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28 Apr 2009 : Column 215WH—continued
Who is closing pubs in this country? The bitter irony is that the vast majority of closures are being carried out by the very companies that protest loudly about the future of the British pub. I want to challenge a comment made by the hon. Member for Selby (Mr. Grogan), for whom I have huge respect as the chairman of the all-party group on beer—I am proud to be an executive committee member of that group—because the simple reality is that fictitious figures are being circulated. In any town in the country, one can see “To let” boards hanging from pubs. It is what is called churn or turnover. When a licensee leaves a pub we are, I am afraid, talking in almost every case now about the failure of a small business. Often that is accompanied by a story of human
misery—sometimes tragedy. We cannot ignore that, yet the big pub companies will not tell us about it. We are told, “Oh, they are temporary closures. They are not real closures.”
We need to be clear that it is not free houses that are threatened. Of course, there are issues to be raised with respect to all pubs, and we all want to challenge the supermarkets on their low pricing and were disappointed by the duty decision last week. However, we must concentrate on the fact that, as has been said, the playing field is now, to an impossible extent, not level between the free houses and the tenanted pubs of some—I stress the word “some”—of the very large pub companies and the large and medium-sized brewers.
Mr. David Drew (Stroud) (Lab/Co-op): I apologise for missing the early part of the debate. I commend the hon. Gentleman on the report that he submitted—I know that others helped—to the Select Committee on Business and Enterprise. It is a very good report.
I have a friend who is a publican. I feel strongly about the fact that publicans cannot know the context in which the pubcos work. It is a completely one-way negotiation. I have gone through with her some of the problems of trying to get clarity about what the pubco expects of her; it is the greatest unfairness. I know that that features in the report, and perhaps the hon. Gentleman will say something about it.
Greg Mulholland: I thank the hon. Gentleman for his comments, which I agree with, and for his help with the submission, which will, of course, be published when the Committee publishes its final report.
The simple reality is that, even since the 1986 beer orders, the situation regarding the tie—we must not be lazy, because we are not talking about one thing or one model—has changed out of all recognition. We no longer have the old paternalistic breweries that supported their tenants; we now have property-owning companies—that is what they are—that, frankly, have little interest in what happens to pubs in each area. If anyone says otherwise, why are some of the large companies slapping restrictive covenants on pubs as they close them, simply to prevent the properties ever being pubs that serve the community again? That is a scandal. Will the Minister say when the Government will legislate to prevent that? He will not find a single Member of the House who thinks that that is acceptable behaviour.
What has changed since 1986? It is a little bit like the situation with the banks. When times were good, sales were allowed to billow, and I am afraid that we saw some extremely irresponsible business practice. The large pub companies have taken on £20 billion of debt. To feed that debt—this is what we should be talking about, rather than whether there should be a tie—those pub companies are having to extract money from their pubs through unreasonably high beer prices and unreasonably high rent. Those things are not balanced.
The two large pub companies, Punch Taverns and Enterprise Inns, pay approximately £750 million per annum to bondholders and banks, much of which goes abroad, which is entirely unsustainable. To give a simple figure, servicing the debt costs £55,000 per pub in this country. That is a profound reason why pubs are closing.
As my hon. Friend the Member for Southport has said, the model has become skewed. Servicing debt is what is closing pubs.
We must send the message that we absolutely need reform. We simply cannot take the excuses that come from those in the pubcos who say that their pubs are not closing when we can all see it happening. We cannot believe that such an enormous and unsustainable debt is not a great threat to the British pub, because it blatantly is. We must have reform.
As the hon. Member for Stroud (Mr. Drew) and the right hon. Member for North-West Hampshire have said, some of the contracts between companies and their tenants are outrageous. Every time somebody buys out—in other words, when they buy beer outside their contract—they are slapped with a huge, five-figure fine. Who polices that? The pub companies. Is there any right of appeal? No, there is not. Some contracts have clauses that force tenants to take on insurance. Although the upward-only rent reviews have gone—that was the only 2004 Select Committee recommendation that was acted on—we still have the retail prices index rent increases in annual agreements. There are countless examples. I am frankly amazed that some of the things in the contracts are legal in British and European law, and they need to be challenged. Will the Minister look at the matter closely? If those things are currently legal, they should not be.
