Pub Companies

Andrew Griffiths Excerpts

Thursday 12th January 2012 Commons Chamber

[Mr Bailey]

The reason is that the Government started to implement their proposals for changes in the industry a month before Christmas, so it is reasonable to assume that by autumn 2012 we shall have some idea of how they are working. By setting up an independent panel of professionally qualified and suitably experienced people to assess the changes, we will be able to make a judgment about pursuing further statutory intervention.

[Andrew Griffiths (Burton) (Con)]

Will the hon. Gentleman give way?

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[Ian Lucas (Wrexham) (Lab)]

It is a pleasure to follow the hon. Member for Northampton South (Mr Binley), whose eloquence I aspire to and whose passion I can only dream about. I know that he has much experience of the detail of this issue from the Select Committee. One aspect of it in particular has concerned me for many years.

Before I came to the House, I was a high street solicitor, although I try to keep that quiet most of the time. One thing that I found most surprising when I began to work on commercial leases, particularly in the licensing sector, was the existence of this curious anomaly called the beer tie, which seems to create an anti-competitive situation in the brewing industry that does not appear to be allowed in any other industry.

[Andrew Griffiths]

The hon. Gentleman talks about the anti-competitive nature of the beer tie. Does he accept that a number of Government reports and one by the Office of Fair Trading have said that it is not anti-competitive at all?

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[Andrew Griffiths (Burton) (Con)]

I pay tribute to the work of the Business, Innovation and Skills Committee, which has been diligent and dogged in taking this issue forward and looking at the pressures and problems that publicans and pub owners face throughout the country. I also thank the Backbench Business Committee for allowing this debate, as it demonstrates the real commitment on both sides of the House to ensuring that the Government do something to support pubs and brewers and get our pub industry back on its feet.

It is a pleasure to follow, in particular, my hon. Friend the Member for Northampton South (Mr Binley), who has immersed himself in pubs more, and has more experience of pubs, than any other Member. I have no doubt that everybody taking part in today’s debate has read the Science and Technology Committee’s report and abstained for at least two days this week in order to contribute this afternoon.

I should also declare an interest as the chairman of the all-party beer group, and because in my constituency I have Punch Taverns, Spirit Group and Marston’s, a family brewer that also owns pubs.

I think we all agree on the need to clean up the pub companies’ act and the way in which tenants are treated. None of us disagrees on that, and we all want to see healthy and vibrant brewing and pub industries. I do not defend the actions of some pub companies, as uncovered by the Business, Innovation and Skills Committee, but although the hon. Member for West Bromwich West (Mr Bailey) said earlier that he was concerned that pubs are over-regulated, his solution was to increase the regulation on pubs.

[Mr Bailey]

I did not say that pubs were over-regulated; I said that they were highly regulated by pub companies, and that a statutory code would release pubs from some of that regulation.

[Andrew Griffiths]

I think we both agree that pubs are highly regulated, but I assert that introducing a statutory code would increase regulation. We want to allow anybody taking on a pub to have access to information, we want transparency, and we want them to understand what they are taking on when they take on their pub.

[Dan Rogerson (North Cornwall) (LD)]

It is absolutely right to point out those in the pub sector and brewing industry who are doing all they can to create a thriving industry and to secure jobs, but we need the backstop of regulation. It should not be brought to bear daily in every pub throughout the country, but I believe that if we have a review in the autumn, it will prove that the threat of such regulation is necessary to ensure that the worst practices in the industry are ruled out.

[Andrew Griffiths]

I agree that we may well wish to consider a review in future, but as for the idea that we should bring in new regulation and new requirements and then, within just a few months, review them again, I worry that companies will be concerned more about the review than about implementing the changes themselves.

[Mr Binley]

Will my hon. Friend give way?

[Andrew Griffiths]

I have given way twice already, so I shall continue, if I may.

We have to be careful what we wish for. More mature Members will be fully aware of the beer orders—well-intentioned regulation to improve the lot of publicans and pubs throughout the country, which, I argue, got us into this situation in the first place. We have to be careful before we reach for the lever of regulation, because once it is imposed, the costs, burdens and unintended consequences are there for everyone to see.

