Beer Taxation and Pubs

Adrian Bailey Excerpts

Thursday 28th March 2019 Commons Chamber

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

I congratulate the hon. Member for Dudley South (Mike Wood), my near neighbour, on securing this debate. He mentioned Baynhams beer, of which I am a regular consumer and supporter, and Ma Pardoes pub, where I am a regular visitor. In fairness to all the other Black Country beers and drinking places, I must say that it is a fantastic area for anyone who loves their beer. The sheer range of craft and real ales there is phenomenal.

I particularly welcome the debate because it is framed in the context of the taxation regime for pubs. We need a change in that regime, but that alone will not protect our pubs and their heritage unless it is allied with a change in the supervisory and regulatory relationship between pub tenants and pub-owning businesses.

Let me touch first on the tax regime, although Members have covered most of this. There is obviously a case for looking at alcohol duties. The fact that high-alcohol beers and ciders are taxed at hugely different rates is in itself a reason for looking at them. The fact that high-alcohol spirits are taxed at a lower rate is another reason for looking at them. Ultimately, it is the job of the Treasury to have a comprehensive review of these duties. That should be designed first to promote social drinking, secondly to sustain pubs and lastly to sustain Exchequer revenues.

[Ruth Smeeth]

My hon. Friend has touched on the fact that there are differential duties. Does he agree that it is ludicrous that there is still, in effect, a subsidy for cider producers whose products contain high levels of alcohol, when that is not the case for beer? There needs to be a level playing field across the sector.

[Mr Bailey]

I agree with my hon. Friend. Given the increased consumption of cider and the increased tax revenues from it, I would have thought there was a case for looking at the relative taxation levels of the two drinks.

Business rates have been mentioned. I will not go over the details, but we have a ludicrous situation whereby someone who invests in their business and increases their turnover often gets a huge increase in their business rates as well. One example given to me involved somebody who took over a pub that had traded at £200,000. He raised that to £700,000 but then found that his business rates had gone from £8,400 to £37,000. He did get that reduced to £24,000, but the mere fact that he had such a big increase and that it was then revised would seem to demonstrate that the process for evaluating business rates is deeply flawed. I recognise the Government’s attempts to do something about that, but we really need a comprehensive review of business rates so that they are geared in such a way as to promote and reward investment rather than penalise it.

[Mrs Main]

The hon. Gentleman is absolutely right. I have had similar experiences, with pubs putting in the investment and then finding themselves penalised. However, they say that when they put in a challenge, it takes a long time and it is difficult to get an explanation as to why the final figure is arrived at. There is not the transparency over the rateable system that there should be.

[Mr Bailey]

I totally agree. The process is opaque and would often appear to be perverse as well. There is a big case not only for revising it but for making it far more transparent so that anybody investing in their business can get a clear idea of what the potential financial penalty—if that is the word—would be on their investment.

I want briefly to touch on the pubs code and the Pubs Code Adjudicator, which my hon. Friend the Member for Chesterfield (Toby Perkins) mentioned. I am the former Chair of the Business, Innovation and Skills Committee, and a member of its predecessor Committees, and we examined time and time again the relative balance in power between the pub tenant and the pub owner, as well as the relatively low level of income that tenants running even the most successful pubs obtained from all their efforts, relative to the revenues accrued by the pub-owning business.

The pubs code was agreed by the Secretary of State for Business, Innovation and Skills in the previous coalition Government, and I give him credit for that. A Pubs Code Adjudicator was appointed to adjudicate and to try to ensure that there was a fair balance of risk and reward between the two parties. It is fair to say that the appointment of Paul Newby was controversial, and a lot of concerns were raised. On the basis of the evidence we are getting back from tenants, those concerns were well founded. The changes do not seem to have affected the rate of pub closures whatsoever; indeed, the number of tenants who are still finding that the reward they get from all their efforts is totally inadequate does not seem to have changed either.

I welcome the fact that the Government are about to undertake a review of the working of the code and the adjudication. The essential thing is for the Pubs Code Adjudicator to act as an adjudicator and not just to enable negotiation between the pubco and the tenant, which actually reinforces the imbalance of power between the two. All too often, pub tenants find themselves negotiating against not only the pub company but their solicitors as well, and they are not in a position to have equivalent legal advice.

I conclude by saying that saving the pub involves two things: a radical transformation in taxation, but also the reinforcement of the legal protections for the pub tenant against the pub-owning business.