Update: British Beer & Pub Association attacks Government plan for statutory code on tied pubs
The Government today announced long-awaited plans to tackle complaints about licensees “tied” to large pub companies, saying they will now be protected from unfair treatment.
Deputy Prime Minister Nick Clegg and Business Secretary Vince Cable announced that publicans will be given new rights under a statutory code, backed by an independent adjudicator with the power to resolve disputes, although the tied house system itself will not be outlawed.
Many publicans who, under the terms of their tenancy, have to buy in supplies via the owner of their pub say they are struggling to make a decent living, with more than half earning less than the minimum wage.
The adjudicator will enforce the new code, arbitrate disputes, carry out investigations into alleged breaches and impose sanctions on pub-owning companies (pubcos) if they fail to comply.
Mr Clegg said: “British Pubs are often the centre of our community, a place where we meet friends, watch sport and enjoy a Sunday roast; they are a national treasure and the envy of the world.
“They also contribute billions to our economy every year. But, for too long, landlords who are tied to larger pub companies have struggled to make ends meet.
“The self-regulatory approach hasn’t worked, so these new rules will give fairer treatment for landlords so that they can keep your local pub going strong.”
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Mr Cable added: “Local pubs and their owners play a vital part in vibrant local communities right across the country, as well as making an important contribution to the economy.
“Far too many landlords feel their income is squeezed by big pub companies. So today we are taking action to make sure they get a fairer deal.
“The introduction of a statutory code will make sure that tied tenants get an accurate assessment of how better off they could be and the new independent adjudicator would make sure pubs companies are forced to act to redress the situation if they aren’t behaving responsibly.”
Tied tenants having to buy beer from their pubco usually pay a higher price than freehouses, leading to complaints that they cannot compete with other pubs. In theory, tied tenants receive other benefits from their pubco to offset the higher prices but many argue that this is not the case in practice.
Under the new code, the Government said pub landlords will benefit from fairer rent assessments. All tied tenants will be given the power to request a rent review if they have not had one for five years.
For the first time, tied tenants will also have the right to review the information pub-owning companies have used to decide to increase rents.
Ministers believe this greater transparency will allow tenants to see what information their landlord has used in calculating the rent, and decide whether an increase is fair.
There will be additional protection for tenants whose pubco owns 500 or more tied pubs, with a right to request a “parallel free-of-tie rent assessment” to show whether they are worse off than their free-of-tie counterparts, so helping them in their rent negotiations.
Steve Kemp, of the GMB union, which has been lobbying on behalf of some tenants, said: “Self-regulation has been rejected, which is to be welcomed.
“We will study what is proposed to see how workable it is, but we regret that the free-of-tie option has been ruled out.”
And Tom Stainer, head of communications at Camra (the Campaign for Real Ale), said: “Camra’s head of communications Tom Stainer said: “With 28 pubs closing a week it is vital that publicans, who are on the frontline of keeping our valued community pubs open, are given protection from heavy-handed business practices from the big pubcos.
“Publicans could see the price they pay for beer fall by up to 60p a pint if the adjudicator forces the big pubcos to match open market prices. A 60p a pint saving would be a huge boost in the battle to keep pubs open and could lead to cheaper pub prices for customers.
“While we urge the Government to go further by introducing guest beer and market rent only options for tied publicans, today’s announcement is great news for publicans and pub-goers alike.”
However, Brigid Simmonds, chief executive of the British Beer and Pub Association, said: “While we welcome greater certainty and clarity after such a long period of debate, we are disappointed that the Government is seeking to introduce potentially costly legislation, with the disproportionate costs of a statutory adjudicator, rather than supporting the existing, and evolving, system of self-regulation.
“Partnerships with entrepreneurial tenants and lessees give them the opportunity to run a pub with very little capital investment, and BBPA members are committed to supporting lessees and tenants. Proposals that dilute the support pub companies can give to these entrepreneurs are unwelcome.
“Capital investment (some £200million per year) and transfer of value through reduced rents and a range of operational support is hugely important to a pub company’s ability to sustain jobs and successful community pubs.
“The Government’s own impact assessment shows that these proposals will close at least 52 pubs with the associated hundreds of job losses.
“A self-regulatory system costing around £100,000 per year will be replaced with a statutory adjudicator costing nearly £2m per annum and, as highlighted in the impact assessment, these additional costs will be passed on to consumers in the form of higher beer prices.”