Pub companies: Follow-to the Government Response

Written evidence submitted by the Federation of Small businesses

The Federation of Small Businesses (FSB) welcomes the opportunity to respond to this call for evidence.

As you will know, the FSB is the UK’s leading business organisation. It exists to protect and promote the interests of the self-employed and all those who run their own business. The FSB is non-party political, and with in excess of 200,000 members, it is also the largest organisation representing micro and small sized businesses in the UK. As you will also know, we are founding members of the Independent Pub Confederation (IPC).

It will come as no surprise to the Committee that the FSB is extremely disappointed with the Government’s response to the Committee’s latest report on pub companies which proposes the implementation of a self-regulatory package of reforms. In our response to this evidence call, we will focus solely on the Government’s response and will not repeat evidence we have already submitted to the Committee.

While there are some elements of the announced package of reforms that are welcome, such as the abolition of upward only rent reviews, given the history of some of the key players representing pub companies, we remain skeptical the process will:

a) be affordable for tenants and lessees;

b) be truly independent; and

c) deliver the reforms envisaged in the Government’s response.

Given that the Government response states that it agrees with the Committee that ‘insufficient progress has been made by the industry in its self-regulation since the previous investigation’ [1] , we remain concerned that these reforms will do little to change the status quo.

We are especially concerned that the British Beer and Pub Association (BBPA) have committed to ensure that the Industry Framework Code will be legally binding by the end of 2011. Given that the Government’s response was recently published and the holiday season arriving soon, the assumption could be made that these key industry changes are being rushed through without the scrutiny they deserve.

The Federation of Small Businesses believes that the implementation of these changes could easily be delayed until the Spring. This would ensure that all parties would have adequate time to meet with the BBPA and other industry stakeholders to have sight of and debate the new Code, and discuss to whom it should apply.

The FSB would like to make the fundamental point that as an organisation, we have not yet seen the new proposals. This adds to our concern that our views have not been sufficiently addressed, and the new Code subject to sufficient scrutiny. We further note that page 11 of the response states: ‘Following intensive discussions with Government, the industry has now made a commitment that it will implement a range of substantive reforms’. The FSB would question the intensity and frequency of these discussions with all parties. It calls on Government to produce details of the organisations it had contact with between the publication of the Committee’s report and the Government response, and the frequency, timing, and length of these discussions as well as the subject matter.

We also agree that there may be some confusion in the understanding of what is meant by long term (FRI) leases and traditional tenancies. We note that Government’s response is essentially targeted at the FRI sector. However, we are worried that this confusion has not enabled a full and clear understanding of the problems. We therefore would welcome the opportunity to gather further evidence, specifically addressing both these categories. A Government consultation on the way forward could easily address this confusion, instead of the de facto situation we have received.

We note that the Government’s response states that the tie plays an important role, especially for safeguarding the future of Britain’s smaller breweries. As you will know, we agree with this: we are not calling for the abolition of the tie, simply its reform. Furthermore, our proposals if implemented would only impact upon those pub companies which have over 500 outlets. It is a shame that this has not been reflected in the Government response.

We are also disappointed by the Government’s response on Brulines. Page nine of the response states:

30. The Committee’s report noted that "there is obviously still a dispute over flow monitoring equipment and its use in accusations of buying out which the Framework has failed to address. In addition there is still confusion over whether it can be proved to be ‘in use for trade’ and therefore covered by the Weights and Measures Act 1985."

31. The Government can confirm that because this equipment is not in use for trade, it does not fall within the remit of the Weights and Measures Act 1985.

In our view, this response simply brushes the concerns of tied publicans under the carpet, without taking stock and addressing what is a very challenging issue.

We hope that our concerns will be reflected in the Committee’s oral evidence session with the Minister next week.

1 December 2011