP members who share them.

Emma McClarkin, who is the chief executive of the British Beer & Pub Association, said that the bill

“poses a real danger to future investment in the sector, entrepreneurship opportunities”

and

“threatens jobs”.

That said, similar legislation was enacted by the Conservative Government in 2015 in England, although the tied pub sector there is much larger. That created a pubs code and an adjudicator that would govern the relationships between some tied pubs’ tenants and their pub-owning company landlords. Mr Bibby’s bill aims to ensure that Scottish tied pub tenants have at least the same protections and opportunities as those covered by the 2015 act. The bill is in a better position than it was, thanks to some sensible amendments and, as I have said, we will back it, albeit with some reservations.

Before I sit down, I should say that my colleague Margaret Mitchell, who also got a member’s bill through, will close for us. It will be Margaret’s final speech as an MSP, so I do not expect her to say much of anything about the bill. She has served the constituents of Central region with distinction since 2003. Until 2016, she was the only Conservative representing the region. It has been a pleasure to work alongside her for the past five years, and I wish her and Henry a happy and healthy retirement.

18:35  

Alex Rowley (Mid Scotland and Fife) (Lab)

I congratulate Neil Bibby and his team for the tremendous amount of work that they have done to get the bill to this stage. I hope that the bill will be passed this evening. I also thank the minister for the positive approach that he has taken, which was evident at stage 2, when the bill came to the committee.

I will focus on the letter that the Scottish Licensed Trade Association sent to all MSPs today. It makes the following points, which are worth restating.

“For too long, large pub-owning companies have taken more than their fair share from publicans. Too often they have held their tied tenants back, restricted consumer choice and failed to properly regulate themselves and keep their house in order. They have put their own profits before the sustainability of local pubs and fairness for tied pub tenants. It cannot go on.”

It continues:

“The Tied Pubs Bill delivers a fairer deal for tied publicans, with a new statutory Pubs Code. It would rebalance tied agreements, shifting power from the large pubcos to the local pubs who desperately need your help. It allows tenants to opt-out of tied deals that aren’t working. It will give publicans more choice over the drinks they stock to help meet consumer demand, promote Scottish products and sustain their business. The Tied Pubs Bill will also be very positive for Scotland’s small brewers, who at the moment are restricted from access to pubs owned by the big brewers and pubcos operating the tie.

The fact that global brewers and pubcos are so desperate to stop this Bill exposes the fact that they take too much from pub profits. The reality is that the Market Rent Only option is just that, an option and if they want to keep publicans tied, they need to offer much better deals, lower prices and lower rents. That’s all the Bill calls for – fairness and a fair split of pub profits, which all MSPs must surely agree with.”

The letter also makes the point that,

“In England, pubcos have continued to invest in pubs, despite the Pubs Code and if they want to continue to own and operate pubs, they will do the same in Scotland.”

I will also refer to the survey that the SLTA carried out, as the key data points in that survey are quite stark. They show that 50 per cent of tied pub tenants report earning less than £20,000 a year, with 34 per cent earning less than £15,000 a year. In many cases, those amounts are for a couple, not for an individual. A shocking 58 per cent of tied pub tenants reported earning less than the minimum wage, with just 13 per cent earning more than the minimum wage. The average price paid for a keg of standard lager by tied pubs is a staggering 61 per cent higher than the open market price, with some paying as much as 107 per cent more than would be paid on the open market. It is also reported that 81 per cent say that the information that was provided to them when they entered the lease was inaccurate or misleading.

That demonstrates why there was a need for the bill. I congratulate Neil Bibby once again on bringing the bill to Parliament, and I hope that everyone will support it at decision time.

18:40  

Willie Rennie (North East Fife) (LD)

Probably more than ever before, we know through the pandemic the value of pubs as community assets that play a social role and as major employers that showcase world-class Scottish products. The bill will help to rebalance the pub sector in Scotland in the way that the sector has been helped in England. However, there is much more to be done beyond the bill, because of the impact of the pandemic on the sector. This cannot be the end of the story. We need to look again at what support we can provide to pubs to ensure that they continue to play that essential role in our communities.

Neil Bibby was generous in his praise of Greg Mulholland, the former Liberal Democrat member of Parliament who championed the sector for many years. Through his hard work and diligence, the landscape of the sector in England and Wales has changed markedly. I like the fact that Graham Simpson tried to claim the legislation there as a Conservative achievement in government, when in fact it was Liberal Democrat ministers who drove it through the Department for Business, Innovation and Skills. I do not often refer to, praise or boast about the coalition years, but that is one thing that I am prepared to recognise.

One Conservative contribution that is missing from this debate is that of Maurice Golden. His contribution last time was remarkable and I would have enjoyed hearing him participate in the debate again today. Alas, he is nowhere to be seen.

The pubs code and the adjudicator are assets to be lauded. They have governed the relationship between the large pub-owning companies and their tied tenants in England and Wales, and it think that that has changed the landscape there for the better.

Neil Bibby deserves huge credit for his determination and single-mindedness. Lesser politicians would have buckled by now, but he withstood the pressure from all sides and persuaded—perhaps even charmed—others to his way of thinking. That obviously had some effect on the minister, who was a reluctant supporter at the beginning; in fact, he was opposed to the bill. The charm obviously worked on the minister, but it has also worked on the rest of the sector because, as the minister said—

Jamie Hepburn

Will the member take an intervention?

Willie Rennie

If the minister is going to deny that he was charmed, I want to hear from him.

Jamie Hepburn

I will leave others to consider the charm or otherwise of Mr Bibby. I put on the record that at no stage did I state any opposition to the legislation.

