Replacement Preliminary Results

The following amendment has been made to the ' Preliminary Results' announcement released on 16 October at 7.00 a.m. under RNS No 2716C.

The 'Owners' earnings per share' table, for the 52 weeks ended 26 July 2020, shown in note 8 has been amended.  All other details remain unchanged. The full amended text is shown below.

16 October 2020

 

J D WETHERSPOON PLC

PRELIMINARY RESULTS

(For the 52 weeks ended 26 July 2020)

 

FINANCIAL HIGHLIGHTS	Var%
Before exceptional items (pre-IFRS 16)
Like-for-like sales	-29.5%
Revenue £1,262.0m (2019: £1,818.8m)	-30.6%
(Loss)/profit before tax -£34.1m (2019: £102.5m)	-133.3%
Operating profit £7.2m (2019: £131.9m)	-94.6%
Earnings per share (including shares held in trust) -27.6p (2019: 75.5p)	-136.6%
Free cash flow per share -54.2p (2019: 92.0p)	-158.9%
Full year dividend 0.0p (2019: 12.0p)	-100%
Before exceptional items (post-IFRS 16)
IFRS 16 did not apply in the previous financial year, so no comparison is included.
Loss before tax -£44.7m
Operating profit £17.0m
Earnings per share (including shares held in trust) -35.5p
After exceptional items (pre-IFRS 16)
(Loss)/profit before tax -£94.8m (2019: £95.4m)	-199.3%
Operating (loss)/profit -£6.0m (2019: 131.9m)	-104.6%
Earnings per share (including shares held in trust) -82.6p (2019: 69.0p)	-219.7%
After exceptional items* (post-IFRS 16)
Loss before tax -£105.4m
Operating profit £3.8m
Earnings per share (including shares held in trust) -89.9p

 

*Exceptional items as disclosed in account note 4.

 

 

Commenting on the results, Tim Martin, the Chairman of J D Wetherspoon plc, said:

 

"Warren Buffett, chairman of Berkshire Hathaway, commented in 1989 (below) on the dangers of what he calls the 'institutional imperative' and how it compels companies to stay on the same course, even if it's the wrong course - and how it compels companies to imitate competitors. The institutional imperative applies just as much to governments as it does to boards of directors. Professor Johan Giesecke, the Warren Buffett of epidemiology, is obviously perplexed in an April TV interview (appendix 1 below) as to how 100 countries all reacted, almost overnight, in the same way to the Covid-19 problem, based on the deeply flawed analysis of Imperial College.

 

"As Warren Buffett explains:

 

"My most surprising discovery: the overwhelming importance in business of an unseen force that we might call "the institutional imperative." In business school, I was given no hint of the imperative's existence and I did not intuitively understand it when I entered the business world. I thought then that decent, intelligent, and experienced managers would automatically make rational business decisions. But I learned over time that isn't so. Instead, rationality frequently wilts when the institutional imperative comes into play."

 

"For example: (1) As if governed by Newton's First Law of Motion, an institution will resist any change in its current direction; (2) Just as work expands to fill available time, corporate projects or acquisitions will materialize to soak up available funds; (3) Any business craving of the leader, however foolish, will be quickly supported by detailed rate-of-return and strategic studies prepared by his troops; and (4) The behavior of peer companies, whether they are expanding, acquiring, setting executive compensation or whatever, will be mindlessly imitated."

 

"Institutional dynamics, not venality or stupidity, set businesses on these courses, which are too often misguided. After making some expensive mistakes because I ignored the power of the imperative, I have tried to organize and manage Berkshire in ways that minimize its influence. Furthermore, Charlie and I have attempted to concentrate our investments in companies that appear alert to the problem."

 

"Since 100 governments adopted a lockdown strategy, it was very difficult for any government to adopt a different course. However, pubs eventually reopened in England on 4 July and in the rest of the UK shortly thereafter.

 

"The lockdown was far longer than was necessary to achieve its stated objective of 'flattening the curve' so as to assist the health service. Before pubs reopened, a detailed and comprehensive operating plan for the hospitality industry was nevertheless agreed on among the government, parliamentary committees, UK Hospitality, civil servants and other interested parties.

 

"The regulations and guidelines reflected in the plan drastically reduced pub capacity, but were carefully thought out and had the backing of the industry, legislators, licensing officials, local authorities and the public.

 

"For the two months following reopening, it appeared that the hospitality industry, in difficult circumstances, was adapting to the new régime and was getting 'back on its feet', albeit in survival mode.

 

"It appears that the government and its advisers were clearly uncomfortable as the country emerged from lockdown. They have introduced, without consultation, under emergency powers, an ever-changing raft of ill-thought-out regulations - these are extraordinarily difficult for the public and publicans to understand and to implement. None of the new regulations appears to have any obvious basis in science.

 

"For example, a requirement for table service was introduced - which is expensive to implement and undermines the essential nature of pubs for many people - pubs have now become like restaurants. Customers can approach the till in a shop, but not in a pub - which is, in no sense, 'scientific'.

 

"In addition, face-coverings, for which the health benefits are debatable, need not be worn while seated, yet must be worn to go to visit the bathroom - another capricious regulation.

 

"The most damaging regulation relates to the 10pm curfew, which has few supporters outside of the narrow cloisters of Downing Street and SAGE meetings. This has meant that many thousands of hospitality industry employees, striving to maintain hygiene and social-distancing standards, go off duty at 10pm, leaving people to socialise in homes and at private events which are, in reality, impossible to regulate.

 

"In marked contrast to the consistency of the comparatively successful Swedish approach, which emphasises social distancing, hygiene and trust in the people, the erratic UK government is jumping from pillar to post and is both tightening and tinkering with regulations, so we are now in quasi-lockdown which is producing visibly worse outcomes than those in Sweden, in respect of both health and the economy.

 

"Risk cannot be eliminated completely in pubs, but sensible social-distancing and hygiene policies, combined with continued assistance and co-operation from the authorities, should minimise it.

 

"Like-for-like sales in the first 11 weeks have been 15.0% below those of last year, with strong sales in the first few weeks, followed by a marked slowdown since the introduction of a curfew and other regulations, some of which are referred to above.

 

"The recent curfew and introduction of table service only have been particularly damaging for trade, depressing sales for customers who find it too much 'faff', at the same time as substantially increasing costs.

 

"As a result of recent changes in regulations, the outlook for pubs over the remainder of the current financial year is even more unpredictable than hitherto."

