The Future of Pubs

Debate between Andrew Griffiths and Karen Bradley

Thursday 9th December 2010 Westminster Hall

[Karen Bradley]

I acknowledge my right hon. Friend’s comments. Although I do not believe that we want to make this a terribly party political debate, I think that he has made some very valid points.

I will cover some of the issues that I have already raised and on which the all-party group campaigns, and I am sure that colleagues will make their own contributions to the debate. It is incumbent on me to declare my own personal interest in this particular issue. For the last 43 years, my family has run a pub. My grandparents, my parents and my brother have been landlords of the same community pub. My aunt and uncle have also run pubs, so my family has had a long interest in the pub trade.

The pub that I grew up in was originally a tenanted pub belonging to one of the big brewers. It was then granted a long lease, following the beer orders of 1989. It was then bought out by one of the big pubcos. Finally, just over 12 months ago, my family, after 42 years of running the pub, were able to buy the freehold and buy out the beer tie, meaning that for the first time in all those years they were at last in a position where everything that they worked for was for themselves. So, I clearly have quite an interest in this issue. I want to explain what is unique about pubs.

[Andrew Griffiths (Burton) (Con)]

My hon. Friend clearly points out the benefits to her excellent family business of buying the freehold of their pub and running it for themselves. However, does she agree that many pub companies offer a great product to the public, that they provide an opportunity for people to start their own small business and that, in many cases, they play a very important role in their community?

[Karen Bradley]

I thank my hon. Friend, and I note the points that he has made. My own personal experience of pub companies has perhaps not been favourable. However, I fully accept that they have a place and a role, as do brewers, and it is important that we have the pub industry working in a way that supports all types of pubs.

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[Karen Bradley]

I agree absolutely, and that is a very good contribution to the debate.

It is not possible to take what works in one pub, move it to another building and make it work. Pubs have different clienteles, they are in different locations and they have different layouts. I accept that there are some pub chains that have a sort of homogenous generic feel, but I would assert that almost all the successful ones have not moved into existing pubs, but have taken other premises, such as old banks and shops, and turned them into pubs. What works in one community pub cannot be moved to another building and made to work there.

As we know, some pubs are based on food sales, and they can be successful, but other pubs are drinkers’ pubs. I know from experience that a drinkers’ pub cannot be changed into a food pub. It simply does not work. Customers who come for the drinking will leave if they think that it is a food pub, and others will not necessarily be attracted.

[Andrew Griffiths]

I agree with my hon. Friend’s comments. Does she accept that the smoking ban was one major reason why so many wet trade pubs, which focus predominantly on selling beer, closed? Many local pub customers left because the smoking ban was introduced. Although not many people in the industry are calling for the ban to be overturned—I do not think that that is what people want—does she recognise that those pubs have been hit particularly hard?

[Karen Bradley]

I do not dispute that some pubs have closed as a direct result of the smoking ban, but I do not think that the industry wants the ban to be rescinded. The pubs that have closed as a result of the smoking ban would not reopen if it were rescinded. The wet pubs that are successful have adapted to the smoking ban and compensated for it.

Dependence on a building makes a pub unique, but it is also at the heart of many problems that pubs face. As for pub companies and the beer tie, the beer tie has a long history. It dates from the time when brewers ran their own pubs and wanted to ensure that their pubs sold their beer, which is a sensible business model. Brewers had a vested interest in ensuring that their pubs were well run, and self-employed tenant landlords ran the pubs for them. Again, that is a good business solution. People were given the chance to run their own business and, as long as they paid their rent and continued to sell the brewers’ beers, the brewers could leave the landlords to it. Brewers had a guaranteed and responsible drinking outlet; clearly, they wanted to ensure that their landlords sold responsibly.

