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Mike Wood (Dudley South) (Con)
I beg to move,
That this House has considered taxation of the beer and pubs sector.
It is a pleasure to serve under your chairmanship, Mr Owen, for what I think is the first time and particularly for this important debate on taxation of the beer and pubs sector. It takes place just three weeks before crucial decisions are made in next month’s Budget. It was pointed out to me this morning that seven years ago an Adjournment debate on this subject was initiated by my constituency neighbour, my right hon. Friend the Member for South Staffordshire (Gavin Williamson). I only hope that my hon. Friend the Exchequer Secretary to the Treasury is as keen to please the Government Chief Whip as I clearly am in repeating his initiative today.
This debate is taking place on Halloween, and pubs up and down the country are decorated with a wide range of ghouls, monsters, skeletons and witches. However, the scariest prospect for our pubs and brewers is surely that they could face a second duty rise this year after next month’s Budget and enormous rises in business rate bills over this revaluation period. I hope to set out, in the short time available to me, why the Minister should avoid that course of action.
In the UK, 30 million adults drink beer each year and 15 million of us visit the pub each week. Representing the Black country, the spiritual home of British brewing, and as chairman of the all-party parliamentary beer group, the largest Back-Bench group in the House, I know how important this issue is for so many of our constituents.
If the midlands is the engine of the British economy, beer is surely the fuel that helps to power that engine, and like all fuel, it needs to be well looked after. My Dudley South constituency is home to four brewers—Bathams, Black Country Ales, Ma Pardoes and the Pig Iron brewery—and no fewer than 75 pubs. The beer and pub sector is vital to our country. Nearly 1 million people across the UK rely on the industry for work. About 46% of them are young people under the age of 25, and just over half are women.
Chris Green (Bolton West) (Con)
Does my hon. Friend agree that having a healthy pub environment will do two things, namely promote healthy drinking and help to revitalise our high streets?
Gloria De Piero (Ashfield) (Lab)
I thank the hon. Gentleman for securing this important debate. May I place on the record my praise for the many microbreweries that have opened in Ashfield? They have totally transformed the high streets in my constituency. Does he agree that the tax break introduced for smaller breweries by the last Labour Government should remain intact to ensure that they continue to prosper?
Mike Wood
Partly because of the small breweries’ relief scheme, we now have a greater variety and, I would argue, greater quality of beer than we have had in the past. It is important that smaller brewers enjoy support that reflects the higher marginal cost of brewing on that scale. However, we also need to look at whether the relief scheme as currently framed is preventing brewers from expanding, or even causing some to scale down.
Mr Cunningham
In the last Parliament, there was a Bill on this subject; I think that a Liberal Democrat introduced it. Certainly the landlords of Coventry’s pubs are voicing a lot of concern about this matter. There is a big effect on pubs—many are now closing—but also a big effect on high streets. Coventry has universities, and sometimes the students have jobs in the pubs, so they subsidise their—
Mike Wood
The hon. Member for Coventry South (Mr Cunningham) of course makes an important and valid point in talking about the role not only of students but of young people more widely in employment, because the pub sector can generate an extremely fulfilling and constructive career for many that goes much wider than the stereotypical picture of students working in a pub until they are in full-time work.
Mike Wood
I must continue because a lot of colleagues are waiting to get in.
The beer industry is a true success story for home-grown British manufacturing. A staggering 82% of all beer consumed in this country is made in the UK. The UK now has more than 2,000 breweries, producing 25 million barrels of beer a year. With 923 million pints exported to 110 different countries, beer is the third largest food and drink export sector in the UK and it is worth £550 million to the UK economy. In my constituency alone, the sector accounts for 1,156 jobs, of which 313 are held by under-25s. It also contributes more than £37 million to our local economy.
Helen Whately (Faversham and Mid Kent) (Con)
I congratulate my hon. Friend on securing the debate. Shepherd Neame, the pub and brewing company, is the largest employer in my constituency, so let me support the case he is making. Given the importance of these companies as employers, and the role of pubs in our villages, we must have a tax regime that supports this part of the economy.
Mike Wood
I thank my hon. Friend, who represents our oldest brewery. It is important that we support established breweries as well as more recent entries into the market. The beer and pub sector adds more than £23 billion to the UK economy, and I know that the Minister will be very grateful for the £13 billion of taxes that it contributes to the Treasury.
There has been a suggestion that duty changes have little or no impact on beer sales in pubs. That is simply not true and is not consistent with the available evidence. The last Labour Government introduced the hated beer duty escalator in 2008. It was hated because the escalator saw beer duty increase by a staggering 42%, hitting beer sales, making pints less affordable and closing pubs at a faster rate than ever. Beer sales have been falling for many years. However, we saw that trend accelerate sharply under the escalator. In the six years before the duty escalator, on-trade beer sales fell by about 3% a year. During the escalator years, on-trade sales fell by more than a quarter, which was about 5.4% a year on average. Almost 7,000 pubs called time for good, and more than 58,000 beer-dependent jobs were lost. However, although beer duty increased by 42%, beer duty revenues rose by only 12%. It was a very expensive failure of a policy and one that I hope the Labour party has put firmly in the past.
Beer duty is now 20% lower than it would have been with tax rises previously planned under the escalator. In the years between 2013 and 2016, when duty was cut or frozen, the annual decline in on-trade beer sales was not 5.4%, but 2%, which year on year makes a significant difference to the number of jobs and the size of the industry. However, the return to a retail prices index-linked rise in this March’s Budget was disappointing. Announcing a second duty rise in the same calendar year would in effect take us back to the days of the beer duty escalator through the back door.
As the price difference between sales in pubs and supermarkets has widened, consumers have become increasingly price sensitive, especially pub-goers. A respected consultancy, Oxford Economics, which has consistently and accurately forecast the impact of duty changes in recent years, 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 and that that would mean more than 2,000 additional jobs.
The Exchequer Secretary will remember the front-page headlines praising the previous Chancellor for cutting beer duty. I cannot promise the Exchequer Secretary the front page of the Evening Standard—maybe he knows a man who can—but I have no doubt that if the current Chancellor freezes beer duty, the whole Treasury team would be carried shoulder high across Whitehall.
The financial benefits of the beer and brewing industry are clear, but just as great is the social impact of pubs and the detrimental effect that pub closures have on the fabric of our society, because pubs are a great addition to the social make-up of our country, at the heart of our local communities. They offer a safe environment in which drinking can be supervised and highly regulated, which is in stark contrast to much street drinking.
Damien Moore (Southport) (Con)
Does my hon. Friend agree that at a time when we are becoming more digitised and people are spending more time alone, the social interaction that pubs create is really important, particularly when loneliness is a major problem, not just for older people, but for younger people as well?
Mike Wood
My hon. Friend goes right to the heart of this issue. Friends are made and communities come together in pubs. Research at Oxford University by Professor Robin Dunbar concluded that pubs play exactly that kind of vital role in tackling social isolation and contributing to wellbeing. People with a local are likely to be better off financially, physically and socially. They are likely to have a wider circle of friends. In a week when researchers have shown again the clear link between strength of social networks and resilience to conditions such as dementia, the social value to which my hon. Friend refers could not be more important.
People who drink in moderation in a pub are more likely to be healthier and register higher levels of happiness than people who do not drink at all. They are also likely to be better fed, with almost 1 billion pub meals sold annually.
We should not forget that pubs play a key role in tourism, being one of the attractions that tourists most want to visit when they are in the UK. Last year there were 600 million day visits to pubs by tourists, and more than half of all holiday visits to Britain included at least one visit to a pub.
