The politics of drinking
             March 22, 2010

The Healey Plan: a licence for tie-slashing

He’s only gone and bloomin’ done it. John Healey, the minister for pubs, amazed nearly everyone last week by coming out with a robust, comprehensive plan to save the pub. Of course, that doesn’t mean anything’s going to happen. For a start, the election is only six weeks away, and implementation will be down to whoever forms the next government. But let’s be generous and take the proposals seriously. What do they mean?

Healey himself has foregrounded the £4m funding behind the plan, £3.3m of which is earmarked as business support to help communities buy their local. This is a splendid idea. One possible model for a future pub industry, even. But why so little? At my estimate (hampered by running out of space on my calculator screen) that’s £1 for every £200,000 the government has spent bailing out the banks. And saving pubs will produce real jobs.

A more far-reaching aspect of the plan addresses the controversial business model that dominates the industry. Healey wants pub owners to offer tenants free-of-tie leases. This has been welcomed by groups campaigning for a fairer deal for tenants, although it effectively deflects growing calls for a Competition Commission investigation into the system.

To me, it doesn’t smell right. I’m not sure Healey and his advisors have quite understood the issue. The official announcement says “we will be slashing ‘beer ties”. Slashing? Really? A strange choice of terminology.

The document talks about “pub companies”, a term usually reserved for non-brewing multiple operators. Healey had to be asked whether or not the tie-slashing also applied to family brewers. He said it did.

Not surprisingly the family brewers are stressed about this. Unless they can convince their tenants not to take the free-of-tie option they may well go to the wall, or at least be forced to choose between running a pub estate and brewing an ale brand that can succeed amid fierce competition in the open market. Doing both may no longer be an option for them.

There is also the question of transition to this new regime. It could be chaos, as Morning Advertiser editor Paul Charity has suggested. The tie is embedded in the business model, and if the major pubcos are going to carry on they’re going to have to find some way to compensate for the loss of the money they make on beer margins, presumably through upping the dry rent.

On the other hand, the model is already in crisis. There isn’t enough cash around at the moment for landlord and tenant to both make a living. It could be, as I’ve mentioned before, that commercial pressures are already forcing drastic changes on the pubcos. The way they’re shifting pubs out of their estates is evidence of this.

The upshot of the Healey plan may only be to accelerate this process. Further down the line that will mean more pubs closing.

It’s wrong, though, to describe this as the New Beer Orders. Because it’s really the Old Beer Orders, still inexorably playing themselves out.

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