In those days, landlords bought directly from the manufacturer, cutting out middlemen and their margin. However—I remember it well—the industry moved to gain more security of tenure for tenants, who often had 12 or 18-month tenancies, as well as the option for landlords to sell guest beer, which is lucrative and allows them to make a significant profit for little extra effort. As a result of that pressure, the beer orders were introduced in 1989. No doubt the intention of the orders was good. They were meant to increase competition by reducing the size of brewers’ estates. Offering tied landlords the option to sell guest beers was a good move that allowed them to make more profits. The orders also gave tenants the security of 20-year leases. My parents were some of the first to benefit from the changes when they took out a 20-year lease and introduced a guest beer. At the time, the industry was positive about the changes, and welcomed them.

As is often the case, however, the problem with the legislation was its unintended consequences, by which I mean pubcos. Under the beer orders, only brewers are restricted in the number of pubs that they can own, and pubs owned by non-brewers, which do not sell only one brewer’s beers, do not need to offer guest beers. Pubcos became the middlemen, buying beers from a range of brewers and selling them to their tied landlords, who lost the right to offer guest beers.

The pubco business model is certainly clever and innovative. I am a chartered accountant—that is probably another interest that I should declare—and I must say that I have always admired the pubco model and thought that some clever financial whizz kid came up with it. Pubcos raise finance to buy large estates of pubs from brewers by securitising future rental income, which is the only asset that they have. Some of those pubs are tenanted, some are leasehold and some managed houses. The pubco makes money from its margin on selling beer to tied landlords and from its rental income. If a pubco wants to increase its profits, it must increase either margins on beer sales or rents, or both, which leads to landlords being squeezed twice.

Rents are based on barrelage, or sales, not rateable value or any other measure that I would consider sensible. Rents increase in line with the retail prices index, even when pubs are struggling, and are reviewed upwards if sales increase. Even if a self-employed landlord is successful and increases beer sales, their rent will go up and the profits of all their endeavours will be given back to the pubco.

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[Karen Bradley]

I was not aware of that letter, so I thank my hon. Friend for raising that issue. I look forward to reading it.

A pubco area manager might also suggest that a landlord adopt a practice that has worked elsewhere, such as showing live football. However, a one-size-fits-all approach does not work. Pubs are all different. Just because one pub succeeds in selling more beer after installing equipment to show live football, it does not mean that a neighbouring pub will do so as well, and it must be borne in mind that under leasehold agreements, the landlord is responsible for buying all the equipment, fixtures and fittings and entering into an arrangement with the sports provider. Landlords can therefore be left with significant outgoings and future liabilities, but no extra revenue. If they do make extra sales, their rent will be reviewed and increased the following year.

[Andrew Griffiths]

I am sorry to interrupt my hon. Friend again—she is making a strong case—but speaking as a Member who represents the constituency in which the country’s largest pub company, Punch Taverns, is based, I must urge her to accept that there are many pub companies in this country that support their tenants in a positive way. As a result of the actions of pub companies, there are many people in business who would not have thought about going into business without having that help, support and expertise. Although there are examples of practices that we should not be content with, the reality is that many people benefit greatly as a result of being an employee or tenant of pub companies.

[Karen Bradley]

I hope that I am not giving the impression that I am completely opposed to pub companies, because I appreciate that they have a place in the market, but it is important to put on the table some of the practices that are making it difficult for pubs to survive. The debate is about the future of the British pub, so it is important that we understand how pub companies and practices could be improved to save even more pubs.

Another area where pubcos may offer concessions on prices to tied landlords is in return for the landlord giving up the right to take income from, for example, gaming machines, pool tables and other such things. Gaming machines are a really important part of the landlord’s income, but many landlords find that they are forced to accept the loss of that income. The problem is that they have lower-priced beer, which they sell at a lower price so that more is sold. Their barrelage then increases, their rent goes up, and they end up no better off. It is important that we ask pub companies to look at how the rents are set, so that we can reach a point where it is in landlords’ interests to take the offers from those companies and work with them to make everyone better off.