We all recognise that pubcos are drinking at the last chance saloon, but today I heard the accusations made against the BBPA and I am, quite frankly, staggered. Hon. Members have mentioned several small family brewers, but all are members of the BBPA. It is not some sinister organisation, and although it is made up of pubcos, it also includes family brewers from up and down the country, so the idea that it has some sinister hand on the Minister’s shoulder and is influencing him in an underhand way is blatant nonsense, as is the idea that the Minister should develop policies for the brewing and pub industry and not have a proper dialogue with the biggest trade body in the industry.

We have a proposal to bring in a tough industry code. It will provide transparent information as a matter of course to anyone who is thinking about taking on a pub, and provide people with legal redress. The code will now be legally binding, so anybody who finds that their pub company or family brewer has not upheld the code will be able to have their case heard in court. There will be a process of arbitration so that anybody who feels that they are being dealt a bad hand by a pub company or the pub industry can have redress through independent arbitration. Those are the things that any tenant who feels hard done by requires to get the assistance and redress that they need. Most importantly, that will be delivered through self-regulation, which I believe will be cheaper, more cost-effective and speedier in producing remedies. We can all point to Departments that have brought in regulation or arbitration that has not worked. We do not have all the answers in government. It is far better to allow the industry this last chance to get its act in order.

Finally, the idea that the tie is the only thing that is leading to the closure of pubs is blatant nonsense. Yes, it is an issue, but we have to consider the impact of people’s drinking habits, the power of below-cost selling by supermarkets, and the red tape and regulation that we have loaded on to pubs. We should not for one minute think that if the motion were passed and the Government introduced the statutory code, it would solve the industry’s problems. It patently would not.

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[Andrew Stephenson (Pendle) (Con)]

I congratulate the Backbench Business Committee on granting this debate and the hon. Member for West Bromwich West (Mr Bailey) on his efforts to secure it. I am a great fan of the British pub, so much so that I live next door to one and have worked shifts behind the bar at three of my local pubs over recent months—the White Swan in Fence, the Four Alls in Higham and the George and Dragon in Barrowford.

As many Members have said, the future of the pub looks far from rosy. UK pubs are in crisis, with 25 closing every week. Pubs are under pressure for many reasons, including the tough economic times that we are in, rising beer prices and taxes, and below-cost sales of alcohol in supermarkets, which I am particularly against. I believe that there is increasing evidence that the beer tie, as operated by the large pub companies, plays a significant role in the decline of the pub trade. I point out explicitly that I am referring only to the behaviour of some large pub companies that own more than 500 pubs, not to family-owned breweries, which tend to act much more responsibly.

In my constituency of Pendle over the past few years, seven pubs have closed in Brierfield, five in Barnoldswick, seven in Nelson, three in Colne and numerous others in the surrounding areas.

[Andrew Griffiths]

We want to keep more pubs open and to stop pubs closing. Does my hon. Friend agree that all the evidence shows that free houses are closing faster than tenanted pubs?

[Andrew Stephenson]

The evidence that I have seen does not suggest that. In my area freehold pubs have certainly been able to buck the trend and survive because they have additional flexibility in the products that they can buy and in the other costs of the pub. I have seen some of the practices of the pub companies hindering rather than helping the pub trade in my area.

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[Toby Perkins (Chesterfield) (Lab)]

It is a pleasure to stand here at the culmination of this excellent debate, which has shown the House in a tremendous light. Let me start by congratulating my hon. Friend the Member for West Bromwich West (Mr Bailey) on securing and opening the debate. I congratulate also the hon. Members for Leeds North West (Greg Mulholland) and for Northampton South (Mr Binley) on their work on this issue. It is to the Minister’s shame that despite diligent research and the magnificent campaign fought by many interested organisations, we are debating how to put safeguards into a policy that was announced without proper consultation and in direct contradiction of assurances given by him.

I shall refer to the remarks of some Members during my contribution, but I must pick out specifically the brilliant and passionate speech of the hon. Member for Northampton South. He described how the Government have reneged on their undertaking, and pointed out that the problem was the major pub companies that have more than 500 pubs. The hon. Member for Leeds North West spoke brilliantly and exposed the shameful collaboration of the Government and the BBPA. That point was also taken up by the hon. Member for Southport (John Pugh).

My hon. Friend the Member for East Lothian (Fiona O'Donnell) talked about the impact on jobs. That is a vital issue: every week hundreds of people lose their job as a result of the number of pubs that are closing.