Willie Rennie

He was charmed even before he knew he was! That is an incredible admission. Neil Bibby’s powers know no bounds.

It is true that the profile of the sector in Scotland is different. 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. That has to be recognised and we should try to hold on to it where it is of benefit to the sector.

However, the support that the bill has received from a range of trade organisations and trade unions is an indication that there is a significant problem and cannot be ignored. The fact that many in the sector came to the minister and tried to make it a workable bill, as far as they were concerned, was recognition from them, too, that change is required. Neil Bibby’s powerful evidence has been persuasive all round.

Giving tenants more freedom to grow and develop their businesses with creativity must be encouraged. Sometimes the sign of a good law is that it is not often used. I hope that that is the case in this circumstance. Neil Bibby has already achieved changes in the sector before the legislation is introduced. Let us hope that that continues and that our pub sector recognises that it has to change for the better to make sure that it thrives for many years to come.

18:44  

Patrick Harvie (Glasgow) (Green)

I add my sincere congratulations to Neil Bibby, not just on introducing the bill and steering it through but on doing the work of building consensus to get the bill to the point of being passed—and it will certainly pass with the support of the Green group of MSPs.

I declare, from my entry in the register of members’ interests, not only my membership of the cross-party group on beer and pubs, which has no collective view on the bill, but my membership of CAMRA, the Campaign for Real Ale. Neil Bibby is one of a relatively select few MSPs I have had the pleasure of bumping into at CAMRA beer festivals from time to time over the years.

As CAMRA’s evidence states, the pub companies take a share of profit from tied tenants that is more than fair and more than sustainable, and that often leaves tenants unable to earn a decent living. The way in which tenants are being expected to pay over the odds for the beer that they sell is clearly unfair. Even if some of them find the tied-pub model agreeable and might choose to stick with it, they should have the choice, and the bill will give them that choice.

Over the years, I have been privileged to host a number of events in Parliament with CAMRA and others in the Scottish brewing community. This is an important opportunity to say that although, when we debate alcohol, we often debate the social and health harm—issues that do not need to be downplayed at all—we should also find opportunities to celebrate what is positive about a more diverse, decentralised model of pubs and brewing. The domination of a small number of giant companies is itself unhealthy, and it is a model that compounds the public health harm that comes from alcohol. A more diverse brewing sector and a more diverse pub sector, with a greater number of smaller independent companies, would offer a healthier way forward, in my view, and the bill will be one measure that helps to achieve that.

Over the past year, as I have spoken both in Parliament and at other meetings from this little corner of my living room, I have occasionally been teased about the fact that I keep my refreshments close at hand. In a few parliamentary debates, that has been necessary. Today, I have made a slight change, so that members can all see that my taste covers the grain as well as the grape. If I regret anything about today’s debate, it is that I will not have the opportunity to buy Neil Bibby a pint in the Parliament bar after the end, to celebrate our passing his bill. If I could think of nothing better, I would give him a chance to try Hoptimistic Future, which was specially brewed for the Green yes campaign back in 2014. After a few years, however, it is probably not safe to open this bottle here, but perhaps I will get the chance to buy Neil a beer when we all return.

18:47  

Willie Coffey (Kilmarnock and Irvine Valley) (SNP)

To say that the evidence that we heard during consideration of the bill was polarised is putting it mildly, and it is fair to say that committee members were more than a little disappointed with that. At the outset, the bill struggled to gain the support of the whole committee, but Mr Bibby’s persistence and his willingness to find a way forward at stage 2 gradually won that support. Of course, the Tories tried to sabotage the bill at stage 2 with hundreds of pointless amendments until they realised the mistake that they were making and gave up their attempt to talk the bill out of parliamentary time altogether.

Although the bill began its journey pre-Covid, it took on new significance as the impact on the tied sector and the wider pub sector became clearer during the pandemic. We can see the continuing impact simply by taking a walk along any of Scotland’s high streets. The pubs were the first premises to be closed, and they will probably be the last to reopen. We know that, sadly, many of them may not reopen at all.

Establishing a new pub code will allow the Scottish ministers to set out the circumstances in which a market-rent-only lease is offered. That will ensure that we get a balance between the rights of the pub-owning companies and their tenants, which I hope will be helpful. It will introduce consultation and engagement into the process, meaning that a tenant who is satisfied with their current lease arrangements will be under no obligation to accept market rent only. All of that should, hopefully, make for a stronger and more successful tenanted pub sector in Scotland.

The bill applies to the tied sector, which accounts for around 17 per cent of pubs, or 750 out of a total of about 4,000. The profile of tied pubs in Scotland is very different from that in Wales and England, but the bill offers some protections and increased opportunities for consultation, as the member in charge has continually reminded us.

At an earlier stage of the bill’s journey, research that the Government carried out did not appear to back the case for change. There were sufficient voices telling us about problems in the tied sector, principally involving the higher costs of beers and ciders and property maintenance issues. On the plus side, the tied model can offer a cheaper way into pub management for many, with the added benefits of including satellite TV and wi-fi, which might otherwise be too expensive for new entrants to pay for themselves.

The arrangements under the bill that will permit tenants to introduce a choice of at least one guest beer beyond the tied arrangement will surely be welcomed by everyone. However, I leave it to other members to give us a flavour of that and of other aspects of the bill.

I offer congratulations to Neil Bibby for taking the bill through; to our committee clerks for supporting us; and to the Scottish Government for showing a willingness to listen to the pleas from the sector and, ultimately, for supporting the bill.

18:51  

Sarah Boyack (Lothian) (Lab)

I, too, congratulate my Labour colleague Neil Bibby on getting the Tied Pubs (Scotland) Bill to stage 3. I recognise all the hard work that he has put in to get it here, as well as the contributions from all the witnesses who gave evidence that was considered by the committee.

