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Mr. Graham Riddick (Colne Valley) : Clearly the hon. Gentleman does not like intervention from across the Channel in the form of actions by the European Commission. Does he not find it a little disquieting that his hon. Friend the Member for Peckham (Ms. Harman) seems happy to accept the Commission's proposals so meekly in this instance?

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Mr. Haynes : The hon. Gentleman will not lead me down that road. I am not going to fall out with my hon. Friend. She is a lovely lass, and so are you, Madam Deputy Speaker.

Mr. Riddick : What is the answer to my question?

Mr. Haynes : I am talking about the freedom of the individual. My hon. Friend is entitled to her opinion, like the hon. Members for Derbyshire, South and for Chislehurst, but I have had a bellyful of being told what to do from across the Channel.

Mr. Day : She is telling you.

Mr. Haynes : My hon. Friend the Member for Peckham (Ms. Harman) is entitled to her opinion, and I am not going to fall out with her. I have said the same about the hon. Member for Derbyshire, South, but I disagree with her. [ Hon. Members-- : "Hear, hear."] I have even got support on the Conservative Benches.

I think that you have heard enough from me, Madam Deputy Speaker. I have made my point. [ Hon. Members-- : "What was it?"] There are some sarcastic Conservatives in the Chamber tonight. My hon. Friend the Member for Jarrow (Mr. Dixon), the Opposition Deputy Chief Whip, is always here-- like me--until the end of the day, even if it is 4.30 am. But many hon. Members are not here when we are dealing with European matters such as this. That is what I say--that I have had a bellyful. Many hon. Members have not experienced what we have experienced in the early hours of the morning. These debates come on far too late, and we are not given proper time to discuss the matters involved. I am trying to deliver a message : let us get together and say that enough is enough. As I have said before-- let me now say it yet again--I have had a bellyful. I am a little disappointed that the hon. Member for Southend, East (Mr. Taylor) is not here, because we usually stand together on such matters, almost arm in arm. We entirely disagree with what is happening. The hon. Member for Northampton, North who has probably gone to bed, disagrees as well. We shall continue to disagree until they shut up over there and let us get on with our job here, and determine the destiny of the people of the United Kingdom. They are the people whom we represent here ; that lot over there can look after themselves.

12.52 am

Mr. Gerald Howarth (Cannock and Burntwood) : In the absence of my hon. Friend the Member for Southend, East (Mr. Taylor), perhaps I may walk arm in arm with the hon. Member for Ashfield (Mr. Haynes). I entirely endorse what he has said. The House is always delighted when the hon. Gentleman is championing a cause, not least when it is the cause of individual liberty. I am not quite sure how he manages to reconcile it with his amazingly competent role as an Opposition Whip : he is a most fearsome character in that role, but a most delightful one when speaking on individual rights.

I do not wish to detain my colleagues, so I shall be brief. My hon. Friend the Member for Chislehurst (Mr. Sims)--like my hon. Friend the Minister and the hon. Member for Peckham (Ms. Harman)--has advanced very good arguments about the dangers of smoking, while others have argued that it is a perfectly legitimate occupation. I believe, however, that the debate is not actually about the

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merits or demerits of smoking : I think that it is about the competence of the European Economic Community to regulate our lives. I am sure that the hon. Member for Ashfield and my hon. Friend the Member for Northampton, North (Mr. Marlow) speak for a large vein of opinion in the United Kingdom. The more that the EEC continues to poke its nose into affairs that have nothing to do with the Economic Community and are increasingly to do with social matters which do not require unity across the Channel, the more it will alienate the British people and put at risk some of the great advantages to be had from EEC membership.

This is a question of competence. The unwarranted interference of Brussels bureaucrats is far more dangerous than any smoke that is likely to be exhaled by the citizens of our country when smoking cigarettes or pipes. It is vital that the Brussels bureaucrats should be kept in check. They should be told to keep their noses out of our business and to allow this Parliament to determine these matters. I agree that it is regrettable that European legislation is debated late at night, with the result that any hon. Member who wishes to make a contribution feels that he must keep his remarks short. The Government were right to refuse to be drawn down the path advocated by the Liberals. It is astonishing how many times the Liberals come to this Chamber to tell the people of Britain what they wish to force upon them. They are a bunch of nannies. They are as bad as any Eurocrat in wanting to interfere in the affairs of the people of Britain. They are jolly good candidates for jobs in Brussels. They are far more in sympathy with what is going on there than they are with the mood of the British people. Last Thursday's election results prove that point. Many of them will soon have to look for jobs in Brussels, because they will no longer be here.