The hon. Member for Burton (Andrew Griffiths) spoke up for pub companies, but said that they were drinking in the last chance saloon—and my right hon. Friend the Member for Torfaen (Paul Murphy) rightly said that the last chance saloon sounded like a pub where time is never called.

[Andrew Griffiths]

Will the hon. Gentleman give way?

[Toby Perkins]

I am afraid I do not have time.

The hon. Member for Bristol North West (Charlotte Leslie) felt that on balance there needed to be some regulation. She defied those who think that a Member cannot make a serious speech wearing a scarf—something that may catch on.

My hon. Friend the Member for Sheffield Central (Paul Blomfield) talked about how, because of their flawed business model, the big pub companies are squeezing out unreasonable returns. My hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) said that the Prime Minister was dodging his round at the bar. The hon. Member for Nuneaton (Mr Jones) reminded us of the role of the pub in uniting couples over the years. He reflected on the good fortune of Mrs Jones to have been drinking in the right pub at the right time.

There were interesting contributions from my right hon. Friend the Member for Torfaen and my hon. Friend the Member for York Central (Hugh Bayley). The hon. Members for North Swindon (Justin Tomlinson) and for East Hampshire (Damian Hinds) spoke about alternative ways in which pubs might choose to improve themselves.

Today we have heard a lot about the history of this issue, but it is worth reminding ourselves that we have had seven reports and there have been four inquiries by the Business, Innovation and Skills Committee. The Government’s response has many flaws, which other Members have exposed, but I want to talk about two specifically.

On the issue of pub closures, which was exposed by the hon. Member for Pendle (Andrew Stephenson), the Minister has swallowed the big pub company line that free-of-tie pubs are more likely to close. He must know that in general tied pubs do not close permanently, because, as the hon. Member for Brighton, Pavilion (Caroline Lucas) pointed out, they have a history of churning through huge numbers of landlords who try and fail—another business going under, another life unfairly ruined. One pub company had a churn rate of 65%, so although the hon. Member for Solihull (Lorely Burt) says that people should go into such arrangements with their eyes open, that does not reflect the reality experienced by many tenants and lessees. Like the hon. Lady, my hon. Friend the Member for Edinburgh South (Ian Murray) was previously a landlord—for Enterprise—and has strongly made the point that many people’s lives were ruined because they were not aware of what they had let themselves in for.

In March 2010, a Federation of Small Businesses survey found that 84% of tied businesses believed that their relation with the pubco did not allow them to compete effectively, 90% believed that the arrangements meant that they could not make a fair profit, and 87% indicated that they wanted to be free of the tie. Despite that evidence, the Government say in their response, as my hon. Friend the Member for Wrexham (Ian Lucas) pointed out, that the debate over tied or free-of-tie status is a distraction. We think that is entirely wrong.

The FSB is not the only organisation to study the issue. The Institute for Public Policy Research also questioned tenants and lessees, and its findings showed that free-of-tie landlords manage pubs longer, are more optimistic about the future, are less likely to be struggling financially, and earn more. According to that study, 46% of tied publicans earn less than £15,000 a year. The hon. Member for Cheltenham (Martin Horwood) noted that the IPPR found that 88% of publicans who claim to be struggling financially identified the beer tie as one of the most significant factors in their financial problems.

The Minister, in his written response, built a man of straw, claiming that the critics were calling for the tie to end completely. He must know that that is not the case. All the critics are saying is that if the traditionally tenanted arrangement is such a good deal, why can the big pub companies not offer both tied and free-of-tie options, and let their tenants decide?

The Select Committee discovered that at every turn the big pubcos had failed to take the actions they had promised. In desperation, the Committee said in March 2010 that it would give the industry a final chance to prove that self-regulation could work. It was supported by a sympathetic Government who promised to back its findings. When there is such knowledge and such commitment and when the industry has been given every chance to put its house in order, how can the Minister possibly write that the issue is more complicated than the critics realise?

What the critics may have failed to understand is not the issue surrounding pubcos but the developing relationship between the pubcos, the BBPA and the ministerial team. As the hon. Member for Leeds North West said, the save the pub group has discovered, through freedom of information requests, that throughout the process the referee was getting changed in the same room as one of the teams.