Inside Track by John Harrington At a first glance, the announcement that the Government Department for Business, Innovation & Skills (BIS) will not implement a statutory code of practice for pub companies, policed by a code adjudicator, amounts to a huge victory for tenanted operators. In one fell swoop, it seems, uncertainty about whether pubcos will be forced to stomach a costly new bureaucratic regime in the foreseeable future were swept aside; it certainly registered well with investors, as Enterprise Inn’s shares rose c.13% on Thursday. To recap, BIS rejected calls from the Business, Innovation & Skills Committee (BISC) to implement a statutory code for pubcos in favour of a ‘toughened’ self-regulatory regime. This meant promises to make the framework code of practice legally binding, creating a new Pub Independent Conciliation and Arbitration Service (PICAS) and strengthening the framework code of practice. BIS was compelled to release a statement in response to BISC’s damning criticism of pubcos and self regulation, contained in its report from September. While the department agrees that the industry “needs to go further”, reading between the lines, it’s clear that BIS feels the Committee failed to grasp the significance of several key reforms. The department lists some of its favourites, including the Pre-Entry Awareness Training (PEAT) programme, now taken up by 80% of new lessees, the Pubs Independent Rent Review Scheme (PIRRS), and the BII-backed mediation service currently being trialled. But dig a little deeper, and it’s clear that there’s still much to play for as details of how the new ‘toughened’ self-regulatory regime emerge. Key details are set to be thrashed out by the industry over the coming weeks and months and big questions remain. For example, who will be involved in mediating disputes under the PICAS, and how can it ensure impartiality when it’s primarily funded by pubcos? Concerns also remain about the pledge to make the codes legally binding. BIS says new leases will make reference to the BBPA’s industry framework code, with existing leases given a supplementary agreement to be bound by the code. In other words, abiding by the framework agreement will effectively become a condition of the lease. Curiously, though, there’s no mention of individual company codes being legally binding. Alistair Darby, chief operating officer of Marston’s, told M&C Report he was convinced that they would be on the grounds that they have received accreditation from BIIBAS under the framework code. But one pub company expert doubted about how this would work in practice. Another concern is the timescale. The agreement gives pubcos until the end of 2011 to add 14 improvements to their codes of practice, covering issues from formerly stating that any upward-only rent review clauses will not be enforced, greater transparency on how AWP machine income is distributed, and include a total rent assessment statement. BISC accused the BBPA of moving at a “glacial” pace with its reforms, so the pub companies and other stakeholders will need to work almost around the clock to make the necessary changes. On another point, was this also the moment that the British Beer & Pub Association (BBPA) in particular turned the corner as a lobbying organisation? On the face of it, the BBPA has played a blinder here, with intense behind-the-scenes lobbying apparently overcoming not just pressure from BISC but also promises from Business Secretary Vince Cable himself, who told MPs last July: “If [pubcos] haven’t delivered a more satisfactory arrangement then there will be legislative action.” But this is a simplistic judgement, in my view. A lot can change in the 16 months since Cable made his comment, and the Government has made it clear that its stated desire not to add to the bureaucratic burden of businesses was at the forefront of its decision to hold off from regulation. One well-placed source has suggested that the Coalition’s much-publicised one-in, one-out approach to regulations means it’s loathe to add more red tape to the pub sector. As BIS says: “Particularly in the current economic climate, the imposition of additional burdens on business must be considered extremely carefully. The possibility of unintended consequences, including damage to businesses, British jobs and the UK economy from even the best legislation in such an area should not be underestimated.” That’s not to say that the industry’s comments haven’t been taken on board. This is especially true of the family brewers, and it’s testament to them that the bulk of the proposed reforms solely apply to fully repairing leases rather than traditional brewery tenancies. BIS says it sees the debate over the tie per se as a “distraction”. It adds: “There is nothing in itself that causes the tie to be fundamentally wrong - and, in fact, in some instances, the tied model may be essential to the preservation of small British brewers.” So there we have it. Industry lobbying may have laid the groundwork for justifying the decision, but when push came to shove, it was the state of the economy that was the decisive factor. But the issue is far from closed. BISC MPs will have a chance to question business minister Ed Davey on the Government's response at a hearing in Westminster on 6 December. The outspoken Committee member Brian Binley was adamant that its fight is not over. He told the Publican’s Morning Advertiser: “I am sure the BISC will be doing all it can to change this position and I beg the Government to rethink before it is too late.” What’s clear, then, is that pubcos are certainly not off the hook and a series of tough challenges remain before tenanted operators can feel confident that the threat of statutory regulation has disappeared. What pubcos now have is some breathing space; what they don’t have is closure.