Pub companies: Follow-up to the Government Response

PubCosFup 18A

Further written evidence submitted by Fair Pint Campaign

I am writing to you ahead of the Committee’s evidence session with the Minister for Consumer Affairs, Ed Davey, where he will give evidence on the Government’s response to your Select Committee’s report on Pub Companies.

We hope you share our concerns and that you will do everything you can to persuade the Minister that he needs to review his decision. As the leading tenants’ voice in the debate we are particularly concerned that we have not been consulted and our view has not been represented. The Government’s response is a totally inadequate response to the problems affecting the sector identified by the multiple reports on the tied pub sector which have been published by the Committee and its predecessors since 2004.

In response to the Select Committee’s report published in 2009, all three main political parties promised intervention to help tied pub businesses benefit from fairness in their tied relationships with the companies who own their pubs if the industry was not able to make meaningful change on a voluntary basis.

Your Committee’s report published earlier this year made it clear that voluntary codes of practice drawn up by the BBPA, the representative voice of the pub owning companies and brewers had done little to solve the problems faced by tied publicans. In light of this, we are bitterly disappointed by the decision of the Government to renege on these manifesto commitments and come up with a response that is clearly driven by the interests of pub owning companies rather than tied lessees and tenants.

The pub sector employs tens of thousands of people in the UK and plays an important role in our economy. Individual pub businesses rather than the pub owning companies (who employ relatively few people to manage their tied estates) create the vast majority of the employment in the sector. In the context of the current economic situation, it seems nonsensical for the Government to have considered the interests of these large property interests more important than the problems faced by individual pub businesses.

The Government’s proposal to make the existing industry codes of practice legally binding is clearly in the interest of the pub companies rather than lessees and tenants. The codes are BBPA and pub company creations which tenant representatives have made clear are unacceptable. As they stand, they seem to confer onerous terms on their licensees and offer very little in return. Making these legally binding will risk making the problems faced by tied lessees and tenants worse than even the current situation.

Many of the improvements that the Government believes it has negotiated with the BBPA and pub companies are already agreed practices. Examples include price matching on insurance, which has happened for many years but still denies publicans access to meaningful competition in insurance as they can’t take their business elsewhere. The Government has agreed clarity in the treatment of machine income which is accepted practice and is already in the codes of practice. Meaningful change would have been ending the machine tie, something that every select committee report since 2004 has called for. The Government response also highlighted as an improvement the non-enforcement of upward only rent reviews which was something agreed by the industry years ago as was the fact that rent review assessments must comply with RICS guidance, which is something which is simply commonsense and is already included in codes of practice.

In their response, the Government has focused on fully repairing and insuring leases, but it is clear that the abuses in the system are not confined to FRI leases and abuses do occur under tenancies as well as leasehold agreements. The risk is that a code of practice that solely focuses on FRI leases will simply lead to pub companies transferring their property to tenancies rather than longer FRI leases.

We believe that tenant as well as pub company representatives must agree any code of practice and this code of practice should be put on a statutory footing. We also believe the tied model needs to justify its fairness by allowing lessees or tenants of companies owning more than 500 pubs the freedom to sell free of tie guest beers and the option to choose to switch to a free of tie agreement with a rent set by an open market review.

Fair Pint believe that the Government’s response offers no solution to the ongoing problems faced by the industry and in many cases will make things worse by making codes of practice which introduce new onerous restrictions on leases legally binding. The focus on FRI leases will encourage pub companies into offering alternative brewery type tenancies, usually short, non-assignable, unprotected agreements that will do nothing to encourage new entrepreneurial flair and investment into a failing industry.

The Government has at best been deceived, and at worst duped. We fear that the upshot of the Government’s response is for them to offer-up a series of empty promises which will do nothing for the plight that so many tied tenants find themselves in. We hope that our voice and our views can be heard by the Minister and his decision can be reviewed sooner rather than later.

5 December 2011