Plans to protect tied pub landlords against high rents and beer costs have been revealed today by the Government as it publishes its consultation on the proposals.
The proposals include a statutory Code of practice and an independent adjudicator with the power to investigate and settle disputes.
The Department for Business claimed the moves would “ensure that tied tenants are treated no less favourably than free-of-tie tenants” and would save landlords £100m per year.
The plans will focus on stopping firms abuse the beer tie, where landlords are forced to buy their beer from the pub owner rather than the open market.
The new Code would contain mandatory rules for all pub companies – so-called “pubcos” – owning more than 500 pubs, which are the source of 90 per cent of complaints. These are Enterprise Inns, Punch Taverns, Greene King, Admiral, Star, Marston’s, Wellington, Trust Inns, and Spirit.
The proposed adjudicator would be based on the model of the widely welcomed Grocery Code Adjudicator and would have the power to:
• arbitrate individual disputes between large pubcos and their tenants, including about whether or not a rent review has genuinely been conducted on an “open market” basis
• carry out investigations based on complaints received
• where an investigation finds that a pubco has breached the Code, impose sanctions including financial penalties where the breach is severe
• publish guidance on when and how investigations will proceed
• advise pubcos and tenants on the Code
• report annually
• recommend changes to the Code
“Voluntary approach isn’t working”
Business Secretary Vince Cable said: “We gave pub companies every chance to get their house in order. But despite four select committee reports over almost a decade highlighting the problems faced by publicans, it is clear the voluntary approach isn’t working.
“Pubs are small businesses under a great deal of pressure, many of which have had to close. Much of that pressure has come from the powerful pub companies and our plans are designed to rebalance this relationship.
“Pubs play a valuable role at the heart of our communities and we urgently need a change to help them survive and become profitable. These plans will do just that and could save pub tenants £100m per year by making sure that pub companies charge their tenants fair rents and beer prices.
“The new proposals could also allow tied pubs to have independently picked guest beers and help the growth of small beer and ale manufacturers across the UK. The Government is committed to building a thriving pub sector. The industry represents many small businesses, employing hundreds of thousands of people across the country.”
Employment relations and consumer minister Jo Swinson said: “We are committed to stamping out abuse of the beer tie and helping British pubs to thrive. It has been a huge concern of mine that pubs, often the hubs of our communities, are closing down at an alarming rate. What is also shocking is that the figures show that almost half of tied pubs earn less than £15,000 a year, and struggle to make ends meet because of rising beer prices and rent.
“I have heard about a variety of unfair practices such as large unjustified increases in rent, and am clear that this sort of behaviour is not good enough.
“These proposals will put a fairer system in place and will make sure that tied pubs are no worse off than free-of-tie pubs. For the first time if pubs feel they are being treated unfairly by their landlords they will be able to complain to a powerful new body.
“This month is also Community Pubs Month with some great work going into helping community pubs. Alongside the recent beer duty discount announced in the Budget, these plans will support the pub industry and the role pubs play in building a stronger economy in our local communities.”
“Desperately needed reforms”
The plans have been widely welcomed by campaign groups and industry insiders.
Mike Benner, chief executive of the Campaign for Real Ale (CAMRA), said: “It is fantastic news that the Government is pushing ahead with these desperately needed reforms. Introducing Guest Beer and Market Rent Only options will deliver fair market rents and ensure licensees are able to buy beer at competitive prices. These reforms, coupled with an industry watchdog with real teeth, are urgently needed to help safeguard the future of many thousands of valued community pubs.”
“The large pub companies have been given repeated opportunities to deliver effective self regulation but have failed to do so. CAMRA is delighted that after nine years of self regulation failure the Government has decided to act.”
“Guest Beer and Market Rent Only options promise to be a major boost for Britain’s thriving independent brewery sector as well as the pub sector. Over 1,000 small brewers who are currently locked out of supplying local pubs will now be able to make their beers more widely available to pub customers.”
Brigid Simmonds, Chief Executive of the British Beer and Pub Association, said: “It is vital for our members that the tied house model works well for both partners, so we are fully prepared for the model to be tested. It is one of the best small business partnerships, for shared investment, shared business development, and job creation, which makes it good for the pub sector and Britain’s pubgoers.
“BBPA members are determined to tackle problems where they exist, as we have been doing, through the system of self regulation that the industry has set up.”
Greg Mulholland MP, chair of the Parliamentary Save the Pub Group, has welcomed the plans. Quoted in an article on his website, Mr Mulholland said: “It is good news that the consultation on the desperately needed statutory code of practice for pub companies has been announced and great news for publicans that it will enshrine in law the principle that a tied licensee must not be worse of than a free of the licensee.
“The Coalition Government have rightly recognised that the large pubcos systematically take more from pub profits than is fair or sustainable which prevents licensees making a decent living and has closed thousands of pubs. The consultation is open to everyone and we need all those who have suffered from this – licensees, smaller brewers who can’t afford to sell their beer to pubcos and communities who have seen their pubs run into the ground – to take part.
“The Government are right to accept the view of the select committee who did four exhaustive reports into this issue and concluded that legislation was necessary and they also should accept the key select committee recommendation which is that the new code must include the option for licensees to pay fair market rent only, alongside the choice of tied agreements.
“It is right that the family brewers will not be covered by the new code which will apply to all companies with 500 or more pubs. It is the larger pubcos where the vast majority of the disgraceful overcharging and in some cases abuse has taken place and they have distorted and exploited the traditional tied model.
“It is time for a fair deal for our local pubs and a fair deal for the licensees who run them. That means pubco publicans must have the choice to pay market rent only and I hope thousands of people will write to BIS to say this, as the future of thousands of British pubs depends on it.”
He also tweeted:
— Greg Mulholland MP (@GregMulholland1) April 22, 2013
Members of the public also took to Twitter to give their reaction to the news. One user said:
— Daniel Reeves (@Cornishson73) April 22, 2013
The consultation begins today and will run for eight weeks, closing on 14 June.