I welcome the fact that the Government have decided not to introduce compulsion but to replace

"the draft Recommendation with a mixed Resolution or Recommendation, which would recognise Member States' doubts about Community competence in this area."

I hope that the Minister will make it absolutely clear to those with whom it is his responsibility to negotiate in Brussels that he speaks with the full authority of this Parliament and nation, that we shall not brook interference in our affairs and that he is speaking not simply for himself but for the British people.

12.56 am

Mr. Freeman : This has been a brief, illuminating and somewhat humorous debate. Nevertheless, several serious points have been made, and I shall seek to answer them.

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My hon. Friend the Member for Chislehurst (Mr. Sims)--to whose work for Action on Smoking and Health, which is much appreciated by many of his colleagues and friends on both sides of the House, I pay tribute--spoke about the serious effect of smoking and the damage that it can do to one's health. I endorse entirely what he said. Sitting next to him is my predecessor in office, my hon. Friend the Member for Derbyshire, South (Mrs. Currie), who in last November's debate also underlined the serious effects of cigarette smoking on health. I endorse entirely what she said in the debate, and I have just re-read it. My hon. Friend the Member for Chislehurst asked for an assurance that when we renegotiate the voluntary agreements we shall vigorously pursue them. I give him that assurance.

The hon. Member for Southport (Mr. Fearn) referred to the importance of no- smoking areas. I agree with him. That is enshrined in the draft recommendation and also in my statement to the House earlier today. He asked me whether the Government believe that the Commission has competence to introduce proposals concerning public health. The answer is no, we do not believe that it has. I hope that I have made that quite clear to the House.

The hon. Member for Peckham (Ms. Harman), who spoke on behalf of the Opposition, asked why our policy of voluntary control could not be replaced by United Kingdom legislation. I hope that I have made it quite clear that the Government do not believe that that is appropriate. It is important to continue with voluntary control. We have had substantial success with voluntary control, and we want more success of that kind. The Opposition believe that legislation is required, but the Government do not share their view.

My hon. Friends the Members for Northampton, North (Mr. Marlow) and for Cannock and Burntwood (Mr. Howarth) and the hon. Member for Ashfield (Mr Haynes) believe that this is a stalking horse for EC control of public health. It is not. The draft recommendation is non-binding. It does not involve the British Government in taking legislative action. The measure is modest, and while the Commission is right to be concerned about smoking in public places, we disagree that it has the competence to pronounce on public health policy. Nevertheless, I commend the motion to the House.

Question put and agreed to.


That this House takes note of European Community Document No. 4225/89 and Corrigendum on banning smoking in public places ; recognises that if agreed it would allow the Government to continue its current successful policy of achieving progress in this area largely through voluntary rather than legislative means ; and endorses the Government's objective of replacing the draft Recommendation with a mixed Resolution or Recommendation, which would recognise Member States' doubts about Community competence in this area.

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Brewing Industry (MMC Report)

Motion made, and Question proposed, That this House do now adjourn.-- [Mr. Chapman.]

1.2 am

Mr. Graham Riddick (Colne Valley) : The proposal in the Monopolies and Mergers Commission's report into the supply of beer in this country would, if implemented, lead to enormous and fundamental upheaval in the industry.

The report, and the issues surrounding it, need to be debated in Parliament, and perhaps I should explain my purpose in initiating the debate. I have no vested interest in the matter. However, I know something about the industry--which some hon. Members may regard as a disadvantage-- because for a number of years before becoming an hon. Member I was a sales manager with a soft drinks company selling to the licensed trade.

I speak as someone who believes strongly in the free market. Any Government action to implement the proposals in the report would amount to an unwarranted--indeed, counterproductive--intervention in the workings of the free market. The brewing industry is a classic example of the free market, having sorted a fairly complex industry into an orderly and consumer- oriented market.

