Written evidence submitted by the All-Party
Parliamentary Save the Pub Group |
The All-Party Parliamentary Save the Pub group was
established in February 2009 with the aim of bringing together
MPs and peers to help protect pubs. Since its formation it has
held a number of successful meetings in Parliament discussing
all the issues affecting the pub trade and engaged in constructive
dialogue with ministers. The group's membership includes 118 MPs
and peers from all parties. The group made submissions to previous
committee inquires, in March 2009 and February 2010.
1.1 The BBPA and IPC - are they in dialogue
and, if so, how is this progressing
The group is not convinced that the BBPA has made
a significant attempt to engage in sustained and effective dialogue
with the IPC, based on the evidence available. Since reports in
the trade press of an initial meeting in May last year, little
has been heard of dialogue between the two groups. The only evidence
recently of the groups working together was the publication of
a survey, conducted by research group CGA, on tenants' and lessees'
attitudes towards the pubcos and new codes of practices.
Despite the survey being jointly commissioned by
the BBPA and IPC, members of the IPC subsequently expressed frustration
that the survey did not address the group's key concerns, such
as tenant profitability.
1.2 Whether the Pub Companies' individual
codes of practice are robust enough and whether the major pub
companies have built upon the de-minimus requirements of the BBPA's
The group is concerned about the robustness and effectiveness
of the codes of practice and has no evidence they have gone beyond
the minimum requirement. Speaking at a meeting of the Save the
Pub group this month (June 2011), Nigel Williams, president of
the only licensee group to sign up to the Framework Code of Practice,
the Federation of Licensed Victuallers Associations (FLVA), said:
"The framework code is a start - but we do
not see anywhere that the codes have gone further than they need
to go. They have gone at best, just about far enough. They haven't
addressed overall tenant profitability."
The key point of course is that the BBPA's Framework
Code, upon which all other codes are based, does not in itself
go as far as the Committee expected. On a guest beer right for
example, the Framework Code simply states that individual companies
must stipulate whether or not they are offered - and does not
require this option to be offered. Despite this weak requirement,
both Marston's and Scottish & Newcastle's codes make no mention
of any guest beer options offered to licensees.
1.3 Are the Codes of Practice being complied
In March 2011 it was reported by the trade press
that 21 serious complaints had been received by BIIBAS from licensees
over operation of the codes. A report from BIIBAS stated:
"BIIBAS has seen an increase in the number
of enquiries from licensees who feel that they are not receiving
the level of service expected by the codes.
"Complaints received are often complex and
involve several areas of business. BIIBAS has received a number
of complaints from licensees whose experiences fall outside of
the remit of the current codes of practice."
BII chief executive Neil Robertson reported to the
Save the Pub Group at the June 2011 meeting that 25 serious complaints
had now been received and five breaches of the code had been found.
1.4 How the BII is policing the codes and
whether this is effective
We acknowledge that the BII has invested significant
time and effort in establishing a system to police the codes through
the BIIBAS scheme. However, the group is concerned about the impartiality
of the BII in this matter, bearing in mind the funding it receives
from its corporate members - including the major pub companies.
Although BIIBAS reported five breaches of the code, only one of
these was since the codes have been updated. This seems a very
small number and raises questions over how well the codes are
being policed and whether BIIBAS has the teeth to effectively
police the codes.
Neil Robertson, the BII's Chief Executive also admitted
to the Save the Pub group at the June 2011 meeting that new tenants'
understanding of the business model is still poor, despite the
codes. He said:
"I am despondent in that
I suspect we
are now back at four or five (out of 10) not fully understanding
the business model
but that is the complication of the industry
and we will work hard to improve that further."
1.5 The enforceability of the codes
Again, with the industry effectively self-policing
itself there is no deterrent for a code breach. The group therefore
believes that a statutory code is the only effective and reliable
way to police the industry. The BBPA's Brigid Simmonds told the
group at the June 2011 meeting:
"There are areas around the tie that could
not be in the framework code because of the competition issues
that offers up - all we can do as an association is to encourage
our members to do more and to offer more to their tenants - and
we set the framework up to do just that."
The Save the Pub Group does not accept this assertion
and believes that any Code must cover the substantive issues (a
genuine free of tie option and guest beer right) for it to be
effective. Should the BBPA's claims be proved, this further demonstrates
the need for a statutory code.
1.6 If AWP machines are now being treated
more fairly and tenants are being given a genuinely free of tie
The Committee's previous report branded the practice
by pubcos of taking 50% of the machine income and then 50% of
the remaining profit as part of the divisible balance for rent
as "totally unacceptable".
However despite this strong view, we remain concerned
that pubcos are taking into account licensees' AWP income as part
of rental negotiations. BII chief executive Neil Robertson was
reported on The Publican's Morning Advertiser website on
June 2, 2011, as saying:
"All landlords have completely removed shared
machine income from their rental calculation. However, some may
still take into consideration the tenant's share of machine income
when making their rental bid."
"We advise you to ensure you understand how
the landlord has arrived at their rental bid and whether it has
been materially influenced by the tenant's share of income."
Many pubcos are only offering a free of tie option
on AWP machines in exchange for a penalty fee (described by Marstons,
Admiral and Enterprise as a "charge"/"increased
rent"/"annual release fee" respectively). Scottish
& Newcastle does not offer free of tie AWP option at all.
