Statutory code: MPs call for flexibility over 500 pub threshold

In a report on the proposed statutory code​, released today, the BISC said the Government must bring forward a bill on a statutory code for the pub companies at the “earliest opportunity” or risk an “unacceptable failure”. The committee said it feared legislation may still be at risk from the Parliamentary timetable.

It has also urged the Government to ensure that the role of the Pub Independent Conciliation and Arbitration Scheme (PICAS) and the Pub Independent Rent Review Scheme (PIRRS) is “not lost” as the code becomes statutory. And it called for more clarity on how the principle that a tied tenant should be no worse off their free-of-tie counterparts would be enshrined in law.

500 threshold​

The BISC welcomed the Government’s proposal for the statutory code to apply only to companies with more than 500 non-managed pubs but it called for flexibility to be included in any bill to let the Secretary of State alter the threshold at a future date. It also called for this threshold to only apply to tenanted and leased operators.

The committee said it supports the need for the principle of fair and lawful dealing and that a “tied tenant to be no worse off than a free-of-tie tenant” and agrees that the code should have a mandatory free of tie option. However, it issued a note of caution claiming that “clarity on how this will be enshrined in law is necessary”.

“We look to the Government to provide us with early detail on how these principals will be achieved through legislation.”

Code of Practice legal status​

The BISC said the enforceability and legal status of the company codes of practice has remained unresolved. “Such confusion reinforces the argument that only statutory intervention will put the legal status of the codes of practice beyond doubt,” it said.

The Adjudicator which will oversee the Statutory Code should be given the full suite of powers, including the power to fine, states the report. 

PIRRS and PICAS​

At the same time, the Committee said that the PICAS and PIRRS have been positive developments and has urged the Government to ensure they are retained in the new statutory framework. 

Adrian Bailey MP, chair of the BISC, said: “The Government has belatedly come to the right decision and consulted on establishing a statutory code and an Adjudicator. I welcome this action and only wish it had come when we first recommended it almost two years ago.

“The Government must now bring forward a Bill at the earliest opportunity and certainly no later than the start of the next parliamentary session. Any more delays would be unacceptable, we have waited long enough. 

“The principle that a tied tenant should be no worse off than a free-of-tie tenant is sound.  But clarity is needed on how this will be achieved in practice.

“The BBPA is against the inclusion of a mandatory free-of-tie option and highlights the benefits of the tied model.  We believe a free-of-tie option should be included in the Code.  If the tied model delivers significant benefits it has nothing to fear—it will continue to be an attractive model for lessees and the free-of-tie option will not be taken up.

“The effectiveness of the Statutory Code will be seriously undermined if overseen by a toothless adjudicator. The adjudicator should be given the full range of powers, including the ability to impose fines.”

Responses to the report​:​

Brigid Simmonds, chief executive of the British Beer & Pub Association​

“It is good to see the committee views the new arbitration systems set up under self-regulation, (PIRRS and PICA-Service) as a positive development that they would not wish to see lost. It shows we have made significant progress on self-regulation, something we could develop further without costly and inflexible legislation.

"The Select Committee supports a threshold of 500 pubs and believe that these should only be leased and tenanted pubs.  Their proposal for flexibility to amend the threshold would create uncertainty for smaller companies and could be detrimental to future investment.  The BBPA has always been clear that market distortion must be avoided.

“The Select Committee supports a free-of-tie option, but does not call for the abolition of the tie.  There is a real concern from the industry that diluting the buying power of companies by forcing a free of tie option will make many more pubs unviable.

“Over the last ten years, pub companies have faced five inquiries and two OFT reports, with the basis for a tied system for public houses supported in every case.

“Tenants would lose support from their pub company, and face big increases in their capital requirements, as they would have to fund costs such as rent increases, deposits, and new fixtures and fittings, themselves. In the current economic climate, many would be unable to secure the necessary finance. It would be very bad news for the pub sector. 

“No mention is made of the importance to British brewers of the tied model which offers a route to market for British beers. 

“It is clear that the Select Committee is struggling to find solutions to some of the issues it raises which are not easy to resolve.  This shows clearly that the perceived problems and solutions are complex, with the potential for many unforeseen consequences – is legislation really the right answer?”

Mike Benner, CAMRA Chief Executive​

"Today's report is a further step towards a long awaited fair deal for the nation's publicans and pub goers. The large pub companies have spent a decade dragging their feet on self regulation and have stubbornly refused to take appropriate action to ensure a sustainable future for the nation's pubs.

"The scale of the the unjust business relationships imposed on unsuspecting publicans is exposed by our recent survey suggesting that 57% of publicans tied to large companies earn less than £10,000 a year. With some large pub companies focused on selling off assets and maximising short term returns we look forward to the Government bringing forward a Bill this Autumn to protect the future of pubs."

Greg Mulholland MP, coordinator of the Fair Deal for Your Local campaign​

“The BIS Select Committee has yet again called for this serious problem to finally be addressed by the introduction of a statutory code of practice for the pubcos, including a market rent only option, whereby pubco tenants can choose to pay an independently assessed market rent to the pubco and be free to buy product from anywhere.  

“It was the Select Committee who proposed this solution and as they once again make clear, the market rent only option remains the only realistic way to stop the endemic overcharging, through inflated beer prices and excessive rents, and to deliver the Government’s clear commitment to ensure that the tied licensee is not worse off than a free of tie licensee.  

“A market rent only option is essential not only in achieving a fairer relationship between the pubcos and their tenants, but it would also be a boost for the British economy, with many more pubs able to survive and thrive and to consumer choice."

John Allan, National Chairman, Federation of Small Businesses:​

“The Federation of Small Businesses  has campaigned for the last decade to get a fair deal for publicans tied to one of the big pub companies and agrees with the BIS Select Committee that the statutory code cannot come soon enough. Our members have said that if they could be free-of-tie to the pub company which owns their pub they would stock more local produce – something they can’t do at present.

“It is clear that self-regulation hasn’t worked and that is why Government needs to intervene. However, FSB fears that practices will not improve without a robust adjudicator with a full range of powers.”

Association of Licensed Multiple Retailers Strategic Affairs Director Kate Nicholls​

“We are pleased that the Committee has chosen to support our recommendations and recognises the importance of achieving sensible and balanced legislation which will work for the industry in the long term. The Committee’s support for the continued operation of PIRRS and PICAS to cover smaller businesses is particularly welcome as are the acknowledgments that the Statutory Code should contain a mandatory free-of-tie option and apply only to leased and tenanted pubs.

“We are also happy that the Committee has called for the Government to set a timetable for implementation as soon as possible. It is important for businesses to have certainty about the future and it is past time that this issue was settled so that the industry can continue to move forward. We look forward to the Government’s response and hope that these issues can be put to bed so that our members can continue their fantastic work creating jobs and growth up and down the country.”