Vince Cable, the Secretary of State for Business, Innovation and Skills, talks about the reasoning behind the Government’s intervention in the pub sector, the consultation process, new policy and its proposed benefits.
The Great British Pub has long been a part of our history. Some brewers have been operating tied pubs since the early Eighteenth Century, and this Government is keen to see the industry build on its rich heritage and ensure we maintain the pub’s place at the heart of our communities. Yet the industry has been over shadowed in the past decade by very real concerns about the unfairness which can arise in the relationship between pub owning companies and their tied tenants.
On the weight of the evidence from four BIS Select Committees, our own call for evidence in 2012 and the ongoing cases of tenants facing hardship, I determined that it was time for Government to step in.
The Consultation
Our consultation on Pub Companies and Tenants sought your views on establishing a Statutory Code and an Adjudicator to govern the relationship between pub owning companies and their tenants. The response to the consultation was huge. We received 1,120 written responses and more than 7,000 responses to the online survey conducted in parallel. I thank all those who responded for contributing their views and helping to shape our understanding of the industry and how best to address the difficulties which tied tenants too often face.
While self-regulation has brought a number of improvements, in the shape of the Industry Framework Code and dispute resolution services, it is clear to me that these changes havenot gone far enough. The evidence we have received shows that, while there is widespread responsible practice in the industry, many tied tenants continue to face unfair treatment and hardship. Self-regulation has not been able to effect the step change desperately needed in the industry to ensure that all tied tenants are treated fairly.
The Policy
The Government is committed to bringing about this step change in the relationship between pub owning companies and their tied tenants. A Statutory Code, supported andenforced by an independent Adjudicator, is the best way to ensure that tied tenants aretreated fairly and that they are no worse off than their free-of-tie counterparts.
We will bring in a Core Code to protect all tied tenants – providing them with increasedtransparency, fair treatment, the right to request an open market rent review if they have not had one for five years, and the right to take disputes to an independent Adjudicator.
Tenants who are tied to a pub owning company with 500 or more tied pubs will also benefit from an additional Enhanced Code, which will require their pub owning company toprovide them with a parallel free-of-tie rent assessment if rent negotiations for their pubfail.
The Benefits
For the first time, tied tenants will be able to test whether they are indeed ‘no worse off’.We are giving those tenants at risk of unfair treatment the tools to redress the imbalance in their relationship with the pub owning companies, and an independent Adjudicator to turn to if those companies aren’t playing fair. The result for tied tenants is what they have sought all along: to be treated fairly and to be no worse off than their free-of-tie counterparts.
A Proportionate Package
Despite the often polarised views in this industry, there is strong support for the tie as abusiness model. What is important to the Government is that there are protections which can operate within the tied model. Some tenant groups and campaigners support amandatory free-of-tie option (also known as the market rent only option). The consultation responses raised that this option would create uncertainty for pub owning companies, which would have an unpredictable impact on the wider pubs sector.
While the mandatory free-of-tie option had undoubted attractions, there is insufficient support to proceed with it. Our proposals for a Statutory Code and Adjudicator will therefore rebalance the relationship between pub owning companies and their tied tenants, without pursuing this more radical option.
Conclusion
This Government has a strong commitment to support a healthy and flourishing pubindustry. We brought an end to the beer duty escalator in last year’s Budget and cut beer duty for the second time this year. The tax on a typical pint of beer is eight pence lower than under the previous government’s duty regime, and measures like the Community Right to Bid are giving community organisations in England a better chance to save their local pub. With the new Statutory Code and Adjudicator in place, I look forward to seeing asector which struggled - like so many others - in the aftermath of the recession, flourishing – to the benefit of all those who work so hard to make the Great British Pub a mainstay of our communities.
