Low pay, tied pubs and the need for reform

SLF backs the Fair Deal for your Local campaign and publishes research showing reform will save Government money by lifting licensees out of poverty pay.

The plight of publicans in the tied pub sector has been increasingly regularly documented in recent years, thanks largely to the single-minded determination of Lib Dem MP Greg Mulholland and the All-Party Parliamentary Save The Pub Group.  The facts, in a nutshell:

  • Around half of Britain’s 55,000 pubs are owned by big property companies – ‘pubcos’ – formed after the 1989 Beer Orders forced the big breweries to divest their pub estate.
  • These pubcos were founded on enormous amounts of debt, based on a financial model that may have worked in good times – but certainly do not in bad.
  • To adjust, they have engaged in increasingly exploitative practices, most famously forcing publicans to pay inflated prices for drinks which, contractually, they cannot buy elsewhere at the market rate.

The fundamental problem is that the large companies take more than is fair or sustainable from pub profits. This makes it difficult or impossible for many licensees to make a living and has and is causing the failure of pub businesses up and down the country. The overcharging takes the form of both hugely inflated beer prices and excessive rents.  The result was summarised, in the words of a publican, here: http://pubaliciouspubs.wordpress.com/2013/06/14/my-name-is-angelique-this-is-my-story/

We are delighted that the Government has committed to introducing a statutory code of practice for the large companies that will enshrine in law the long accepted but largely ignored principle: that the tied licensee should not be worse off than a free of tie licensee.  The www.fairdealforyourlocal.com campaign has brought together a wide range of interests and SLF supports those campaign objectives – particularly the need for tied licensees to be worse off, which can only work if the legislation ensures the new code includes an option for the tied landlords of large companies to pay rent only to the pub owning company.

Data released recently by the Campaign for Real Ale and created by market research specialists CGA Strategy shows the majority of tied licensees are earning less than £10,000 a year, with over 80% earning less than the ‘living wage’ rate of £15,000.  This is not the case in the free of tie sector, and the cost to Government in tax credit payments and missing income tax and National Insurance contributions is phenomenal.  The BIS consultation (which closed last Friday) stated, conservatively, that reform will transfer in excess of £100 million from pub companies to publicans (and would generate more as publicans are incentivised to sell more as the profit margins would be significantly more attractive).

We calculated that – whichever figures you use, and based on the methodologies used by the Resolution Foundation whose Commission on Living Standards advocated a sectoral move to the Living Wage in those sectors that could afford it – the public purse would be in credit from reform to the tune of tens of millions of pounds.  Using the most conservative figures, to bring the income of tied licensees up to the non-tied standard would bring in at least £30 million a year, and potentially significantly more as it is impossible to calculate the effects on the part-time staff working in the sector – all 250,000 of them.  Potentially the figure for this sector alone is well in excess of £100 million a year, just by ending crony capitalism and bringing in fairness instead.

SLF has made a submission to Government highlighting this huge benefit.  Reform will help not only licensees but also the public purse – not to mention consumers who will not have to pay distorted wholesale prices and could see the price of a pint drop by 10-20% in some cases.

Unfortunately previous opportunities for reform have been scuppered by bad old practices of the ‘revolving door’ which allowed pubco industry lobbyists the British Beer & Pub Association (BBPA) to wield disproportionate influence.  However, in a political landscape that will not allow lobbying shenanigans such as those documented at http://www.libdemvoice.org/opinion-we-need-to-tackle-crony-capitalism-on-our-watch-26755.html by the Save the Pub Group, there is at least some reassurance that this time, reform will happen.

Gareth Epps is co-Chair of the Social Liberal Forum in which capacity this article is written.  He is also a member of CAMRA’s Public Affairs Committee.

Tagged with: , ,
Posted in SLF blog

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Follow us on Twitter

Blog archive