The Pubs Code was supposed to stamp out the endemic exploitation of tenants of the large pub companies (pubcos) through the ‘tie’, but the weak and flawed legislation has not only failed to do this, it has allowed the pubcos to thwart and even evict tenants seeking to exercise their rights under the Code, whilst also actively moving their estates away from traditional regulated leaseholds and towards new so-called ‘self-employed management’ models to avoid the Pubs Code altogether.

The Campaign for Pubs has written to the Secretary of State for Business and Trade, Jonathan Reynolds MP, urging the Government to act to deal with this – and to finally deliver what Parliament and pub tenants were promised in 2014. The Labour Party in opposition – including Jonathan Reynolds – supported the introduction of the Pubs Code and the vote for a Market Rent Only option.

The Market Rent Only (MRO) option clause was introduced to the House of Commons by Greg Mulholland, then the MP for Leeds North West, who is now the Campaign Director of the Campaign for Pubs and Chair of the British Pub Confederation. The vote on 18^th November 2014 was the only defeat on legislation suffered by the then Coalition Government, with the Conservatives within the Coalition strongly opposing the MRO option. This followed years of campaigning, including through the Fair Deal for Your Local coalition, which persuaded a majority of MPs to back the all important MRO option to stop the endemic exploitation of the tied model by some of the large pub companies.

However, the Pubs Code legislation, including the vital Market Rent Only option, was cynically watered down by the majority Conservative Government that took control after the 2015 General Election.

The original clause gave a tenant publican of a regulated pub company the right, at certain trigger points, to move to a free-of-tie lease with an independently assessed market rent within 90 days of making the request, without the ability for the regulated pubcos to thwart this. Instead, the replacement clause and the subsequent Pubs Code allowed the pubcos to delay and thwart tenants, meaning that going MRO would take at least a year and sometimes over two years, putting it out of the reach of most tied tenants.

Campaigners and tenant groups had also campaigned for the Pubs Code to apply to all tenants and lessees of the large (now regulated) pub companies, but instead the Government introduced it only for tied publicans, creating an absurd situation whereby any tenant successfully exercising their right to go MRO/free-of-tie would immediately take themselves outside the scope of the Pubs Code and have no protection against subsequent discrimination or mistreatment, something that the legislation was supposed to prevent.    

The reality of the failure of the Pubs Code is as follows:

• MRO processes being routinely delayed by pubcos, meaning instead of tenants being able to go MRO after 90 days, cases take 12-24 months. In some cases, tenants have given up and others haven’t bothered trying, knowing they will not be able to achieve MRO before the end for their lease or knowing they can’t afford the costs of trying.
• Tenants considering going MRO are threatened with punitive measures by their pubco regional representative.
• Direct discrimination during the Covid-19 lockdowns with MRO tenants told to pay full rent (despite having no trade) whilst rents were reduced for tied tenants.
• MRO tenants evicted from their pubs or threatened with eviction, with pubcos issuing spurious Section 25 notices to oust them.
• Systematic Pubs Code avoidance by some of the regulated pubcos by scrapping tenancies and moving towards so-called ‘self-employed manager’ models or franchises (most of which are not covered by the Code).
• Continued operation of the exploitative gaming machine tie, which the relevant House of Commons Select committee said should be abolished in both 2004 and again in 2009.
• Global brewers have increased their dominance in the tenanted pub sector, an outcome that is bad for consumers as well as tied publicans and is completely contrary to the intention of the Beer Orders of 1989 which was the last time competition was properly examined in the sector.
• Small brewers are denied fair access to thousands of pubs and are still too often forced to supply pubcos at well below market prices just to get listed, whilst the same beer is then on sold by the pubcos to their own tenants at a huge, well above market price, mark-up.

The archaic tied system is often wrongly thought to be about breweries simply insisting on selling their own beer through their pubs, however it is actually a model whereby hugely marked up prices are imposed on pub tenants not just for beer but often all drinks, other products and in some cases also even services. Tenants are prohibited from buying direct from other suppliers at genuine wholesale/market prices, and unlike the old brewery tie, which was only on beer, pubco tenants are not charged a lower rent to compensate for the higher beer prices.

The tied model was cynically exploited and distorted after the Beer Orders, with tied prices and rents both increasing well above market levels and being expanded to all products and some services. Since then, the tie has been routinely abused including by the huge property company pubcos that don’t even brew beer yet are still permitted to impose huge marked-up wholesale prices on their tenants. The tied model was at the heart of the ’Great British Pubco Scam’ when large non-brewing pubcos went on an acquisition spree, buying up pubs and over-valuing their businesses, borrowing millions in the form of foreign bonds to deliver huge returns for bosses and shareholders. When the property market collapsed, the top two pubcos were collectively in over £7 billion of debt and only survived by further borrowing and by systematically increasing tied prices and rents, forcing many publicans out of business, reducing consumer choice and ultimately leading to the needless closure and loss of a huge number of pubs. 