 

"The company has successfully adapted its business, over the last 41 years, to cope with widely different political and economic circumstances. We now employ over 40,000 people, 10,000 of whom are shareholders in the company, and are a major contributor to national income, paying approximately one pound in every thousand of treasury receipts in 2019 and in preceding years.

 

"However, the company and the entire hospitality industry need a more sensible and consistent regulatory framework in which to operate - the current environment of lockdowns, curfews and constantly changing regulations and announcements threatens not only pub companies, but the entire economy. The most important lesson, as Professor Mark Woolhouse of Edinburgh University has said, is that "lockdown just defers the problem; it doesn't solve it"."

 

Enquiries:

 

John Hutson                         Chief Executive Officer      01923 477777

Ben Whitley                          Finance Director                  01923 477777

Eddie Gershon                     Company spokesman         07956 392234

 

Photographs are available at: www.newscast.co.uk         

 

 

Notes to editors

1.         J D Wetherspoon owns and operates pubs throughout the UK. The Company aims to provide customers with good-quality food and drink, served by well-trained and friendly staff, at reasonable prices. The pubs are individually designed and the Company aims to maintain them in excellent condition.

2.         Visit our website jdwetherspoon.com

3.         The financial information set out in the announcement does not constitute the company's statutory accounts for the periods ended 26 July 2020 or 28 July 2019. The financial information for the period ended 28 July 2019 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under s498(2) or (3) of the Companies Act 2006. Statutory accounts for 2020 will be delivered to the registrar of companies in due course. The auditors have reported on those accounts: their report was unqualified, contained an emphasis of matter highlighting a materiality uncertainly related to going concern and did not contain a statement under section 498(2) or (3) of the Companies Act 2006. This announcement has been prepared solely to provide additional information to the shareholders of J D Wetherspoon, in order to meet the requirements of the UK Listing Authority's Disclosure and Transparency Rules. It should not be relied on by any other party, for other purposes. Forward-looking statements have been made by the directors in good faith using information available up until the date that they approved this statement. Forward-looking statements should be regarded with caution because of inherent uncertainties in economic trends and business risks.

4.         The annual report and financial statements 2020 has been published on the Company's website on 16 October 2020.

5.         The current financial year comprises 52 trading weeks to 25 July 2021.

6.         The next trading update will be issued on 11 November 2020.

 

 

CHAIRMAN'S STATEMENT

 

Financial performance

 

The company was founded in 1979 - and this is the 37th year since incorporation in 1983. The table below outlines some key aspects of our performance during that period.

 

Summary accounts for the years ended July 1984 to 2020

 

Financial year	Total sales	Profit/(loss)	Earnings	Free cash flow	Free cash flow
		before tax and exceptional items	per share before exceptional items		per share
	£000	£000	pence	£000	pence
1984	818	(7)	0
1985	1,890	185	0.2
1986	2,197	219	0.2
1987	3,357	382	0.3
1988	3,709	248	0.3
1989	5,584	789	0.6	915	0.4
1990	7,047	603	0.4	732	0.4
1991	13,192	1,098	0.8	1,236	0.6
1992	21,380	2,020	1.9	3,563	2.1
1993	30,800	4,171	3.3	5,079	3.9
1994	46,600	6,477	3.6	5,837	3.6
1995	68,536	9,713	4.9	13,495	7.4
1996	100,480	15,200	7.8	20,968	11.2
1997	139,444	17,566	8.7	28,027	14.4
1998	188,515	20,165	9.9	28,448	14.5
1999	269,699	26,214	12.9	40,088	20.3
2000	369,628	36,052	11.8	49,296	24.2
2001	483,968	44,317	14.2	61,197	29.1
2002	601,295	53,568	16.6	71,370	33.5
2003	730,913	56,139	17.0	83,097	38.8
2004	787,126	54,074	17.7	73,477	36.7
2005	809,861	47,177	16.9	68,774	37.1
2006	847,516	58,388	24.1	69,712	42.1
2007	888,473	62,024	28.1	52,379	35.6
2008	907,500	58,228	27.6	71,411	50.6
2009	955,119	66,155	32.6	99,494	71.7
2010	996,327	71,015	36.0	71,344	52.9
2011	1,072,014	66,781	34.1	78,818	57.7
2012	1,197,129	72,363	39.8	91,542	70.4
2013	1,280,929	76,943	44.8	65,349	51.8
2014	1,409,333	79,362	47.0	92,850	74.1
2015	1,513,923	77,798	47.0	109,778	89.8
2016	1,595,197	80,610	48.3	90,485	76.7
2017	1,660,750	102,830	69.2	107,936	97.0
2018	1,693,818	107,249	79.2	93,357	88.4
2019	1,818,793	102,459	75.5	96,998	92.0
2020	1,262,048	(34,095)	(27.6)	(58,852)	(54.2)

 

 

 

Notes

Adjustments to statutory numbers

1. Where appropriate, the earnings per share (EPS), as disclosed in the statutory accounts, have been recalculated to take account of share splits, the issue of new shares and capitalisation issues.

2. Free cash flow per share excludes dividends paid which were included in the free cash flow calculations in the annual report and accounts for the years 1995-2000.

3. The weighted average number of shares, EPS and free cash flow per share include those shares held in trust for employee share schemes.

4. Before 2005, the accounts were prepared under UKGAAP. All accounts from 2005 to date have been prepared under IFRS.

5. Apart from the items in notes 1 to 4, all numbers are as reported in each year's published accounts.

6. Financial year 2020 data is based on pre IFRS 16 numbers.

 

 

 

Hygiene Record and Reopening Preparations

 

For many years, Wetherspoon has emphasised the importance of hygiene standards, an area under close scrutiny today. Local authorities run a 'scores on the doors' scheme in England, Wales and Northern Ireland; this awards pubs from zero to five stars, following inspections by environmental health officers. Wetherspoon is rated the top large pub company, averaging 4.96 out of a maximum of five, with 758 pubs scoring a maximum of five.

Before pubs reopened after lockdown, the company, after consultation with employees, local authorities, the police and licensing officers, invested £13.1m to ensure that its staff and customers were safe.

Since reopening, Wetherspoon has operated comprehensive social distancing and hygiene practices in all of its pubs. These include reduced capacity levels, the spacing-out of tables, the installation of floor screens between tables and the addition of till-surround screens at the bar.

Staff conduct regular surface-cleaning, so that all hand contact-points in our pubs are frequently cleaned and sanitised throughout the day. Numerous hand sanitisers have been installed in each pub. All pubs are also thoroughly cleaned at the end of every trading day.

