Beer Duty Rates

Debate between Giles Watling and Andrew Griffiths

Tuesday 25th June 2019 Westminster Hall

[Giles Watling]

I thank the Minister for pointing that out. I am well aware that it was his predecessor; it was the Minister incumbent at the time.

I sent a long and detailed reply to the letter, but the response was almost word for word the same as the first. Four words at the start of one sentence had been removed, and one word and one number—the date—had been changed. I am sure that that was just an oversight in the machinery of the Government; I hope it is not an indication of how much the Treasury wants to debate the matter. We must do more to protect our pubs.

The Minister will tell me that the Government have supported pubs in many ways, notably through the beer duty freeze, which means that beer duty is 18% lower than it was in 2012—hurrah! No doubt that is an impressive achievement, but if we have done so much, why have 11,000 pubs closed in the last decade and why does one pub still close every 12 hours?

[Andrew Griffiths (Burton) (Con)]

My hon. Friend is making a passionate speech. The Government have delivered not just a duty freeze for our pubs, but three duty cuts followed by a number of duty freezes. The Government have taken positive action to support our pubs.

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[Giles Watling]

I ran a pub with my wife—the Kings Head on Kings Head Hill, Chingford—in one of those moments when my acting career was not going too well.

Pubs are also positive for our high streets. They attract visitors, so closures are counterproductive to the Government’s efforts to revitalise our urban centres. Let us not forget the general economic impact of the beer and pub industries, which contribute £23 billion to GDP every year and support more than 900,000 jobs. Crucially, 44% of those jobs are held by 16 to 24-year-olds.

All that is at risk, however, because of beer duty rates. Even after the Government’s reductions, we still have one of the highest rates in Europe and pay 40% of all beer duty in the EU while consuming only 12% of the beer—despite my best efforts. That has contributed to the fact that, according to the Campaign for Real Ale, 56% of drinkers believe that the price of a pint of beer in a pub has become unaffordable.

Drinkaware notes the shifting preference of the consumer, who now purchases alcohol in the off-trade marketplace to consume at home, as per my example of the little village near Stratford-upon-Avon. When people can buy a pint of beer for less than £1 in some supermarkets, it is hardly surprising that many choose that option, especially when pubs simply cannot get near those rock-bottom prices. I believe that the average pint of beer is between £3.50 and £4, which is three or four times the amount.

The data supports that shifting preference and demonstrates that while high rates of beer duty have been pricing people out of drinking in pubs, off-trade sales have been thriving. Figures from the British Beer and Pub Association show that since 2000, on-trade consumption has fallen by a massive 47.2%, but off-trade consumption has risen by 29.3%. That is clearly inequitable and stems from the disparity in cost between the two. The Government’s across-the-board beer duty reductions have not addressed that disparity, given that they also benefit off-trade sales. Because pub closures largely derive from the surge in the sale of cheap alcohol, the disparity needs to be addressed.

An underlying potential public health concern could result from inaction, because people who drink at home without a responsible landlord to keep an eye on them are at risk of alcohol abuse. Today, the number of hospital admissions related to alcohol remains high at one million annually, and that places a strain on our precious resources. Most worryingly, the number of admissions has risen as a pint has become more expensive. Even if there is not a direct correlation, 73% of publicans think that increasing the price of off-trade alcohol is crucial to tackling alcohol problems.

We can do that with a differential rate of beer duty that skews the odds back in our pubs’ favour by cutting the on-trade beer duty rate to benefit those sales over off-trade sales. The Exchequer Secretary to the Treasury said recently:

“I can see the strong argument for that, but it is unfortunately not possible under EU law. Duty is levied on production, not on the place of consumption. However, we might be able to turn to that should we have sufficient flexibility.”—[Official Report, 28 March 2019; Vol. 657, c. 635.]

We are shortly going to get that flexibility, and there must be a technological mechanism that we can use to track the destination of beer products when they leave the producer, and then add the tax accordingly. Such an approach would mean cutting the on-trade duty rate, before adding a stipend for beer products destined for the off-trade marketplace. It would also mean that the cut for on-trade sales would offset the increase in off-trade duty. I accept that such a change could impact all off-trade retailers, and therefore any such adjustment should be narrowed to large retailers only. For large retailers, sales of beer form only part of their turnover, whereas for small off-trade retailers, alcohol sales can be everything. That important point must be considered during any discussion of the proposal so that we do not damage our very valuable small businesses.

We must differentiate and cut beer duty for on-trade sales, because doing so will truly benefit our pubs. However, although I might be considered an expert on beer, I am not an expert on tax law. I hope that we can have a pledge from the Minister today that the Treasury will investigate this matter, so we can see whether such differential rates could hypothetically be used to support our pubs when we leave the EU. Moreover, when we investigate, we must find a way to ensure that producers pass on savings to the consumer. Many in the industry allege that previous savings have been retained by brewers, and that undermines efforts to save our pubs.

If I have convinced the Minister that there is still a strong argument for differential rates of beer duty—I am sure I have—I hope that one day he will join me for a drink in my local in Frinton to celebrate the introduction of this important change.

[Andrew Griffiths (Burton) (Con)]

rose—

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[Andrew Griffiths]

Yes, I do. Thank you, Mr Hollobone, for allowing me to take part in this debate at the very last minute. I wholeheartedly congratulate my hon. Friend the Member for Clacton (Giles Watling) on his tour de force in defence of the great British beer industry and on the importance of the British pint. I only wish there were more Members of Parliament who spoke with such passion about what is a great British industry. Although the Americans or the Germans or the Belgians might claim it, I have no doubt that we produce the best beer in the world here in Britain and we should support the industry.

I will reiterate a few of the points that my hon. Friend made so well. First, there are the costs incurred in the on-trade and the off-trade. It is more cost-effective and cost-efficient to sell trays of lager or six-packs of beer from a supermarket, for them to go down the aisle, be beeped through by the assistant in the supermarket of one’s choice and for someone to take them home. There is clearly a much higher cost involved in delivering a wonderful pint of British cask ale. For a start, there is a great deal more work in keeping it, and there is the customer service that is needed in its delivery. There is a lot more science and work in delivering great customer service and a great pint of beer than one may imagine, and that costs the publican. It also, of course, provides excellent jobs, with good training, in the pub industry, which we should support and encourage.

[Giles Watling]

My hon. Friend will appreciate that there is a great artisan skill in looking after beers, such as knowing how to tap and spile, when to leave the beer waiting, and serving it when it is just right.