I want to mention the Fair Pint campaign, which represents the interests of tied publicans across the UK. It has found that 67% of tenants earn less than £15,000 a year from their pubs, and that includes 50% of pubs that have a turnover of more than £500,000 a year. I can assure Members that one has to work very hard to sell £500,000 of beer a year—at £3.50 a pint, that is nearly 150,000 pints a year, or around 400 pints a day. I think that £15,000 a year is little reward for working that hard. It is no coincidence that most pubs that close are owned by pub companies, especially when one considers the effort involved and the fact that, no matter how hard one works, someone else can end up benefitting as a result of the contractual arrangements. As I have said, I accept that pubcos are here to stay and hope that, with a little action from the Government, we can make the system work better for all.

I ask the Minister to consider looking at basing rents on rateable values, or at some other system that does not penalise successful, responsible landlords. I also ask him to look at the beer tie to see whether a system could be developed that would allow a guest beer or some such incentive to be introduced. Good, well-run pubs encourage sensible drinking, so I hope that the Government will look at the sources of binge drinking, which largely are not pubs. Although I accept that there is a need to look at how policing is paid for, it will be little help to the pub trade if the responsible landlord has to make a contribution while the supermarkets and off-licences that sell at below cost price make no contribution because they close before midnight. Unlike many Government Members, I support the current licensing laws and ask that, instead of introducing new laws, the existing ones be properly enforced to ensure that those guilty of encouraging anti-social behaviour and binge drinking are targeted; that is preferable to a blanket restriction being imposed on everyone.

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[Andrew Griffiths (Burton) (Con)]

I welcome the community pubs Minister to his position, and congratulate him on his elevation. Few Members of the House have done more to support brewers and the British pub industry. The coalition Government’s commitment to the pub trade is demonstrated by our pubs Minister being pint-sized, and I am sure that he will be stout and resolute in his support for the industry—[Interruption.] And never bitter.

I thank my hon. Friends who arranged the debate. It is testament to the House’s commitment to the pub and the beer industry that so many hon. Members are giving up their valuable time to contribute to this substantial debate on a day when such an important discussion is taking place in the main Chamber. That is hugely encouraging.

I also welcome colleagues from the Campaign for Real Ale. Everyone will agree that it has done a huge amount of work to develop real ales, and to support British pubs, and we should commend its work. Long may it continue to strive and to develop. The manifestos of all the main political parties at the last election included a commitment to the British pub. The Liberal Democrats, the Conservative and Labour parties all had a section pledging their support for the British pub and brewing industry, but the pub trade is still in a perilous state. My hon. Friend the Member for Isle of Wight (Mr Turner) said that 56 pubs were closing every week. I am pleased that the statistics that I was given recently showed that that number has slowed to 30 pubs a week, although we all recognise that that 30 is too many.

[Karen Bradley]

Perhaps the rate has slowed down because there are fewer pubs, so the stock of those that can be closed is smaller.

[Andrew Griffiths]

That is absolutely true. Last night, I hosted the all-party beer group’s Christmas party. We sampled 25 brews from some of Britain’s best brewers. I was pleased that Marston’s was represented, and I am told that it will open 20 new pubs this year, which is encouraging, but we recognise that the pub estate has shrunk dramatically, and every pub lost is a community resource that will be missed. If we are to stick up for the commitment that all parties made at the general election, we need action, not just talk and fine words, to deliver meaningful support to the British pub and brewing industry.

It is important to examine why we are in this situation. There is no doubt that the smoking ban had a dramatic impact on many pubs throughout the country. Many pubs that were reliant on the wet trade were unable to find alternative income when drinkers who had used their pubs for many years decided that if they could not enjoy a cigarette with their pint they would stay at home with a can of lager and sit in front of the television to smoke. That is regrettable, but we all recognise that the time to overturn the smoking ban has passed.

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[Andrew Griffiths]

My hon. Friend makes a good point. The difference is bulk buying, and the power of supermarkets to drive down the price for the brewers is the crucial factor. Earlier in the debate we heard about the methods used by supermarkets to force down prices paid to our dairy farmers, and we have seen a drastic reduction in the price that they receive at the farm gate.

