Beer and Pub Taxation

Mike Wood Excerpts

Wednesday 5th February 2020 Westminster Hall

[Mike Wood (Dudley South) (Con)]

I beg to move,

That this House has considered taxation on beer and pubs.

I am delighted to have secured another important debate covering the brewing and pubs sector in the UK. This one is particularly timely because the all-party parliamentary beer group will hold its event celebrating the beers of the UK in Parliament this evening, to which, of course, all Members are very welcome.

Beer and pubs in the UK are a home-grown manufacturing success story. They are represented in every part of our United Kingdom and in every one of our constituencies. Some 80% of the beer brewed by this country’s fantastic brewers is consumed in this country. The industry supports almost 900,000 jobs in all corners of the country, including more than 1,000 in my constituency.

[Nick Thomas-Symonds (Torfaen) (Lab)]

I congratulate the hon. Gentleman on securing this debate, and he is absolutely right about the success story of our pubs and brewing industry. However, does he agree that we have seen far too many pubs close in recent years and that we really need to value them as community hubs?

[Mike Wood]

The hon. Gentleman could not have read my mind more thoroughly if he had had a copy of my speech.

[Sir Greg Knight (East Yorkshire) (Con)]

Will my hon. Friend give way?

[Mike Wood]

I had almost answered the previous intervention, so I will of course give way.

[Sir Greg Knight]

I am most obliged to my hon. Friend for giving way, and I congratulate him on securing the debate. May I amplify the point that was just made and ask whether he agrees that the public house is the heart and soul of the local village in many rural areas?

[Mike Wood]

I would go further than that: in many areas, and not only rural areas, the pub is the last service, and often the last facility, in the town or village. Often, it is not just a place to drink, but also the place with the shop or where people get their hair cut. There might also be a jobs club or any number of other services there.

[Lilian Greenwood (Nottingham South) (Lab)]

The Plough Inn in Radford, which is in the inner city of Nottingham and which is also the brewery tap for Nottingham Brewery, is precisely the sort of nucleus of the local community that he has described and the landlady, Mel, is a legend. Does he agree with the managing director of Nottingham Brewery, Phil Darby, who says he is worried that if action is not taken on beer duty and small brewers relief, the price of a couple of pints in a pub will simply not be able to compete with the price in supermarkets for much longer?

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[Mike Wood]

The hon. Lady is absolutely right. As has been made clear, pubs are much more than just a place to drink.

[Bill Esterson (Sefton Central) (Lab)]

The debate is about taxation of pubs and breweries. I received an email from one of the three excellent small breweries in my constituency—it was from Les O’Grady, who runs Neptune Brewery, as well as a taproom there. He employs three people, and he makes the point that his challenge is the current relief—the taper—and the fact that it is difficult for him to overcome that barrier in growing his business. That is a challenge faced by all small breweries. Does the hon. Gentleman agree that there is a strong case for pressure to be put on the Treasury to change those rules, to enable these brilliant manufacturers and employers to grow as they wish to?

[Mike Wood]

The small and microbrewers of this country have been one of the great success stories of the past 20 years in brewing. They have transformed brewing and beer across the country—both the diversity and the quality. The small brewers relief scheme that was introduced under the previous Labour Government has done a fantastic job in increasing the number of small brewers. However, we now need to look at the disincentives the existing thresholds create in terms of growth, expansion and employing more people. For example, Black Country Ales, which is based in my constituency, faces exactly the issues to which the hon. Gentleman referred.

[Stephen Crabb (Preseli Pembrokeshire) (Con)]

I congratulate my hon. Friend on securing this important debate. The hon. Member for Sefton Central (Bill Esterson) and my hon. Friend are exactly right about the importance of the small brewers tax relief. Does my hon. Friend agree that this issue is about not only changing the shape of the relief curve, to remove that barrier to growth for the really successful craft brewers, but maintaining the 50% reduction in duty for the very small craft brewers so that they can get a foothold in the marketplace?

