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

Examination of Witness (Question Numbers 160-179)



  Q160  Chairman: Have you had any approaches yet from RICS to be on the trade related valuation group?

  Mr Clarke: Not yet.

  Q161  Chairman: They could do much worse.

  Mr Mallen: My name is Garry Mallen. I am a council member of the ALMR. I was part of the ALMR team of mediation and also attended the RICS forum.

  Q162  Chairman: I want to ask some brief factual questions. Your confederation is made up of a large number of organisations with quite a variety of views on some of the key issues. How easy is it to provide a unified voice? When we take evidence again in however many months from now on this subject what are the chances that you will still be together as a confederation?

  Mrs Nicholls: The key point is that we are a confederation. We are not a new trade body but an umbrella grouping that seeks to bring together the national trade bodies that represent publicans and we are a unified voice for them. We believe that there is a very real democratic deficit in vocalising the views of publicans and we speak where we can on common points of interest with consensus. As an umbrella we work alongside our component organisations in support of them; we do not replace them. Each of them retains its own distinct voice. We are a very broad church. You will appreciate that our component members hold distinct positions. We do not try to hammer home one position that must be held by all; we speak where we can with a consensus and common position where we reach agreement. Therefore, today we are presenting to you where we have reached agreement. We will continue to present on all issues focusing on publicans where we have reached agreement, not just on the tie and the issues before the Committee today.

  Q163  Chairman: You are not driven by the need to reach a consensus on every issue, so you are not an organisation that tries to find the lowest common denominator. You speak only where you can genuinely agree?

  Mrs Nicholls: When we came together and felt there was a role for us to play we very much wanted to avoid the allegation that we would be the lowest common denominator. We want to speak where we can with a common voice and allow our member organisations to speak freely on other issues where they have distinct positions.

  Q164  Chairman: You are not the only ones who have been slagged off by the pubcos. I think Punch said that you represented only a handful of licensees. How do you respond to that allegation?

  Mrs Nicholls: We bring together all the national trade bodies currently representing the interests of publicans: the Association of Licensed Multiple Retailers; the Guild of Master Victuallers; campaigning groups such as Justice for Licensees, Fair Pint and Unite; the Federation of Small Businesses, which has over 4,000 individual publican members, and CAMRA and SIBA. We are also supported in our work by the BII. Therefore, between us as national trade bodies, leaving aside the campaign groups who have many thousands of supporters, we alone directly represent 25,000 publicans or just under half of all pubs in England and Wales. About half of those will be leased and three-quarters will be tied. Therefore, to dismiss us as being a disgruntled minority is foolish in the extreme.

  Q165  Chairman: It is a pretty large handful, certainly. The FSB has said in relation to the concern we pursued in our previous evidence session with the BBPA: "There has been much activity by the pub companies but little delivery of meaningful change." I would like to hear your observations on that.

  Mr Harrison: I was quite disappointed by what I heard a short while ago in terms of what is supposed to have happened since the Committee's previous report. Our experience on the ground is that there has been little movement certainly in the main pubcos which control many thousands of pubs. Initially, there was criticism of your report and some legal threats; there has been continuing pressure on tenants and churn in the large pubco estates; there have been heavy-handed evictions, closures and breaches of codes as confirmed by the BII; and there has been a denial of problems in the sector generally in its formal reporting and in the media. There has been some window-dressing. I give just one piece of information that relates to Punch Taverns and their existing code of practice. I refer to a court case that took place as recently as 17 November.

  Q166  Chairman: Is it a court case that has concluded?

  Mr Harrison: Yes. Their barrister pointed out in strident terms—I can send you a copy of it—that their retail charter was not binding in law and the tenant ought not to seek to rely on it; furthermore, their commitment to upward and downward rent reviews also was not appropriate and the court could not rely on that either. That was said as recently as 17 November by those who otherwise hold themselves out as having taken big strides.

  Q167  Chairman: To what extent does that conflict with the evidence we have just heard from BBPA about the legal enforceability of the codes? If you cannot answer that question now perhaps you can think about it and drop me a note.

  Mr Harrison: Yes.

