The politics of drinking
           April 15, 2013

Thatcher’s alcohol legacy
Part 1: The Beer Orders

Amid the tsunami of verbiage in the wake of the earthquake that was the death of Margaret Thatcher, barely a drop has mentioned her impact on alcohol policy. The only teacupful tossed into the maelstrom, so far as I can see, has come from researcher and blogger Will Haydock.

Haydock makes an ambitious bid to locate the politics of drinking within the economics of Thatcherite neoliberalism, but there’s more that can be said, I think. And I’m going to say it.

I’m not sure how surprising it is, but apart from Haydock nobody has mentioned the 1989 Beer Orders, short of nationalisation arguably the largest state intervention in industry in recent British history.

Based on the recommendations of a Monopolies & Mergers Commission investigation into the tied house system, it forced the national brewers to sell off a total of 11,000 pubs between them, a third of their combined estates.

It was enough to precipitate a restructuring of the industry which saw five of those six brewers eventually exiting retailing - the exception being the one with the fewest pubs, Scottish & Newcastle, which as Heineken UK still has an arm’s length relationship with Star Pubs & Bars.

Not only that, each of those six national brewers were also taken over by foreign companies and absorbed into global brewing. The Thatcher government effectively decapitated the British brewing industry.

This certainly came as a shock to what was known a the ‘beerage’ at the time. Indeed, the complacency of the Brewers Society, which had understandably come to believe that it had the Conservative Party in its pocket, contributed to the ease with which the government was able to push the measure through.

But why would the Tories want to do it? And of all prime ministers, why should it have been free enterprise-loving Margaret Thatcher who presided over a government that would wield such state power against a British industry?

The root of the answer lies in the economic predicament that provided Thatcher with the opportunity to play her historically important role. As economist Michael Roberts explains in a welcome antidote to the cult of personality that has dominated the past week’s eulogies, Thatcher came to office with a job to do. Her mission, in the broadest terms, was to restore the profitability of British capitalism.

But why pick on the brewers? After all, as the semi-official industry account* argues, in the years leading up to the Beer Orders the brewers were making record, and growing, profits. But they were profits based on hiking the price of beer at the pump way ahead of inflation.

It was this that enabled the government to pitch the Beer Orders to the drinking public as something that would bring down the price of a pint. Which, of course, it didn’t.

But the key figure here is not profit but another, related, statistic in the MMC’s report – the brewers’ return on assets was declining sharply.

It wasn’t so much the age-old challenge of filling the mash tuns in a period of falling beer consumption. That had largely been achieved by the process of consolidation in which breweries had been taken over and closed down, reducing industry capacity.

The real nut to crack was the sprawling pub estates of the big brewers. Seen from the point of view of British capitalism as a whole, these were the assets that weren’t performing, a locked-up profitability that the brewers were sitting on to maintain market share and fill those mash tuns.

No doubt the Beer Orders didn’t quite play out in the way the Thatcher government envisaged. Rather than giving thousands of small businesses a chance to flourish, releasing all those pubs onto the market instead laid the basis for the growth of the giant tenanted pubcos, which had their own problems. But that’s capitalism for you.

Yet, more than 20 years on, many unprofitable pubs have closed and, just as significantly, there are scores of small multiple operators out there working those assets in ways the big brewers could not have dreamed. And the process continues.

There have been casualties, and real human misery caused by the Beer Orders. But that, after all, was always Thatcher’s way.

In part two of this mini-series I’ll be looking at Thatcherism and the rise of ‘new’ public health.

*The long-winded title of my edition, Intervention in the Modern UK Brewing Industry, has been slightly abbreviated. It contains some invaluable insider background and information but the authors seem to lean towards an unsatisfying cock-up theory of why the Beer Orders happened, mostly blaming Lord Young, himself very much Thatcher’s man.

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