Draft Supply of Beer (Tied Estate) (Revocation) Order 2002

[back to previous text]

Mr. Robathan: They were indeed.

Nevertheless, Lord Young pushed the orders through. In general, they have been of tremendous benefit to bars and pubs. Frankly, there was not much innovation in pubs in this country in the 1980s. There tended to be a lot of spit and sawdust. Things were changing slightly, but they have changed dramatically since the beer orders. We now have possibly the most diverse and vibrant drinks retailing sector in the world. One only has to look around the streets of London or any of our constituencies to see that. When he was Secretary of State for Trade and Industry, the right hon. Member for Tyneside, North said that the beer orders were radical and necessary for their time.

My first question to the Minister is whether the orders have benefited consumers in the way that we would wish, particularly given the dominance of the retail market. Although separation of the retail and brewing arms of the business was designed to help consumers, it appears not to have done so to any significant extent. In fact, beer prices have risen faster than inflation. Do the Government consider that they have any lingering responsibility for consumer protection in this market, and are there any proposals to investigate ways to aid competition?

My second point is that there are high barriers to entry to the beer market, except at micro-brewery level. That is partly to do with know-how and the high cost of machinery but also because of large investments in brand names and brand image—we have all seen that in television advertisements. Can the Government do anything to reduce entry barriers? I am not sure that they can, but I would be interested to know the Minister's thoughts on the matter.

Thirdly, I would like the Minister to comment on the response of the Campaign for Real Ale. CAMRA is firmly against scrapping the beer orders. Mike Benner, its head of communications, stated:

    ''While it is true that the Beer Orders do not restrict the activities or growth of big non-brewing pub chains, the answer is not to throw the baby out with the bath water, but rather to investigate properly the need for a revised set of Orders to curb the power of pub chains and global brewers. Leaving British beer and pubs at the mercy of

    Column Number: 007

    global market forces will erode our still unique and relatively diverse industry and lead to power falling into the hands of fewer and bigger global players.''

I am not sure that I agree with that, but I would be interested in the Minister's comments.

My fourth point is that the Society of Independent Brewers also does not support the move. Paul Davey, its chairman, stated:

    ''We find it extraordinary that Melanie Johnson can revoke the orders that gave small brewers the only legal opportunity to sell their products into an almost completely closed market. To suggest the Beer Orders have served their purpose is absurd as we increasingly find we cannot sell our beers.''

The Minister has suggested that the guest beer is redundant.

Fifthly, micro-brewers have a sliding scale of duty on beer. The duty for small brewers was cut in the 2002 Budget by the equivalent of 14p a pint. I welcomed that, but there is still an argument that the system does not compensate for advantages to big brewers such as economies of scale and market power. Of course, the matter is one for the Chancellor of the Exchequer, but I would like to know whether the Minister thinks that duties for micro-breweries might fall yet further.

Finally, does the Minister think that brewers and pubs would be greatly assisted were the duty to fall to European levels?

4.44 pm

Richard Younger-Ross (Teignbridge): The hon. Member for Blaby (Mr. Robathan) started by criticising a Liberal Democrat for not being here at the start of the debate. At least we have a full complement. I understand that the hon. Gentleman has wholehearted support, but the Conservative Benches look rather denuded. Obviously, his party considers the matter to be very important and serious.

Mr. Robathan: Since we are not opposing the order, we did not impose a Whip. My hon. Friend the Member for Bromsgrove (Miss Kirkbride) is ill, and I have given her apologies to the Chairman.

Richard Younger-Ross: I am so glad that the Conservatives have not imposed a Whip, but more of them should have been here anyway.

The Minister said in her opening remarks that the cut in beer duties had been a great success. If she reviews the matter, she will find that it was a one-step drop. The campaign has always been for a progressive beer duty with several steps, but micro-brewers would tell her that they have a ceiling. They do not brew more barrels than that level allows, because the next step is far too great. When she speaks to the Chancellor, she might recommend that there be two or three more steps to allow micro-brewers to progress and grow into larger regional breweries in time.

I thank the hon. Member for Blaby for quoting CAMRA and the Society of Independent Brewers—it saved me the bother. I am surprised that he quoted them when he intends to support the statutory instrument.

Mr. Robathan: We are not supporting the statutory instrument. We simply are not opposing it. There is a difference.

Richard Younger-Ross: I am very grateful for that clarification. The Tories cannot decide whether they are in favour of it or against it.

