The news comes ahead of Labour’s Opposition Day debate on the pubco-tenant issue which is to take place in the House of Commons tomorrow.
An official at the Department for Business, Innovation & Skills (BIS) told the PMA there is "complete political will" to introduce a statutory code and adjudicator following four select committee inquiries on the issue of pub companies and their relationships with tenants.
It follows a letter sent last month by business secretary Vince Cable to parties involved with the self-regulation deal which was agreed between the Government and the British Beer & Pub Association in November 2011.
In the letter, Cable said he was considering “the possible options that are available”, adding that “the changes are not as far-reaching as I would have liked and do not appear to have engendered the culture change that is needed.”
Consumer affairs minister Jo Swinson had previously turned down an interview with the Publican's Morning Advertiser on the self-regulation deal, saying that the commitments “have now been achieved”, but Cable later denied that the Government was “washing its hands” of the issue and vowed to look into the matter.
The proposed Code will be based on the existing Industry Framework Code but will be strengthened to include an overarching ‘fair dealing’ provision, and also the principle referring to the beer tie which states that ‘a tied licensee should be no worse off than a free-of-tie-licensee’.
It is expected to apply to all pub companies which own more than 500 tied leases, based on evidence indicating that smaller companies have been behaving responsibly.
The new Code will ensure fair practices for a number of issues including rents and beer prices, and it will also have the power to investigate and deal with disputes between pub companies and licensees and in some cases have the power to fine.
However, the Code will not mandate a ‘free of tie option with open market rent review' or completely remove the beer tie.
In a letter sent to chairman of the Business, Innovation and Skills Select Committee, Adrian Bailey, Cable wrote: "The evidence strongly suggests that the tie, per se, is not the issue: when operated as envisaged and fairly, it is a valid business model being used responsibly by companies both large and small and, were it to be removed, the British brewing industry could be significantly disadvantaged. What is clear is that it is the abuse of the tie, like the abuse of rent calculations and other factors, that is causing problems in certain circumstances."
The proposed Adjudicator will be based on the model of the Groceries Code Adjudicator, and will have the power and function to:
- arbitrate individual disputes between large pub companies and publicans
- carry out investigations based on complaints that have been received, during which they could require information from pub companies;
- impose sanctions where an investigation finds that a pub company has breached the Code – including, in the case of severe breaches, financial penalties;
- publish guidance on when and how investigations will proceed and how these enforcement powers will be used;
- advise pub companies and publicans on the Code;
- report annually on his or her work; and
- recommend changes to the Code.
A formal consultation on the proposed measures will be launched in the spring, and the PMA understands that the Government is keen to push through the proposals "as soon as possible" which could see the consultation period last as little as six weeks. This follows extensive pre-consultations between the Government and key stakeholders in the industry.
Cable added in a statement today: “There is some real hardship in the pubs sector, with many pubs going to the wall as publicans struggling to survive on tiny margins. Some of this is due to pubcos exploiting and squeezing their publicans by unfair practices and a focus on short-term profits. Four Select Committee reviews since 2004 have highlighted these problems.
“Last year we gave the pubcos one last chance to change their behaviour but it is clear that the self-regulatory approach was not enough and in October I wrote to the industry to seek their views. A change in the law is now needed to shift behaviour.
“I hope these measures mean publicans are given a fairer chance at running their pub, which in turn will help them grow their businesses instead of losing them.”