Members of the Independent Pub Confederation (IPC) have called for a statutory code of practice to be implemented claiming it is the only way to change pubco “behaviour”.
Speaking at the second meeting of the Business, Innovation & Skills Committee follow-up inquiry IPC secretary Kate Nicholls said that nothing had changed since the 2004 investigation: “The only answer is a statutory code. That is the only thing that will change behaviour”.
She claimed that the current pubco Codes of Practice fail to go far enough and the lack of implementation means they have not been effective. She added: “The code could go a lot further.”
She said this is backed up by statistics which reveal that 20% of licensees are signing a tenancy or a lease when they have not received a shadow P&L.
Nicholls said the current codes were too “vague” and “weak” and don’t effectively deal with the key commercial problems faced by tenants.
However, she said she would accept a legally binding code with an adjudicator.
Campaign for Real Ale chief executive Mike Benner agreed: “The only next step is to put it on a statutory footing which will protect people.”
Fair Pint campaigner and pub retailer Karl Harrison added: “Self-regulation is not working. We have a weak code of practice written by the people the code is supposed to apply to.”
Harrison said not enough effort had been made when putting together the codes. He said the BII and Federation of Licensed Victuallers Association simply said: “Where do I sign?”.
Concern was raised about the lack of sanctions the BII has to penalise pubcos who breach the code.
CAMRA chief executive Mike Benner agreed claiming the code is not “robust enough”.
“The BII is not independent and does not have authority or sanction at their disposal,” he added.
Nicholls also raised concern that naming pubcos for breaches of the code was of little help to an ingoing tenant.
“Three-quarters are not making a decision on the pubco they want - they are making a decision on (a particular) pub,” she said.
Harrison also launched a stinging attack on the BBPA claiming the association was representing property companies.
Harrison added: “All we have got as sanctions to breaches is that you can no longer be a member of an organisation that does not have credibility.”
Simon Clarke, Fair Pint campaigner and Enterprise tenant, said: “If the rule book is no good there is no confidence in enforcing it. This is a double edged sword.”
The IPC also disputed claims by pubcos that offering genuine free-of-tie options would damage the sector.
MP Brian Brinley asked the question: “Aren’t you running the risk of creating a senario where many more pubs go to the wall?”
Harrison said claims that more pubs would close if they were allowed to go free-of-tie were “laughable”. He was responding to pubco claims that their supply agreements are based upon them having pubs within the tied model. “We are talking about companies which have collapsed and are trying to defend their business model,” he added.
Harrison gave examples of how both the City and the banking sector do not have faith in the tenanted market. He said the fact that Punch is demerging its tenanted businesses showed there was no confidence in the tied model. He called tenanted pubcos intermediaries who simply take “commission and backhanders”.
Benner added: “The industry is already at crisis point and we shouldn’t be concerned about unintended consequences of pubcos disappearing.”
He said the key points are that the rent is too high, wholesale prices are too high and as tenants can’t make enough profit they head into a “spiral of decline”.
Clarke accused pubcos of “seeking ways to circumvent” the effect of recommendations from the previous committee. He said many pubcos had starting insisting on minimum beer orders, which means tenants are “penalised to buy beer that they potentially can't sell.”
