My Lords, I thank the noble Lord, Lord Whitty, for his amendment, and for his engagement on these provisions in advance of Report. As the noble Lord explained, these amendments would change the definition of a pub-owning business for the purposes of the Pubs Code to one with 500 or more pubs of any kind rather than 500 or more tied pubs.
The noble Lord asked about franchises. They will indeed be included for the purposes of the 500, as I think my noble friend Lord Hodgson helpfully explained when we were discussing it earlier. The definition focuses on the alcohol tie, because that is where we have evidence of problems, as colourfully explained in four Business Select Committee reports, all of which focused on the tie.
I understand the noble Lord’s view that companies with more than 500 pubs of any kind are companies of sufficient size that they can cope with complying with the code. However, the amendments would lead to some striking anomalies. A pub-owning company with 499 pubs, all of which are tied, would not be covered by the code, but a pub-owning company with 500 managed or free-of-tie pubs and just one tied pub would be covered for that one tied pub.
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Any intervention into the pubs market has to be proportionate and focused on problems of which we have evidence. The evidence of the past 10 years shows that the problems in the pub industry relate to abuses
of the tied relationship. The Government do not have evidence of a problem in the free-of-tie or managed pubs market. We believe that, in the current market, the amendments would bring just one more company within scope—Mitchells & Butlers, which has around 1,800 pubs in total but fewer than 60 tied pubs in England and Wales. While I understand the noble Lord’s concerns about market share, bringing these few extra tied pubs within scope of the Pubs Code would create an anomaly. A regulatory regime for the tied pubs market would be regulating a company with 60 tied pubs but not several companies that each own several hundred tied pubs but fewer than 500 pubs in total, such as Shepherd Neame and Fuller’s. Indeed, we estimate that around 20 companies have around the same number or more tied pubs than Mitchells & Butlers, yet they would not be brought into scope by these amendments.
As noble Lords may recall, it was the will of the Committee in the other place that pub-owning companies with fewer than 500 tied pubs, including family brewers, should not be in scope of the measures in Part 4. Our legal advice also indicates that the anomaly I have referred to would put the Government at risk of a legal challenge. I hope that the noble Lord, Lord Whitty, understands the difficulty that this would place us in and the attendant risk. The legislation covers the six largest tied pub-owning companies with the vast majority of tied houses, with around 13,000 tied pubs in England and Wales between them out of around 20,000 in total, and there are anti-avoidance provisions in place. I hope that in the light of my comments he will feel able to withdraw his amendment.