MPs call pubcos to account

Related tags Tisc Pubcos Peter luff Renting Members of the united kingdom parliament for english constituencies

Pubcos once again face scrutiny from MPs about how they treat tenants — and whether they have acted on previous recommendations. John Harrington...

Pubcos once again face scrutiny from MPs about how they treat tenants — and whether they have acted on previous recommendations. John Harrington reports on the second inquiry

What is the background?

In 2004, a group of MPs from the Trade & Industry Select Committee (Tisc) conducted an inquiry into how tenants are treated by pubcos, following complaints about licensees getting a raw deal from their pub companies.

Tisc's report said pubcos must improve their practices. Recommendations included scrapping the machine tie, keeping rents sustainable and having transparent rent reviews. "Pubcos are on a yellow card at the moment," Tisc chairman Martin O'Neill warned at the time. He recommended a successor committee should re-examine pubcos — and regulation be imposed if changes haven't been made.

Tisc's successor, the Business & Enterprise Committee (Bec), chaired by Tory MP Peter Luff, has now confirmed a new inquiry will take place.

Why a new inquiry now?

1) Frustration. There is genuine frustration among influential MPs that the Tisc recommendations have not been adopted. Former Tisc members MPs Roger Berry and Lindsay Hoyle — now on the Business & Enterprise Committee — have signed

the Early Day Motion (EDM) petition that "notes with concern that pubcos have failed to adopt the recommendations of the Trade & Industry Select Committee".

2) Tough times. The recent acceleration of pub closures — with four closing per day — has brought the plight of pubs to the attention of politicians and the media. Many grassroots MPs believe high pubco rents are partly to blame for bankruptcies and pub closures. Liberal Democrat MPs Tim Farron and Greg Mulholland have led the charge. Farron's anti-pubco EDM, referred to above, has been signed by 51 MPs to date.

3) Lobbying. The anti-pubco lobby has been re-energised this year with the launch of the Fair Pint campaign. Fair Pint says pubcos have failed to act on Tisc's recommendations about removing the machine tie, being open about how rents are calculated and scrapping upward-only rent reviews. The group is funded by music mogul Vince Power and has hired renowned lobbying/PR firm, Connect Public Affairs. Following a high-profile launch in Westminster, Fair Pint asked Bec for a new inquiry after the Office of Fair Trading (OFT) ruled out calls for the Competition Commission to investigate.

Although Luff played down the impact of Fair Pint — "we had agreed to do this before being lobbied by anyone" — there's little doubt that the group has raised the issues to greater prominence among grassroots MPs.

What will the MPs look at?

Bec said it wants to know how Tisc's recommendations have been applied by pubcos. It points to four key areas to be examined:

1) To what extent has the British Beer & Pub Association's (BBPA) revised code of practice for pubcos satisfied the Tisc recommendations?

2) To what extent are the codes applied by the pubcos?

3) Is there a need for further regulation of the industry?

4) Has the Licensing Act had an effect on competition within the market?

Luff said: "We are aware that some progress has been made [by pubcos]. This brief inquiry is intended to find out whether the developments have been adequate."

What aspects will be scrutinised most closely?

Some of the main areas include:

1) The machine tie. Tisc wanted it scrapped, but no major pubcos have done so. They say tenants benefit from the tie because it means better support and a higher quality of machine, resulting in greater earning potential for the licensee.

2) Arbitration. Tisc called for an "inexpensive and efficient system of arbitration", with independent experts resolving disputes. Pubcos are likely to say the small number of disputes going to arbitration means there's no problem.

3) Rent valuation. Tisc demanded clarity for the rent valuation process, with pubcos telling tenants how the rent has been calculated. Pubcos will likely say they follow guidelines from the Royal Institute of Chartered Surveyors, to ensure rent is linked to net divisible profit.

4) Discounts. Tisc said pubcos should tell tenants the average discounts they receive on beer, how this compares with free-market discounts available, and how much of the discount is passed to tenants. Pubcos say this is confidential commercial information.

5) Products. Tisc wanted more flexibility for tenants in the choice of products they sell. Pubcos say the range has increased since the 2004 report. But has it gone far enough?

Do pubcos have trump card?

Pubcos are bound to point to the one major step taken to respond to Tisc: the BIIBAS code of practice accreditation scheme. Seven tenanted operators have so far had their codes stamped to say they give clear information about what an incoming tenant can expect when signing a lease.

Pubcos have said the process has led to concrete changes in policy; for example, extending cooling off periods for new tenants to 90 days and commitments to provide barrelage figures dating back three years. But amid concerns among some that not all policies have been followed correctly, expect close scrutiny of how the scheme has worked in practice.

Who will be probing pubcos?

Pubcos could be in for a rough ride as critics Roger Berry and Lindsay Hoyle are included on the 11-strong cross-party panel of MPs. The committee includes two others from Tisc — Julie Kirkbride (Conservative, Broms-grove) and Michael Clapham (Labour, Barnsley West and Penistone).

How will the inquiry work?

The Bec will accept written and oral evidence before outlining its views and recommendations in a report. Oral hearings are likely to start in October, with representatives of the pubcos and anti-pubco campaigners — including disgruntled tenants — expected to be grilled by MPs. Luff told the MA that Bec would decide who to call once the written evidence has been submitted.

What power does the inquiry have?

Bec can only makes recommendations to Government about what actions it should (or shouldn't) take. Luff said: "The Government is free to ignore anything we say." But Farron hopes it will be a springboard for Government action against pubcos. "This inquiry will no doubt provide further ammunition in our call for legislation of the pubcos, and so help keep our local pubs open."

How is evidence submitted?

Written evidence must be emailed in a Word document to becom@parliament.uk by 29 September. A hard-copy version must be sent to the clerk of the committee by this date too. Evidence can be given confidentially, if requested.

When is the report due?

Around Christmas time, according to a Bec spokeswoman. She added: "It depends on what evidence they take and how long it takes to write the report."

What some of the interested parties think

Fair Pint campaigners

Licensee Mark Dodds said: "I think the pubcos will struggle to prove they have complied with the recommendations of the Trade & Industry Select Committee.

"It is amazing for Fair Pint — in just four months we have managed to get an inquiry. People said it would never happen, but here we are."

Greg Mulholland MP said: "It can only be good news that this is now on the political agenda, and it is absolutely right the select committee looks at these issues, which are of real concern to licensees everywhere. For once the Government has swung into action quickly. It is very important this inquiry takes place as soon as possible."

Freedom for Pubs Association founder Mike Bell said: "This is the combination of four years hard slog. I suppose the hard work starts now, but this time we have more witnesses to call on."

The British Beer & Pub Association

The BBPA, which represents the major pubcos, welcomed the news. Director of communications Mark Hastings said it will be "a chance to finally lay to rest the myths and misconceptions that have grown up around pub companies".

"It will give us the opportunity to show how companies have positively acted on the recommendations of t

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