The Future of Pubs

Greg Mulholland Excerpts

Thursday 9th December 2010 Westminster Hall

[Karen Bradley]

I thank my hon. Friend, and I note the points that he has made. My own personal experience of pub companies has perhaps not been favourable. However, I fully accept that they have a place and a role, as do brewers, and it is important that we have the pub industry working in a way that supports all types of pubs.

[Greg Mulholland (Leeds North West) (LD)]

I thank my hon. Friend very warmly for taking over this debate from me at short notice. Does she think it striking that small pub companies and indeed small breweries are doing exceptionally well and opening pubs, while the largest pub companies, which have very different business models that have been a cause of concern for the Business, Innovation and Skills Committee, the previous Government and this Government, are in trouble, in debt and having to get rid of pubs every week?

[Karen Bradley]

My hon. Friend makes a valid and important point. That issue is part of the debate—again, we should not over-generalise and say that all pubcos and all brewers are bad. They are not bad; they are doing a job in difficult economic times. However, it is clear that the smaller ones are perhaps having more success than the bigger ones.

I would now like to explain what is so unique about a British pub. Pub closures are an issue that affects every single Member in this House; every constituency is affected by it. Running a pub is unlike any other business. It is a way of life, not a job. You live on site, and your home is a public house; people come into your home at all hours of the day and night, and expect to be welcomed into your home. Landlords—I apologise for using that generic term, and I want to make it clear that I mean landlords and landladies—have a civic responsibility to provide the heart of the community, and it should not be surprising to anyone in this country that the longest running TV programme in Britain, which today celebrates 50 years on our screens, is based, and has always been based, around the community pub.

Landlords have a responsibility to look after their customers, both in the pub and when they leave the pub. There are very few other businesses where the retailer can be held responsible for the behaviour of customers after they have left the premises. We do not often see a situation in which a supermarket gets into trouble if a customer uses a product that they have bought at the supermarket and then, let us say, disposes of it as litter; the supermarket is not held responsible. However, the pub landlord is held responsible when the customer leaves and engages in antisocial behaviour. Landlords also have a duty to the local community, to work with residents and authorities, such as the police, to ensure good behaviour. In my view, however, the most unique element of the pub business and one of the reasons why I think we are seeing so many pubs struggling is that no two pubs are the same, because pubs are absolutely dependent on the building in which they are located.

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[Karen Bradley]

I am coming to exactly that point. The margin on beer is the pubco’s other source of income. When my family bought out their beer tie last year, the pubco from which they bought the tie told them that the average additional amount that it charged per barrel under the tie was £185. A 36-gallon barrel of Carling Black Label sold under the tie was £369, compared to a free trade price of £227. Imagine us allowing any other industry to disregard free-market pricing so blatantly.

Pubcos have clearly accepted that many pubs are closing. That is not in their interests, so they try to help landlords who are struggling, which is undoubtedly a laudable aim, but they do so either by over-managing or by giving with one hand and taking with the other. For example, they might install monitoring equipment, ostensibly to help landlords see what is selling well and what is failing to sell, but the equipment is then used to establish whether the landlord is buying out of tie. The monitoring equipment sees how much beer is travelling from the cellar to the pump; the pubco then says, “That is more than you are buying from us. You must therefore be buying out of tie,” perhaps forgetting that it is in all our interests for the pipes to be cleaned regularly, which involves liquids other than beer going through them. The feeling—I accept that some of this is anecdotal—is that it is “them and us”, and that the landlord is guilty until proven innocent. The two parties should be working together to run a successful pub for the sake of the community, but instead they are fighting each other.

[Greg Mulholland]

I thank my hon. Friend for her generosity in giving way again. As we have not had a meeting recently, she might not be aware that both the all-party save the pub group and the all-party group on beer recently received a copy of a letter from the Fair Pint campaign to Enterprise Inns that raises serious issues about the Brulines system and Enterprise Inns’ use of that equipment. It is important to put that on the record. We await with interest developments in that case.

[Karen Bradley]

I was not aware of that letter, so I thank my hon. Friend for raising that issue. I look forward to reading it.

A pubco area manager might also suggest that a landlord adopt a practice that has worked elsewhere, such as showing live football. However, a one-size-fits-all approach does not work. Pubs are all different. Just because one pub succeeds in selling more beer after installing equipment to show live football, it does not mean that a neighbouring pub will do so as well, and it must be borne in mind that under leasehold agreements, the landlord is responsible for buying all the equipment, fixtures and fittings and entering into an arrangement with the sports provider. Landlords can therefore be left with significant outgoings and future liabilities, but no extra revenue. If they do make extra sales, their rent will be reviewed and increased the following year.