[Karen Bradley]

The issue is not just the power of the supermarkets in buying, but the fact that they use alcohol as a loss leader to get people into the supermarkets, where they buy other goods. The supermarkets offset the profit that they make on other goods against the loss that they make on alcohol.

[Andrew Griffiths]

As always, my hon. Friend is spot-on. We cannot allow a situation in which the supermarkets are fuelling the phenomenon of binge-drinking, which we see all too often on our streets. I am not trying to hype that or to scaremonger. The fact is that the irresponsible pricing by supermarkets has led to an increase in consumption. The facts speak for themselves. In 1992, 527 ml was the average for alcohol consumed at home; in 2008, that increased to 706 ml. In 2000, 733 ml was the average for alcohol consumed away from the home; in 2008, it was 443 ml. It is cause and effect. Cheap, irresponsible pricing by supermarkets is changing people’s drinking habits and leading to unsupervised drinking.

Burton upon Trent County Court

Debate between Andrew Griffiths and Karen Bradley

Tuesday 27th July 2010 Westminster Hall

[Andrew Griffiths]

I thank my hon. Friend for his insightful and useful intervention. It is important to consider the effectiveness and efficiency of the court system. As he says, such a backlog of unclaimed fines is unpalatable and uncomfortable for anybody running the court system. I will mention later the impact that the proposals for cuts will have on the future efficiency and effectiveness of the courts.

The proposal in the consultation document is that work from Burton will go to either Derby or Stafford, my hon. Friend’s constituency. The consultation paper states that Stafford county court is 26 miles away by car, by the shortest route, and that the journey takes 45 minutes by car. Even by car, that is no short journey, and the task of attending court will be much more difficult for the 24% of households in my constituency—almost a quarter of my constituents—that do not have access to a car or van and rely solely on public transport. Many of those households are among the most vulnerable in the area, comprising those on a low income, the elderly and people with disabilities. A third of the wards in my constituency that are covered by the county court are among the 20% most deprived wards in the country; that gives an indication of the kind of vulnerable people who are served by the court. That deprivation brings with it related problems of poverty and increased social and family breakdown—precisely the kind of problems dealt with by the county court.

According to the consultation paper, it takes two hours and 23 minutes to get from Burton to Stafford by bus—a journey well worth making, because Stafford is a wonderful place to visit—but the round trip takes the best part of a working day for anybody from my constituency who wishes to attend the county court in Stafford. It takes five hours to travel there and back, not taking into consideration waiting time or the time for the case to be heard. Even the train takes one hour and 40 minutes, with a change, at a cost of some £14.30 for a normal adult return fare. That is simply unaffordable for many on low incomes in my constituency.

It is important to remember that the journey times calculated are for a journey from the county court in Burton to the proposed alternative in Stafford. For the many people who do not live right next door to Burton county court, the journey will be significantly longer, because they will have to go into Burton town to get a train or bus to travel onwards.

As for constituents who live in areas such as Marchington, which is one of the larger villages in the middle of my constituency, or Rocester, the home of JCB, no combination of trains and buses can get them to Stafford county court in time for a 9 o’clock meeting. I accept that Derby county court is more convenient for some of my constituents than Stafford, and it may seem sensible in principle to say that cases will be transferred from Burton to Derby, but many people have doubts about whether that is likely to happen in practice, and what percentage of cases will be affected. Perhaps the Minister will tell us what he envisages happening, and how many cases he proposes to send to Derby, and how many to Stafford. That would provide a clearer picture of what we may expect.

Derby court falls outside the West Mercia and Staffordshire area court services. Derbyshire’s courts are subject to a separate review, and I would like an assurance from the Minister that the two reviews will be dovetailed together and considered as a whole. What guarantees can he give that if changes to the county court service in Derbyshire lead to more work being transferred from other courts in Derbyshire to Derby county court, Burton will not fall down the pecking order, with cases ultimately being transferred to Stafford, with the associated difficulties that I outlined?

