Beer Duty Escalator

Greg Mulholland Excerpts

Thursday 1st November 2012 Commons Chamber

[Andrew Griffiths]

I completely understand what my hon. Friend is saying. Nobody wants one industry to fight against the other, but we are seeing a reduction in the brewing industry simply because it is being treated unfairly. All that we are calling for is fairness. He talks about cider, and he will know that there is a 50p difference between the duty paid on a pint of cider and on a pint of beer. How can it make sense to the Treasury that every time somebody buys a pint of cider instead of a pint of bitter, it not only disadvantages brewers but costs the Treasury 50p?

[Greg Mulholland (Leeds North West) (LD)]

I am delighted to be working with my hon. Friend on this matter. He is aware that beer carries higher duty per serving than any other form of alcohol—spirits, wine or cider. Duty is 19p on a pint of cider and 41p on a pint of beer, which is simply not fair. We are calling today for fair duty on beer.

[Andrew Griffiths]

My hon. Friend hits the nail on the head.

We need to understand that the beer and pubs industry employs 1 million people across the country, 50% of whom are under the age of 25. We have a problem with youth unemployment, so surely supporting such a dynamic industry is the right thing to do.

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[Greg Mulholland (Leeds North West) (LD)]

I am delighted to be a co-sponsor of the motion and to work with my hon. Friend the Member for Burton (Andrew Griffiths). He is the chair of the all-party parliamentary beer group and I am the chair of the all-party parliamentary save the pub group, and we are delighted to be working together on this very important campaign. I add my thanks to the Backbench Business Committee for granting us this time. I also congratulate the 104,000 people, and counting, who have signed the e-petition, and CAMRA and others who have achieved that figure.

This debate is about our national drink, beer, but it is also a Treasury debate about a major national industry. There are brewers up and down the country—

[Several hon. Members]

rose—

[Greg Mulholland]

Despite being a co-sponsor, I only get eight minutes, so I will take only two interventions.

[Neil Carmichael (Stroud) (Con)]

I wish to highlight the fact that I have four breweries in my constituency—Uley brewery, Severn Vale, Stroud and John Kemp’s excellent brewery, which has produced a Coalition ale, appropriately for this debate. All four do a huge amount for the community. Does my hon. Friend agree that that is a powerful reason to support this motion?

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[Greg Mulholland]

It is, indeed. I have not tried Coalition ale—perhaps we can toast with it when the Government abolish the duty escalator next May. Exactly the same point applies to my own breweries: Wharfebank, Briscoe’s, Rodhams and other Leeds breweries all contribute to the local economy.

[John Hemming (Birmingham, Yardley) (LD)]

I declare an interest on behalf of myself and my hon. Friend the Member for Cheadle (Mark Hunter). We are both members of the Campaign for Real Ale. Does my hon. Friend agree that the social environment of pubs is very important?

[Greg Mulholland]

My hon. Friend is absolutely right. The key point from the hub perspective, as opposed to the beer perspective, is that beer duty is simply absorbed by the big supermarkets. They do not need to pass it on. They do not even have to make a profit from beer. Indeed, they have been shown to be selling irresponsibly at a loss. The point is not one of unfairness, though; the escalator simply makes no sense in terms of the Government’s own agenda, because it pushes people away from drinking in the sociable, controlled environment of the pubs and social clubs around the country, and encourages them to drink at home.

Beer is now 10 times more expensive in pubs than in supermarkets. That cannot be good. I am delighted to see the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Great Yarmouth (Brandon Lewis), who has responsibility for community pubs, in his place. I welcome him to his post and look forward to working with him, as well as with the Economic Secretary. Frankly, though, we should also have a Health Minister attending this debate, given the health impacts that are being discussed.

The beer duty escalator does not make economic sense. It was introduced in 2008, at a time when alcohol duties were keeping pace with rising incomes and when inflation was considerably lower. Now, incomes have fallen, inflation is higher and VAT has risen. The simple reality is that since 2004 beer duty rates have increased by 60% and beer duty revenue by just 10%—a significant fall in real terms. As well as the damage to jobs, in putting up the duty, the Government are simply not taking the revenue projected. It is nonsense. It is a tax that simply does not add up.

It is encouraging to see Opposition Members now opposing the escalator. We have this strange situation, though, in which Labour, which introduced it, now opposes it, and Conservative and Liberal Democrat MPs who opposed it at the time now support it. Can we not unite the House now and say that this silly tax should go? We are sending that message loud and clear today.