[Mike Wood]

My right hon. Friend makes an important point. I have a feeling the Minister might just touch on small brewers relief in his response to the debate, because the Treasury has of course conducted a review into it, and we are all looking forward to seeing some of the results of that review—hopefully, we will see them before too long.

[Dr Lisa Cameron (East Kilbride, Strathaven and Lesmahagow) (SNP)]

Will the hon. Gentleman give way?

[John Howell (Henley) (Con)]

Will my hon. Friend give way?

[Mike Wood]

If I may, I will give way to the hon. Lady first, and then I will come back to my hon. Friend.

[Dr Cameron]

I thank the hon. Gentleman for giving way and for bringing this extremely important debate to the House today. Does he agree that we also need common-sense rateable values? The Glassford Inn in our community is under threat of closure due to the ridiculous rateable value that has been placed on it, meaning that it would actually have to sell a drink to every single person in the village every single night of the week just to meet the rates, never mind make any profit and pay the staff. Does the hon. Gentleman agree that common sense is needed in this agenda and that we must support our rural pubs so that they can continue?

[Mike Wood]

The system of non-domestic rates—business rates—is fundamentally a system of local taxation that was designed in the 19th century, building on the previous poor law. It really does not suit the needs and features of a 21st-century economy, particularly one where so much retail is increasingly moving out of town or on to the internet—as yet, nobody has designed an effective virtual pub that can serve a virtual beer that is quite a satisfying as the real thing. We are in a position where our community pubs are at an unfair disadvantage, as the hon. Lady says, compared with businesses that can reduce their liabilities.

[Mr Steve Baker (Wycombe) (Con)]

Will my hon. Friend allow me to intervene before he moves on?

[Mike Wood]

I promised my hon. Friend the Member for Henley (John Howell) that I would give way to him.

[John Howell]

I thank my hon. Friend for giving way. One of the things I have been most proud about over the last 12 years is that, at the beginning of that period, we introduced assets of community value. If that system is operated properly, as it has been in my constituency, it allows a huge number of pubs to become self-owned by their communities so that they can continue to prosper. Does he see that system as a good way forward?

[Mike Wood]

We have some exceptionally good community-run pubs up and down the country; I visited one in Stafford a couple of years ago. It was on the point of closing down and could easily have become derelict. However, because of the assets of community value system, it was possible for the local community to take it on and see it succeed. We are also seeing such pubs in Twickenham, and I have a feeling that the hon. Member for St Albans (Daisy Cooper) may refer to similar schemes in her own constituency later in the debate.

As well creating and supporting jobs, the beer and pub sector is a massive contributor to the economy more widely and, of course, to the Exchequer, as the Minister will know. The sector’s total value to the economy is almost £23 billion; in my constituency, our breweries and pubs contribute £30 million to our local economy. Nationally, the sector pays almost £13 billion into Treasury coffers, which I am sure the Minister is grateful for ahead of the Budget.

[Giles Watling (Clacton) (Con)]

Does my hon. Friend agree that the pub is not only, as he described, a great financial asset to the UK, but a unique selling point for it? People come from all over the world to visit our pubs, including our rural pubs, right across the country. That is why we must support them by having differential rates.

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[Mike Wood]

Again, my hon. Friend pre-empts a later part of my speech. In terms of attracting tourists and investment into the United Kingdom, beer and pubs are one of the top three things tourists say they want to do while they are visiting. Of course they want to have fish and chips. Normally, they also want to visit some of the heritage, whether it is Buckingham Palace or Stratford-upon-Avon. The third thing that always comes up is that they want a pint of proper British beer in a proper British pub.

[Mr Steve Baker]

My hon. Friend is being incredibly generous in giving way, and I know he wants to make progress, but will he help me put on record the sheer scale of the attendance at this debate? Clearly the Minister would be incredibly popular if only he cut tax on beer and pubs. With that, I will let my hon. Friend resume his magnificent speech.