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[Greg Mulholland (Leeds North West) (LD)]

I thank you, Mr Benton, and Mr Speaker for understanding and accommodating my somewhat challenging situation, in that I have to speak in two debates at the same time. If I start going on about student fees, I hope that you will forgive me and put me back on track.

I thank my hon. Friend the Member for Staffordshire Moorlands (Karen Bradley)—when I say “Friend”, I mean it literally—for her excellent introductory speech, which showed a depth of real knowledge drawn from personal experience. I have had the great pleasure of meeting her parents, who, as publicans, have done such a good job in their community for so many years. I am absolutely delighted that they have now got their hands on their pub, that they own it and that they can run it as they like. We would, I hope, all agree that those of us who believe in small businesses and localism should want as many of our pubs as possible to be in the hands of those who run them, and the save the pub group certainly wants to campaign for that.

My experience of pubs is slightly different from that of my hon. Friend, in that it relates largely, although not entirely, to the other side of the bar. I have worked in some pubs, but I have spent an awful lot more time on the other side of the bar. A little over 18 months ago, however, I decided that we needed a save the pub group in Parliament because the British pub faced such a crisis and, as hon. Members have so eloquently explained, because the pub is central to our communities. As my hon. Friend mentioned, the pub is iconic to us as a nation. Pubs are unique to this country and are part of our heritage, history and culture, and we lose them at our peril. Sadly, we are losing them in great numbers.

The biggest scandal, which some organisations, companies and developers try to cover up, is that we are losing viable pubs every week. Some of those pubs are actually profitable when they are closed. As the hon. Member for Isle of Wight (Mr Turner) so powerfully said, that is happening simply as a result of the greed of developers and individuals who see an easy way to make money, and that is not acceptable.

I ask those hon. Members who are concerned that we do not go down the route of having more planning restrictions to accept that the community has the moral ownership of community pubs—pubs that have been in the community for years and years. Legally, of course, those pubs will go through certain hands, and as my hon. Friend said, they will have passed through the hands of breweries and into the hands of pub companies. Although the simple reality is that those organisations legally own the building and the business, the moral ownership is surely with the community that the pub has served for many years. That is not, however, reflected in planning law.

[Andrew Griffiths]

My hon. Friend has a great record of standing up for the great British pub in this place, and we all applaud him for that. I absolutely agree that we need to do all we can to preserve pubs, but one difficulty is that many people are put off making the large investment involved in buying a pub—purchasing a pub is a heck of a financial commitment. However, somebody who has attempted to run a pub and been unable to make it viable may be prevented from realising that asset if we introduce restrictive requirements for the sale of pubs. Does my hon. Friend share the concerns of those who say that the unintended consequence of that might be that we put people off investing in pubs and becoming landlords or publicans in the first place?

[Greg Mulholland]

I agree with the hon. Gentleman on many things, but I am afraid that I simply cannot see his logic on this occasion. Let me explain the position of the save the pub group to make it absolutely clear. If one pub business fails, he would surely agree that another pub business should have the opportunity to attempt to make the pub a success. At the moment, people are prevented from doing that simply because the owner says that they do not want the building to be used as a pub any more. Even if the entire community wants it to be a pub, even if it is viable and even if it makes an awful lot of money, the community has no say.

I am delighted that the Prime Minister has chosen, a little belatedly, to appoint a Minister with responsibility for community pubs, whom I had the great pleasure of welcoming at the save the pub group’s British pub week event a few weeks ago. That appointment is very positive, and it is handy that the Minister is also a Planning Minister. I therefore say to him that although we are looking forward to the upcoming decentralisation and localism Bill, it must give communities the right to have a say, through the planning process, in the future of community pubs, which we all say are so important.

[Dan Rogerson (North Cornwall) (LD)]

Like others, I congratulate my hon. Friend on the huge amount of work that he has done on this subject. He talks about developers converting pubs and denying others the right to make a success of them. Are there not also examples, however, of owners who sell a pub on and, even though they do not wish to convert it themselves, make it clear by means of covenants and so on that they wish to prevent anyone from running it as a pub in the future?

