Ted Tuppen hits out at statutory regulation plans; suggests legal challenge down the line possible: Enterprise Inns chief executive Ted Tuppen has claimed plans to transfer £102m of economic benefit to tenants under statutory regulation proposals are “entirely without logic”- and raised the prospect of a possible legal challenge down the line if legislation seeks to re-cast commercial relationships. On the proposed figure for transfer of value from pub companies to tenants, he said: “There is no formula. It is almost impossible to see how they came up with a number.” Tuppen told City analysts that he believed there are ‘wiser heads’ in government, particularly those concerned about the law of unintended consequences, “but that the process is being led by Vince Cable and parts of BIS, not the whole of BIS”. He said that the whole process was “going to take some time” with the government having four months to respond after the consultation ends in June. He added: “That legislation may be subject to legal challenge, depending on what it says - even if we then get some legislation that does require some intervention by a statutory code. If it is statutory enforcement of things we already do then we would welcome it. In many ways it would be easier to deal with a sensible adjudicator rather that the court of campaigning.” He added that the company had “plans to deal with whatever the outcome may be”. He also noted that with around 500 rent reviews a year at Enterprise any detrimental outcome of the consultation would take a “long time to find its way into the business”. Tuppen questioned claims that £4,000 transferred to tenants under proposals set out in the consultation would result in increased investment overall – he pointed out that Enterprise invests £60m in the estate per annum, which is worth around £10,000 per pub. He said: “There is an extraordinary suggestion in the consultation that under this new code that the struggling publican will earn a further £4,000 per year which they will invest in improving their pubs. Well, £4,000 after tax will be £3,000 and you don’t have to be a mathematician to divide our £60 million investment by 5,720 pubs to see that we, along with so many in the industry, invest an average of £10,000 or more every year in our pubs. So the idea that investment into the pub estate of this country is going to be improved is frankly farcical. There will be job losses as pubs close, tax revenues will be reduced and the thing that would upset me most of all is that a very good system that offers entry into a brilliant industry would be closed off. The training, the support, advice and assistance that we give would be chocked off as we are forced to consider different ways of running our business.”

Ted Tuppen – what changed between November 2011 and November 2012? Tuppen told City analysts that it is hard to work out what changed between November 2011 and a year later that meant self-regulation was not working. He said: “One wonders what happened between November 2011 and November 2012. You will know that we have been subjected to appearances in front of three or four select committees and the general consensus was that as a result of those, the industry has taken on board a number of key messages and that we had introduced across the industry a voluntary code that was seen to be working. We were not surprised when in November 2011, Ed Davey on behalf of the government, said, “We’ve looked at all the evidence, we’ve looked at the OFT review in 2010 and we have concluded government should not intervene in setting the terms of commercial contractual relationships when these are fully justified by law and have been found by the OFT to be raising no competition issues that significantly effect consumers”. Now that’s pretty straight forward and it’s worth getting the rest of that speech that he made in Parliament. That’s pretty clear that whilst there are difficulties across the industry, the industry in general has made huge advances with a voluntary code that appeared to be working and there was deemed to be no cause for intervention. The OFT conclusions were very straight-forward and whilst they mainly dealt with competition issues, at the request of CAMRA, the OFT also looked at whether or not a tied tenant was less well off than a free-of-tie tenant. You will see a clear analysis and statement from the OFT that says very clearly that the tied tenant is no worse off than the free of tie tenant. So, again, one wonders what happened in that 12-month period. The voluntary code, which is legally binding, is working. Out of 2357 rent reviews, just 29 went to some form of arbitration either formally or via the voluntary Pirrs system. Just five cases were taken to the PICAS review board. So you do have to wonder where the motivation is coming from for the introduction of a statutory code? We will be addressing this very firmly in our response to the consultation and also addressing the risk of serious unintended consequences – government intervention often leads to unintended consequences. One would face a serious risk of pub closures, a serious risk of reduced consumer choice as the smaller brewers were driven out of business by the international brewers who could offer the best possible terms to the new freehouse market. So the model works and it is well-regulated and legally binding in accordance with the voluntary code, so we wait to find out and we will ask through the consultation process just what new evidence came along in that 12 month period that caused BIS to change it’s mind?”

Ted Tuppen – BIS figures on Enterprise complaints completely wrong: Tuppen reported that the BIS committee had made a fundamental mistake on reporting complaints by Enterprise licensees to the BII. He told analysts: “I can’t resist showing you this I’m afraid – perhaps it is a simple mistake on behalf of BIS, perhaps they really did believe that out of the 740 calls that the BII had received, in the four years through to now, did indicate a high level of dissatisfaction. Now, the reality is that Enterprise Inns, along with some other pub companies, pay for their publicans to join the BII. It’s not terribly expensive (around £50-£60 per year) but whenever someone comes on our induction courses, part of the benefit is that we pay for them to join the BII, because we value the helpline and the advice that it can give. The consultation said that 37% of the complaints to the helpline had been from Enterprise tenants. Well, even mathematically that’s not that surprising even if they were complaints because we own about 30% of the pubs and we encourage our publicans to join - so not much of a surprise. It was only when the BII had to contact the Department of Business, Innovation and Skills that they pointed out to them that these were actually phone calls and not complaints. Fortunately, the BII keeps a detailed database of every single phonecall. And of the 276 calls that were made by (Enterprise) publicans during the four-year period, there were no complaints in the first year, there were three in the second year, there were none in the third year and there was one in the final year – the total number of grievances were four. Now it could be - and I would love to think that this would happen - that BIS say, “(We’ve) made a terrible mistake. It does appear, as everyone keeps telling us from across the industry, that the majority of publicans are happy with the situation they find themselves in and that, of course, they would like their rents to be less and discounts to be higher, but actually the whole thing works, I signed up for it and it works and its fine”. I don’t think BIS will respond in that way but I think they will be provided with a lot of evidence during the consultation process to support our view and I think they will be asked to provide a great deal of evidence to support their conclusions.”