The letter signed by three MPs — Lib Dem Greg Mulholland, Conservative Caroline Noakes and Labour’s Grahame Morris — criticised the proposals for a statutory code governing the pubco/tenant relationship as failing to achieve its stated aim, to ensure fairness for tied tenants.
It asked the Business Secretary to explain what mechanism the Government was proposing to ensure a tied licensee is no worse off than one who is free-of-tie.
It insisted the Government has “fallen into the trap” of only applying an enhanced code to tied pubs. The MPs said the decision , which they described as “absurd”, would allow pubcos a loophole of removing the tie but enforcing “wholly unfair and excessive rental arrangements”.
The letter said: “This is self-evidently nonsense — but also by doing this the Government is immediately undermining its commitment to fairness.
“The tenanted and leased model gets abused in different ways, tied, part tied and rent only and all must be stopped — or pubco overcharging will continue and the code will have failed.”
Unworkable
The letter also criticised a central plank of the Government’s proposals — offering parallel rent assessments — which the group claimed had been deemed unworkable by all parties.
It reiterated the group’s call for a mandatory market-rent only option as the only way to guard against pubcos acting unfairly.
It said the basis for the establishment of the adjudicator was “confused and flawed”, with no clear role.
The group also criticised the reference to an adjudicator dealing with “breaches of the code”, when no code was specified in the legislation.
The letter called on Cable to add more detail to the proposals, which were included in the Small Business, Enterprise and Employment Bill. It also called on him to clarify when the code would be drafted and how it would be approved by Parliament.
A spokeswoman for the Department for Business, Innovation & Skills said Cable would respond to the letter in due course. She said: “The Government considers the measures are a proportionate and targeted response to tackle the long standing problems in the pub industry. They will protect all tied tenants and strengthen their negotiating position with their pub-owning companies.”
The Small Business, Enterprise and Employment Bill, which includes the Government's plans for a statutory code will have its second reading in Parliament today.
Scandal
Commenting on the letter, Greg Mulholland, chair of the Save the Pub Group said: “We welcome the introduction of a new and long overdue statutory code of practice and adjudicator, but as currently drafted the Government proposals will not actually tackle the pubco overcharging nor will it deliver their own clear commitments to ensure fairness and that the tied licensee will not be worse off than a free of tie licensees. So the Save the Pub Group will be calling on BIS to amend and strengthen the proposals, so that at last we can see an end to the scandal of rip-off prices and excessive rents, which will make thousands more pubs viable”.
Vice-chair Caroline Nokes MP added: “The proposals are a step in the right direction and I welcome the acknowledgement from government that years of self-regulation has simply not worked. There remain, however, many flaws in the pubco reforms as proposed and, having identified them, the Save the Pub group intends to work over the coming weeks and months to help Government strengthen its Bill to ensure that.
“The issue is a simpler one – the small business must be allowed a fair split of the profit they generate. Unless the Government clearly legislate to ensure that this happens and that the anti competitive pubco tie can no longer be abused, they will not have dealt with the problem they acknowledge exists”.
Grahame Norris, the other vice-chair, said: “It remains disappointing that the Government did not do the simple and obvious thing and back the cross party Select Committee and give large companies tenants the right to pay a fair, independently assessed rent only.
“How can they possibly on the one hand argue that the BIS Select Committee market rent only option, with 67% support in the Government’s own consultation, does not have sufficient support, yet put forward parallel rent assessments that had literally no-one proposing it as a solution?
It is not at all clear who the adjudicator as proposed would be able to enforce the principle that no tied tenant should be worse off than a free-of-tie tenant and to impose fair tied rents. Without that clear role and power, the adjudicator would be toothless”.