22 April 2013: The government has published its terms of reference today for the consultation on pubco and tenant relations, together with an impact assessment. The government seeks views by 14 June and proposes that the new Code will apply to all pub companies with more than 500 pubs. Vince Cable says he does not propose to abolish the tie, however. When we have digested the consultation paper we will publish our views on the potential impact on the sector –  watch this space!


Confusion follows contradiction

The much publicised public consultation on tenanted pubco regulation proposed by Vince Cable was expected to start by the end of March, or certainly by the first week of April.

On 7 April the Mail on Sunday claimed that Chancellor George Osborne had vetoed plans, stepping in amid Treasury claims that the changes could strangle the industry with red tape and put up the price of a pint.

This in turn appears to have led shadow pubs minister Toby Perkins to write to Vince Cable, expressing his alarm over the report and asking for an urgent written response on what action will be taken to bring forward this legislation “as quickly as possible”. Whilst Toby Perkins seems to have pre-judged the issue in assuming that legislation will be introduced following the consultation, there appears to have been no substantive response from Cable.

Just to complete a very confused picture, it has been reported that the Speaker of the House of Commons, John Bercow, has suggested that reports that George Osborne may have overridden plans to introduce a statutory code may be wide of the mark.

Since then a  BIS spokesman confirmed to the trade press that the Government intends to carry out a consultation “shortly” – but no comment was made as whether the terms of reference for the consultation have been settled or are still to be settled. So we still await the process to kick off.

Fear of the unknown?
The evidence available suggests that the Treasury are taking a close interest in this matter. This may follow recent comments attributed to the Chancellor in the trade press, as well as the recent reduction in duty. The Treasury are likely to be fully aware that previous legislation produced some unintended consequences, which they will be keen to avoid in this case, in order to safeguard the long term health of an industry which employs many.

The key issue for the sector is whether the model on which the tenanted and leased sector bases its business is to be radically changed. This is what critics of the sector want to happen. Greg Mulholland has been quoted as saying that the model operated by the pub companies is “simply not fair” although he exempts family brewers from this – even though most of them use the same basic model. If consultation leads to major and radical change within the pub industry the Government is, no doubt, keen to understand what impact such changes may have.

Underlying contradictions
This isn’t the first confusing turn of events. The announcement on 8 January of the consultation, with a view to there being a statutory code and an adjudicator, contained some surprising contradictions. Not least, having said in November 2011 that the distinction should not be primarily by size, but by lease or tenancy, the Government has since announced the dividing line is the ownership of 500 pubs!

Whilst cynics say the consultation just won’t happen, Greg Mulholland is convinced there is “a very strong will in Parliament to reform the company system…” It appears there a possible reason for delay may be a fear of the unknown, in terms of it being hard to predict the full ramifications that any legislation could have.

Nevertheless, it is by no means clear that the consultation will be postponed indefinitely, and it may just mean that the terms of reference are being more closely scrutinised, prior to a date being finally set for the process to commence.

The content of this page is a summary of the law in force at the present time and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.