Enterprise rounds on tie-breakers
Enterprise Inns chiefs mounted a strong attack on tenants buying outside the tie when they gave evidence to MPs in the pubco inquiry.
They accused wholesalers of being complicit with the practice and Enterprise boss Ted Tuppen said there was "strong evidence" that licensees do it as a way to avoid paying tax.
Tuppen and Punch chief executive Giles Thorley defended the conduct of pubcos and the beer tie when they gave evidence in the second hearing of the Business and Enterprise Committee probe into pubcos.
Tuppen said last year four wholesalers made out-of-tie deliveries to "a large number" of Enterprise pubs. Payments are in cash and VAT, income tax and corporation tax were not paid, he claimed.
Enterprise chief operating officer Simon Townsend said six licensees in the Sheffield area had made illegal purchases amounting to £72,000. "We will be persuing that with the full force of the law," he stressed.
"We have good photographic evidence of wholesalers have been providing equipment to pubs to bypass beerflow equipment."
However, he added: "I don't believe this is large-scale."
Tuppen said: "We found another pub close to a football ground that put in special equipment on match days and stole £40,000 of beer in the last four years.
"This is not a Robin Hood crime."
Defending the tie
Pubco bosses were pressed on a number of aspects of the tie by the MPs during the two-hour grilling.
They highlighted changes they had made since the previous inquiry from 2004. Enterprise pointed to areas such as increasing the cooling off period for new tenants from 90 days to six months and Punch spoke of new support such as new training programmes and catering support.
On the issue of rents, Tuppen said the average increase for tenants since the 2004 inquiry has been 10.4%, lower than the RPI of 16.1%. For both pubcos, upward-only rent reviews causes, when they do still exist, are not acted upon, they said.
The pubcos were accused of letting tenants be "seduced" into parting with their cash by attractive adverts, but Tuppen said the company turns down about two out of three business plans to ensure only capable people take its pubs.
Tuppen spelled out his view of the damage that would be caused if the tie was scrapped. "Were the tie to be removed we would become straight forward property companies and wouldn't see anything like the £9m of support to licensees [we have given] in the last year.
"We have an interest in success of our pubs that is exactly aligned with those of the licensees."
Tuppen and Thorley also rejected arguments that their debt levels were "reckless", saying they amounted to about 60-70% of asset value, similar to most house mortgages.