The suggestion in the consultation paper that work could be transferred to Derby has so far done little to reassure my constituents. We must consider the consequences of the vastly increased travel times. I fear that they will result in people not bothering to attend. If witnesses are faced with five hours’ travel to give evidence for 20 minutes, they will simply not turn up, and that will further frustrate the court system, delay justice and waste even more money—taxpayers’ money. Surely, if the priority is to reduce inefficiency in the court system, our priority should be to tackle non-attendance in court and non-payment of fines, an issue to which my hon. Friend the Member for Stafford referred. That is a problem in the civil courts and in magistrates courts, and it should surely be at the top of our hit list. The problem will be made worse by increasing the inconvenience for witnesses who are called to give evidence.

[Karen Bradley (Staffordshire Moorlands) (Con)]

My constituency has no court facilities whatever, and little public transport, so I can vouch for my hon. Friend’s points about witnesses’ inability to get to court, and the difficulties created for many of those constituents of mine who are called as witnesses.

[Andrew Griffiths]

I thank my hon. Friend for her important intervention. I mourned the passing of Leek county court; in a rural constituency such as hers, it is important to consider travel times and the sparsity of public transport. Not to do so would be to the detriment of justice and fairness in the system.

I am worried about the impact on the legal process. It is not difficult to understand that some witnesses will find it difficult if they are forced to travel to court on the same bus as the plaintiff, the defendant or the person against whom they will give evidence. It is not difficult to understand that witnesses may find that a harrowing and frightening experience, perhaps frightening enough to stop them giving evidence. Will the Minister assure me that he does not envisage everyone involved in a case being forced to travel on the same bus to give evidence?

In the consultation paper, the rationale for closing Burton county court seems to rest on two factors. The first is that the facilities have not been upgraded, and that is obviously due to the previous Government’s failure to invest properly in the Courts Service. I yield to no one in my belief that public spending must be brought under control to repair the damage that was done by that spendthrift Government, but it would be short-sighted, and would damage the justice system, if we closed the court to save the one-off capital cost required to bring it up to scratch. Imposing such a cut, which would significantly inconvenience many east Staffordshire court users, to save what would not even amount to a rounding-up error in the deficit reduction plan risks undermining confidence in the bigger picture of balancing the nation’s public finances.

The second reason suggested in the proposal is that Burton county court is not used efficiently. I have met the dedicated, committed and hard-working staff, and there is no doubt but that it is not used efficiently. It has a total of 178 sitting days before district and deputy district judges, but the problem could be easily overcome if we considered the overall effect of the closure of courts in Staffordshire, rather than considering the closure of Burton county court in isolation.

The consultation paper proposes the closure of two courts, the second being Tamworth county court; its work would be transferred to Stafford. Tamworth is 11 minutes from Burton by train, and the bus links between the two are fabulous. That closeness is recognised elsewhere in the Minister’s helpful consultation document, where it is proposed that Tamworth magistrates court be closed and its business transferred to Burton. Surely the answer is to follow that approach, and to transfer county court cases to Burton. That sensible approach would add an additional 60 sitting days, at least, to Burton county court, vastly improving its effectiveness and efficiency, and delivering much better value for money and access to the justice system.

Court users in Tamworth would benefit from the proposal, because they would have to travel only to Burton, rather than to Stafford, and the case load at Burton would rise to the necessary amount because of that increased work load. Furthermore, Staffordshire would bear its fair share of the burden of the reorganisation, losing one in four of its county courts—exactly the national average of 25%. I respectfully ask the Minister to reconsider the proposals, and to ensure that we have a strong civil court system in Staffordshire that offers access to justice for all, rich or poor. I ask him to ensure that Staffordshire shoulders its fair share of the pain, and to guarantee that my constituents will have fair and equal access to justice in the court system.