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
| 