Giles Watling (Clacton) (Con)
Does my hon. Friend agree that it is a terrible shame that we lost some 10,000 pubs between 2003 and 2013, ripping the hearts out of many of our villages and communities? Does he also agree that pubs represent part of our British way of life that other people come here to see?
Mike Wood
Absolutely. That is as true in our towns as it is in our villages. About 80% of pubs are community or rural pubs. They bring not just jobs, but a community focus, often in areas of the country where other traditional providers of jobs and community coming-togetherness might have been lost.
Graham Stringer (Blackley and Broughton) (Lab)
The hon. Gentleman makes a profound point about the importance of pubs to rural villages, but does he agree that pubs in inner-city areas are just as important to the local community? There has been a migration of licences from inner-city areas into city centres, which has denuded our inner cities of many of the benefits of public houses.
Mike Wood
The hon. Gentleman is absolutely right. It is particularly troubling that those pubs that close in our towns and city centres are often housed in large buildings that are very difficult to fill and that remain as decaying monuments to the changing nature of consumer behaviour.
Stephanie Peacock (Barnsley East) (Lab)
Pubs and breweries in Barnsley East contribute more than £12 million to the local economy, but on the particular issue of pub closures, does the hon. Gentleman agree that we need to consider updating the compulsory purchase powers and the planning system, which would give more powers to local communities?
Mike Wood
I think that is exactly what the Government have done over the past 12 months in changing the rules on permitted development in particular. Obviously, now we have to go through planning processes before pubs can be converted.
The licensees and customers at many of our pubs contribute in both a financial and practical manner to their communities, by funding and running sporting and other activities, such as football, darts, dominoes and cribbage, but also through community activities, a large number of which are run through our pubs. Of course, because pub customers are extremely generous people, initiatives such as PubAid are able to generate about £100 million each and every year for good causes in communities in all of our constituencies.
For all these pubs to flourish and remain at the beating heart of their communities, they need a transfusion of investment and custom that will come with a freeze in beer duty and a reduction in their business rate burden. I have set out why our beer and pub industry is so important economically and socially, but it faces the twin threats that I referred to earlier: the increases in business rates and in beer duty. The three duty cuts, last year’s freeze and the ending of the escalator secured about 20,000 jobs, boosted confidence in our brewing and pub businesses and meant that more beer was sold than would otherwise have been the case, boosting the Treasury’s total tax take, if we include both direct and indirect taxation. On business rates, the Chancellor has already recognised the pain caused to pubs by the disproportionate burden caused by valuation based on turnover; about half of that turnover may be beer duty and VAT that the pub is collecting on behalf of the Government.
The £1,000 pub relief announced in the March Budget is extremely welcome, particularly for smaller and medium-sized pubs. However, it is particularly important that that relief is now expanded and extended, because our pub sector pays nearly 3% of all business rates despite making up just under 0.5% of business turnover. It is hugely, disproportionately overtaxed through business rates.
Ruth Smeeth (Stoke-on-Trent North) (Lab)
Does the hon. Gentleman agree that it is ludicrous that pubs in Stoke-on-Trent pay more in business rates—in fact, more in total—to the Exchequer than Amazon does in its entirety? Stoke is paying more than Amazon.
Mike Wood
I could not agree more. The revaluation of business rates was often seen as an issue that affected only businesses in London or the south-east. As for everyone else, it was thought that some gained and some lost out, but that is completely untrue when it comes to pubs, which have experienced huge increases in every part of the country. The 27 pubs run by Black Country Ales across the west midlands and neighbouring counties will have experienced an increase in their rateable value of, on average, 40% by the time the transitional period is over.
Anne Marie Morris (Newton Abbot) (Ind)
My hon. Friend makes a very good point. A pub in my constituency has seen its rates go up 83%. Does he agree that it is completely inappropriate for pubs to be measured by turnover? They get measured on their actual turnover, not the perceived turnover for the square footage, so there is no fair comparison with the way in which rates are levied and measured in other industries in our country.
Mike Wood
That is right. As well as a large part of that turnover being just business tax, it is a huge disincentive to invest in and improve the property.
We supported the Chancellor when he suggested he would look at business rates in the light of the increase in online businesses and the harm that could cause our beloved high streets. The message that has come from Members on both sides of the House is that the sooner that can be done, the better. We want to ensure that our community pubs, high street pubs and village pubs are properly considered when any new system is put together, so that we can all get together to protect the great British pub.
I applaud the Government’s work in reducing the deficit, and the measures that the Exchequer Secretary and his colleagues are taking to reinvigorate the economy, but I ask him to urge the Chancellor to go further. Hard-pressed UK beer drinkers still pay 40% of all Europe’s beer duty, despite drinking only 12% of the beer consumed in Europe. Some colleagues may think that means we need to drink more beer to keep up, but let us just focus on the duty. As a Yorkshire MP, the Exchequer Secretary will know that the Black Sheep brewery employs more than 100 people in the Yorkshire dales, but he might not know that it pays more in beer duty each year than it does on the combined costs of employing those 100 staff, buying all the raw materials to produce its beer and then distributing it around the country. Beer duty that is more than four and a half times as high as eBay’s UK corporation tax liability seems an undue burden.
Julie Cooper (Burnley) (Lab)
Does the hon. Gentleman agree that it is unfair that in this country, compared with other EU nations, we drink 12% of all the beer consumed in the EU, but pay 40% of the duty across it?
Mike Wood
As I have indicated, I think that situation is not sustainable in even the medium term, and certainly not in the long term.
Britain’s growing ranks of brewers have much more growth potential, which would mean more investment and more jobs to underpin the economy. The Treasury needs to look at whether the way in which beer duty is structured is appropriate for the 21st century. In particular, there is a growing consensus in the industry that the small breweries’ relief scheme, which has done so much to allow new breweries and microbreweries to become established, is now preventing breweries from growing, and in some cases means that they are downsizing to receive the lower duty rates. I know that the Exchequer Secretary has already received representations on that issue.
To look further ahead, as we leave the European Union in 2019 there are also opportunities to consider whether it is appropriate that beer sold in pubs is taxed at the same duty rate as beer sold in supermarkets or other off-sales, and the role that a differential tax rate could play in supporting our pubs, helping keep more of them open, and the social benefits that come with that. The Treasury should also look at supporting reduced-strength beers by expanding the current bracket to cover beers between 1.2% and 3.5%, instead of just up to 2.8% as at present. I have written to the Exchequer Secretary on this subject. Britain has a strong tradition of brewing 3% to 3.5% beers, and if we can incentivise the industry to develop, produce and market beers at that end of the market, there will be an advantage to the industry and to our health. However, while all those areas for reform are important, none of them should distract us from the immediate need to freeze beer duty and tackle business rates in the Budget in three weeks’ time.
If the Exchequer Secretary is not already persuaded by the economic case against a further rise in beer duty, the social case for helping pubs and reducing their business rates, or the political case for doing something that is genuinely popular across the country, he might want to reflect on the personal-political benefits of backing beer. I have already mentioned that a previous proponent of this cause is now the Government Chief Whip. However, it might be even more pertinent for me to point out to the Exchequer Secretary that the three previous holders of his post who presided over recent cuts to beer duty—my right hon. Friends the Members for Bromsgrove (Sajid Javid), for Witham (Priti Patel) and for Loughborough (Nicky Morgan)—all went on to reach the giddy heights of Cabinet office. As a canny Yorkshireman, the Exchequer Secretary may want to reflect on the fact that cutting beer tax is clearly not a bad career move. In all seriousness, I ask him to do the right thing for the longer term: encourage the Chancellor to freeze beer duty in his autumn Budget, act on the disproportionate burden of business rates on pubs around the country, and invest in and support these great sectors, which do so much economically and socially in every part of Britain.
