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Column 1268thought up the inquiry itself. Is Marks and Spencer to be investigated because it sells only St. Michael products in its shops? There is no monopoly there, of course, because one can go round the corner if one does not like its products or prices. So why was the brewing industry investigated in the first place?
If only one point emerges from this debate, I hope that my hon. Friend the Minister will take seriously the widely held view that the Monopolies and Mergers Commission is no longer up to the complex, important and elaborate investigations that it has recently been asked to carry out. I know one or two people on the long panel of those selected for these difficult hearings. They are busy, knowledgeable and intelligent people, but the sheer volume of material presented to the commission is a barrier to full understanding, and the salaries paid mean that the staff are generally young and inexperienced. The Government must grasp the nettle either by employing some seriously well qualified people to head up the teams in the MMC or think of going along the American road and passing proper legislation so that cases can be hacked out in the courts of this country. It is completely wrong and against the interests not just of big business but of the nation's shareholders and our national interest in Europe and the world for our great companies to be threatened by such a totally incompetent organisation. I say that advisedly because I can use this report as an example.
The MMC never understood the nature of the retail market in beer. It failed to recognise the importance of clubs. In one village in my constituency the chairman of the licensed victuallers association has a club opposite his pub. He tells me about the competition that the club provides for his pub. The MMC failed to accept the competition between outlets and the choice of beer available in many pubs. It never grasped one of the most elementary facts about the industry, which is that most profits are generated from retailing and not production. That did not take much finding out because it is in the annual reports of all the breweries which are public companies. The MMC complained about regional price variations, but took no account of variations in land and house prices or labour costs. We who travel from our constituencies to London know about the differences in retail costs in different areas. We accept that everything is more expensive in the centre of London.
There is a wider choice of beer in the United Kingdom than anywhere else in the world. The United Kingdom industry is less concentrated than that of any other country, except possibly West Germany. Prices in United Kingdom pubs, relative to earnings, are lower than in bars elsewhere. Perhaps this is not a good example, but the other day in Rome I was charged the equivalent of £5 for a bottle of mineral water and a bottle of lager beer.
The MMC never accepted that vertical integration was the brewers' incentive to invest in retail premises. It became extremely concerned about the ability of new brewers to enter the market, but more than 50 per cent. of beer sales occur outside brewers' premises. The beer market, particularly in ale, is a mature market and its most successful new entrants have been internationally known brands advertised at great expense, as we all know as we walk through the streets.
I shall not dwell upon the Landlord and Tenant (Licensed Premises) Bill which has just received its Second Reading for fear of being ruled out of order. Pubs and
Column 1269their ties were created as retail outlets for the breweries. Tenants who entered pubs did so in the knowledge that they had a contract, just as a farm tenant takes on his farm knowing that he has a contract with his landlord. The tighter we make the protection for the tenant, the less we induce the landlord to enter into an agreement. I confidently forecast that the number of tenancies which continue on the same basis will start to decline rapidly as the legislation begins to bite.
I fully understand the concern felt about loan ties, but brewers are not banks and if they lend money for the improvement of a club, which is the usual form, it is not unreasonable that they should tie that loan to some interest of their own. That is a perfectly normal commercial transaction.
One of the more agreeable events of my annual calendar is to attend, as an honorary member, the annual general meeting of the Weston-super-Mare Conservative club. In recent years if has borrowed a large sum of money to purchase the property next door, to expand the club, open it up to ladies and generally prosper. It has become so prosperous that it has amassed capital sufficient to pay back the loan that it received under an agreement from a brewery. I listened with interest as the members argued among themselves about the desirability of paying off the loan and being able to buy cheaper beer, from a wider market, and I understand that desire.
Once the order is passed, however, clubs will be unable to obtain such loans as brewers will be less and less willing--because they will see less and less benefit to their businesses--to make such loans available to clubs. That is to be deplored. The publication of wholesale prices is an interference with trade which is unique to beer. I hope that the Minister will justify that in much more detail and with better arguments than the MMC has used.
The Supply of Beer (Tied Estate) Order contravenes all the Government's best principles. It is the most serious intervention in private property rights since Labour's Rent Acts. Many public houses will come on to the market. Given the size and location of some of those properties, many of them will cease to be licensed premises because their value as residential property will be greater. One more nail will thus be driven into the coffin of rural communities with low-profit pubs.
