Beer Taxation and Pubs

Anne Main Excerpts

Thursday 28th March 2019 Commons Chamber

[Mrs Anne Main (St Albans) (Con)]

It is a pleasure to follow the hon. Member for Heywood and Middleton (Liz McInnes). This debate has been very good humoured, and it is a pleasure to take part—I’m fed up with this place at the moment! Beer duty has been mentioned, and I should declare an interest: the headquarters of the Campaign for Real Ale, which is in the forefront of the campaign on beer duty, is in my constituency. However, I want to focus on pub business rates.

Generally speaking, people do not go to the pub to get drunk these days. There are so many other things: some pubs run mini-libraries or toy libraries, while others run campaigns to support local people in need or help charities. Some hold darts matches. They are a focal point for many people who have nowhere else to go to meet friends and can be a place for celebrations with relatives as well. A pub is so much more than just the price of the liquid in the glass, and we really have to get that over. That is why I want to focus on the premises in which the liquid is served. A reduction in beer duty would be good, but as a wine drinker I want to focus on how we keep pubs in business so that we all have somewhere to go.

I took part in the previous, very well attended, debate on this issue in Westminster Hall. I am trying to get a meeting with the Financial Secretary to the Treasury to raise this important issue and some of my constituency’s pubs and landlords have come to meet my hon. Friend the Exchequer Secretary to the Treasury, who is on the Front Bench now. But the reality is that those people do not feel that there is a real awareness that the much welcomed reduction in business rates will not reach all the parts that other beers cannot reach. In my constituency, the reduction reaches a mere 50% of the pubs, on average. Many of the pubs have contacted me about a massive hike in business rates; they have to cut staff or close their businesses altogether. That cannot be the message that the Government intended to send out.

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

This, of course, is not the first time we have had a debate about pubs; we have had them for years, although we never seem to make much progress when it comes to their taxation. The other affected area is the working men’s clubs, a lot of which are now dying out. It is important that the Treasury has a good look at the situation to see whether it can help pubs. At the end of the day, pubs are a catalyst for the community. The hon. Lady is on the right track.

[Mrs Main]

I am pleased that the hon. Gentleman mentioned the community aspect in his valuable intervention. Some pubs threatened with closure are taken on as community assets, but it is incredibly hard to make the business case, given how business rates are. No matter how willing the community is, there are only so many pints of beer that anyone can drink to help provide the income it needs, unless we want to encourage people to be blotto night and day. We have to ask whether the business model is workable, and for many pubs it just is not.

The cut of 33% in rates for businesses with a rateable value of under £51,000 was a major step, but in areas such as St Albans it is not having an impact. Areas with high property values such as St Albans are almost totally overlooked. Many people have mentioned heritage and beautiful buildings: pubs in my area are under a huge threat of being turned into domestic properties. That is a real worry. They are struggling at the cliff edge, and we have to address the issue now.

The 2017 business rates formula for pubs uses a methodology for setting the rateable value based on fair maintainable trade. Nobody seems to understand how that works. The rateable value is driven mainly by the pub’s turnover and it takes into account property valuations. That means that even small pubs in St Albans are having huge hikes in business rates because they happen to be settled among much higher-value domestic properties. The formula does not take that into account, so it penalises small business operators.

The hon. Member for Keighley (John Grogan) mentioned micro-breweries: the formula also penalises the independents, which is a real problem. We may lose some of the quirky pubs on our high streets that offer that level of interest and difference and prove a huge pull for tourists who come into areas such as St Albans and appreciate pubs such as The Boot and Ye Olde Fighting Cocks, many of which have historic backgrounds and architecture to match. That means that it is difficult to expand or increase footfall, because they are extremely small.

Save UK Pubs has compiled a useful document outlining the increases that pubs face. I have given it to the Minister before, but I will send it to him again in case he has lost it. The Boot, which I have just mentioned, is an absolutely tiny heritage pub—some people have bigger sitting rooms. People there reckon they would have to sell an additional 22,000 pints to cover the additional £51,000 in business rates that they now have to pay—a 280% increase. That is unsustainable.

If the Chancellor came up with the model, he certainly was not looking at St Albans when he did. Christo Tofalli of Ye Olde Fighting Cocks told me that unless there is proper reform of the relevant taxes, licensing laws and duty costs, his pub will be finished. He bought this beautiful, historic pub; people can work out from its name that it goes back a long time. Bringing it back to life has cost him a huge amount of personal investment. Having pulled it back from despair, he expects people in this House to get how important a pub is. It is not necessarily a drinking outlet—there are plenty of those. A pub is family to some people and part of the community to many people. Once it has been turned into a posh house, as happens in my constituency, it will never come back. I put in a plea for the Minister not to hide behind all the different things that have been done. It is not enough, and we need to look at the situation again.

--- Later in debate ---

[Mr Bailey]

I agree with my hon. Friend. Given the increased consumption of cider and the increased tax revenues from it, I would have thought there was a case for looking at the relative taxation levels of the two drinks.

Business rates have been mentioned. I will not go over the details, but we have a ludicrous situation whereby someone who invests in their business and increases their turnover often gets a huge increase in their business rates as well. One example given to me involved somebody who took over a pub that had traded at £200,000. He raised that to £700,000 but then found that his business rates had gone from £8,400 to £37,000. He did get that reduced to £24,000, but the mere fact that he had such a big increase and that it was then revised would seem to demonstrate that the process for evaluating business rates is deeply flawed. I recognise the Government’s attempts to do something about that, but we really need a comprehensive review of business rates so that they are geared in such a way as to promote and reward investment rather than penalise it.

[Mrs Main]

The hon. Gentleman is absolutely right. I have had similar experiences, with pubs putting in the investment and then finding themselves penalised. However, they say that when they put in a challenge, it takes a long time and it is difficult to get an explanation as to why the final figure is arrived at. There is not the transparency over the rateable system that there should be.

[Mr Bailey]

I totally agree. The process is opaque and would often appear to be perverse as well. There is a big case not only for revising it but for making it far more transparent so that anybody investing in their business can get a clear idea of what the potential financial penalty—if that is the word—would be on their investment.

I want briefly to touch on the pubs code and the Pubs Code Adjudicator, which my hon. Friend the Member for Chesterfield (Toby Perkins) mentioned. I am the former Chair of the Business, Innovation and Skills Committee, and a member of its predecessor Committees, and we examined time and time again the relative balance in power between the pub tenant and the pub owner, as well as the relatively low level of income that tenants running even the most successful pubs obtained from all their efforts, relative to the revenues accrued by the pub-owning business.

The pubs code was agreed by the Secretary of State for Business, Innovation and Skills in the previous coalition Government, and I give him credit for that. A Pubs Code Adjudicator was appointed to adjudicate and to try to ensure that there was a fair balance of risk and reward between the two parties. It is fair to say that the appointment of Paul Newby was controversial, and a lot of concerns were raised. On the basis of the evidence we are getting back from tenants, those concerns were well founded. The changes do not seem to have affected the rate of pub closures whatsoever; indeed, the number of tenants who are still finding that the reward they get from all their efforts is totally inadequate does not seem to have changed either.

I welcome the fact that the Government are about to undertake a review of the working of the code and the adjudication. The essential thing is for the Pubs Code Adjudicator to act as an adjudicator and not just to enable negotiation between the pubco and the tenant, which actually reinforces the imbalance of power between the two. All too often, pub tenants find themselves negotiating against not only the pub company but their solicitors as well, and they are not in a position to have equivalent legal advice.

I conclude by saying that saving the pub involves two things: a radical transformation in taxation, but also the reinforcement of the legal protections for the pub tenant against the pub-owning business.