I also speak as someone who believes in the sanctity of private property. I am horrified that one of the main planks of the report would force companies to divest themselves of assets that they have legally and enterprisingly built up over many decades. For a Conservative Government to undermine those two fundamental principles, there has to be clear and overwhelming evidence that competition does not exist and that the consumer is getting a raw deal. Yet there is almost no evidence in the report that there is massive consumer dissatisfaction with the current set-up. The report tells us that 80 per cent. of beer consumed in this country is consumed away from home on licensed premises. In America, only 20 per cent. of beer is consumed away from the home, in West Germany the figure is 40 per cent. and in Belgium and France, the figure is 43 per cent. Those figures do not suggest mass dissatisfication in the United Kingdom with pubs and clubs.

One of the key factors on which the Monopolies and Mergers Commission based its conclusion that a so-called "complex monopoly" was operating against the interest of the consumer was that the price of beer had increased by 15 per cent. above the retail prices index since 1979. But the report records the results of a survey carried out by the Consumers Association, which showed that only 1 per cent. of consumers mentioned price as the reason for choosing a particular pub. That is not surprising, because beer prices in this country are among the cheapest in the industrialised world. The consumer is looking for the right mix of amenity, choice of product and comfort. If price is as important as the report suggests, why is it that clubs, which generally offer lower prices as well as a lower level of amenity, have declined in recent years?

The real competition exists between pubs. The commission reports that the licensee survey showed that 90 per cent. of pubs had competition within a five-minute walk and that 34 per cent. of licensees faced competition from at least 10 pubs within a similar distance. The report records also that pubs in this country have a much greater advantage in the number of brands of beer per outlet than

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those in other countries, which is not altogether surprising when one considers that there are more than 1,000 different brands of beer sold in the United Kingdom. Surveys have shown that the British consumer is satisfied with the choice available in pubs-- so much for the commission's claim that there is insufficient choice in the British pub.

The report has not even attempted to prove that there is massive consumer dissatisfaction with the current set-up. That is not surprising. I contend that there is no such massive dissatisfaction. I carried out my own survey in the village of Honley in my constituency last Friday by visiting several pubs and clubs. Honley, with an adult population of 5,500, has an interesting mix of pubs and clubs. I found a significant difference in prices being charged and in the level of amenity being offered. One pub was popular because of its taproom, another was known as a beer house and yet another was known as one frequented by young people. It was interesting to note that the pub charging the highest prices also seemed to be the pub attracting the most customers. I talked to some of the punters enjoying a pint in the various pubs. From my own straw poll, I can report that there was practically no dissatisfaction with the choice available. The only grumble I heard concerned the price of low alcohol beer. I was surprised by the high level of awareness of the report. I have to inform my hon. Friend of the enormous concern that it has generated already, especially among tenants and free landlords.

I find it disturbing that the report seems determined to underplay the significance of the massive amounts of money, amounting to about £3 billion, that have been invested in the refurbishment of existing pubs by the brewery companies between 1982 and 1988. The commission makes much play, for example, of the large price increase between July 1985 and July 1986, but fails to mention that that price increase coincided with an especially heavy amount of investment of £1.2 billion in the years 1985 and 1986 alone. It is almost as though the fact of that investment did not fit in with the conclusion that the MMC wished to reach.

One aspect of the report that I find particularly unsavoury is the fact that the MMC highlights the regional variations in the price of beer. I should have thought that lower beer prices in the north could be easily explained by lower property costs as well as lower service costs, not to mention the fact that consumption of beer is far higher in the north than in the south and that that increased volume justifies a lower price. Regional variations are not uncommon where a significant level of services is involved, and I understand that beer price differentials are lower than those in prices for car servicing, cinema admissions and restaurant prices. If the Government act to reduce the regional variations in price--I have no doubt that that would mean an increase in the price of beer in the north-- the move will be clearly seen as an attack on the north, and with justification.

I now come to some of the recommendations in the report. The most stunning omission from the report is its failure to examine exactly what effect the proposals will have on the industry. As the dissenting member of the investigating group, Mr. Mills, said : "the recommendations, if implemented, would be an unnecessary leap in the dark."

