Written evidence submitted by the All-Party
Parliamentary Save the Pub Group
On behalf of the All-Party Parliamentary Save the
Pub Group, I am writing to you regarding the Government's recent
response to the Business, Innovation and Skills Select Committee
report on Pub Companies.
As we are sure you are aware, we and many others
from the pub trade were extremely unhappy with the Governments
response to the Business, Innovation and Skills Select Committee's
fourth and final damning report into pub companies. The report
clearly showed that Pub Companies had failed to regulate in line
with the recommendations of the previous three reports and as
such, the Government should implement reforms including putting
the codes of practice on a statutory footing.
Despite making clear promises to do so, the Government
response has failed to offer anything substantive, let alone actually
adopting the Select Committee's recommendations. Ed Davey gave
assurances to stick to the previous Government's plans to set
a timetable to act if the industry did not reform itself in response
to a question posed by Greg Mulholland in the House on the 30
June 2010; "after vigorous lobbying, including by the
all-party "Save the pub" group, the last Government
confirmed plans to relax the beer tie and to set a timetable to
act if the industry did not reform itself. Can we get an assurance
from the Minister that this Government will stick to that plan
and timetable?" Mr Davey answered "yes",
which clearly and unequivocally indicates backing both the plan
and the timetable. The plan stated that:
— "We
will endorse the one year deadline for the industry to show it
is complying with its own Code, making clear that Government will
monitor progress for one year and intervene to regulate the market
by putting the Code on a statutory basis backed by an industry
enforcer if the industry fails to deliver.
— "We
will push the industry further to offer freedoms for tenants to
offer consumer choice as part of their Code of Practice. The code
of practice should offer tenants a tie/non tie option to enable
them to best reflect the needs of the community and a guest beer
option for those tenants that opt for a beer tie.
— "We
will also make clear that Government will 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".
The fundamental commitment here is to introduce a
statutory code, a free-of-tie option and a guest beer right for
tenants who remain tied. It is clear and explicit.
The Rt Hon Vince Cable also confirmed to the Select
Committee that the Government would take legislative action (again,
along the lines of the plan put forward by the previous Government)
if the Select Committee found that the large pub companies had
not reformed. Mr Cable was asked by Brian Binley, "You will
know that we recommend that we should re-look at the question
of code of practice in the industry if we felt the pubcos were
not acting properly within that voluntary code, and the previous
Government accepted that they would take action if our findings
were that the pubcos were not acting properly within that code.
Can I ask if you will confirm that the present Government would
continue that policy? Mr Cable replied: "I can confirm that".
Below are outlined a series of grave concerns that
the Government's response to the Select Committee report has prompted:
— Firstly
the response is based primarily on negotiations with the British
Beer and Pub Association (BBPA) which took place behind closed
doors, not only excluding Independent Pub Confederation (IPC)
organisations but without even the IPC or the Committee's knowledge.
The previous attempt at bringing forward a solution to these issues
was based on mediation, but this method had limited success. For
Ministers to then draw up a solution with only one side of that
dispute consulted is not only reprehensible but also, considering
the nature of the industry, renders it illegitimate. Had the IPC
been included, the department would be aware that the response
is not offering anything substantive at all. Believing the submission
of the BBPA is frankly naive and the very fact that they are now
claiming that the problem is solved should demonstrate that they
have conned Ministers and officials at the Department for Business
Innovation and Skills. The fact of the matter is that this is
their code and offers very little to the licensee.
— The
response states "Following intensive discussions with Government,
the industry has now made a commitment that it will implement
a range of substantive reforms". To claim that these are
industry-agreed reforms is outrageous, given the failure to involve
the other side of the argument in the negotiations.
— The
proposals make no significant changes to the Codes of Practice
asked for by the Select Committee or IPC organisations such as
CAMRA, Fair Pint and the Federation of Small Businesses. They
do not address the fundamental issue that the Pubco model takes,
and by its nature must take, more from pub turnover than is fair,
leading to failures and to closures.
— They
fail to include any action on delivering flexibility such as a
genuine free of tie and guest beer options, which means there
is no effective mechanism to reduce the overinflated prices of
tied products and is a key reason the proposed reforms are weak
and ineffectual. Would the Department for Business, Innovation
and Skills agree with the EU and domestic competition law principles
that the disadvantages of the tie should be countervailed by benefits,
one of which would be a reduced rent, in order to render the tied
licensee no worse off than if they were free of tie?
— We
would also raise concerns that in Mr Davey's recent article for
Lib Dem Voice, he said that there was a call "to end
the tie entirely". There was no such call in the Select Committee
response and nor was there such a call from the IPC and others
within the pub sector. The call was simply for reform of the tie.
We would also note here that the proposals that were put forward
would only impact on Pub Companies that have over 500 Pubs, thus
protecting the family brewers.