The CGA survey found that 44% of existing businesses and 42% of
new entrants are still tied for AWPs.
1.7 The treatment of flow monitoring equipment
The group still has concerns about the accuracy of
Brulines equipment, as noted in previous committee reports. The
group notes that the National Measurement Office (NMO) refused
to substantiate claims by Brulines that its equipment was "fit
for purpose", after tests by the NMO. Paul Dixon of the NMO
told The Publican magazine:
"We've given no approval of the systems tested,
or commented on its suitability for the purpose for which it is
"We haven't given any opinion on whether
the technology is good, bad or indifferent."
"We have just performed a range of tests
and reported our findings. Because this technology is not prescribed
under legislation there are no error limits."
1.8 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 group has seen no evidence that the RICS guidance
is effective in offering clarity on the principle that a tied
tenant should be no worse off than a free-of-tie tenant. Indeed,
the group notes that the long-delayed 20-page guidance published
by RICS in December 2010 contained no direct reference to this
principle. RICS also stressed at the time of publication that
the paper was "guidance" and not "legally binding".
RICS also said its members "are not required to follow the
advice and recommendations contained in the paper" (thepublican.com,
December 22, 2010).
2.1 The availability and effectiveness of
complaints procedures and an independent disputes mechanism
The group acknowledges the work of the Pubs Independent
Rent Review Scheme (PIRRS) to settle disputes. However, the CGA
survey suggests a major lack of awareness among licensees of the
scheme. Well over half (56%) of existing and new licensees said
they unaware of PIRRS.
The first PIRRS annual report found that only five
dispute cases had been resolved by the scheme. The report notes
that concerns had been raised as to the "accuracy of the
information that is supplied by the independent experts"
based on the independent experts' "listed conflicts of interest
on the website".
2.2 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
At the June 2011 meeting, the group was given clear
and unequivocal evidence from Enterprise Inns and Punch Taverns
that neither offered complete free-of-tie options with an open
market rent review. This is a cause of serious concern for the
Save the Pub group.
Simon Townsend, Enterprise's chief operating officer,
told the group:
"I will go straight to the nub of the issue.
We have not included the availability of a completely free-of-tie
option within our code of practice"
Roger Whiteside, Punch's leased division managing
"We have stopped short in one respect
we were to offer them (licensees) a completely free-of-tie option
then we would be giving up the additional benefit we gain through
our scale and not available to them as independent licensees.
If we had to give that up, then that would jeopardise the business
There is also evidence of a glaring lack of willingness
by the pubcos to actually offer a free-of-tie option. The CGA
survey revealed that only 16% of new licensees had been offered
a free-of-tie agreement by their landlord. In addition only 9%
of current licensees have been offered changes to their agreement,
the survey showed.
It is clear that the pub companies have not
done what they have clearly been asked by the select committee
(and Government) to do and it is clear that all the different
leases on offer still involve the pub company dictating the rent
and what this means is that the pubco would still be taking more
from pub turnover than is fair, reasonable or sustainable. If
the "tie" is as attractive as pubcos suggest it is,
then should have the courage to offer a genuine free-of-tie option
alongside it (in this model the pubco gets the rent only at a
fair independent level - paying more for product should then lead
to lower) rent, which is not what is being offered).
The Group is deeply concerned that some companies
are using the term "free of tie pricing" for leases
that are patently not free of tie and simply involve a different
set of tied prices and believe this is deliberately misleading
and they should be asked to cease doing so.
2.3 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
The group is aware of the Pre-entry Awareness training
course that the BII operates. However the group notes that more
than a fifth (22%) of new licensees were not required by their
pubco to take the course in order to take on a pub.
The group is concerned that despite successive Parliamentary
investigations over the course of seven years issues still remain
and around 25 pubs a week continue to close, meaning vital community
assets are lost. An average pub employs around 10 staff, which
reveals the human cost of a pub closure as well as adding to the
difficult overall economic situation.
On a specific point, the Save the Pub Group wishes
to point out that oft quoted statistics that free of tie pubs
close in greater numbers than tied pubs is both misleading and
also seriously dubious. Apart from the fact that these statistics
are collected by the BBPA and paid for by the pub companies (and
cannot therefore be regarded as impartial) they are misleading
as they do not include temporary closure and the rate of business
failure for tied pubs is many many more times that what it is
for free houses; dubious because of the deliberate practice of
selling tied pubs to developers who only close the pub after the
sale, once the pub can be declared as a "free of tie"
pub even though it has only traded as such for a short time (with
the closure already planned). There is considerable evidence of
this. Sometimes the pub may not even open again but is offered
on a free of tie basis, which means that again, when it is closed
permanently (not the same thing as the doors closing) it is reported
as being free of tie even though it never traded as such!
This is a scandal and needs to be exposed and the CGA figures
One of the key aims of the Save the Pub group when
it was established was reform of the beer tie model. The group
believed then, and still does, that the model makes it impossible
for some licensees to make a living and leads to pub closures.
This is due to the lack of a genuine free-of-tie option along
with an open market rent review.
The group believes the pub companies have failed
to meet the full recommendations from previous committees and
therefore a statutory code of practice is required for the industry
together with an independent ombudsman, funded by the pubcos.
The group therefore believes it's now time for the
government to legislate to force companies to offer a free-of-tie
option with an open market rent review and a guest beer option.