Thursday, 16 January 2014

Time running out for pubco reform

The Alexandra in Penge; now closed but locals hope it will reopen

It is just over a year ago since Vince Cable unveiled his reform plans for large pub companies (pubcos), broadly along the lines for which campaigners had spent years lobbying.

After repeated select committee reviews, the business secretary said: 

‘We gave pub companies every chance to get their house in order, but despite four select committee reports over almost a decade highlighting the problems faced by publicans, it is clear the voluntary approach isn't working.

‘Pubs are small businesses under a great deal of pressure, many of which have had to close. Much of that pressure has come from the powerful pub companies and our plans are designed to rebalance this relationship.’

Under Mr Cable’s plans an independent adjudicator was to be appointed to study unfair practices in the industry, as well a statutory code introduced (for those unfamiliar to the topic, background on the pubco reform campaign can be found here). Many publicans celebrated; finally, they hoped, the pressures coming from the likes of Enterprise and Punch Taverns, would be relieved.

A consultation process began in Spring last year and the government gave every impression legislation would be published by the end of 2013 or early 2014.  

But what has happened? Er, nothing. Barely a word. The results of the consultation have not yet been published  - minister Jo Swinson blames a greater number of responses than they expected - and the government is rapidly running out of time to get any proposed legislation on the statute books; it would be left to a successive government to decide what to do, no doubt setting any reform back by several more years.

It’s no surprise to see a petition has been launched to try and get the issue moving against in parliament. Already, more than 12,000 people have signed their name to the call for the government to legislate; it can be seen here.

But, considering pubco reform has such wide support from across all parties in Parliament - a quick glance at Early Day Motions on the subject and this is clear - why the delay?

There is no doubt pubcos have lobbied hard against any reform and campaigners have highlighted a core of politicians who they claim have blocked the reform moving forward; pubs minister Brandon Lewis and Chancellor of the Exchequer George Osborne the favourite suspects. It sounds plausible enough. Lewis has been very quiet on the topic and, as Vince Cable was initially pushing for reform, his Tory coalition colleagues might well stymie what they may view as Lib Dem legislation.

Labour are trying to seize on this inaction and have tabled an Opposition Day Debate on the proposed reforms, set to take place on January 21st. When the debate was announced, Toby Perkins MP, the shadow pubs minister, said this: 

'It is becoming an annual event that Parliament debates the issue of pubs in January.  In January 2012 the House voted unanimously for a statutory code to regulate large pub companies as recommended by the BIS Select Committee.  In January 2013 after Labour called another debate on the subject, the Tory-led government agreed to introduce a statutory code.

'Twelve months on, despite a lengthy consultation, nothing has changed in legal terms to help struggling pubs and publicans.'

What impact the debate will have is open to speculation. I fear it may already be too late and senior figures have vetoed pubco reform in this parliament. I wait to be pleasantly surprised.

Final point

While this is not strictly lobbying - as it claims to be an independent report - the financial consultancy group London Economics published a report at the end of last year on what might happen to jobs in the sector were the pubco reforms enacted. Such were its findings that it could have been commissioned by pubcos - it wasn't, the Department for Business ordered the study.

In a worst case scenario, it warned that introduction of reform could lead to the closure of more than 6,000 pubs, taking with them up to 40,000 jobs. Its conclusions were in stark contrast to earlier studies - such as this from the Federation of Small Business - which indicated publicans planned to expand if they were freed from the tie.

However, the London Economics report seems to me to be somewhat hampered by some major flaws. The most significant failing was that it failed to take into account the financial stability, or otherwise, of the pubcos (only yesterday the perilous position of Punch Taverns was exposed yet again as warned it could default on its debt if its latest restructure is blocked by bondholders). The debts of pubcos appears not to be mentioned anywhere in the document's 34 pages. And it fails to take into account a pubco may deliberately run down a pub to sell on simply to service its debts. Pubcos may deny such a practice occurs but it is a very familiar story.

Moreover, while London Economics received much of its data from the pubcos themselves, it seems not to have spoken to any pub reform campaigners, or studied their literature; I certainly didn't find any reference to either. 

The study also makes claims which appear not to be the case, such as pubcos being 'responsible for capital costs ie maintenance'. It only takes a brief conversation with tied publicans to discover they can be liable for a whole range of capital costs. And it makes the completely unfounded assumption that 60 per cent of drinkers whose pub shots move to another pub; there is no evidence to support this figure and for drinkers in cities it seems extraordinarily low.

There are at least two sides to every debate, of course, but in this case asking for the contributions of a wide range of voices, would seem to be a prerequisite for any worthwhile, 'independent' report. 

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