There has been a decline in the number of brewers. I have the figures for the past 10 years. In 1978 there were 143 breweries and in 1988 there were 107. That decline will be strongly accelerated because, as my hon. Friend the Member for Gillingham (Mr. Couchman), who knows more about the industry than most of us put together, said in his extremely well-informed speech, some of the big brewers will escape the effects of the order by selling their brewing interests. My guess is that before our time is up there will be only a small handful of breweries. That will be the result of the work of the Government--who have no business to interfere in a free market, as they constantly tell us in relation to other areas.
I am disappointed in my right hon. Friend the Secretary of State for Trade and Industry, who brought a fresh mind to his new position. I had expected him to look at this matter and say that his best market philosophies were not in total agreement with those of his predecessor, but he did not take the view that he could reverse his predecessor's decision. I hope that I am not being too mischievous in reminding the House that his successor at the Department of the Environment took a completely different view about
Column 1270a well-known planning application at Foxley Wood. Perhaps in his heart my hon. Friend the Under-Secretary of State for Corporate Affairs will have some sympathy with me in reminding the House of that.
If the theory of monopoly grabs the mind of any hon. Member, I ask him to remember that the position of the regional brewers is greatly strengthened by the order. The competition for the regional brewer, which so far has been the national houses--the big breweries--will be taken away. Out of that will come a greater strengthening of the position of individual regional brewers and that, of course, is at the heart of the reason why the Brewers Society has been so impotent in the matter. That was one of the few things on which I agreed with the hon. Member for Newcastle upon Tyne, North. It is a problem of all trade federations--and I have some sympathy for them--that they cannot meet the interests of all their members when there is conflict in the organisation.
Happily, for once there is a positive and easy solution to the problem and I regret that the Government have turned their back on it. It is to review the licensing laws, because it is the existence of those laws which allows the value of a public house to exist. The Government have said that in the next year or two they will review the licensing laws with a view to dealing with the number of licensed houses in an area. Meanwhile, this draconian measure is to be pressed through the House and in three years the Office of Fair Trading will look again at the brewing industry, casting yet another shadow over its future and its commercial development. Why on earth has it not been possible for the Government to say that they will review the licensing laws and consider the proposition that the licensing justices shall not take into account the number of licensed premises in an area? If the Government did that, competition would be rife and free and none of the problems mentioned today, which I do not think exist anyway, would have occurred in the first place.
The Secretary of State should change the decision. The Office of Fair Trading operated under a false premise, the Monopolies and Mergers Commission was incompetent, the Brewers Society was muted and the Government's final decison disastrous. I shall vote against the order.
Mr. Graham Riddick (Colne Valley) : Before I refer to previous speeches in the debate, I must tell the House how pleased I was to be in the Chamber when my hon. Friend the Member for Gillingham (Mr. Couchman) was telling us about his public houses. I have the great good fortune to live bang opposite one of them. It is appropriately called the Constitution, and it is a very attractive and popular-looking pub. A few yards further down the road there is another pub called the St. George's Conservative Club, so I am well served, although I am ashamed to tell the House that I have not been in either of them--[--Hon. Members : "Shame!"]. Hon. Members must understand that I am not a heavy drinker, and I have to spend so much time here, working hard.
The comments of the hon. Member for Newcastle upon Tyne, North (Mr. Henderson), when he referred to Conservative Members having vested interests, were somewhat discourteous, to say the least. I have no vested interest whatever. My only interest is that I used to work for a company that sold soft drinks to the licensed trade,
Column 1271so I know a little bit about the industry. I realise that that may be a disadvantage when one is talking about a subject, particularly if one is a Labour Member.
The speech of the hon. Member for Newcastle upon Tyne, North was one of the most blatant and cynical exercises in political point-scoring imaginable. He is totally out of step with his own Back-Bench Members.
Mr. Stan Crowther (Rotheram) : In view of what the hon. Gentleman said, how can he say that my hon. Friend the Member for Newcastle upon Tyne, North (Mr. Henderson) is out of step with me, and I am the only Back- Bencher here?
Mr. Riddick : I have talked to the hon. Member for Rotherham (Mr. Crowther) about this issue on many occasions, and I am not sure that he altogether disagrees with some of the comments that I may make. During the past few months, I have had conversations with Labour Members who were concerned about the possible repercussions of the proposals of the Monopolies and Mergers Commission.