The Financial Consequences of the UK Government's Covid-19 Policies

 

The financial effects of the closure of pubs by the government in March, which lasted for approximately three months, were severe. Pretax profits* of £102m in the financial year ended July 2019 were followed by a loss of £34m* in the year of the lockdown - the financial year ended July 2020. In addition, exceptional costs of £29.1m were incurred in respect of Covid-19-related matters in FY20.

 

Wetherspoon and other pub and restaurant companies have always generated far more in taxes than is earned in profits. Wetherspoon generated total taxes of £764m in FY19 (see table below). In FY20, mainly as a result of the lockdown, total taxes paid to the government declined by £327m to £437m, net of furlough payments.

 

Taxes generated by Wetherspoon (including staff and customers):

 

	2020	2019
	£m	£m
VAT	244.3	357.9
Alcohol duty	124.2	174.4
PAYE and NIC	106.6	121.4
Business rates	39.5	57.3
Corporation tax	21.5	19.9
Machine duty	9	11.6
Climate change levy	6.1	10.4
Carbon tax	0	1.9
Fuel duty	1.7	2.2
Stamp duty	4.9	3.7
Sugar tax	2	2.9
Premise licence and TV licences	1.1	0.8
TOTAL TAX	560.9	764.4
Tax per pub (£000)	677.6	871.4
Tax as % of sales	44.40%	42.00%
Furlough tax rebate	-124.2	0
TOTAL TAX ADJUSTED FOR FURLOUGH TAX REBATE	436.7	764.4
Tax per pub adjusted for furlough tax rebate (£000)	527.6	871.4

 

* Before exceptional items

 

 

Mainly as a result of the lockdown, there have been substantial further 'knock-on' effects on the sales and profits of our third-party suppliers and contractors, ranging from large international brewers to architects, builders and small suppliers, such as window cleaners. Their losses are difficult to quantify, but we estimate that the total cost to the UK economy - to Wetherspoon (decline in profits equals £165.6m), the government (decline in tax generated equals £327.7m) and third parties - of closing Wetherspoon's pubs for approximately three months in the financial year was probably over £500m.

 

The academic, medical and political worlds have been split regarding the efficacy of lockdowns and the extent to which they confer health benefits which might justify these costs. SAGE members and the government appear broadly to believe that lockdowns improve health outcomes, whereas Professors Gupta and Heneghan of Oxford University, Professor Woolhouse of Edinburgh University, Nobel Prize winner Professor Levitt of Stanford University and many others broadly take the opposite view.

 

In general, Wetherspoon supports the Swedish view of Professor Johan Giesecke, Anders Tegnell and others, which emphasises social distancing, hand-washing and trusting the people, rather than coercive measures such as lockdowns, curfews and fines, favoured by the UK government and its advisers. It seems to us that the Swedish approach is working relatively well, with fewer fatalities per million people than the UK, Spain and Italy, for example, as well as materially less economic damage.

 

Examples of important contributions to the debate also include those of writer Mathew Parris, who has argued that the view against lockdown is 'mainstream' and is under-represented in some sections of the media, and former Supreme Court judge Jonathan Sumption QC, who has argued that the use of emergency powers has infringed basic democratic rights and led to poor administrative standards.

 

 

Covid-19- the risks associated with pubs

 

 

There have been approximately 46 million customer visits to Wetherspoon's UK pubs since 4 July. There have been no instances reported to Wetherspoon through the NHS test and trace system, or from local health officials, of a transfer of the virus from staff to customers or vice versa - or among customers.

 

There has been one case in which enquiries by Wetherspoon auditors and local authority health officials concluded that insufficient social distancing in staff areas, not accessible to customers, probably resulted in four staff members testing positive. Following this incident, further training and information were provided to all Wetherspoon staff.

 

Many people presume that pubs are likely to be centres of virus transmission - it's 'commonsensical', as one government minister recently said. However counterintuitive though it may be, that does not appear to be the case. As Professor Johan Giesecke said in April (see Sky News interview, appendix 1): "If you don't get too close to other people, they won't infect you." The pub industry generally has worked very hard to maintain social distancing and Covid-safe environments, with considerable success.

 

As Councillor Ian Ward, leader of Birmingham City Council, has said:

 

"The data we have shows that the infection rate has risen, mainly due to social interactions, particularly private household gatherings. In shops and hospitality venues, there are strict measures in place to ensure they are Covid safe, whereas it is much easier to inadvertently pass on the virus in someone's house, where people are more relaxed and less vigilant."

 

Following a significant increase in testing in the UK, 429 (1%) Wetherspoon employees have tested positive for the virus since 4 July - from a total of 43,000 employees. In the UK as a whole, there have been 603,716 (0.9%) positive tests (as at Sunday 11 October, www.worldometers.info). Comparative information is not widely available, but Amazon, for example, recently reported 20,000 positive tests among its 1.37 million US employees (1.5%). If pubs were, indeed, 'centres of transmission', it might be expected that infection rates would be higher among employees than those of either the general population or companies like Amazon.

 

Internal enquiries indicate that most Wetherspoon employees who tested positive have had mild symptoms or been asymptomatic.

 

Certainty is impossible, yet it appears that most positive tests resulted from contacts outside of work. 670 pubs (77%) have had zero positive tests among staff; 116 pubs (13%) have had one positive test; 85 pubs (10%) have had two or more positive tests.

 

 

Financial Outcome

 

Total sales in the financial year were £1,262.0m, a decrease of 30.6%. Like-for-like sales decreased by 29.5%, having increased by 5.9% in the first half. Bar sales decreased by 29.3%, food sales by 30.1%, slot/fruit machine sales by 20.9% and hotel room sales by 38.7%.

 

Pre-IFRS 16 operating profit, before exceptional items decreased by 94.6% to £7.2m (2019: £131.9m). The operating margin, before exceptional items was 0.6% (2019: 7.3%).

 

Pre-IFRS 16 profit before tax and exceptional items decreased by 133.3% to -£34.1m (2019: £102.5m), including property losses of £0.6m (2019: £5.6m). Earnings per share, including shares held in trust by the employee share scheme, before exceptional items, were -27.6p (2019: 75.5p).

 

Net interest was covered 0.3 times by operating profit before interest, tax and exceptional items (2019: 3.9 times).

 

Total capital investment was £171.6m in the period (2019: £167.6m), almost all of which occurred, or was contracted, before lockdown. £41.0m was invested in new pubs and pub extensions (2019: £35.2m), £32.1m in existing pubs and IT (2019: £55.2m) and £98.5m in freehold reversions, where Wetherspoon was already a tenant (2019: £77.2m).

