The New Statesman’s rolling politics blog

RSS

It's time to protect pubs from exploitative PubCos

Too many pub companies force their licencees to buy limited products at inflated prices. But the Tories have consistently failed to act.

The Campaign for Real Ale estimates that 26 pubs close each week. Photograph: Getty Images.
I often say that one of the best things about my job is that no two days are the same. But for the first time since I became shadow minister for pubs, I’m getting a strange feeling of déjà vu. This is now the third January in a row I’ve been involved in a grassroots campaign to drag ministers to the House of Commons to talk about supporting British pubs.
 
Pubs need this support so they can get a fair deal. Most people know a favoured local which has been left derelict or transformed into a supermarket. These personal stories are reflected by the national figures. The Campaign for Real Ale (CAMRA) estimates that 26 pubs close each week and that each closure costs the local economy £80,000. Pubs are more than just businesses – they are community hubs, part of the fabric of neighbourhoods which bind us together.
                                                                                                                    
That is why it is so important that we fix the unbalanced and unfair relationship between landlords and the large pub companies (known as PubCos) from whom they rent their premises. In the House of Commons on Tuesday we will be repeating our call for a proper statutory code to govern this relationship and protect landlords.
 
Many landlords used to dream of opening a pub so they could be their own boss and run their own business. Unfortunately this dream is all too often not matched by reality. The PubCos own three quarters of Britain’s pubs and often require their licencees to buy all drinks products from them, at whatever price they determine. There also many disputes about setting of rents on pubs, and even cases where a licencee works hard to increase the profit of their pub only to see this swallowed up in increased rents the next year. The PubCos have been accused of creating perverse incentives to squeeze short-term finance out of their properties rather than promote long term stability. No wonder CAMRA estimates that three fifths of landlords tied to PubCos earn less than the minimum wage.
 
The cross-party BIS Select Committee has investigated this issue several times and has consistently recommended a strengthened statutory code to rebalance this relationship. Such a step is also supported by trade unions and small business groups. However, the Tory-led government has consistently failed to act.
 
A new statutory code would not be a silver bullet addressing all of the challenges that publicans face, but it would certainly make a positive difference.
 
In January 2012, the House voted unanimously to introduce such a code, but the government did nothing. So in January 2013, I called an Opposition Day Debate to highlight this inaction.  Just 24 hours ahead of the debate the government announced a dramatic U-turn and promised finally to introduce the code.  But a year later, despite a lengthy consultation, nothing has changed in legal terms.
 
So next Tuesday we will be debating the issue once again.
 
I will make a genuine offer to work collaboratively to get a code on the statute book to support local publicans.  But any new code must meet three key tests:
 
1. The Beer Tie, whereby landlords can only buy products from their PubCo, works for some licencees. However, for many others it means they can only buy limited products at inflated prices. We want every landlord to have the choice of whether to go free-of-tie. This would allow licencees to operate in a re-constructed market which would actually be more competitive.
 
2. When a new licencee takes over a pub, or when an existing rent contract expires and is renegotiated, there should be a fully transparent and independent rent review completed by a qualified surveyor.
 
3. There must be a truly independent body to monitor the regulations and adjudicate in disputes between licencees and pubcos.
 
Many Lib Dems privately claim that they are persuaded of the need for these measures, but have difficulty persuading the Tory side of the coalition. I hope we are able to gain enough support from right across the House to ensure that next Tuesday marks the start of a brighter future for this great British industry.