Market Access carried out a survey among right hon. and hon. Members, showing that only 23 per cent. of Labour Members believe that the MMC's proposals should be implemented in full. However, the hon. Member for Newcastle upon Tyne, North was criticising the Government for not implementing the MMC's proposals in full, and was suggesting a few months ago that the Government should go further. I take very little notice of what the hon. Gentleman has to say, particularly his comment that a Labour Government would stop the likes of Ansheuser Busch from getting a foothold in the British market. The proposals will lead to that outcome--they will open the door to the big foreign predators--but he does not seem to realise that.
The brewing industry provides 450,000 jobs in the United Kingdom. It is a significant contributor to the Exchequer and it has invested billions of pounds in pub refurbishment in recent years. There is more variety in the outlets, a larger number of brands are sold--there are more than 1,000 brands of beer in the United Kingdom--beer prices are lower and the average number of brands per bar is greater than in any other industrialised country. Consumer surveys have shown up no great consumer dissatisfaction with the current pub scene. In short, the British pub and the British brewing industry is a success story. How does the British establishment react? As is often the case, we try, perhaps unwittingly, to undermine and even to destroy it. These orders will severely undermine the delicate and complex balance in the industry. The vertical integration which the order is designed to upset, and which the Office of Fair Trading and the MCC seem to dislike so much, has led directly to the provision of a wide range of brands and the brewers' high level of investment in retail outlets.
Column 1272The order encourages brewers to entice customers to drink more of their beer, not by making their pubs and amenities more attractive, but by spending more on advertising a few, select big brands. Nevertheless, the order represents an enormous improvement on the MMC's recommendations. I pay tribute to my right hon. and hon. Friends on the Front Bench who have shown that they are prepared to listen to some of those who understand the industry. They have made some sensible alterations. As I know them both to be firm believers in the free market, I have no doubt that, had either of them been in the Department during the spring, the original report would have ended up where it most certainly belongs--the dustbin.
I hope that I have not embarrassed my hon. Friend the Minister. He will of course deny emphatically what I have said. Unfortunately, the previous Secretary of State, who we imagined believed in the free market, embraced a report the recommendations of which amounted to a massive and unwarranted intervention by Government in the workings of the free market.
The report raises some questions about the brewing industry and about the role of the MMC and the Office of Fair Trading. After an investigation lasting two and a half years, how could the commission have got it so wrong? Its proposals were based on a number of false premises, as my hon. Friend the Member for Weston-super-Mare (Mr. Wiggin) said. It wrongly concluded that most profits were made out of brewing, not retailing. The report failed to understand that consumers are more interested in the amenities on offer than just price. The report almost totally and, it seems, deliberately ignored the clear lessons to be learnt from international experience, which shows clearly that, where brewers have no tied outlets, the market is dominated by a small number of massive concerns.
As my hon. Friend the Member for Faversham (Mr. Moate) said in the Second Reading debate, the report would take us down the route followed by Australia some 10 years ago. The MMC dismissed the results of that experience, which was that the market became dominated by two major players and prices rose way ahead of inflation. The MMC recommendations were condemned by those whom they were intended to help. The original guest beer provision which was designed to help small brewers was condemned by small brewers. The proposed ending of loan ties to the free trade was condemned by those in the free trade. How could the MMC get it so wrong? Was the report plain flawed or was it drawn up with one purpose in mind--to destroy the vertical integration which is the central structure around which the brewing industry is built?
I have heard from more than one source of the Office of Fair Trading's dislike of vertically integrated industries. Sir Gordon Borrie, the director general, has confirmed to me in a letter that he was consulted about the MMC's recommendations when they were being drawn up, so it is a little surprising that the OFT, which has great experience, did not draw attention to some of the obvious flaws in some of these recommendations.
The failure of the MMC and the OFT to grasp the obvious solution to any so- called problem that might exist in the market--to limit the number of houses that any brewery could own in any geographical area--suggests to me that those responsible for the MMC's report were determined to arrive at a preconceived set of conclusions regardless of the realities of the industry and so long as it
Column 1273undermined the vertical integration that they disliked so much. They failed to tackle regional monopolies. There seems to have been dogma at work.