[Greg Mulholland]

My hon. Friend raises an important point. I was coming to that, but I will cover it now. I have already raised with the Planning Minister some companies’ continued use of restrictive covenants, in which the company says, with no thought to the community’s rights, that a pub must never be allowed to be a pub again. That is a scandal. The previous Government said that they would outlaw that practice, which was a hugely welcome step. I am disappointed that the right hon. Member for Wentworth and Dearne (John Healey) is no longer here, because I worked closely with him and I commend him on his work to support pubs. I ask the Minister to give us the good news for which we have all been waiting—CAMRA, in particular, has campaigned for this for many years—and to say that he will outlaw this totally anti-free market and anti-community practice once and for all.

Let me return to planning. I hope that I can address the concerns of the hon. Member for Burton (Andrew Griffiths)—Burton is, of course, one of the most famous centres, if not the most famous centre, for brewing in the country. The save the pub group says that we need to include two things in the planning process for community pubs. First, we need a genuine period of community consultation, which some councils have and some do not. Secondly, there needs to be a viability test. If a small business is viable, it should have the opportunity to continue as a small business, and should not simply be closed because someone can make a large killing by closing it, as my hon. Friend the Member for Staffordshire Moorlands said.

[Simon Hart (Carmarthen West and South Pembrokeshire) (Con)]

Does my hon. Friend accept that in some communities it is not only the pub that performs an important social function, and that there are examples of viable shops and filling stations that have also been sold by people who want to make a quick buck? How does he recommend that the Government should overcome that problem, with planning changes related simply to pubs? Would the changes not have to extend to other community functions that might, to some people, be just as important?

[Greg Mulholland]

The good news for my hon. Friend and, indeed, the Minister is that I have exactly the answer to that very point. It is not my original idea. Being a politician, I may sometimes take the credit for things, but I will not on this occasion. A Bill has been proposed by CAMRA, and is, I am delighted to say, being promoted by my hon. Friend the Member for Selby and Ainsty (Nigel Adams). The Protection of Local Services (Planning) Bill will have its Second Reading in the new year. The save the pub group officially backs it. The Bill would do precisely what my hon. Friend the Member for Carmarthen West and South Pembrokeshire (Simon Hart) has described; it would give councils the power to extend planning permission to local services that they designated. It would cover certain particularly important shops, post offices, pubs and perhaps petrol stations—the things that a community would identify for itself as important. Perhaps I may reassure my hon. Friend the Member for Suffolk Coastal (Dr Coffey), who is passionate about pubs and beer, about this—I enjoyed a glass or two with her at the Great British beer festival earlier this year. We should support the Bill; it would not do what she fears. It would simply give councils the power to adopt those practices if they wanted to, and to extend the planning permission in question. The provisions would be flexible and decentralising, but would not impose anything.

[Dr Coffey]

My hon. Friend is right to praise the aims of the Bill. I support them. I simply wanted to point out that I am not sure that primary legislation is required. I think that councils already have powers. I cited Basingstoke and Deane as a good example of somewhere that has used those powers in its planning process and policies.

[Greg Mulholland]

I thank my hon. Friend for that point, but she is lucky. Clearly her council appreciates the importance of pubs, but many councils do not, and I am afraid that Leeds city council is one with a poor record of defending them.

[Mr Turner]

It depends very much on local ability. The Sun Inn at Hulverstone, which I mentioned a moment or two ago, is an example: members of the planning committee knew that they could do something, although the planners told them that they could not.

[Greg Mulholland]

I am pleased that my hon. Friend raised that point, because I have had the same experience in Leeds, with planning officers telling councillors on the plans panel that the pub had no status and that viability could not be a planning concern, while at the same time councils around the country have taken the action in question. There is confusion, so we want to give the message, and empower councils. We want to give them the opportunity to take such action where they think it is important. I urge all right hon. and hon. Members to support the Bill, and the community pubs Minister to take those points forward if the Bill should fall, which I hope it will not.

[Mr Knight]

Does my hon. ally agree that the viability test must be objective, with an element of independence about it? There is a pub in my constituency the owner of which wanted to use the building for something else. Two years before he closed it, he deliberately stopped serving food, which was one of the most profitable aspects of the business, so that he could try to con council officers that the pub was not viable, although the whole village knew that it was.

