Vince Cable: Why we are acting on pubcos

The Great British Pub has long been a part of our history. Some brewers have been operating tied pubs since the early Eighteenth Century, and this Government is keen to see the industry build on its rich heritage and ensure we maintain the pub’s place at the heart of our communities. Yet the industry has been overshadowed in the past decade by very real concerns about the unfairness which can arise in the relationship between pub owning companies and their tied tenants.

On the weight of the evidence from four BIS Select Committees, our own call for evidence in 2012 and the ongoing cases of tenants facing hardship, I determined that it was time for Government to step in.

The Consultation​

Our consultation on Pub Companies and Tenants sought your views on establishing a Statutory Code and an Adjudicator to govern the relationship between pub owning companies and their tenants. The response to the consultation was huge. We received1,120 written responses and more than 7,000 responses to the online survey conducted in parallel. I thank all those who responded for contributing their views and helping to shape our understanding of the industry and how best to address the difficulties which tied tenants too often face.

While self-regulation has brought a number of improvements, in the shape of the Industry Framework Code and dispute resolution services, it is clear to me that these changes have not gone far enough. The evidence we have received shows that, while there is widespread responsible practice in the industry, many tied tenants continue to face unfair treatment and hardship. Self-regulation has not been able to effect the step change desperately needed in the industry to ensure that all tied tenants are treated fairly.

The Policy​

The Government is committed to bringing about this step change in the relationship between pub owning companies and their tied tenants. A Statutory Code, supported and enforced by an independent Adjudicator, is the best way to ensure that tied tenants are treated fairly and that they are no worse off than their free-of-tie counterparts.

We will bring in a Core ​Code to protect all ​tied tenants – providing them with increased transparency, fair treatment, the right to request an open market rent review if they have not had one for five years, and the right to take disputes to an independent Adjudicator.

Tenants who are tied to a pub owning company with 500 or more tied pubs will also benefit from an additional Enhanced ​Code, which will require their pub owning company to provide them with a parallel free-of-tie rent assessment if rent negotiations for their pub fail.

The Benefits​

For the first time, tied tenants will be able to test whether they are indeed ‘no worse off’. We are giving those tenants at risk of unfair treatment the tools to redress the imbalance in their relationship with the pub owning companies, and an independent Adjudicator to turn to if those companies aren’t playing fair. The result for tied tenants is what they have sought all along: to be treated fairly and to be no worse off than their free-of-tie counterparts.

A Proportionate Package​

Despite the often polarised views in this industry, there is strong support for the tie as a business model. What is important to the Government is that there are protections which can operate within the tied model. Some tenant groups and campaigners support a mandatory free-of-tie option (also known as the market rent only option). The consultation responses raised concerns that this option would create uncertainty for pub owning companies, which would have an unpredictable impact on the wider pubs sector.

While the mandatory free-of-tie option had undoubted attractions, there is insufficient support to proceed with it. Our proposals for a Statutory Code and Adjudicator will therefore rebalance the relationship between pub owning companies and their tied tenants, without pursuing this more radical option.

Conclusion​

This Government has a strong commitment to support a healthy and flourishing pub industry. We brought an end to the beer duty escalator in last year’s Budget and cut beer duty for the second time this year. The tax on a typical pint of beer is eight pence lower than under the previous government’s duty regime, and measures like the Community Right to Bid are giving community organisations in England a better chance to save their local pub. With the new Statutory Code and Adjudicator in place, I look forward to seeing a sector which struggled - like so many others - in the aftermath of the recession, flourishing– to the benefit of all those who work so hard to make the Great British Pub a mainstay of our communities.

Stop Press! Tenants now attend the Tenanted Pub Company Summit at half price (£198 + VAT per place).​

What will the statutory code mean for you? Get informed. Be part of the debate. Next Thursday, June 12 at The Landmark, London. Limited places available. More details www.tenantedpubcompanysummit.co.uk​