 

Exceptional items totalled £60.7m (2019: £7.0m). There was a £3.5m loss on disposal, an impairment charge of £44.0m, expenditure in relation to Covid-19 of £29.1m and a credit of £15.9m in respect of a long-standing claim with HMRC for VAT on fruit/slot machines.

 

The total cash effect of exceptional items was a net cash outflow of £10.6m. There was an outflow related to Covid-19 expenditure of £23.2m, while beer and food stock losses, as a result of lockdown, were £5.9m. An inflow resulted from a successful HMRC fruit/slot machine VAT claim of £15.9m and pub disposal receipts of £2.6m. Since the current pub disposal programme started in 2015, it has produced a net inflow of £23m from the disposal of 109 pubs.

 

Free cash flow, after capital payments of £44.3m for existing pubs (2019: £54.3m), £11.1m for share purchases for employees (2019: £16.0m) and payments of tax and interest, decreased by £155.9m to -£58.9m (2019: £97.0m). Free cash flow per share was -54.2p (2019: 92.0p).

 

 

IFRS 16

 

On 29 July 2019, the company adopted the IFRS 16 leases standard. For the year ending 26 July 2020, as a result of the new standard, EBITDA has increased by £58.5m and operating profit by £9.8m. Finance costs increased by £21.5m. There will be no impact on cash flows, except in relation to tax payments. As a result of this new accounting standard, gross assets as at 26 July 2020 are £521.1m higher than last year and net assets are £8.0m lower.

 

 

Management actions

 

The company implemented an extensive set of measures to safeguard the business when the government closed pubs in March. These measures included the cancellation of the dividend, the raising of equity, a reduction in capital expenditure and the introduction of the government furlough scheme for employees.

 

Following a downturn of trade in the pub and restaurant industry, the company took the difficult decision to reduce the number of employees at its head office by 108. It has also started a consultation process to reduce staff numbers at airport pubs, where sales are generally much lower and where a high percentage is closed.

 

 

Dividends and return of capital

 

No interim dividend was paid in March 2020. The board is not proposing a final dividend payment for the year.

 

During the year, 419,741 shares (0.40% of the share capital) were purchased by the company for cancellation, at a cost of £6.5m, an average cost per share of 1,523p.

 

 

Financing

 

As at 26 July 2020, the company's total net debt, excluding derivatives, was £817.0m (2019: £737.0m), an increase of £80.0m.

 

Year-end net-debt-to-EBITDA ratio was 9.48 times (2019: 3.36 times) - EBITDA was £133m lower and net-debt increased by £80m in 2020. The company has a waiver agreement in place, against the financial covenant tests, which extends to October 2021.

 

As at 26 July 2020, the company had £194.0m (2019: £158.0m) of cash or cash equivalents. There has been an increase in total facilities to £993.0m (2019: £895.0m), following the addition of a US private placement in August 2019.

 

In August 2020, the company raised an additional £48.3m under the coronavirus large business interruption loan scheme (CLBILS).

 

In order to try to avoid increased costs, the company has fixed its LIBOR interest rates in respect of £770m until March 2029. The weighted average cost of the swaps is 2.42% for this financial year (excluded the banks' margin); this will reduce to 1.61% at the end of July 2021.

 

The company has fully drawn down its revolving credit facility. As previously stated, it is the company's intention that the maximum net-debt-to-EBITDA ratio should be around 3.5 times, other than in the short term. The ratio has risen mainly as a result of the temporary closure of pubs. The company intends to reduce the level in a timely manner, as and when more normal trading conditions resume. The company has previously stated that debt levels of between 0 and 2 times EBITDA are a sensible long-term benchmark, although higher levels may be justified at times of very low interest rates.

 

The company conducted a non-pre-emptive placing of 15% of the company's issued ordinary share capital to raise £141m, with a good level of support from institutional investors; directors and members of the senior management team participated, alongside the equity placing, to raise a further £0.3m. The net proceeds were used to strengthen the company's balance sheet, working capital and liquidity position.

 

 

Taxation

 

The current tax credit (ie the cash which the company will receive from HMRC) for the period is £2.6m (2019: £22.5m charge). The rate of corporation tax recovered on current year losses is 4.5%. The 'accounting' tax credit, which appears in the income statement, is £6.2m (2019: £22.8m).

 

The company is awaiting an HMRC refund of excise duty totalling £524k, in relation to goods sent to the Republic of Ireland, when pubs first opened in the country. The company has been charged excise duty on the same goods twice, as they were purchased in the UK, and excise duty was paid in full, then Irish excise duty was also paid in full, when the goods were sent to Ireland. To ensure that taxpayers aren't subject to 'double taxation', there are provisions in place to allow the UK duty to be reclaimed from HMRC ('duty drawback'). However, owing to alleged procedural omissions, the company has been unable to reclaim this duty, even though it is transparently clear that the duty has been paid.

 

 

VAT equality

 

As we have previously stated, the government would generate more revenue and jobs if it were to create tax equality among supermarkets, pubs and restaurants. Supermarkets pay virtually no VAT in respect of food sales, whereas pubs pay 20%. This has enabled supermarkets to subsidise the price of alcoholic drinks, widening the price gap, to the detriment of pubs and restaurants.

 

Pubs also pay around 20 pence a pint in business rates, whereas supermarkets pay only about 2 pence, creating further inequality.

 

Pubs have lost 50% of their beer sales to supermarkets in the last 35 or so years.

 

It makes no sense for supermarkets to be treated more leniently than pubs, since pubs generate far more jobs per pint or meal than do supermarkets, as well as far higher levels of tax. Pubs also make an important contribution to the social life of many communities and have better visibility and control of those who consume alcoholic drinks.

 

Tax equality is particularly important for residents of less affluent areas, since the tax differential is more important there - people can less afford to pay the difference in prices between the on and off trade.

 

As a result, in these less affluent areas, there are often fewer pubs, coffee shops and restaurants, with less employment and increased high-street dereliction.

 

Tax equality would also be in line with the principle of fairness in applying taxes to different businesses.

 

On 8 July 2020, the chancellor, Rishi Sunak, announced a temporary reduction in VAT to 5% in respect of food and non-alcoholic drinks sales. As a result, the company lowered its pricing on a wide range of products, including food, soft drinks and real ale. If the chancellor decides to make these VAT reductions permanent, the company intends to retain these lower prices indefinitely.