— The
Government have also swallowed the myths being peddled by the
BBPA that free of tie pubs were closing at a greater rate than
tied pubs, stating in the response that "it sees little
evidence to indicate that tied pubs are more likely to close,
as has been suggested". This is despite figures compiled
by the Save the Pub Group and CAMRA, based on existing CGA figures,
which showed that the exact opposite was the case. These figures
were sent to the department, although we received no acknowledgement
of these and they were evidently ignored.
— These
two points demonstrate a complete misunderstanding of the subject
matter and failure by Ministers and the department to act with
due diligence, as well as showing how ill-thought out the whole
process has been.
— It
is acknowledged in paragraph 29 of the response that the question
is over risk and reward, with no free of tie option that puts
all the eggs of rebalancing in the one RICS guidance basket. We
would urge ministers to seek confirmation from RICS that the countervailing
benefits (including a lower rent) outweigh the inflated tied product
prices, since the Government response relies almost entirely on
the correct guidance.
— We
would further note that under the Government proposals, rent review
assessments do not have to be signed off by a RICS official; this
is only required for new lease rent assessments. The fact of the
matter is that what is needed is for all rent review assessments
to be signed off by a RICS official. What has been proposed by
the Government is the antithesis of what is needed.
— PICAS,
the independent mediation body, is set to be funded by the BBPA
and thus in turn by the Pubcos; PICAS as a result is in no way
an independent body. Not only this, but it will also not deal
with rent disputes, which will be dealt with by PIRRS.
— There
also appears to be confusion over the actual role of PICAS, as
to whether it is an independent mediation body or an arbitration
body. Both Government and BBPA comments on PICAS appear to be
confused. Given that mediation with the large Pub Companies is
unlikely to work, are ministers in a position to confirm that
PICAS will be an arbitration body which would be significantly
more effective in ensuring redress of code breaches?
— We
note that the PICAS arbitration body will cost lessees £200
to complain, which in fact creates a worse situation than we have
now, and is a further disincentive to whistle-blowing on bad practice
by the Pub Companies.
— It
also states in the Government response that "PICAS will be
operated under the same governance as PIRRS, namely the BBPA,
BII, FLVA, GMV and ALMR and would be funded through a levy raised
primarily from BBPA members". The Save the Pub Group understand,
however, that the GMV knew nothing of their future involvement
in PICAS, having been neither asked nor consulted on it.
— The
Save the Pub Group have also been made aware by the ALMR that
they were contacted in October and given a very brief description
of PICAS's function. We gather they were unwilling to support
the proposal without further detail and in the absence of information
on other changes to the code and therefore asked for a detailed
and formal proposal to be submitted to the PIRRS Board for its
consideration. The Save the Pub Group understand that the ALMR
have not been asked to participate in PICAS per se, although as
a Board member of PIRRS they would consider any sensible request
to build on existing functions or bring in new services under
the PIRRS umbrella. We are lead to believe no formal proposals
have been submitted to PIRRS.
— With
regard to prescribed flow monitoring, the department have been
told- by the very people taking advantage of the law's vagaries—that
flow monitoring equipment is not in use for trade, and therefore
does not need to be prescribed. We have been made aware, however,
of a vastly differing legal opinion from a QC. If ministers maintain
this view, do they at least agree that data obtained from equipment
that is not prescribed is not suitable as evidence in an allegation
of buying out and that physical evidence, other than a confession
obtained by intimidation, is necessary before a court action is
taken.
— This
is yet another broken promise by the Government, which committed
to the recommendations of the Healey Plan; announced on 19 March
2010, this stated that:
— We
will respond to the industry concerns over Brulines—these
are the flow measurement devices that ensure the tie contract
is being observed and that the tenant is not buying beer outside
the contract. Government will make clear our view that the industry
should voluntarily ensure that all such measuring equipment is
calibrated by the National Weights and Measurement Laboratory
with the backstop that failure to do so will result in Government
prescribing the equipment to ensure fairness.
— This
is also confirmed in a letter from The Rt Hon Lord Drayston, who
stated that "if industry fails to ensure that any flow measuring
devices used to ensure that the contract tie is being observed
have been "calibrated" by the National Measurement Office,
the Government intends to prescribe the equipment in order to
ensure that the ticket is fair".
— The
Government response fails to set out a mechanism to ensure that
the BBPA's promises will be delivered—given past failings
of the BBPA, this is reckless, and mechanisms must be put in place
to ensure successful delivery.
— Will
the Government also commit to a full public consultation on these
proposals in 12 months time, to discern whether the commitments
that have been laid out have been properly delivered? As it stands,
the proposals include a review which will only involve the BII
and the FVLA, both of which are funded by Pub Companies and therefore
prejudice the findings of the review.
— The
Government response clearly acknowledges there are unfair practices
at work in the pub sector, stating in the report that "The
Committee identified a wide range of concerns in this area. It
is clear that, as the Committee has stated, significant reforms
are needed quickly, particularly around transparency, dispute
resolution and the legal status and strength of the Code . . ."
How therefore do Messrs Cable and Davey reconcile the governmental
response which they have published with their own personal commitments
to act on the Select Committee's recommendations?
30 November 2011
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