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Stop the big pubcos taxing our local pubs out of existence
7th June, 2010
Pubs are closing everywhere, and in many cases there's a simple reason behind the shuttering of the local...
In the past fortnight I have almost literally crossed the country, both from Southampton to the peaks of Glen Nevis, and from North Wales to the Norfolk Broads. Everywhere I saw the same thing; pubs closing down or already boarded up. Some of these I’d never had a chance to visit, others were old favourites where I had laughed and drank with friends. Eventually, outside yet another shuttered building, I stopped the car and started talking to the people involved.
Here was a landlord who'd poured his heart into the business, then poured his money after. The pub turned over almost half a million a year but there still isn’t enough left to repay his debts. Another works 80 hours a week to pay himself £15,000 a year and has just started making lunches for local schools to make ends meet. In one village a gang of mates used to meet most nights at the pub. It closed. Now they sit at home alone drinking supermarket beer and watch TV.
Nor are they alone. The British Beer & Pub Association says almost 40 pubs close across the country every week. The pub I’m sitting in to write this has a photocopied poster on the wall that helps explain why. On it is a pint glass, with horizontal lines drawn to show where each part of the £2.80 cost ends up. Great greedy slurps are taken by the taxman – 37 per cent in excise duty, 17.5 per cent in VAT – while brewing, distribution, shipping, lighting and staff costs swallow most of the rest. What’s left are the dregs, just 2.5 per cent, for the man behind the bar.
And that’s only part of the story (the smoking ban and recession also played a role). The leading characters, as the landlords tell it, are the pubcos, huge corporates who own the physical pub buildings and lease out the right to run a business to landlords who think they’re onto a good thing, except that one condition of the lease is the ‘beer tie’ or ‘wet rent’, which means they must buy all their beer from the pubco itself. And the pubco sets the price.
Two pubcos, Punch Taverns and Enterprise Inns, between them control over 14,000 pubs – more than a quarter of those that remain in Britain. A parliamentary investigation last year criticised both their businesses and the men who run them, saying, 'in evidence to us both Mr Thorley [chief executive] of Punch and Mr Tuppen [chief executive] and Mr Townsend [chief operating officer] of Enterprise Inns made assertions which, on investigation, proved to give a partial picture, or on one occasion were positively false'.
You can read all three men’s self-defence to the parliamentary committee here.
'It may be that the beer tie should be prohibited,' the report said. The Office of Fair Trading 'had failed to examine this market properly' in the past. As if to emphasise this point, another OFT investigation after the parliamentary report largely cleared the pubcos of any fault.
But, amidst the gloom, a chink of light. Last week the new Government was asked if it would force pubcos to 'relax the beer tie' by 2011, or face intervention from the state. The consumer minister Edward Davey gave a one word answer.
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