[James Gray (in the Chair)]

Order. The hon. Gentleman prompts me to comment that this debate is hugely popular. A lot of Members would like to speak—I have some 17 on my list. It is of course up to the hon. Member for Dudley South (Mike Wood) whether he takes interventions, but constant interventions will mean that his speech is very long and that there may be time for only five to 10 speeches from Back Benchers. If we keep interventions a little bit under control, we can get more speakers in later on.

[Mike Wood]

I will endeavour to follow your guidance, Mr Gray. My hon. Friend the Member for Wycombe (Mr Baker) makes the point extremely succinctly. I would like to pretend that I was the big attraction in this debate, which has brought so many Members from all parts of the House to this Chamber, but it probably has a little more to do with the quarter of a million people who have signed the Long Live the Local petitions. That has resulted in nearly 130,000 emails being sent from constituents to Members of Parliament, encouraging them to support our beer and pubs and to press for the kind of support that my hon. Friend was calling for the Minister to announce. I know the Minister will not feel too confined to his briefing and his mandate; I am sure he can go a little off-piste later.

It is not an exaggeration to call the pub an essential part of British life, but the link between beer and pubs is completely inextricable. Seven in 10 of the alcoholic drinks sold in pubs are beer, and beer accounts for more than half of a pub’s turnover. A thriving brewing sector is intimately entwined with successful local pubs. The statistics, the employment and the economic contribution are extremely impressive—including the £100 million raised for charity every year by pubs up and down the country—but there is so much more to beer and pubs than figures alone.

The great British pub is one of our most loved national institutions and is the heart of so many of our communities. We only have to think of the times we have stopped for directions in our constituencies. Those directions are more likely to be, “Turn left at the Old Cat and then go straight on at the Red Lion”, than to refer to street names. Pubs also make a huge difference on social issues. Loneliness and isolation are among the top social issues facing our society, and pubs do so much to help.

We have already talked about the many services that pubs offer. When the pub is the last service or facility in the town and it closes, it is not only a place to drink that goes, but all the services. Visiting Cornwall with the wonderful Pub is the Hub charity in 2018, I saw pubs that were home to convenience stores, hairdressers and jobs clubs. Last year, the all-party parliamentary beer group conducted an inquiry into unlocking pubs’ potential, which we should be publishing in the next few weeks. We heard evidence of the social contribution made by pubs in rural and urban areas alike, whether that was pubs providing meals for people with dementia and their partners, Christmas meals for the isolated and lonely, free meals for older people, yoga classes, literacy groups, or parent and toddler groups. Pubs are the original social network, bringing people and communities together. Unlike some more modern social networks, Facebook pays just over 1.5% of its UK turnover in tax; pubs typically pay about a third. That averages to some £142,000 a year a pub to the Exchequer.

A large part of that money is in the form of business rates. The recently announced extension of the pub-specific relief, which knocks £1,000 off the bills of pubs with rateable values of less than £100,000, will help a huge number of pubs—in particular, smaller ones—as will the 50% reduction in business rates bills for certain businesses. For pubs, the burden of business rates remains particularly acute because of the way pub valuations work. Pubs account for 2.8% of all business rates revenues, despite accounting for only 0.5% of rate-paying business turnover. That amounts to an overpayment of £500 million every single year. Pubs pay more in business rates compared with turnover than any other sector. That is a basic fairness issue.

Every extra pound on the business rates bill makes it harder for a pub to survive, while some sectors of the economy simply do not seem to be paying their fair share. We need the fundamental review of business rates that the Government promised in our election manifesto and a new system that reflects the realities of the 21st-century economy.

The other main tax burden on our beer and pubs is duty, and beer duty remains much too high. It is much higher than in any other major beer-producing country in Europe. In fact, someone who bought a pint in each of the five other major beer-producing countries—Germany, the Netherlands, Spain, Belgium and Poland—would still have paid less duty on those five pints than they would on a single pint in Britain.