I know that the Economic Secretary is a fan of pubs, and I know his Bromsgrove constituency well, because it is where my in-laws come from. I often visit and am pleased to drink in some of his local pubs. As well as announcing—I hope—that he will conduct this review, will he take the opportunity to consider other forms of progressive taxation that can help the British pub? There are various ways of doing that.

On the question of whether we can tax cask beer or real ale—or, indeed, all draught ale—separately, there is of course the problem of European regulation, as the Economic Secretary will point out when he sums up. First, we should challenge those regulations, but secondly may I put to him the interesting possibility presented by the duty-free element on cask beer? The reason for the duty-free element is the sediment in cask beer and the fact that cask beer requires much more care and effort to store, and lasts for a much shorter time. At the moment, we have a complex regime under which different breweries have different rates for different casks of beer. It is very complex and costly to administer. Could we not consider standardising the allowance and being generous with it, because it could provide a perfectly legal way of applying a lower rate of duty for real ale, our great British beer?

I also ask the Economic Secretary to consider the report by the Institute for Public Policy Research on the possibility of community pubs being granted 50% business rate relief if they can demonstrate their social and community impact. It has come up with a test, and I urge him and his officials to look into that and other ways of benefiting the pub in the way that right hon. and hon. Members are suggesting, alongside getting rid of the beer duty escalator.

As the chair of the save the pub group, I would be the first to say that the beer duty escalator is not the only issue facing pubs. There are others that should also rightly be tackled. I want to raise with my hon. Friend the Minister the issue of large pub companies and the large pub-owning breweries. Unfortunately, the large pub companies’ tenants and lessees also face their own pubco escalator, with unfair rises resulting from the eye-watering debts that those companies incurred because of their irresponsible actions some years ago. It is also important to tackle that. When my hon. Friend announces the review, as I hope he will, I hope he will also make it absolutely clear to those companies that they should pass on any drop in beer duty, because if they do not, those tied pubs will see no benefit whatever. In conducting the review and, we hope, making that announcement in the Budget next year, he must issue and receive a firm guarantee that any drop will be passed on, so that it benefits licensees and can therefore be passed on to customers, so that those pubs can become more attractive in competing with free houses.

My final point—I say this to the community pubs Minister—is that we must look at giving more protection to pubs in planning law.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis)]

Does my hon. Friend agree that the work we have done to allow the community right to buy and to bid has been helpful—just this afternoon I am visiting the Norton pub, which has been taken over by the community in order to save its local pub—and that any work we can do to support those pubs will be helpful?

[Greg Mulholland]

I thank the Minister for that, and I look forward to working positively with him. The inclusion of pubs in the national policy planning framework is hugely positive. I would also point him in the direction of Cambridge city council’s excellent policy, which I hope he will encourage other councils to follow.

At the moment we face a ludicrous situation, which is absolutely pertinent to this debate. We talk about supermarkets and wanting people to drink in pubs, but at the moment the planning system allows pubs to be turned into Tesco and Sainsbury’s shops without even having to go through the planning process and without any opportunity for the community to have a say. The supermarkets are engaged in the predatory purchasing of profitable pubs from indebted pub companies that are desperate to sell them just to try to balance their books. The Minister is the man who can stop it, by making very simple changes to the planning law and dealing with the fact that free-standing pubs can be demolished. I hope that there is progress, but there are also simple things that I hope he will do—both as part of this process and in getting rid of the beer duty escalator—so that the Government can live up to the Prime Minister’s claim about this being a pub-friendly Government.

As I hope I have pointed out already, and as I know many colleagues will, it is absolutely fantastic to see so many colleagues here when those of us on this side of the House have been put, I believe wrongly, on a one-line Whip. Whatever the vote, and even if there is no vote, it is absolutely clear what the will of the House is on this issue, and the Government must not ignore it. The beer duty escalator does not make economic or social sense. It is unfair, unsustainable and unjustifiable. I hope the Minister will have the courage today to say, “We will have the review,” and I look forward to a sensible economic strategy for growth in next year’s Budget which involves abolishing the beer duty escalator once and for all.

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[Mr John Denham (Southampton, Itchen) (Lab)]

I am very pleased to have an opportunity to speak in this debate, and I commend the Backbench Business Committee on securing it. When I was briefly Secretary of State for Communities and Local Government at the end of the last Labour Government, we appointed my right hon. Friend the Member for Wentworth and Dearne (John Healey) as the first pubs Minister. His 12-point plan has been mentioned today, and it still sets the agenda on issues such as the community right to buy, the need to change the planning rules, and the relationship between pub companies and pubs. I am very pleased to have a chance to return to this issue today, prompted by not only the wider concerns, but the fate of one pub in my constituency that illustrates some of the wider problems.

