Election special
Government policy: Looking back at the last 5 years for pubs
Six months after coming to office, Prime Minister David Cameron told Parliament during British Pub Week “I’m a big supporter of British pubs. I want us to be a pub-friendly Government.”
Only a week earlier he had appointed — under pressure from the Campaign for Real Ale (CAMRA) — the nation’s first community pubs minister, Bob Neill.
If signals are anything to go by, Cameron was sending out all the right ones. Pubs were on the agenda. They were, in their role as community hubs, part of the Big Society, key to the PM’s unifying vision in those early days of the coalition.
And while the Utopian notion of Big Society has been quietly forgotten, pubs still trigger the political dopamine. Researching this feature, I made a call to the Department for Communities & Local Government. As soon as I mentioned the word ‘pub’, before I’d even asked a question, the woman answering the phone frothed: “Ooh, we love pubs!”
Love
But how well, exactly, has the Government expressed this love during the past few years?
The National Planning Policy Framework, published in March 2012, spelt out the view that pubs are among the institutions that provide the social, recreational and cultural facilities any community needs and that we should guard against their unnecessary loss.
To that end, the Government put £250,000 into Pub is The Hub and the Plunkett Foundation to help bolster the services that pubs provide, and to help communities take over and run their pub on a co-operative basis.
This was later backed up by legislation to enable pubs, along with other businesses, to be listed as an Asset of Community Value (ACV), which gives communities six months to get their act together to bid for their local should it come under threat. Current community pubs minister Kris Hopkins has now strengthening that measure with ACV-listed pubs also needing planning permission before a change of use.
ACVs have proved popular. More than 600 pubs have been listed so far. But that’s only the first step.
Community groups have to raise the cash, as well as grapple with numerous operational and market challenges, and most give up before making a bid.
According to the Plunkett Foundation, there are now 34 co-op pubs, defined by strict criteria, though they are increasing fast and you could probably add a few dozen more with a looser definition of ‘community-owned’.
Market rent-only option
But in spite of some inspiring case studies, you have to set that against a broad picture that has seen almost 5,000 pubs close since 2010. Appealing a prospect as it is, relying on communities alone to save the pub is like bailing out the Titanic with a tea cup.
For its whole term of office, the coalition also grappled with the controversies around the tied-house system and the relationship between pub companies and their tenants. Ballroom dancing business secretary Vince Cable performed the old slow-slow-quick-quick-slow, taking an age to make his mind up before declaring that a statutory code enforced by an independent adjudicator was the answer.
Then, against Government’s intentions, MPs sprung a surprise by adding a market rent-only (MRO) clause to the code, giving tenants a statutory option of buying outside the tie in return for a higher rent.
What about the macroeconomy?
The bigger picture
On a slow news day, you might find the trade press twisting and stretching big national stories to come up with an angle that’s peculiarly relevant to the industry they write about. It’s a dangerous game that can make it seem like an issue is being trivialised, which is much more serious and important than, say, pubs.
Yet when it comes to what’s happening in the wider socio-economic environment, and the way government policies impact on the world, there’s no doubt pubs, and their chances of success and survival, are caught up in it.
The Conservative and Liberal Democrat coalition took charge of an economy that was already in a long recession, one which hit the pub trade hard. Only recently have we begun to pull out of it.
The big question of the election campaign is whether the Government could have done more to generate a speedier recovery.
Prioritising the reduction of the deficit by cutting welfare and increasing VAT stifles demand in the economy generally, and disproportionately affects working class pubgoers.
Unemployment is down, but has been replaced by under-employment — part-time jobs and zero-hours contracts. More working families than ever before are on benefits to top up their income, and those benefits are being cut.
The Labour Party, which it’s true has an axe to grind, calculates that average annual gross pay, adjusted for inflation, fell by more than £1,600 between 2010 and 2014.
Using different measures, the Institute of Fiscal Studies reports that median household incomes fell from £473 a week in 2009/10 to £453 in first two years of the Cameron Government before recovering somewhat to £461 in 2014/15.
That’s just the average. Many pubgoers will have suffered more. It all means there’s been less money to spend over the bar, as publicans know only too well.
And where there have been pub businesses that have done well and have an opportunity to grow, it’s been hard for them to raise funding for expansion. The same goes for giving failing pubs the investment they need, and for rescuing pub premises from the clutches of supermarkets and developers. Where is the money coming from?
Despite hundreds of billions of pounds in quantitative easing, the banks have barely been lending more, and remain especially cautious when it comes to pubs.
So while there are signs of recent improvements in the wider economy, the question publicans might ask themselves is how much damage has been done by this prolonged downturn?
And, the really big one, how long might a recovery last before we dip into recession again?
The pubcos were horrified, but it looks like the Government has been able to calm their fears with some judicious hedging. According to latest reports, both sides of the debate are happy with the proposed arrangements. If that’s true, the coalition will go down in history should perhaps have a crack at reconciling the Palestinians and the Israelis, which can’t be any more difficult.
In the longer term, the MRO option is nevertheless likely to provoke further industry restructuring, the regional brewers taking their tied estates closer to the 500-pub statutory code threshold while larger companies look to franchise agreements that fall outside the MRO and multiple operators continue to expand their managed estates.
Five or 10 years down the line, the outcome might start to look quite healthy. Though it would be hard to see that as entirely intentional on the Government’s part.