Several hon. Members rose—
Albert Owen (in the Chair)
Order. A number of hon. Members have indicated that they wish to speak, so I am going to start with a four-minute limit on Back-Bench speeches, starting with Mr Toby Perkins. Bear in mind that we may have votes shortly.
Toby Perkins (Chesterfield) (Lab)
It is a great pleasure to serve under your chairmanship, Mr Owen. I congratulate the hon. Member for Dudley South (Mike Wood) on securing this incredibly important debate and the vigour with which he is going about his role as chair of the all-party parliamentary beer group. As chair of the all-party parliamentary group on pubs, I also feel very strongly about the issues that have been raised.
I am not going to repeat all the statistics that the hon. Gentleman laid out. We have already heard many of the financial arguments as to why pubs matter, but the community point is also important. I support the point made by my hon. Friend the Member for Blackley and Broughton (Graham Stringer) about the importance of inner-city pubs. We are seeing so many of them close. We often think about village pubs, but too little is said about those pubs in our communities and on our estates that have really struggled.
It is definitely the case that the pub is the safest place to drink, because there are other things to do there, people do not drink as fast, they have other people around and it is a much more self-regulating environment. That was brought home to me strongly at a meeting I had with a publican who runs the Harley’s bar in Staveley in my constituency. One of his customers had been a regular attender, but stopped going. The publican met him outside the pub as the man was coming back from Morrison’s with bottles of whisky in his bag, and asked him why he was not coming into the pub any more. The man said, “I can’t afford to come in the pub any more.” The publican said that within six months the guy had drunk himself to death, because all those regulating forces were no longer there. The story that we need to get out there is that the pub is by far the safest place for us to drink.
The point about pubs being a big employer of both the young and women has been well made, as has the point about the importance of the pub for tax revenues. I welcome the fact that the campaigning of a wide range of groups finally persuaded the Chancellor to end the beer duty escalator and to cut beer duty between 2013 and 2015. I take issue slightly with what the hon. Member for Dudley South said, because this is a story that I like to tell. The truth of the matter is that the Chancellor who raised most through the beer duty escalator was not Ed Balls but George Osborne. George Osborne took the escalator that Ed Balls had introduced in 2008 and 2009 and escalated it again in 2010, again in 2011 and again in 2012. I support the fact that he ultimately got rid of it, but he milked that cow just as much as Ed Balls did—let us not be in any doubt about that. There was also the big increase in VAT, which has a big impact on our tourism businesses.
The point made by my hon. Friend the Member for Ashfield (Gloria De Piero), and repeated by the hon. Gentleman, about the importance of small breweries’ relief is incredibly important. I really support the fact that the Government have kept that relief.
Albert Owen (in the Chair)
Order. We now resume the debate. Mr Perkins has 41 seconds left, but I will be generous and give him a minute to gather his thoughts. Mrs Anne Main will follow and will have four minutes.
Toby Perkins
I will finish with this. We have spoken a lot about beer duty and VAT, but it is crucial that the issue of business rates is addressed in the Budget. Every member of the Conservative party who stood in the 2015 election stood on a manifesto of a comprehensive review of business rates. That seemed to disappear from the 2017 manifesto, but the issue of business rates is crucial. We have the most expensive corporate property tax in all of Europe, and no Government who theoretically profess to be a low-tax Government can continue to see business rates going up in the way that they have. I urge 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 our pubs instead.
Mrs Anne Main (St Albans) (Con)
It is a pleasure to serve under your chairmanship, Mr Owen. This is an excellent debate, which is timely, coming just before the Budget, as my hon. Friend the Member for Dudley South (Mike Wood) has said.
St Albans is an extremely high property value area. It is a desirable area and its proximity to London makes it a destination for many families fleeing London for a better quality of life. That puts pressure on pubs in St Albans. Many of them are in small listed premises, in heritage buildings. The pubs struggle to survive in a world where big is beautiful and they generate footfall. St Albans is where the Campaign for Real Ale has its headquarters and it has a strong voice within the pub industry. I pay tribute to the landlords and owners of historic public houses in St Albans for the work that they do to keep their brand alive. It is not enough to say that pubs can survive in this day and age without considering the strains put on them. The historic Boot in French Row is a small, quaint, gorgeous pub that went through trials and tribulations trying to expand its kitchen because it has historic listing.
Similarly, we have the Fighting Cocks, one of the oldest pubs whose name derives from the history that encompassed it. Seeing historic pubs with historic pub names is what draws tourists into St Albans.
Sir Henry Bellingham (North West Norfolk) (Con)
In my constituency, King’s Lynn also has a historic heart. CAMRA has been really proactive in driving forward all the issues, not least the issue around business rates and the impact on older buildings, which are much more expensive to maintain.
Mrs Main
My hon. Friend is absolutely right. Indeed, CAMRA provided me with statistics. There are 62 pubs in St Albans supporting 1,651 jobs with an estimated £32.6 million in gross value added. That is a huge amount put into the local economy. I wrote to the Chancellor about this matter pre-2016 because the rateable value for many of the pubs is enormous. I pay tribute to Sean Hughes of the Boot in St Albans, who is busy collecting signatures. I can do no better in the short time that I have than to read what the petition calls for, because I fully support it. As the hon. Member for Chesterfield (Toby Perkins) said, those who stood in 2015 stood on a manifesto of speaking up on pub business rates. I am afraid I did not read the 2017 manifesto because, like many, I was caught on the hop, so I do not know whether a review of business rates was in it. However, in principle I support that. The petition calls for an interim pub cap
“and a full review of the business rate system.”
It states:
“Pubs in St Albans and parts of England have been hit with extortionate business rate increases due to property values increasing over the past decade. We believe there needs to be a fundamental review on the business rate system to stop pubs disappearing from our villages, towns and cities. We are calling for an immediate interim "Pub Cap" limiting increases in rates bills to 12.5% in England (currently operating in Scotland) and a fundamental review of the whole system to ensure that pubs can survive and this British community asset will not be lost forever.”
I wholeheartedly agree with that.
Warm words will not save our pubs. Anything we say today about how important they are, how much they do for charities and how much they are a part of our constituencies will do absolutely nothing unless we have something along the lines of what that petition suggests. I know we are under pressure in St Albans, with an average house price of more than £500,000, but other areas are equally affected. We do not want to be lamenting the loss of our pubs because we did not take the issue seriously and do something about it when we had time to. Now is the time to take action, and I hope the Chancellor is listening. [Interruption.]
Albert Owen (in the Chair)
Order. A mobile phone is being picked up by the microphone, which we can hear loudly up here.
Jim Shannon (Strangford) (DUP)
It is a pleasure to speak in this debate; I congratulate the hon. Member for Dudley South (Mike Wood) on securing it. The Northern Ireland hospitality industry sustains some 60,000 jobs, including more than 45,000 in food and drink. I advocate drinking responsibly, and many of the public houses in my area have a reputation for removing keys from locals if they have ordered enough drinks to be approaching the limit, even if the drinks are not completely drained. I am thankful for that. I ask more people and businesses to take that step, to ensure that people never drive at or close to the limit.
Norman Lamb (North Norfolk) (LD)
Does the hon. Gentleman agree with me and other hon. Members who have spoken that there is a need for a comprehensive review of the business rate, which puts pubs and other small businesses at a disadvantage—particularly in comparison with cheap booze from supermarkets and other larger businesses?
Jim Shannon
No one in the Chamber today would disagree with that.
