Dear Conservative MP,
I am writing you as, as a fellow Conservative – a party member and activist – who is a former Punch Taverns tenant – to tell you the reality of the pubco tied model – and to ask you, as a Conservative, to vote for cross party New Clause 2 at 4pm today.
My name is Alison Smith, I ran a Punch Taverns pub with my partner. I know that you have heard from Punch Taverns about their views on their relationship with their tenants, but you need to hear from me the reality of this business model on the ground, in their pubs.
We were told what a good opportunity the pub was, yet once we had signed up – it was the all too common story (you must have heard it from your own constituent pubco publicans) of struggling to make a living, despite working really hard, despite innovating and eye watering marked up beer prices – significantly more, 60/70% more – than we could have bought direct from local brewers (who of course, we weren’t allowed to trade directly with, or we would be hit with draconian fines).
Our rent (‘dry rent’ as we call it in the ‘trade’) wasn’t any lower as a result of us having to pay these marked up prices. In fact, it went up, precisely when we were doing well – punished, it felt to us, for doing well and improving the pub’s turnover, which we were proud to do.
In the end, despite improving the turnover – and making our pub a popular place for our local community, a community we cared passionately about and saw ourselves as the hub of – we couldn’t make a living ourselves, due to the excessive beer prices and rent we were obliged to pay – and we had to leave the pub, which we were bitterly disappointed about.
So whatever you have heard from Punch Taverns, in their recent PR drive, and from their lobbyists the British Beer and Pub association, who speak for them, I need to tell you the cold, hard reality of the pubco tied model, which is one that does not work for hardworking publicans and does not work for community pubs.
So I must ask you – as a Conservative – who shares my values of entrepreneurialism, competition, hard work and enterprise – do you really think this is a business model that you can and should support?
As a Conservative, I can tell you that there needs to be reform to stop the large indebted pubcos from taking too much from individual pub profits which has stopped many licensees like me from taking a fair share of the money they work hard to get in the till. It is also a model that creates an artificial price for beer – how can it be right that giant non brewing companies dictate the price of beer to pubs – forcing breweries to sell beer at lower prices than many microbrewers can manage and then marking it up hugely, way above what anyone can buy beer for direct, to their own supposed business partners? Does that sound like a competitive, open market to you? It isn’t, it is a closed market, dictated by companies who got themselves into billions of debt by overvaluing their estates and borrowing money against that imaginary value. It isn’t a market or model that any Conservative should defend.
Surely we want to allow many more hardworking publicans to stand on their own two feet, to decide what deal is right for them, to buy beers direct from brewers according to what they think our customers want – not whatever we can get on our pubco price list, where everything is much more expensive that the brewery price?
The pubco model is anti-competitive, distorts the market, stops smaller brewers getting access to market and relies on artificially inflated price (yes, it is a form of price fixing).
So as a Conservative – and a former Punch Taverns tenant, I urge Conservative Members to vote for new clause 2, supported by the Fair Deal for Your Local campaign, to deliver the market rent option (MRO) tied publicans need.
The market rent only option is the cross party select committee solution, that was proposed in 2009 – and should have been implemented in 2011. The pubcos have had several ‘last chances’ now to get their house in order, but each time have failed to do so. This is the right solution – it is a market based solution merely re-establishing the basic commercial rent, which should be and always the benchmark – then tied agreements would once again offer lower rents, for agreeing to pay higher beer prices (unlike the pubco model, which is based on high beer prices AND higher rents – with average tied rents actually now higher than free-of-tie rents, when the opposite should be true.
Please be clear that it is an OPTION – to stop the chronic overcharging – and is a simple, market based, that would comes in very gradually – over five years – allowing all companies the time to adjust their business model (and far from abolishing it, makes the tie fair and work as it is supposed to – i.e. offering lower rent for higher beer prices).
In truth I can tell you, as a former tied licensee that MRO is the ONLY realistic solution to what CAMRA have called the pubco scandal which has closed so many pubs.
The Parallel Rent Assessment (PRA) in the Bill is NOT the same as the market rent only option in NC2, and does not give publicans the advantages which an MRO would. That is why the pubcos have openly stated they do not believe the PRA is problematic for them. Indeed, Punch Taverns have stated “Punch does not believe that the reforms currently proposed would materially adversely affect the Punch Group”.
PRA is actually more regulatory than MRO – and makes the Adjudicator the rent assessor rather than being an Adjudicator on disputes, which simply doesn’t make sense when their job should be to deal with disputes, not survey and calculate pub rents.
For those with regional/family brewers in your area, you can be vote for NC2 knowing that no family brewer would be affected – the clause deliberately excludes them – and could not be changed without changing primary legislation.
Not backing MRO is allowing the pubcos to carry on business as normal, with no real mechanism for stopping the pubcos charging excessive beer prices AND excessive rents (the Associated Licnesed MR survey show tied rents are now HIGHER than FOT ones).
Two thirds of those who responded to the Government’s own consultation said they supported the market rent only option – so why is a Conservative led Government ignoring this and proposing something supported by no-one?
It is very notable that whilst the large pubcos lobby you to vote against NC2, so they would not any longer be able to continue take too much from licensees profits to pay off their debt, that NC2 is supported by the two leading small business organisations in the UK, the Federation for Small Businesses and the Forum for Private Business as well as CAMRA and licensees organisations.
So please listen to someone who actually knows how the pubco model works – and how despite our very hard work and best efforts, it just wasn’t possible to succeed. My experience on the sharp end of this was that the current system allowed my landlord too much control over my business, especially where the economic climate is fluctuating and where having restrictions on your cost of sales adversely impacts your profitability.
So to conclude, the pubco tied model is unfair, grossly so, uncompetitive, frustrating and also strips away creativity and enterprise from individual tenants who may wish to develop their business away from the standard products offered on a tie. This system has no place in the 21st Century – and also has no place being supported by those who share Conservative values!
So please – as a Conservative – please show your support for hardworking publicans, for pubs and for a freer, more competitive, more open pubs and beer sector – and vote for pubs, NC2 and a fair deal for your local today.