There is no right of appeal for tenants in such situations and no right to independent arbitration. Those agreements must be changed in a series of ways, if they are not to continue leading to situations in which abuse takes place. That is a strong word, but people feel that they have been abused. Let me a quote a few of the many, many letters and e-mails that the all-party save the pub group has received. I will not name the pubs, because the large pub companies are astonishingly litigious. Those companies spit out solicitors’ letters as soon as anyone dares to criticise them, and I do not want to get tenants into trouble.
I received this letter from a pub in Essex:
“Enterprise Inns are a debt-ridden company. They have to tie their pubs and charge extortionate prices for their ale. They do not have any understanding of our businesses nor do they care...Something needs to be done. We are a very viable business, but it is being undermined by Enterprise for its greed. They should be assisting tenants, not hindering them. The sad thing is all we can do is fight them or walk away.”
A letter from a Punch pub in Watford said:
“Last week, a visiting publican, during a conversation, worked out that through my rent and beer purchases, Enterprise Inns makes over £260,000 a year out of my pub. He called it ‘obscene’. As I said, I make a living...Enterprise Inns and the tax man can make the fortune my customers think I am making.”
Here is a case from my own constituency:
“If I knew what Enterprise Inns were like, I would not have taken on one of their pubs and wasted all my life savings—it is disgusting.”
I could go on. The save the pub group has had countless letters and e-mails from all over the country saying exactly the same thing.
Something must be done. CAMRA believes that something should be done, and it has made it explicitly clear that the system of pub ownership created by the
pub orders is closing community pubs. It wants to see the issue referred to the Office of Fair Trading. However, that is no good, because time is running out for pubs in all our constituencies up and down the country. Unless we have real reform and soon, we will lose thousands of pounds because of this business model. That is the simple reality, and I challenge the Minister to go away and consider the issue. We were very disappointed by the beer duty decision last week, and we will carry on campaigning to try to have that reversed. Nevertheless, I ask the Minister to consider this issue and to come back with proposals to replace the existing model, which, as my hon. Friend the Member for Southport has said, no longer works for tenants, pub customers or the debt-ridden companies themselves.
What I am concerned about is that the situation is closing pubs. We must have fair rent, transparent and independent rent reviews and an end to the grossly excessive prices that are charged to tenanted pubs. For example, Enterprise Inns has raised prices above the level of inflation over the past few years, and yet it has said how concerned it is about beer tax—as we all are. We must have real and serious reform. Simply referring this desperately important matter to the Office of Fair Trading would be to kick it into the long grass.
My challenge to the Government is to go away and consider some of the proposals on the table. For example, they should look at making the operation of the tie subject to a time limit, so tenants have the chance to opt out in a review after three years. We would be saying to pub companies and breweries, “If it is such a good model for the tenants, as you say it is, surely they will continue with the operation of the tie.”
Lorely Burt (Solihull) (LD): If there were an opt-out, as my hon. Friend has said, what would happen to the tenants who were not in a position to go ahead and buy the pub? What would happen to the model? Is he suggesting that we change the whole model and have a different type of tie, or is he suggesting that we abolish the tie all together?
Greg Mulholland: I am suggesting that a tied relationship could have a maximum length of operation after which there would be an opt-out for both sides. We have seen people tied in for many years. Many have lost their life savings and houses and have been pursued incredibly aggressively by some companies. There is no question but that we need a mandatory code of practice. How on earth can those people who are closing pubs—in some cases, they are abusing their tenants—be the ones who are considering how the industry should operate? We need restrictive covenants. One concern is about what happens if a number of those companies go to the wall, which is not out of the question considering the level of debt. I appreciate that this is not the responsibility of the Minister present today, but if we are serious about the community pub, we must enshrine it in planning law and give every community a right over its future. We cannot have pubs being closed to service debt or to deal with shareholders and bondholders who are abroad, but that is what is happening.