The Government rightly tried to incentivise the production of lower strength beers, up to 2.8% ABV, in order to encourage moderate drinking. Unfortunately, because of the taste of 2.8% beer, that has not stimulated the relevant part of the market. Current HMRC duty receipts show that those lower strength beers make up only 0.15% of total UK volumes. However, the industry has provided concrete evidence that the consumer will drink lower strength beers at 3.5% ABV, which is still significantly below the UK average strength. Legal advice has also been provided, which shows that the Treasury can indeed add another duty band between 2.8% and 3.5%, which would enable the Government to incentivise the production and consumption of lower strength products, in the interests of moderation. There no excuse for that change not to happen now; the current advice is compliant with the EU structures directive, but the Government have so far chosen not to act, or to ignore it. We should not be prevented by the EU, when we are trying to bring in a progressive policy that would benefit the UK.
The contribution of the hospitality industry in Northern Ireland in wages alone is £653.4 million. Tourism in Northern Ireland provides 58,000 jobs; the wider tourism economy contributes £1.6 billion to Northern Ireland’s GDP; and food and drink account for more than 30% of visitor spending. Those are significant figures, on which we can build.
Giles Watling
Tourism is vital to my constituency, but does the hon. Gentleman agree that the issue is also communities, and talking to each other? It is a question of talking to each other eye to eye and having a proper discourse—maybe, God forbid, about politics—instead of being on Facebook and Twitter.
Jim Shannon
Yes, I do hold with that. We all agree—it is very much a part of what we are about.
In Northern Ireland we are happy that we offer world-class shopping, spa facilities, eateries that are second to none, scenic views, and the friendliness of the local populace, but there is a need for Government to keep us competitive. The Republic of Ireland has much lower tax, and we need to address that. The Northern Ireland Assembly has set a target for the number of tourism jobs to grow by an additional 8,000 by 2025. As the House will know, the Assembly is in some disarray at the moment—it is not functioning, so it may fall to us in this place to help the industry. One step would be reducing taxation, something I want to support by taking part in the debate.
Tourism is an export generator—the value was £545 million in 2015. There is no point in being able to get a hotel room for £67 per night if a meal will cost £100; we must address the issue, and take action on what is a false economy. Previous attempts to increase Government revenue through duty rises proved ineffective. As a result of the beer duty escalator, from 2008 to 2013 duty increased by more than 42%, but Government revenues increased by only 11.5%. During that time beer sales in pubs fell by 24%, total beer consumption fell by 16%, 75,000 jobs were lost and 3,700 pubs closed.
Conversely, 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. It is necessary to spend money to make money. We may believe that increasing tax will help bring income to depleted coffers, but it has been shown that that is not the case. People simply drink at home, as has been said—or in a friend’s home, where no one is watching the limits, counting how many drinks have been had, or considering how safe it is for them to be in control of a vehicle.
In my constituency there are 39 pubs and two breweries—670 jobs and £7 million in wages, with a £14 million contribution to GDP and £5.4 million in tax paid. The issue is about more than a couple of people complaining about the price of beer in their local; it has the potential to be a factor in increasing tourism and helping local businesses. I ask the Minister seriously to consider what is being proposed.
John Lamont (Berwickshire, Roxburgh and Selkirk) (Con)
I congratulate my hon. Friend the Member for Dudley South (Mike Wood) on securing this important debate. I am delighted to be speaking, and to stand up for the beer and pub sector, which supports about 800 jobs in my constituency. It gives me the opportunity to promote some of the great produce that can be found in the borders. There are certainly some excellent examples, such as Tempest Brewing Company, from Tweedbank, which recently cleaned up at the Scottish Beer Awards, picking up six awards; and multi-award-winning Born in the Borders Brewery, near Jedburgh, which has recently expanded its bottling plant, creating new jobs in my constituency.
As well as award-winning brewers, there are some fantastic pubs in the borders. They make our towns lively, and in villages they are often a focal point for the community. At a time when banks and post offices are closing, often the only community facility left in a village or community is the pub. We cannot kid ourselves that taxation of the beer and pub sector is not necessary. Excessive alcohol consumption is bad for our health, and often causes antisocial behaviour, so it is right that businesses contribute. A certain level of taxation also reduces consumption, so targeting the problem areas, such as drinks with higher alcohol content, is appropriate. However, the burden on the sector is clearly having an impact, and tax now makes up a third of the price of a pub pint. The beer duty is one of the highest in Europe and I support calls for it to be reconsidered.
We must recognise the positive impact that pubs and brewers have on jobs and the communities that they serve. We must also recognise that the problem of excessive drinking is not the sole responsibility of pubs; it not even primarily a problem caused by the sector. Pubs encourage sociable and responsible drinking in a regulated environment where the purpose is to socialise and enjoy a drink, rather than just to get drunk. By making beer unaffordable in pubs we are only promoting a shift in consumption to the off-trade market, which would not be a good thing in terms of reducing alcohol consumption.
On the issue of business rates relief, my hon. Friend the Member for St Albans (Mrs Main) mentioned the 12.5% cap scheme in Scotland. That has not necessarily been welcomed there. Certainly, in my constituency a number of pubs and hotels face a huge one-year increase. It is capped at 12.5% but, given what went before, and what they were previously paying, many pubs have not welcomed it.
I want finally to make a point that, although not directly related to taxation, is relevant to the challenges that pubs face—the reduction in the drink-driving limit. In Scotland it was reduced a few years ago. I supported the move and do not advocate changing the law. However, there has been a fairly profound impact on pubs— particularly rural pubs. In fact, a third of rural pubs in Scotland have reported a drop in sales of more than 10% since the limit was reduced. I do not think that enough was done to support the sector when the change was made, and I hope that lessons can be learned, particularly if there is a debate as to whether the law should change in England and Wales.
John Grogan (Keighley) (Lab)
I think that the hon. Member for Berwickshire, Roxburgh and Selkirk (John Lamont) has tempted many of us to renew our acquaintance with pubs in the borders. It is a particular pleasure to take part in the debate, as it was secured by a true champion of the pub—the hon. Member for Dudley South (Mike Wood).
Having retired in 2010 from chairmanship of the all-party group on beer and from Parliament, I might have thought that my days of speaking in such debates were long gone; so I am delighted to say a few words today. In those days I represented the constituency of Selby, which included Tadcaster—still the only town in England that can boast three major brewers. In Keighley, which I now represent, there is one major brewer—Timothy Taylor’s, which dates back to 1858. It is a byword for quality in the beer industry, with brewers who trained at that icon of higher education in brewing, Heriot- Watt University—perhaps the leading university in the field. There was a minor hiccup in relations between Timothy Taylor’s and the all-party group when I voted—it seems so long ago—to ban fox hunting. The then managing director, Charles Dent, promptly resigned his involvement with the group. I can assure the House that this summer in typical Yorkshire fashion, over a pint at Headingley, we let bygones be bygones. I am very much in dialogue with Timothy Taylor’s. There are also breweries such as Wharfedale, Bridgehouse, Wishbone, Haworth steam brewery, Ilkley and, just outside the constituency, Goose Eye.
There has been a lot of talk about statistics; I want to underline just two. One in seven of all the jobs created since 2010 have been in this sector. What has not so far been expressed is how quickly people can rise up this industry; it is, if not unique, then certainly renowned for that. Some £1 billion from Yorkshire goes in taxation from the pubs and brewing industry to the Exchequer—about the same amount that goes from Northern Ireland, as the hon. Member for Strangford (Jim Shannon) said. If only we had a Yorkshire Mayor spending that money! We truly would have devolution.
I want to make four quick points. We should encourage beer exports, and there has been quite a movement towards that from the industry. Some have suggested that export sales should be excluded from the brewers’ volume for duty purposes, as a way of encouraging exports. That should be considered.
