Small Business, Enterprise and Employment Bill

Written evidence submitted by Justice for Licensees (SB 62)

BACKGROUND

Justice for Licensees is a campaign group formed in December 2007 by Inez Ward, who wished to ascertain the level of discontent within the estates. In March 2008 we formed ‘The Save the Great British Pub campaign’ which garnered in excess of four hundred and thirty thousand members through its social media campaign, this gave JFL the opportunity to collect and collate the thoughts and opinions of a large cross section of society, it also gave us the opportunity to produce a large database of contacts. Justice for Licensees also founded British Pub Week an initiative designed to positively promote and celebrate the Great British pub whilst gently encouraging footfall for the pubs. Due to the large nature of JFL and its campaigns we formed a council, council members are from across the country and have different interests in the trade, all care passionately about the Great British pub. JFL submitted evidence to previous enquiries by government select committees (1), we were involved in the trade mediations (2) and are members of the Fair Deal For Your Local campaign (3).

SUMMARY

Government should be under no illusion, self-regulation has been an abysmal failure, it has failed to address the issues clearly highlighted by successive Select Committee enquiries and in particular the problem of unsustainable rents intrinsically linked with restrictive price lists which appear to increase exponentially. The pubcos and their supporters have continually, since 2004 subverted, side-lined or ignored government recommendations. The pubcos have had since 2004 to reform and they have failed miserably. Tied rents remain higher than FOT rents for the third year running (4), tied products lists remain excessive when compared to those available in the free market and alleged SCORFA is either charged for or not worth any value to the tenant. The pubcos have argued that it is taxes, duty, government legislation and red tape which have affected the trade, these are areas which affect all sectors of the trade, that is tenanted/leased, managed and freehouses. The number of tenanted and leased pubs has declined from 30,800 in 2007 to 21,000 now. Meanwhile, freehouses have increased in number from 17,700 in 2007 to 19,500 now. The number of managed pubs has increased from 9,000 in 2007 to 9,300 now. Total UK pub stock stands at 49,800, down from 57,500 in 2007 (5). It is clear from this that the tenanted/leased sector is in freefall, whilst freehouses and managed are in growth, despite facing the same adversities as defined by the pubcos, ergo it has to be assumed that it is the onerous practices within the tenanted/leased sector which is at fault. The Statutory Code should include:

· A mandatory market rent only option

· RICS rental valuation guidance to be vastly improved to counter the negative impact on people and communities by continual abuse of the system by pubcos.

· A guest ale right for those who choose to remain tied

· Removal of the AWP tie

· A truly independent adjudicator which has the ability to completely and thoroughly investigate complaints, have the ability to readdress any issues and the ability to heavily fine pubcos for any abuses

· The ability for previous tenants who feel that they were abused, ripped off, scammed or they believe they were misrepresented to by their pubco to seek justice and redress through the Adjudicator

1. Market rent only option (MRO)

MRO is an option only, it would only become a problem to the pubcos if they were abusing the rental system by continuing to demand and obtain unsustainable rents when the complexities and true cost of the tie are taken into account. Their screams of Armageddon are one of two things either nothing more than:

· scaremongering , if their claims that the majority of their estates are happy and dissent is from a vocal minority, then there would be no need for tenants to invoke MRO, the majority would remain tied because they are happy in their relationships with their pubco.

· a tacit admission of the volume of abusive practices across the estates. It is only if the pubcos were aware that there would be a fallout across the estates, with the majority of tenants invoking MRO, that they would have cause for concern. There is no excuse for abusive practices, they must be addressed and remedied, clearly the pubcos have no intention of doing this themselves, they have had a decade, therefore it is incumbent upon government to do it for them.

2. RICS rental valuation guidance

Guidance (6) remains opaque and open to interpretation and is only guidance for RICS members. As tied rents have remained higher for the third year running (7), it is clear that the new guidance has done little to address the issue of unsustainable rents, despite the problems being clearly highlighted by Select Committees (8). This is disappointing and continues to ensure the demise of the British pub, with a detrimental effect on licensees and consumers alike, with both having to pay for pubco excesses, abuses and incompetence. RICS, as a recognised body should hang their heads in shame for failing to ensure that pubcos did, indeed, demand sustainable rents, rather than the Fantastic Mythical Targets which appear to be the reality (9). From JFL’s perspective very little has changed from a grassroots level, the pubcos questionable practices continue unabated and the carnage created is not a pretty picture, the destruction of people’s lives and livelihoods and the destruction of a valued asset to many a community and a wider asset to the country.

