Background
The Tied Pubs (Scotland) Bill (the Bill) is a Member’s Bill which was introduced on 3 February 2020. The Member in Charge is Neil Bibby MSP. This short briefing sets out a summary of Stage 1 and Stage 2, ahead of Stage 3, which is anticipated to take place on 23 March 2021.
The aim of the Tied Pubs Bill is to improve the position of tied pub tenants by requiring the establishment of a Scottish Pub Code to govern the relationship between pub-owning businesses and their tied tenants and ensuring the appointment of a Scottish Pubs Code Adjudicator to apply the code. A tied pub is one where there is a contract between the owner (pub-owning business) and the tenant, which means that the tenant has to buy certain products (mainly beer) from the owner at a cost that is higher than wholesale, in exchange for reduced rent of the pub (the rent is often set at a lower than market value). There are currently around 750 tied pubs in Scotland. SPICe produced a briefing on the Bill ahead of Stage 1.
In 2015 the UK Parliament passed the Government Bill that became the Small Business, Enterprise and Employment Act 2015, which established the Pubs Code adjudicator and introduced provisions requiring the Secretary of State to introduce a Pubs Code in England and Wales. The Policy Memorandum that accompanies the Bill in Scotland notes that the policy objectives are broadly similar to those introduced in England and Wales, and states that:
A further objective of the Bill is to ensure that Scottish tied pub tenants have at least the same protections and opportunities as are now enjoyed by some tied pub tenants in England and Wales.
Tied Pubs (Scotland) Bill: Policy Memorandum
Stage 1 consideration
The Economy, Energy and Fair Work Committee was designated as the lead committee on the Bill at Stage 1. The Committee issued a call for views, a survey for tied pub tenants and held a follow-up focus group with tied pub tenants to discuss the bill. Evidence sessions were held with industry bodies and pub companies on 18 August 2020, with the Minister for Business, Fair Work and Skills on 25 August 2020 and with the Member in Charge, Neil Bibby MSP on 1 September 2020.
The Committee published its Stage 1 report on 11 November 2020, which did not agree to the general principles of the bill, noting that:
A majority of the Committee remained frustrated by the polarised arguments and the lack of complete, robust and independent data upon which to evaluate the potential impact of the proposed Bill on pub owners and tenants. That majority were unconvinced that sufficient evidence was presented to the Committee to suggest that the problems described were large-scale or that there were adequate grounds to warrant legislative interference in contractual agreements.
Economy, Energy and Fair Work Committee, Stage 1 report
This conclusion was reached by division: six in favour and two against, with one abstention. The minority of members stated that:
a minority of the Committee agrees that there is an imbalance in the relationship between pub tenants and landlords and that the provisions in the Bill would help to ensure a fairer balance of risk and reward. They note that the Bill is supported by the majority of those who responded to the Committee’s call for evidence, in particular a broad coalition of workers, tenants, and consumers. The establishment of a statutory code, an independent adjudicator and a market only rent option are welcome and overdue measures.
Economy, Energy and Fair Work Committee, Stage 1 report
However, ahead of the Stage 1 debate, the Scottish Government indicated that it would be supporting the general principles of the Bill and that it intended to work with Neil Bibby MSP to bring forward amendments at Stage 2. On 26 November, the Parliament voted to agree to the general principles of the Bill, with 107 votes for, zero against and four abstentions.
Stage 2 amendments
Ahead of Stage 2, the Committee wrote to stakeholders to seek additional views on the Bill. The Minister responded to this letter and the Stage 1 report, indicating that the Scottish Government intended to:
- introduce amendments to lengthen implementation and review timescales;
- remove elements of retrospection;
- enable the Adjudicator during investigations to have regard to the actions of tenants as well as pub companies; and
- ensure levies on pub companies are proportionate and Ministers are involved in determining levy rates.
Neil Bibby MSP also wrote to the Committee setting out the areas in which he intended to introduce amendments. The Committee also received further responses from several pub owning companies and industry bodies.
A total of 315 amendments were lodged at Stage 2. However, during the course of the Committee’s consideration it became clear that there was not a majority in favour of most of these amendments, and so most amendments were not moved. The only amendments agreed at Stage 2 were those proposed by Neil Bibby MSP and the Minister. These amendments made the following changes:
- Timelines and implementation: These amendments changed the requirement for the Scottish pubs code to be introduced from one year following royal assent to two years. Both Neil Bibby and the Minister stated that this was a hard limit, and that the pubs code could be in place before this time, but that the extension was to ensure there was sufficient time for consultation on the secondary legislation. The first review of the pubs code and adjudicator will take place two years after implementation, with subsequent reviews every three years.
- Market rent only (MRO): Several amendments were proposed which would have weakened the unqualified right to request an MRO lease that is included in the Bill, but these did not proceed at Stage 2. The Scottish Government introduced amendments which would allow the pubs code to specify limited circumstances where an MRO may not be offered. Neil Bibby MSP supported these amendments, noting that he did not believe they would “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”.
- Levy: Amendments were agreed to allow pub owning companies to appeal against the imposition of a levy, or to appeal the amount of the levy. This aims to ensure that the levies will be proportionate.
- Arbitration: Amendments agreed introduce a six-month time limit for the referral of disputes to the arbitrator by a tenant, with this period starting when a tenant becomes aware of the alleged breach of the pubs code. Additionally, amendments allow the arbitrator flexibility to allocate some of the fees and expenses related to arbitration to tenants, not only to pub-owning companies.
- Appeals process: The Scottish Courts and Tribunal Service highlighted that the appeals procedure included in the Bill as introduced was unusual in that it would have appeals proceed directly to the Scottish Appeals Court, a process which does not exist elsewhere. The Bill has been amended so that appeals will now be heard by the Court of Session.
- Regulatory principles: Ministers will be required to exercise their powers to create a pubs code consistent with the regulatory principles set out in the Bill on a best endeavours basis, and to ensure that the adjudicator takes a consistent approach with regard to the application of the regulatory principles to both pub owning businesses and tied tenants.
Stage 3
Some of the withdrawn amendments may return at Stage 3, which is anticipated on 23 March 2021.
Andrew Feeney-Seale, Senior Researcher, Financial Scrutiny Unit
“Beer goggles” by afagen is licensed under CC BY-NC-SA 2.0