The hon. Member for Dudley South was right that under the Labour Government and under the coalition, the beer duty escalator did a great deal of harm. It is good to see the hon. Member for Burton (Andrew Griffiths) in his place, because he achieved what I certainly did not, and I hope that future chairs of the all-party beer group will achieve similar things. He got rid of the beer duty escalator. This is a crucial year for the reputation of the Conservative party and its relationship to the beer industry. Will those three years be known as the Burton interregnum or will we have not just beer duty relief, but rate relief? We clearly need an extension of £1,000 to £5,000 on rate relief this year.
Turning to small breweries’ duty relief, Gordon Brown has been agonising in recent days about his lack of empathy. Whatever the truth of that, he will always be known as the friend of small brewers—it is one of his great legacies—because of that massive change to our economy. At some stage, we will have to look at whether that can be extended. Many family brewers are losing out. They feel that they do not have the advantage of the duty rate relief and do not have the economies of scale that big brewers have.
Toby Perkins
And because my hon. Friend wants to hear what I have to say, I am sure. On the important point about the relief for small breweries, does he agree that although the policy is excellent, its impact sometimes means that brewers cannot grow any more as they will no longer come under it? Perhaps some kind of tapering to allow brewers to go from small to big would be helpful.
Albert Owen (in the Chair)
The hon. Gentleman does not have to take the full minute.
John Grogan
As you have assured me that your favourite brewery in Yorkshire is Black Sheep brewery, I will take only 45 seconds, Mr Owen.
I urge the brewing industry, which has a great number of good leaders—including Mike Benner at the Society of Independent Brewers, Brigid Simmonds at the British Beer and Pub Association, Kate Nicholls at the Association of Licensed Multiple Retailers and Tim Page at CAMRA—to address this issue. The industry needs a consensus to put to Government about reform of the progressive beer duty. That would be the ideal situation.
Finally, I urge the pub industry not to absent itself from the debate about minimum pricing. If the Supreme Court upholds the Scottish Government’s decision to introduce minimum pricing, this issue will be back on the political agenda. A decade ago there was a strong alliance between the health lobby and many in the pub sector. That led to the smoking ban, and I think there could be considerable scope for renewing that alliance.
Mr Nigel Evans (Ribble Valley) (Con)
It is an honour to follow the hon. Member for Keighley (John Grogan), who is such a champion of the pub and beer industry, and to serve under your chairmanship, Mr Owen. During the last vote, I bumped into the Chancellor of the Exchequer. I said, “Chancellor, come down to Westminster Hall and listen to the debate on the beer duty,” and he smiled. I assume he is not here because he has rushed back to No. 11 Downing Street to pore over a spreadsheet and work out how much extra he can earn for the industry by reducing the taxation on beer—and also how popular he can become with each 1p reduction.
It is also a pleasure to be here with the former chairman of the all-party beer group, my hon. Friend the Member for Burton (Andrew Griffiths), who managed to have three successive 1p beer cuts and a freeze under his chairmanship—no pressure, then, on my hon. Friend the Member for Dudley South (Mike Wood), the current chairman of the beer group!
I get criticised for always prattling on about the pub that I live next door to, the Swan with Two Necks. In an emergency, I can be in that pub in three seconds. I will correct that today by mentioning three other pubs that serve the community that I represent. Alex Coward, the landlord of those pubs, is with us today and has lobbied me about the importance of cutting the beer duty. There is the White Bull at Alston, the White Bull at Gisburn and the Alston Arms at Longridge. I have eaten and drunk in all three of those pubs at some stage. Alex told me about all the charities that they support, from the Brittle Bone Society to the Air Ambulance, to Macmillan, as well as Longridge juniors and Longridge town football club and the local Joanne Smith Wareing cancer charity.
We know that pubs are a focal point for a lot of occasions, such as christenings, funerals, birthdays or just for people coming together. That is how important they are. The current chair of the all-party beer group went through a list of reasons why local pubs are important to the community, so I do not need to repeat those, but I want to stress a number of things about how important the local pub and brewing industry happens to be.
I hope that the Government will look at lower taxation on lower gravity beer. They tried an experiment on beer of 2.8% or less, but it has not taken off. People have not flooded to taste that beer, but I believe there is an audience for beer that is between 2.8% and 3.5% in strength. We are told that the Treasury would love to do it but that it cannot because of the European Union. Well, the good news is that we can all rush to our pubs post-March 2019 and celebrate our leaving the EU, but there are things that the Treasury can do, such as introduce a new rate of 2.8% and 3.5% and have a different rate of taxation on it. I have legal advice stating that the Government can do that, so I hope the Treasury will look at that.
We have argued for lowering the taxation rate generally. Every 1p that it was reduced by in the past created 4,000 more jobs in this area. Let us look again at business rates, which are going to clobber a load of pubs. I am a member of CAMRA. Twenty-one pubs are closing every week and that is a huge loss to the community, particularly when the pub is the only one in a community. It can have a savage impact.
Ruth Smeeth
As the hon. Gentleman knows, I am a proud representative of the Titanic brewery in my constituency. For the record, there is no better beer, but it also has a small pub estate, and its business rates have gone up by 37%. That is £70,000 a year that it can no longer invest in its estate or in its people. Surely at this point we need to reflect on what is really happening in the beer industry and what is likely to happen to pubs.
Mr Evans
The Treasury really has to take this issue on board. Business rates, the living wage and other costs that are heaped on the brewing and pub industry mean that this has to be looked at carefully. Pubs are closing. I mentioned Alex Coward, who employs 45 people in the local community, and we represent a semi-rural, or rural, area. These are vital jobs in those areas.
A lot of pubs play music and pay their licence under the Phonographic Performance Limited licence. A lot of pubs are now receiving a new notification. If they have a TV on the wall and show live TV—not just the sport, but something else—they are being asked to pay a minimum of £100. The larger the pub, the more they will be asked to pay. As a lot of people have mentioned, it is cheaper for someone to buy beer from a supermarket and then sit at home alone watching a big TV. How miserable is that! We need to do more to incentivise people to use pubs. If that means lowering taxation on pump-pulled beer compared with beer that someone buys in a pack—12 bottles or 24 cans—we need to do that. I am told again that that can happen when we leave the EU in March 2019, and I hope the Treasury will look at it.
Several hon. Members rose—
Albert Owen (in the Chair)
I call Anne Marie Morris to speak for four minutes and I will then reduce the time limit to three minutes, because I want to hear the three next speakers after that. They will be Peter Aldous, Steve Double and Fiona Bruce.
Anne Marie Morris (Newton Abbot) (Ind)
Pubs are a core part of my very rural constituency and provide 2,000 jobs overall. In those rural communities, many pubs are the only community centre. The small shop has gone. The post office has gone, and many of the pubs are now becoming the local store, in addition to being the local pub. We really need them but, despite all that, they are being penalised.
We have discussed a number of taxes, but I will focus on business rates. The challenge for pubs, as I said earlier, is that their business rates are based on turnover. As I understand it, the original intent was to base the tax on the turnover that could be generated given the square footage of the public house. In reality, the actual turnover is taxed. Not only does that mean that it is not comparable with how business rates in other sectors are calculated, but it also penalises successful pubs with rises in business rates and effectively gives handouts to unsuccessful pubs. That does not seem right.
The Smugglers Inn, a successful pub in my constituency, is a case in point. Before the revaluation, its rateable value was £66,500, and it paid £33,000 in business rates. After the revaluation, its rateable value was £125,000, and its business rates £60,000—a rise of 87%. The advice that the landlords received when they complained was to reduce their turnover. I thought that we as the Government of this country wanted to increase productivity, not cut it.
The rate relief provided in the 2017 Budget was welcome, but the £1,000 for pubs and the discretionary amounts available were not distributed quickly; the guidance from Government was slow. I am pleased to say that much of it has now been distributed, but the Government should look at it again. If the same happens again, we need to ensure that the money needed is distributed.
