BII Blog: Andrew Pring, Editor, BIIBUSINESS: MPs Prepare to Deliver Their Pubco Verdict

Now, though, it really is crunch time. Business Secretary Vince Cable has threatened statutory codes and/or a Competition Commission referral if the latest select committee feels pubcos have still failed to clean up their act. There is talk, also, of fines for code breaches, and of setting up an industry ombudsman. So the stakes are high.

The litmus test is how genuinely pubcos have responded to the 2009  Parliamentarians’ recommendations. Which is why senior pub people were summoned to explain themselves in Portcullis House recently in front of the Business, Innovation and Skills Committee, the latest, and all would hope the last, to investigate pubco power.  This time, pray goodness, there should be a definite outcome, and it might well place the licensee-pubco relationship on an entirely new legal footing.

Masters of our Universe rarely find themselves challenged at work. So it makes for gripping drama to see them under fire from people they have scant time or respect for. (Enterprise boss Ted Tuppen’s famous description of MPs as “morons” was, he claimed, misinterpreted to refer to them all, rather than just his bête noir Greg Mulholland – but most business people in the pub trade would have felt little need to make a distinction.)

“Not enough being done” 
Battle lines had been well drawn in advance of BISC’s first oral evidence sessions. Its chairman, Adrian Bailey MP, is on record saying he does not think enough is being done to address our industry’s problems. His view is shared in spades by at least one of his committee members, Brian Binley MP, a former Courage BDM who sat on the 2008/9 Business Enterprise Committee pubco probe.
It was no surprise, therefore, that both men were in attack mode when questioning the BII, the BBPA and assorted pubco chiefs at the two sessions the other day. And fellow committee members, most notably Simon Kirby MP, were also pugnaciously keen to display suspicion of what pubcos have been doing in response to their colleagues’ 2010 report (the one that threatened statutory regulation if Parliamentary recommendations were not implemented by June 2011).

But what was perhaps unexpected was quite how sharp Mr Bailey and Co. were with Ted Tuppen, Brigid Simmons, head of the British Beer and Pub Association, and to a lesser but still critical extent, Neil Robertson, BII Chief Executive. And how polite they were with Kate Nicholls of the Independent Pub Confederation (ALMR, Fair Pint, CAMRA, SIBA and Justice for Licensees) and Karl Harrison, licensee champion and pub entrepreneur, and Simon Clarke, an RICS qualified Enterprise lessee.

Tuppen under fire
Despite Tuppen being at his most diplomatic, he was interrupted bluntly whenever he attempted to answer seemingly simple questions that often required complex explanation. “We’re getting bogged down in detail,” was a frequent response to his replies.
He was also mocked for saying Enterprise shared its licensees’ pain when he himself drew a £1 million salary. And most damagingly of all, he was accused by Binley of “misleading incoming tenants for a very long time.” He added: “I want you to know what kind of suffering is going on in your pubs.” For Tuppen, read Lord Voldemort.

In striking contrast, when it came to the turn of the licensees’ representatives, the politicians were sweetness and light. The chairman’s fierce gaze softened as he appeared far more the professional librarian he’d been before entering Parliament, and far less the stern inquisitor.
Yet if the Parliamentarians wore their hearts on their sleeve, landing real blows on the pubcos  was not an easy matter. Buoyed by the claim of licensee Gary Mallen that Enterprise was ignoring the new RICS guidance on rent setting, Binley set about Tuppen and accused him of ignoring this vital recommendation from the previous Parliamentary report. Tuppen batted away the claim in masterful fashion, claiming no rent is set without careful consideration by RICS-qualified Enterprise employees, in full compliance with the guidelines. His answer probably rankled, but the MPs must surely believe the view from the horse’s mouth and not Mallen’s? Especially as Tuppen promised to back it up with corroborative evidence.

The missing lease data
There were some areas, though, where the MPs felt they could expose pubco shortcomings in total certainty of their position. BII had failed to post on its website full details of every pubco lease – why? Neil Robertson’s explanation – citing the complexity and perhaps impossibility of capturing every possible lease offer, changing as often as they do – was swept aside imperiously by Binley. “You’re saying ‘No’ to a Select Committee recommendation? I’d have thought you’d have taken it more seriously.” Chairman Bailey nodded in agreement.
 Failure to create an online national rent register, or to incorporate the ALMR’s benchmarking information into shadow P&L accounts, or for BBPA to engage in proper discussions with IPC also drew stern disapproval from the MPs. These were all BISC recommendations that it believed would offer much more financial transparency for incoming licensees. They again expressed surprise their recommendations had been “ignored”. Bad marks to BII and the pubcos for not implementing them.

But in terms of scoring palpable hits, that was about it. BII boss Neil Robertson calmly outlined the steps taken under BIIBAS and PIRRS, with codes of practice and rent setting, Pre-Entry Awareness Training and BDM qualifications, and demonstrated how much progress has been made in implementing recommendations . “Though there is scope to do more,” he said and referred to the possible need for more clarity and stronger provision for mediation.

Impartial self regulation
“I think we’ve achieved good self-regulation,” said Robertson. “No one within the industry could have done it any better. We’re not independent of the industry, but we are impartial, and we’re critical of bad practice wherever we see it, with either pubco or licensee.” The MPs listened, it seemed, respectfully. And to Phil Dixon too, sitting alongside Robertson, as he gave his positive verdict on progress to date. “I don’t think there is any evidence of pubcos just paying lip service to the codes.”

IPC, though, took a diametrically opposed stance and the committee began rubbing its hands excitedly. Kate Nicholls claimed the codes of practice are not working and must be placed on a statutory basis, with no role for BII.
The committee asked her if this would be expensive, in the way a keen but nervous purchaser appeals to the salesman for encouragement. “No, a light touch regulatory regime is all that’s required… I don’t see why it should be unduly burdensome.”

Her words might just prove sufficiently reassuring for the committee to propose exactly that. Intriguingly, in parallel to its pubco inquiry, BISC is also considering the case for a grocery ombudsman to protect suppliers from supermarket abuse.
Industry Ombudsman

If BISC is reluctant to give pubcos a clean bill of health, and is unconvinced BII is right for a policeman role, an industry ombudsman could present a neat solution. Certainly, CAMRA has been urging this for some time.
The committee is taking further evidence until the end of July, and is expected to deliver its report in September. On what we’ve heard so far, how likely is it that it will deliver a body blow to the pubcos?

My own view is that it will call for a new body to oversee and regulate the trade, and that the codes of conduct will be moved onto a statutory basis . The committee’s impatience at being thwarted over the rent register and benchmarking was there for all to see. But even more important is something that, amazingly, was not even discussed at the two hearings – the pubcos’ utter failure to remove the AWP tie. Machine income may no longer be rentalised but the tie remains in place – and this is something that can so easily be interpreted as yet one more example of pubco intransigence in the face of Parliament.
Changes on the way

True, not even these MPs could deny there has been real progress since the last report. The industry has clearly worked hard to cleanse the stables of bad practices. But has it done enough? I suspect not.
As Ted Tuppen made to leave following his appearance, the chairman remarked: “I’m glad you feel you’ve made progress. I can assure you this report will continue that progress.” That can surely only mean one thing:  statutory regulation is on the way.