Annex 1: Letter from the Secretary of
State, 19 December 2012
Further to my appearance in front of your committee,
and my subsequent letter, I wrote to Rodger Vickers (Chair of
the Pubs Independent and Conciliation and Arbitration Service
- PICAS) on 7 November, copying the letter to British Beer and
Pub Association (BBPA), the British Institute of Innkeeping (BII),
the Association of Licensed Multiple Retailers (ALMR), the Federation
of Licensed Victuallers Association (FLVA), the Guild of Master
Victuallers (GMV) and the Independent Pubs Confederation (IPC).
My letter asked for evidence on how the self-regulatory approach
announced in December 2011 was working.
I received 19 responses to the letter. Regarding
the elements of the self-regulatory approach I received the following
evidence:
- Version 5 of the Industry Framework
Code was made binding in contracts at Christmas in 2011. Some
respondents were not convinced that the code was indeed legally
binding, though all large pub companies have said that they will
be bound by it. The pub companies all wrote to their tenants in
December 2011 to inform them of this change. Since then there
has been no co-ordinated communication to tenants about their
rights under the Code. At least one pub company incorporates it
into training and some licensee groups actively promote it to
their members; however, some groups who do not support self-regulation
either don't mention the Code or talk about the Code negatively.
- The FLVA, ALMR, GMV and BBPA are negotiating
Version 6 of the Code, and see opportunities for further improvements.
The IPC was involved in early meetings with the BBPA but this
engagement lapsed due to a disagreement as to whether the question
of whether or not there should be a free of tie option was open
for discussion.
- PICAS was launched in March 2012, and became
operational in June 2012. It has so far heard two cases (both
found against the pub companies), with further cases pending.
One of the two successful claimants said "The administration
of the PICA service was straightforward and efficiently handled
and the communication was clear from the start and up to the panel
hearing. The actual hearing [chaired by Rodger Vickers] was and
the questioning from the panel afterwards was relevant and fair".
- The British Institute of Innkeeping (BII) have
established their code reaccreditation process, and it will begin
in late 2013.
- A new Pubs Advisory Service has been established
by an independent tenants' group; however, it is not clear from
the consultation how substantive a service this provides to tenants.
The BII and FLVA are also exploring setting up their own advice
services. A number of respondents thought that there was scope
for having a range of services in the market - several suggested
the possibility of a Board overseeing these services to set minimum
standards.
- Some respondents believe that unless the issue
of the beer-tie is addressed, with all licensees given a free-of-tie
option with open market rent review, the issues in the industry
will remain.
- A few respondents questioned the process of determining
rents. Version 5 of the Code requires that rents must be set in
accordance with RICS guidance but some respondents believe the
guidance is open to interpretation.
- Several bodies of the industry are negotiating
over an Industry Governance Board, which would oversee the operation
of the Industry Framework Code. This would go further than the
self-regulatory deal announced last November, but discussions
have faltered on two issues: firstly; discussions around who should
sit on the Governance Board, and whether it should be a pre-requisite
to have signed up to the Code; secondly; whether issues relating
to the tie should be included in the Code.
Having considered the evidence, although the industry
has implemented Version 5 of the Code and made other improvements,
notably on setting up PICAS, the changes are not as far-reaching
as I would have liked and do not appear to have engendered the
culture change that is needed. Many of the responses I received
show clear evidence that significant numbers of individual publicans
are continuing to face serious hardship and difficulties in operating
in this industry.
At present, I am considering the possible options
that are available. I recognise the valuable role that the Committee
has played in highlighting this issue, and will write again in
January outlining how the Government intends to take forward this
issue.
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