Beer Taxation and Pubs

Debate between Mike Wood and Helen Whately

Thursday 28th March 2019 Commons Chamber

[Mike Wood]

I thank my hon. Friend for raising that point, which is one of those that needs to be considered. I understand the Treasury’s concerns about the risk of fraud, the ability to actually enforce it, and particularly, at the moment, legality under the current European duty framework.

Beer duty has divided this House in the past, but there is now a general agreement on all sides that it is already high and we certainly need to avoid rises. When the hated beer duty escalator was introduced by Gordon Brown, beer duty rose by a staggering 42%, while beer consumption in the UK fell by 16% overall and by nearly a quarter in our pubs. Almost 7,000 pubs called time for good, and more than 58,000 beer-dependent jobs were lost. This was a very expensive policy failure, and the price was paid by beer drinkers, publicans and employees alike. I am delighted that, as a country, we are now drinking more beer but also paying less tax on it as a proportion of the cost. However, the amount of this beer being sold in pubs continues to fall, and while the rate of pub closures has slowed, as I said, they are still closing at a disturbing rate.

[Helen Whately (Faversham and Mid Kent) (Con)]

I commend my hon. Friend on his speech. Pubs are very important in my constituency, where the brewery Shepherd Neame is the largest employer as well as the producer of excellent beer. I see colleagues nodding. Lower-alcohol beers are becoming increasingly popular, so does he agree that there may be a case for looking at the threshold at which brewers get duty relief for such beers?

[Mike Wood]

My hon. Friend is absolutely right. I know that my hon. Friend the Member for Waveney (Peter Aldous) would also agree, with St Peter’s being a major advocate of this argument as well. The European Union, within its beer duty framework, is in the process of changing those thresholds. I would hope that the Treasury, regardless of what form of Brexit we end up with, will make sure that, at the very least, we follow the mechanisms that are already in place, amending the threshold for low-alcohol beers to one where it is rather more viable for brewers to produce at that strength. Encouraging people to go down from over 4% to around 3% is better for their health, and if we can make sure that it is fiscally better for the brewer as well, then so much the better.

As CAMRA has made clear, one of the opportunities as we leave the European Union—we know from last night’s discussion that there is an element of disagreement as to what should happen next—is that we are able 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.

Taxation: Beer and Pubs

Debate between Mike Wood and Helen Whately

Tuesday 31st October 2017 Westminster Hall

[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.