My hon. Friend the Under-Secretary of State and my right hon. Friend the Secretary of State should initiate an investigation into the conduct of the MMC's inquiry. The orders will lead to some breweries divesting themselves of their brewing interests and to more money being spent on brand advertising and less on pub refurbishment and improvements. I fear, too, that the price of a pint will increase, not decrease. If my worst fears come to pass, the MMC will have much to answer for. I am minded not to support the orders.
Mr. Ivan Lawrence (Burton) : I declare an interest as the proud representative of the great brewing centre of Britain. The constituency is proud of the contribution to its daily life for over a century of such great brewing names as Bass, Ind Coope, which is part of Allied Lyons, and Marston's which is one of the great regional brewers.
I congratulate the Government on a shrewd piece of business management in scheduling the debate, when the House has been hammered by world-shattering events over the past few weeks, when we have faced the demands of television and the urgent requirements of our families to see us before we slip into the Christmas mode, and when as a result the House is emptier, especially on the Opposition Benches, than it would have been. It is as shrewd a piece of business management as could have been engineered in the interests of business efficiency. When my hon. Friend the Minister says, "The hour is late, these measures are not all that important and really, chaps, it is time for us to pack up and get home," I can appreciate how clever the Government have been.
So it comes about that, at the fag end of the pre-Christmas part of the Session, we are debating changes as potentially damaging to the British drinker and the production of the British pint as it is possible to conceive in a free society. If the Monopolies and Mergers Commission had had its way, the only brewer left in Burton would have been the Heritage brewery, which, although an excellent institution, is a working museum. However great its output and however delightful its product, it hardly satisfies the nation's thirst in the same way as the great breweries of Allied Lyons, Bass and Marston. The MMC's report was a production so manifestly damaging and absurd in its major pronouncements that the industry could hardly believe its ears when Lord Young of Graffham, in a moment of inadvertence, which he must have lived to regret, said that he was minded to accept it. So great was its authors' commitment to the removal of restrictive practice, wherever it is, however it is and whenever it is, that they seemed never to begin to grasp some of the essential truths about the brewing industry.
They did not understand that commercial rents are not always being charged for public houses. The country is full of small pubs that could not exist if commercial rents were charged. Why is that? Because the brewers can get their profit from volume sales of their own beer, and there is no need to make money from rents. Small villages often have uneconomic village pubs. They are of great charm and beauty, existing in some of the most beautiful parts of
Column 1274Britain, but their existence could hardly be justified by turnover. They are encouraged to continue by the large breweries, which consider them publicity outlets--perhaps loss leaders--or perhaps quite simply can afford to carry their losses.
The Monopolies and Mergers Commission did not understand that beer prices are lower in tied houses than in free houses because there are lower rents and cheaper loans and the prices are kept down by the tie. In my constituency town of Burton upon Trent we visited a number of pubs and found that in almost every case the price of beer in tenanted houses was lower than that in the free houses.
The commission did not understand that the good pubs, and there are very many of them, provide a far wider choice of beers, produced by major brewers, than can be found anywhere on the continent. The French do not come to Britain expecting a limited supply of beer or a limited choice, and neither do the Italians. We could go anywhere on the continent and find nothing like the opportunity in Britain to choose between the different sorts of beers produced by the same brewer, or even different brewers. The sheer number of small pubs in the streets of towns and villages in Britain provides the competition for which the MMC thirsted, and it is far greater than in any street in any town or village on the continent where the tie does not exist.
The MMC did not understand that, if we force major brewers to choose between being manufacturers of beer and being retailers, because they have shareholders they have to choose to be retailers. That is where all their capital is tied up. One major brewer said to me, "We have £30 million tied up in our manufacturing estate, but we have £750 million tied up in our retailing estate. If we are forced to choose, we will shift our production abroad or import beer that is manufactured abroad." One of the primary fears about the MMC report was that it would cause a serious decline in the manufacturing of beer in Britain.
The MMC did not understand that, in any event, 50 per cent. of beer sales are made not in public houses, but in supermarkets and other outlets. It is no longer true to say that one must go to a public house for beer.
Nor did it understand that the commitment to a certain brand of beer is often very strong. The nearest to a riot that I have experienced in my constituency office on a Saturday morning was when Bass and Allied decided to swop some pubs in Burton. The appalling thought occurred to some of my finest constituents that they might have to walk a little further down the road to get the Double Diamond they loved. They would not put up with a change of product in their local public house. That sort of commitment is peculiar to beer and has nothing to do with the choice that the economists say the customer craves.
