23rd October 2008
The All Party Parliamentary Beer Group's report on community pubs lays the blame at the wrong door. Thousands of pubs are closing around the country, and many more are at breaking point, but a report funded by the chief culprits does nothing to enlighten us.
The Beer Group’s report almost exclusively calls on the Government to reduce duty levels, reduce rates and provide increased funding for pubs. Whilst this may sound like the answer to all our problems, it is just subsidising the excesses of the big property companies that, as a result of a loophole in well-intended legislation, are the dominant force in the market place. This country has undergone economic difficulties before but, whilst the brewers ultimately had the best interests of pubs at heart, this cannot be said of the ‘pubcos’ who have relentlessly driven up rents and beer prices.
Despite the fact that the 'pubcos' are generating profits into the hundreds of millions, with top executives on multi-million pound pay packages, they are so heavily geared that as the recession bites they are being forced to promote ways in which the UK tax payer might bail them out so they do not breach their banking covenants.
The Beer Group’s report points to differentials between beer prices in the off and on trades but in truth supermarkets and off-licenses have sold beer more cheaply than pubs for 30 years or more.
The real reason for the increasing differential is because the ‘pubcos’ have been forcing up the prices they charge their tenants for beer whilst demanding ever higher discounts from the breweries. The publicans, the public and the brewers are all losers in this scenario whilst the middle-men in the ‘pubcos’ siphon off the cash. In 2004, the average discount that a pubco could achieve was about £140 per barrel from the brewers, this is now in the region of £190-£215. By contrast most tenants’ discount from their pubco has remained static at 0-£40.
Any reduction in beer duty would simply subsidise the ‘pubcos’ activities as nothing would be passed on to the publicans or the consumer.
Similarly, the Beer Group’s report recommends that AWP stakes and prizes are increased and machine gaming duty is abolished for the first fruit machine in each pub. Of course this policy is advocated by the ‘pubcos’ as they take the vast majority of the earnings from fruit machines and quiz games, leaving very little for their tenants. It is well-known that ‘pubcos’ usually take half the money from the machines when they are emptied. What is less obvious is the fact that this is not accounted for in the profit assessment calculation used to set the rent for the pub, so the rent is even higher than it should be.
Equally, in order to become a nominated supplier by the ‘pubco’, fruit machine suppliers have to pay a royalty payment to the ‘pubco’. This is then passed on by the machine supplier to the tenant in the form of higher rents for the machines than those for free-of-tie pubs. Once again the Beer Group’s proposals would benefit the ‘pubcos’ and not the publican or the consumer.
Brian Jacobs, a member of the steering group of the Fair Pint campaign, said:
“There is a certain irony in a group that is funded by the pubcos claiming that it is promoting a positive future for pubs. As many pubco tenants and our supporters will confirm, pubcos are the single biggest factor in the decline of the pub industry.
“This report does not represent the views of those people that run the vast majority of the pubs in this country. The pubcos pose as pub operators but they operate virtually no pubs at all and employ comparatively few people. Instead this report represents a further effort by a small number of greedy property companies to muddy the waters and apportion blame on anybody and everybody that is not them, specifically the Government.
“All that the proposals in the report would do is underwrite the practices of the pubcos, through their subsidisation by the taxpayer. Make no mistake, these measures would do nothing to help the individual pub tenant, but simply prop up a business model which has abused its position and become even more unviable.
“The pubcos have acted irresponsibly for many years, in much the same way as we now know some bankers have been acting. Whilst the Government has had to bail out the banks for the good of us all, it is in nobody’s interest for them to do the same to pubcos.”
The Fair Pint campaign feels that the proposals set out by the Beer Group’s report would simply put more money in the pockets of the ‘pubcos’ – with the UK taxpayer effectively subsidising their profits. The majority of the pubs in the UK are under the influence of the ‘pubcos’ and it is these pubs that are finding it hard to survive as the ‘pubcos’ are unwilling to reduce rents, beer prices and their share of fruit machine income. The pubcos show no intention of allowing their tenants to buy beer at proper prices.
The Fair Pint campaign is calling for the Business and Enterprise Select Committee to make recommendations to Government for legislation to remove the beer supply tie in its inquiry into pubcos. This will truly help publicans and benefit the general public at the cost of the ‘pubcos’ and not the taxpayer, who, after bailing out the banks can scarcely afford to start bailing out property companies.
The campaign is also in the process of setting up an All Party Parliamentary Group that actually represents the interests of individual publicans rather than the vested interests of a few listed corporations and property companies.
The Fair Pint campaign is a coalition of independent, tied landlords and industry experts that are seeking to highlight the plight of UK landlords and consumers who suffer as a result of ‘tied lease agreements’ to pub companies (pubcos).
The campaign is calling for the upcoming Business and Enterprise Committee’s inquiry into pubcos to recommend that the Trade and Industry Committee’s 2004 recommendations be enshrined in law.
The All Party Parliamentary Beer Group’s activities are funded by the following pubcos:
- Enterprise Inns (£4700 registered in June 2008)
- Punch Taverns (£4700 registered in September 2008)
- Mitchells & Butler (£4700 registered in July 2008)
- Marston’s (£4700 registered in August 2008)
- Scottish & Newcastle (£4700 registered in August 2008), and
- Greene King (£2820 registered in July 2008)
In addition, the following brewers help fund the group:
- Coors Brewers (£4700)
- Anheuser Busch (£2900)
- SAB Miller (£2900)
- Diageo (£4700)
- InBev UK (£4700) and
- Carlsberg UK (£2900).
The All Party Parliamentary Beer Group’s report on the Community Pub Inquiry can be found at: www.communitypubinquiry.co.uk.
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