Taxation: Beer and Pubs

Debate between Julie Cooper and Mike Wood

Tuesday 31st October 2017 Westminster Hall

[Mike Wood]

That is right. As well as a large part of that turnover being just business tax, it is a huge disincentive to invest in and improve the property.

We supported the Chancellor when he suggested he would look at business rates in the light of the increase in online businesses and the harm that could cause our beloved high streets. The message that has come from Members on both sides of the House is that the sooner that can be done, the better. We want to ensure that our community pubs, high street pubs and village pubs are properly considered when any new system is put together, so that we can all get together to protect the great British pub.

I applaud the Government’s work in reducing the deficit, and the measures that the Exchequer Secretary and his colleagues are taking to reinvigorate the economy, but I ask him to urge the Chancellor to go further. Hard-pressed UK beer drinkers still pay 40% of all Europe’s beer duty, despite drinking only 12% of the beer consumed in Europe. Some colleagues may think that means we need to drink more beer to keep up, but let us just focus on the duty. As a Yorkshire MP, the Exchequer Secretary will know that the Black Sheep brewery employs more than 100 people in the Yorkshire dales, but he might not know that it pays more in beer duty each year than it does on the combined costs of employing those 100 staff, buying all the raw materials to produce its beer and then distributing it around the country. Beer duty that is more than four and a half times as high as eBay’s UK corporation tax liability seems an undue burden.

[Julie Cooper (Burnley) (Lab)]

Does the hon. Gentleman agree that it is unfair that in this country, compared with other EU nations, we drink 12% of all the beer consumed in the EU, but pay 40% of the duty across it?

[Mike Wood]

As I have indicated, I think that situation is not sustainable in even the medium term, and certainly not in the long term.

Britain’s growing ranks of brewers have much more growth potential, which would mean more investment and more jobs to underpin the economy. The Treasury needs to look at whether the way in which beer duty is structured is appropriate for the 21st century. In particular, there is a growing consensus in the industry that the small breweries’ relief scheme, which has done so much to allow new breweries and microbreweries to become established, is now preventing breweries from growing, and in some cases means that they are downsizing to receive the lower duty rates. I know that the Exchequer Secretary has already received representations on that issue.

To look further ahead, as we leave the European Union in 2019 there are also opportunities to consider whether it is appropriate that beer sold in pubs is taxed at the same duty rate as beer sold in supermarkets or other off-sales, and the role that a differential tax rate could play in supporting our pubs, helping keep more of them open, and the social benefits that come with that. The Treasury should also look at supporting reduced-strength beers by expanding the current bracket to cover beers between 1.2% and 3.5%, instead of just up to 2.8% as at present. I have written to the Exchequer Secretary on this subject. Britain has a strong tradition of brewing 3% to 3.5% beers, and if we can incentivise the industry to develop, produce and market beers at that end of the market, there will be an advantage to the industry and to our health. However, while all those areas for reform are important, none of them should distract us from the immediate need to freeze beer duty and tackle business rates in the Budget in three weeks’ time.

If the Exchequer Secretary is not already persuaded by the economic case against a further rise in beer duty, the social case for helping pubs and reducing their business rates, or the political case for doing something that is genuinely popular across the country, he might want to reflect on the personal-political benefits of backing beer. I have already mentioned that a previous proponent of this cause is now the Government Chief Whip. However, it might be even more pertinent for me to point out to the Exchequer Secretary that the three previous holders of his post who presided over recent cuts to beer duty—my right hon. Friends the Members for Bromsgrove (Sajid Javid), for Witham (Priti Patel) and for Loughborough (Nicky Morgan)—all went on to reach the giddy heights of Cabinet office. As a canny Yorkshireman, the Exchequer Secretary may want to reflect on the fact that cutting beer tax is clearly not a bad career move. In all seriousness, I ask him to do the right thing for the longer term: encourage the Chancellor to freeze beer duty in his autumn Budget, act on the disproportionate burden of business rates on pubs around the country, and invest in and support these great sectors, which do so much economically and socially in every part of Britain.