  Q168  Chairman: Enforceability lies at the heart of the debate.

  Mr Harrison: In relation to the strides supposedly made on the codes we have seen what we believe to be some ill-considered codes certainly in terms of enforceability. All of it seems to have been hashed together at the last moment in advance of this Committee's inquiry. Letters have arrived with you from the BII and other people turn up. We have not seen a draft code. I would have thought that if a great deal of collaboration was going on we would have seen it but we have not; and we have not been asked to comment on it. We do know from the heads of terms that the code proposed is not independent and binding. As of today it does not seem to be enforceable. There appear to be no effective sanctions apart from forcing somebody out of the BBPA possibly at the cost of a six-figure sum to that organisation. That does not seem to me to be a sanction. ALMR as a member of the IPC initiated the mediation process. Only one pubco turned up to it. We formed the new confederation. It is great to see it because no longer do we have to put up with the BBPA claiming it represents publicans: you now have before you people who do. We have been working with the RICS and have been instrumental in encouraging them to report as they did. We have all been working together with the ALMR on benchmarking and also with the BII to look towards the future in terms of training.

  Q169  Chairman: We shall go into detailed questions about rents and so on in a minute or two, but that is a helpful general picture. Mr Clarke, do you want to add anything?

  Mr Clarke: The code we have just heard about has been offered up as a solution to a multitude of previous sins. It is almost as if there was never any code before and this will now be the code. I remind the Committee that there was a code before the TISC in 2004 and a code before the BESC in 2008 and one after the BESC in 2008. This one really cannot be any different in that it is not mandatory, not regulated and independent.

  Mr Mallen: There is further evidence of this. Pubcos have stated that their code is non-contractual and all deals done under the code are concessionary and wholly discretionary. I received such correspondence in September.

  Q170  Chairman: With one particular pubco?

  Mr Mallen: Yes.

  Chairman: That makes the answers we are to get from BBPA on that issue all the more important. I am sure they are listening to this.

  Q171  Mr Clapham: Mrs Nicholls, the Confederation has welcomed the RICS forum report. Can you confirm whether or not the Confederation will sign up to it? We would also like to know whether you will provide information to the benchmarking register following the RICS code of practice in providing information for rent reviews et cetera.

  Mrs Nicholls: I take those in two parts. First, we very much welcome the RICS report which entirely concurs with the analysis and some of the recommendations of this Committee. It is a welcome recognition by an independent third party of the problems that face the industry and our members.

  Q172  Chairman: Initially, they were not quite so inclined to change but there is more joy in heaven over one sinner who repenteth.

  Mrs Nicholls: Absolutely. I see the role of a Select Committee as making observations on an industry and for an industry to listen and respond positively where it can. Undoubtedly RICS have done that and you have heard from them today. We have worked collaboratively with them; both Mr Clarke and Mr Mallen made presentations to the forum. We held meetings with them subsequently about inputting into the trade related valuation working group guidelines and their code, which incidentally we agree with entirely. There are too many industry codes; there should be one that is independent and RICS should have primacy. If we are invited to do so we shall be very happy to work with them and endorse it. Benchmarking falls entirely within my area of responsibility at ALMR; I am the person who runs the survey that we carry out at present. We shall be very happy to work with them. We have already had meetings with them about how we can take that forward. We have not been sitting still and waiting to have a follow-up session or for somebody to come to us. As lessee groups we have worked to refine the benchmarking study so that now we split it out from multiples to lessees. RICS have said that at present the study is limited by a lack of pan-industry co-operation and that has been proved in spades when we have gone out into the marketplace to ask people to input. Previously it was limited to ALMR members; it has now been extended to anybody in the industry who wants to participate in that study. We have had lots and lots of responses from individual lessee groups but not from the landlord groups. Landlords who previously participated in the survey have pulled out.

  Q173  Mr Clapham: Why do you think that is?

  Mrs Nicholls: I do not have to guess; I have been told that it is because of ALMR's participation in the IPC and before this Committee.

