The Rt Hon Michael Fallon MP

Minister of State for Business and Enterprise

Department for Business, Innovation and Skills

1 Victoria Street
London  SW1H 0ET

Date: June 7^th 2013 

Dear Michael,

I am writing to you about the current situation for tied pub tenants, who are currently locked into unfair contracts which make it more difficult for them to earn a living and keep Britain’s pubs open.

As I’m sure you are aware, pubs are an important part of this country’s heritage and play a role in local communities, as well as contributing to the economy. However, an estimated 26 pubs are closing each week across the UK, causing a loss of jobs and revenue as well as local facilities and community cohesion.

The Office of Fair Trading has reported that the average tied lessee who rents a pub from a pubco is being overcharged by around £12,000 per year, or £230 per week. BIS itself has concluded that pub companies will overcharge tied tenants for rent unless they are prevented from doing so. Some experts calculate that this system has resulted in the price of a pint of lager being an average of 80p higher, with ale 65p higher than justified by inflation and tax changes. This is pricing tied pubs out of the market and contributing towards their closure.

The current situation is damaging individual businesses and the wider economy, so I support your Department’s plans for legislation. I urge you to ensure that the statutory code for tied pubs is sufficiently rigorous to be effective and includes Option 3 of the BIS consultation. This is known as the ‘freedom option’, and guarantees tied tenants the option of buying products on the open market and paying a fair market rent for pub premises, rather than being tied into an unfair and extortionate pricing structure. GMB, whose members include tied pub tenants, has warned that without Option 3 pub companies will be able to put rents up by stealth, by overcharging for the products tenants are tied into buying from them if rents are reduced.

I have signed EDM 57 which welcome the Government’s commitment to introducing a statutory code of practice to ensure fair dealing by pub companies, and that tied licensees should not be worse off than those who are free of ties. The EDM also notes that large companies take more than is fair or sustainable from pub profits, in both inflated product prices and excessive rents, causing the failure of pub businesses nationwide. The EDM, which has received wide cross-party support, supports the ‘freedom option’, as does the Business, Innovation and Skills Select Committee.

The beer and pub sectors support around a million jobs in the UK. Each pub contributes around £80,000 to local economies like that in my Brighton Pavilion constituency, and pays £66,500 in beer tax every year. I urge you to take action now to ensure that the tied pub tenants who work hard to keep Britain’s pubs open are able to access a free and open market, and are not forced to pay unfair rents or excessive product prices. This would help secure a thriving, sustainable pub sector, safeguard jobs and build a resilient economy.

Yours sincerely,

Caroline Lucas, MP, Brighton Pavilion