Government pubs report fails to stand up for the little guy

by Toby Perkins

Pubs are businesses at the heart of their communities; so it is a cause for great concern that pubs are now shutting at the alarming rate of 25 a week, and the government is failing to live up to its promises to take action to support this great British institution.

The pub sector is also an area which starkly illustrates the difference between the active, intelligent government working in partnership with business which Labour stands for, and the ‘government getting out of the way’ approach, favoured by Osborne, Cable et al.

The business, innovation and skills select committee has investigated in detail the relationship between the pub companies (or PubCos) – the branded chains of pubs which account for the majority of pubs in the UK – and their tenants. It has produced three reports on the subject over the past three years.

Most significantly, they found an unfair relationship between the huge companies which dominate the market and the small business owners who run individual pubs, alongside restrictive practices preventing smaller breweries from accessing huge swathes of the trade.

This week, after months of dither and delay, the government finally responded to the long-standing call for a fairer relationship between pubs and their owners. Sadly, it is a case of too little too late, and comes up short of the action needed.

The previous Labour government gave the industry a year to reform itself, putting in place a voluntary code, and made it clear that a statutory code would be put in place if the industry did not get its act together.

It also introduced a 12 point plan for pubs prior to the 2010 election, backed by CAMRA and the BIS select committee, which supported tougher rules to prevent big pub companies from treating their tenants unfairly and to help support local brewers. There was also support through the Regional Development Agencies for “pubs as the hub” – recognising their important role at the centre of communities.

After taking office, both Vince Cable and BIS minister Ed Davey promised to honour these commitments, but at the March 2011 deadline for the PubCos to put in place accredited codes, only seven of the 32 largest pub companies had done so. But, with more than six months passing since the deadline, and despite repeated calls for action, until this week the government refused to take any action.

A key requirement that tied tenants (publicans having to buy their beer from the pub company) should be no worse off than ‘free of tie’ tenants was not consistently honoured and the requirement to offer tied and non-tied arrangements has simply been ignored by the PubCos.

The government’s belated and feeble response this week suggests that they have now fully reneged on their commitment to put the code on a statutory footing if necessary, to allow tenants a free of tie option and to ensure a fair deal for tenants whether they are tied to the pub company or not.

Fundamentally, when government is aware of unfair relationships and restrictive practices and can see the big guy using their power to treat the little guy badly, they have a choice. Labour members will be proud that Ed Miliband spelt out our commitment to speak up against irresponsible business practice, and pubs are just such a case.

We recognise the financial pressure which pub companies are under, partly because they bought their properties at the height of the property bubble and in many cases are sitting on overpriced stock. But the solution to that must never involve tenants losing out, finding that despite running busy pubs they never make enough to get by.

Research by the IPPR graphically exposed how the financial difficulties of the pub companies were being passed on to their tenants:
• 57 per cent of tied publicans say they are struggling financially, compared to 43 per cent of those who are free of tie.
• 46 per cent of tied publicans earn less than £15,000 per year, in contrast to only 22 per cent of non-tied publicans.
• 88 per cent of tied publicans who claim to be financially struggling identify the beer tie as one of the most significant factors in their financial problems
• One-third of tied publicans have not seen their pub company’s revised code of practice, and only 17 per cent of those who have believe it will benefit them.

Whilst recognising that some pub companies have made significant efforts to act responsibly and transparently, too many still don’t. We are urging the government to stick to the commitment made to members on all sides of the house, supported by organisations like CAMRA, the independent pub confederation, federation of small businesses, and guild of master victuallers, and bring forward a statutory code, initially for the large pub companies (those owning over 500 or more pubs) who own the lion’s share of the nation’s pubs.

The government has also announced this week that a new regulatory body PICAS (pub independent conciliatory advisory service) will be formed. We will put pressure on ministers to ensure that this body has teeth, is funded by the pub companies themselves, not the taxpayer and we will continue to fight for the government to live up to the commitments which it has made.

Strong action to free up the trade and charge fair rents and fair prices in an open and transparent market by the largest firms will inevitably influence behavior at all levels in the chain, and help create a fairer and more prosperous market.

The last impression this week is that a key opportunity to strengthen the hand of the little guy, and help support a treasured British institution, has been missed.

Toby Perkins is Labour MP for Chesterfield and shadow minister for small business.


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5 Responses to “Government pubs report fails to stand up for the little guy”

  1. swatantra says:

    Big is not always best.

  2. The tied lease system that dominates the UK pub and beer market is an anachronistic license for unscrupulous pub companies to run a cart and horse through any advances in workplace regulation, property owners’ responsibilities there have been in the last 150 years, and, well, to drop anything at all to do with responsibility for any aspect of the day to day running of thousands of businesses – their pubs – which they manage to get other people to pay them for the privilege of running them while transferring all their profit from the beer pump to the boardroom pocket.

    This governments’ response to the recommendations of FOUR Select Committees taken over seven years is disgusting. It is so DISGUSTING, distasteful and wrong that pubcos should simply be let off the hook and allowed to self regulate on first reaction it is difficult to see how the ministers’ responsible – Ed Davey and Vince Cable – arrived at their decision without consulting beyond Select Committee (who did an excellent job of analysis and assessment of the tied pub sector) and talking to any publican/lessee representative bodies. Such as IPC CAMRA Fair Pint JFL FSB FPB oh and about another dozen such outfits.

    No, on the face of it, if you didn’t know better, you’d assume we’re in a Banana Republic and the ministers got bunged to rig the match. It’s so outrageous they can say the industry can self regulate when its own Committee says the industry has proven it has no intention whatsoever of taking any notice at all of anything anyone in government says.

  3. AnneJGP says:

    Does the report comment on the drop in customer numbers which resulted from the smoking ban?

  4. diverbeachbum says:

    Pubs were shutting in their droves, long before the coalition came to power, why now do you make a story out of it? YOU lot started the rot, now, its unacceptable? Typical!

  5. Jon Campbell says:

    Please stop saying that CAMRA represent the industry, they dont, they represent only their members.

    Continuous inteferance by the previous government was disaterous for the trade, that you now take an interest is sickening. You are the problem.

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