 

 

Corporate governance

 

The comments made in last year's annual report are just as relevant today and are repeated here:

 

The underlying ethos of corporate governance is to comply with the guidelines or to explain why you do not.

 

The original creators of the rules must have realised that business success takes many forms, so a rigid structure, applicable to all companies, cannot be devised - hence the requirement to explain non-compliance.

 

Wetherspoon has always explained its approach. For example, in 2016, our approach to corporate governance was summed up in the annual report as follows:

 

"I have said that many aspects of current corporate governance advice, as laid out in the Combined Code, are deeply flawed…"

 

I then went on to say:

 

"I believe that the following propositions represent the views of sensible shareholders:

 

"The Code itself is faulty, since it places excessive emphasis on meetings between directors and shareholders and places almost no emphasis on directors taking account of the views of customers and employees which are far more important, in practice, to the future well-being of any company.

 

"For example, in the UK Corporate Governance Code (September 2014), there are 64 references to shareholders, but only three to employees and none to customers - this emphasis is clearly mistaken.

 

• "The average institutional shareholder turns over his portfolio twice annually, so it is advisable for directors to be wary of the often perverse views of 'Mr Market' (in the words of Benjamin Graham), certainly in respect of very short-term shareholders.

• "A major indictment of the governance industry is that modern annual reports are far too long and often unreadable. They are full of semiliterate business jargon, including accounting jargon, and are cluttered with badly written and incomprehensible governance reports.

• "It would be very helpful for companies, shareholders and the public, if the limitations of corporate governance systems were explicitly recognised. Common sense, management skills and business savvy are more important to commercial success than board structures. All of the major banks and many supermarket and pub companies have suffered colossal business and financial problems, in spite of, or perhaps because of, their adherence to inadvisable governance guidelines.

• "There should be an approximately equal balance between executives and non-executives. A majority of executives is not necessarily harmful, provided that non-executives are able to make their voices heard.

• "It is often better if a chairman has previously been the chief executive of the company. This encourages chief executives, who may wish to become a chairman in future, to take a long-term view, avoiding problems of profit-maximisation policies in the years running up to the departure of a chief executive.

• "A maximum tenure of nine years for non-executive directors is not advisable, since inexperienced boards, unfamiliar with the effects of the 'last recession' on their companies, are likely to reduce financial stability.

• "An excessive focus on achieving financial or other targets for executives can be counter-productive. There's no evidence that the type of targets preferred by corporate governance guidelines actually works and there is considerable evidence that attempting to reach ambitious financial targets is harmful.

• "As indicated above, it is far more important for directors to take account of the views of employees and customers than of the views of institutional shareholders. Shareholders should be listened to with respect, but caution should be exercised in implementing the views of short-term shareholders. It should also be understood that modern institutional shareholders may have a serious conflict of interest, as they are often concerned with their own quarterly portfolio performance, whereas corporate health often requires objectives which lie five, 10 or 20 years in the future."

 

I also quoted Sam Walton of Walmart in the 2014 annual report. He said:

 

"What's really worried me over the years is not our stock price, but that we might someday fail to take care of our customers or that our managers might fail to motivate and take care of our (employees)… Those challenges are more real than somebody's theory that we're heading down the wrong path… As business leaders, we absolutely cannot afford to get all caught up in trying to meet the goals that some … institution … sets for us. If we do that, we take our eye off the ball…. If we fail to live up to somebody's hypothetical projection for what we should be doing, I don't care. We couldn't care less about what is forecast or what the market says we ought to do."

 

It is, therefore, very disappointing that one large institutional shareholder does not appear, by its actions, to support the central tenet of our stance on the issue of governance, which is that experience is extremely important and that the so-called 'nine-year rule' is perverse and counterproductive.

 

This shareholder failed to support the re-election of two of our non-executive directors at last year's AGM. I arranged a meeting, in April 2019, for all of our main institutional shareholders, to further explain our position, which the shareholder in question failed to attend. I then arranged a further meeting, in May 2019, with the shareholder at that shareholder's office.

 

Following the meeting, there was no confirmation that the shareholder would support the re-election of our long-serving non-executive directors. As a result, three of our four non-executives, in the best interests of the company, offered to leave, on a rotational basis.

 

The company contacted all of its main shareholders to inform them of this proposal. The shareholder in question agreed. However, several other shareholders expressed their discontent with the proposed resignations.

 

The executive board and I feel strongly that these sorts of board change disrupt and weaken the company. I wrote to the shareholder on 9 September 2019 to ask them to reconsider their position, but have not received a reply.

 

Wetherspoon has had harmonious relationships with almost all of its shareholders over many years and has complied with the corporate governance requirement for explanation. Judging from the absence of any adverse comment, our approach has generally been accepted by investors.

 

This year's annual general meeting will take place on 17 December 2020.

 

 

Further progress

 

As always, the company has tried to improve as many areas of the business as possible, on a week-to-week basis, rather than aiming for 'big ideas' or grand strategies. Frequent calls on pubs by senior executives, the encouragement of criticism from pub staff and customers and the involvement of pub and area managers, among others, in weekly decisions, are the keys to success.

 

We now have 781 pubs rated on the Food Standards Agency's website - the average score is 4.96, with 96.9% of the pubs achieving a top rating of five stars and 2.3% receiving four stars. We believe this to be the highest average rating for any substantial pub company.

 

In the separate Scottish scheme, which records either a 'pass' or a 'fail', all of our 62 pubs have passed.

 

We paid £33m in respect of bonuses and free shares to employees in the year, of which 98% was paid to staff below board level and 87% was paid to staff working in our pubs.

 

The company has been recognised as a Top Employer UK (2020) by The Top Employers Institute for the 17th consecutive year.

 

Thanks to fantastic efforts by our employees and customers, in association with the charity CLIC Sargent, approximately £1.1m was raised, bringing the total (since August 2002) to over £18.7m.

 

 

Property

 

The company opened two pubs during the year and sold or closed nine, resulting in a trading estate of 872 pubs at the financial year end.

 

The average development cost for a new pub (excluding the cost of freeholds) was £2.3m, compared with £2.6m a year ago. The full-year depreciation charge, excluding right-of-use assets, was £79.3m (2019: £81.8m).

 

Ten years ago, the company's freehold/leasehold split was 41.3%/58.7%. As at 26 July 2020, as a result of investment in freehold reversions (relating to pubs where the company was previously a tenant) and freehold pub openings, the split was 64.3%/35.7%. As at 26 July 2020, the net book value of the property, plant and equipment of the company was £1.4 billion, including £1.1 billion of freehold and long-leasehold property. The properties have not been revalued since 1999.

