Beer Duty Escalator

Dan Rogerson Excerpts

Thursday 1st November 2012 Commons Chamber

[Mr Wright]

I absolutely agree with the hon. Gentleman. If manufacturing is to be an important part of this country’s economic base, with small and medium-sized enterprises forming a key part of that, the food and drink sector—of which microbreweries have to be an essential and growing component—will be vital to that.

I have listened closely to other hon. Members’ contributions to this debate, which has been fair and balanced. It is unreasonable to suggest that beer duty is the sole reason that the pub and beer trade is facing difficulties. There are long-term social and economic forces at work. Over the past 30 years, people have switched away from beer to wine in their alcohol consumption. That is true not just in Britain, but throughout western Europe and the United States. Significantly—this point has been touched on many times in the debate, but it is worth repeating—people are now consuming alcohol in their homes rather than in pubs. In fact, some 70% of the alcohol purchased in the UK is bought for consumption at home. Traditionally, 30 or 40 years ago, people probably bought alcohol only in a pub; now, it is far more likely that beer will be bought in a supermarket.

[Dan Rogerson (North Cornwall) (LD)]

Will the hon. Gentleman give way?

[Mr Wright]

Just because I went through the Education Bill Committee with the hon. Gentleman—we had nightmares together—I will give way.

[Dan Rogerson]

The hon. Gentleman is making a good point about wine drinking in the home. Does he agree that, because wine has a much higher alcohol content and because people are often drinking not in pub measures but in much larger glasses at home, the health issues are a result more of wine and spirits than of beer, which has a much lower alcohol content?

[Mr Wright]

The hon. Gentleman makes an important point. Among even the strongest beers and ales, Cameron’s 6th Sense, which I mentioned earlier, is only 6%, but some of the bottles of wine that are being consumed in one go at home can be 13% or 14%. That has health implications, as does the departure from responsible and supervised drinking in pubs.

The switch from on-trade to off-trade purchase and consumption via the supermarkets has had major effects on the pub industry. The Treasury’s own analysis of alcohol consumption in the UK, which was published in December 2010, showed enormous price elasticity for off-trade beer. That illustrates the enormous competition between supermarkets, the price wars that are going on and the cutting of margins on beer by supermarkets, all to the detriment of the pub trade.

Pubs have an enormous disadvantage, in that they tend not to have the buying power, or the ability to achieve economies of scale, of the major supermarkets, and the nature of their business model means that they have to pass on increases in prices—whether in the form of additional duty, increased VAT or rises in the cost of raw materials—directly to the consumer. Supermarkets are, by and large, able to cross-subsidise, as the hon. Member for Shipley (Philip Davies) pointed out, and they often have the ability to absorb any price rises. Beers can even be used as loss leaders to encourage shoppers, a practice that the pubs cannot afford to compete with.

These problems arise not just from the beer duty escalator but from rises in raw material prices, and there must be concern that beer prices will rise still further because of the recent wet summer, which has had an impact on barley crops, and the increase in VAT last year by the Government. The rise in VAT must have put an extra 5p or 6p on the price of a pint, which in turn will put additional pressure on the viability of pubs. Has the Minister looked at the impact on pubs of that VAT rise, of the rises in barley prices and of the beer duty escalator?

On the point about raising revenue, it was estimated when the beer duty escalator was introduced in 2008 that it would generate between £500 million and £600 million for the Exchequer. Given the difficulties since then, and the squeeze on household incomes, has it actually generated that much revenue? What cost-benefit analysis has the Treasury put in place to determine whether the escalator is raising revenue for the Exchequer to the detriment of local economies and local pubs?

