A committee of MPs has called for “flexibility” in the proposed statutory code for pub companies so it could be applied to smaller tenanted pub operators at a later date.
The Business, Innovation & Skills Committee (BISC) has also urged the Government to ensure that the role of the Pub Independent Conciliation and Arbitration Scheme (PICAS) and the Pub Independent Rent Review Scheme (PIRRS) is “not lost” as the code becomes statutory. And it called for more clarity on how the principle that tied tenants should be no worse off than their free-of-tie counterparts would be enshrined in law.
In a report on the proposed statutory code, released today, the BISC urged the Government to act swiftly, saying that legislation “may still be at risk from the Parliamentary timetable”.
“There can be no more delays in resolving this matter and the Government should bring forward a Bill at the earliest opportunity. To start the Parliament with an undertaking to act and end without any change would represent an unacceptable failure.”
The BISC welcomed the Government’s proposal for the statutory code to apply only to companies with more than 500 non-managed pubs but it called for flexibility to be included in any bill to let the Secretary of State alter the threshold at a future date.
It also called for this threshold to only apply to tenanted and leased operators.
The committee said it supports the need for the principle of fair and lawful dealing and that a “tied tenant to be no worse off than a free-of-tie tenant” and agrees that the code should have a mandatory free of tie option. However, it issued a note of caution claiming that “clarity on how this will be enshrined in law is necessary”.
“We look to the Government to provide us with early detail on how these principals will be achieved through legislation.”
The BISC said the enforceability and legal status of the company codes of practice has remained unresolved. “Such confusion reinforces the argument that only statutory intervention will put the legal status of the codes of practice beyond doubt.”
The Adjudicator that will oversee the Statutory Code should be given the full suite of powers, including the power to fine, states the report.
The Committee said PICAS and PIRRS have been “positive developments in the pub industry” but said it was “unclear as to how they will fit into a new statutory landscape”.
“The Government needs to ensure that, whichever route it takes, the role of these two arbitration bodies is not lost as a result of a statutory/non statutory split in the oversight of the industry.”
Adrian Bailey MP, chair of the BISC, said: “The Government has belatedly come to the right decision and consulted on establishing a statutory code and an Adjudicator. I welcome this action and only wish it had come when we first recommended it almost two years ago.
“The Government must now bring forward a Bill at the earliest opportunity and certainly no later than the start of the next parliamentary session. Any more delays would be unacceptable, we have waited long enough.
“The principle that a tied tenant should be no worse off than a free-of-tie tenant is sound. But clarity is needed on how this will be achieved in practice.
“The BBPA [British Beer & Pub Association] is against the inclusion of a mandatory free-of-tie option and highlights the benefits of the tied model. We believe a free-of-tie option should be included in the Code. If the tied model delivers significant benefits it has nothing to fear — it will continue to be an attractive model for lessees and the free-of-tie option will not be taken up.
“The effectiveness of the Statutory Code will be seriously undermined if overseen by a toothless adjudicator. The adjudicator should be given the full range of powers, including the ability to impose fines.”
Industry responses
Brigid Simmonds, chief executive of the British Beer & Pub Association, said: “It is good to see the Committee views the new arbitration systems set up under self-regulation, (PIRRS and PICA-Service) as a positive development that they would not wish to see lost. It shows we have made significant progress on self-regulation, something we could develop further without costly and inflexible legislation.
“The Select Committee supports a threshold of 500 pubs and believe that these should only be leased and tenanted pubs. Their proposal for flexibility to amend the threshold would create uncertainty for smaller companies and could be detrimental to future investment. The BBPA has always been clear that market distortion must be avoided.
“The Select Committee supports a free-of-tie option, but does not call for the abolition of the tie. There is a real concern from the industry that diluting the buying power of companies by forcing a free of tie option will make many more pubs unviable.
“Over the last ten years, pub companies have faced five inquiries and two OFT reports, with the basis for a tied system for public houses supported in every case.
“Tenants would lose support from their pub company, and face big increases in their capital requirements, as they would have to fund costs such as rent increases, deposits, and new fixtures and fittings, themselves. In the current economic climate, many would be unable to secure the necessary finance. It would be very bad news for the pub sector.
“No mention is made of the importance to British brewers of the tied model which offers a route to market for British beers.
“It is clear that the Select Committee is struggling to find solutions to some of the issues it raises which are not easy to resolve. This shows clearly that the perceived problems and solutions are complex, with the potential for many unforeseen consequences - is legislation really the right answer?”
Mike Benner, Campaign for Real Ale chief executive, said: “Today’s report is a further step towards a long awaited fair deal for the nation’s publicans and pub goers.
“The large pub companies have spent a decade dragging their feet on self regulation and have stubbornly refused to take appropriate action to ensure a sustainable future for the nation’s pubs. The scale of the unjust business relationships imposed on unsuspecting publicans is exposed by our recent survey suggesting that 57% of publicans tied to large companies earn less than £10,000 a year.
“With some large pub companies focused on selling off assets and maximising short term returns we look forward to the Government bringing forward a Bill this Autumn to protect the future of pubs.”
Association of Licensed Multiple Retailers strategic affairs director Kate Nicholls said: “We are pleased that the Committee has chosen to support our recommendations and recognises the importance of achieving sensible and balanced legislation which will work for the industry in the long term. The Committee’s support for the continued operation of PIRRS and PICAS to cover smaller businesses is particularly welcome as are the acknowledgments that the statutory code should contain a mandatory free-of-tie option and apply only to leased and tenanted pubs.
“We are also happy that the Committee has called for the Government to set a timetable for implementation as soon as possible. It is important for businesses to have certainty about the future and it is past time that this issue was settled so that the industry can continue to move forward. We look forward to the Government’s response and hope that these issues can be put to bed so that our members can continue their fantastic work creating jobs and growth up and down the country.”
