Luff Exclusive: one last chance for pubcos

In his second article for the Morning Advertiser, BISC chairman Peter Luff explains why he has set a deadline of June 2011 for change by pubcos — and what they must do.

What we recommend is that the industry should build on the reforms that have followed our 2009 Business & Enterprise Committee report.

These include an extension of the Pub Independent Rent Review Scheme (PIRRS) to become a general dispute system; the policing of the codes by the BII; an increase in transparency on pub company compliance through a "how good is your landlord" style website; the publication of pub company wholesale prices and discounts; and the recognition through the Royal Institution of Chartered Surveyors (RICS) valuation guidance that a tied tenant should not be worse off than a free-of-tie tenant.

We also recommend that the industry should address recommendations made in 2009, which have up until now not been acted on; for example, the removal of the AWP tie and the choice for lessees to go free of tie.

Deadline​

So why give the industry until June 2011 and what if there have not been improvements by then?

We chose June 2011 because it is one year after the pub company codes of practice have to be accredited for them to remain as members of the British Beer & Pub Association (BBPA).

By then it will be clear whether the new codes are really making a difference on the ground to lessees and whether the pub companies are abiding by them.

It also gives the BII a year to prove whether it can be relied upon as a strong enforcement and policing body.

In addition, it gives time for any potential court case to establish case law on the legal enforceability of the new "signed" codes.

We have recommended that our successor committee (which will come into being following the general election) should evaluate what changes have been made and the effects of these changes.

Tenants survey​

This most probably will be done through a further survey, as well as the normal "call for evidence". The committee would then be in a position to inform the Government whether there have been improvements or whether statutory intervention is required.

The committee can then recommend legislative action direct to the Government in the same way the Competition Commission could. Crucially, this would be in one year's time as opposed to four, shortening the process of a Competition Commission inquiry by three years.

This legislation may include: breaking up pubcos; a legal requirement for lessees to have the choice to go free of tie; and the creation of an industry ombudsman to enforce the codes and the use of fair maintainable trade (FMT) and/or a RICS certified chartered surveyor at rent evaluations and reviews.

Unintended consequences​

So why not make these recommendations now? Because we stand by our position in our 2009 report that "interventions can have unexpected consequences".

The Beer Orders are evidence of this. We are giving the industry one last chance to reform itself under our guidance first.

However, we do not take this date of June 2011 lightly. We also ask for a clear project plan from the industry, with key stages at which it can be marked against achievement throughout the 14-month period between now and then.

We make clear that any slippages by the industry at these key stages will require robust explanations to us and the Government, accompanied by a plan of action to get the timetable back on track.

United front​

Many Morning Advertiser​ readers comment that this has been going on for 20 years or so — referring to the 1989 Monopolies & Mergers Commission inquiry — and that the position cannot go on for one year longer.

From recent research I have carried out I find that the situation is far worse — it was actually 1816 to 1817 when a House of Commons committee first looked at the issue of the beer tie, which led (13 years later!) to the 1830 Beerhouse Act.

The committee found that the most objectionable feature was not any effect on the consumption of drink or social disorder, but "the restricted power which the public at large possessed of employing their capital in the trade of vicutalling houses".

This is not a new problem that can be solved over night. There is a need for the industry to work together. It is now time for both sides to put down their weapons and help the reforms escalate into lasting changes for the good of the industry.

Only then as a united front can the industry move forward and concentrate on the other issues that really matter to the great British pub.

• Part one: Luff: We stand by every word on pubcos​​