I appreciate that the duty is, and should be, a source of revenue for the Exchequer—about 2% of all Government receipts. I appreciate that beer has generated revenue for the Treasury for centuries, to the dismay of beer drinkers everywhere, and that it will continue to do so. I also appreciate that, in a free country, the manner in which people wish to consume a legal product is up to them and not up to the Government. If somebody wants to drink beer bought from the supermarket in their front room while watching the football or a film and having a takeaway, without causing any hassle or intimidation to anybody else, that is entirely up to them. However—this is my key point—if we as a country value the social and economic importance of the pub as a focal point for the community and a means of encouraging responsible and supervised drinking, what steps can the Government take to nudge consumers towards drinking beer in pubs?

In responding, will the Minister set out how he proposes to tackle the growing gulf in prices between pints in pubs and beer in supermarkets? I am not suggesting that he attempts to turn back the tide of social trends over the past 30 years, but I hope he will tell us how the Government value the pub as one of the great British institutions and how he will work with his colleagues, using the tax system, beer duty and any other means at his disposal, to ensure that the pubs and brewing industries of Britain have a brighter and longer-term future as part of a revitalised manufacturing base. I think we would all drink to that.

--- Later in debate ---

[Dan Rogerson (North Cornwall) (LD)]

It is a pleasure to follow the hon. Member for Bedford (Richard Fuller). As a Cornish exile in Bedford for a number of years, I am well aware of the great contribution that Charles Wells, and Wells and Young’s, make to the economy. I once saw the Blues beat Newcastle at Goldington Road, and I wish them every success this weekend.

Beer is part of the culture of this country. I do not mean that in the sense that the tabloid press would have us see it in focusing on the sad events we see on streets around the country, when most of the problem is not due to beer but to alcopops and novelty drinks, irresponsible promotions in the night-time economy, and people pre-loading before they go out in the evening. I am talking about the centuries of beer culture that we have in this country in producing an incredible, natural product. When the water was not safe to drink, beer was, and people would brew it at home. In the Victorian era, there was a huge growth in regional and family brewers, which—those that remain—are well- loved institutions in the parts of the country that they inhabit.

The pub is very much at the heart of the community, whether in a village or in an urban neighbourhood. In North Cornwall, they are where charitable events take place and huge amounts of money are raised, where clubs and societies meet, and where the fabric of the local community is stitched together. I was recently at The Bullers Arms in Marhamchurch, where the owner of the pub, having lost his most recent tenant, is concerned about its future and putting forward plans to build housing on part of the site. People in the village are very worried, but I know that by coming together they will guarantee the future of that pub and keep it there.

I am very fortunate to have in my constituency such small, innovative brewers as Penpont and Tintagel, and, more recently, Harbour brewery on the edge of Bodmin, and Frys. That is adding to the diversity of the beers on offer to local people and visitors to the area alike. We also have a great success story in Sharp’s, which was acquired a couple of years ago by Molson Coors. I was apprehensive about that. I feared, as did many local people, that it would buy the brands and shut the brewery down, but it did not. Instead, it has invested in those brands, and Doom Bar is now a fast-growing brand across the country. It has also created jobs for young people who are now getting into a career in brewing. It has brought increasing numbers of skilled jobs to the low-wage economy of North Cornwall. We need to underpin the industry by supporting pubs but supporting brewing too.

We have heard about the growth in wine drinking, which has happened without the need for any economic support. Can you imagine, Mr Deputy Speaker, a similar situation in France or Italy, with the wine industry needing to have a debate to try to get support from its own Government? I cannot imagine such a scenario, so why do we need to have a debate about the urgent need to support our brewing industry, which is the equivalent in this country?

Because our beer industry is so innovative and forward looking, with the growth in craft brewing, many people from across the world are coming here to learn these skills. As a result, we now see craft brewing in places such as Italy, America, Australia and New Zealand, where people look to the styles of beer that we brew—the stouts, the milds, the IPAs, and all those kinds of products. We must be proud of the contribution that our beer is making to the culture of the world, let alone the culture of this country. It would be such a small thing for the Government to take account of that by getting rid of this punitive and unrealistic levy on a core industry that could create many more jobs and do far more to underpin the lives of our towns and villages. I urge the Minister to listen to what everybody has said today.