Pub Companies

Jason McCartney Excerpts

Thursday 12th January 2012 Commons Chamber

[Mr Marcus Jones (Nuneaton) (Con)]

Pubs are not just places we frequent to buy beer; they are vital community hubs that can be fundamental to our lives. I can say that, given that I met my wife in a pub called the Chetwynd Arms in my constituency back in 1997. Given that it was in 1997, I conclude only that it was probably the only good thing to come out of that year. Since those heady days, we have lost much of that community heritage that our pubs give. At the moment we risk the continuing demise of the good old British pub. Part of the demise has no doubt been exacerbated by the relationship between the pubcos and their lessees.

History tells us that the arrangements between pubcos, lessees and tenants, which emanated from the break-up of the estates of the large breweries back in the 1990s, were not initially dissimilar to the situation that obtained under the breweries. Where the model differs tremendously, however, is that the pubcos are middlemen—yet another middleman between the product producer and the end user of the product. That has necessarily added costs over a number of years. The costs seem to have been met quickly by the tenants and lessees who have seen many changes over that period: metered pumps, tighter reins on guest ales, loss of machine income, reductions in the will to help with refurbishments—these are probably only a few of the additional burdens that lessees have had to face. We need to be aware that much of that stems from 1980s legislation in the context of the fundamental shift towards the large pubco estates that we now have.

I welcome much of the work done by successive Select Committees on the practices of pubcos, but I think we should be careful about what we wish for as we look to legislate now. We could end up out of the frying pan into the fire, because we are in a very different world today than we were when the Select Committee first considered this issue in 2004. Back then, pubs were still in decline, but there has been a huge aggregation of issues since. We have had the smoking ban, increased regulation on alcohol sales, beer duty rising by 35% over the last four years alone, below-cost selling at supermarkets becoming more prevalent and, to top all that, we have suffered the deepest and longest recession since the 1930s. These factors have no doubt strained even further relations between pubcos and their lessees.

[Jason McCartney (Colne Valley) (Con)]

I thank my hon. Friend for giving way and would like to add to his list of other factors affecting our local community pubs. We heard about Performing Rights Society licences from the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop). There is also the cost of live television sport in pubs; one of my local landlords needs £800 a month to pay for that. My hon. Friend mentioned regulation a few moments ago. Does he agree that self-regulation of the pubcos is not working; will he join me and many other Members in supporting this motion and setting a timetable for the Government to look again at self-regulation?

[Mr Jones]

I thank my hon. Friend for his comments. I shall come on to the issue of self-regulation.

The relationship between pubcos and lessees has been exacerbated by external factors. That has not been helped by the fact that, as many hon. Members have mentioned, the pubcos are now greatly overleveraged. That leads me to be a little concerned about what we seem to be wishing for. The overleveraging of the pubcos makes the position very difficult for them in comparison with 2004, as the horse might now have bolted. Perhaps we should have done the legislating back then when the circumstances were different.

When it comes to the external factors I mentioned, there are many things—in addition to what the Select Committee report raised—that the Minister with responsibility for pubs and the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for Kingston and Surbiton (Mr Davey), who is to reply to this debate, need to look at and address. The Select Committee focused its mind on the relationship between the pubcos and lessees. That is important when we have reached a position in which the pubcos are looking at things in a different light, albeit not quickly enough for many lessees.

I believe that the voluntary measures put forward are positive and I welcome the industry framework code, which will be legally binding. I welcome PICAS, the three year accreditation code and the strengthening of the framework code. I particularly welcome having a new pubs advisory service. More advice, training and information is vital to potential lessees, who need to go into these businesses with their eyes fully open. Having the right training for the lessees going into them is important. Under the old breweries, most of the lessees coming into pubs as tenants had managed pub groups for many years. They knew their trade inside out. That is why they ran successful pub businesses. In that respect, there is a gap now.

Voluntary measures will be positive only if they are adhered to and only if PICAS has teeth and the pubs advisory service has more independence. That is why I fully support a review of these arrangements over direct, immediate regulation. I think we need to give more time to see whether the voluntary arrangements being put in place are going to work.

We must try to avoid making the mistakes of the past, which happened when the big breweries were broken up. Voluntary regulation is important. It must be monitored carefully, and we must not look to deal with this issue in a silo or depend only on this aspect to solve the problems that our community pubs face.

--- Later in debate ---

[Martin Horwood (Cheltenham) (LD)]

I congratulate the hon. Member for West Bromwich West (Mr Bailey) on promoting today’s motion. He is a fellow Robins fan, and I know that he, like me, will have wanted to toast, in a pub somewhere, Cheltenham Town’s phenomenal, confident performance against Spurs last week—but as he rightly points out, the choice of pubs is becoming much more limited. That is happening for many reasons, but the pub tie is clearly one of the factors contributing to pub closures.

I promoted a private Member’s Bill on this subject last year. It received very wide cross-party support, and that same level of cross-party support has been evident in the backing for early-day motions; the all-party save the pub group, ably led by my hon. Friend the Member for Leeds North West (Greg Mulholland); the Select Committee reports that have repeatedly set a timetable, which has now passed, for introducing a statutory code; and, of course, today’s debate and motion.

When I promoted my Bill I received a lot of correspondence, especially from the trade. I did receive one letter from Enterprise Inns, which pointed out the value of the tie. Indeed, the company generously took me round my constituency and demonstrated that the tie can sometimes deliver real benefits; that is true, especially where extensive capital investment is required. Yet the overwhelming volume of correspondence from the trade was supportive of a statutory code with a free-of-tie option.

One of the most powerful letters I received came from someone who said the following:

“I have the misfortune to have a successful pub/restaurant…under a tied Enterprise lease…Having taken the lease last May from previous tenants who couldn’t make the business work, looking back no one seems to have had success since Enterprise bought the pub”.

[Jason McCartney]

The hon. Gentleman makes some excellent points, as many colleagues have done on the basis of their own personal experience, be it from meeting their partner in pubs or having worked in the industry. My experience is of my two local pubs in Honley, in Yorkshire. The Allied has had three tenants in 18 months—it is on to its third lot now—and the Coach and Horses, after numerous tenants over the past three years, has just closed. Although an Indian restaurant called Balooshai is going to open, which I welcome, I no longer have a pub within a minute’s walking distance. For those reasons, as well as because of all the other points made in the Chamber this afternoon, does my hon. Friend agree that action needs to be taken?

[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.