Beer Duty Rates

Hugh Gaffney Excerpts

Tuesday 25th June 2019 Westminster Hall

[Giles Watling]

I celebrate that positive action; it is great that the duty is 18% lower than in 2012.

The Alcohol Health Alliance concludes that previous across-the-board cuts in beer duty have helped supermarkets to continue to undermine on-trade sales, while failing to slow the rate of pub closures. Despite the Government’s valiant efforts, therefore, the important contributions that our pubs make to the economy and to community life by providing a place to socialise and encouraging responsible drinking remain at risk.

Most concerningly, analysis shows that it is small independent pubs that are disappearing as the big pub chains consolidate their businesses around larger bars, usually in town centres. Eventually, that will allow those big pub chains to monopolise the on-trade marketplace. That will give them a stranglehold over pricing and is unlikely to result in a cheaper pint for the consumer.

Moreover, the closure of any pub, especially a small community asset, endangers work on loneliness and social cohesion. Researchers have found that people who have a local pub are happier, have more friends and feel more engaged with their local communities, but closures are depriving some people of those benefits. That can be particularly acute in rural areas. The pub is a famous and traditional part of the British way of life. It is an essential part of the community. It deals with loneliness and is a form of social care. The traditional landlord knows his clientele. He knows who needs help, who is in trouble and what resources are available, and he is a friendly ear.

As a touring actor many years ago, I stayed in a small village on the outskirts of Stratford-upon-Avon that had a pub, a church and a community centre, and a pub landlord, a vicar and a policeman. Twenty years later, I went back and those three pillars of the community had gone, along with the pub. It was a sad reflection of that wonderful little community that I knew so well, where people talked over the garden fence, talked to one another in the pub, looked after each other and looked out for one another. Instead, the people of that little local community had disappeared into their silos. They went to the local town to work as commuters and came back to their houses to drink cheap supermarket booze in front of their widescreen televisions. The community had broken down. The loss of that community is a great shame, and I want to prevent that from happening elsewhere. We must do all we can to prevent the closure of any pub.

[Hugh Gaffney (Coatbridge, Chryston and Bellshill) (Lab)]

I worked in the pub trade for 10 years. One of my first and most enjoyable jobs was working at the Windmill Tavern and the Gates Bar in my constituency. That was a long time ago, but those pubs survive. Sadly, I know a lot of landlords who knew then, and know now, that business rates and the price of a pint are far too high. We are losing places to socialise and we are losing communities. Communities need pubs, so I strongly support the hon. Gentleman.

[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.

--- Later in debate ---

[Andrew Griffiths]

My father said that there was no such thing as bad beer. My hon. Friend is articulating that there is—there is a skill; it is a profession. One of the things we have lost over many years is the landlord as a profession, but with the rise of cask ale, it is beginning to come back. The landlord was well respected in our communities. He was a pillar of the community. He knew his job and he knew his cellar. The more we can support the great British pub, the more those skills can be retained and will flourish.

Secondly, on public safety, we all suffer on our high streets occasionally from what we call preloading or binge drinking, particularly among younger people who might buy some alcohol from the supermarket, or who may get it from their parents or whatever, who then go and drink in the park or in the town centre. There is a cost involved for the police and the wider community in managing that, but there is no cost to the supermarket. However, publicans are required to keep their house in order. They are required to have door staff who treat people with respect and with care, and who make sure that the licensed premises is safe and that people who turn up who may have had too much to drink are refused so that everybody else in the establishment is kept safe. None of those costs are on a supermarket, but they are on the British landlord. It is important to recognise that and to represent it in the taxation regime.

There is also the extra cost of delivering cask ale or draught ale. This may be one way in which the Minister can think about being creative when he looks at a replacement for EU duty on alcohol as we come out of the European Union. The duty is on production and it may be difficult to differentiate the duty on a bottle of beer sold from a supermarket and the beer sold in a pub, but we could differentiate a bottle of beer sold in a supermarket and a pint of draught ale, because it is in a different container and is served in a different way. That may be one clever way—I know the Minister is extremely clever—in which he can crack this nut of supporting our pubs, which offer an asset to the community, keep us safe and are the great introduction to responsible drinking. I am sure hon. Members remember when someone went down to the pub where the landlord would keep an eye on them; he knows the family; if someone gets into trouble, he says, “You’ve had a few too many—go home.” We risk losing that if we lose the great British pub.

[Hugh Gaffney]

I am a non-alcoholic. I do not drink. I have done the pub trade for 10 years and I have never drank. I enjoy the social side of going to a pub and meeting people. Where publicans are really struggling now is with business rates. Pubs are community hubs, and we really need to look at business rates.

[Andrew Griffiths]

I could not agree with the hon. Gentleman more. As the ex-chairman of the all-party parliamentary beer group, I decided to challenge myself to have 12 months off alcohol. That runs out in July. I have been alcohol-free for 12 months, but that does not mean that I do not continue to support the British brewing industry and the British pub. It is absolutely at the centre of our community. The hon. Gentleman is exactly right.

The hon. Gentleman mentioned business rates and it is absolutely right that pubs are treated in a unique way on business rates. I use an old phrase: we have an analogue taxation system in a digital world. I am not saying that Amazon will be delivering my pint of cask ale to me via Amazon Prime, but businesses more generally, particularly small businesses, are having to compete with sales on the internet and the brave new world of retailing. I am absolutely sure that doing something about business rates will help our high streets.

I have one other matter to take up with the Minister, which I hope he will find interesting. One of the objectives behind all Government policy is responsible drinking. We want people to enjoy a pint of great British beer, but we want them to do it responsibly. A great thing we have seen because of responsible actions by brewers is a reduction in the alcohol by volume in drinks, and in beer in particular. Beer is a particularly good way for us to take units out of consumption, because of its high volume and relatively low strength.

The Government introduced a lower rate of duty on beer less than 2.8% ABV. Brewers have done a really good job and have tried to embrace that, but it is difficult for a brewer to produce a tasty beer at less than 2.8%. It is the alcohol that gives it the bite, but it is also the alcohol that helps to preserve it and keep it drinkable in the pipes for longer. With the best of intentions, landlords wanted to provide a lower-alcohol beer on cask, but they could not because it was not economically viable because the beer went off. It was 2.8% because of the EU directive, which prevented us from doing anything else. As we Brexit and come out of the European Union, we have the opportunity of a differential rate—maybe 3% or 3.5%—at which brewers could produce a great, tasty beer while taking units out of consumption. For those of us who enjoy a pint, but not a stronger pint, all those things would work well together.

I thank you very much for allowing me to take part in the debate, Mr Hollobone. In conclusion, I am absolutely heartened to hear that we have such beer champions. As the MP representing the heart of British brewing—Burton upon Trent, with its history and future in brewing—I hope the Minister will think about using Brexit to deliver cheaper beer for Britons across the country as we leave the European Union.