Pub Companies

George Howarth Excerpts

Thursday 12th January 2012 Commons Chamber

[John Pugh]

I think self-regulation might work sometimes. What we are debating is what will happen if it does not. What do the Government intend to do in that event? I think it incumbent on the Minister to state plainly that if self-regulation does not work, statutory regulation remains an option. If the Government have an objection in principle to statutory regulation, they must make it clear to the House, because that is the most honest and forthright approach.

[Mr George Howarth (Knowsley) (Lab)]

I have been following the hon. Gentleman’s argument closely. Does he agree—indeed, I think this is his conclusion—that if self-regulation is to work, the industry needs to know that if it does not in fact work, the Government will be prepared to follow up with statutory regulation?

[John Pugh]

I think that the Government must say that. The industry has been given a second, third, fourth, fifth, sixth, seventh—however many chances we may care to cite. If the Government do not intend ever to introduce statutory regulation, they can and should say so at the Dispatch Box today.

--- Later in debate ---

[Martin Horwood]

Yes.

My correspondent also said:

“The local rep visited at my request this May, only his 3rd visit and I now prefer to deal with him by email to have everything in writing.”

That supports the points that have been made about loss of trust. The letter continued:

“He first volunteered the figures from the brulines system, showing my doubling sales, food has also gone from nothing to a very good business and is the only way to make any money on this lease. I then put to him that at £5.5k breakeven I am paying about £23k rent and £50k through the beer tie. This equates to around 17% return on the value of the property while I will struggle to even repay my investment let alone make a return on it or pay myself an income. When I put to him that unless he rebalanced this I would be selling up and moving on he confirmed that I have a lease in order that I can do this.”

As my correspondent pointed out, the pubco representative would

“make a mean poker player.”

My correspondent continued:

“I’m waiting to see what comes from Westminster…Last resort is to sell up and move on.”

He points out that this is not just about the price of the beer either, saying:

“Aside from paying between 1.5 to 2 times wholesale value within the tie. Enterprise restrict what I can buy, for example I can not have Crabbies Ginger Beer”.

I have never heard of that. [Hon. Members: “Oh dear!”] Other hon. Members obviously have.

The letter continues:

“this may seem petty, but Crabbies is heavily marketed and is hence what customers ask for.”

He concludes:

“With a monopoly to supply 7,000 pubs, the service is understandably poor, why would you offer more than a week or 2 payment terms, daily delivery, knowledgeable staff, sale or return, dependable deliveries, useful special offers, volume discounts, why would they? It’s not as if I can take my business elsewhere.”

That inequality in the power relationship between struggling small businesses and the major pubcos demonstrates my point.

[Mr George Howarth]

As I am ever anxious to be helpful, may I tell the hon. Gentleman that Crabbie’s ginger beer is made in Knowsley?

[Martin Horwood]

The right hon. Gentleman will have to buy me whatever the relevant quantity is in a pub sometime, if we can find one.

To be even-handed, I must say that I have had quite a lot of complaints and correspondence from lessees of Punch Taverns, too. One wrote:

“I am a Punch Lessee, I am at present on the biggest discount”—

in other words on beer price—

“that Punch can give me, I am paying what is in my view an extortionate rent, an example of pricing is as follows:

My buying price from Strongbow Cider at highest discount from Punch = £110 + VAT—Price from free-trade Moulton Coors = £64 +VAT.

This comparison is throughout the range. What chance have I got of staying in business. The truth of the matter is that the prices we have to charge to customers = empty pub.”

That is the unequal power relationship we need to have tackled, and that view is widely held across the trade.

The Minister should take credit for the positive steps that he is taking, but none of them really sort out the central issue, which is not the need to abolish the tie or even customer choice and competition among pubs for customer trade but the need to rebalance the relationship between publicans and the pubcos, and the lack of any real incentive for those highly leveraged businesses to offer better terms and avoid pub closures. It is increasingly clear to everyone in the trade, to the Select Committee, which has repeatedly considered it, and to Members across this House, that the only way to do that is to introduce a statutory code with a free-of-tie option. We should not force all pubs out of the tie, but give the pubcos an incentive to rebalance the relationship and offer more generous terms to those struggling small businesses. The pubcos have been drinking in the last chance saloon for so long that they must be under the table by now, and it is time for Ministers to join us all in saying, “Time” and “Enough”.