The combination of imposing a ceiling of 2,000 pubs on each brewery, insisting on a guest beer being allowed into

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each tenancy and stopping tied loans being made to the free trade will, in my view, lead to many marginal pubs in rural and inner-city areas being closed, many free outlets finding it impossible to get off the ground and an increasing trend towards a few national, heavily promoted megabrands dominating the market.

The report is already creating ripples. Decorative Glass Structures Ltd., a firm in my constituency which manufactures stained glass for pubs, has written to tell me that the effect on its order book has already been significant. The reason for that is simple. Major brewery chains have now frozen all their projects on tenanted premises. We know, too, that three regional breweries have already given notice to all their tenants.

I find it somewhat worrying that the MMC should so signally have failed to calculate just how the brewers would respond to the proposal to limit their tied estate to no more than 2,000 pubs. The MMC rather naively believed that the brewers would meekly sell off a number of pubs to bring their estate down to 2,000, although it does not take a genius to realise that even if they did that, while many pubs would be bought, those on the margin in rural and inner-city areas would almost certainly be closed.

It is now becoming clear that the national brewers would choose to be retailers and simply sell their brewing interests. That would almost certainly lead to a concentration of brewing in the hands of fewer companies and it would also provide the opportunity for foreign brewing interests to buy into the United Kingdom brewing industry. At the moment, the national brewers are happy to keep the marginal pubs open because they contribute extra volume, but once the interests have been split up the retailing companies would see no benefit whatever in keeping such pubs open, so in those circumstances, too, the marginal pubs are likely to disappear.

I am concerned that, despite all the MMC's fine words about its wish to help the small regional brewers, great stress is laid on the fact that there are still opportunities to reduce costs through the economies of scale. By implication the MMC therefore expects there to be fewer but larger breweries in the future. It is worth pointing out that the report records, albeit in passing, that, in 1986, the number of off-licence premises owned by breweries amounted to about 57 per cent. of the United Kingdom total, compared with 78 per cent. in 1967.

The proposal that guest beer should be introduced in every tenancy is well meaning, but it will become counter-productive. It is intended by the MMC to help small regional breweries, but I fear that it is likely to result in big national breweries spending more and more money promoting one or two megabrands that it will be almost impossible for a tenant to refuse to take, not because the brewery is twisting his arm but because of the X millions of pounds being spent on television advertising, thereby giving certain brands an extremely high profile.

Of course, smaller breweries will be able to sell their beers to some of the national tenancies, but hon. Members should make no mistake : when it comes to a battle between the local and big national brands, there will be only one winner, as experience in other countries has

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shown. I have heard that a regional brewery in the south of England believes that that provision is likely to see its sales of beer decline by about 30 per cent.

Another effect of the proposal being implemented will be the number of tenanted houses that will be turned into managed houses, which I would regret. A tenant tends to be more entrepreneurial than a manager and contributes his own special character to the pub environment.

The proposal that tied loans to the free trade should be eliminated would be disastrous for many small clubs and would make it increasingly difficult for an entrepreneur to start a new club or pub, particularly if the venture were unique or unusual. Even the Campaign for Real Ale recognised in its evidence to the MMC that loans were often necessary for a new free house to be viable. The MMC admitted that there was a great deal of competition between brewers in relation to loans made to the free trade, and, from my experience, I can confirm that free trade outlets frequently change suppliers to get a better deal from an alternative brewer.

I received a letter from a constituent, Mr. John Moxon, who is involved with the Marsden football club in my constituency. His letter states :

"Six years ago, without any track record, Greenalls brewery had sufficient faith in us to advance a substantial loan to enable us to start up and erect a tastefully furnished clubhouse with full facilities which was then expanded in a similar fashion three years later by further brewery investment. We now enjoy a proud position in the community with great accent on junior football and a family atmosphere second to none in social activities."

He believes that the opportunities to develop clubs in that way will be lost if brewers are no longer allowed to lend money. Thousands of similar clubs up and down the country would never have got off the ground without the help of breweries and would have found it almost impossible to get a loan from banks, because of the high commercial risk involved and also because, in many cases, there is no collateral for a sports club to offer in return for a loan. Concern about the issue is not confined to Conservative Members. The hon. Member for Glasgow, Springburn (Mr. Martin) went out of his way to find me and ask me to mention his concern. He is worried about the abolition of loans to rural pubs in Scotland, not to mention employment prospects being threatened in the Tennants brewery in Glasgow.