 

 

Property litigation

 

As previously reported, Wetherspoon agreed on an out-of-court settlement with developer Anthony Lyons, formerly of property leisure agent Davis Coffer Lyons, in 2013 and received approximately £1.25m from Mr Lyons.

 

The payment relates to litigation in which Wetherspoon claimed that Mr Lyons had been an accessory to frauds committed by Wetherspoon's former retained agent Van de Berg and its directors Christian Braun, George Aldridge and Richard Harvey. Mr Lyons denied the claim - and the litigation was contested.

 

The claim related to properties in Portsmouth, Leytonstone and Newbury. The Portsmouth property was involved in the 2008/9 Van de Berg case itself.

 

In that case, Mr Justice Peter Smith found that Van de Berg, but not Mr Lyons (who was not a party to the case), fraudulently diverted the freehold from Wetherspoon to Moorstown Properties Limited, a company owned by Simon Conway. Moorstown leased the premises to Wetherspoon. Wetherspoon is still a leaseholder of this property - a pub called The Isambard Kingdom Brunel.

 

The properties in Leytonstone and Newbury (the other properties in the case against Mr Lyons) were not pleaded in the 2008/9 Van de Berg case. Leytonstone was leased to Wetherspoon and trades today as The Walnut Tree public house. Newbury was leased to Pelican plc and became Café Rouge.

 

As we have also reported, the company agreed to settle its final claim in this series of cases and accepted £400,000 from property investor Jason Harris, formerly of First London and now of First Urban Group. Wetherspoon alleged that Harris was an accessory to frauds committed by Van de Berg. Harris contested the claim and has not admitted liability.

 

Before the conclusion of the above cases, Wetherspoon also agreed on a settlement with Paul Ferrari of London estate agent Ferrari Dewe & Co, in respect of properties referred to as the 'Ferrari Five' by Mr Justice Peter Smith.

 

 

Press corrections

 

Following lockdown, a large number of press reports misrepresented Wetherspoon's position in several important areas. The company complained to the media organisations concerned and obtained apologies or corrections from the Times, the BBC, Sky News, the Mirror, the Sun, the Daily Mail, Forbes and several other publications. Please see the article I wrote on this subject in appendix 2.

 

 

Current trading and outlook

 

Warren Buffett, chairman of Berkshire Hathaway, commented in 1989 (below) on the dangers of what he calls the 'institutional imperative' and how it compels companies to stay on the same course, even if it's the wrong course - and how it compels companies to imitate competitors. The institutional imperative applies just as much to governments as it does to boards of directors. Professor Johan Giesecke, the Warren Buffett of epidemiology, is obviously perplexed in an April TV interview (appendix 1 below) as to how 100 countries all reacted, almost overnight, in the same way to the Covid-19 problem, based on the deeply flawed analysis of Imperial College.

 

As Warren Buffett explains:

 

"My most surprising discovery: the overwhelming importance in business of an unseen force that we might call "the institutional imperative." In business school, I was given no hint of the imperative's existence and I did not intuitively understand it when I entered the business world. I thought then that decent, intelligent, and experienced managers would automatically make rational business decisions. But I learned over time that isn't

so. Instead, rationality frequently wilts when the institutional imperative comes into play.

 

"For example: (1) As if governed by Newton's First Law of Motion, an institution will resist any change in its current direction; (2) Just as work expands to fill available time, corporate projects or acquisitions will materialize to soak up available funds; (3) Any business craving of the leader, however foolish, will be quickly supported by detailed rate-of-return and strategic studies prepared by his troops; and (4) The behavior of peer companies, whether they are expanding, acquiring, setting executive compensation or whatever, will be mindlessly imitated.

 

"Institutional dynamics, not venality or stupidity, set businesses on these courses, which are too often misguided. After making some expensive mistakes because I ignored the power of the imperative, I have tried to organize and manage Berkshire in ways that minimize its influence. Furthermore, Charlie and I have attempted to concentrate our investments in companies that appear alert to the problem."

 

 

Since 100 governments adopted a lockdown strategy, it was very difficult for any government to adopt a different course. However, pubs eventually reopened in England on 4 July and in the rest of the UK shortly thereafter.

 

The lockdown was far longer than was necessary to achieve its stated objective of 'flattening the curve' so as to assist the health service. Before pubs reopened, a detailed and comprehensive operating plan for the hospitality industry was nevertheless agreed on among the government, parliamentary committees, UK Hospitality, civil servants and other interested parties.

 

The regulations and guidelines reflected in the plan drastically reduced pub capacity, but were carefully thought out and had the backing of the industry, legislators, licensing officials, local authorities and the public.

 

For the two months following reopening, it appeared that the hospitality industry, in difficult circumstances, was adapting to the new régime and was getting 'back on its feet', albeit in survival mode.

 

It appears that the government and its advisers were clearly uncomfortable as the country emerged from lockdown. They have introduced, without consultation, under emergency powers, an ever-changing raft of ill-thought-out regulations - these are extraordinarily difficult for the public and publicans to understand and to implement. None of the new regulations appears to have any obvious basis in science.

 

For example, a requirement for table service was introduced - which is expensive to implement and undermines the essential nature of pubs for many people - pubs have now become like restaurants. Customers can approach the till in a shop, but not in a pub - which is, in no sense, 'scientific'.

 

In addition, face-coverings, for which the health benefits are debatable, need not be worn while seated, yet must be worn to go to visit the bathroom - another capricious regulation.

 

The most damaging regulation relates to the 10pm curfew, which has few supporters outside of the narrow cloisters of Downing Street and SAGE meetings. This has meant that many thousands of hospitality industry employees, striving to maintain hygiene and social-distancing standards, go off duty at 10pm, leaving people to socialise in homes and at private events which are, in reality, impossible to regulate.

 

In marked contrast to the consistency of the comparatively successful Swedish approach, which emphasises social distancing, hygiene and trust in the people, the erratic UK government is jumping from pillar to post and is both tightening and tinkering with regulations, so we are now in quasi-lockdown which is producing visibly worse outcomes than those in Sweden, in respect of both health and the economy.

 

Risk cannot be eliminated completely in pubs, but sensible social-distancing and hygiene policies, combined with continued assistance and co-operation from the authorities, should minimise it.

 

Like-for-like sales in the first 11 weeks have been 15.0% below those of last year, with strong sales in the first few weeks, followed by a marked slowdown since the introduction of a curfew and other regulations, some of which are referred to above.

