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A victory for Pub Goers!

On Tuesday 18 November, Labour MPs voted to protect local publicans from the predatory practices of large pub owning companies (known as pubcos) by backing a new cross-party clause to the Small Business Bill.

Following a report into the industry by the cross-party BIS Select Committee in 2010, Labour have campaigned alongside a broad coalition of groups in the industry – including the Federation of Small Businesses, the Forum of Private Business, CAMRA, FairPint and the GMB and UNITE trade unions – to call for greater protection for community pubs.

The government brought some provisions to regulate pubcos in the Small Business Bill, but these fell some way short of the BIS Select Committee’s recommendations.  Labour therefore supported a cross-party clause to strengthen the Bill.  The government opposed this change but were defeated by 284 votes to 259.

Toby Perkins, the Shadow Pubs Minister, explains the background to the vote below.

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00015_brynphot_toby_perkins_mp_IMG_7287“It was my pleasure to lead the debate in Parliament in favour of New Clause 2 of the Small Business Bill, which would introduce a market rent only option (also known as the mandatory free of tie option) for tenants of the large pub companies.

The member of the Cabinet responsible, Vince Cable, argued against it, the government whipped their MPs to vote against it, and the timing of the vote was even moved at the last minute in an attempt to confuse proceedings.  But despite all this enough MPs did the right thing and New Clause 2 was passed by 284 votes to 259.

I have used my position to call for a mandatory market rent only option of this kind for four years and I have even brought the issue to a parliamentary vote on three previous occasions.  On each of these the government chose to stand up for the big pub owning companies, rather than struggling landlords, by voting down my proposals.  So I am glad that they’ve finally got the comeuppance and been defeated in the Chamber this week.

Under the original Bill, licencees would merely have the right to ask their pub company to show them how much their rent would be under a free of tie scheme.  This was problematic as all the information would be held by the pubcos, all the calculations crunched by their accountants and all the final estimates would be made by them – and then even if they revealed that the landlord would be better of free-of-tie they would have had no legal right to demand this option.

The government’s own response to a consultation on a statutory code, printed in June, concluded that a mandatory free of tie option: “is popular with many tenant groups and might arguably offer the simplest way of ensuring a tied tenant is no worse off than a free of tie tenant” – but for reasons known only to themselves they decided not to pursue this.

So whilst the tied model will work for some landlords, for others there are clearly issues.  CAMRA’s research indicates that the majority (57%) of pub company licensees report earning less than £10,000 a year, this compares with just 25% of free of tie lessees.

Last year I carried out a survey of pubs in Chesterfield, and the results I got backed up the national evidence that tied pubs are struggling:

  • 57% of tied-tenants who responded to the Chesterfield Pubs Survey cited PubCos increasing the price of beer disproportionately to cost as one of the most serious negative influences on their businesses,
  • 43% of tied-tenants claimed to have already sought a renegotiation of the terms of their tenant’s agreement,
  • 96% of the pubs which returned the Chesterfield Local Publicans Survey saw a drop in profits during the last year, but crucially tied and managed pubs saw their profits drop to a greater degree than free-houses.

New Clause 2 puts the right principles back into the Bill.  It delivers a mandatory free of tie option (also known as the market rent only, or MRO, option) which allows publicans to buy their beer on the open market.  The BIS Select Committee concluded that this was the only way to ensure that landlords would be no worse off than if they were free-of-tie as it would force pubcos to offer tied tenants the best deals.  I agree and so was proud to support this clause and delighted that it passed.

You can be assured that I will continue to follow this issue closely and will be calling on ministers to act immediately to ensure there is a proper statutory code with a mandatory free-of-tie option to protect local pubs.  They must not be allowed to ignore the will of the House of Commons.

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Welcome

I am Toby Perkins, Labour's Member of Parliament for Chesterfield. If you would like to get in touch with me, my office is open and can be reached by phone on 01246 386 286. I also hold regular surgeries so that constituents can meet me and I can take up their concerns. If you would like to make an appointment then please do contact my office. Thank you for visiting.

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Post: 113 Saltergate, Chesterfield, S40 1NF

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