Pub Companies

Andrew Griffiths Excerpts

Tuesday 21st January 2014 Commons Chamber

[Vince Cable]

I have met the hospitality industry and it has set out its case for a VAT reduction. As the hon. Lady will know, I do not make the decisions on what goes into the Budget on tax measures. I am sure that there are many other claims on the Budget in terms of tax reduction and spending. Certainly, the hospitality industry has been very effective in making its case.

[Andrew Griffiths (Burton) (Con)]

I thank my right hon. Friend for the measured way in which he is considering all the responses to the consultation. Does he understand the concerns raised by the Office of Fair Trading about the free-of-tie proposal as outlined in the consultation? It claims that it will increase rents and the price of beer and lead to the closure of more pubs.

[Vince Cable]

I have not seen those comments by the Office of Fair Trading, but I will certainly look for them. I am rather surprised by them because the whole purpose of that option is to increase competition and market forces. If my hon. Friend could send me the details, I would be interested to see the response of the competition authorities.

--- Later in debate ---

[Paul Murphy (Torfaen) (Lab)]

In the last three Januarys, including this one, I have written to Mr Speaker to ask to speak in a debate on pub companies. In all three debates—I assume this one as well—there has been unanimity across the House of Commons on what measures need to be taken. I pay particular tribute to my hon. Friend the Member for Chesterfield (Toby Perkins), the hon. Member for Leeds North West (Greg Mulholland) and, although he is not here, the hon. Member for Northampton South (Mr Binley), and many others too, right across the political spectrum, who regard this as a very serious and important issue. There have been two unanimous votes in the House of Commons on this, although on the second one it took 24 hours before the Secretary of State decided that he agreed with the House of Commons, and he came along and gave us great assurances of what would happen.

There have been four Select Committee reports, more or less all arguing for the same course of action. Enormous numbers of people from our constituencies—I think of Mr Phil Jones who owns the Open Hearth in Griffithstown in my constituency—have written to us about the iniquities of the system. A large number of organisations support the basis of the Opposition motion, including the GMB, CAMRA and the Federation of Small Businesses—a whole host of them. The essence of it is that they all say—I understand that the Secretary of State agrees with this—that first of all there should be a statutory code of practice; secondly, a mandatory rent-only option for pubcos that own more than 500 pubs; thirdly, an open market rent review; and finally, an independent adjudicator. All those are meant to enhance the significance and importance of the role of pubs in our communities. That has already been mentioned a number of times, and I am sure will continue to be throughout the course of the debate.

A new institution that has come into the debate, which many hon. Members will have read about, is the Local Government Association, which talked about the importance of pubs in our communities, and, as the Secretary of State mentioned, the importance of the community right to bid for pubs. But the essence of my contribution is not what has been said and will be said, but why we have had a delay, which strikes at the heart of what was said by the Secretary of State—who clearly is not listening to me, but perhaps other hon. Members are.

The Secretary of State presides over one of the largest Departments in the Government. He has an army of officials and civil servants and a little army of junior Ministers. He tells us today that the reason why this has been delayed is that the consultation is so enormous, so vast and so unwieldy that they cannot make up their minds as to what to do, but in the same speech he admits that this was not an open-ended consultation. This was a consultation on the basis of the Government not having made up their mind but being very close to making up their mind on what the solution should be. In many ways it was a closed consultation, making it much easier.

[Andrew Griffiths]

I understand the right hon. Gentleman’s desire for movement and to see some improvement in this matter, but does he not accept that in 13 years of his Government, despite 6,000 pubs closing in the last three years alone, they did nothing at all, apart from a few weeks before the general election, when, amazingly, something appeared in the manifesto? Does he understand that at least this Government are listening to the consultation and looking to make some changes for the good?

[Paul Murphy]

Of course I accept that Labour could have done more when we were in government, but after three debates in the House of Commons during the last three years, and when the Government have already said that they want to take these matters into legislation, they are now using the excuse of a consultation being too burdensome to allow them to make up their mind. If we were at the beginning of a parliamentary Session, that would not be too bad, but we are not. We are 15 months away from a general election. We are possibly just months away from a Queen’s Speech. When my hon. Friend the Member for Chesterfield referred to the fact that this had been kicked into touch, perhaps he had a point. Unless the Government make up their mind relatively soon, time will run out and nothing will happen between now and the general election.

--- Later in debate ---

[Mr Laurence Robertson (Tewkesbury) (Con)]

Let me declare a non-declarable interest, as it were. My sister, along with her husband, runs the local pub, The Village Inn, in Twyning, the village I live in, so although I do not have absolutely first-hand experience of the pub trade, I have what must pass as a close interest.

I echo what has been said about the value of pubs to communities. They are not only places where people drink; they are places where they eat and meet. Many golf societies, darts clubs and pool tournaments are hosted by pubs, and they are of great value to local communities in rural areas especially. Pubs also raise a lot of money for charities. Just this Saturday gone, I had the honour of presenting three cheques totalling almost £4,000 to local charities, and that picture is replicated across the country.

