Deputy Prime Minister Nick Clegg and Business Secretary Vince Cable have announced that publicans will be given new rights under a statutory code, backed by an independent adjudicator with the power to resolve disputes, although the tied house system itself will not be abolished.
Many publicans who, under the terms of their tenancy, are forced to purchase supplies through the owner of their pub say they are struggling to make a decent living, with more than half earning less than the minimum wage, and many going out of business.
The adjudicator will enforce the new code, arbitrate disputes, undertake investigations into suspected breaches and levy sanctions on pub-owning companies (pubcos) if they fail to comply.
Mr Clegg said: “British Pubs are often the centre of our community, a place where we meet friends, watch sport and enjoy a Sunday roast; they are a national treasure and the envy of the world.
“They also contribute billions to our economy every year. But, for too long, landlords who are tied to larger pub companies have struggled to make ends meet.
“The self-regulatory approach hasn’t worked, so these new rules will give fairer treatment for landlords so that they can keep your local pub going strong.”
Mr Cable added: “Local pubs and their owners play a vital part in vibrant local communities right across the country, as well as making an important contribution to the economy.
“Far too many landlords feel their income is squeezed by big pub companies. So today we are taking action to make sure they get a fairer deal.
“The introduction of a statutory code will make sure that tied tenants get an accurate assessment of how better off they could be and the new independent adjudicator would make sure pubs companies are forced to act to redress the situation if they aren’t behaving responsibly.”
Tied tenants having to buy beer from their pubco usually pay a significantly higher price than freehouses, leading to complaints that they cannot compete with other pubs. In theory, tied tenants receive other benefits from their pubco to offset the higher prices but many argue that this is not the case in practice.
Under the new code, the Government said pub landlords will benefit from fairer rent assessments. All tied tenants will be given the power to request a rent review if they have not had one for five years.
Brigid Simmonds, Chief Executive of the BBPA said:
‘While we welcome greater certainty and clarity after such a long period of debate, we are disappointed that the Government is seeking to introduce potentially costly legislation, with the disproportionate costs of a statutory adjudicator, rather than supporting the existing, and evolving, system of self-regulation.
‘Partnerships with entrepreneurial tenants and lessees give them the opportunity to run a pub with very little capital investment, and BBPA members are committed to supporting lessees and tenants. Proposals that dilute the support pub companies can give to these entrepreneurs are unwelcome. Capital investment (some £200 million per year) and transfer of value through reduced rents and a range of operational support is hugely important to a pub company’s ability to sustain jobs and successful community pubs.
‘The Government’s own Impact Assessment shows that these proposals will close at least 52 pubs with the associated hundreds of job losses. A self regulatory system costing around £100,000 per year will be replaced with a statutory adjudicator costing nearly £2 million per annum, and as highlighted in the Impact Assessment these additional costs will be passed on to consumers in the form of higher beer prices.’