Pub Companies

Debate between Greg Mulholland and Martin Horwood

Wednesday 9th January 2013 Commons Chamber

[Martin Horwood]

May I join my hon. Friend in paying tribute to the hon. Member for West Bromwich West (Mr Bailey)? I am sure that the announcement will have come as some compensation for the shock defeat of Cheltenham Town by Everton earlier this week. One of the best things about the Committee’s work has been its willingness to return repeatedly to this issue and to check on progress. Is that not a very good model for other Select Committees to follow on other similar issues?

[Greg Mulholland]

Indeed, it is an exemplary one and it shows the power of Select Committees.

Let us remind ourselves of the issue we are dealing with, because although it is often presented as complicated, it is a simple one: after years of self-regulation and twists and turns in this matter, the giant lease pub companies still continue to take far more than is fair or reasonable from pub profits. It is as simple as that; that is the issue that has to be dealt with. I will come on to address the point made by the vice-chair of the all-party save the pub group, the hon. Member for Easington (Grahame M. Morris), as to precisely how we should try to do that.

Let us remind ourselves of the incredible figure from the Select Committee survey: 67% of lessees with a turnover of more than £500,000 were earning only £15,000 a year or less—that is a 3% return. I know, as I am sure a lot of right hon. and hon. Members do, that some pubco tied licensees have a reasonable turnover yet are making nothing at all. That is a scandal and it is closing pubs. This is a Department for Business, Innovation and Skills debate, but we must also remember that between 2009 and 2011 Ted Tuppen, the chief executive officer of Enterprise Inns, gave himself an £848,000 bonus package over three years, at the same time as the value of his company collapsed by 80%. This is one of the worst examples of irresponsible capitalism that this country has ever seen, and yesterday must signal the end of it—I hope that it does.

We have recently seen the sale of Admiral Taverns. Has anyone noted that there has been a huge loss to the taxpayer, because of course that company had been bought by Lloyds TSB? The estimates of the loss to Lloyds, which is 43% owned by the taxpayer, are of up to £800 million. This is the economics of the madhouse.

Let us remind ourselves that the Association of Licensed Multiple Retailers survey said that for the first time tied rents overtook rents for free-of-tie leases. The whole basis of the tied system was supposed to be that where more was paid for the beer, a lower rent would be paid as a result. The Select Committee, the ALMR and others have shown that that is simply not the case and that licensees are being doubly ripped off, paying higher than reasonable rents as well as exorbitant beer prices. That is, simply, why they cannot make a living.

We need to be clear that the proposal being made is not red tape or bureaucracy; it is about freeing up the British pub sector. It is about freeing up small businesses to make the decisions to be able to succeed, and to get a reasonable living from their pub. It is notable that the proposal has had the full and professional support of the Federation of Small Businesses and the Forum of Private Business. I can name many examples of former pubco pubs around the country that have been taken on by smaller companies, by microbreweries and by individuals and are now succeeding. It has not been the pub that has not been viable; it has been the business model. Two such examples are the Horse and Farrier in Otley, a former Enterprise Inns pub that is now successful under the ownership of Market Town Taverns, an excellent Yorkshire-based pub company, and the Roebuck, just up the road, which is a pub that Enterprise Inns had run into the ground but is now a very successful pub run by local businessman Chris Payne. So it can be done and we want it to happen more. We want it to be a result of yesterday’s announcement.

The pub companies we are discussing are zombie companies; they are not contributing to the British economy. Our concern should not be what happens to them; it should be what happens to the individual small businesses, because there is a huge growth opportunity in this sector if we can free up those licensees to be able to succeed because they employ people and buy things locally.

The response to the announcement from the British Beer and Pub Association—the pubcos association—and from the pubcos has been extraordinary, if unsurprising. Amazingly, the BBPA has said that it is “disappointing” that self-regulation has not been given enough time “to work”. The reality is that the process has been as glacial as it had been when the Select Committee reported, the BBPA has been as impotent in getting self-regulation to work and there is still an impasse on those codes.

The final thing—the big challenge—is how the Government deliver the principle that the tied tenant should not be worse off than if they were free of tie. They are taking on a considerable challenge, but it is the right one. Whether or not this approach succeeds depends on the Government getting that right, because having a code and an adjudicator, on its own, will not change the fundamental issue if the code does not deal with that matter. I believe—the all-party save the pub group will continue to campaign on this—that the best and easiest way of doing that is through the free-of-tie option with an open rent review. If the Government have other ways of doing it, we look forward to listening to them. Either way, they have to stop the overcharging and they have to save the Great British pub.