Examination of Witnesses (Question Numbers
220-239)
MR GILES
THORLEY, MR
GILES KENDALL,
MR TED
TUPPEN AND
MR SIMON
TOWNSEND
9 DECEMBER 2008
Q220 Miss Kirkbride: I would be interested
to see what the valuations are based on and when—
Mr Tuppen: I am sure there will
be a question mark there.
Q221 Miss Kirkbride:— property
prices or earnings, but that is a matter of conjecture.
Mr Thorley: The vast majority
of our debt, and I mean 95% of our debt, is on a long-term mortgage,
it is 30-year money at a fixed rate, and the level of debt that
we have on our business is the same as it was over the last five
years. Now, it would have been reckless in the heady days of 2007
to increase the amount of debt that we had in the business and
actually we began reducing our debt at that stage. In terms of
our business, we have £6.5 billion worth of property and
we have revalued part of our portfolio down, reflecting the current
market conditions, and we have just under £4.5 billion of
debt, so it is less than 70% which, in a Mrs Beeton's school of
finance, is the same as the vast majority of people have financed
their houses in the UK where they have a 70% mortgage on a 25-year
fixed basis.
Q222 Mr Hoyle: This is quite interesting
and can I get it right, roughly £6 billion in assets, in
pubs, and £3 billion in borrowings?
Mr Tuppen: It is 3.5, about a
60% mortgage.
Q223 Mr Hoyle: When were they last
valued?
Mr Tuppen: This year.
Q224 Mr Hoyle: So that is on present-day
values, so that is okay?
Mr Tuppen: Absolutely.
Q225 Mr Hoyle: So it is just a little
bit of recklessness and you are not insolvent, and that is what
we can say. You talked about the number of tenants and the number
that you actually have to throw out of the pubs. What are your
figures for the number of tenants that have just handed in the
keys because they cannot make the businesses pay?
Mr Tuppen: I have that number
as well. It is 170.
Mr Thorley: I actually just gave
that number because I do not have the number of insolvencies and
the number was 575.
Q226 Mr Hoyle: That is your total?
Mr Thorley: Correct, yes.
Mr Tuppen: Mine was 170.
Q227 Mr Hoyle: Out of?
Mr Tuppen: Out of 7,500 pubs.
I accept the point that you were trying to get to about pub closures,
but pub failures may not appear in the statistics and I am completely
prepared to accept that, which is why we specifically found these
numbers for you. The 170 is about three pubs a week out of 7,500.
We treat each of those with equal seriousness, and Simon will
help me with this, but we find that a closed pub is genuinely
the worst possible thing that could happen to our business. We
will bend over backwards. We are not a bank that may repossess
from a remote head office. We have regional managers who, in most
cases, have become very close to the 50 or 60 licensees that they
are looking after and, were that pub to fail, it is not just a
heartless head office writing down one more statistic, but it
might well be a meeting that ends in tears because the licensee
has recognised that they really are not going to make it and,
in most cases, I would like to say we have done our best to help,
but the reality in the current economic climate is that businesses
fail. The percentage of pubs that are failing in our particular
sector is far less because we have this strong vested interest
in helping people to succeed. Now, let us be very clear. There
are people who, in very plain terms, are stealing from us from
buying outside the tie and we have absolutely no hesitation at
all when we catch them in, first of all, giving them a chance
and saying, "Okay, you may have made a mistake. You may have
misunderstood some of the points put forward by the Fair Pint
Campaign and regarded buying outside the tie as some sort of Robin
Hood crime, stealing from the rich to give to the poor, so we
will give you a chance to put that right. However, if you do it
again, we'll have no hesitation in throwing you out". Can
I just give you a statistic because it is vitally important for
you, ladies and gentlemen. Were each of our pubs to buy, outside
the tie, one barrel a week, we would lose £7.8 million in
income. For the Treasury, given that the majority of these barrels
of beer would be purchased for cash, were they to be purchased
for cash and were they then not to appear in the books of the
pub, there would be VAT, income tax and corporation tax fraud
amounting to £8 million.
Q228 Chairman: Are you suggesting
that fraud is widespread among publicans?
Mr Tuppen: I am saying that in
certain cases one of the reasons that people will seek to buy
outside the tie will not just be to buy more cheaply, but we have
strong evidence, and we will report this to the Revenue &
Customs whenever we get it, that some of that buying outside the
tie is done to make more money by buying it for cash, by not putting
it through the books and, therefore, avoiding VAT, income tax
and corporation tax.
Q229 Mr Hoyle: It is a very serious
point you have made because presumably then the breweries must
be in on it to sell it for cash because they have to account for
the beer that they brew. Is that what you are really telling us?
Mr Tuppen: I am not suggesting
for a moment that the major breweries would do any such thing.
I think there are, however, wholesalers.
Q230 Mr Hoyle: Hang on, you cannot
have this both ways! Let us be realistic. You are misleading us
a little bit because the brewery sells to a wholesaler, so, therefore,
there is a VAT transaction on it.
Mr Tuppen: Yes.
Q231 Mr Hoyle: So there is VAT and
it is accounted for, so what you are saying is that somewhere
along the line there may be cash, but it has been at some time
VAT paid-for.
Mr Tuppen: If the pub buys the
bottle of whisky or barrel of beer, be as it may, for cash and
fails to put that through the books of their business, they will
be committing a VAT fraud and they will be under-declaring for
income tax purposes.
Q232 Mr Hoyle: So it is not the breweries,
it is the wholesalers that are all on back-handers?
Mr Tuppen: No, I did not say all
of them, I said in certain instances, and we will happily provide
you with evidence.
Q233 Mr Hoyle: How many instances
do you have in a year? If it is wide-scale, you must have the
figures and you must have been to the police, saying, "This
is a major criminal investigation".
Mr Townsend: We absolutely do
provide evidence to the police where we find evidence of wholesalers
who, for example—
Q234 Mr Hoyle: How many times have
you been to the police in 12 months?
Mr Townsend: We will have records
of that and I would be happy to provide that to the Committee.
Q235 Mr Hoyle: Come on! It is so
serious, yet you are telling me that you do not know.
Mr Townsend: Please let me finish,
and this is so serious. We have got photographic evidence of where
wholesalers have been providing equipment to our pubs to allow
them to bypass the beer-flow metering equipment that we put into
our pubs in order to ensure the validity of the contract that
we have with them, and we have got evidence of wholesalers who
have done that.
Q236 Mr Hoyle: So it is large-scale
or not?
Mr Townsend: No, I do not believe
it is large-scale, but there are significant instances and we
will provide evidence to the authorities when that occurs.
Mr Tuppen: Can we also be clear
that we do not believe that buying outside of the tie is wide-scale.
My whole point is that there are people out there who choose to
buy outside the tie and they are stealing money from us, and I
do not want to sound as if I am seeking too much from this, but
this is money that we would be happier to give to people whom
we want to help who comply with their responsibilities.
Chairman: You have opened up a can of
worms here, Mr Tuppen, but I think that it is very important that
we examine this.
Q237 Roger Berry: In seeking to know
whether this is a significant question or not, are we talking
about ten cases, 100 cases or 1,000 cases a year? What are the
ballpark figures?
Mr Tuppen: In the past year, we
have identified, caught and communicated with four particular
wholesalers who have been delivering to a large number of our
pubs.
Q238 Roger Berry: How many references
to individuals who are committing tax fraud have you reported
to Revenue & Customs over the last 12 months?
Mr Tuppen: I do not know the answer
to that.
Q239 Roger Berry: Well, is it one,
is it ten, is it 15, is it 100, or 1,000?
Mr Tuppen: We will come back to
you with that data.
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