As the hon. Gentleman said, there was some opposition from the big brewers when the beer orders were introduced. ''The Supply of Beer—A Report on the Supply of Beer for Retail Sale in the United Kingdom'' was published, and there was much pressure in the industry for reform. The criticism at the time was not that the Government were doing too much or causing too much pain for some big brewers but that they were not doing enough. If I remember correctly, the Opposition at the time argued that they ought to go further than the extent of the rather limited orders.

However, the orders changed the industry. The Minister's argument is we should abolish them because they worked. It is as if everything in the garden is now different: there are no big, nasty people out there, and it will remain the same for ever and a day. If the effect of the beer orders has been to keep to fewer than 2,000 the number of pubs in which the big brewery chains have an interest or part ownership, what is to stop that number being exceeded after the revocation of the orders?

There are pressures from at least one national and two regional brewers to abolish the orders, because they wish to extend their business. They wish to control more than 2,000 pubs. The Minister would take us back to the bad old days described in the MMC report:

    ''We have confirmed our provisional finding that a complex monopoly situation exists in favour of the brewers with tied estates and loan ties . . . Even in the free trade many brewers prefer to compete by offering low-interest loans, which then tie the outlet to them, rather than by offering beer at lower prices. Wholesale prices are higher . . . there is a pressure on the free trade to accept loans, which then fetter their ability to attract customers by offering their own distinctive range of products, drawn from many brewers . . . In summary, we believe that the complex monopoly has enabled brewers with tied estates to frustrate the growth of brewers without tied estates''.

If we revert to that situation, the MMC's findings will again apply. It may not happen overnight—it may take several years—but it will happen.

I ask the Minister to consider the situation. What happens when one of the pub chains is bought out and becomes part of one of the regional breweries? There are people who wish such mergers to take place. There are some very successful pub chains that the big brewery groups would very much like to pull under their wing. I shall not name names. The Minister will be well aware of them because she will have heard from several of them in the consultation that has been undertaken.

I quote what the right hon. Member for Tyneside, North said when he was Secretary of State for Trade and Industry:

    ''The brewing industry has undergone major changes since the Beers Orders were first introduced, but the guest beer rules still help to promote choice and competition—benefiting small brewers, publicans, and their customers.''

Column Number: 009

The Minister says—we shall take her word—that because Whitbread's has now got rid of its guest ale tied pubs, things are all right. However, I put the question again: what will happen when some of the pub chains become part of the regional brewers? What will happen when the successful brewing industry in parts of the south-east and south-west suddenly acquires 700 pubs from one of the pub chains? We will have gone back to the bad old days.

The Minister referred to the creation of 11,000 free houses. Many of those will not be ideal—a little free house, down a country lane, owned by one person or a small group. Many such free houses went into pub chains, and are not free houses in the sense that the public—that many beer drinkers reading Hansard—would understand.

The Minister referred extensively to the guest ale provision. The abolition of that will not only restrict guest ale provisions in pubs that are among the 2,000 surplus, but remove alcoholic beverages of less than 1.2 per cent. The Minister is nodding her head.

Miss Johnson: No, I am not.

Richard Younger-Ross: That abolition would also restrict the sales of beverages of less than 1.2 per cent. and non-alcoholic provision, which is also covered by the statutory instrument passed in 1989.

I think that CAMRA and the small brewers are right. That is why the Liberal Democrats will oppose the order.

4.51 pm

Hugh Bayley (City of York): I should like to speak up for small and independent brewers. The beer orders have made a dramatic difference to cities, towns and villages by creating opportunities for new businesses to grow and thrive. They have increased the diversity and quality of the watering holes available to the public, and done an important job.

The city of York has had breweries for centuries, but for four decades there was no York brewery until the new regime was created that made it possible for small micro-breweries to set up. Now, someone walking down Micklegate, within the city walls, can small the hoppy, brewing smell that has been part of the history of York for centuries. I welcome that. The York brewery is a great little brewery. It now has three pubs of its own and provides guest beers for many other pubs. It has produced award-winning beers such as Terrier, and produces both cask and bottled beers. I have to say to the Liberal Democrats that it was over the moon at my right hon. Friend the Chancellor's announcement of reduced duty for small brewers.

If reduced duty is also given to bigger brewers, that does not provide the advantage and incentive for small businesses to get started and grow what my right hon. Friend the Chancellor intended.

Previous Contents Continue

House of Commons home page Parliament home page House of Lords home page search page enquiries ordering index

©Parliamentary copyright 2002
Prepared 11 December 2002