As we have heard, the bill is supported by Scotland’s trade unions, CAMRA and many pubs across the country. It puts power in the hands of consumers and tenants, rather than multinational pub companies, and it is an important step in bringing tied pubs in Scotland into line with those in England and Wales, which FSB Scotland identified as being important to the sector. As others have said, it is vital that we support the sector, and I am glad that the small pubs in our communities will get the flexibility and new choices that they need.

Hospitality is a key sector in our economy, and, as we build back from the pandemic, I am pleased that the bill will give pubs more choices and more support as they begin to think about opening again. As the Society of Independent Brewers said, it is important to open up opportunities for

“small brewers … to provide the craft beer that more and more consumers are demanding.”

As GMB Scotland said, the bill is also about “creating and safeguarding” jobs in our Scottish breweries. There is much to look forward to when the bill is passed.

The bill requires the Scottish Government to make regulations that will change the relationship between tied pubs and pub-owning businesses to ensure that there is fair and lawful trading; that tied pubs should be no worse off than free-of-tie equivalents; and that tied agreements should provide a fair share of risk and reward. It gets rid of voluntary self-regulation and introduces statutory regulation, which means that there will be a clearer set of rules. I am glad that the bill will bring all of that into play.

In addition, the market-rent-only option allows a publican to opt out of their tied agreement and pay a market rent only for their premises. The evidence from England and Wales shows that MRO rights give tenants leverage to negotiate fairer deals, even if they do not choose to go free of the tie. The bill is about choices and fairness, and I hope that it will support our hospitality sector.

It will also provide for something that I suspect one or two colleagues in the chamber will like. Tied publicans will have the right to stock one beer of their choosing, which will allow them to respond to consumer demand and make their pub more profitable. That provision will also support our Scottish and independent brewers, which has to be good news for Scotland. The bill will change the landscape for tied pub tenants, bringing greater equality to the relationship between tenants and pubcos and opening up a bigger market for Scotland’s brewers. I am delighted to support this Labour bill today.

I have been thinking about all the comments from members about the work that Neil Bibby has done and about his negotiating and persuasion skills. I attended a Commonwealth Parliamentary Association conference on getting organised for COP26—the 26th United Nations climate change conference of the parties. The last session was about negotiating skills and how to get the Government to do something that it does not initially agree with. In the future, Neil Bibby will be able to talk to members about how to go from proposing a members’ bill that may not work to taking the bill through the legislative process, with a lot of hard work by the lead committee, and getting support from Parliament. The bill is a great example of that, and I hope that all members will support it at decision time.

18:54  

Colin Beattie (Midlothian North and Musselburgh) (SNP)

I thank Neil Bibby for introducing the bill and for his open engagement throughout the whole process. The bill was not easy for the Economy, Energy and Fair Work Committee to consider, by any means. Listening to the evidence over the months raised many question marks. Effectively, two sides put forward evidence: on the one hand, the tenants; on the other hand, the pub companies or landlords. Frequently, those two sides presented significantly differing evidence, with one side sometimes contradicting the other. Little in the way of independent data was available, and the committee felt concerned at times that it did not have enough information to reach a conclusion—a situation that led to the committee’s initial rejection of the bill at stage 1.

We heard forceful arguments from the pub landlords that legislating for a change in relationship between the tenant and the landlord would lead to dramatic drops in investment in tenanted pubs and create uncertainty and slow recovery from the Covid-19 pandemic. Equally, forceful arguments were made that the pubcos take an unfair share of the profits of the tied tenants and that the legislation would make community pubs more sustainable, as well as increasing variety and choice at the bar for customers. It has been difficult to separate out the carefully constructed and presented arguments and get a grip of the best solution. However, we all want a prosperous and well-run pub sector that provides both choice and service to its customers while enabling the tenant to secure a fair income for the work that they commit to the business.

On balance, I accept the probability that tenants are at a disadvantage when negotiating with pub landlords. The decision for the tenant of whether to take up the MRO option is to be made entirely in the light of individual circumstances. When a good and fair relationship exists with the landlord, it seems to me unlikely that the tenant will wish to disturb it. However, when a relationship is sour or perceived as less than fair, the tenant will have the option to change that relationship if they believe that that will be of benefit.

The concerns about choice of products and the stocking of guest beers—specifically local beers—have received considerable attention. It seems fair to think that a tenant might feel that they have more flexibility to stock products that better reflect local tastes if they take the MRO option.

I was in two minds as to whether the bill was needed, but I am now content that, for a few tenants, it might provide a level of protection and the opportunity to reset a relationship that is simply not providing the expected results. I believe that it is important that we put policies in place that support pubs to best recover from the Covid-19 pandemic. If that will benefit some tenants, it is worthwhile.

Once again, I congratulate Mr Bibby on introducing the bill and I commend it to Parliament.

18:57  

James Kelly (Glasgow) (Lab)

I join other members in congratulating Neil Bibby on securing the passage of his member’s bill on tied pubs later this evening. As many have recounted, it has been a long journey for Mr Bibby—a bit of a bumpy ride with regard to getting the bill through the committee and to this stage—and it is a tribute to his persistence that he will achieve that tonight. I remember going into his office earlier in this session of the Parliament: he had a list of MSPs on the wall, with one of those election battleground maps, which he had used to chart how he would persuade MSPs to support his bill. He has come a long way since then, and it is great to see the success that he has achieved.

The bill will make a difference. Pubs have been closed during the pandemic, which has shown that they play an important role in our communities. They bring people together and are important for their social aspect. They support people, as a trip to the local pub might be the only way anyone who lives on their own can come into contact with people, so it is important that we support them.

