Pub companies: follow-up - Business, Innovation and Skills Committee Contents

Examination of Witness (Question Numbers 40-54)



  Q40  Mr Clapham: You referred earlier to enforceability. Do you expect the RICS code to be enforceable on anybody who values the rent aspect of a public house? For example, pub companies have development managers. Are we likely to see the RICS code being enforceable on them?

  Mr Rusholme: The strict answer is that we can develop only a code by which our members abide. We would certainly call for everyone else in the industry to use that code and abide by it.

  Q41  Mr Clapham: What kind of response have you had from the industry? Does the industry see the importance of a code that is enforceable across it and therefore are you encouraged?

  Mr Rusholme: I am optimistic and encouraged that that can happen.

  Q42  Mr Clapham: Where there is a code that is not adhered to normally there are sanctions. What kind of sanctions do you envisage being imposed if people deviate from the code or refuse to accept it?

  Mr Rusholme: There are a great many sanctions within the armoury of the RICS as a professional organisation from arm's length regulation to a full range of disciplinary powers.

  Q43  Mr Clapham: Has it been made plain to the pubcos that this is something you are looking at and there will be sanctions if people do not adhere to the codes?

  Mr Rusholme: The sanctions will apply to chartered surveyors operating in this area.

  Q44  Chairman: But not to businesses?

  Mr Rusholme: Unfortunately, I do not have the power to make that happen.

  Q45  Mr Hoyle: You have summed it up, have you not? You can put some meat on the bone only as far as your own organisation is concerned and that is the weakness of it. We come back to enforceability. The truth of the matter is that you can enforce it only against chartered surveyors and without that it is a toothless tiger. Are you not asking that this be mandatory across the whole industry?

  Mr Rusholme: There is great merit in taking that route if others can make that happen.

  Q46  Mr Hoyle: The only way it can make a difference and make things happen is if everybody signs up to it.

  Mr Rusholme: Certainly, the stick of making that happen is an attractive one and perhaps the carrot is to come up with well thought-out advice in the code which has the industry behind it. If we can carry those involved along with us in preparing the code there must be a greater chance that people will stick to it once it is published.

  Q47  Mr Hoyle: Who do you believe will be the fly in the ointment in coming up with a mandatory code?

  Mr Rusholme: I would not single out any particular organisation.

  Q48  Mr Hoyle: Is it your belief that this morning everybody will be happy; it will all be done and dusted and they will be with you all the way and will sign up to it?

  Mr Rusholme: If we can carry everyone along in the process there is a good chance of people adhering to it.

  Q49  Mr Hoyle: I think they are in danger of falling out of bed, waking up and facing reality. Is the truth of the matter that there are certain people from whom we will be hearing evidence who will not be quite as enthusiastic as yourself?

  Mr Rusholme: I agree that it must be a combination of the two. If there are some mandatory ways to make this happen we would very much welcome it, as we would any support in achieving that.

  Mr Hoyle: That is very fair of you; at least you are honest enough to say that a mandatory code is the way forward in reaching a solution. Let us hope everybody listens to you.

  Q50  Mr Wright: If we turn back to the question of valuation, is there any element of it that takes into account the wage or salary of the publican?

  Mr Rusholme: As I understand the profits method at the moment there is no specific allowance for the salary of the lessee himself. You make allowances for those you employ. Where that is reflected in the calculation is in the split of the balance that is apportioned at the end of the process. There is no one line in the calculation that deals with a wage to the lessee.

  Q51  Mr Wright: Do you not think that should be included? We have heard all sorts of stories from various publicans who have significant incomes but the salaries and wages they draw are not commensurate with sales of £400,000 or £500,000 and salaries of perhaps £15,000 or £16,000. Do you not think there should be a standard within the valuation which says one should not go below a certain wage level?

  Mr Rusholme: I agree that it is a very important element and it would be ridiculous to set rents that did not make an allowance in the split of profit for making a living or profit out of the business. As to where it is reflected in the calculation is something on which we would like the new guidance to focus specifically. At the moment it is to do with how one apportions the balance of profit at the end. Of course there must be a commonsense check that it provides a decent living and return to anyone operating the business.

  Q52  Mr Wright: The figures indicate that 65% receive less than £15,000 a year. For the hours put in that does not appear to be commensurate with an attractive option for those who want to come into the industry.

  Mr Rusholme: It is only right that our rent guidance reflects a fair reward at the end of the day for the operator. It comes back to what people are prepared to pay in the market. If potential lessees are making high bids for rents in the first place it is very difficult to argue that rent levels should not follow those levels. A lot of things are changing now; for very obvious reasons rents are falling and rents at review should also fall. You also have to counterbalance that in the equation.

  Q53  Chairman: Those are all the questions we want to ask you. Is there anything you particularly want to say that we have not covered?

  Mr Rusholme: I do not believe so.

  Q54  Chairman: The message of this Committee is: stick to your guns. We are encouraged by the progress RICS is making but it needs to stick to that and not slip back.

  Mr Rusholme: That is recognised.

  Chairman: Thank you very much.

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