BEHIND THE HEADLINES: How will the law change affect your local?

PUB goers daily demonstrate the capacity to discuss a bewildering range of subjects over a pint in their ‘local’ – but it is a fair bet that until last week the government’s Small Business Enterprise and Employment Bill barely merited a mention.

Since MPs gave the government a proverbial ‘bloody nose’ during the Bill’s passage through the House of Commons last week however, the key amendment they voted through has become a very hot topic.

That amendment will introduce a market rent only or ‘free of tie’ option for the tenants of large pub companies.

Currently, under what is known as the beer ‘tie’, such tenants must buy their beers from their pub company in return for reduced rent on the premises.

The amendment means they will get the option to buy their beer direct from breweries, rather than having to do so through the pub companies at what are invariably higher prices.

That should be good news for those chewing the fat over a pint at their aforementioned ‘local’ as the cost of that pint should be lower.

But pub companies are predicting that said pub goers will have fewer pubs to drink in, as the new measure is likely to trigger closures into four figures.

There has been growing disquiet among tenants and drinkers’ groups for many years, with claims that pub companies are still charging inflated rents, and higher than necessary prices for beer.

Liberal Democrat MP Greg Mulholland, chairman of the Save The Pub campaign, who led the charge with the amendment last week, said the industry had become “grotesquely anti-competitive.”

It is estimated that since the turn of the century, the number of pubs in the UK has fallen by about 13,000 or around 20 per cent.

Economic downturn and recession has driven a change in drinker’s habits in the past several years, with more now preferring to drink at home having bought their beer more cheaply in supermarkets.

But those fighting the beer ‘tie’ model argue too that many pub closures are due to tenants simply not being able to compete with non-tied pubs offering beer at cheaper prices, and because they cannot make a meaningful living despite working long hours.

Among the 284 MPs who voted to defeat the government last week is Torfaen’s Paul Murphy, who argued during the debate on the Bill for what he believes is a fairer deal for publicans who are the tenants of big pub companies.

He has campaigned for a market rent only option for several years, and was among 91 MPs who backed Mr Mulholland’s amendment, also supported by a coalition of groups including the Federation of Small Businesses, the Forum of Private Business, the trade unions GMB and Unite, and lobby groups Fair Pint and Camra (Campaign for Real Ale).

“Pubs often lie at the heart of our local communities. Whether they are in our towns and cities or in more rural areas they bring people together and help to make the community a real, living place,” said Mr Murphy.

“For too long big pub companies have been charging excessive rents and inflated beer prices, leaving many hard-working tenant publicans impoverished as a result. That has nothing to do with fair competition and everything to do with greed.

“It is a basic principle of fairness that a tied tenant should be no worse off than a tenant who is free of tie and a market rent-only option is absolutely central to achieving this.

“This amendment will finally force large pub companies to offer fair terms to their licensees and will help address the scandal of so many valued community pubs closing their doors.”

l Phil Jones, licensee at the Open Hearth in Sebastopol, Pontypool, called the passing of the amendment to introduce a market rent only option “a major milestone” and “momentous” for the pub industry.

He said the result was a reward for several years’ perseverance by campaigners and MPs such as Mr Mulholland and Mr Murphy.

“The important thing to understand is that this is not about ending the beer tie, but about ensuring it works effectively,” he said, adding that the market rent-only option will be introduced gradually, and will come up for discussion only at certain times.

These occasions are likely to include rent reviews, lease renewals, or on the sale of the title of a property, if there is a major change in prices.

“At certain trigger points for any tied tenant, they will have the option of assessing their tied rent and the price they pay for beer, and will be able to request an independently-assessed market rent for their pub,” said Mr Jones, also involved in the Fair Pint campaign, which has lobbied for the change.

The Small Business Enterprise and Employment Bill already includes plans for a pubs code and an adjudicator to support pubs and their tenants.

“This (amendment) is about increasing our competitive edge in the market. We can now compete with places like Wetherspoons to offer a better deal for our customers,” said Mr Jones, who added that when many people lease a pub they are not fully aware of what a tied lease means.

“You think you are entering into a business partnership, but it is not really that at all. It is skewed in favour of the pub companies.

“The only thing that will change is the price they (tenants) will pay for their beer.

“It is not about getting rid of pub companies, but about creating an even playing field when negotiating a fair profit from the business.

“The pub companies have been warning that this will cause a wave of pub closures, but we are losing 20 pubs a week now.

“The beer tie is not ending – this merely gives tenants the option of looking at tied and free-of-tie options.

“We need a chance to work more effectively. We’re saying, if we are paying more for rent, let us buy our beer for less.

“And if there is a breakdown in negotiations over rental levels, either side can take it to an independent assessor.”

* The pub companies unsurprisingly see the reform of the beer tie as bad news.

Brigid Simmonds, chief executive of the British Beer and Pubs Association – which represents many brewers and pub companies – said the amendment “effectively breaks the ‘beer tie’, which has served Britain’s unique pub industry well for nearly 400 years.

She said the government’s research showed it will hugely damage investment, jobs, and result in 1,400 more pubs closing, with 7,000 job losses.

“There are (also) serious legal and competition issues which must be faced, as it rides roughshod over what are previously agreed contracts.”

Enterprise Inns, which has 5,500 pubs, said the change “threatens to have serious unintended consequences for publicans and the industry at large.”

Its chief executive Simon Townsend said it would lead to “widespread pub closures, significant job losses and reduced investment in the sector.”

“We continue to believe the tie offers the best operating model for the vast majority of our publicans.”

Punch Taverns, which has around 4,000 leased and tenanted pubs, also warned of “significant adverse consequences for Britain’s community pubs.”

It said the government had earlier rejected the mandatory “free-of-tie” option of tenants as it was likely to have caused uncertainty and “unnecessarily risked leading to higher levels of pub closures and job losses”.

It also warned of reduced pub investment and reduced consumer choice, while tenants face exposure to higher fixed rents, reduced levels of support, and greater risk of failure.

The Campaign for Real Ale sees things differently. Its chief executive Tim Page said the amendment will help keep pubs open and ensure the cost of a pint to consumers remains affordable.

“The large pub companies will no longer be able to charge their tenants prices up to 60 pence a pint higher than open market prices.”

Camra’s own study last year found a pub company may charge £150 for an 11 gallon keg of Fosters, compared with a wholesale price of £84. An 11 gallon keg of Guinness may be charged at £162.46 against the wholsesale price of £108.99. And a Courage Best Cask (nine gallons) may be charged at £104.21 against a wholesale price of £69.99.