As a result of all those misconceptions of what are fundamental truths about how the British brewing industry works and how the drinking people respond to it, the Monopolies and Mergers Commission was driven to some truly absurd conclusions.
It recommended the forced sale of private property, some 22,000 pubs, as tyrannical a measure as could be found in any Socialist regime in eastern Europe, and one which is totally unacceptable to a Britain of the Thatcher era or even to the era that preceded it, when the Prime
Column 1275Minister was my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath). He also would never have tolerated such tyranny. The commission recommended a low ceiling on the number of tied outlets which, as my hon. Friends have already said and I will not labour the point, would inevitably have forced down sales and forced up closures, reduced public houses and restricted competition and the availability of beer to the British drinker.
The commission threatened the disruption of clubs. They are competitors to pubs. They provide not only a high proportion of the draught beer that is drunk in Britain, but they do so at low prices. It proposes to draw a distinction between the major brewers and the regional brewers. So in parts of Britain, such as Wolverhampton, the regional brewers would be permitted to operate every pub, because the regional brewers are not a major brewer, and the major brewers would not be allowed to operate such a monopoly--an absurdity. Like so many of these economic rules stretched to a completely alien environment, the logic of it leads to the most absurd results.
The commission proposed to restrict the outlets of a brewer's product--an interference with the working of the free market. That is what we have in Britain at present. My hon. Friend the
Under-Secretary of State, the most outstanding spokesman of the free market on the Government Front Bench, choked on his words. He could hardly sit down quickly enough. His introduction of the order took about two and a half minutes flat. No wonder he was ashamed of what he was saying. All his life he has fought for the free market and that is the very thing that the commission's proposals will interfere with.
I do not seek to delay the House a moment longer than is necessary to try to convince hon. Members of the nonsense of the measures. The question is whether the Government have seen enough sense to cut, to trim, to neuter, the commission's harmful recommendations. I am driven to the conclusion that they have not. They have hardly begun. They think that they have come to some kind of compromise and it is true that the compromise will cushion the blow to some extent. The Government have done good things such as the Landlord and Tenant (Licensed Premises) Bill, to which the House has just given a Second Reading. They have done things that are not unacceptable, such as the introduction of a guest beer, as though there are many pubs that do not now have guest beers. That is another misunderstanding of the commission. Practically every pub has some kind of guest beer, if it is only Guinness. I do not think anyone will mind too much about the breaking of the tie of the soft drinks.
But the fundamental matter is the forced closure, the forced transfer, the restriction of outlets, the restriction of choice, the restriction of competition within Britain where we understand how beer is brewed, the reduction in the access which ordinary drinking people in our society will have. I see one curled up in the corner there. The hon. Member for Ashfield (Mr. Haynes) is a great tribute to the drinking masses. When the drinking people of Britain wake up tomorrow morning and hear what we have done in their name tonight, they will throw up. I am driven to
Column 1276the conclusion that the Government have done nothing near enough to trim away what is bad and absurd in the Monopolies and Mergers Commission's report.
I listened to the comments of the hon. Member for Newcastle upon Tyne, North (Mr. Henderson)--who has left the Chamber to have his goodnight tipple, or whatever--concerning jobs. The Opposition Benches are crowded with hon. Members who are concerned about the possible job losses inherent in stripping down the major brewers' contribution to employment. One is talking not just of the people working in the breweries but of those employed in pubs and, in my own constituency, in the factories that produce brewery equipment. We must consider all those matters. I welcome back to the Chamber the hon. Member for Newcastle upon Tyne, North. I hope that he sustained himself with Burton ale.
Under these orders there will inevitably be a concentration of a smaller number of brand products produced in a high volume. A limitation on choice will be the result. There will also be a restriction on the capital investment in public houses. The price of beer will rise, and although the market may assuredly be open to the foreign brewer, he cannot claim to produce beer of the quality that we in Britain know how to produce.
To argue, as the Opposition have done, that the Bill represents a craven collapse to the brewers' lobby or to the Brewers Society is as much nonsense as we have heard from the members of the Opposition Front Bench on any subject so far in this Session. The very opposite is true. The Government are instead guilty of a craven collapse to the views of some very strange reporters in the Monopolies and Mergers Commission.
