Earlier this year, Business Secretary Vince Cable set out proposals for the consultation on the Code of Conduct, which contains mandatory rules for all pub companies with more than 500 pubs in a bid to improve the pubco-tenant relationship.
The consultation ran between 22 April and 14 June but the BIS Committee, which first recommended action in 2011, insists the Government must now bring forward the Bill ahead of the next Parliamentary session in spring 2014.
“Any more delays would be unacceptable, we have waited long enough,” said the BIS Committee’s chairman Adrian Bailey. “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 initial Government proposals for the consultations were fronted by Cable, who said self-regulation within the pub industry ‘wasn’t working’. Proponents of the Code believe it could save tenants £100m a year and would stop pub companies abusing the beer tie.
VIDEO: Government consulation
In the below video, Jo Swinson, Minister for Employment Relations and Consumer Affairs, and Camra’s chief executive Mike Benner discuss the Government's proposals for establishing the Statutory Code.
Under the Code, tied pubs would essentially be able to sell independently picked guest beers in their pubs, be fairly and lawfully treated by pub companies and be charged fairer rents and beer prices, with the possibility of open-market rent reviews.
Free-of-tie option?
If a Bill is eventually passed, the Government intends to include within the Code a principle that a tied tenant should be no worse off than a free-of-tie tenant. This 'free-of-tie option' has divided opinion among the industry, with the BIS Committee wanting it to be included in the Code, but the British Beer and Pub Association (BBPA) are against it.
The BBPA’s chief executive Brigid Simmonds said: “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.”
But Bailey from the BIS Committee argues that ‘the principle that a tied tenant should be no worse off than a free-of-tie tenant is sound’, adding that ‘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” he said. “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.
Adjudication
Of the 50,000 or so pubs operating in the UK, 48 per cent are tied. If the proposed threshold for the code remains the same, the code would apply to Enterprise Inns; Punch Taverns, Greene King, Admiral, Star, Marston’s, Wellington, Trust Inns and Spirit.
The Code will be backed by a ‘powerful’ adjudicator, which will be able to enforce the code, investigate breaches and deal with disputes. But the BIS Committee’s report claims the adjudicator should be given the full suite of powers, including the ability to impose fines.
Bailey added: "the effectiveness of the Statutory Code will be seriously undermined if overseen by a toothless Adjudicator."
The Business, Innovation and Skills Committee is appointed by the House of Commons to examine the administration, expenditure and policy of the Department for Business, Innovation and Skills (BIS) and its associated public bodies.