Written evidence submitted by the Forum
of Private Business
The Forum of Private Business is a not-for-profit
organisation which supports micro and small businesses throughout
the UK. We provide our members with a range of services, including
representation of their views to decision-makers in Westminster,
Cardiff, Holyrood and Brussels.
The Forum previously wrote to this Committee in July
of this year, ahead of the publication of its Report into Pub
Companies, in order to share the experiences of our members. We
do not wish to repeat points that have already been made nor do
we wish to provide a long list of the many failings of self-regulation
of the pub industry. Instead, we would like to express our disappointment
at the Government's response to this Committee's Report on Pub
Companies and we urge the Committee to recommend that the Government
go further to reform the pub industry, and in particular the issue
of the beer tie. We recommend that the Government consult openly
on introducing:
— a statutory
code of practice that upholds the principle that a tied tenant
no worse off than a free of tie tenant
— a truly
independent adjudicator to oversee this code
— a free
of tie option for all new licence holders
— the
right to a guest beer for tied tenants
These recommendations are much in line with suggestions
that this Committee made to the Government in its report. However,
the Government failed to take many of these suggestions on board.
Since 2004, there have been three parliamentary select
committee inquiries into the pub industry yet no substantial action
has been taken by the Government. The third report in 2010 delivered
a final ultimatum to the industry that they must reform effectively
within eighteen months. The Government promised that if this reform
failed it would legislate and implement a statutory code of practice
for the industry. This reform has indeed been left wanting yet
once again, the Government has advocated self-regulation of the
industry - an approach that has proved ineffective time and time
again with pub companies continually failing to address the problems
that many landlords throughout the country face.
While we welcome aspects of the Government's response
and its acknowledgement that the pub industry is facing huge challenges,
we do not agree with its conclusions on how these challenges should
be faced. The Government argues strongly against legislating against
mistreatment of landlords by pub companies, arguing that legislation
should be the last resort. Self-regulation has consistently failed
to address the issues and it is time to face the last resort.
There is no alternative. Our members have repeatedly reported
heavy handed and unfair treatment by pub companies and the power
that these companies have over individual tenants and lessees
has not been reduced by the introduction of the voluntary Industry
Framework Code.
The Government has proposed a strengthening of this
code, however, until the code can be properly enforced this proposal
is of little use. The Government's proposals for a Pub Independent
Conciliation and Arbitration Service (PICAS) to be set up under
the umbrella of PIRRS and a three-yearly reaccreditation process
for Company Codes fall far short of the sort of adjudicator we
have been calling for. Moreover, the British Beer and Pub Association's
involvement in this service is worrying. The BBPA, which largely
represents the pub companies who have resisted reform for so long,
were heavily involved in negotiations with the Government on reform
of the pub industry. Last minute lobbying by this organisation
has led to the Government's weak proposals on reform. This is
categorically unfair and the Government should immediately launch
a consultation which would allow representations from a more diverse
range of stakeholders.
The Government's response to the select committee
report has failed to address the beer tie issue. The Government
claims that there "is little evidence to indicate tied pubs
are more likely to close" yet research from the Campaign
for Real Ale (CAMRA) shows that more tied pubs are closing than
free of tie pubs. And the IPPR recently published a document entitled
"Tied Down: the impact of the beer tie on Britain's pubs"
which found that tied publicans are more likely to earn less and
face more financial difficulties, and they blame this on the beer
tie. The Government argues that as the OFT concluded there were
no competition issues adversely affecting consumers it was not
up to the Government to regulate in this area. The concern is
not with how the beer tie affects consumers but rather how it
affects publicans. As I am sure the Committee is aware, tied pubs
have to buy all their beer and most or all other drinks from the
pub company which owns the premises, usually at a higher cost
than they would on the free market. The relationships between
pub companies and their tenants have become increasingly difficult
as pub company beer prices have increased in the worsening economic
climate. This incontrovertibly puts the publican at a competitive
disadvantage, regardless of the beer ties impact on the consumer.
Tied landlords are trapped in unfavourable contracts and struggle
to control costs their costs and this adversely affects their
business. Tinkering with other aspects of pub industry reform
is ineffective if not coupled with significant action on the beer
tie.
To conclude, the pub industry faces serious challenges.
The slowdown in consumer spending and high levels of unemployment
in recent years mean that more and more people are tightening
their purse strings and staying at home instead of going to the
local pub. The price of beer in pubs has risen rapidly over the
past few years yet the price of alcohol in supermarkets has remained
low. Pubs are squeezed from all sides yet their hands are tied.
The Forum strongly recommends that the Government hold a public
consultation on reform of the pub industry and that it seriously
considers introducing: a statutory code of practice enforced by
an independent adjudicator and that ensures that tied tenants
are no worse off that free of tie tenants; a free of tie option
for all new licence holders; and the right to a guest beer for
all tied landlords.
1 December 2011
| 
