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

Examination of Witness (Question Numbers 54-59)



  Chairman: Welcome. We all know who you are so we can dispense with the usual formality of introductions. When your colleagues representing the pubcos appeared here last time the trade press described it as a Spanish inquisition. That was not our intention. We are after the truth. Although Mr Darby is one of my constituents I am afraid that will not prevent me being a dogged searcher after the truth today. The Committee is disappointed that the industry did not respond more fully to the 2004 report and that we have to have these evidence sessions at all. I agree with the industry that there are other very important questions facing the future of British beer and pubs that need to be addressed, but this issue just will not go away; it simply has not addressed it. Almost the central question for us today as a committee is one that may provoke a titter in the public gallery, namely: can we trust you? I do not feel that we can and you need to persuade us otherwise. The reason is that the reaction by your industry to our May report was so bitterly disappointing. Let me quote what a few people have said. Enterprise Inns only recently described the Committee as being ill-informed and said the report was based upon hearsay rather than evidence. I reject that absolutely. Shortly after the report came out on 13 May Enterprise Inns said that, "The Committee has chosen to focus upon a highly emotive, and we believe unsubstantiated, allegation of systematic and widespread abuse by pub companies of their licensees." We think it is very well substantiated. The former head of Punch Leasing Division, Deborah Kemp, who to be fair is no longer in the industry, talked about the stage being monopolised by a minority group of bigoted and ill-informed MPs egged on by a small number of self-interested pressure groups. Mrs Simmonds, you yourself said of the OFT response to the recent CAMRA inquiry that the industry had a clean bill of health. I do not believe that even the most benign interpretation of the OFT report is that the industry is given a clean bill of health. The result of the OFT decision was disappointing, but it was not a clean bill of health. Giles Thorley, the man who misled this Committee when he gave evidence about flow monitoring equipment, described us as a "kangaroo court". Brulines said they were considering legal actions over claims made in the report. This is the kind of thing we are dealing with. I cannot remember the exact words but they said that at best it was irresponsible and at worst scandalous and the Committee was very lucky to have parliamentary privilege "after writing this trash. But I take heart from the fact that very little credibility will be given to them, given the current furore over their expenses." Brulines are wrong about that. Enterprise Inns' Ted Tuppen said, "Without parliamentary privilege, we would be considering action." If that is what Mr Tuppen has written it is not an idle threat. Being bullied, threatened, intimidated and slagged off is hardly an encouraging response from the industry to what was a very serious and well received report. That is the background to today's session which makes your task more difficult than it need have been. I ask the first question.

  Mr Hoyle: Chairman, I think the witnesses ought to reply to what you have just put.

  Q55  Chairman: Mr Hoyle is absolutely right in his comment, but my first question gives them precisely that opportunity. No major improvements were made following our 2004 report. Why should we not believe that that will be the case again after all I have said to you.

  Mrs Simmonds: Thank you for that introduction. In sitting here the British Beer and Pub Association is not in any way complacent; we take the criticisms of this Committee very seriously. We have worked extremely hard in the past few months to come up with a new industry code that we believe gives greater detailed financial information to both prospective and actual tenants when rent is reviewed. It provides accredited training for both business development managers and prospective tenants and above all we have PIRRS which will allow lessees and tenants to take concerns about their rents to that independent scheme which is already up and running. We are not in the slightest bit complacent. We genuinely believe that there is a sea change and hope that during the next hour we will have the opportunity to talk about any concerns you have and how we will tackle them.

  Q56  Chairman: Your answer to my fundamental question which overhangs the whole session—why we should believe the same thing will not happen again—is what? Members of the industry including quite senior people within the BBPA said to me they had not realised the codes were not being followed and they were shocked by many aspects of the report. I have had some very encouraging and helpful discussions in private with many senior figures in the industry. That is why I take the comments I have just quoted so badly. I believe that most people in the industry think we have put our finger on some important issues. How can we trust you this time?

  Mrs Simmonds: The overriding and important part of this is transparency. We must be open and honest with our tenants; they have to understand how the system will work in future and must have a low-cost process by which they can take action if they believe that the rent set is not the right one.

  Q57  Chairman: Do you believe that the kind of response given to our report last time round by some high profile people in the industry is a helpful way to engage in public debate?

  Mrs Simmonds: I do not think it is in the slightest way helpful. At the end of the day we have to come up with something that will work better. We need a system whereby everyone can understand how it works and an industry code—we have sent a draft to the Committee—to which all our members are committed in terms of its implementation and new company codes which will be accredited by BII. I am aware that the British Institute of Innkeeping has written to you separately on exactly how that will work and I am very happy to discuss that in due course today.

  Q58  Chairman: I have seen the code and I agree that it is a great improvement on what has gone before; it has many things in it that I welcome. When do you expect it to come into force? It has not been approved yet by the BBPA; it awaits formal approval?

  Mrs Simmonds: It has not been approved by the BBPA, and it must also be approved by the FLVA and BII who are co-signatories. We hope to have that done by the end of the year. We will then go through the process of bringing all the individual company codes into alignment with the overarching industry code. All of those codes will have to be implemented. We have said we expect to have the majority of those codes fully implemented by June of next year. We may need additional time particularly for some of the smallest tenanted individual company codes to be taken in.

  Q59  Chairman: I have talked to some of the small regional brewers who are concerned about the compliance costs of the code for which I have some sympathy. It is easy for Enterprise and Punch to throw resources into these codes; it is much more difficult for small family brewers to cope. You are talking about extra time for enforcement of the codes. There are many fewer problems with the smaller regional brewers. Is it a matter of lighter codes or just extra time to bring them in?

  Mrs Simmonds: We have to make sure that the code is applicable to a brewery tenancy and a fully leased pub. If you have a full repairing lease that is very different from a three-year tenancy. It is a matter of making sure that your practice is one that is reflected in the company code.

  Mr Darby: Having chaired the BBPA working party in response to your report I should like to give a little background. I have been Marston's Pub Company's managing director for only a year. Prior to that I was in charge of our beer company and therefore operating in the free trade, so I have had experience dealing with free trade customers for six years: supermarkets and effectively non-tied customers. I come from an arena where you win business only if you do a good job for your customer. When I took over as managing director of Marston's Pub Company it was striking that the then existing industry relationships highlighted by the BESC report were simply not sustainable. It does not make good business to have unhappy relationships with your tenants. We as a business do care about the tie. We own five breweries and we have a lot of people employed in them and ensure we have successful, viable businesses with people employed in breweries and in delivering beer and so forth. But we recognise that you have to earn the tie. In the working party that I chaired there were a number of people including me who were new to the industry, for example Roger Whiteside at Punch. Here is a group of people on the working party who recognise that some very serious concerns are raised by the BESC report and they have to do a substantially better job this time than it did post the TISC report. Do not forget that the working party included not only Enterprise, Punch, Marston's and Greene King but also a cohort of small family brewers including Stephen Gould from Everards and Fullers. This was an industry-wide group that was determined to make a difference. I give you my reassurance that having chaired that group with my reputation being on the line those people absolutely want to make a difference and are determined to ensure that the new code is established and properly conducted in the trade, not least because fundamentally that is good for business.

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