12 January 2012
Speaking during a debate on the Government’s proposals for reform of the pub industry on Thursday, Peter Aldous highlighted unfairness in the rating system which puts community pubs at a disadvantage.
Peter Aldous (Waveney) (Con): I am grateful to the Backbench Business Committee for granting this debate and to the hon. Member for West Bromwich West (Mr Bailey) for securing it.
Before I came to this place, I spent 27 years as a chartered surveyor. During that time, I carried out rent reviews on most types of business properties, although my experience with licensed premises was peripheral. Underpinning most rent review valuations is a requirement to assess the open-market rental value. That is the best way of establishing a rent that is fair to both parties, providing landlords with a fair return on their investment and tenants with a reasonable opportunity to build a sustainable business into the long term. If the two parties are unable to agree, the matter is referred to an arbitrator or an independent expert.
It is bizarre that a procedure that is routine for the vast majority of business people who lease premises is not available to a particular group: pubco tenants. Research produced by CAMRA shows that such publicans are at a considerable disadvantage compared with non-tied operators. They are worse off financially and work harder for a lower return, normally burning the midnight oil, tackling red tape and filling in the dreaded VAT return.
The tied system has some advantages in that it can provide an opportunity for people to set up their own businesses without having to raise large amounts of capital, and it continues to form an important part of many family brewing businesses. However, it should have the potential to act as a stepping-stone, with people then moving on to own their own businesses, as we heard from my hon. Friend the Member for Staffordshire Moorlands (Karen Bradley); it should not drive people out of business altogether.
The tied system was devised in a different era, which is long since gone, when the pub market was dominated by many family brewers, who wanted to ensure that their pubs sold their beer. Those brewers had a vested interest in ensuring that their pubs were well run, and landlords duly received support. In return, they bought their beer directly from the brewers, with no middleman in between. Many of those breweries were household names, but they have long since gone. Tollemache, Cobbold, Lacons, Bullards and Manns owned pubs across Suffolk and Norfolk. Today, only Greene King and Adnams remain, along with micro-breweries such as Green Jack in Oulton Broad in my constituency. Greene King and Adnams continue to run their tied houses well and successfully, but the market is now dominated by pubcos, which do not brew their own beer; they are middlemen taking their margin, and they have different business objectives from the family brewers. Given those changes, it is appropriate that the tied system should be reformed, and the proposals in the motion appear sensible and logical.
As we have heard, there are other issues that need to be addressed: the taxation of beer; the reform of licensing laws, which, since 2003, have made it more difficult to play live music; and the below-cost sale of alcohol by supermarkets. However, for me as a chartered surveyor, there is one other subject that needs to be addressed: the rating system. Many publicans scratch their heads over how the Valuation Office Agency has arrived at such a high rateable value assessment for their properties. The art of rating valuation has, I am afraid, become totally abstract and distant from reality. Town centre drinking barns, which are subject to a different rating regime, seem to have an unfair advantage over community pubs. That anomaly needs to be addressed, but that is a debate for another day.
Mr Davey: I wanted to intervene on the hon. Gentleman before he finished his remarks, because he is a chartered surveyor. I therefore invite him to welcome the fact that, in our negotiations with the BBPA, we secured a strengthening of the industry framework code, which will specify that all rent review assessments must comply with Royal Institution of Chartered Surveyors guidance, and that rent assessments for new full repairing and insuring leases must be signed off by a RICS-qualified individual.
Peter Aldous: I am grateful to the Minister for giving that clarification.
In the meantime, let me conclude by saying that although there are other issues that need to be addressed to enable pubs to compete on a level playing field, we have an opportunity to address an iniquity that, in many respects, is leftover from a bygone age. I therefore support the motion.
| Hansard
Peter Aldous (Waveney) (Con): I am grateful to the Backbench Business Committee for granting this debate and to the hon. Member for West Bromwich West (Mr Bailey) for securing it.
Before I came to this place, I spent 27 years as a chartered surveyor. During that time, I carried out rent reviews on most types of business properties, although my experience with licensed premises was peripheral. Underpinning most rent review valuations is a requirement to assess the open-market rental value. That is the best way of establishing a rent that is fair to both parties, providing landlords with a fair return on their investment and tenants with a reasonable opportunity to build a sustainable business into the long term. If the two parties are unable to agree, the matter is referred to an arbitrator or an independent expert.
It is bizarre that a procedure that is routine for the vast majority of business people who lease premises is not available to a particular group: pubco tenants. Research produced by CAMRA shows that such publicans are at a considerable disadvantage compared with non-tied operators. They are worse off financially and work harder for a lower return, normally burning the midnight oil, tackling red tape and filling in the dreaded VAT return.
The tied system has some advantages in that it can provide an opportunity for people to set up their own businesses without having to raise large amounts of capital, and it continues to form an important part of many family brewing businesses. However, it should have the potential to act as a stepping-stone, with people then moving on to own their own businesses, as we heard from my hon. Friend the Member for Staffordshire Moorlands (Karen Bradley); it should not drive people out of business altogether.
The tied system was devised in a different era, which is long since gone, when the pub market was dominated by many family brewers, who wanted to ensure that their pubs sold their beer. Those brewers had a vested interest in ensuring that their pubs were well run, and landlords duly received support. In return, they bought their beer directly from the brewers, with no middleman in between. Many of those breweries were household names, but they have long since gone. Tollemache, Cobbold, Lacons, Bullards and Manns owned pubs across Suffolk and Norfolk. Today, only Greene King and Adnams remain, along with micro-breweries such as Green Jack in Oulton Broad in my constituency. Greene King and Adnams continue to run their tied houses well and successfully, but the market is now dominated by pubcos, which do not brew their own beer; they are middlemen taking their margin, and they have different business objectives from the family brewers. Given those changes, it is appropriate that the tied system should be reformed, and the proposals in the motion appear sensible and logical.
As we have heard, there are other issues that need to be addressed: the taxation of beer; the reform of licensing laws, which, since 2003, have made it more difficult to play live music; and the below-cost sale of alcohol by supermarkets. However, for me as a chartered surveyor, there is one other subject that needs to be addressed: the rating system. Many publicans scratch their heads over how the Valuation Office Agency has arrived at such a high rateable value assessment for their properties. The art of rating valuation has, I am afraid, become totally abstract and distant from reality. Town centre drinking barns, which are subject to a different rating regime, seem to have an unfair advantage over community pubs. That anomaly needs to be addressed, but that is a debate for another day.
Mr Davey: I wanted to intervene on the hon. Gentleman before he finished his remarks, because he is a chartered surveyor. I therefore invite him to welcome the fact that, in our negotiations with the BBPA, we secured a strengthening of the industry framework code, which will specify that all rent review assessments must comply with Royal Institution of Chartered Surveyors guidance, and that rent assessments for new full repairing and insuring leases must be signed off by a RICS-qualified individual.
Peter Aldous: I am grateful to the Minister for giving that clarification.
In the meantime, let me conclude by saying that although there are other issues that need to be addressed to enable pubs to compete on a level playing field, we have an opportunity to address an iniquity that, in many respects, is leftover from a bygone age. I therefore support the motion.
| Hansard
