Written evidence submitted by the Fair
Pint Campaign
Fair Pint Campaign would like to thank the Business,
Innovations and Skills Committee for the opportunity to be able
to submit evidence with reference to the Government Response.
SUMMARY
1. Fair Pint Campaign Members are disappointed with
the Government response published last week.
2. There is no agreed "industry" code just
a BBPA created code that was rejected at mediation, this confers
more onerous obligations on tenants.
3. The "other reforms" that the Department
negotiated from the pubcos and brewers are NOT new most already
exist and did so before 2008.
4. The response neither delivers none of the campaigners
requirements or committee recommendations—no government
regulation, no regulator no free-of-tie, open market rent option.
5. The existing BBPA code made enforceable is meaningless
without the material provisions required for real reform.
6. Making the existing code legally binding despite
being unacceptable to all Independent Pub Confederation members
(IPC) is an irresponsible and rash decision.
7. A new mediation service must be independent.
8. It is said the pubcos have agreed to strengthen
their Codes of Practice in a range of critical areas, for example,
on rent assessments, they must now comply with the independent
guidance from the Royal Institute of Chartered Surveyors, the
existing BBPA code says this already as do the company codes—this
is not progress.
9. The issue of the tie is complex. Mr Daveys statement
does not tackle the problems that concern licensees. He has yet
to meet them and establish their problems.
10. The tie does interfere with competition and has
the effect of influencing price to the customer amongst other
things. The consumer is suffering.
11. If the issue is only an issue of fairness in
the relationship between the pubcos and brewery landlords, and
their tenants and lessees, licensees must rely on the benefits
of being tied to outweigh the disadvantages. That re balancing
relies almost entirely on the RICS rent valuation guidance which
in which confusion over interpretation in the response has been
identified.
12. The real problem remains the abuse of a dominant
position, regardless of the agreement terms. The appropriate code
once established should apply to tenancies and leases.
13. Tenancies typically are short, non assignable
and outside the security provisions of the Landlord and Tenants
Act 1954 Pt II. These agreements are of little interest or value
to any individual seeking to build a business of value as they
offer no secure future and any efforts to build goodwill are not
transferable, therefore valueless.
14. Enterprise Inns and Punch Taverns are already
offering tenancies giving them opportunity to circumvent regulation
once more.
15. We consider the BIS Ministers have been subjected
to an elaborate and well executed scam resulting in them believing
they have offered something of substance when in fact they may
have destroyed the process of reform on the very eve of its fruition.
16. The IPC were not consulted on the response leading
to a one sided and empty outcome.
17. We have been offered an imbalanced package, that
destabilises an already faltering sector and does nothing to address
abuse, bullying and intimidation or licensee profitability, both
of which were the cornerstones of Select Committee Inquiries inception.
18. Uncertainty now reigns once more, the glimmer
of hope so many tenants and lessees clung to is extinguished and,
for the sake of a few days inconvenient appearances at hearings,
the pub company gravy train remains firmly on the tracks.
RECOMMENDATIONS
19. The rushed legalisation of the inadequate BBPA
code be cancelled.
20. IPC be consulted on new reforms and existing
provisions that will add substance and material changes to the
BBPA framework code.
21. The new reforms become legally enforceable are
independently regulated and include a free-of-tie, open market
rent option and guest beer right in accordance with the IPC manifesto.
22. Royal Institute of Chartered Surveyors, guidance
is reconsidered and amended to avoid future misinterpretation.
23. IPC are consulted throughout the process of code
reform.
24. Government issue a clear statement that measures
are intended to ensure the balance of risk and reward is readdressed
fairly and that if working correctly the tied licensees should
be no worse off than if they were free of tie.
25. The industry code, once established, should apply
to tenancies and leases.
INTRODUCTION
26. The Fair Pint Campaign (FP) is a membership organisation
that campaigns for the interests of tied tenants. FP has a membership
of around 1,000 tenants, funded entirely from donations.
27. FP provided written and oral evidence to the
Business and Enterprise and Business Innovations and Skills Select
Committee Inquiries on pub companies. We welcomed the Committee's
views that the balance of risk and reward between pub owning companies
("pubcos" including brewers) and tied publicans is unfairly
skewed towards pubcos and the fact that, despite bearing most
of the risk, publicans do not receive a fair share of the benefits.
28. FP is a founding member of the Independent Pub
Confederation. We endorse the IPC Charter. The collaboration of
tenant organisations and CAMRA is the first time a collective
and genuine voice has been given to publicans and consumers in
an industry which has for too long being dominated by the property
and brewing interests represented by the BBPA.