I conclude by reminding the House of the minority report. Mr. Mills commented :
"I consider my colleagues' recommendations to be far more drastic than is necessary and indeed that they could worsen the problem I consider that the recommendations are unnecessary and indeed could lead to a reduction of competition and less consumer choice." My hon. Friend the Under-Secretary of State for Corporate Affairs, the great stalwart for consumer choice and for more competition, should take heed of those words.
Mr. Mills continued :
"Many [tenants] would presumably become unemployed in my view the proposed changes might even lessen that competition and the other recommendations would be an unnecessary leap in the dark, could be counter- productive and damaging to the structure of the industry and consequently be against the public interest. The tied estate and the loan tie should be left to continue as they are and the brewing industry should be left to change and develop as it is already doing."
I pay tribute to the major brewers in my constituency who have done wonders in improving their pubs. With the help of flexible licensing hours, they have been encouraged to introduce whole families into the environment of the traditional English pub. The standard of behaviour has also improved. At the very moment when the British brewing industry and the British pub are beginning to expand and improve, and to be greater than they have ever been, we are going to break the glass and dash it in the face of the consumer. That is a very odd way for a Conservative Government to behave.
There seems to be no sense in these measures that this Government of all Governments are introducing. They will damage one of our great industries, reduce
Column 1277competition, weaken quality, and drive up prices. If there is a Division at the end of these proceedings, I shall go into the lobby and vote against the Government.
Although the interest that I declared earlier is still relevant, let me put it on record that I am no longer a licensee, having passed the joint licenseeship of my six houses to a fellow director. It happened quite recently, and I overlooked it in my point of order. It is the Supply of Beer (Tied Estates) Order that mainly concerns me, as I believe that it will wreak the most damage on the traditional pub estate. My hon. Friend the Member for
Weston-super-Mare (Mr. Wiggin) was particularly worried about rural pubs, and other hon. Members have also mentioned them, but I believe that if brewers are forced to choose between putting a substantial number of their pubs at arm's length and selling them off they will choose the latter course. They will begin to sell valuable high street properties, which will almost certainly be worth more if sold for some other use than they are as public houses, and not only rural communities but many urban ones will lose their pubs.
Mr. Gale : As a friend, colleague and fellow Kent Member, my hon. Friend will know only too well that many rural pubs in Kent are already faced with exactly that prospect, standing as they do in as much as three quarters of an acre of development land. The order will result in villages in Kent and throughout the country having no pubs at all.
Mr. Couchman : My hon. Friend's remarks encapsulate the problem in the south-east, particularly those areas where land values and property prices are high. That is where the most pubs will probably be sold.
Although my hon. Friend the Minister has managed to modify the extent to which certain classes of licensed premises are caught by the Act, he has failed to address the problem of full on-licence premises that are not public houses. I refer particularly to hotels, in which the proportion of turnover representing beer sales is extremely small. I believe that there is also a problem relating to bingo clubs and the like, although I am not personally acquainted with it.
I have one more question for my hon. Friend, concerning the estate that the brewers will be allowed to retain under tie. New developments are taking place : in the old Chatham dockyard in my constituency, a complete new community will be built up through such a development, which includes residential, office, leisure and commercial elements, and the addition of a public house--perhaps two or three--will undoubtedly seem an attractive proposition. What will be the position of the major brewers, who may have the money to invest in the new properties? Will they have to put further houses at arm's length to compete? It would be ridiculous, surely, if the overall pool of licensed premises were increased by those houses. My next point is very parochial and vested : it relates to the guest cask- conditioned beer that those of us who are the tenants of six major brewers will be allowed to stock.
Column 1278Personally, I consider that my hon. Friend was right to exclude the regional brewers, although we must remember that the biggest is nearly as big as the smallest of the big six. The regional brewers, especially the small ones, had a legitimate fear that their pubs would be flooded with major, heavily advertised national brands of lager if they had had to have a guest beer in those houses. There are problems that the orders do not address. The orders speak of additional rents that may be required by brewer landlords so that the loss of income shall be made up, but they do not address problems such as the use of equipment. The near- mutilation of counters is involved in the installation of new facilities for the supply of cask-conditioned beer. The installation of a pump is a substantial modification and that problem should be addressed. Refrigeration equipment is used to cool beer and, in its modern form, is a far more complex piece of equipment than it used to be. Can the guest cask- conditioned beer be served through that or will additional equipment have to be installed?
