Tuesday, November 25, 2008

There is a very important objective case to be made about this budget and I think we might be able to make mileage out of it:

YET AGAIN the government - New Labour - is being blamed for the clusure of thousands of pubs. BBPA is heading this call particularly vocally, standing as champion of the pub trade. Why? The truth is rather different. The government is misinformed about the state of pubs and this is why it believes pubs can accommodate duty increases and ride out the recession without the financial lifeline of vat reduction it is giving to all other small businesses.

WHY is the government misinformed? How has this come about? Why does the government not understand that what they are doing will make even more pubs close at an even faster rate?

It's because the pubcos are still making huge profits and telling everyone - the government particularly because the pubcos privately really fear do the tie may be under threat - that the tied model is 'robust and vibrant' and that their lessees are 'enjoying' earnings 70% more than the average adult full time worker. The implied messages are severalfold:

1) In these hard times pubcos are doing well; ergo, with the divisible balance of profit being split equitably, publicans are doing alright too, thank you Jack.
2) pubs are recession proof and any examples you hear and see to the contrary - with pubs closing, boarded up all over the country - these were mostly free of tie, outside the cosseting arms of pubco protection, badly run not viable and are the result of market settling - nothing to do with the pubco, in fact it's in spite of all the support the pubcos are pouring into these unfortunate pubs; these pubs struggle because of are exceptional circumstances; not enough people supporting their local; the supermarkets under cutting their prices, all the other trotted out reasons, duty, weather, smoking ban and so on and this means these particular – as opposed to all the other I’m alright thank you Jack pubs - pubs should be given tax breaks to keep them going.
3) the tie obviously works so don't get rid of it.

DO NOT GET SIDETRACKED the finger of blame for pub closures should be aimed at the real culprits NOT THE GOVERNMENT. THE real culprits are a handful of pubco CEO's - who have systematically, deliberately, knowingly put lessees in the precarious position they are in by squeezing ALL this industry's profit into their own and shareholders’ bank accounts while trumpeting to government that their tenanted model is 'robust and vibrant' and this makes our industry look like it can afford to absorb a bit more here and there.
Why did Tuppen offer a dividend? It was a gamble - To prove the model is working well even though times are hard. What message does it give the government?

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