Pub Companies

Debate between Brian Binley and Karen Bradley

Thursday 12th January 2012 Commons Chamber

[Mr Binley]

That is absolutely correct. I am talking about pubcos and I exclude family businesses that own fewer than 500 pubs. The big owners of pubs and their unsustainable financial structures are the real problem. Let me make it clear: this is not about family-owned brewery companies, who do a very good job indeed. I am talking about big pub companies whose model is unsustainable; it is based on excessive debt, misleading information and deception, as the inquiry has proved.

[Karen Bradley (Staffordshire Moorlands) (Con)]

Will my hon. Friend clarify this point? Is it correct that large pub companies borrowed against future rental income, so they are dependent on that to sustain their high levels of debt?

[Mr Binley]

They borrowed against the value of the properties, and rental income is very relevant. That is absolutely correct. Therein lies the unsustainability of the model, when we bear in mind that the breweries built up their estate over a 200-year period.

Sadly, tenants are the victims of that unsustainable structure. In many cases they face prices higher than those on the open market, exorbitant rents and a quart-measure of misleading information. To make a pub work, individuals have ploughed in their savings on the back of distorted information, and as a consequence they have gone to the wall. Most publicans are dedicated and hard-working people. We should take note: they are influential opinion formers in our communities and many of them have been badly treated. All I seek is fairness on their behalf.

Following the Committee’s 2010 inquiry, there was a clear understanding that the industry would have a year to get its house in order, or a statutory code of practice would be introduced. I questioned the previous Government and received that assurance. I questioned the current Secretary of State, who confirmed that he would continue with that promise, but the Government have sadly reneged on that undertaking. I find that very sad indeed.

The Government’s proposals for a legally binding voluntary code are not good enough. They have performed a volte face on this issue and it is incumbent on them to explain why their proposals are superior. How will a voluntary code work? The Minister’s argument seems to be that the level of protection will be comparable to that provided by a statutory code, but why is a voluntary code preferred when it has failed in the past? If the answer lies within the industry, why has it taken so long to make such desultory progress? Why should this Minister have any more faith in the industry than his predecessors, who had similar confidence? What is the cost of the voluntary code? How does it compare with the certainties that statutory regulation would bring? How much will it cost tenants, when they are in trouble, to pursue an action under the voluntary code? Those answers I demand from the Minister today. Concerns about the future of the industry abound. Why should small tenants be made to pay the price? They have suffered enough. Were they not persuaded to take on these pubs under false pretences, under an unsustainable structure? Does not all the Committee’s evidence prove that to be true?

I want the Government to support the entire industry, including the tenants. That means that in companies with more than 500 pubs—that excludes the small businesses—tied tenants should have the option to become free of the tie.