Beer Duty Escalator

Debate between Jonathan Edwards and Sandra Osborne

Thursday 1st November 2012 Commons Chamber

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

Was the hon. Lady as surprised as I was to learn that beer tax in the UK is 13 times higher than in Germany?

[Sandra Osborne]

I am not really surprised: I am well aware of it, and I was going to make a similar comment. I know that this will be of concern to many Members.

In their first Budget after the 2010 general election, as hon. Members will be aware, the coalition Government launched a review of the taxing and pricing of alcohol, including the beer duty escalator, which was first introduced by the former Labour Government in 2008. The coalition’s aim was to ensure that it

“tackled binge drinking without unfairly penalising responsible drinkers, pubs and important local industries.”

If the views expressed so far are anything to go by, we would all agree that that is simply not working. I am aware that the Government have stated that they intend to keep the escalator in place until 2014-15, although Treasury forecasts have shown that no additional revenue will be generated from beer duty, despite the increases of 2% above inflation planned in forthcoming Budgets over the next two years. The Government are not even going to make any money out of it. The planned 2% rise above inflation, equating to a 5% price increase, came into effect from 1 April 2012.

The Campaign for Real Ale, which has 450 members in my constituency alone, and the British Beer and Pub Association have criticised the decision not to abolish the escalator in the Budget, claiming that the increase could cost thousands of jobs. CAMRA has also expressed concern about the impact of the escalator on the industry, stating that a third of the cost of a pint of beer goes to the Exchequer—as was said earlier, that is the second highest rate of duty in the EU—while 16 pubs now close in the UK every week. The Government need to recognise the harm this is doing to brewers as well as to community pubs.

Since the escalator was first introduced, beer sales in pubs and clubs have fallen by 23%, leading to more than 6,000 pubs closing. Since that time, so much has changed: inflation has risen, VAT has increased, brewing costs have risen and household incomes have fallen. According to the Beer and Pub Association, beer taxation now costs the average pub around £66,000 a year. As other Members have stated, this is having a terrible impact on towns already suffering from the current economic situation, as more people are purchasing alcohol from supermarkets, which is competitively priced, to drink within their homes rather than having a social drink in their local pub. I am aware that the most common complaint received by the local licensing department in my constituency is about the threat posed to the local pub trade by the volume of cheap sales of alcohol by supermarkets.

Given that beer and pubs support almost a million jobs in the UK and that 48% of pub employees are under 25, the Beer and Pub Association has stated that if the escalator is removed, the industry has a real capacity to create jobs, raise more for the Exchequer and contribute to growth.