3. A guest ale right for those who choose to remain tied

This will improve the ability of licensees who chose to remain tied to be able to offer a product not of the restrictive product lists at a price freely available in the open market, so ensuring a benefit to the licensees and consumer of a wider choice, at a competitive price whilst enabling brewers who are restricted from access to the estates to be able to sell their products. If a guest ale right were to be introduced under the proviso that it can only use products not supplied by the pubco, this would make the pubco arguments mute whilst ensuring a benefit to licensees, consumers and brewers alike.

4. Removal of the AWP tie

There is no sound reasoning for the protection of the AWP tie, this has been clearly highlighted by successive government enquiries and recommendations (10).

5. A truly independent Adjudicator

It is clear from successive enquiries and the continuing contact of tenants who are less than happy, which is a complete understatement, with the modus operandi and business practices of the pubcos. It is clear that self-regulation has failed to address a number of issues highlighted by the successive Select Committees (11), it is also patently clear the want and need for an independent Adjudicator. We believe that there have been too many questions raised over the independence of self-regulation and remain disappointed at the lack of transparency and answers. JFL has offered on occasions to discuss our concerns, the concerns of tenants, over self-regulation, our offers remain ignored. We believe that they clearly have no intention of listening to tenants, which is why this sector of the trade now finds itself in its current position. Tenants need an independent adjudicator, an adjudicator who has no conflicts of interest, who does not receive remunerations or other benefits from either side, who does not run the risk of personal loss if he/she were to find against either side, free from the shackles of cronyism.

6. Justice for previous tenants

From successive government enquiries (12) it is clear that there has been consistent questionable practices by the pubcos over a considerable period of time. We can see no justification for previous tenants not to be able to seek justice and redress, when there are clear examples of dishonesty and/or abusive practices by the pubcos. We do not believe that people should be restricted from seeking justice and redress just because they do not have the financial ability, due to the injustices they perceive they have been dealt, that is clearly unfair.

7. Office of Fair Trading

We have noted that members of the Committee have mentioned the OFT and its investigation and report concerning pubcos, we believe that the OFT submission to the Statutory Code Consultation was questionable. We filed a complaint with the OFT (13), after a considerable amount of time the CMA responded to our complaint.

8. Self-regulation

JFL had serious concerns over self-regulation as highlighted in our submission to BISC (14) and our submission to the Statutory Code (15) following on from a complaint filed with the BII (16) and the response from the CEO (17) and Board of Trustees (18) JFL responded (18). We also filed a complaint with the PGB (19), following advice received from Tim Hulme, CEO of the BII, the PGB response is annexed (20).This experience has been drawn out, lacking transparency and costly in time and effort, we are bitterly disappointed at the lack of professionalism displayed and remain convinced that information supplied to BII members should not then be disseminated on an open forum by BII members without the full, written permission of all parties involved. We no longer maintain that the BII are best placed to ‘police’ the industry, the thought of the BII having access to tenants information and the simple fact that BII support said information being disseminated by BII members and associates, under the pretext of personal opinion, we believe is unprofessional and not fitting of the organisation charged with the task of ‘policing’ the industry, we believe that this trade deserves better, much better. Filing a complaint against the practices of the self-regulatory bodies is far from transparent, it is severely lacking in clarity and complaints have to go through the BII, if a campaign group such as JFL has difficulties, then what hope a lone tenant? We believe that the system is not fit for purpose, which was to regulate the industry, JFL Council are of the opinion that self-regulation fails to address the imbalance between landlord and tenants, fails to address the recommendations of successive government enquiries and completely fails to address fair, reasonable and lawful dealing and that a tied tenant should be in no worse a financial position than a FOT tenant.

9. Society of Independent Brewers

We remain concerned and disappointed at the change of opinion by SIBA to not supporting a Statutory Code (21) JFL was supplied with a SIBA Brewers Price List (22), JFL contacted a member of SIBA, who wishes to remain anonymous, JFL wanted to ensure that the figures contained within the brewer’s price list were indeed reflective of the reality of the situation, it became clear that they were. From this price list when studied alongside pricing in the open market (23) it is clear to see who benefits most from SIBA, clearly it is the pubcos who benefit most. We do not understand SIBA’s position, if it became legislation for MRO then SIBA would be able to include the numerous small brewers and microbrewers that are currently excluded from the tied houses, therefore ensuring growth of their organisation. They would be able to raise their prices to similar to the open market, therefore ensuring a bigger return for their members. The market would become vibrant and competitive. Licensees would benefit from a much wider choice and pricing consistent with the open market, so enabling them to improve premises and to be able to compete in their own market place with other sectors of the trade. Consumers will benefit from increased choice, improved premises and more competitively pricing. Communities will benefit from a competitive trade, the destruction of pubs that have the unfortunate position as to be in the tied/tenanted sector of the trade will be in a better position to become viable when not strangled by unsustainable rents and expensive pricing strategies. Even the pubcos will benefit as the pubs flourish into competitive, viable going concerns. Considering that tied rents are more expensive than the FOT sector clearly the pubcos are going to have to take a haircut, they can expect no less, they have gained, to the detriment of licensees, consumers, brewers and communities for far too long, the unbalance requires immediate attention and redress. Following on from discussions with small brewers we were concerned over SIBA’s change of opinion, it did not seem to reflect the thoughts of some members, with this in mind we asked our contact, a member of SIBA, a simple question "Did SIBA vote on it's submission to the Consultation?" The response is as follows "From memory it was delegated to senior management."