[Greg Mulholland]

I do not think that I have ever taken part in a debate in which the interventions were so accurate and helpful. My right hon. Friend and ally is right that there is a scandal going on, with pub owners—whether individuals, pub companies or brewers—who have decided that they want to do something else with the pub deliberately running it down. Often an inappropriate person is picked to run it. That has happened in Leeds and, I am sure, around the country. It is a scandal, and takes us back to the fact that communities have no say in the process.

I hate to see boarded-up pubs. One of my local pubs, the Summercross, remains boarded up after we were conned by a company that told us it would quickly build a care home there. That was more than two and a half years ago, and it is still a huge eyesore in a very pleasant part of Otley. The surrounding community has no power. I agree that there should be powers to stop people land banking derelict buildings that could and should be used. However, we must not let that become an excuse for it to be made even easier for people to lose their pubs.

I welcome the community right to buy that the Government have proposed and look forward to hearing more about it from the Minister. It fits very well with the idea of the big society and with our passion for empowering communities, decentralising power and giving communities a voice. However, I have one note of caution to sound for the Minister about something I have raised previously. Although it is incredibly welcome that communities are to be given the opportunity to see whether they can take over ownership of their pubs, that will not solve the problem of popular, wanted and viable pubs closing. In some areas the community will be unable to take a pub on, or will not want to; but it will still want the pub to continue. I have seen many cases in which a good small pub company, small brewery or individual wanted to buy or take on a pub; but they can currently be prevented from doing so. Unless we include in the planning process a right for communities to have a say in a process, that gap will not be plugged. I ask the Minister to consider that.

I now turn my attention to the model of the beer tie operated by pub companies, which my hon. Friend the Member for Staffordshire Moorlands has already outlined. It would be useful to give the House an update on the current position. I look, once again, to the Opposition Benches, because, after a long campaign fought by several organisations, the previous Government listened and acted. That was extremely welcome and I was delighted when the present Government, through Business Ministers, said that they would follow the process that was put in place by the previous Government. That was extremely important and positive.

I shall not go through the figures and the issue of the tie, but the present position is that three recommendations were made by the previous Government and adopted by the present one, and they come within ministerial responsibilities. The first is that the industry should ensure the accuracy of flow-monitoring equipment. We have already had mention of that. The second was the implementation of a code of practice; and the third was that Ministerial action should follow a failure to do those things and establish a code of practice that addressed the concerns of the Select Committee on Business and Enterprise. That is crucial. In addition, Ministers would consider the matter and would be minded to refer the matter to the Competition Commission if reform was not forthcoming.

I raised concerns with the Minister’s colleague, the Secretary of State for Business, Innovation and Skills, to whom I was perhaps a little less kind in a previous debate, about the merging of the Competition Commission with the Office of Fair Trading and its implications for the process in question. That is in the light of the fact that the OFT came up with the extraordinary decision that, although it admitted that tenants were not treated fairly and beer prices to the customer were higher, there were no competition issues. I look forward to hearing about that.

So far the result of the process is that only two companies have established an accredited code by the deadline, which was 1 July 2010. The deadline for implementation was 1 October. Therefore 28% of British Beer and Pub Association members failed to meet their obligations. The BBPA framework on which the codes are based deliberately and explicitly excludes the commercial issues that constituted the problems highlighted in the ministerial response. Crucially, no company code offers a genuine free-of tie option to lessees and few offer a guest beer option. The reality—I have to make this clear—is that so far those companies deemed to be operating unacceptably to the previous Government and the Select Committee, and to this Government, are still doing so. Unless that changes significantly, Ministers will have to act.

I have to mention the codes of practice, some of which are now being produced. Hon. Members may not be surprised that I will mention specifically the Enterprise Inns code of practice, a glossy document that starts:

“Our new Code of Practice sets out our commitments to you”.

However, it generally sets out the tenants’ obligations to Enterprise Inns. Tenants are being pressed by Enterprise business development managers to sign the certificate of acceptance in the manner of a door-to-door window salesman. I ask the Minister’s colleagues in the Department for Business, Innovation and Skills to look at that, because not only are the codes—particularly that one—not delivering what they were supposed to deliver but there is a danger that they will make the situation worse, will put more onus on the tenant and are doing nothing to address the problems in that business relationship.