Fundamentally, the problem is that the system is unfair. If we want our pubs to survive, we absolutely must do more to assist them. As has been said, many of them are rural, meaning that their costs are high: pensions, living wage, tax. Burst water mains and power failures, which are common, cost money. They have to use kerosene and LPG, which are much more expensive and must be bought in bulk in advance—
Anne Marie Morris
I will give an example of the costs I mentioned. One of my publicans told me about the cost of Bombardier. In July 2012, a nine gallon barrel cost him £42.99 plus VAT and he sold it at £2.20 a pint. In July 2017, the same barrel cost him £120 plus VAT and he sold it at £3.80 a pint—not the £6.60 that would have reflected the cost.
We need to properly address the burdens that our pubs face. My focus is on business rates. I endorse other hon. Members’ calls for a thorough review of the whole business rates system. The valuation office often gets valuations wrong because it is no longer staffed by local people and does not visit sites. My local council often pays refunds to schools and doctors’ surgeries, but they are the last types of organisation that should be getting refunds after overpaying.
We need to review the appeals system. If pubs have got it wrong, the appeal system is not fit for purpose—it is slow and hard to afford. We should also look at the turnover methodology for pubs, which clearly does not work. What is supposed to happen, and what happens, penalises the good and gives a subsidy to the not so good. That is not fair and not fit for purpose. Because of these circumstances and their importance, we need to look at a permanent rate relief system for all our pubs.
Peter Aldous (Waveney) (Con)
It is a pleasure to serve under your chairmanship, Mr Owen. I congratulate my hon. Friend the Member for Dudley South (Mike Wood) on securing this debate. I will focus on the specific issue of small breweries’ relief. I ask that the Government consider removing export volumes from the relief’s calculations.
There is clear evidence that the current arrangements hold breweries back from increasing exports, investing in buildings and equipment, and creating new jobs. St Peter’s Brewery near Bungay in my constituency was established in 1996 and set out specifically to target the export market. Its exports to 50 countries make up 42% of its turnover. St Peter’s is a great British success story, but it is constrained from doing better by the current structure of small breweries’ relief. Although the relief is generous to microbusinesses, it discourages exports by breweries looking to grow and it significantly disadvantages small and medium-sized brewers above the threshold that have export potential. St Peter’s advises that removing the duty on exports would enable it to invest in new buildings and equipment and to increase their workforce by five from 18.
St Peter’s is not alone in making the case for removing export volume from the SBR calculations. That case is also supported by the Society of Independent Brewers, which describes it as a “no brainer”, and by the British Beer and Pub Association, which includes it in its compelling eight-point export strategy. As Brexit approaches, it is vital that we realise the full export potential of an industry that is a fundamental part of the British brand. A relatively small fiscal change in next month’s Budget would enable breweries such as St Peter’s to realise their full potential, be part of a great British success story and create new, much needed jobs in their local communities.
Several hon. Members rose—
Albert Owen (in the Chair)
Order. Before I call Fiona Bruce, let me say to Iain Duncan Smith that his debate will start at approximately 4.30 pm.
Fiona Bruce (Congleton) (Con)
Pubs are indeed great community assets, but many face challenges because of the availability of cheap alcohol in supermarkets and off-licences. Cheap alcohol carries tremendous costs to health, too. One particular product, high-strength white cider, causes disproportionate levels of harm and perpetuates deprivation and health inequalities. It is often called the drink of choice for the homeless, the lonely and vulnerable young people, many of whom are on the streets, underage or drinking simply to blot out their problems. It results in death for many who drink it, but it is people’s drink of choice because it is so very cheap.
High-strength cider has developed largely because, as a result of anomalies in the tax system, it has the lowest cost per alcohol unit of any product on the market. A 3-litre bottle of white cider contains 22 units—the equivalent of 22 shots of vodka—and can be bought for just £3.59. The homelessness charity Thames Reach says:
“Super-strength drinks have become one of the biggest causes of premature death of homeless people in the UK, and…are doing more damage than both heroin and crack cocaine”.
Some 78% of the deaths in Thames Reach’s hostels are attributed to high-strength alcohol.
Before I speak about how the Treasury can address this problem, I would like to mention the touching story of one mother, Joanne Good, who came to Parliament in February to tell us about her young daughter, Megan, who went out to a new year’s eve party aged 16 and drank half a bottle—1.5 litres—of Frosty Jack’s. She died in her sleep. These high-strength products should not be available for pocket-money prices. In the light of the Government’s commitment to put social justice at the heart of all they do, introducing a new higher band of duty in the forthcoming Budget that applied to cider with an alcoholic strength by volume of between 5.5% and 7.5% would be a targeted and proportionate response. It would leave the majority of ciders completely unaffected; the vast majority of products subject to the new rate would be white ciders.
There is compelling evidence that altering duty bands can influence consumer behaviour, so I ask the Government to consider increasing the rate for this band of drinks. I am offering them a healthier option. With an increase in tax take, what is not to like?
Steve Double (St Austell and Newquay) (Con)
It is a pleasure to speak in this debate; I congratulate my hon. Friend the Member for Dudley South (Mike Wood) on securing it and on his excellent opening speech.
I have the incredible honour and privilege of representing the constituency that contains St Austell Brewery, which since 1851 has been brewing high-quality beer in the centre of St Austell under the ownership of the same family. It now enjoys incredible success and exports a number of its brands around the world.
The three years of beer duty cuts and the subsequent freeze were incredibly positive, not just because of the money they saved on the cost of a pint of beer, but because they sent the brewing industry the clear message that the Government backed it and were behind it. That gave brewers the confidence to plan for the future and invest in products, plant and machinery to grow their businesses and the market. Unfortunately, the rise in the retail prices index earlier this year has undone virtually all the good work of the cut and freeze years and has sent a negative message to the industry.
I encourage the Minister to take back to the Chancellor and the Treasury the strong message that this year we really need at least a freeze in the beer duty, to restore confidence in the industry. We are a Conservative Government, after all; we believe in low taxes, and we know that punitive taxes do not work. Cutting, or at least freezing, the beer duty will allow the sector to continue to grow, with more and more jobs being created.
I must also mention the small breweries’ relief scheme for brewers who produce up to 60,000 hectolitres a year—I did not know what a hectolitre was until a couple of days ago, but there we go. That threshold is clearly acting as a brake on small breweries that prevents them from investing and growing beyond it. Some form of tapering would be very welcome, because we have created a squeezed middle—brewers who are just above the threshold but are paying much higher rates of beer duty. I believe it is time for a review, and I ask the Government to work with the industry to get an overall view of small breweries’ relief and see whether the limit can be increased.
Fiona Bruce
Does my hon. Friend support my request that the Minister consider applying small breweries’ relief to cider producers, who do not enjoy that advantage at present?
Steve Double
I absolutely agree that cider should be considered for the relief as well.
The Budget gives us an opportunity to send the clear message to the brewing industry and our pubs that we back them, we understand how essential they are and we need to take action to support them.
Albert Owen (in the Chair)
I thank the Labour and Scottish National party Front Benchers for agreeing to shave some time from their speeches, to allow all Back Benchers time to get their points across.
Joanna Cherry (Edinburgh South West) (SNP)
I congratulate the hon. Member for Dudley South (Mike Wood) on securing this debate and on his excellent and thorough opening speech. There has been great cross-party agreement today about the important role that pubs play as employers and as the hearts of our community. We have also heard heartfelt pleas for freezing the duty on beer and for assistance with business rates.
The Scottish National party is proud of the substantial economic contribution made by pubs, breweries and microbreweries to the Scottish economy. The brewing and pub industry supports the employment of 60,000 people in Scotland, some 72% of whom are directly employed in it. Individuals who work in these jobs earn a combined £767 million per year; the industry contributes £1.6 billion to the Scottish economy and generates £972 million in tax revenues for an annual investment of only £69 million.
