Statutory code proposals are a potentially crippling U-turn

So the industry’s self-regulation procedures, which were lauded by junior minister Jo Swinson just a few weeks ago, are suddenly unacceptable to her boss Vince Cable and we now need to have a statutory code and adjudicator. Have there been any comments, concerns or suggestions from Government since her pronouncements? Of course not, but we are suddenly confronted with a spectacular U-turn.

Is self-regulation working? Mr Cable highlights “abuse of rental calculations” yet PIRRS (the Pubs Independent Rent Review Scheme) has been widely applauded for ensuring that a licensee can have their rent set fairly. A Punch lessee has told me he wants to kiss the PIRRS valuer, and a member of our BII (British Institute of Innkeeping) West Midlands Council was ecstatic that his rent has been reduced to £10,000pa less than he had offered his pubco.

The PICA-Service (the Pubs Independent Conciliation & Arbitration Service) has only recently been set up and though Russell Stone, who won his case against Enterprise Inns, confirmed to the Publican’s Morning Advertiser that he was totally happy about how his case was handled and the result, this appears not good enough for Mr Cable.

Basically, for £200, 98% of tied licensees can take their complaint before an independent panel and receive their £200 back if their complaint is upheld. This, like PIRRS, has already had the knock-on effect that companies are far keener to resolve grievances than have to justify their actions before an impartial group. I have personally mediated on three cases in the past five months with the licensees concerned accepting compensation of more than £60,000.
Despite all the evidence that self-regulation is making a difference, we are now going to have a ‘statutory adjudicator’ for tied licensees in companies with more than 500 leased pubs.

This pronouncement will no doubt be amended once civil servants discover that some of the companies they named don’t actually have 500 leased pubs — for example, Admiral Taverns (220 leased) Marston’s (415) Star Pubs & Bars (349) and Greene King (248); so are we going to have legislation just for two companies, Punch and Enterprise? Of course not. This will inevitably be amended to 500 pubs on any tied agreement.

If so, where does that leave Trust Inns? The homepage of its website (www.trustinns.co.uk) confirms that it runs over 500 pubs in the UK. If this proposal comes into action, watch Trust immediately sell enough sites to go below the 500 limit.

Is Mr Cable saying that if you are an Admiral tenant you can make a complaint, but if you are a Spirit lessee you cannot because it only has 479 pubs? Won’t Spirit and all regional brewers now keep their estates below the threshold if the proposals are implemented?

If you are an Enterprise lessee in dispute you can have a grievance, but if it sells you to Fuller’s does your grievance disappear? All tenants and lessees should be able to challenge their landlords irrespective of how many pubs they own. If I want to complain about service from an airline, it’s not dependent on how many planes it has in the sky!

Then there is the issue of a free-of-tie option. If the Government forces companies to give a free-of-tie option with a rent review, then what will happen to investment? Surely no one in their right mind would invest thousands in a site where they could not be guaranteed a return. How does reducing investment and restricting job creation help our economy? There is a general assumption that the removal of the tie will leave licensees better off and in some cases it probably would, but is it that simple?

What is life like in a free-of-tie pub company? And let’s not forget one company alone has around 850 pub sites, where:

1. There is no relationship except for the property chap telling the licensees what they need to spend. (A full and total repair liability.)

2. Buildings insurance is typically £4,000pa, for which there is no price match.

3. No business support, no help other than seasonalising rents in the recession. I am unaware of any rent being reduced for a sitting free-of-tie lessee, despite the worst trading conditions in living memory.  

4. No training provision whatsoever.

5. Bullying, as in using upwards-only rent review clauses to increase rents when no increase is warranted.

If we create more free-of-tie property companies simply to appease the Labour Party and show that Liberal Democrats are tough, the UK on-trade will be damaged beyond repair.