However, we have concerns. We are seeing many pubs closing, as has been said, and many landlords getting by on very little money. Their profits have been squeezed by the business model under which many of them are operating. There are no easy answers to the problem. As I said in an intervention, I held an Adjournment debate on this issue in the last Parliament, during which there were other such debates. The then Government were accused of not responding to a report that came out in that Parliament. I do not seek to make a party political point about that; I merely suggest that it is fairly unusual for the House to be almost in total agreement when discussing a problem, as it is today, yet for us all to be struggling to come up with a solution that will actually work.

As has been mentioned, the idea was tried with the beer orders in 1989, when breweries were barred from holding more than a certain number of pubs. That gave birth to the pubcos that we now see, which then bought pubs and other properties at high prices. As has been rightly said, they are now trying to recoup that money, in some cases quite desperately.

[Andrew Griffiths]

I completely concur with my hon. Friend’s point. He mentions the history of this. Would he be surprised to learn that the number of pubs owned by pubcos doubled under the last Government?

--- Later in debate ---

[Andrew Griffiths]

The hon. Lady says that the tie is distorting. I point her to the Office of Fair Trading investigation, which clearly said that the tie does not distort and that it is not anti-competitive in any way.

[Alison Seabeck]

The hon. Gentleman raises an interesting point, and it would be interesting to hear what the Secretary of State says in response to that finding, which, to be honest, many Members find rather odd.

My hon. Friend the Member for Chesterfield highlighted other areas of business where there is a relationship similar to the one that exists between the pubs and the companies, but where things are much more open and fairer. Clearly, we need to get pubs put on to that type of footing. This motion encourages a move away from the current position. All hon. Members who enjoy visiting their local pub and drinking a good ale or beer should think carefully and support the motion.

With pubs struggling for a range of different reasons, we need to do something about it. We need to introduce independent rent reviews to stop this double rent charging, to put in place the mandatory free-of-tie option and to set up an independent adjudicator, which would make a massive difference. The Government keep telling us that they are not kicking this issue into the long grass—I have lost count of the number of times that has been said—and that everything is being handled in a timely manner. Timely for whom? The Government should tell that to the 26 pubs that are about to close. They are not acting in a timely fashion. How many pubs will have to go to the wall before we finally get legislation? Let us face it: at the moment, the legislative programme is virtually non-existent, and there is no excuse for the Government not to bring legislation forward. I urge the Secretary of State to get his finger out and do something about it.

--- Later in debate ---

[Andrew Griffiths (Burton) (Con)]

Thank you, Madam Deputy Speaker, for allowing me to take part in this important debate. I have been struggling to juggle the task of opening a new business in my constituency with my membership of the Care Bill Committee, so I am grateful to you for giving me the opportunity to speak—which I do as the Member of Parliament for Burton, which is the home of brewing and of two important pub companies.

Given that I am the last Back-Bench speaker in the debate, it is unfortunate that it should fall to me to represent the voice of doom, but I must urge the House to think about the unintended consequences of what it calls for today. I listened intently to the very reasoned speech of my hon. Friend the Member for Tewkesbury (Mr Robertson), who uttered those words that strike fear into anyone who has been involved in the brewing and pub industry over the years: the Beer Orders. This is the single biggest factor that any Minister considering legislating in this area should consider. It is because of the Beer Orders and because of ill-thought-out legislation that we find ourselves in our present position, and I urge the House not to repeat those mistakes.

All Members who have taken part in today’s debate have done so for the same reason. They want to see a healthy and successful pub industry, and they want our pubs to thrive and to succeed. However, I believe that the unintended consequences of the proposed regulations will cause many more pubs to close.

It is important for the House to understand exactly what we are talking about when we refer to a free-of-tie option and to market rents. Let me cite the example of a pub company in my constituency, a brewery called Marston’s. It owns a number of pubs, which would be regulated under the proposed legislation. It has been operating for many years, and is a reputable business with a long and proud history. That brewery might have owned a pub for 30, 40 or 50 years, and run it extremely successfully. The tenant might retire or decide to do something else, and a new tenant might take over. Within months, that new tenant—despite having seen all the pub books and despite having had the business case assessed by his lawyer, his business adviser, his bank manager, and Uncle Tom Cobley and all, and despite knowing exactly what rent he would pay and what he would pay for beer—might decide that he wanted to become free of tie.

What is now being proposed is not only that the Government should tell Marston’s what it can charge for beer and rent in a property that it may have owned for 50 or 60 years, but that we should then allow that tenant, paying a rent set by the Government, to sell beer that is not Marston’s. We can see the unintended consequences of successful pubs, well run by brewers, no longer selling the beer on which they were built.

[Mr Jim Cunningham (Coventry South) (Lab)]

The hon. Gentleman has led a debate in the House on the same issue in the past, and it has still not been resolved. The situation he is describing actually happened between working men’s clubs and breweries. A number of clubs ran up a lot of debt that they owed to the brewers, and were then forced to sell their beer. How can we solve that problem? Many people in Coventry are concerned about pub closures.

--- Later in debate ---

[Andrew Griffiths]

As a young boy, I was more or less brought up in a working men’s club. I went to it every weekend. I recognise the importance of our working men’s clubs, and I know that a situation arose whereby clubs were in hock to the brewers. What we must bear in mind is that this is intervention in the marketplace that we would see nowhere else in business.