The SNP has long supported a wider evidence-led overhaul of the alcohol duty regime. We believe that evidence-based decision making that levies alcohol duty based on alcohol content is fairer, more equitable and more in line with encouraging a healthier approach to drinking. That is what the Scottish Government’s minimum alcohol pricing policy seeks to do; it will not attack the price of a pint in a pub, but it will affect supermarket cheap alcohol promotions.
The Scottish Government are encouraging new small businesses in the drink industry with the small business bonus, which provides 100% rate relief on business property up to a rateable value of £15,000. As the hon. Members for St Albans (Mrs Main) and for Berwickshire, Roxburgh and Selkirk (John Lamont) mentioned, the Scottish Government also introduced a 12.5% cap on business rate rises for the hospitality trade. The national chairman of CAMRA, Colin Valentine—a constituent of mine—said that the cap
“has made a big difference and in some cases it has been, and will be, a life saver”
for pubs, so the policy has clearly been of some assistance, although I am sure he and others would say that there is much more to be done.
The Scottish Government are working closely with public bodies and industry to support jobs, infrastructure and the thriving sector. I am happy to say that start-ups have helped the Scottish brewery sector to double in size since 2010. In 2016, 115 breweries were up and running in Scotland, compared with 55 just six years earlier. I am very proud that my constituency of Edinburgh South West hosts one of Scotland’s most iconic breweries: the Caledonian Brewery in Slateford Road. Edinburgh South West also boasts one of Scotland’s most successful microbreweries, the Edinburgh Beer Factory, which is located on the Sighthill industrial estate.
As the hon. Member for Keighley (John Grogan) said earlier, Heriot-Watt University in my constituency has an International Centre for Brewing and Distilling—a unique facility devoted to teaching and research, and meeting the needs of brewing, distilling and malting industries worldwide. I applaud Heriot-Watt University, which of course recently won International University of the Year from The Sunday Times.
The Caledonian Brewery, which is in the heart of Edinburgh and close to my constituency office, opened in 1869 and it has been preserved by Heineken UK, which now owns it, as a working masterpiece of manufacture, utilising many of the more old-fashioned methods of brewing but in a modernised setting. Heineken’s UK headquarters is in my constituency at South Gyle, employing around 550 people. Of course, Heineken is one of the UK’s leading pub, cider and beer companies, and more than 90% of the beer it sells in the UK is brewed here. It is also a major supporter of British agriculture, sourcing 100% of its malt and barley for its UK-brewed beer from UK farms and maltsters.
Heineken is also a passionate supporter of the great Scottish pub, through its Star Pubs and Bars business. I am proud to say that I have visited several of its pubs in my constituency, including the Jolly Botanist; the Athletic Arms, which is a very old Edinburgh pub known as “the Diggers”, where I held my victory party after the SNP tsunami in 2015; and the Spylaw Tavern. These are all thriving, local, community pubs.
I also applaud Heineken for what it puts back into the community in Edinburgh. In the summer of 2016, I joined Heineken employees, in collaboration with the Edinburgh Festival Fringe Society, in a volunteering project to regenerate the Broomhouse Centre in Broomhouse in my constituency, which is a charity that provides personal, social and community development opportunities. At the end of a day of hard work, we celebrated by enjoying performances from Edinburgh festival artists.
Earlier, I mentioned the Edinburgh Beer Factory, which is also in my constituency. It was founded just over two years ago and is an independent, family-run brewery that is going from strength to strength. It has won multiple awards, including the award for the UK’s best Helles lager two years running and the award for the world’s best American brown ale in 2017. The company’s products are really quite outstanding and 2018 will be an exciting time for it, as it launches two new products and starts to export its beers. However, like many other companies, the Edinburgh Beer Factory would like to see a freeze in beer duty in the next Budget, as well as measures to encourage exports. Beer is in the top three British food and drink exports, and, like all parts of the British food and drink industry, brewers fear the consequences of Brexit and require more reassurance on that front.
Albert Owen (in the Chair)
I am very grateful to the hon. and learned Lady; if the next Front-Bench spokesperson takes the same amount of time, we will get a good response from the Minister.
Gill Furniss (Sheffield, Brightside and Hillsborough) (Lab)
We hope, Mr Owen. It is a pleasure to serve under your chairmanship. I congratulate the hon. Member for Dudley South (Mike Wood) on securing this debate. It was in his company and that of my hon. Friend the Member for Stoke-on-Trent North (Ruth Smeeth) that last week I tasted and enjoyed many UK beers with the Titanic Brewery.
I will comment briefly on some of the contributions. My hon. Friend the Member for Ashfield (Gloria De Piero) made very astute references to microbreweries and the tax break provided for them by the last Labour Government; I hope the Minister will tell her that that will be retained. My hon. Friend the Member for Coventry South (Mr Cunningham) made an interesting point about the valuable work that young people and students can get in the hospitality industry, including in pubs.
It is worth mentioning at this stage some of the worries of brewers and pubs in the city of London about their requirements for European labour after Brexit. We also need to look at the planning issues, which my hon. Friend the Member for Barnsley East (Stephanie Peacock) mentioned, including permitted development rights.
The British pub is renowned around the world. Since the oldest one was established in the 11th century, the pub has continued to be a central feature of British life—a unique social hub for meetings, discussion and debate. Since then, of course, the world has drastically changed, but the continuity provided by the presence of a pub in the community remains. It is important that we work to preserve and encourage the growth of our pub industry; it makes both economic and social sense to do so.
According to the British Beer and Pub Association, the sector supports 900,000 jobs, with 42% of them held by under-25s; generates £23 billion in economic value; and provides £13 billion in tax revenues. On top of all that, 30 million adults visit the pub every month, which is proof that the British pub is not only a business but is at the heart of our communities. It brings people together and continues to be on the “to-do” list of almost every tourist visiting the UK.
Yet drinking establishments across the UK continue to be under severe threat. We have all seen the boarded-up pubs in our constituencies, not least because of the burden of the business rates evaluations but also because of the unequal relationships between large pub-owning businesses and pub tenants. Unfortunately, the pubs code as it currently stands has failed to deliver effectively what it was set up to do, but that is a debate for another time.
I return to beer taxation. As colleagues have already said, it was announced in the 2016 Budget that the duty on beer, spirits and most ciders would be frozen in the year 2016-17. That freeze on a typical pint of beer followed three consecutive years of beer duty cuts. On the other hand, duties on other alcoholic drinks, including wine at or below 22% alcohol by volume and high-strength sparkling cider, rose by retail prices index inflation. However, in March 2017 the Chancellor announced an RPI increase for beer too, which beer groups have called a “setback”, especially given the fragile environment that pubs find themselves in.
Can the Minister confirm what the beer duty RPI increase has meant in prices for customers and what mechanisms are in place to monitor the effectiveness of any such measure? When the beer duty freezes were introduced, Labour did not oppose them, but we asked questions about what the tax freeze meant in distributional terms. For example, the freeze favoured those who consume more of the relevant types of drinks. The equalities impact statement relating to last year’s freeze noted that
“any changes to alcohol duties will have an equalities impact that reflects consumption trends across the adult population”.
However, it failed to outline the specific equalities impact with respect to gender.
Although men are more likely to drink excessively than women, statistics from the Office for National Statistics show that wine, the tax on which was not frozen, is the most popular drink among women, while the most popular type of drink among all ages of male drinkers was normal-strength beer, lager, cider or shandy. Additionally, many trade bodies questioned why wine was singled out for a duty rise. Any future decision about alcohol levies should take that point into consideration.