David Taylor:
I speak as a signatory of early-day motion 1272, which proposes outlawing the tie. The hon. Gentleman wants substantial reforms; perhaps
one that he might consider and find attractive would be for pubcos to have a maximum of only 1 or 2 per cent. of British pubs within their ownership. That would give protection to the medium-sized regional breweries that are struggling. Such breweries have a great deal to offer and do not operate in the way that has been colourfully described with reference to pubcos.
Greg Mulholland: I thank the hon. Gentleman for that intervention and for his contribution to the Select Committee. As he knows, I would advocate that measure, because the concentration of ownership in a few companies is a bad thing and is closing pubs. On its own, however, it would not change things, because the model itself is wrong. One unfairly treated or exploited tenant is also an issue, and we must look at that.
The final recommendation, which I wish the Minister to take seriously, is that of giving tenants the right to buy at market rate. The right hon. Member for North-West Hampshire has already mentioned the absurdity that the big companies purportedly offer their pubs to their tenants. I will give one example from Otley where I live. A pub valued independently at approximately £450,000 was offered to the tenant for £1.2 million. That is what is happening, and that is why people cannot buy their pubs and serve their communities. I advocate that communities should be given the right and opportunity to buy a pub before it is closed.
To conclude, if we are serious about saving the great British pub—let us not make any bones about it; that is the situation that we face—we must reform an entirely unsustainable business model that leads to a skewed relationship, which in some cases borders on abuse. We must put more power in the hands of communities. We want to see more pubs owned by people and landlords, but we will not get that unless we address the market and the way in which it operates. It is time to put the British pub back in the hands of the British people.
Mrs. Joan Humble (in the Chair): Order. I must call Front-Bench speakers at 12 noon. That leaves eight minutes and there are two hon. Members who wish to speak. I hope that they will show great forbearance in limiting their speeches so that I can call them both.
11.53 am
Mr. Laurence Robertson (Tewkesbury) (Con): As my neighbour in Gloucestershire, the hon. Member for Cheltenham (Martin Horwood), also wishes to speak, I would not dream of taking too long. I congratulate the hon. Member for Southport (Dr. Pugh) on securing this debate. It is a slight variation on the one that I secured before the Easter recess, which was about the future of pubs more generally. I requested that debate because of the figure of 39 pubs that are closing a week—I think that the hon. Gentleman said 40, but we shall not argue about that. Whichever number it is, it is very alarming. In that debate I tried to explore some of the reasons for the pub closures.
I will return to the pubco situation in a moment, but I do not think that we should let the Government off the hook as lightly as we seem willing to do. They have been well aware of the number of pubs that are closing. They increased the cost of alcohol last year and have done it again in the Budget. When they put VAT back up to 17.5 per cent.—as they surely will—the cost will go up
yet again. They do not seem to be aware of what they are doing, and it is important to remember that. Then we have the supermarkets. I have nothing against supermarkets that sell alcohol as a loss leader. They sell it very cheaply and it is consumed very responsibly by some, and less responsibly by others. That is what the pubs must face. A number of other measures have caused the pubs to close on the back of that, and now that the Minister has returned I will say again that we should not let the Government off the hook. They are helping to close pubs and should not continue to do so through the taxation policy that they follow. They take almost £15 billion a year in taxation from the drinks industry, and they should not squeeze it any more than they already have.
Normally, when I stand up to speak in this place I have a particular point to make. I am not quite sure where I stand on pubcos, so one might ask, “Why bother speaking in the first place?” Well, in the couple of minutes that I have left, I want to say that we need to balance the debate a little more than it has been balanced today. I really come down on the side of my right hon. Friend the Member for North-West Hampshire (Sir George Young), who says that we should probably look at this issue a little more cautiously. I want to see the conclusions that the Select Committee reaches when it publishes the results of its inquiry. At the moment, I would not rush into abolishing the tie.
