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Morning Briefing for pub, restaurant and food wervice operators

Mon 22nd Jul 2013 - BIS - pubco bill should be introduced in the next session
BIS – statutory regulation should happen in the next session: The Business Innovation and Skills Committee has published its views on the current consultation by the government on statutory regulation of tenanted pub companies – and called for legislation in the next session of Parliament. Its main conclusions and recommendations are: The government’s proposals for enhanced self-regulation: We welcome the fact that the government is now consulting on a Statutory Code of Practice for the pub industry. We also welcome the fact that the government now agrees with the Committee that the OFT’s response to the CAMRA super-complaint is no bar to statutory intervention. Having previously agreed to act, it is regrettable that the government has taken over a year to come to this decision; The Framework Code of Practice and legal enforceability: For too long the question of certainty over the enforceability and legal status of company codes of practice has remained unresolved. Again, BBPA assurances appear to have been undermined by its own members. Such confusion reinforces the argument that only statutory intervention will put the legal status of the codes of practice beyond doubt; The overarching principles: There is general agreement that the Statutory Code should include the governments overarching principles of fair dealing and that a tied tenant should be no worse off than a free-of-tie-tenant. However, clarity on how this will be enshrined in law is necessary. We look to the government to provide us with early detail on how these principles will be achieved through legislation; Additions to the Framework Code: The mandatory free-of-tie option is seen by many lessee organisations as key tool to address the imbalance in risk and reward. It is also the option, which is resisted most vigorously by the BBPA. It is for the government to decide, on the balance of evidence, whether this should be included in a Statutory Code. We have not previously recommended the abolition of the tied model but we do support a free-of-tie option. If the tied model is proved to deliver significant benefits to the lessee, then the option would not be taken up, and the tied model would remain; The 500 threshold: We understand the rationale for setting a threshold for the Statutory Code. However, we see merit in including a level of flexibility in any Bill to allow the Secretary of State subsequently to alter the threshold in the interests of the industry. We accept the argument that the Statutory Code should only apply to pub companies with leased and tenanted pubs and recommend that the Department reflect this in the Bill; Self regulation and arbitration: Both PICAS and PIRRS have been positive developments in the pub industry but we are unclear as to how they will fit into a new statutory landscape. The government needs to ensure that, whichever route it takes, the role of these two arbitration bodies is not lost as a result of a statutory/non statutory split in the oversight of the industry; Powers of the Adjudicator: When we undertook pre-legislative scrutiny of the draft Groceries Code Adjudicator Bill, we recommended that the Adjudicator have the power to fine. The government accepted this recommendation during the Bill’s passage through Parliament. We recommend that the government provide similar powers to this Adjudicator; Legislative Timing: We believe that with the right level of commitment from government, a Bill could be introduced in this Session of Parliament. At the very least, the government must bring one forward at the start of the next Parliamentary Session. We will expect the Department, in its response, to provide us with a timetable for its introduction. There must be no more delays in resolving this matter. To start the Parliament with an undertaking to act and end without any change would represent an unacceptable failure. Brigid Simmonds, chief executive of the British Beer & Pub Association, said: “It is good to see the Committee views the new arbitration systems set up under self-regulation, (PIRRS and PICA-Service) as a positive development that they would not wish to see lost. It shows we have made significant progress on self-regulation, something we could develop further without costly and inflexible legislation. The Select Committee supports a threshold of 500 pubs and believe that these should only be leased and tenanted pubs. Their proposal for flexibility to amend the threshold would create uncertainty for smaller companies and could be detrimental to future investment. The BBPA has always been clear that market distortion must be avoided. The Select Committee supports a free-of-tie option, but does not call for the abolition of the tie. There is a real concern from the industry that diluting the buying power of companies by forcing a free of tie option will make many more pubs unviable. Over the last ten years, pub companies have faced five inquiries and two OFT reports, with the basis for a tied system for public houses supported in every case. Tenants would lose support from their pub company, and face big increases in their capital requirements, as they would have to fund costs such as rent increases, deposits, and new fixtures and fittings, themselves. In the current economic climate, many would be unable to secure the necessary finance. It would be very bad news for the pub sector. No mention is made of the importance to British brewers of the tied model which offers a route to market for British beers. It is clear that the Select Committee is struggling to find solutions to some of the issues it raises which are not easy to resolve. This shows clearly that the perceived problems and solutions are complex, with the potential for many unforeseen consequences – is legislation really the right answer?”

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