 

The recent curfew and introduction of table service only have been particularly damaging for trade, depressing sales for customers who find it too much 'faff', at the same time as substantially increasing costs.

 

As a result of recent changes in regulations, the outlook for pubs over the remainder of the current financial year is even more unpredictable than hitherto.

 

The company has successfully adapted its business, over the last 41 years, to cope with widely different political and economic circumstances. We now employ over 40,000 people, 10,000 of whom are shareholders in the company, and are a major contributor to national income, paying approximately one pound in every thousand of treasury receipts in 2019 and in preceding years.

 

However, the company and the entire hospitality industry need a more sensible and consistent regulatory framework in which to operate - the current environment of lockdowns, curfews and constantly changing regulations and announcements threatens not only pub companies, but the entire economy. The most important lesson, as Professor Mark Woolhouse of Edinburgh University has said, is that "lockdown just defers the problem; it doesn't solve it".

  

 

Appendix 1 - Transcript of interview, former Swedish chief epidemiologist Johan Giesecke, SKY NEWS AUSTRALIA - 29th April 2020

 

 

Question:  You've been a strong critic of the idea of lockdowns, Sweden has avoided these sort of lockdowns that we're seeing here in Australia.  Tell us your thoughts - are lockdowns the correct way to go?

 

Johan:  You introduced me by saying that I would say that you got it all wrong.  I don't think you go it all wrong but you painted yourself into a corner and I'm watching with interest how you and 100 other countries will climb out of the lockdown, because I don't think any government that I know gave a minute's thought about how they would get out of the different lockdowns that are installed.  Take the school closure for example, if you close the schools, when are you going to open them, what's the criteria? I don't think anyone thought about that when the closure was decided on.  Anyway, so Sweden doesn't have such a strict lockdown, there are a few things that are forbidden - the crowd can't be more than 50 people, at restaurants that are mostly open, there should be 5ft or 1.5 meters between the tables, you have to sit down to eat, there are a few things like that but rather mild things… there are very few laws and ordinances passed, you can go out without being stopped by the police and fined or threatened with prison and mostly we talk about trust… we trust the people - people are not stupid. That's… the basic line [in Sweden]. If you tell people what's good for them and what's good for their neighbours and other people, they do that.  You take a restriction that's sensible and understandable, people will follow it.  

 

Question:  You said that you think the results are going to be similar across most countries regardless of the approach they've taken, can you take us through that?

 

Johan:  There is a tsunami of a rather mild infection spreading around the globe and I think that's there's very little chance to stop it by any measure we take.  Most people will become infected by this and most people won't even notice.  We have data now from Sweden that shows between 98 and 99 percent of the cases have had a very mild infection or didn't even realise they were infected.  So we have this spread of this mild disease around the globe and most of it is happening where we don't see it.  It's among people that don't get very sick, spread it to someone else that doesn't get very sick and what we're looking at is a thin layer at the top of people who do develop the disease and even thinner layer of people that go into intensive care and then even thinner layer of people who die.  But the real outbreak is happening where we don't see it.

 

Question:  So…..you're saying that at some point pretty much everybody is going to get this disease to some degree or another.  Here in Australia we've done an incredibly good job suppressing it.  I'm wondering do you think we've done too good a job, is it possible to do too good a job suppressing it in the early stages such that you won't ever be able to take the foot off the break on your restrictions to get the disease just to a manageable flow of cases that the health system, which we were told this was all about preparing for that, be allowed to handle the cases as they come through.

 

Johan:  Yes… one point is to flatten the curve a bit so that the health care isn't overused. You may succeed, and New Zealand may also succeed, but I've been asking myself when New Zealand or Australia has stamped out every case in the country, what do you do for the next 30 years.  Will you close your borders completely?  Quarantine everyone who is going to Australia or New Zealand?  Because the disease will be out there.  I don't know how you are going to handle that.  That's your problem.

 

Question: You've said you think in most countries regardless of the measures we take, eg. Taiwan has been very successful and other countries like Italy have been disaster cases, but you think at the end of the day they're all pretty much going to end up with the same fatalities, the same results, the same deaths regardless of what measures they took.  Explain that.

 

Johan:  Yes.  Basically I think it will be the same because, like I said, the real epidemic is invisible and it's going on all the time around us.  The other thing with a lockdown is when you open it, you will have more cases, so the countries who pride themselves in having a few deaths now, will get these deaths when they start lifting the lockdown.

 

Question:  Tell us briefly about the Imperial College results that sparked this worldwide panic.  You believe they were flawed, these were the initial results that were coming out and the modelling that was saying millions are gonna die.  You thought that was flawed, tell us why.

 

Johan:  Yes, there are a few procedural things…  One is that the paper was never published which is normal scientific behaviour.  The second thing it wasn't peer-reviewed, which means it wasn't looked upon by other people, which is also normal scientific procedure.  So it was more like an internal departmental communication, a memo.  And then the big mistake of the Imperial group was under-estimating the proportion of the very mild cases that would never be detected, that's the main thing with that prediction.  And it's fascinating how it changed the policy of the world. The UK made a u-turn overnight [upon] the publication of the paper which is fascinating.  So, yes, there were several other mistakes with the paper but it gets very technical to get into that.

 

Question:  You mention that the overwhelming majority of people that get this disease have no symptoms or very minimal symptoms.  Do we even know the real fatality rate of the coronavirus?

 

Johan:  No.  Well it's around 0.1%.

 

Question: We were told it was 3% initially, initially 2%, are you saying now that it's 0.1%., that's pretty much the same fatality rate as the regular flu isn't it?

 

Johan:  I think it's a bit higher actually.  I said before in Sweden that this is like a severe influenza.  I don't think that's completely true - it will be a bit more severe than the influenza, maybe double but not tenfold.

 

Question: With all of the health care systems focusing on flattening the curve and being prepared for these waves of infection, which aren't necessarily coming because of the very restrictive measures, overall are we gonna see more people dying, we talked a little bit about this before on the show, of cancers, heart attacks, things like that, simply because they're too scared to go to the hospital because they think they won't get treated.  Is there going to be other deaths that are going to be caused by our overweighting focus just on this one particular disease?

 

Johan:  Could well be. The emergency rooms here in Stockholm have about 50% of the usual number of patients coming in, and one reason is probably that people are scared of contracting the disease when they go into hospitals, and another is that, I think, they say they can wait a bit until the thing is over.