[John McDonnell (Hayes and Harlington) (Lab)]

The hon. Gentleman is advancing a coherent argument, but surely he does not oppose the introduction of an adjudicator. We have done that in other contexts, such as supermarkets.

[Andrew Griffiths]

I am certainly open to the idea of an adjudicator. My question is, who pays? It is estimated that the administration of an adjudicator could cost £1 million, which is a huge amount of money to take out of the beer and pub economy. Who is going to pay for what could be described as just another piece of red tape and Government regulation?

I genuinely ask the Minister why she would want to sit in judgment on rent disputes or other commercial or contractual disputes between two businesses, especially when effective mechanisms are already in place that are unique to the pub sector, independent and funded by the industry. I ask her to consider carefully the Office of Fair Trading’s report to the consultation. It clearly expressed the view that the tie is not distorting the market, and states that the proposed intervention could result in a breakdown in economies of scale, leading to an increase in rents and prices that would affect tenants and consumers. I also urge the Minister to consider the report from London Economics, which her own Department requested. It suggests that more than 2,400 pubs could close as a direct result of the proposed intervention in the market.

The reality is that many pub companies are nursing pubs because they cannot find a tenant or buyer for them. The proposed economic model would mean that those companies would have to free themselves of those pubs, which could lead to thousands of pubs closing in a very short time. I ask the Minister: why regulate? Is there a consumer issue involved? Not according to the Office of Fair Trading. Would regulation help the smaller brewers? Certainly not, according to the Society of Independent Brewers. That organisation represents the micro-breweries. We have heard people rejoicing today that those breweries have flourished and blossomed. There are now 1,000 micro-breweries operating in this country as a result of the progressive beer duty introduced by the previous Government—I commend them for that—so why would we want to interfere in the market, given that those brewers have clearly stated that to do so would prevent their access to the market?

[Mr Donohoe]

I used to run a licensed premises myself, so I understand what the hon. Gentleman is saying, but he has not really addressed the issue before us today. Why are so many pubs closing? Why, in his opinion, is that happening?

[Andrew Griffiths]

I think that you would become apoplectic, Madam Deputy Speaker, if I were to wax lyrical on why pubs are closing. We all know that it is due to changing social demographics, to the fact that people are spending more time at home, to the drink-driving laws and to the supermarkets. There are many reasons—[Interruption.] And, yes, the smoking ban. The hon. Member for Central Ayrshire (Mr Donohoe) gesticulates as though he is puffing on a cigarette. I completely agree with him on that point. The previous Government introduced the smoking ban and, at a stroke, closed thousands of wet-trade pubs without putting in place any support for the pubs or the industry. He has pointed out another unintended consequence of legislation. It was a good idea that we stopped smoking in pubs—they have a nicer environment as a result—but the unintended consequence was that many of them closed.

The danger is that we repeat those mistakes in the proposed regulation. We would not expect McDonald’s franchisees to be able to sell Kentucky Fried Chicken products because they thought there would be more profit in doing so. Why, then, should we want a Marston’s pub to be forced to sell other people’s beer as a result of the proposed regulation?

[Bob Stewart]

Would it not help licensees if Marston’s could reduce the price of its beer to a market level? Would that not make their pubs more sustainable? Reducing the price of beer in that way would help a heck of a lot, without the need for any intervention.

[Andrew Griffiths]

I completely agree with my hon. Friend, and I am grateful to him for his support for our cross-party campaign to reduce beer duty. That campaign did a lot to help publicans, and I hope I will be able to call on his support again as we move forward.

[Mr Laurence Robertson]

My hon. Friend has mentioned the difficulties involved in reaching a solution, as I tried to do in my speech. Does he agree that one clear way for the Government to help pubs would be to cut the tax charged on beer, which can amount to 37% on the average pint? That is a huge amount of money, and any tax cut would benefit customers and landlords.

[Andrew Griffiths]

I completely agree with my hon. Friend. The previous Government increased the duty by 60% during their time in office, and it is no wonder that 9,000 pubs closed on their watch as a result.

[Mr Donohoe]

I recall a previous debate on beer, which I think was led by the hon. Gentleman. I made an intervention on that occasion to ask about whisky and other spirits. It is now known that spirits account for 40% of the sales in pubs, so would he include them in his calculations, as well as beer?

[Andrew Griffiths]

The hon. Gentleman will also be aware that the vast majority of a pub’s income comes from the sale of beer. We brew beer in this country; it is something that we are fantastic at doing. It is a British product—

[Mr Donohoe]

Whisky is as well.

[Andrew Griffiths]

Of course, and whisky is a great product, but the hon. Gentleman will also know that the whisky industry is growing and that the vast majority of that growth is coming from exports, whereas the beer industry is in decline, and beer is produced and sold uniquely in this country.

I recognise that I am in the wilderness here, but I urge the Minister, colleagues and all Members who are considering how to vote in this debate not to introduce red tape and regulation that will force more pubs to close and create a further decline in the great British pub.