There is also the question of advertising and promotion. I got out my six agreements--in five different forms--and the one point that they have in common is that I am not allowed to advertise or promote within those pubs other people's products. What provision does my hon. Friend propose to make for the advertising of guest beers? What is more natural, if a minor or regional brewer manages to get its product into a major brewer's pub, than to want to promote it in some way? Those questions need to be answered.
We are now seeing no alcohol and low-alcohol beers in pubs--the so-called "NABLABs"--on draught as well as in bottles. If we are to free the tie for NABLABS, it will require additional dispensing equipment which will have to go on to the counter. That will bring into question the brewer-landlord's ownership of those counters and their use for dispensing.
There is a myth about the mineral tie. I am not tied on minerals for any of my public houses. By and large, the major brewers do not tie for minerals. It is the regional brewers which still tie for minerals and they are excluded from the order, which makes it a bit of a nonsense. Those are the questions--which I accept are technical and parochial within the industry-- that my hon. Friend has a duty to the House to answer if the order is to have any substance. I want to say little about the Supply of Beer (Loan Ties, Licensed Premises and Wholesale Prices) Order. The publication of wholesale price lists with discounts that are available will do nothing other than to allow brewers to publish their maximum wholesale prices. Those maximum wholesale prices will undoubtedly be exacted from the tenanted trade, so the tenanted trade--the weakest purchasing power--will be unable to use the benefits of the publication of those price lists.
If I had more time, I should like to say more to the hon. Member for Newcastle upon Tyne, North (Mr. Henderson) about mineral prices. I can justify the prices that are charged for minerals in public houses, but perhaps we shall have another occasion on which to discuss that.
Column 1279with sensibly by several of my hon. Friends who are better qualified than me. I wish to make just one comment about the Supply of Beer (Tied Estates) Order.
I ask my hon. Friend the Minister not to create a level playing field--an overused metaphor these days--but to ensure that the tenants of regional breweries have the same slope on the counter as colleagues who belong to larger breweries in relation to the tie for minerals and ciders. As my hon. Friend the Member for Gillingham (Mr. Couchman) properly pointed out, it is nonsense that the regional breweries have been excluded from the provision which removes that tie for the larger brewers. The tenants of those regional brewers in my constituency would welcome the opportunity for that tie to be swept away.
I ask my hon. Friend the Minister to look at that point in Committee and to accept certain evidence on it.
Mr. Redwood : A good number of points have been raised. Of course, Opposition Members have raised points in a diametrically opposite way from those raised by my hon. Friends who are worried about the impact that this measure may have upon the brewing industry. My hon. Friends the Members for Weston-super-Mare (Mr. Wiggin) and for Gillingham (Mr. Couchman) and my hon. and learned Friend the Member for Burton (Mr. Lawrence) suggested that my right hon. Friend the Secretary of State and I might have had some difficulties with the order. I remind them of my personal history in this connection.
I seem to remember that, as a Back-Bench Member, I signed the early-day motion in the name of my hon. Friend the Member for Colne Valley (Mr. Riddick) when the MMC report first came out, and when the then Secretary of State said that he was minded to implement the report in full. I felt, as my hon. Friends feel today, that that was an extremely large attack on property in the private sector, which I could not support. When the proposals were substantially changed on 10 July so that mandatory sale of pubs was no longer to be imposed upon brewing companies, I withdrew my name from the early-day motion, and I am glad that I did as Opposition Members might otherwise have been unkind enough to point it out. That reflected my then judgment that a good compromise had been reached between the recommendations of the MMC and those who did not wish to see any change at all in the industry after the identification of a public interest detriment with respect to competition.
I cannot say that I accept the criticism that I, the apostle of competition and free markets, am eating all my own words, because I am responding to an MMC report which identified defects in competitiveness in an industry and I am making proposals today which go some way to remedy the identified defects. Some Labour Members have criticised me, saying that I have not been competitive enough in the proposals that I have brought forward.
My hon. and learned Friend the Member for Burton was concerned that this measure is not the craven collapse to the brewers that Labour Members are suggesting. He felt that we would have been well advised to take the advice in the minority report. In some ways, one can say that the Government did that, as our proposals are nearer the views of Mr. Mills than to the recommendations of the
Column 1280main report in terms of the treatment suggested for the industry in the orders. I remind my hon. and learned Friend that the minority report also found a public interest detriment. The author of the report did not say that there was no case to answer. He said that he thought that the remedies recommended in the main report went too far. That is the Government's view, too, and that is why the 10 July statement, as amended in response to subsequent consultation, has taken the form of the current orders and not the more extreme form of remedies suggested in the original MMC report.
