Anthony Hilton: Reckless policymakers killed our pubs: what will their next reform ruin?

For almost 30 years I have taken a perverse pride that a book of mine had the worst title of any business book ever published, but this week I ceded the crown at the launch party for Intervention in the Modern UK brewing Industry* written by an old friend, Simon Ward, and three like-minded colleagues.

They, collectively, have an encyclopaedic knowledge of British brewing. I was there because I had contributed the foreword.

In spite of the title, it is a fascinating book which ought to be compulsory reading for every minister, politician and senior civil servant – as well as everyone else with an interest in how policy is made in this country and why it goes horrendously wrong.

The book tells the story of how in 1989 the Thatcher government passed legislation which became known as the beer orders, and which were arguably the most far-reaching – and reckless – intervention in private industry inpost-nationalisation Britain.

It tells the story of how Margaret Thatcher and her Trade minister, Lord Young, both declared champions of free enterprise, produced one of the most ill-thought-out bits of legislation ever to make it to the statute book, when they decided to end the system under whichbrewers were allowed to own large chains of pubs through which to sell their beer.

The argument was that the tied house system restricted competition and gave consumers a poor deal. But whatever the faults of the old system, the cure was massively worse. The result of the beer orders was that giant pub companies bought up the brewers' pubs and created monopolies far more exploitative than those they were designed to replace.

Worse, these were mostly runby people whose skills were in financial engineering rather than catering for the customer, so they over-borrowed against the property, jacked up the rents, imposedonerous supply agreements ontheir tenants and failed to invest in their estate. This more thananything else is what has destroyed the pub as the centre of community life in this country.

The customer benefit is hard to see. Though there is a wider choice of brands available in pubs, the cost of a pint of beer has risen for 20 years significantly faster than the rate of inflation. The regional and national brewers, many of which were pillars of their local communities and genuine supporters of local charities, football clubs and the rest, found they could not produce at the low prices demanded by the newly created pub companies, which were in effect monopoly buyers. They were forced to sell up.

Today the industry is in the hands of a handful of foreign-owned multinational giants, producing homogenised products which in taste are almost impossible to tell apart, and with no local ties.

This book tells the story of a thriving British industry destroyed by political dogma and amateurism. It would be nice to think that policy-making has improved in the interim so something similar could not happen today. Nice, but foolish.

The Metro Bank mantra

People who live or work in central London may already have come across one of the 10 branches of Metro Bank. They, like me, might have wondered what on earth makes someone think now is a good time to launch a bank.

Well, on Wednesday, I got the answer, direct from Anthony Thomson, the man behind Metro.

Where banking has gone wrong – indeed where financial services generally have gone wrong – is in thinking the purpose of business is to make a profit. This leads them to do all sorts of things customers don't like. But in his view the purpose of a business is to make a product or provide a service that customers value because it gives them a benefit. Do that successfully and the profits will follow.

The second mistake banks make is to believe that everything comes down to price – that the customer will always buy what is cheapest.

That, however, is not how people behave. They don't buy the cheapest food, the cheapest clothes, and the cheapest car, or go on the cheapest holiday. They buy what they think gives them the best value in terms of what they can afford and which best suits them at the time. So Metro bank will be a little bit more expensive – in other words, it will pay slightly lower interest rates on its deposits that its competitors, but it will spend the extra money on delivering top-quality customer service. His banks are open early in the morning and don't close till 8pm. They are also open all day Saturday and Sunday. There will be no attempt by counter staff to sell customers other products. Everything is to be focused on getting the customer experience right, because if they are happy with the experience they will be willing to pay that little bit more. That extra will be enough for Metro to prosper.

So is it working? Well, he has only been going a few months, but he could be on to something, because 80 per cent of the new accounts they are opening are the result of referrals by existing customers.

So the plan is rapidly to open more branches – doubling and redoubling in size till he has about 200 to 250 loosely within the M25. That, he thinks, will take about 10 years, at which point he says he should have about £2.5bn of assets. This would be about 7 per cent of the London banking market, and assuming the average return of 1.1 per cent on assets, it would give him a profit of £250m to £300m.

Also pencilled in is a plan to go public, probably in 2014, at which point we will know if he is right in his belief – that it is possible for a bank to have happy customers and happy shareholders.

The whiplash nation

The Transport Select Committee reported on Thursday that whiplash claims added £90 or more to the annual cost of a typical motor insurance policy. Implying that some at least of these claims are bogus, it suggested that insurers should take a tougher line before agreeing topay out.

It reminded me of a lament I heard over lunch from the then head of Norwich Union about 10 years ago. In our parents' day, he said, when passers-by saw a road accident they would rush to the scene to help the passengers get safely out the car. Today if they see an accident, they jump into the back seat and file a claim for whiplash.

*Intervention in the Modern UK Brewing Industry by John Spicer, Chris Thurman, John Walters and Simon Ward; published by Palgrave Macmillan