Concern that another round of duty rise in 2017 would hark back to beer duty escalator

3 Nov 2017

There was a debate in Westminster Hall on the taxation of beer and pubs. Two things are important to know, last March the Government announced that beer duty, along with other alcohol duty rates, needed to rise in line with RPI.

Previously, between 2008 and 2013, there was a beer duty escalator which was ditched after heavy lobbying from the beer and pub industry which said it put up the price of a pint by two per cent above inflation every year. At last March‚ s spring Budget the Chancellor announced a £1,000 business rates discount for pubs with a rateable value of less than £100,000.

Conservative MP Mike Wood said nearly one million people across the UK rely on the pub and beer sector for work and the sector contributes £13 billion of taxes. About 46 per cent of workers are young people under the age of 25, and just over half are women. Wood is concerned that the relief scheme as currently framed is preventing brewers from expanding, or even causing some to scale down. In the six years before the beer duty escalator, on-trade beer sales fell by about three per cent a year. During the escalator years, on-trade sales fell by more than a quarter. Beer duty increased by 42 per cent, beer duty revenues rose by only 12 per cent, he added. He was disappointed with the return to a RPI-linked rise in this March‚ s Budget and ‚ announcing a second duty rise in the same calendar year would in effect take us back to the days of the beer duty escalator‚ . Oxford Economics calculates that even a freeze in beer duty in next month‚ s Budget, rather than the planned increase, would boost pub sales by about 33 million pints per year against the current baseline. He claimed that the three duty cuts, last year‚ s freeze and the ending of the escalator secured about 20,000 jobs. He wants the £1,000 pub relief on business rates announced in the March Budget expanded and extended, because the pub sector pays nearly three per cent of all business rates despite making up just under 0.5 per cent of business turnover. Last year there were 600 million day visits to pubs by tourists.

Two other Conservative backbenchers spoke. Peter Aldous made a case for removing export volume from the small brewers' relief calculation. John Lamont spoke on the issue of business rates relief and the 12.5 per cent cap scheme in Scotland. That has not necessarily been welcomed there, he said. ‚ Certainly, in my constituency a number of pubs and hotels face a huge one-year increase. It is capped at 12.5 per cent but, given what went before, and what they were previously paying, many pubs have not welcomed it.‚

From the Labour benches, Gloria De Piero said the small breweries‚ relief introduced by the last Labour Government should remain intact. Stephanie Peacock said we need to consider updating the compulsory purchase powers and the planning system, which would give more powers to local communities. Toby Perkins said the Chancellor who raised most through the beer duty escalator was not Ed Balls but George Osborne. He urged the Government to get away from an over-reliance on business rates at the expense of corporation tax cuts and bring down business rates for pubs instead. The Government should consider excluding export sales from the brewers‚ volume for duty purposes and he urged the pub industry not to absent itself from the debate about minimum pricing.

For the SNP, Joanna Cherry said the party has long supported a wider evidence-led overhaul of the alcohol duty regime. The Scottish Government is encouraging new small businesses in the drink industry with the small business bonus, which provides 100 per cent rate relief on business property up to a rateable value of £15,000, she added.

The Treasury has the power to add another duty band for between 2.8 per cent and 3.5 per cent ABV, which would enable the Government to incentivise the production and consumption of lower strength products, in the interests of moderation, and it should use it, said Jim Shannon, DUP. In this, he was supported by Tory Nigel Evans. The Centre for Economics and Business Research found that an additional 750 million pints were sold in 2013-14 as a result of the first cut in duty after the escalator was stopped, Shannon added. Independent (suspended from the Conservative Party) Anne Marie Morris said a pub in her Newton Abbot constituency has seen its rates go up 83 per cent. It is inappropriate for pubs to be measured by turnover. They get measured on their actual turnover, not the perceived turnover for the square footage. We need to look at a permanent business rate relief system for all our pubs, she said.

Exchequer Secretary to the Treasury Andrew Jones reminded MPs that since 2013, the public finances assume that alcohol duties will rise with the RPI each year. Defending the link with RPI, ‚ it is worth noting that in light of all the cuts and freezes to beer duty since 2013, a pint of beer costs 11p less than it would otherwise‚ . EU law requires member states to charge excise duty on all alcohol and alcoholic beverages, which prevents the UK from selectively charging excise duty on particular products, such as off-trade alcohol, or relieving other sectors, such as on-trade.

The full debate can be read here.