I shall mention something now that will upset deeply my colleague the hon. Member for Burton although he may wish to comment on it in his speech—I hope that he does. The largest pub company, Punch Taverns, is in a desperately parlous financial position. It gives me little pleasure to say so. There is a crisis in the biggest pub companies, which are in eye-watering debt. That is the biggest threat that the British pub faces at the moment. Hon. Members have said that that is because of bad business decisions—the sort of gambling that gave the bankers a bad name—including over-valuing their estates, and now they are in vast amounts of debt to creditors. Pubs are being sold and closed continually to deal with that. Enterprise has just raised another £9 million from auction.

There is concern that Punch is teetering on the brink. I hope that that is not so, because the last thing that we want is many pubs suddenly coming on the market and many of those being converted to other uses. That goes back to what I said before. We have to get something in the planning process that stops people simply getting rid of pubs for what they can get.

I come now to my final question to the community pubs Minister. It gives me great pleasure to call him that. The Minister is a fan and a friend of the pub and I look forward to chatting with him, perhaps over pints in pubs, as we move forward and work together with his team and the all-party save the pub group. Are the Government committed to a below-cost selling ban? I think that all hon. Members would support that to stop the scandal of supermarkets selling beer below cost. It is not a price-fixing measure or thinking that is against the free market; we are simply saying that supermarkets should not be selling beer below cost to get people into their stores. If they want to do that, they can do it with chicken or bread, or things that are useful to people, but they should not undermine pubs and sell irresponsibly.

[Rory Stewart (Penrith and The Border) (Con)]

I would not encourage supermarkets to underprice other goods, such as dairy products, for the sake of beer. I strongly support the hon. Gentleman’s saying that they should not underprice beer, but we should not encourage them to underprice bread or any other commodities, either.

[Greg Mulholland]

I was not suggesting that they should do that. If they really want to attract people to their stores in a moral way, they should do so with things that are of value. I am not for one minute suggesting that people should be under-cutting. I am one of many people—I am sure that colleagues have campaigned for it—who would like a supermarkets ombudsman and fair pricing for dairy farmers, for example. I reassure the hon. Gentleman on that point.

I have asked the Leader of the House about below-cost selling, which was not in the policing Bill last week, although many hon. Members thought that it would be. Can the community pubs Minister give us some news about when that will come forward? I hope that this is the last Christmas that we see irresponsible promotions that do damage to pubs, which also rely on Christmas.

Duty is a challenge. I congratulate the Government on not increasing beer duty again, because it has gone up too high and has been damaging. I hope that that message has got through, even in this difficult time, because putting too much duty on beer will have a detrimental effect, particularly on smaller and medium-sized breweries that come above the progressive rate relief, which incidentally we must keep for microbreweries that a colleague, who is no longer in place, so correctly mentioned.

My final challenge to the Minister is not for his Department, but is one that he should pass on. We must find a way to help pubs by allowing a differential rate of duty. That is a challenge with regard to European law, but we can face that and should not keep using it as an excuse. There are ways of doing that. One way, which has been raised, is to have a differential rate of VAT for pubs, which is worth putting on the table. Another way would be to have a differential rate for draft beer, which at the moment is believed not to be possible through EU law.

Another solution was given to me by the head brewer at Fuller’s in London. There may be a way to have a different rate of duty on real ale, specifically cask ale, which is our great national drink—our Burgundy and Bordeaux—of which we should be prouder and about which we should make more noise. Every barrel and cask that leaves a brewery has an allowable duty-free element, because it is a sedimented product. If that provision could be unified, it would remove all the bureaucracy of checking at the gate and the different rule per beer and there might be a way to allow a different rate of duty perfectly legally within EU rules. I put that challenge to the Minister.

I thank all hon. and right hon. Members for attending this important debate. It is great to see such a wonderful turnout and I know that they are all passionate. I look forward to working with all of them, and with the community pubs Minister and the all-party save the pub group, to do as much as we can to support and save our great British institution.

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[Andrew Griffiths]

I understand my hon. Friend’s concern, and many people support his suggestion. The danger is that if we lose sight of the real problems facing pubs and focus on reintroducing smoking in them, we may lose our focus on the more pressing problems that lead to pubs closing.

[Greg Mulholland]

I thank my hon. Friend for giving way. I apologise, Mr Benton, that I did not explain earlier that at the request of the Speaker I must return to the main Chamber after his speech.

The save the pub group does not have a position on the smoking ban, but we called for a review of its impact on pubs and clubs. That was promised by the previous Government, and it is disappointing that the response by the Department of Health to the save the pub group was that it would not go ahead with that review. We believe that it should take place.