Pub Companies

Debate between Martin Horwood and Baroness Burt of Solihull

Thursday 12th January 2012 Commons Chamber

[Lorely Burt (Solihull) (LD)]

Although several Members have a lot of knowledge of the pub industry, I think I am the only Member who has spoken today who has operated under a tie. Admittedly it was an awfully long time ago, but the experience of operating under a tie is principally the same now as it was when the beer orders came in.

I agree with the hon. Member for East Hampshire (Damian Hinds) that the tie is not the problem. In my view, it represents the symbiotic relationship between the company, which owns the pub, and the tenant, who puts his or her labour, blood, sweat and—often literally— tears into the equation. Landlords have always complained about the unfairness of the tie—they did it in my day and they do it today—but people should enter into tenancy agreements with their eyes wide open, not with the starry-eyed image of being “mine host” behind the bar obscuring the economic facts. I am glad to see that the new pub advisory services will be established to support would-be tenants and ensure that they understand what they are getting themselves into.

The difference today is that the vast majority of tied pubs are owned not by breweries but by companies whose purpose is not just selling beer but owning properties that they expected to accrue in value. Several changes over the years have made that a less and less attractive business proposition, including changes in drinking habits, drink-drive legislation and so on. The property bubble has now burst and the pubcos can no longer rely on increasing property values to square a decreasing profit circle. To their shame, some pubcos have resorted to imposing increasingly punitive terms on their tenants to make up the difference, including the full repairing and insuring leases that have been mentioned, along with many other examples.

[Martin Horwood]

Does not the point that my hon. Friend is making underline the difference between the kind of tie under which she operated with a brewer and those under pub companies, which have no incentive not simply to sell their pubs and take the cash, as that helps their balance sheets?

[Lorely Burt]

I agree with my hon. Friend to a degree, but the principle of the tie is the same. We need to make sure that the tie operates fairly.

These problems must stop, but should the answer be legally to require companies to offer a free-of-tie option? The balance has indisputably tipped too far towards the landlord, but I think we are tipping the baby out with the bathwater. For the breweries, what would be the point of having their own pubs if they could not impose a tie? Why would they go to the trouble of buying and refurbishing property and recruiting suitable tenants only for those tenants to start in competition against them, selling someone else’s beer? Breweries have been anxiously awaiting the Government proposals because they want to invest in the industry, but they will not do that if they cannot keep the tie.