What is staggering about the report is that it has simply not considered what effects its key proposals will have on the industry ; nor has it made any serious comparisons between the United Kingdom brewing industry and brewing industries in other countries. If it had done so, it would have recognised how disastrous its proposals would be. For a start, it would have learnt that the United Kingdom, with over 1,000 beer brands, has infinitely more choice and variety than any other country in the industrialised world and that that is a direct result of the mix of tied and free outlets.

The tie in Australia was abolished 10 years ago, with the direct result that beer prices have increased by 40 per cent. above the retail prices index ; two breweries now dominate the market with over 90 per cent. of the market share between them, and the consumption of beer in the home has risen markedly. The fact is that those countries where the brewing industry has no tied outlets are dominated by a few massive companies.

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The direct result of the proposals, if implemented, would be the formation of a few large brewing companies, which would then spend massive amounts of money on promoting a few national megabrands. Those promotional activities would in turn ensure that the market share of those national megabrands would increase year after year, so that we would eventually reach the situation that exists in so many other countries. Is that really what the MMC intended?

If my hon. Friend the Minister were to report that the MMC does not intend a free-for-all and that the tie will be continued, albeit in limited form, I would draw his attention to the position in Scotland and Northern Ireland, where there are far fewer tied outlets than in England and Wales and where two breweries dominate the market with over 80 per cent. of the market share.

What I find somewhat ironic is that one of the few companies that is quoted in the report as arguing strongly in favour of the changes suggested, because the tied system is working against it, is Bulmer H. P. Holdings plc, yet without the tied system the brewers would have been wholly unable to break the near-monopoly stranglehold that Bulmer itself had in the 1960s and 1970s, and which it has now lost, to the benefit, I suggest, of all.

I turn briefly to one or two aspects of the report to which I am more favourably inclined. The MMC is keen to see the conditions of tenants improved and that is an area which needs some work. The brewers need to make some concessions in that area. I know that the National Licensed Victuallers Association representing tenants and free landlords is keen to see greater security of tenure and I believe that in the wake of this report it would be appropriate if the Brewers Society sat down with representatives of the tenants to see whether an agreement can be hammered out in relation to some of these issues.

There are one or two lesser aspects of the report with which I agree, but, as one or two of my hon. Friends are pointing to their watches, I shall summarise them briefly. I believe that the MMC report into the supply of beer is fundamentally flawed. It is based on a number of false premises and seems to have been compiled by theoreticians who were determined to arrive at a preconceived set of conclusions regardless of the realities of the industry. If the report's recommendations were implemented, a number of pubs would disappear, the nature of many clubs and pubs would change dramatically and the variety of outlets would be reduced significantly.

The brewing industry in this country provides beer at competitive prices in attractive surroundings which are heavily patronised by consumers up and down the land. It would be ironic indeed if it were a Conservative Government, and this Conservative Government of all Conservative Governments, who meddled in the brewing industry like a good old-fashioned interventionist Socialist Government. We would not be forgiven if we did so meddle and changed the face of the British pub. My advice to my hon. Friend the Minister is very simple and very practical--leave well alone.

1.23 am

The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. Francis Maude) : I am grateful to my hon. Friend the Member forColne Valley (Mr. Riddick) for raising this subject. It has been useful to air some of the issues.

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It is important to remind the House of the background to this whole issue. The subject of the supply of beer was referred by the Director General of Fair Trading to the Monopolies and Mergers Commission in 1986. The MMC took two and a half years over its deliberations and investigations and reported to us in February this year. The report is a substantial document which, with appendices, runs to just over 500 pages. The MMC came to a clear conclusion that there was a complex monopoly that restricted competition at all levels. The MMC set out in considerable detail the detriments to the public interest, which it saw as arising from the lack of effective competition in the supply of beer. It is worth repeating those detriments. It found that consumer choice was restricted, both because one brewer did not allow another brewer's beer to be sold in outlets which the first brewer owned and--perhaps especially important--because of the brewers' efforts to ensure that their brands of cider and soft drinks were sold in their outlets.

