Beer Duty Escalator

Debate between John Hemming and Greg Mulholland

Thursday 1st November 2012 Commons Chamber

[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.