Tax burden not so small beer for pubs and breweries, say MPs

3 Apr 2019

MPs took a break from Brexit to debate beer taxation on March 28th, in a debate allocated by the Backbench Business Committee. The prime movers in obtaining the debate were three officers of the All Party Parliamentary Beer Group ‚ Mike Wood and Nigel Evans (both Conservative) and Ruth Smeeth (Labour).

Mike Wood, the group‚ s chair, spoke first. He called on the Chancellor to cut beer duty in future Budgets, reform business rates and continue to look at new ways of reducing the ‚ disproportionate tax burden on pubs and breweries‚ . He welcomed the Chancellor‚ s announcement of a review of small brewer‚ s relief. He argued that Brexit (unavoidable in any parliamentary debate these days it appears) provided an opportunity to ‚ take back control‚ of our excise duty regime. ‚ This gives the Chancellor an opportunity to look afresh at how we tax beer in pubs, in particular‚ how we can use fiscal measures to help pubs to thrive, to support responsible drinking, and to redress the competitive disadvantage that our community pubs have as against, in particular, supermarkets that are able to stack drinks high, sell them below cost, and use them a loss-leader.‚

Ruth Smeeth highlighted what she called ‚ some stark figures about the impact of taxation on the sector‚ . ‚ Amazon UK paid £4.5 million in corporation tax last year. Black Sheep brewery‚ paid £8 million in beer duty. Amazon UK has a turnover of £1.98 billion. Black Sheep brewery has a turnover of £19 million. Minister, there is an issue here. In 2016, eBay UK paid £1.6 million in corporation tax. Titanic brewery paid 25% of its turnover to HMRC‚ £2 million.‚

Nigel Evans said taxation on beer was ‚ massive‚ , citing a figure of £13 billion. ‚ We need to look at ways of lowering that taxation. There is something wrong when taxation goes up, people drink less and less money actually goes to the Inland Revenue. There should be a common-sense approach to lower taxation, increase sales and ensure that HMRC gets more money out of that.‚

Liz McInnes (Labour) drew attention to the call of the Campaign for Real Ale for a fundamental review of the tax system to stem the tide of pub closures. British beer remains overtaxed, she argued, stating that Britons pay nearly 40% of all the beer duty paid in EU nations, but we consume only 12% of the beer.

Toby Perkins (Labour) argued that the system of business rates disincentivises investment, whether in pubs, manufacturing or retail. ‚ When people make their premises better they pay a higher tax bill, which flies in the face of the sort of investment that we all want to see. I would love the Government to put less focus on reducing corporation tax at the expense of business rates. Corporation tax is businesses paying tax on profits that they have made, whereas business rates are a tax on owning a property. At a time when pubs and so many retail units are closing, the taxation policy achieves the opposite of what the Government intend.‚

Jamie Stone (Lib Dem) pointed to the role of pubs in encouraging tourism. Huge Gaffney (Labour) called for an end to the taxing of bar staff‚ s tips. Jim Shannon (DUP) said he was not in favour of a cut to alcohol taxes per se, but he did believe that a cut targeted specifically at our pubs, bars, hotels and restaurants should be considered, ‚ as the social benefit would surely outstrip the initial duty cut cost‚ .

Kirsty Blackman (SNP) said that Scotland had pioneered minimum alcohol pricing and had the friendliest environment for business rates in the UK. ‚ Two out of every five pubs in Scotland receive the small business bonus and pay zero or reduced business rates as a result.‚ In an independent Scotland, we would be looking for a comprehensive review of alcohol taxation overall, she said, adding that that review should be based on the amount of alcohol in each drink. She asked about the timescale for the government‚ s post duty point dilution review.

Anneliese Dodds (Labour) agreed with the Institute for Fiscal Studies, that the UK‚ s current system of alcohol excise duties was ‚ a mess‚ , and that the way in which we tax our alcohol does not necessarily ‚ fully correct for the social costs of alcohol.‚ She said business rates have been ‚ extremely damaging to pubs and to many other businesses that are based on bricks rather than clicks‚ . ‚ A business pays corporation tax only when it has become profitable, but the Government appear to have focused on reducing the corporation tax rate. My party would not take that approach, because we value the high streets and we value bricks-and-mortar-based businesses.‚ Labour has committed itself to a ‚ proper review‚ of local taxation, including both business rates and council tax.

Robert Jenrick, Exchequer Secretary, responded to the debate, and defended the Government‚ s record on issues raised by MPs. On beer duty, ‚ we have taken a number of steps over the past nine years to improve the situation in a country that has been widely acknowledged to have high levels of alcohol taxation. We removed the beer escalator, and we have either cut or frozen beer duty in six of the last seven fiscal events‚ . On lowering the duty on low-alcohol beers: ‚ We are somewhat constrained in that respect by EU law‚ but this is something that we will work on with our partners across Europe, and we could have further flexibility in the years ahead.‚ On business rates: ‚ We have taken several actions to support pubs by lowering their tax burden. The most important of them - this comes into effect on 1 April - is the Chancellor‚ s Budget announcement that the business rates bills of small and medium-sized retailers, including pubs, will be cut by a third.‚

The neutral motion ‚ That this House has considered beer taxation and pubs‚ was agreed without a vote.

The full debate can be read here.