10. The British Beer and Pub Association

The BBPA represents the interests of its members, the pubcos, some larger family brewers and the multinational brewers. As successive enquiries and the Statutory Code Consultation have clearly highlighted the interests of BBPA members are often clearly out of kilter with the interest of licensees, consumers and brewers that are not members of the BBPA. BBPA have launched a Campaign called "Better Rates for Pubs" yet were instrumental in assisting the VOA with the FMT definition in the first place - leading to inflated assessments and passing on significant operating costs to consumers (though strangely enough not its members). We feel that it somewhat bizarre that the pubcos would act against the interest of the licensees and consumers as it is clearly these people who earn them their revenue. The BBPA did not wish to become involved in discussion, preferring to let government consider (24) the issues raised. We believe a rather bizarre approach from an organisation that clearly represent the interests of the pubcos and does not want legislation, the intransigence remains as it always has, even when the threat of legislation hangs over their heads. The pubcos have had a decade to reform sufficiently and we believe they have failed miserably, they should not be given any further time to reform, they have had every chance under the sun for over a decade, we believe that that is totally unacceptable when taking into account the cost to licensees, consumers and communities.

October 2014

Annexes:

1a http://www.publications.parliament.uk/pa/cm200809/cmselect/cmberr/26/26we74.htm

1b http://www.publications.parliament.uk/pa/cm200910/cmselect/cmbis/138/138we44.htm

1c http://www.publications.parliament.uk/pa/cm201012/cmselect/cmbis/1690/1690iw16.htm

1d http://www.publications.parliament.uk/pa/cm201012/cmselect/cmbis/1369/1369vw34.htm

2 http://www.morningadvertiser.co.uk/General-News/Mediation-a-cathartic-process-for-all-involved

3 http://www.fairdealforyourlocal.com/quote/

4a http://www.morningadvertiser.co.uk/General-News/ALMR-benchmarking-survey-shows-red-tape-threatening-recovery

4b http://www.morningadvertiser.co.uk/General-News/Tied-rents-remain-higher-than-free-of-tie-rents-for-second-year

5 http://www.propelinfonews.com/pi-Newsletter.php?datetime=2014-07-07%2008:00:00

6 Attached – Not published

7 http://www.morningadvertiser.co.uk/General-News/ALMR-benchmarking-survey-shows-red-tape-threatening-recovery

8 www.publications.parliament.uk/pa/cm201012/cmselect/cmbis/1369/1369vw01.htm

9a http://www.morningadvertiser.co.uk/Business-Support/Fair-Maintainable-Trade-or-Fantastic-Mythical-Target

9b http://www.morningadvertiser.co.uk/Opinion/My-Shout/Dixon-Time-to-get-real-about-how-much-pubs-can-actually-turn-over

10 www.publications.parliament.uk/pa/cm201012/cmselect/cmbis/1369/1369vw01.htm

11 www.publications.parliament.uk/pa/cm201012/cmselect/cmbis/1369/1369vw01.htm

12 www.publications.parliament.uk/pa/cm201012/cmselect/cmbis/1369/1369vw01.htm

13 Attached– Not published

14 http://www.publications.parliament.uk/pa/cm201012/cmselect/cmbis/1369/1369vw34.htm

15 https://www.gov.uk/government/consultations/pub-companies-and-tenants-consultation

16 Attached– Not published

17 Attached– Not published

18 Attached– Not published

19 Attached– Not published

20 Attached– Not published

21 https://www.gov.uk/government/consultations/pub-companies-and-tenants-consultation

22 Attached– Not published

23 https://www.justiceforlicensees.org.uk/news.php?story=39

24 Attached– Not published

Prepared 5th November 2014