Pub Companies - Business, Innovation and Skills Committee Contents


1  Introduction


Past inquiries

1.  The deep-seated problems within the pub industry and in particular the relationship between pub companies and their lessees who run pubs, have been the subject of repeated scrutiny by Parliamentary select committees scrutinising the Department for Business, Innovation and Skills and its predecessors. Our Report is the fourth Report on those problems over the past seven years. In 2004 the then Trade and Industry Committee published its Report Pub Companies.[1] This was followed-up in 2009 by the Business and Enterprise Committee's Report, Pub Companies.[2] In 2010, the Business, Innovation and Skills Committee published a further follow-up Pub Companies: follow-up.[3]

2.  Each Committee Report challenged the industry to deliver meaningful reform. On every occasion the industry was found wanting. Therefore, the 2010 Report delivered a final ultimatum to the industry. It concluded that:

Past Committee inquiries into these issues have proved that proposals for reform mean nothing if they are not carried through. This Report makes clear that this is the industry's last opportunity for self-regulated reform. If it does not deliver on its reforms by June 2011, then government intervention will be necessary. We do not advocate such intervention at this stage, but remain committed to a resolution to all the problems discussed in this Report and those of the 2004 and 2009 Reports.[4]

It made clear to the industry that it had failed to deliver on its promises for reform on two previous occasions and that if it failed to deliver on its latest promises for reform "it should be in no doubt what the reaction will be".[5]

3.  We congratulate the previous Government on its enlightened response to the 2010 Report. Rather than simply providing a commentary on the recommendations, that Government gave the following undertaking:

Government gives the industry until June 2011 to improve. If the Business, Innovation and Skills Committee concludes by then that the Code is not working as well as it should we will consult on putting the Code on a statutory basis with effective enforcement.[6]

4.  This declaration for the first time put the Committee in the driving seat. It was for the Committee to make the judgement and for Government to act on the Committee's conclusions. The change of Government at the 2010 election could have meant that this undertaking did not have to be honoured. However, when he came before us on 20 July 2010, the Secretary of State made clear to us that the coalition Government would honour its predecessor's commitment:

Mr Binley: You will know that we recommended that we should re-look at the question of code of practice in the industry if we felt the pub cos were not acting properly within that voluntary code, and the previous Government accepted that they would take action if our findings were that the pub cos were not acting properly within that code. Can I ask if you will confirm that the present Government would continue that policy?

Vince Cable: I can confirm that.[7]

5.  We thank the Secretary of State for his clear undertaking that, should we conclude that there is a need for statutory intervention, then his Department will act in accordance with the commitment given by the previous Government.

This inquiry

6.  We called for an update on progress made by the industry at the end of July 2010 and again after the return of the House in autumn 2010.

7.  This inquiry was launched in June of this year. Witnesses were invited to submit evidence based on the following terms of reference:

The inquiry will examine the recommendations made by our predecessor Committee in March 2010. Of particular interest to us is whether the problems raised in the Parliamentary inquiries of 2004, 2009 and 2010 have been resolved or whether statutory regulation is required.

The following areas were also highlighted in the terms of reference:

  • If the BBPA and IPC are now in dialogue and if so how this is progressing;
  • Whether the Pub Companies' individual Codes of Practice are robust enough and whether the major pub companies have built upon the de-minimis requirements of the BBPA's Framework Code;
  • If the Codes of Practice are being complied with;
  • How the BII is policing the codes and whether this is effective;
  • The enforceability of the codes;
  • If AWP machines are now being treated more fairly and tenants are being given a genuinely free of tie option;
  • The treatment of flow monitoring equipment;
  • The advice being provided by BBPA to prospective publicans;
  • The effectiveness of the new RICS guidance on pub rental valuations and whether it provides clarity on the principle that a tied tenant should be no worse off than a free of tie tenant by defining what constitutes a countervailing benefit;
  • The creation of an industry benchmarking survey;
  • The availability and effectiveness of complaints procedures and an independent disputes mechanism;
  • The availability of genuine free of tie options ie an open market rent review under RICS new guidelines, ability to buy beer from any source; and
  • The guidance from BII on the type of pub leases available and what the options mean in reality to prospective lessees. This includes free of tie, tied pricing and discounts as well as the business support countervailing benefits available.