I am a regular patron of pubs and I have listened to many pub landlords who say, “We have got to get rid of the pubcos”. However, they all seem to rush towards the pubcos when they want to take the pubs on, and I wonder whether a strengthening of their position through their own actions might be a better way forward. I understand what my right hon. Friend says, which is that the Government can intervene in free markets, and he gave many examples where that has been the case; I understand that point. None the less, we really ought to be very careful on this issue. We all want to achieve the same thing, but I remember that the beer orders—I think that I am right in saying that they were introduced in 1989—did not achieve what they were meant to achieve. The last thing that I want to do is introduce further legislation—well-intended legislation, as most legislation is—and not solve the problem but actually make things worse. It is possible that we could do that.
We must look at all the considerations. For example, would it be better if companies simply rented out the premises and did not have an arrangement with regards to beer, or would that lead to rent being a lot higher than it is now? We have to consider all these elements before we rush to judgment on this issue.
I do not want to take up any more time; I know that the hon. Member for Cheltenham wishes to speak. However, I just want to urge a little caution about this issue. Yes, let us look at it extremely carefully. I am well aware of the complaints that are made against pubcos and I do not seek to represent pubcos at all. Nevertheless, I think that we should engage with pubcos to discuss the way forward.
I am a member of the all-party save the pub group and the all-party beer group. We have discussed these issues with licensees, but we should also discuss them with pubcos and see if there is not a better way forward before we rush towards introducing what could be inappropriate legislation.
11.58 am
Martin Horwood (Cheltenham) (LD): I want to congratulate my hon. Friends the Members for Southport (Dr. Pugh) and for Leeds, North-West (Greg Mulholland), both of whom are proving to be great champions of the traditional British pub. It is also a pleasure to follow my neighbouring MP, the hon. Member for Tewkesbury (Mr. Robertson), and to see such good representation by Gloucestershire MPs from all three main parties in this debate.
We are losing 40 pubs a week in this country, or something of that order. That is a national crisis. It may not compare with climate change, global recession or even pandemic flu, but after we have spent all day contemplating those global catastrophes we need a pint and somewhere good to drink it in.
[Mr. Clive Betts in the Chair]
Unless we defend the British pub, that place to drink will not be available. These social and community hubs will continue to be lost. Furthermore, as other hon. Members have said, pubs are environments in which responsible drinking is naturally controlled, because landlords and bar staff keep an eye on people and there is also peer group pressure among drinkers in pubs that simply does not operate in the type of drinking environments that are starting to develop elsewhere. So pubs are an important weapon, if you like, in the war against binge drinking.
In the time that I have available to me, there are two issues to which I want to alert hon. Members. The first is planning. It is quite rightly said that not all pubs are closing because of the tie. The Greyhound pub in my constituency, which is a popular community pub and a viable business, is closing despite huge support from the community and unanimous opposition to its closure from the local council. It is closing because the private owner wants to increase the land value, presumably with a view to a potential sale. He has planning permission to convert the pub into flats. That planning permission was initially refused by the council, but the council’s decision was overturned on appeal by an inspector who spent a few minutes in the local area. It will be a tragedy for the local community if that pub closes.
The Sustainable Communities Act 2007 offered some hope that we might be able to counter such actions, but when we read the small print, we found that there was precious little that the local council could do to defend local pubs. We need to pay attention to that.
On the tie, my constituent Simon Daws runs the Royal Oak in Prestbury, in the constituency of my neighbour the hon. Member for Tewkesbury. Mr. Daws suggests a restricted form of tie that offers an interesting alternative. He suggests that the tie, if not abolished, could be reformed to guarantee a list of products—for instance, one draught ale, one draught lager, one bottled beer, one red wine, one whisky and so on—that the landlord could offer free of the tie.
The system would have the advantage of offering consumers more choice and presumably more competitive prices, and enable them, for instance, to support local beers from microbreweries. The licensees, as Mr. Daws says, would clearly
“see a margin increase in the Listed Products, benefiting profitability. They could source which ever product they chose, from wherever they chose. Fewer licensees would be on the breadline and more pubs would remain open.”
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