The legislation addresses the issue of the balance of power between landlords and tenants. As Sarah Boyack pointed out, it is all about achieving fairness. It is reasonable to say that that balance of power in some relationships has gone too far in support of the big pub businesses, which have sometimes taken decisions that are not to the benefit of the tenant or the local customers. Alex Rowley quoted some vital statistics around wages and prices in local pubs, which shows the advantage that there would be in giving a greater say to tenants.

The legislation sets up the role of an adjudicator and a statutory code, which will ensure that there is a mechanism to achieve fairness and ensure better wages, proper pricing and a better choice of beers on the ground. That is why the bill has achieved such a wide range of support from organisations such as the Scottish Licensed Trade Association, the GMB, and the Federation of Small Businesses. Such support shows that the bill will make a difference to businesses, workers and customers.

Ultimately, the bill will help as we emerge out of Covid, and when the shutters come up as pubs reopen. It will be good to see customers return, but the model will also help to promote pubs, which will be good for jobs and local economies and communities.

I congratulate Neil Bibby on taking the bill though the Parliament to a conclusion. The point of legislation is to make a difference, and I firmly believe that the bill will be to the benefit of pubs, pub owners and customers alike.

The Deputy Presiding Officer

I call Margaret Mitchell, who is making her final speech as a member of the Parliament.

19:02  

Margaret Mitchell (Central Scotland) (Con)

I know how much work goes into introducing a member’s bill, and I congratulate Neil Bibby on the tenacity that he has shown in getting it to this stage.

The Tied Pubs (Scotland) Bill seeks to improve the position of tied pub tenants and their pub-owning businesses, and give Scottish tied pub tenants at least the same protections and opportunities as those in England and Wales have. As others have said, those aims are to be realised through the establishment of a Scottish pubs code and the appointment of a Scottish pubs code adjudicator. Key aspects of the code include the right to sell a guest beer and the right to pay a market rent on a property without having to buy into other products or services.

The bill’s overall benefits include prompting owners and tied tenants to work together to ensure that both parties share the profits and risks. Covid has had a massively adverse effect on Scotland’s pubs and publicans, which makes it all the more important that owners and tenants work together to aid the industry’s recovery. The bill will give tenants greater choices in running their pub, and the opportunity to invest in the business and themselves.

Scotland’s pubs are a vital part of our economy, as well as our local communities. Pubs act as a social hub in villages and communities throughout Scotland. When we can meet again, customers will be able to enjoy a wider choice of products, particularly from local independent brewers, at more competitive prices, and Scotland’s brewing industry will also see a welcome boost. Therefore, I look forward to voting for the bill at decision time.

After 18 years of having had the privilege and pleasure of representing my constituents in the Central Scotland region, this is my last speech in the Scottish Parliament. The most important and rewarding aspect of being an MSP has been the ability to fight my constituents’ corner, help to resolve problems and ensure that their issues and concerns are not brushed aside, but given a fair hearing.

As a list MSP, it has been a frustration that, rather than being held directly accountable to our constituents when seeking re-election, the list ranking of regional MSPs is in the hands of our various parties before the electorate has its say. That is a weakness of the Scottish Parliament’s democratic process.

Chamber debates tend to be dominated by party-political speeches. By contrast, MSPs work well together in cross-party groups, such as the CPG on dyslexia. Such groups seek to take forward issues raised by the individuals, voluntary organisations and other stakeholders who are members of the groups. I will return to CPGs in my closing remarks, with suggestions about how we can make chamber business more effective.

The atmosphere in the chamber today has been different from the usual final days of a parliamentary session as MSPs make their closing speeches. I want to address the Committee on the Scottish Government Handling of Harassment Complaints inquiry report. For me, the most important findings were not those relating to breaches of the ministerial code but the infinitely more worrying revelations about the centralised system of Government in Scotland, in which the Government is all powerful and there is an absence of the necessary checks and balances to prevent abuses and ensure the openness, transparency and accountability that is essential for any Government to establish trust with the electorate.

Those issues will not be easily or quickly resolved. For all of us in the chamber and for the wider public, a good place to start is with the inquiry report, which can be used as a reference document with the minutes of the committee meetings, the Official Reports of our evidence sessions and the published submissions, which are listed in the report’s annexes.

The report contains the transcript of the balanced and insightful evidence of the two brave complainers, who, having listened to the inquiry evidence, including the final evidence sessions with the former First Minister and the First Minister, insisted on giving evidence to the committee on oath and in person. They did so because those who are anonymous have no voice. It was entirely fitting that the final evidence session was with the complainers and that they had the final word. Abuses of power matter in any democracy and the end does not justify the means. It is a stark reminder that our democratic freedoms are hard won and should never be taken for granted.

I return to the Parliament’s CPGs. My first experience of a CPG was in 2003, when Annabel Goldie asked me to attend a meeting of the CPG on adult survivors of childhood sexual abuse. From that day on, I have been full of admiration for individuals whose trust has been betrayed in an unimaginable way, often in a family context by the very people who they should have expected to protect them and keep them safe. The CPG has informed much of the work that I have focused on as an MSP, including the Apologies (Scotland) Bill, which was suggested in a CPG meeting by the former chair of the Scottish Human Rights Commission, Professor Alan Miller. It was something that could give brave women—largely, the victims are women, although men have also suffered dreadful abuse—the important acknowledgement that they seek of the abuse that they have suffered. It provides empathy and—most important for them—it provides a method of ensuring that the same thing does not happen to anyone else.