29. We believe that the agreement between the BBPA,
BII and FLVA to a Code Framework is a totally inadequate response
to the problems highlighted by the Select Committees, and shows
unwillingness by the industry to consider change which would rebalance
the relationship between tied tenants and pubcos in any significant
way. This reluctance to make material changes has been further
proven by the findings of the 2011 Select Committee and is borne
out by its recommendations which we wholly support.
30. The major pub owning companies have shown that
they are unwilling to take any steps to significantly alter the
balance of risk and reward between landlords and tied tenants
and have used the time offered to simply seek ways to circumvent
reform under a veil of apparent compliance. That Government now
proposes allowing more time seems a miscarriage of justice.
31. We believe that the Government response is an
attempt to quickly clear the desk of a long and drawn out dispute
by a series of ill considered measures and the failure to engage
with any other groups representing the other side to the dispute
make the outcome biased and unjustifiable.
32. We consider it a major flaw in the Governments
response that the rebalancing of risk and reward, acknowledged
by them as uneven, is almost entirely reliant on the Royal Institution
of Chartered Surveyors (RICS) valuation guidance. Also recognised
is the massive rift in RICS guidance interpretation, this is not
simply by non-valuers but also between the very panellists who
wrote the new guidance. Parties representing pub company interests
denying entirely that the principle, that the tied tenant should
be no worse off than if they were free of tie, even exists within
guidance, while even the RICS representative giving evidence confirmed
the principle was now enshrined in the wording.
33. The tied model in its current form does not work
and remains in urgent need of reform. The industry needs an enforceable
code, containing material and substantive reforms and capable
of legal redress if breached. The RICS guidance urgently needs
amendment to avoid misuse and deliberate misinterpretation.
34. ED DAVEYS
ANNOUNCEMENT
35. The response announcement last week on pubs has
been badly received by all but the parties benefiting from the
historic abuse of the tied model and the naïve.
36. The pubcos have until Christmas to make their
Codes of Practice legally binding, their codes being the ones
created by them following the failure of mediation containing
no material or substantive changes and offering licensees very
little in exchange for further onerous terms on their existing
agreements. Mr Davey claims tenants and lessees can now enforce
their rights, those rights are so inconsequential few will bother
to even waste their time. This has been borne out from the BII's
statements, indicating most complaints fall outside the remit
of code breaches.
37. Mr Davey has been duped into thinking that supposed
"other reforms" that the Department negotiated from
the pubcos and brewers are new, upward only rent reviews have
been ignored for years and simply replaced with inflationary increases.
38. Mr Davey has cited a pub in his constituency
that is flourishing, indeed thriving, this same pub, The Lamb,
was a Punch Taverns pub having churned tenants through to bankruptcy
before finally being bought freehold by the last tenant. Since
going free of tie the pubs fortunes have changed and Mr Davey
has acknowledged with his own blog the now apparent success in
a fair and competitive environment having being released from
the tie agreement.
39. The response purports to have delivered only
half of what the campaigners for licensees and consumers have
sought. Mr Davey considers the campaigners sought two things,
first, government regulation of the pub industry, with a new regulator
to enforce it; and second, either an end to the tie entirely or
a free-of-tie, open market rent option to be legally required
to be available to all tenants and lessees. Whilst being factually
untrue, abolition of the tie has not been sought for a good few
years now, we wonder which half he claims he has delivered. We
have no government regulation or enforcement and no free of tie
option.
40. It is claimed a self-regulatory regime "so
much stronger than the past" has been delivered, the past
offered nothing and twice nothing is still nothing. However the
code is made enforceable it is meaningless without the material
provisions required for real reform. These provisions have been
demanded by campaigners and recommended time after time by Select
Committees for the last seven years.
41. Making the existing code legally binding despite
being unacceptable to all Independent Pub Confederation members
(IPC) is an irresponsible and rash decision. There is no "industry"
Code of Practice just a BBPA one.
42. A new mediation service would be welcome but
it must be independent and with such heavy BBPA involvement we
consider it difficult to see how a conflict can be avoided.
43. It is said the pubcos have agreed to strengthen
their Codes of Practice in a range of critical areas, for example,
on rent assessments, they must now comply with the independent
guidance from the Royal Institute of Chartered Surveyors, the
existing BBPA code says this already as do the company codes but
RICS guidance is ineffectual as confusion over interpretation
still exists. Being bound to a guidance that is capable of misinterpretation
is no concession.
