Statutory code: licensee groups and small business organisations support Government intervention

The government consultation on the issue closed on Friday (14 June) and the Department for Business Innovation and Skills has already confirmed it will be at least three months until it will respond with its plans.
In the Guild of Master Victuallers submission Bill Sharp national parliamentary committee member said the organisation supported moves for a statutory code and an adjudicator.  

He said: “There should be a free-of-tie option with an open market rent. The proposed basis of the tie and how it used to operate is that licensees pay more for beer (and other products) but pay a lower than market rent – but this stopped being the case and leases became unfair, based on hugely inflated beer prices and high rents.   
“If as the pubcos maintain that the tie is a benefit to licensees then why should they not agree a free of tie option and let licensees ascertain for themselves whether or not the tie is to their advantage.”
The Federation of Licensed Victuallers Associations (FLVA) also supported plans for the statutory code and adjudicator. But said it should be binding on all companies who operate lease or tenancy agreements irrespective of the size of the estate.
However the FLVA gave its support for the beer tie and said it was not a supporter of a mandatory free-of-tie option.

Its submission said: “The FLVA support the beer tie acknowledging the levels of aggregated discounts are there to potentially support a revised pubco/licensee business relationship. These pubco discounts need to be maintained not diminished through free of tie proposals that would inevitably result in margin moving back up the supply chain to brewers, many of whom are foreign owned. The proposals for a mandatory beer free of tie option and/or guest ale option is not supported.”
Membership organisations, the Federation of Small Business (FSB) and the Forum of Private Business (FPB), also supported the statutory code and adjudicator.
In the FSB submission Clive Davenport chairman of the Enterprise and Innovation Policy Unit, said that to support a diverse and healthy pub sector the Government must introduce a statutory code on large pub companies that prohibit any products other than drinks to be tied and provides tied pubs with the right to sell a guest beer.
It said: “It should enshrine the right to request an open market rent review if: the price of tied products has increased above inflation, if an event outside the tenants control significantly impacts on the tenant’s ability to trade, the tenant did not have a rent review within the last five years, if the pub company decides to sell the pub.”
The FSB also wants to give tied tenants the option to go free-of-tie by paying a market rent only, on rent review, lease renewal or when the decision is made to sell the pub.
The FPB agreed that licensees should have the option of a market only rent option.  

In its submission it said: “As a key supporter of the Fair Deal for Your Local campaign we believe the best way to ensure a fair deal for pubs – and to deliver the Government’s clear commitment - is to include in the statutory code an option for tied publicans to only pay a fair, independently assessed market rent to the pub owning company - a ‘market rent only’ option. This is a simple, cheap to administer and market based solution that would simply give tied licensees the choice as to whether to pay fair rent only or a lower rent and higher beer prices.”
In its submission it suggested that the Government should review the implementation of an adjudicator after a year to decide whether it is desirable that the remit is extended or the threshold lowered of 500 pubs is lowered. It also said it believed that the pubs adjudicator should have fining powers from the start.
While Simon Clarke, secretary and campaign manager, Independent Pub Confederation (IPC) in his submission said: “IPC as a whole originally were keen to see a code that applied to all pub owning companies and a provision that those with more than 500 should offer the free of tie option to their licensees.

" We think the Government estimate of an average of £4,000 profit transfer per pub is perhaps an underestimate. We all agree on the overarching principles of fairness and tied licensee no worse off (TLNWO) than if they were free of tie.

"We all see clear and transparent rent assessment as a major issue to be resolved but IPC overwhelmingly consider the Governments proposed ‘formulaic approach’ to be a useful tool of transparency rather than a solution or mechanism to deliver TLNWO. We would still like to see abolition of machine ties, provision of a guest beer option and that flow monitoring has no place as evidence of buying out.”