8.  The evidence we received continues to demonstrate a high level of acrimony within the industry and is littered with claims and counter-claims, from both sides, including accusations of providing factually incorrect material. Yet again we are put in the position of receiving contradictory evidence. We are disappointed with how little the industry has moved on. We are also disappointed by the accounts we received from deeply unhappy lessees.

9.  In May of this year the British Beer and Pub Association (BBPA) and the Independent Pub Confederation (IPC) commissioned a survey of lessees from CGA (referred to in this Report as the BBPA/IPC survey)—the same company our predecessor Committee used in 2009—to analyse the position of lessees. The BBPA said the aim of its joint survey with the IPC was to assess the availability, recognition and implementation of the company codes of practice with existing and new lessees.[8] The results of the survey, as well as the surveys carried out by the Federation of Small Businesses (FSB) of its members and the recent survey and report by the Institute of Public Policy Research (IPPR) on tied houses have assisted our analysis of the reforms.

10.  The contradictory evidence we received can also be seen in the poor relationship between the two key players, the BBPA—the trade association for the pub companies and brewers—and the IPC—the umbrella body representing lessees. The 2010 Report made the following observation on that relationship:

We deprecate the fact that the BBPA refuses to enter into dialogue with the IPC. The BBPA needs to work with the lessee groups and representatives towards a consensus on the issues raised in both this Report and the 2009 Report. We expect the BBPA to engage with the IPC as a matter of urgency.[9]

It also recommended:

The BBPA and the lessee organisations need to work together to develop processes in a way which are mutually beneficial. Both sides must ensure that the history of lack of trust and intimidating behaviour by pub companies does not magnify disagreements on this issue and undermine the Framework Code.[10]

11.  The Government's response to the Report was:

Government will be doing what it can to encourage the various parties to work together over the coming weeks and months with the objective of reaching a situation where further government intervention is unnecessary. We intend to monitor progress at regular intervals.[11]

12.  It is clear from this inquiry that little, if any, meaningful engagement has taken place since the 2010 Report was published. Ms Nicholls, Secretary of the of IPC gave the following assessment of the engagement between the two bodies:

They are not as good as I would like them to be. We have had one formal meeting of the IPC Chairman and the BBPA Chief Executive, and three follow up meetings between me and BBPA officials. I think we would really like to have a healthy and robust dialogue with the BBPA, as indeed we have with other bodies—BIIBAS, BII, RICS.[12]

13.  It is possible that a significant level of disagreement could have been resolved had there been meaningful engagement between the IPC and the BBPA. The fact that there was not reflects badly on both sides.

14.  This Report is an assessment of the recommendations made by House of Commons select committees and what the response has been from the industry. It does not go back over the arguments and debate which led to our past recommendations nor does it try to evaluate the reasons why the recommendations were not met. It simply states the evidence received against the criteria set out by our predecessors as to whether or not those recommendations were being fulfilled.


1   Trade and Industry Committee, Second Report of Session 2004-05, Pub Companies, HC 128 Back

2   Business and Enterprise Committee, Seventh Report of Session 2008-09, Pub Companies, HC 26 Back

3   Business, Innovation and Skills Committee, Fifth Report of Session 2009-10, Pub Companies: follow-up, HC 138 Back

4   HC (2009-10) 138, Summary p 4  Back

5   HC (2009-10) 138, para 161 Back

6   Business Innovation and Skills Committee, Eighth Report of Session 2009-10, Pub Companies: follow-up: Government Response to the Committee's Fifth Report of Session 2009-10, HC 503, para 6 Back

7   Oral evidence taken before The Business, Innovation And Skills Committee HC (2010-12) 384-i, Q76 Back

8   Ev 89 Back

9   HC (2009-10) 138, para 11 Back

10   HC (2009-10) 138, para 40 Back

11   HC (2009-10) 503, para 7 Back

12   Q242 Back


 
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© Parliamentary copyright 2011
Prepared 20 September 2011