Government publishes consultation on statutory code into pubco-tenant relationship

21-Apr-2013 - Last updated on 22-Apr-2013 at 11:19 GMT

Plans for a statutory adjudicator for the pubco/tenant relationship would save tenants £100m per year, and ensure tied pubs are "no worse off than free-of-tie pubs", the Government has said today as it publishes its consultation into the move.

According to the Government, the proposal will make sure that:

Tied pubs are no worse off than free-of-tie pubs
Pub companies charge fair rents and beer prices, with the possibility of open market rent reviews
Tied pubs could have the option of a guest beer, picked independently, "which could help the growth of small beer and ale manufacturers in the community"
Pubs are fairly and lawfully treated by pub companies.

Surprisingly, today’s announcement lists Wellington Pub Company, which has no tied estate, among those pub companies that would be subject to the proposals.
The proposal is that pub companies with more than 500 pubs, where almost 90% of complaints are received, would take part, namely; Enterprise Inns; Punch Taverns; Greene King; Admiral; Star; Marston’s; Wellington; Trust Inns and Spirit.

The total one-off costs to the seven affected pub companies of complying with the code are estimated to be £1m. The annual ongoing costs of compliance are estimated as £168k per pub company totalling £1.2m per year. The adjudicator is estimated to cost £220k to set up and £900k per year to run. These costs are based on those for the Groceries Code Adjudicator.

"The main benefit and aim of the policy is the estimated transfer from pub owning companies to licensees that is estimated to be £102m per year. This isn't included in the NPV figures as it is a transfer between businesses."

Under the proposals, a new adjudicator would have the power to enforce pub companies’ codes of practice, investigate any breaches and deal with disputes through possible sanctions and fines.

If pubs feel that they are being treated unfairly or there has been a breach of the Code, they will be able to complain to the adjudicator who can investigate and arbitrate the dispute for them. They will have the power to enforce the code and impose fines on pub companies if the breach is severe.

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 hub 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."

The consultation runs until 14 June. The consultation document can be found here.