The survivors’ trial process led me to make arguments for independent legal representation for victims of rape and other serious assaults, which has been rejected by the Government in the context of various pieces of legislation but which I hope will go forward in the next Parliament.

On improving chamber time, if the Scottish Parliament cut out the happy-clappy, time-filling debates that we all know exist, and used the time for MSPs to raise informed issues that have come about through their work in cross-party groups, that would allow for suggestions to be put forward at the end of the debate for the minister to consider, with the possibility that they could put in place concrete proposals to address the issues that have been raised.

I thank Kate Wane and Claire Wilson for their hard work and support in what has been an exhausting parliamentary session. I look forward to spending more time with my family—that is usually a euphemism and has other connotations, but I genuinely mean it—my husband, Henry, and westies Jack and Jamie. Henry will be very pleased, if not a little surprised, that I have put them in that order. I also look forward to doing what I want to do, including starting on my ever-increasing bucket list.

I wish remaining MSPs, and those who are standing down, well in the future. I hope that all who seek re-election do well. It has been a pleasure to work with everyone and to be an MSP in the Parliament, and I wish members good fortune for the future.

19:12  

Jamie Hepburn

I thank those who have contributed to the debate, which has been something of a revelation. I was interested to see that both Graham Simpson and Patrick Harvie, on receipt of a bottle of beer, decide to hold on to it rather than to drink it. That might be the only thing that unites them. I put it on record that, when I am presented with a bottle of beer, I opt for a different tack.

I had not envisaged that the debate on the Tied Pubs (Scotland) Bill would involve my last speech during this parliamentary session, but I am very glad to have been able to take part. I am not sure whether Margaret Mitchell intended this to be the debate for her last-ever contribution; she certainly took advantage of the opportunity, and I wish her well for the future.

I will try to confine my remarks, because I recognise that we are running later than expected.

I recognise that there remain differences of opinion on the merits of the bill, but the constructive approach that we have taken has ensured that the bill is more balanced and fairer in representing the interests of tenants and landlords than it was at the outset, while it continues to respect the fundamental precepts that were envisaged by Neil Bibby.

I want a successful tied pub sector in Scotland. I do not think that any member demurs from the point of view that tied pubs are an appropriate model and form of tenure in the pub sector. I want that to continue, and I also want a level playing field for tenants and landlords. I want tenants to be treated fairly and landlords to be able to see a return for their investment. The approach that we have taken through refining and improving the bill will, if it is passed this evening, enable us to reach that point.

I urge Parliament to support the legislation. I congratulate Mr Bibby once again on reaching this stage and I thank him for his constructive approach in working with me towards the position that we have reached.

19:15  

Neil Bibby

I thank all members who have participated in the debate.

I pay tribute to Margaret Mitchell, who just made her final speech. She was a particular help to my constituent, the late Michael McClelland. He was grateful for her support when she was convener of the Justice Committee, and I thank her.

I thank the minister, again, for the leadership that he has shown in listening to Scotland’s tied publicans throughout the bill process.

I thank Willie Rennie for his warm words—although I am sure that I cannot match his charm. I thank him for his support and that of the Liberal Democrats. Liberal Democrats were instrumental in getting similar legislation passed at Westminster.

I thank Patrick Harvie for his long-standing support. I recognise that the cross-party group does not have a collective view and I welcome his personal commitment to and sustained interest in the issue. I look forward to having that drink with him when the CAMRA festival is allowed to happen again.

I recognise that the views of members, particularly committee members, have evolved during the bill process. I am aware that there continue to be reservations about the bill; Graham Simpson highlighted some of them. I welcome the collaborative approach of the Government and the candid discussions about how the bill could be amended, which have led to a bill that has reassured members. I particularly thank the committee members who supported the bill and spoke in the debate—I also thank Andy Wightman, who did not speak in the debate, for his support.

I thank Willie Coffey and Colin Beattie for their speeches. They were right to say that the debate about tied pub reform has been described as polarised, with different views on how the model operates in practice. That was a feature of the debate in England and Wales before the UK Parliament chose to act, and it has been a feature of the debates on this bill.

As legislators, we must regularly make decisions about issues on which opinion is divided and about which accounts differ. It is what we are elected to do. However, the fact that opinion is divided does not mean that the weight of opinion or indeed the evidence is divided equally. We have to decide whether to take the global brewing giants at their word—companies such as Heineken, which was fined £2 million for serious and repeated breaches of the pubs code in England and Wales—or to accept the outcome of three parliamentary select committee inquiries, my consultation and the evidence that the Economy, Energy and Fair Work Committee heard, which brought us to this point.

We have to decide whether to accept the evidence that was brought to us by perhaps one of the broadest coalitions ever assembled in support of a member’s bill that sought to intervene in a sector of the economy, which included the SLTA, CAMRA, FSB Scotland, GMB Scotland, the Society of Independent Brewers, the British Pub Confederation, the Campaign for Pubs, the Pubs Advisory Service, Tennent Caledonian Breweries, the STUC and many more organisations that backed tied pub reform.

As Greg Mulholland told the committee last year, the number 1 cause of pub closures is tenants not being able to make a living out of their pubs. Sarah Boyack and James Kelly talked about the importance of rebalancing the relationships in the tied pub sector. As Alex Rowley said, the SLTA has circulated survey findings today that show that one in three tied pubs earns less than £15,000 a year in profit, while paying excessive mark-ups for the products that it sells.

I have always accepted that there is a place for the tied pub model. We are not debating the model’s merits and whether it should continue. If the tied model was being operated responsibly, as pubcos claim, pubcos would have nothing to fear from the bill. Why would a publican who is getting a fair deal report their landlord to an adjudicator? Why would a publican who is getting a fair deal choose to break the tie and exercise their right to a market-rent-only option? Why would an adjudicator rule against a pubco that is operating in a way that is consistent with the principles on which the bill is based?

