Why a new quango will not save Britain’s over-taxed pubs

 
Allister Heath
WHAT is wrong with this government? Does it really think that the answer to the slow demise of Britain’s pubs is to create a new quango? This supposedly pro-market government now believes in employing more officials to tell companies how to run themselves, imposing a statutory code of conduct for pub landlords and setting up an independent adjudicator for tenant publicans. All of this is bound to lead to a raft of unintended consequences, most likely precipitating the further decline of that industry.

We shouldn’t find anything that emanates from our so-called business secretary Vince Cable shocking any more, but the language used yesterday was astonishing, especially the use of the word “exploitation”. Even Labour wasn’t this bad. Cable clearly doesn’t like the tied pub system. While he claims not to want to axe it, that is the way many believe the policy is moving. Yet the system helped many pubs survive the recession.

When the OFT investigated the matter in 2009-10, it found that tied tenants were able to compete and that the interests of landlords and tenants were aligned: “any strategy by a pub company which compromises the competitive position of its lessees would not be sustainable, as this would be expected to result in sales and margin losses for the lessee and, in turn, for the pub company”.

A recent House of Commons Business Select Committee accepted that there is “little evidence to indicate that tied pubs are more likely to close”, and that “data produced by CGA Strategy clearly shows that between December 2008 and June 2011 more free-of-tie pubs closed than tied pubs, both in absolute figures and as a percentage of the total number of pubs in that category”.

Unfortunately, facts don’t matter: yesterday’s document suggests that this is about fairness, not competition, a loose and meaningless concept which apparently now allows the state to impose any outcome it wants without any real evidence, including undoing private contracts.

What is so depressing about this is that it just confirms that the coalition is utterly muddled in its approach to the economy, philosophically as well as practically. It keeps acting in a contradictory manner. This is true on beer and pubs – George Osborne rightly cut the tax on beer at the Budget, while Cable is now attacking the industry – as it is with everything else.

It is great to see Osborne take the EU to court over the hideously extra-territorial Tobin tax, which is going to affect the City and transactions that take place in London, even though the UK is supposedly exempt. Similarly, the privatisation of the government’s stake in Urenco is a step in the right direction, as is the looming privatisation of Royal Mail, which is as necessary as it is overdue. But while some parts of the government get it, others clearly don’t.

The accelerating demise of the British pub industry is partly being caused by a major cultural shift – less alcohol is being consumed, and pubs aren’t as fashionable – but primarily by deliberate or accidental state action. Taxes on alcohol, business rates and national insurance are crippling; combined with red tape, the smoking ban and high property prices caused by silly planning rules, the playing field is now massively tilted against pubs and in favour of home consumption. Even without state action, pubs would be in decline – but politicians are their biggest enemy. So when Cable claims that his quango will seek to rescue the industry from “short-termism”, it is hard to know whether to laugh or to cry.

allister.heath@cityam.com
Follow me on Twitter: @allisterheath