44. A new Pub Advisory Service will be established,
to support and advise would-be lessees and tenants, to make sure
they know what they are letting themselves in for. Essentially
this should include a simple shadow profit and loss calculation
for the individual tenant demonstrating their likely earnings
and showing the volatility of small changes in costs and tied
product prices. Effectively a health warning for tied agreements.
45. The British Beer and Pub Association and other
players on the landlord side, should have no problem in introducing,
at speed, a package that they have formulated and addresses none
of the areas of concern.
46. The issue of the tie is complex and has been
considered at length (over seven years) by the select committees.
Peter Luffs committee suggested a compromise that being an option
which would truly test the fairness of tied agreements. Contrary
to Mr Daveys statement he is not tackling the problems that concern
licensees rather the ones he is told by the BBPA that concern
licensees.
47. The tie does interfere with competition, the
very fact that groups like JD Wetherspoon and now smaller companies
like Amber Pub Company can sell beer at a fraction of the price
in a tied house demonstrates the lack of fair competition. Tied
pubs, representing the majority in the UK, set the price for tied
products like beer, most free of tie operators take the tied lead,
hence prices to consumers, with a few exceptions, appearing to
be relatively competitive. The difference is that the tied operator
is barely making a profit the free of tie operator substantial
gains.
48. There is choice and a wide variety of beers are
widely available but at a falsely inflated price, the OFT failed
to recognise this. The consumer is suffering as a result and voting
with their feet being forced away from pubs and into the open
arms of operators who are prepared to share the profits derived
from their buying power like Wetherspoons and supermarkets.
49. If we were to accept the issue is not competition
and is only an issue of fairness in the relationship between the
pubcos and brewery landlords, and their tenants and lessees, commercial
relationships, it follows that licensees must rely on the benefits
of being tied to outweigh the disadvantages. Rents should be lowered
to countervail higher tied product prices, this is not the case
at present and it is seen as a fundamental flaw in the Government
response that re balancing relies almost entirely on the RICS
rent valuation guidance which is still being abused and was acknowledged
to be suffering confusion over interpretation in the response.
50. There are far fewer brewery tenancies than pubco
leases and therefore there have been fewer reported abuses of
the power the agreement affords. This should not be confused with
a constantly benevolent relationship. Evidence suggested by Neil
Robertson of the BII indicates that the churn rate (business failure
rate) amongst some brewers is even higher than the rate amongst
pub companies. The real problem is the abuse of a dominant position
regardless of the agreement terms. Those operating tied tenanted
or leased estates properly should have no reluctance to committing
to a genuine code ensuring the behaviour they purport to offer
is capable of legal redress if breached.
51. There has been plenty of evidence submitted of
abusive brewery behaviour to the previous committees all be it
proportionally less than that found amongst the bigger pub companies.
Tenancies typically are short, non assignable and outside the
security provisions of the Landlord and Tenants Act 1954 Pt II.
These agreements are of little interest or value to any individual
seeking to build a business of value as they offer no secure future
and any efforts to build goodwill are not transferable.
52. By directing the Government response to leases
rather than tenancies, any abusers of the tied lease model will
simply seek to convert their agreements over time to tied tenanted
models. Enterprise Inns and Punch Taverns are already ahead of
this game and offer tenancies giving them even more control over
their licensees than their lease agreements did.
53. We do not consider the response is a sell out.
We consider the BIS Ministers have been subjected to an elaborate
and well executed scam resulting in them believing they have offered
something when in fact they may have destroyed the process of
reform on the very eve of its fruition.
54. The IPC were not consulted on the response despite
intensive behind the scenes discussion with those representing
the pub companies and brewers, leading to a one sided and immaterial
outcome. The response indicates that some members of IPC have
committed to participating in the new Pubs Independent Conciliation
and Arbitration Service (PICAS) until the response publication
last week the GMV were not even aware of its existence.
55. As a result, we have a totally imbalanced package,
that destabilises an already faltering sector and does nothing
to address the abuse of licensees or licensee profitability both
of which were the cornerstones of Select Committee Inquiries inception.
56. Uncertainty now reigns once more, the glimmer
of hope so many tenants and lessees clung to is extinguished and,
for the sake of a few days inconvenient appearances at hearings,
the pub company gravy train remains firmly on the tracks.
57. CONCLUSION
58. Stop the process of legalising the BBPA code,
issue a timetable for consultation and reform, appoint an independent
overseer to report to Government on progress. Ensure all subjects
are capable of being debated between the parties and that Independent
Pub Confederation are permitted the courtesy of participating
in the consultation process.
30 November 2011
| 