If pub companies operate in a manner that is inconsistent with the principles of the bill, publicans will have recourse to a statutory code, which will be consulted on by Government, approved by the Parliament and enforced objectively by an independent adjudicator.

I will say a few words about the challenges that the pub sector faces. The crisis that we are living through has no precedent in modern times and the impact on the sector has been enormous. As members said, businesses have been unable to trade for extended periods, and when trading was permitted, many establishments found that the on-going restrictions made the business unviable. Politicians of all parties have called on the nation to build back better after the pandemic. Those calls give new meaning and purpose to the bill and to the statutory code for which it provides, which can protect Scotland’s publicans as they choose to do what is best for their pubs and customers as they emerge from the crisis.

We have an opportunity to secure a fairer deal for Scotland’s tied pubs tonight. For the good of the industry, we must seize that opportunity.

The Presiding Officer (Ken Macintosh)

There are three questions to be put. Before I put the first question, which is on legislation, I will pause to allow members to refresh the voting app. Members do not have to put the PIN in again, but if they press their refresh buttons, it should come back up with the most recent vote that they took part in today. Members who have not already voted today will need to enter the PIN; hopefully, most members have voted already and just need to refresh the app.

The first question is, that motion S5M-24238, in the name of Andy Wightman, on the European Charter of Local Self-Government (Incorporation) (Scotland) Bill at stage 3, be agreed to. As this is legislation, we must all cast a vote. Members should press their voting buttons now. This is a one-minute division.

The vote is now closed. Please let me know if you were not able to vote.

Jamie Greene (West Scotland) (Con)

On a point of order, Presiding Officer. Perhaps the office wi-fi has failed us one last time. I would have voted yes.

The Presiding Officer

I am sorry, Mr Greene, I did not catch that. Would you have voted yes?

Jamie Greene

Yes.

The Presiding Officer

Thank you, Mr Greene. I will make sure that your name is added to the voting list.

Beatrice Wishart (Shetland Islands) (LD)

On a point of order Presiding Officer. I do not know what happened; there was a hiccup here and I would have voted yes if the system had allowed.

The Presiding Officer

Thank you, Ms Wishart. I will make sure that your yes vote is also added.