Underlying this debate is a recognition of the importance of the pub as a local community hub and of the need to ensure that we do what we can to support it. That is why Labour is committed to securing the long-term future of pubs and the hospitality sector. Action must be taken to ensure that pubs are profitable and worth running as independent small businesses.
The Conservatives have neglected the needs of small business in favour of introducing tax breaks for big business that have failed to stimulate investment or create the high-skilled, well-paid jobs the country needs. Their cliff-edge approach to Brexit risks our access to the single market, and risks damaging all business by prioritising an economically damaging, undeliverable and unworkable cap on immigration at all costs.
Labour is the party of small business. We know that small businesses are the backbone of our economy, accounting at the start of 2016 for 99.3% of all private-sector businesses and 60% of all private-sector employment in the UK, or 15.7 million people. That is why we will end the Conservative attacks on small businesses by reforming business rates, scrapping quarterly reporting, ending the scourge of late payments and reforming employment allowance. Under a Labour Government, pubs will have the support necessary to thrive and grow.
Albert Owen (in the Chair)
I am grateful to the hon. Lady for her remarks and for allowing the Minister a full 10 minutes, unless he wishes to allow the sponsor of the debate to finish. Either way, I will call time at 4.30 pm.
The Exchequer Secretary to the Treasury (Andrew Jones)
It is always a pleasure to serve under your chairmanship, Mr Owen. I congratulate my hon. Friend the Member for Dudley South (Mike Wood) on securing this well attended and enthusiastic debate. I participated in the Adjournment debate seven years ago—I remember it well. I take this opportunity to commend the work of both the all-party parliamentary beer group, which my hon. Friend the Member for Dudley South chairs so effectively, and of which my hon. Friend the Member for Burton (Andrew Griffiths) is a distinguished former chair, and the all-party parliamentary save the pub group. No one in the pubs and brewing sector across our country can be in any doubt that they have some enthusiastic and eloquent champions within Parliament.
I will try to respond to as many of the issues as I can, but I am sure that hon. Members will appreciate that I am not able to pre-empt what my right hon. Friend the Chancellor may or may not say in three weeks and one day’s time. The requests to do so have been very tempting, but I am afraid that those making them will be disappointed. Before commenting on duty, let me just say that the Government recognise the importance of the UK beer and pubs sector. We hugely value the industry and its contribution to employment, to promoting responsible drinking and to community life. The sector’s footprint covers every single constituency in the country.
As colleagues across the House have said, pubs play a central role in our communities, whether in urban areas, in villages or on the high street. They are often far more than just a social venue; they double as restaurants and I can think of somewhere where they are also the village shop and, indeed, the post office. In my constituency we have a very good not-for-profit organisation called Pub is The Hub, led by John Longden, which does fantastic work helping pubs to diversify their offering.
Colleagues have also mentioned the charitable work in which pubs are involved. Pubs raise more than £120 million per year for charity, so there is a significant impact. The British Beer and Pub Association estimates that the sector as a whole invests more than £2 billion per year in its pubs and breweries, which in turn has an impact on employment; the sector is estimated to employ nearly 900,000 people throughout its supply chain, generating £23 billion in economic value. The very good points made by colleagues about the sector’s employment record have been powerful, and I entirely agree with them. In the run-up to preparing the Budget, I have met the British Beer and Pub Association and other businesses from the industry, including pubs and brewers of all sizes, and we recognise the contribution they make to economies and to the wider beer market—I have made that very clear to them.
The number of breweries in the UK has risen by 64% in just the past five years, to more than 2,000. The growth in the number of small breweries in recent years has increased the diversity and choice in the beer market, and has promoted consumer interest in a much larger range of beers, which has benefited the entire sector. My hon. Friend the Member for Dudley South commented on export, and I can provide some further information about that. More than 1 billion pints of beer are exported from Britain every year and reach 184 countries. Beer is one of the top three food and drink exports, generating nearly £700 million in sales—nearly £2 million, therefore, every day.
Colleagues have spoken about beer duty. I must say, first, that since ending the escalation of the beer duty in 2013, we have demonstrated clear Government support for this industry. After ending the duty escalator, the Government proceeded to cut beer duty in the 2013, 2014 and 2015 Budgets, before freezing it in 2016. It is worth noting that, as has been the Government’s policy since 2013, the public finances assume that alcohol duties will rise with the retail prices index each year. That means that there is a cost. If we choose to cut or freeze duties, there is an impact on the amount of money taken into our Treasury, which affects other areas of public expenditure or perhaps means that we have to seek to raise tax elsewhere. We just need to balance all those points; colleagues must remember that we are still running a giant deficit, which we inherited from the Labour party.
I know that hon. Members will want to reiterate the point made here this afternoon, that cutting duty supports growth and increases revenue. We have seen some evidence of that. I am, instinctively, a low-tax Conservative and I recognise that the lower the tax environment, the more businesses have to invest. It is not as straightforward to see direct cause and effect where we have had cuts, but the principle is, I think, understood. We, therefore, had to take the difficult decision last March that beer duty, along with other alcohol duty rates, needed to rise in line with RPI, but 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.
Some hon. Members have mentioned the price difference between the on-trade and the off-trade. That issue is raised regularly, and people would like to see the Government applying higher duty rates in the off-trade. Currently, however, that is not legal. European Union 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. I need to be clear about that so that we can manage expectations here. I cannot say what is in the forthcoming Budget, but I can say that I will take to it all the representations from today’s debate and share them with my right hon. Friend the Chancellor.
A number of colleagues have raised the issue of business rates, recognising that they are a high fixed cost for some businesses, including pubs. We fully recognise that, and that is why in 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. To put that into context, that is 90% of all pubs, which basically means that the pubs that do not qualify are more likely to be managed by the much larger chains and are therefore able to manage business rates much more easily. Having said that, I can assure colleagues that we are aware of the request made both here and by the sector to extend the discount, and I can confirm that we will include it within our Budget representations, as we will the comments on business rates overall. However, I should just note that the cuts in business rates announced in the 2016 Budget will cost nearly £9 billion over the next five years, so we are out there helping businesses.
I turn finally to small brewers relief. We know that the number of small brewers has increased significantly over the years, from 400 in 2002 to 2,000 now. I mentioned earlier that the Government recognise that that diversification has added to the sector and the small brewers relief has really helped the growth of the industry. However, we are aware of the concerns about small brewers relief that many have raised with me. When I consider what we need to do, I want to ensure that we work with the whole sector. I want to work with the sector, not against the sector, to support growth, and I would like to see what evidence can be produced to suggest that we can have some uniformity of opinion before moving anywhere forward.
We have heard the points that my hon. Friend the Member for Congleton (Fiona Bruce) made about white cider and will respond in due course. We have had a consultation on that; there is no doubt that it is a problem area.
I finish the debate by saying that it has been a great, constructive and positive one. We have clearly demonstrated support for the sector and the Government are clearly a part of that, with all the actions we have been taking, for all the excellent reasons that have been presented throughout the debate. I assure everyone here that I have listened keenly and that we will take the contributions to be Budget representations. It is only three weeks and one day until we all get to hear what the Budget says—not very far away. I thank hon. Members once more for their contributions and for raising the issue.
Albert Owen (in the Chair)
I thank the Minister. I call Mike Wood to make the concluding remarks.
Mike Wood
I thank the Minister for making a generally positive response and for the many meetings he has had with colleagues and industry groups over the past few weeks, and will have over the next few weeks. I thank the many industry groups that have contributed to support Members in this event: CAMRA, the British Beer and Pub Association, the Society of Independent Brewers, the Association of Licensed Multiple Retailers and the Small Brewer Duty Reform Coalition. I also thank the many hon. and right hon. Members—