Successive coalition and Conservative Governments have taken action to limit the impact of beer duty on pubs since abolishing—I have to call it this—the hated beer duty escalator in 2013. That has saved pubs and pubgoers millions of pounds, which can be seen in the change in the fortunes of many of our brewers and pubs. I hope the Treasury will go even further by offering support for British beer and pubs in next month’s Budget, because keeping a lid on beer prices helps to keep pubs viable. What is more, taking action to limit beer duty increases sends a positive signal to the quarter of a million supporters of the Long Live the Local petition, not to mention the 25,000 individual pubs backing the campaign. A cut or freeze in beer duty will appear on the Treasury’s books as a cost, but evidence suggests that keeping costs down for brewers and consumers leads to increased revenue.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

The hon. Gentleman may wish to remind his colleagues in the Treasury of a helpful precedent that they may wish to follow. The coalition Government cut the duty rate on spirits by 2p. At the time, that was expected to reduce revenue; in fact, revenue increased fairly significantly as a result.

[Mike Wood]

I agree with the right hon. Gentleman. Indeed, there is an even more recent example. The excise revenue from beer is up £250 million compared with Treasury forecasts since 2017-18. That appears largely to be down to boosts to beer and pubs following freezes in duty in the 2017 and 2018 Budgets. Further action on beer duty in the Budget would clearly boost jobs and investment in beer and pubs. It would also likely lead to additional custom, which generates extra revenue.

Beer duty needs to be lower overall. Within that, we need to look at how that beer duty is levied. We need a wider review, first to look at the operation of small breweries relief and whether it acts as a disincentive to growth and expansion, and secondly to look at how beer duty can better support our community pubs, rather than the “stack ’em high, sell ’em cheap” produce in some off-licences and supermarkets.

Now that we have left the European Union, with the implementation period ending at the end of the year, there is an opportunity for a fundamental review of how duties are structured. I urge the Treasury to look at how beer duty could be levied at a lower rate for beer that is likely to be sold in pubs, and particularly when it is levied on draught beer, kegs and casks rather than small-pack cans and bottles. Supporting our community pubs in that way, without giving the dead cost of duty cuts to supermarkets, would make a big difference to many of those pubs.

Members on both sides of the House will not need persuading of the intrinsic value of pubs to not just the economy but society as a whole. As ever, it bears repeating that the pub is in many ways synonymous with the UK.

[Mr Toby Perkins (Chesterfield) (Lab)]

I congratulate the hon. Member on securing this incredibly important debate. Alongside what he said about the economic and social value of pubs, does he agree that the pub is also the safest place for drinking to take place, particularly for problem drinkers? Supporting our pubs has a huge benefit in terms of health expenditure too.

[Mike Wood]

Further to that, research from Professor Dunbar of the University of Oxford suggests not only that it is safer to drink in moderation in a well-run pub, but that people who drink regularly and in moderation in a local pub are more likely to be happier and healthier—both their physical and mental health is likely to be better. Although the immediate appeal of the modern temperance movement, calling for large increases in duty to try to reduce consumption, is understandable, high levels of duty tend to move consumption away from well-regulated and licensed premises to people buying cheap alcohol to consume at home, or in public, without the protections that licensed premises provide. The issue is therefore one of safety, health and public health.

I am delighted to see so many Members present to support Great British brewing and the pub industry. I hope the Minister will hear the messages of gratitude for the action that has already been taken, as well as the messages of hope and desire for—and even expectation of—continued support, which is needed to ensure that brewing in pubs remains viable for many years.

[Several hon. Members rose—]

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[Mike Wood]

I thank all hon. Members who have contributed to the debate. We have had many contributions from six different political parties representing all four nations of the United Kingdom. They have displayed a rather rare unity of opinion, purpose and passion: beer and pubs are a force for good, and they should be supported through our taxation system.

I thank CAMRA, the Society of Independent Brewers, the British Beer and Pub Association, Long Live the Local and the quarter of a million people who have signed up to the Long Live the Local campaign for highlighting the importance of this issue. We have the opportunity of two Budgets this year, and I hope we will have support on beer duty in March. At the end of the year, we can have the announcements on a new system of beer duty for a post-Brexit Britain.

Question put and agreed to.

Resolved,

That this House has considered taxation on beer and pubs.