  Q174  Mr Clapham: You expressed some concerns about how and when the RICS code would be implemented. We heard from RICS that it would happen in spring of next year but we know that spring might turn into summer and summer into autumn. Are you helped by what you have heard from RICS?

  Mrs Nicholls: Yes.

  Mr Mallen: I am very much encouraged by the RICS report and the speed with which they have dealt with it. They seem to have taken on board the comments in the Committee's report earlier this year, dealt with it quickly and issued their report promptly. I believe they have acted in the interests of the industry. I am sure the IPC share their desire to see somebody make the code mandatory because in that way it is enforceable and we shall not end up with the same problems we had in 2004, 2008 and today.

  Q175  Mr Clapham: Is there anything missing from the RICS report that you feel ought to be included?

  Mr Clarke: We are delighted to hear that they intend to enshrine the recommendations of the report in their revised guidance, particularly the issue of the tied tenant being no worse off than the free of tie tenant that is a principle for which all of us have been fighting for some time.

  Q176  Chairman: You heard the earlier discussion in this room. Are you happy about the way that crucial issue was met?

  Mr Clarke: That is exactly what I am about to touch upon. We must be sure that the guidance will be absolutely clear. Even the RICS would be the first to admit that the misinterpretation of the guidance has been used to the benefit of some surveyors. We must ensure that there is now no muddying of the water. As to the issue of advantages and disadvantages being valued I believe that is a perfectly valid comment. If those benefits or onerous terms are contractual and are in the terms of the lease they should be included in the valuation. If they are discretionary—some would describe them as onerous—there is no way that effectively they should be quantified and included in the rental valuation.

  Q177  Mr Clapham: Were you encouraged by what was said this morning by RICS in relation to the Brooker case and the ways in which they see it providing some flexibility?

  Mr Harrison: To put it in a wider context, since the RICS report came out there has not been a rush to accept its findings. Earlier Mr Hoyle asked whether any pressure had been brought to bear. We know that there are plenty of surveyors working within the RICS and trade related valuation group on behalf of the pubcos who will no doubt be lobbying in relation to that report. The report has not been universally accepted. We have seen correspondences to tenants of companies such as Greene King. I know that the Chairman is meeting them later so perhaps he could ask them why they are writing to tenants denying what that report means or perhaps suggesting that the Brooker case does not have significance. I use that word `significance' because that was how Mr Rusholme described it earlier in his evidence. Therefore, we are not seeing as we have been told by the BBPA a rush to embrace this report. That is not our experience at the moment. Brooker has been put in context by BBPA members and large pubcos as being specific to that particular case but it is not at all. That is why Mr Rusholme describes it as significant. The judge in that case, Ian Hughes QC, was very specific about making two general points. First, he conferred some credibility on valuation information paper no.2, which is the guidance that Mr Rusholme is looking to revise; second, he went on to include a set of issues that hypothetical tenants could consider in rent reviews, such as the general economy and the fact that a tied lease is likely to be more onerous than a free of tie lease et cetera. Therefore, in some ways he was already embracing the prime principle in that judgment. I believe that is why the RICS and their solicitors are interested in a general and not specific set of principles. It has wider implications. We are in the process of taking leading counsel's advice on that at the moment and perhaps in due course we can come back to the Committee on that.

  Q178  Mr Clapham: Mr Mallen, you are not as encouraged by the BBPA's code of practice as you are by some of the recommendations that RICS make in relation to their code of practice. Is it that you are not happy with the implementation of the BBPA code or what is contained in that code of practice?

  Mr Mallen: I am sure I could bore you for hours on the things in the code that do and do not suit the industry. In one word the issue is enforceability. As long as it is not possible to enforce it it is an issue. I do not see the sanction of being thrown out of the BBPA as a matter of great concern. The BBPA does not even represent all the landlords in the country in any event, so if they are not members they do not have to abide by it.

  Q179  Mr Clapham: One point made earlier by the previous witnesses was that the codes of practice established a kind of contract and it might be possible to enforce it, but you tend to disagree with that.

  Mr Mallen: The evidence I have in front of me is that a senior executive of one pubco says that they are wholly discretionary. I believe that the lease is the contract and a court would see it that way.

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