Taxation: Beer and Pubs

Helen Whately Excerpts

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.