Debate on PubCo Reform

This afternoon a debate was held in the House of Commons on Pub-Co reform, whether the recebtly announced self-regulated code of conduct will be effective or whether the Government should have looked to legislation. Numerous other issues were touched upon that I will mention here.

Most readers of this blog will be aware at the high rate of pub closures in recent years. Its gotten as high as 63 pubs per week, but even now 25 pubs are closing a week. There are a number of factors that are causing this, but one of the greatest in the eyes of those who matter (the tennants who run the pubs) is the unfair pub tie arrangement. (Over 87% of those polled stated they'd rather be free of the tie). When you look at the facts it becomes obvious why this is. Pubs that are tied pay a massive premium on drinks supplied to them by PubCos. Free from competition they feel they can charge whatever they like and often charge 1.5 to 2 times more than the wholesale prices available to Free Houses. One example given was Strongbow, avaiable at ~£65 wholesale and £110 through Punch, a 70% markup...no wonder pubs are unable to make any money!

In a recent survey 57% of those subject to tie vs 43% in the free trade said they were struggling financially. This shows that more tied publicans are struggling than those in the free-trade...the difference being they are tied to supplier via the tie.

Over the last few years a number of organisations and MP groups have been campaigning to get this altered, even getting the issue to the attention of the OFT and today's debate was the culmination of this hard work.An allegation of collusion with the British Beer and Pub Association (BBPA) was made of the minister for business innovation and skills as the response to a freedom of information request (FOI) was copied almost verbatim from the BBPAs suggestions to the Government.

Even those in favour of reform were quick to point out than an unfair tie is just one aspect of the challenge pubs  face at the moment. In additition is the tax burden on both alcohol, particularly beer and in terms of business rates. In addition there is the fact that people are more likely to drink at home, a big driver of this of course being cheaper supermarket alcohol but also people not wanting to head out to pubs for a drink, prefering the convenience of drinking at home. Of course, another thing more convenient to do at home is smoking as now the smoking ban has been introduced smokers have to take their habit outside.

Pubs were defended as integral to communities, being part of the solution to irresponsible drinking, raather than a part of the problem and supporting the local economy, both directly in terms of jobs and sales and indirectly by bringing custom to other businesses in the area.

Despite there being a small element of opposition in attendance, the motion for an Autumn review of the voluntary code of conducts efficacy was passed unanimously. It now remains to be seen if the self-policing by the PubCos will work or if the Government will have to legislate after all. From their history of broken promises I don't hold out much hope that this new initiative will have any effect.

To read a synopsis of the debate, blogged live see here.