 

Question: You've said the best policy, the correct policy, would be to simply protect the old and the frail. Is that correct?

 

Johan:  Yes, and that's the Swedish model. It has… two pillars.  One is only use measures that are evidence-based. And there are two that are evidence-based… one is washing hands… we've known that for 150 years since Semmelweis in Austria a long time ago. The other is social distancing.  If you don't get too close to other people, they won't infect you.  And the third may be trust people.  People are not stupid, if you tell them what's good for them they will do what you say.  You don't need soldiers on the street - and police. It's unnecessary.

 

END.

 

  

Appendix 2 - Tim's Viewpoint, Wetherspoon News, Summer 2020

 

The press plays a vital role - but don't believe everything you read

 

Some journalists apply more spin than a Shane Warne googly and more venom than a Waqar Younis Yorker

 

The press plays a vital role in a free society by shining a light on privilege and power, including on those who run businesses - and by informing and entertaining.

 

We blame the press for many sins, but there's some truth in the defence that it's often just saying what we like to read.

 

To understand what makes a press 'story', it's useful to hark back to 2003, when a customer wrote to Wetherspoon News complaining about swearing in one of our pubs.

 

I replied in this magazine that I would ask customers to 'mind their language'.

 

Believe it or not, that workaday response to a customer in our humble publication became one of the biggest news stories in the world, for a few days.

 

It was a leading news headline on BBC and ITV and featured in most local papers - as well as in numerous publications in faraway India, Canada, the US, Australia and elsewhere.

 

I was even phoned by a relative living in the Swedish 'outback', saying that the story was on the front page of the village paper… but why did it go viral?

 

In truth, the story was given a 'twist' by a journalist from a pub industry newspaper who said that Wetherspoon might 'punish' customers for swearing.

 

This transformed the story from 'true, but boring' into 'not quite true, but very interesting'.

 

Some people think that newspapers should always stick to the truth, but, to be fair, the 'Wetherspoon bans swearing' story was probably innocent fun - no harm done

- and the public knew instinctively that it wasn't LITERALLY true.

 

Part (but only part) of the reason for buying a newspaper is to be entertained - no one attending a Billy Connolly or Kevin Bridges show expects them, for example, to stick to the literal truth.

 

Artistic licence is permitted to embellish a comedian's monologue, and the same can be true of journalists - with the proviso that, in the process, innocent parties should not be unfairly damaged or duped.

 

Hence, we have libel laws and controls over press accuracy, including a 'right of reply' - to protect what Shakespeare called the 'bubble reputation'.

 

However, a vicious side of the press was revealed after 20 March, when pubs and restaurants were closed, without notice, by the government, throwing Wetherspoon and almost the entire pub and restaurant industry into default on bank loans - with hundreds of thousands out of work.

 

I recorded an internal company video, less than 48 hours after pubs were closed, hoping to reassure employees that they would be 'furloughed' and would not lose their jobs - which was happening, on a large scale, elsewhere in the economy.

 

The video said: "All our endeavours are going to be on trying to make sure that you get your money."

 

And an e-mail, which went out with the video, said that "employees will be paid as normal on Friday 27 March".

 

In fact, staff were paid on that Friday and have been paid on every Friday since - thanks, above all, to the lightning-quick creation of a furlough scheme and, in our case at least, great flexibility from banks.

 

However, the press was looking for a 'story' with a villain, and the truth was subject to malicious distortion.

 

Times journalist Caitlin Moran, for example, with more spin than a Shane Warne googly, said that Wetherspoon employees "wouldn't get paid until the end of April for work they had done" which The Times has now retracted through gritted teeth.

 

Fellow Times columnist Alistair Osborne referred to me as a rat, while Caitlin Moran herself, with more venom than a Waqar Younis yorker, called me the worst word in the language, albeit with hyphens replacing some letters - as did the Daily Mail.

 

Ben Marlow of The Daily Telegraph said that I was "Britain's worst ever boss" - and scores of press stories made similar accusations.

 

Maybe the press can justify this hyperbole - it has newspapers to sell in an Internet-ravaged industry.

 

However, the wackiest behaviour, during these mad March days, was from two MPs, Rachel Reeves and Jo Stevens, who, with Wetherspoon and the hospitality industry at their most vulnerable, tried to turn the story to personal political advantage.

 

Jo Stevens, MP for Cardiff Central, invented a story on Twitter that I had appeared in front of a parliamentary committee (the BEIS) then chaired by Rachel Reeves, MP for Leeds West, and, as a result of that appearance, had "u-turned on decision not to pay 43,000 staff while pubs are shut".

 

This was complete cobblers.

 

I never appeared in front of the BEIS Committee, as both Stevens and Reeves know, and Wetherspoon had already undertaken to pay staff on 27 March.

 

They must have been bonkers to have made up a fictitious appearance in front of a parliamentary committee - since that could so easily be disproved.

 

Rachel Reeves added to Twitter 'disinformation' and confusion (7, opposite) by saying that Wetherspoon was at "first refusing to lock down altogether".

 

That's a complete lie.

 

All Wetherspoon pubs shut, when requested, on Friday 20 March - ask any of our staff or customers.

 

I wrote to Reeves on 2 April to complain, yet received no reply.

 

Wetherspoon's response to the torrent of 'disinformation' has been to wade through the press articles, one by one, and to write to the various publications to ask them to print a correction.

 

Bravo and thanks to publications like the Daily Mirror, Sky News and local newspapers like the Herald Express and the Loughborough Echo which cared enough about the truth to publish a correction or a Wetherspoon article in response.

 

For democracy to work, the press itself, given its huge power, has to be subject to regulation and scrutiny.

 

If the press is the guardian of democracy, who guards the guardians, as Lord Leveson famously asked in his inquiry into the press, stemming from the phone-hacking scandal.

 

Politicians themselves, over the years, have championed the campaign to require the media to correct inaccurate statements.

 

As the public realises, the press often, but not always, bends the truth out of any recognisable shape, in pursuit of a story.

 

It is disturbing, therefore, that MPs Jo Stevens and Rachel Reeves have, themselves, resorted to blatant fabrication - which, itself, was the source of much media inaccuracy.

 

Perhaps John Webster, Shakespeare's contemporary, was right when he said:

 

"A politician is the devil's quilted anvil; he fashions all sins on him, and the blows are never heard."

 

But just as a free society needs the press, it also needs honest politicians.

 

Even in our murky and compromised world, the truth will out - that's why democracy works so well, despite its trials and tribulations.

 

Tim Martin

Chairman