My hon. Friend the Member for Weston-super-Mare thought that there was some inconsistency in the Government's treatment as between these measures and Foxley Wood. There is a missing link in his argument, which does it some damage. When my right hon. Friend the Secretary of State arrived at the Department of Trade and Industry, the Government had already had second thoughts on the MMC report and, in the light of consultation and of feelings in the House, had come forward with the excellent compromise proposal that has been embodied in the orders, with some minor amendments in the light of further consultation. That was not the case when my other right hon. Friend arrived at the Department of the Environment, where the report had been through only one stage. The Secretary of State then said that he was minded to accept it, and consultation revealed that that was not a good idea. I hope that my hon. Friend the Member for
Weston-super-Mare will appreciate the nuances and see that there is a distinction.
My hon. Friend the Member for Gillingham asked a number of detailed questions. He asked whether high street pubs rather than rural pubs might be sold and whether they might pass out of the pub business altogether. I do not think that there will be a huge change between the position after these orders have gone through and the position that already exists. Brewers are becoming much more aware of the valuation of their retail estates, and they are making a distinction, for management purposes, between running the property and running the brewery. That was quite clear in the trends in the industry before the orders came forward. Therefore, I do not think that there is such a sea change as the hon. Gentleman is suggesting and I do not hazard a view as to which types of pubs are more likely to be sold or to pass out of pub use altogether.
Mr. Moate : My hon. Friend is suggesting that there is already a trend in the way in which the brewing industry is structured and that there has not been a significant sea change, but others would suggest differently. We are already seeing evidence of major and significant changes as a direct result of the MMC report. If the trend appears to be hastening and we are to see a substantial divestment of properties--my hon. Friend has said that he was against the original proposals because of the implications for enforced sales of properties--what proposals does he have for altering and relaxing these proposals, perhaps to undo some of the damage that people may suffer?
Mr. Redwood : There is all the difference in the world between forcing people to sell pubs and giving them choices to deal with the problem of the tie which is what the report and these orders address. There is evidence that pubs are coming on to the market, but there is also evidence that before the orders were laid before the House
Column 1281and before the MMC report was published major brewers were looking hard at their property values and were beginning, for management purposes, to segregate the returns on rented property from those on brewing.
My hon. Friend the Member for Gillingham asked about new pubs and new developments. If a national brewer wishes to buy and open such pubs, it will be governed by the dynamic formula. There are several ways in which that brewer could acquire a new pub and still meet the target of the dynamic formula by, for example, adding one untied property for every tied property or by making other changes in the estate. Because of the way in which the dynamic formula works, people are not prevented from adding pubs to their chain, but the numbers of tied and untied are influenced under the formula. I am glad that my hon. Friend feels that the Government were right to exclude the regional breweries. There is logic in that case, as the hon. Gentleman described.
The questions of equipment, advertising and new agreements which might be necessary to implement some parts of the provision are commercial matters that will be settled by negotiation between the parties. It would not be right for the Government to have a view on how those negotiations should be conducted or how they may turn out. To my hon. Friends who are worried that we may have gone too far against the brewers and who fear that there may be a threat to the British pub, I say simply that that well-known independent publication, "The 1990 Good Pub Guide", passes into the realm of political and industry comment when it concludes :
"Our research shows that the MMC proposals to break the big brewers' complex monopoly pose no threat to the future of the British pub as a thriving institution."
As my hon. Friends may know, those responsible for the publication have conducted an extensive survey of all pubs. If we are concerned about the charge brought by the Labour party that there may not be enough competition in the proposals, Labour Members can listen to my hon. Friends who feel that too many changes may be in view. Another independent source--a leading stockbroking analyst in the City, with a good knowledge of the brewing industry--has stated : "What will probably happen as a consequence of the latest recommendation is that the proportion of UK beer sales sold in some sort of free market place could rise from 54 per cent. towards two thirds, and it is possible that the proportion could rise even as high as 70 per cent. Our view is that the UK brewers will find the new environment considerably more challenging."
That may well be a sensible conclusion to have reached on the evidence.