Meeting of the Parliament (Hybrid) 26 November 2020
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.