Playing politics with pubs

By Rob Willock

- Last updated on GMT

Related tags: Tenanted pub summit, Tenanted pub sector, Enterprise inns, Mro

Willock: MRO 'no one knows with any certainty how the market will shape up'
Willock: MRO 'no one knows with any certainty how the market will shape up'
Did you follow the House of Commons debate that immediately preceded the successful amendment vote for a Market Rent Only (free of tie) option for pub tenants?

It was a tense affair among a disappointingly small number of MPs who, between them, made the final arguments of a long and drawn-out political intervention into the relationship between pubcos and their tenants.

It is unusual, if not unprecedented, for politicians to interfere in business relationships between parties who have exchanged contracts of their own free will. The fact that they have done so here must indicate the strength of feeling in Parliament about what they perceive to be the misbehaviour of some pubcos under the current regime.

Private matters

At our Tenanted Pub Summit in June, I asked Adrian Bailey — Labour MP, chair of the BIS select committee that investigated the pubcos, and an avid MRO advocate — whether he felt any unease at the prospect of instigating government intrusion into private commercial matters.

He admitted that he did, but plainly he was not worried enough to prevent himself and his colleagues from doing just that.

During last week’s tetchy Common’s exchanges Richard Fuller (no, not that one), Conservative MP for Bedford (Charles Wells country), warned against the temptation for elected representatives to meddle in matters of commerce, saying: “We believe that because we are politicians we can somehow magically understand what makes an entrepreneur and what makes an industry work.

"There are times when industries fail and when intervention is required, but they are far less frequent than we in this place would like to think is the case and we should be modest in our efforts to change things that are working. We should be precise about the regulations we seek to impose and we should listen intently to those who are affected by the changes we make.”

Mulholland's Law

So does ‘Mulholland’s Law’ — as the Lib Dem MP and self-appointed “pub champion” Greg Mulholland revels in describing his MRO amendment — offer that modesty and precision? Not according to City analysts and investors, who fled the tenanted pub sector last week, wiping £400m off the value of Enterprise Inns and Punch Taverns.

And not according to the pubcos themselves, who have more than hinted at a freeze on pub investments and a legal challenge to the legislation. And so we face those potential dreaded ‘unintended consequences’ that sometimes result from well-meaning rule changes.

CAMRA — front and centre of the campaign for MRO — appears unconcerned about the prospect of repercussions that could actually exacerbate pub closures, despite previously admitting naivety in its involvement in the Beer Orders fiasco.

Predictions

But its former CEO Mike Benner, who was the lead signatory in correspondence with the government demanding MRO as a “relatively straightforward solution to the pub industry’s problems”, left the organisation in June and now leads SIBA (the Society of Independent Brewers), which as an association expresses “concerns about the MRO option”.

It’s a complex matter, and the truth is that no one knows with any certainty how the market will shape up following the introduction of MRO into the tenanted pub sector.

The reality will inevitably lie somewhere between the Utopian vision of those that pressed for this reform and the direst predictions of those who argued for the status quo.

Related topics: Legislation

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3 comments

Fair Analysis

Posted by Objective Observer,

Rob outlines fairly where we are now, expressing that no one knows with any certainty what will happen next.

I share is carefully chosen words about Mr Mulholland and his chosen 'Mulhollands Law'characterisation. This implies a massive over inflated ego, rather than an acceptance that many contributed in making possible clause 142.

However let us not forget the mysterious on the day Government amendment which even took Government whips by surprise, I am given to believe it is still being discussed, and has been mentioned to the Solicitor General.

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Third time Lucky????

Posted by ken nason,

Unfortunately government intervention into the pub industry has been woefully disaster filled.

The beer orders supposed to break the regional monoplies of the brewers gave birth to the pubcos.

The 2003 licensing act designed to free the industry from restrictions and red tape and trade to the needs of the licensee easily and cheaply led to more red tape and cost and interference and restrictions on a licensee trading.

Now the COP with MRO designed to set the tenant free from his contractual "bondage"
Wonder what odds the bookies will give on this being "third time lucky"?

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Punch Tennant

Posted by Claude,

I have a Punch Pub which is 300 years old, I have a 10 year Vanguard lease with a fully repairing clause. I purchase a keg of fosters for about £147.00 and sell it at £3.50 a pint that's a cost to me of £1.67 a pint, after VAT I make £1.33 per pint. The only choice I have is to increase the price of a pint if I want a 50% margin I would need to charge £4.01 per pint. We have not made a profit in five years without MRO we will close

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