The Castle pub in Midanbury in Southampton has been sold by Enterprise Inns to Tesco, which has just put in a planning application for the minor changes needed to develop a convenience store. That is deeply unpopular with the 600 people in the area who signed a petition against the move, partly because they did not want to lose the pub and partly because they do not want a Tesco. They have been utterly powerless to influence the decision, however.

Similar situations have been described by other Members. The latest figures I have from CAMRA show that its members have identified 189 conversions of pubs to supermarkets since the start of 2010, with a further 41 pubs under serious threat. Of those 189, Tesco has done 124 conversions, while Sainsbury has done 21.

In my constituency, in addition to the Castle pub, the Bulls Eye in Sholing and the Woodman were also owned by Enterprise Inns and are being converted by Tesco. Other pubs have been sold to the Co-op, the Best-one convenience stores, the Alfresco group and the One Stop group.

Beer duty is one of the factors contributing to this trend. Because it impacts on the profitability of pubs, for the big pub companies considering what to do about a pub it is one of the factors that tips the balance away from investing in it and strengthening the management and towards simply seeing selling the pub as a property deal, which is often what those capital-hungry companies are after. The bigger picture is of communities such as mine being left without any say when two giant companies —Enterprise Inns and Tesco in this case—have commercial strategies that they work on together and which suit them, but that give local people no voice and no say at all in the future of their pub and community.

[Greg Mulholland]

I congratulate the right hon. Gentleman on raising this serious problem. It is a tragedy to see our local pubs being turned into supermarkets. What is happening is predatory purchasing. I will send the right hon. Gentleman the Save the Pub group planning charter, which addresses this issue. I ask all Members to urge the community pubs Minister to make simple planning law changes to give communities the right to have a say, and to stop the nonsense of no planning permission being required for supermarket conversions. That would stop the collusion the right hon. Gentleman mentions between the giant indebted pub companies and the giant supermarkets. What is currently happening is certainly not an example of the big society.

[Mr Denham]

I commend the hon. Gentleman on his work on this issue. What he says is right. In the case I have mentioned—and, I suspect, in many others—there was never even an open disposal. There was never an opportunity for somebody else to come in and start up a microbrewery for instance. The whole thing takes place behind the scenes, and the deal is done. The first thing the community ever knows is that the property has already changed hands and is on the way to being converted.

[Greg Mulholland]

There are huge growth opportunities in the pub sector. Many pubs are being taken on by small pub companies, and their figures show they are doing well. The managed pubs sector is doing perfectly well. Lots of small breweries around the country are also buying pubs, but they are often prevented from doing so because of the situation the right hon. Gentleman describes. This can be solved through the planning system, and it must be, or else growth in the sector will be hampered.

[Mr Denham]

The hon. Gentleman again makes a fair point. I say to the Treasury Minister on the Front Bench, the hon. Member for Bromsgrove (Sajid Javid), that in addition to reviewing beer duty and changing the planning laws, the way in which these big companies operate needs to be looked at.

The hon. Member for Bristol North West (Charlotte Leslie) talked about the big society. We cannot have a big society if two big companies shut the community out. Labour Members talk about responsible capitalism; it is not responsible capitalism if big companies collude to stop small entrepreneurs starting up businesses of the sort we want to see in our communities.

In every one of the cases I have raised where a Southampton pub has been turned into a convenience store, that pub offered a safe, social environment for the responsible consumption of alcohol, and it was replaced by an off-licence that trades on cheap booze. I am not saying nothing ever goes wrong in a pub, but there are social constraints on how much people drink and how they behave. If the outcome of public policy is that we lose the places where alcohol is consumed responsibly and replace them with outlets for cut-price booze that encourage people to drink too much at home, where those constraints might not exist, there is something wrong with public policy. The message from Members on both sides of the House is that the Government need to look at beer duty and the wider context.

The Minister on the Front Bench and other current Treasury Ministers, along with previous Treasury Ministers over many years, have all said—because this is in the word processor in the Treasury—that it is difficult to untangle the impact of beer duty from the other factors affecting pubs. Of course that is true, but that is no reason for not looking at beer duty and all the other factors affecting pubs.