Beer duty cuts
A more calculated contribution has, of course, come from Chancellor George Osborne, who has now made an unprecedented three successive cuts to beer duty as well as scrapping predecessor Alistair Darling’s punishing duty escalator.
The Centre of Economics & Business Research, in a report commissioned by CAMRA, estimated in advance of Osborne’s last Budget that, had the escalator kept running, more than 1,000 extra pubs would have closed.
It’s hard to be sure of the accuracy of that with so many other factors in play, but by giving fiscal form to fine words, the duty cuts have given operators a little more margin to work with and have certainly boosted business confidence, restoring much of the industry’s support for its natural ally, the Conservative Party, going into the next election.
It’s also distracted attention from the campaign to cut VAT for hospitality businesses, a measure that would close the food and drink price gulf between pubs and supermarkets that politicians have largely chosen to ignore.
There have been some other modest gains, though. Rate relief for small businesses has been doubled, and for pubs with rateable values of up to £50,000, a further temporary discount is now available, worth £1,000 in 2014/15 and £1,500 in 2015/16.
According to the Department of Community & Local Government, a total of 600,000 small businesses benefit from rate relief with about 400,000 paying nothing at all. Unfortunately, figures for pubs have not been broken out.
Other measures
The Government has also given local authorities powers to grant discretionary business rates discounts to pubs, meeting half the costs itself, although it’s not yet clear what the take-up of that option has been.
The Focus on Enforcement initiative has also been welcomed by the pub industry for its commitment to cutting back on red tape. One positive result has been new guidance on the use of CCTV cameras, which should mean that licensing author-ities won’t insist on their installation in pubs unless they are strictly necessary.
Licensing regulations around live music have been relaxed, too.
Other measures have been more ambivalent. Take glass sizes, for instance. It’s now possible for pubs to serve beer in two thirds of a pint, a welcome flexibility, especially if you’re selling strong craft brands on draught.
Yet changes to mandatory licensing conditions that came into force last autumn insist that small measures, such as 125ml glasses of wine, must be made available, meaning, for some, a considerable extra cost.
In the kitchen, new guidance has cleared up confusion about whether you really need two sets of equipment to prepare food. You don’t – washing a single set is enough to prevent cross-contamination.
But then new laws introduced last December on advising customers about allergens in food caused more worry for licensees.
So it’s certainly not been all give from the coalition. Like any government, it has hesitated and vacillated and compromised on issues that affect the pub industry.
Drawing up a balance sheet, the beer duty cuts alone will probably put it in the black for most. But can we be sure of a fourth or fifth favourable Budget should the Tories be returned to office?
How will the statutory code with added MRO play out? And how might the strange whims of alcohol policy impact on pubs?
Place your bets and mark your cross.
Alcohol policy
For the Cameron Government, pubs, or at least ‘community’ pubs, have provided some solid policy ground amid the tossing seas of the alcohol question.
Although it was a different matter 100 years ago, today you can separate out pubs as the home of responsible drinking, a lobbying point the industry has managed to score in recent years.
But there’s a tension here. Within three months of coming to office, the Home Office had launched a consultation on ‘Rebalancing the Licensing Act’, claiming that the 2003 legislation had “introduced a new drinking culture in our towns and cities”, one of “alcohol-fuelled crime and antisocial behaviour”. The gains of a more liberal licensing regime would have to be rolled back.
While acknowledging that most pubs and bars were responsible businesses, local authorities, police and residents were given greater powers in making licensing decisions. Councils are able to restore blanket closing times with early-morning restriction orders and charge operators that stay open after midnight a late-night levy to help pay for policing.
They are measures the trade would spend a lot of time and money contesting from town to town and city to city with varying degrees of success.
The original consultation also mentioned banning the sale of alcohol at below-cost price. Meanwhile, efforts by the health lobby to persuade Government to introduce a much tougher minimum unit price were gaining momentum, and this was reflected little more than 18 months later by the Government Alcohol Strategy.
Again the target was ‘binge drinking’ and the focus on disorder, but this time the measures went further. “We will introduce a minimum unit price for alcohol,” it unequivocally announced.
The pub industry was split. Some believed a minimum price, by narrowing the growing gulf between off-trade and on-trade pricing, would help tempt people back into pubs. An alternative analysis suggested it would merely mean people had less money and would cut back on trips to the pub. Others worried where a minimum price, once started, might stop.
We may never find out. Under pressure from the drinks industry big guns, the Government about-turned and fell back on banning below-cost pricing, which makes barely any difference at all.
Responsibility
But something else was going on. Government and the drinks industry agreed on a Responsibility Deal, binding the industry to a number of pledges. While most of the health bodies originally involved in the plan walked away from the table, it happened anyway and — on its own terms — has been a success.
Alongside pledges on labelling, marketing and education, perhaps the most dramatic initiative has been to slash 1bn alcohol units from the UK marketplace, chiefly by making lower strength products available.
This is the sort of self-regulating alcohol policy the industry can live with. On the ground, though, pub operators continue to grapple with local authorities that are quickly growing into their larger licensing powers.
This has arguably been the main trend in alcohol controls during the past few years — from national to local. How much further that will go in future will depend on whether the next government chooses to take matters more into its own hands.
What’s not in doubt is that pressures from the media and from the health and public order lobbies to ‘do something’ about the drink question aren’t going to go away.