For

Adam, George (Paisley) (SNP)
Adamson, Clare (Motherwell and Wishaw) (SNP)
Allan, Dr Alasdair (Na h-Eileanan an Iar) (SNP)
Arthur, Tom (Renfrewshire South) (SNP)
Baillie, Jackie (Dumbarton) (Lab)
Baker, Claire (Mid Scotland and Fife) (Lab)
Balfour, Jeremy (Lothian) (Con)
Beamish, Claudia (South Scotland) (Lab)
Beattie, Colin (Midlothian North and Musselburgh) (SNP)
Bibby, Neil (West Scotland) (Lab)
Bowman, Bill (North East Scotland) (Con)
Boyack, Sarah (Lothian) (Lab)
Briggs, Miles (Lothian) (Con)
Brown, Keith (Clackmannanshire and Dunblane) (SNP)
Burnett, Alexander (Aberdeenshire West) (Con)
Campbell, Aileen (Clydesdale) (SNP)
Carlaw, Jackson (Eastwood) (Con)
Carson, Finlay (Galloway and West Dumfries) (Con)
Chapman, Peter (North East Scotland) (Con)
Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Cole-Hamilton, Alex (Edinburgh Western) (LD)
Constance, Angela (Almond Valley) (SNP)
Corry, Maurice (West Scotland) (Con)
Crawford, Bruce (Stirling) (SNP)
Cunningham, Roseanna (Perthshire South and Kinross-shire) (SNP)
Davidson, Ruth (Edinburgh Central) (Con)
Denham, Ash (Edinburgh Eastern) (SNP)
Dey, Graeme (Angus South) (SNP)
Doris, Bob (Glasgow Maryhill and Springburn) (SNP)
Dornan, James (Glasgow Cathcart) (SNP)
Ewing, Annabelle (Cowdenbeath) (SNP)
Ewing, Fergus (Inverness and Nairn) (SNP)
Fabiani, Linda (East Kilbride) (SNP)
Fee, Mary (West Scotland) (Lab)
Findlay, Neil (Lothian) (Lab)
Finnie, John (Highlands and Islands) (Green)
FitzPatrick, Joe (Dundee City West) (SNP)
Forbes, Kate (Skye, Lochaber and Badenoch) (SNP)
Fraser, Murdo (Mid Scotland and Fife) (Con)
Freeman, Jeane (Carrick, Cumnock and Doon Valley) (SNP)
Gibson, Kenneth (Cunninghame North) (SNP)
Gougeon, Mairi (Angus North and Mearns) (SNP)
Grahame, Christine (Midlothian South, Tweeddale and Lauderdale) (SNP)
Gray, Iain (East Lothian) (Lab)
Greene, Jamie (West Scotland) (Con)
Greer, Ross (West Scotland) (Green)
Griffin, Mark (Central Scotland) (Lab)
Hamilton, Rachael (Ettrick, Roxburgh and Berwickshire) (Con)
Harper, Emma (South Scotland) (SNP)
Harris, Alison (Central Scotland) (Con)
Harvie, Patrick (Glasgow) (Green)
Haughey, Clare (Rutherglen) (SNP)
Hepburn, Jamie (Cumbernauld and Kilsyth) (SNP)
Johnson, Daniel (Edinburgh Southern) (Lab)
Halcro Johnston, Jamie (Highlands and Islands) (Con)
Johnstone, Alison (Lothian) (Green)
Kelly, James (Glasgow) (Lab)
Kerr, Liam (North East Scotland) (Con)
Kidd, Bill (Glasgow Anniesland) (SNP)
Lamont, Johann (Glasgow) (Lab)
Lennon, Monica (Central Scotland) (Lab)
Leonard, Richard (Central Scotland) (Lab)
Lochhead, Richard (Moray) (SNP)
Lockhart, Dean (Mid Scotland and Fife) (Con)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Angus (Falkirk East) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Macdonald, Lewis (North East Scotland) (Lab)
MacGregor, Fulton (Coatbridge and Chryston) (SNP)
Mackay, Rona (Strathkelvin and Bearsden) (SNP)
Macpherson, Ben (Edinburgh Northern and Leith) (SNP)
Maguire, Ruth (Cunninghame South) (SNP)
Marra, Jenny (North East Scotland) (Lab)
Martin, Gillian (Aberdeenshire East) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Mason, Tom (North East Scotland) (Con)
Matheson, Michael (Falkirk West) (SNP)
McAlpine, Joan (South Scotland) (SNP)
McArthur, Liam (Orkney Islands) (LD)
McKee, Ivan (Glasgow Provan) (SNP)
McKelvie, Christina (Hamilton, Larkhall and Stonehouse) (SNP)
McMillan, Stuart (Greenock and Inverclyde) (SNP)
McNeill, Pauline (Glasgow) (Lab)
Mitchell, Margaret (Central Scotland) (Con)
Mundell, Oliver (Dumfriesshire) (Con)
Neil, Alex (Airdrie and Shotts) (SNP)
Paterson, Gil (Clydebank and Milngavie) (SNP)
Rennie, Willie (North East Fife) (LD)
Robison, Shona (Dundee City East) (SNP)
Ross, Gail (Caithness, Sutherland and Ross) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Ruskell, Mark (Mid Scotland and Fife) (Green)
Russell, Michael (Argyll and Bute) (SNP)
Sarwar, Anas (Glasgow) (Lab)
Scott, John (Ayr) (Con)
Simpson, Graham (Central Scotland) (Con)
Smith, Elaine (Central Scotland) (Lab)
Smith, Liz (Mid Scotland and Fife) (Con)
Smyth, Colin (South Scotland) (Lab)
Somerville, Shirley-Anne (Dunfermline) (SNP)
Stevenson, Stewart (Banffshire and Buchan Coast) (SNP)
Stewart, Alexander (Mid Scotland and Fife) (Con)
Stewart, David (Highlands and Islands) (Lab)
Stewart, Kevin (Aberdeen Central) (SNP)
Todd, Maree (Highlands and Islands) (SNP)
Tomkins, Adam (Glasgow) (Con)
Torrance, David (Kirkcaldy) (SNP)
Watt, Maureen (Aberdeen South and North Kincardine) (SNP)
Wells, Annie (Glasgow) (Con)
Wheelhouse, Paul (South Scotland) (SNP)
White, Sandra (Glasgow Kelvin) (SNP)
Wightman, Andy (Lothian) (Ind)
Wishart, Beatrice (Shetland Islands) (LD)
Yousaf, Humza (Glasgow Pollok) (SNP)

The Presiding Officer

The result of the division on motion S5M-24238, in the name of Andy Wightman, is: For 114, Against 0, Abstentions 0.

The motion is agreed to and the European Charter of Local Self-Government (Incorporation) (Scotland) Bill is therefore passed. [Applause.]

Motion agreed to,

That the Parliament agrees that the European Charter of Local Self-Government (Incorporation) (Scotland) Bill be passed.

The Presiding Officer

The next question is, that motion S5M-24271, in the name of Neil Bibby, on the Tied Pubs (Scotland) Bill at stage 3 be agreed to. Members may cast their votes now. This will be a one-minute division.

The vote is now closed. Please let me know if you were not able to vote.