The MMC found that the tenant's bargaining position was so much weaker than his landlord's that he was unable fully to meet consumer preferences. In addition, independent manufacturers and wholesalers in beer and other drinks were allowed only limited access to the market. The MMC found that the results were that the price of beer in public houses had been rising much faster than inflation in the past few years ; the price of larger was higher than justified by the cost of producing it, and that the variation in wholesale prices between regions was excessive.

The MMC concluded that those were serious public interest detriments. It must surely be clear that the Government cannot simply ignore those findings. Our consistent policy has been to give power to the consumer, and the best way of doing that is to ensure that competitive markets work properly.

In the past couple of weeks we have seen quite an extraordinary campaign conducted through advertising in the national press. That was a campaign that was eventually identified as emanating from the Brewers Society. However, that campaign has not sought to argue through the issues in any thorough sense at all. It has instead been based on assertions and emotive appeals, many of which do not stand up to scrutiny. At least, my hon. Friend has actually put and developed arguments and has not simply relied on bald assertions. I shall try to deal with some of the points that have arisen. An attempt has been made to create the impression that the entire industry is united in its opposition to the MMC's recommendations, but that is certainly not the case. For example, Friday's trade press quoted one regional brewer as saying :

"The report contains more positives than negatives, and if the big six got their heads out of the sand they'd see that."

The Small Independent Brewers Association came to see me last week to tell me personally of its support for the recommendations. It welcomed the opportunity to compete on more equal terms with the bigger breweries. CAMRA --the Campaign for Real Ale--has told us that it, too, is strongly in favour of the report's recommendations. In addition, the National Licensed Victuallers Association supports the arguments set out in the report for stronger tenants' rights. Well they might do so, because in the past few weeks tenants of a number of major breweries have found themselves served with notice to

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quit. That is not just hearsay. My Department has received a number of letters from tenants who are seriously concerned about their position.

It is worth recalling that nearly 100 pages out of the 300 that form the body of the report are given over to consideration of the views of the Brewers Society and of individual views. Therefore, brewers' views have been carefully considered.

In its report, the MMC paid tribute to the rigour and thoroughness of the Brewers Society in responding to the MMC's questions and to the society's effectiveness in championing its members' interests. Since the report was published, we have seen in the advertising campaign independent evidence of its willingness to champion vigorously its members' interests. It is sad that the quality of that campaign has not matched the seriousness of the issues which are addressed in the MMC's report.

I understand that it is an expensive campaign, which is costing about £200,000 a day. It would have been cheaper for the Brewers Society if, instead of spending all that money--all of which is paid for by beer drinkers--it had spent a more modest sum in coming to my Department in Victoria street to talk to us about its views. I am pleased to report that today, some seven weeks after the report was published, the Brewers Society, in response to our specific request, has written to us with its views and has accepted that it would be better to meet and to discuss the matter face to face.

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We are not wedded to every word of every recommendation that the MMC has made. There may well be consequences of some recommendations that were not previously foreseen. There are many recommendations of different sorts affecting different interests in the industry in different ways. It is unusual to find many people who have expressed views who condemn every aspect of the recommendations, and it is important to recognise that.

Clearly, there is a great deal of scope for discussion and we look forward to taking part in those discussions. I am aware that uncertainty is damaging to the industry and that many employees, tenants and others have been alarmed by some of the assertions made during lobbying. I hope that we can resolve those uncertainties as soon as possible. We want to make decisions before long so that these matters can be resolved, but naturally we have to ensure that those decisions are properly considered. We are keen to hear from anyone who has constructive proposals for better remedies than those which are identified by the MMC. I reiterate what my right hon. and noble Friend the Secretary of State said last week :

"If the brewers don't like the MMC proposals let them come to us with alternative proposals which address the serious public interest issues raised".

I am glad that the Brewers Society is now to do that and I look forward to discussions with it, but let no one be under any misapprehension : in the face of the serious public interest findings, for the Government to do nothing is simply not an option. Question put and agreed to.

Adjourned accordingly at twenty-nine minutes to Two o'clock.

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