Luff: I don't feel we can trust pubcos
I don't feel we can trust you to change voluntarily — that was the stark message delivered by the chairman of the Business, Skills and Innovation Committee to pubco representatives.
In a scathing attack on the reaction of certain pubcos to the Committee's summer report, chairman Peter Luff said he was "bitterly disappointed".
He said that "bullying, threatening and slagging off" was not a good response to the report after citing the reaction and comments from Enterprise Inns chief executive Ted Tuppen, Punch boss Giles Thorley, ex Punch tenanted boss Deborah Kemp and Brulines.
"I am not used to being unable to comment on my own reports for fear of litigation," he said.
"The central question is can we trust you? I don't feel we can."
He added: "There have been no major improvements since the 2004 inquiry."
Luff pressed British Beer and Pub Association chief executive Brigid Simmonds on how much longer the industry needed before the impact of the new Framework Code on Tenancies and Leases (Pubcos set out 'fundamental reform' plans) could be judged.
The answer of "two years" was met with much jeering and laughing. Simmonds said she would be happy to report back in a year's time.
Luff said: "The picture of the industry I have is a very varied one. Some have responded magnificently (to the report) and others grudgingly. Is it a face saving exercise?"
Marston's Pub Company boss Alastair Darby said he recognised the industry had to do a "substantially better job" than in 2004. "We recognise you have to earn the right to the tie," he said.
Darby said he had had some "fairly strong words" with industry colleagues over their reaction to the report and realised the industry had to act with "decorum" if they were to ever be trusted.
He said the success of the new code would be if there was never another person who claimed they simply did not know what they were signing up for. "There have been far too many emotional decisions and not enough commercial decisions," he said.
Enforcement
Luff questioned the enforcability of the new code, pointing to the example of Greene King. "The one great sanction (removal of accreditation and BBPA membership) is being willingly embraced."
Simmonds assured Luff that Greene King was fully committed to the new code and Darby said that having an unaccredited code would put a pubco at a "commercial disadvantage" as potential tenants would choose other pubcos. He likened it to having a bad credit record and trying to get a mortgage.
Simmonds stressed that the new code would be enforceable by courts because it was signed by both the lessee and the pubco. The new Pub Independent Rent Review System has already settled two disputes while three more had been settled before reaching it, since its launch two weeks ago.
She promised that the BBPA members would adhere to the new RICS guidance being produced and reassured the committee on numerous occasions that it had put no pressure on RICS.
Beer tie
On the beer tie, Simmonds said: "We do not believe the beer tie should be broken." Darby said it was for the market to decide if there was a demand for free of tie leases.
He said there had been an "accelerated evolution" of lease agreements and cited his own trial agreements, where tenants are offered free of tie prices on beer in return for a higher rent.
"The argument (from tenants he had spoke to) is not about the range of products but about the ability to compete," he said, adding this had been exacerbated by cheaper prices in managed houses.
Of the 60 tenants offered free of tie prices on beer, he reported only half had taken it up. "They don't want to take on additional extra fixed costs," he said.
"It is a sharing of the risk."
Darby warned that there could be dire consequences for a statutory code, which would make free of tie agreements the norm. "As a former brewer, it would be an opportunity to build margin, which is the thing that is most challenging in the UK beer market."
Brulines
Luff said the "most spectacular inaccuracy" of the last hearing had been from Punch's Thorley, who said that Brulines could tell the difference between water and beer — a statement later corrected in writing.
Luff quoted an email he had received from a Trading Standards Officer with 40 years of experience in Weights and Measures saying that Brulines equipment was "definitely not legal for trade" despite a recent statement from Trading Standards that it did not require accreditation.
Simmonds said that she had no knowledge that fines for buying out were being taken via direct debits from the accounts of tenants.
On the machine tie, Darby said that in his experience, where lessees worked in partnership with the pubco, they could take up to £40 more because of the pubcos buying power, technical expertise and support.