For

Adam, George (Paisley) (SNP)
Adamson, Clare (Motherwell and Wishaw) (SNP)
Allan, Dr Alasdair (Na h-Eileanan an Iar) (SNP)
Arthur, Tom (Renfrewshire South) (SNP)
Baillie, Jackie (Dumbarton) (Lab)
Baker, Claire (Mid Scotland and Fife) (Lab)
Balfour, Jeremy (Lothian) (Con)
Beamish, Claudia (South Scotland) (Lab)
Beattie, Colin (Midlothian North and Musselburgh) (SNP)
Bibby, Neil (West Scotland) (Lab)
Bowman, Bill (North East Scotland) (Con)
Boyack, Sarah (Lothian) (Lab)
Briggs, Miles (Lothian) (Con)
Brown, Keith (Clackmannanshire and Dunblane) (SNP)
Burnett, Alexander (Aberdeenshire West) (Con)
Campbell, Aileen (Clydesdale) (SNP)
Carlaw, Jackson (Eastwood) (Con)
Chapman, Peter (North East Scotland) (Con)
Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Cole-Hamilton, Alex (Edinburgh Western) (LD)
Constance, Angela (Almond Valley) (SNP)
Corry, Maurice (West Scotland) (Con)
Crawford, Bruce (Stirling) (SNP)
Cunningham, Roseanna (Perthshire South and Kinross-shire) (SNP)
Davidson, Ruth (Edinburgh Central) (Con)
Denham, Ash (Edinburgh Eastern) (SNP)
Dey, Graeme (Angus South) (SNP)
Doris, Bob (Glasgow Maryhill and Springburn) (SNP)
Dornan, James (Glasgow Cathcart) (SNP)
Ewing, Annabelle (Cowdenbeath) (SNP)
Ewing, Fergus (Inverness and Nairn) (SNP)
Fabiani, Linda (East Kilbride) (SNP)
Fee, Mary (West Scotland) (Lab)
Findlay, Neil (Lothian) (Lab)
Finnie, John (Highlands and Islands) (Green)
FitzPatrick, Joe (Dundee City West) (SNP)
Forbes, Kate (Skye, Lochaber and Badenoch) (SNP)
Fraser, Murdo (Mid Scotland and Fife) (Con)
Gibson, Kenneth (Cunninghame North) (SNP)
Gougeon, Mairi (Angus North and Mearns) (SNP)
Grahame, Christine (Midlothian South, Tweeddale and Lauderdale) (SNP)
Gray, Iain (East Lothian) (Lab)
Greene, Jamie (West Scotland) (Con)
Greer, Ross (West Scotland) (Green)
Griffin, Mark (Central Scotland) (Lab)
Harper, Emma (South Scotland) (SNP)
Harris, Alison (Central Scotland) (Con)
Harvie, Patrick (Glasgow) (Green)
Haughey, Clare (Rutherglen) (SNP)
Hepburn, Jamie (Cumbernauld and Kilsyth) (SNP)
Johnson, Daniel (Edinburgh Southern) (Lab)
Halcro Johnston, Jamie (Highlands and Islands) (Con)
Johnstone, Alison (Lothian) (Green)
Kelly, James (Glasgow) (Lab)
Kerr, Liam (North East Scotland) (Con)
Kidd, Bill (Glasgow Anniesland) (SNP)
Lamont, Johann (Glasgow) (Lab)
Lennon, Monica (Central Scotland) (Lab)
Leonard, Richard (Central Scotland) (Lab)
Lochhead, Richard (Moray) (SNP)
Lockhart, Dean (Mid Scotland and Fife) (Con)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Angus (Falkirk East) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Macdonald, Lewis (North East Scotland) (Lab)
MacGregor, Fulton (Coatbridge and Chryston) (SNP)
Mackay, Rona (Strathkelvin and Bearsden) (SNP)
Macpherson, Ben (Edinburgh Northern and Leith) (SNP)
Maguire, Ruth (Cunninghame South) (SNP)
Marra, Jenny (North East Scotland) (Lab)
Martin, Gillian (Aberdeenshire East) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Mason, Tom (North East Scotland) (Con)
Matheson, Michael (Falkirk West) (SNP)
McAlpine, Joan (South Scotland) (SNP)
McArthur, Liam (Orkney Islands) (LD)
McKee, Ivan (Glasgow Provan) (SNP)
McKelvie, Christina (Hamilton, Larkhall and Stonehouse) (SNP)
McMillan, Stuart (Greenock and Inverclyde) (SNP)
McNeill, Pauline (Glasgow) (Lab)
Mitchell, Margaret (Central Scotland) (Con)
Mundell, Oliver (Dumfriesshire) (Con)
Neil, Alex (Airdrie and Shotts) (SNP)
Paterson, Gil (Clydebank and Milngavie) (SNP)
Rennie, Willie (North East Fife) (LD)
Robison, Shona (Dundee City East) (SNP)
Ross, Gail (Caithness, Sutherland and Ross) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Ruskell, Mark (Mid Scotland and Fife) (Green)
Russell, Michael (Argyll and Bute) (SNP)
Sarwar, Anas (Glasgow) (Lab)
Scott, John (Ayr) (Con)
Simpson, Graham (Central Scotland) (Con)
Smith, Elaine (Central Scotland) (Lab)
Smith, Liz (Mid Scotland and Fife) (Con)
Smyth, Colin (South Scotland) (Lab)
Somerville, Shirley-Anne (Dunfermline) (SNP)
Stevenson, Stewart (Banffshire and Buchan Coast) (SNP)
Stewart, Alexander (Mid Scotland and Fife) (Con)
Stewart, David (Highlands and Islands) (Lab)
Stewart, Kevin (Aberdeen Central) (SNP)
Todd, Maree (Highlands and Islands) (SNP)
Tomkins, Adam (Glasgow) (Con)
Torrance, David (Kirkcaldy) (SNP)
Watt, Maureen (Aberdeen South and North Kincardine) (SNP)
Wells, Annie (Glasgow) (Con)
Wheelhouse, Paul (South Scotland) (SNP)
White, Sandra (Glasgow Kelvin) (SNP)
Wightman, Andy (Lothian) (Ind)
Wishart, Beatrice (Shetland Islands) (LD)
Yousaf, Humza (Glasgow Pollok) (SNP)

The Presiding Officer

The result of the division on motion S5M-24271, in the name of Neil Bibby, is: For 111, Against 0, Abstentions 0.

The motion is agreed to and the Tied Pubs (Scotland) Bill is passed. [Applause.]

Motion agreed to,

That the Parliament agrees that the Tied Pubs (Scotland) Bill be passed.

The Presiding Officer

The final question is, that motion S5M-24453, in the name of Graeme Dey, on approval of an SSI, be agreed to.

Motion agreed to,

That the Parliament agrees that the Health Protection (Coronavirus) (Restrictions and Requirements) (Miscellaneous Amendments) (Scotland) (No. 2) Regulations 2021 (SSI 2021/117) be approved.

The Presiding Officer

That concludes decision time. We will shortly move to members’ business in the name of Jeremy Balfour on the “Stories of Hope” report. We will pause for a few moments to allow some members to leave and others to arrive. I remind members who are leaving the chamber to be careful to observe social distancing rules, follow the one-way systems and wear their masks.