5 The Beer Tie
PREVIOUS COMMITTEE INQUIRIES
147. In 2009, Business and Enterprise Committee
Report made the following conclusions:
The dispute over the tie could be ended easily: every
lessee could be offered the choice of being free or being tied.
This would enable both sides to prove their competing claims.
We believe each and every existing lessee should, in a phased
programme, be offered this choice and the same choice should be
offered to every new lessee as he or she takes on the lease. To
make the choice fair, the process of agreeing revised rents must
first be improved as we have previously recommended.
Although a voluntary agreement is preferable, we
doubt that the pubcos would respond effectively to such an approach.
We therefore recommend that the Department considers how best
to achieve this end and that it opens an urgent consultation into
the principle and phasing of this proposal. The status quo is
not an option. [193]
The 2010 Report agreed this was the way forward and
recommended "the option of being tied or being free of the
tie is the only way to judge properly the fairness of the tie".[194]
148. The previous Government responded to the
Report in the following terms:
The Code of Practice should also incorporate a beer/non-beer
tie option for tenants with a commitment that the Government will
act if the industry does not.[195]
That Government's support for community pubs briefing
paper confirmed that position and undertook to "monitor progress
for one year and intervene to introduce a non-tie option and legislate
for a Beer Order to allow guest beers if these flexibilities are
not introduced".[196]
FREE OF TIE OPTION PROGRESS
149. The BBPA told us that although a free of
tie option was not explicit in the Framework Code, it "does
not preclude companies from offering free of tie options".
The BBPA went on to say that many of its members already offered
a variety of agreements and cited as evidence:
- 9 of its largest members offer
free of tie agreements on beer
- 5 of these offer to all their tenants and 4 offer
to new tenants only
- 75% of new tenants are aware of Free of Tie Options
- Options currently cover about one third of the
pubs owned by BBPA members, ie. approximately 8,000 pubs.[197]
150. Ted Tuppen of Enterprise Inns told us that
his company "have and will consider proposals from any publican
who wishes to exchange their current agreement for an entirely
new agreement on a free of tie basis".[198]
He went on to state that:
We are negotiating free-of-tie deals with people
as we speak, and in an open market. If somebody wants to take
a pub from us free of tie, they will have a business plan, they
will have a rent that they believe is correct and they will make
that rent bid.[199]
151. By contrast, Mr Whiteside argued that Punch
Taverns was not offering genuinely free-of-tie deals because lessees,
as independent free of tie operators, would not have access to
the same level of discount on supply of beer as Punch. In addition
he said that Punch needed to 'protect' its 'buying terms arising
from scale.'[200]
152. The BBPA/IPC survey revealed that only 16%
of new lessees had been offered a free-of-tie agreement by their
landlord and only 9% of current lessees had been offered changes
to their agreement.[201]
In addition, CAMRA argued that the 'free of tie leases' being
offered were unlikely to be of 'substantial interest' even if
proactively marketed to lessees as:
Any concessions on the tie are fully counter-balanced
by requirements for an unsubstantiated increase in rent or an
unsubstantiated Tie Release fee.[202]
153. Our predecessor's recommendation
clearly stated that over a period of time all existing lessees
and all new lessees should be offered a free of tie lease with
an open market rent review based on RICS guidance. This recommendation
was endorsed by the then Government. Despite this clear instruction,
the BBPA/IPC survey has shown that only 16% of new lessees and
only 9% of current lessees had been offered a free-of-tie lease.
Furthermore, it is open to question whether the free of tie agreements
which have been offered are 'genuine' free of tie and accompanied
by a full open market rent review. Again we conclude that the
industry has shown itself unable or unwilling to deliver meaningful
reform.
193 HC (2008-09) 26, paras 138 and 139 Back
194
HC (2009-10) 503, para 153 Back
195
HC (2009-10) 503, para 6 Back
196
HC (2009-10) 503, para 10 Back
197
Ev 91 Back
198
Ev 107 Back
199
Q195 Back
200
Ev 82 Back
201
Written evidence submitted by APPG Save the Pub (para 2.2). Published
in Volume II on the Committee's website www.parliament.uk/bis Back
202
Written evidence submitted by CAMRA (para 6.9). Published in Volume
II on the Committee's website www.parliament.uk/bis Back
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