The current Pubs Code Adjudicator system has also been a profound failure, with inadequate powers and a lack of clarity that the focus should be on stamping out abuse and ensuring a fair share of pub profits between pubco and tenant. This was the fundamental issue as highlighted by the Fair Deal for Your Local campaign and the prime reason for the legislation, however it was deliberately and cynically omitted meaning that the regulated pubcos can continue to abuse the tie and prevent tenants making a living from their pubs.

The Campaign for Pubs is calling for the following simple but vital changes:

1. The failing Pubs Code and Pubs Code Adjudicator legislation must be reformed:

• The law must be changed to introduce a genuine market rent only option, the ability for all pubco tenants to be able to go free-of-tie on an independently assessed market rent after 90 days of requesting it.
• The Pubs Code must be extended to apply to all tenants of all companies with 500 or more pubs, not just tied tenants, to put a stop to the systematic discrimination and abuse of tenants choosing to go free-of-tie.
• The legislation must be strengthened to establish a genuine Pubs Code Adjudicator, to properly oversee the sector and stamp out all abusive and unfair practices, with proper powers to adjudicate and a clear and strong brief to ensure fairness and a fair share of risk and reward.

2. There must be wider, simple reform of the tie, to stop the abuse altogether:

• The tie – charging above market prices and preventing direct access to products and services – can only possibly ever be justified if the pub rent is commensurately lowered to cover the additional cost of tied prices and restrictions. This means that all tied tenants must have the right to an annual independent rent assessment, in order to ensure that tied rents are at a level that compensates for higher tied prices.

• The tie should only be lawful when operated by breweries who brew their own beer (not under licence) and on their beer only. There is no justification for non-brewing property companies operating the tie and this in itself has been a serious anti-competitive and abusive restraint of trade.  

Greg Mulholland, Campaign Director of the Campaign for Pubs and the person who’s MRO clause was voted through in 2014 said:

“Ten years ago, after four damning Select Committee reports, a majority of MPs in the House of Commons listened to publicans and campaigners and voted for the right for tenants of the large pubcos in England and Wales, to be able to operate free-of-tie on an independently assessed market rent.

“Yet that all important Market Rent Only option was never delivered and the whole legislation was deliberately and cynically watered down by the Conservative Government following the 2015 election. In reality, the Pubs Code was deliberately set up to fail to achieve the stated objectives, with a weak Adjudicator unable to deal with the fundamental issue, which is the fact that the large pubcos systematically take far more than is fair from a pub’s profits, meaning many tenants can’t make a living despite a decent level of trade.

“Ten years on from the vote, the outcome of which was never delivered, we are now calling on this Government to act to put matters right”. 

Paul Crossman, Chair of the Campaign for Pubs and a publican in York said:

“Ten years ago today publican campaigners packed the Commons gallery for a vote which was the culmination of many years of grassroots effort. The Coalition Government was asked to finally regulate the appalling behaviour of the notorious pub companies, and in particular their abuse of the despised “beer tie” that routinely stripped the financial lifeblood out of thousands of community businesses, ruining countless livelihoods and driving huge numbers of pubs to needless destruction.

“The Government suffered an historic defeat against its own whip when the vote went in favour of much needed reform. Parliament MPs chose to back tenant campaigners against big business lobbyists and voted for a statutory Pubs Code backed by a regulator, and also crucially, for tenants to have a right to free themselves from the shackles of the tie.

“Yet those rights were never properly delivered. Post-coalition, the Tory Government actively watered down the Code that it had never wanted, and then installed a compromised and ineffectual Adjudicator for good measure. The result was ten more years of continued abuse and destruction throughout the tied pub sector, with powerful companies not only avoiding the consequences of what should have been transformative legislation but continuing to find new ways to wreak havoc.

“Following ten lost years of betrayal we are now calling on this new Government to act to put matters right. The abuse of tenant publicans must finally be stopped, as must the associated ongoing asset-stripping of our community pub infrastructure by faceless offshore corporations who continue to put their own profit and share values before everything else”.

Victoria MacDonald, a Campaign for Pubs National Executive Committee member and publican at the Old Ram, Tivetshall St. Mary’s, Norfolk said:

“The Labour Party, including Jonathan Reynolds, fully supported the introduction of the Pubs Code and the all important Market Rent Only option. In the knowledge that the Conservative government deliberately neutered this important legislation, it is now the clear duty for this Labour Government to change the law to finally stamp out abuse of the beer tie and the ongoing exploitation of hard-working pub tenants”.

ENDS