Beer Taxation and Pubs

Robert Jenrick Excerpts

Thursday 28th March 2019 Commons Chamber

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

I thank the Backbench Business Committee for securing this debate. As numerous Members have noted, it has felt rather like finding a good pub on a long walk when we are feeling weary and looking for a welcome break. The debate has been conducted in a very good-humoured manner throughout. I was first elected at the end of the coalition Government, and pubs was the only vote I believe that that Government lost in all those years, whereas today we are united on this topic but it is just all the other votes we seem to be losing.

I thank my hon. Friend the Member for Dudley South (Mike Wood) for sponsoring the debate. Like the hon. Member for West Bromwich West (Mr Bailey), he spoke about the Black Country’s long association with beer and brewing. I grew up in the shadow of Banks’s brewery in Wolverhampton and spent my teenage years, like the hon. Member for Oxford East (Anneliese Dodds), working in pubs that my hon. Friend’s constituents might drive out to Staffordshire and Shropshire to visit. I also thank the hon. Member for Stoke-on-Trent North (Ruth Smeeth) for her contribution; I have had a few drinks near her constituency in the Potteries, not least on the night I lost my first election in 2010. Given the scale of the result I probably should have drunk a pint from the Titanic Brewery.

But I do not want to be too negative about what we find today, because there are many great positives about beer and the brewing industry across the United Kingdom, many of which have been heard over the past couple of hours, not least the flowering of the British craft beer industry. That has brought fresh life to the market, creating a new generation of entrepreneurs, many of whom I know from my own constituency, a former brewing town, Newark-on-Trent, which has seen several new breweries created in recent years. This has given people across the length and breadth of the country unprecedented choice and, as we have heard, word has spread across the world and exports have risen very significantly.

[Toby Perkins]

The Minister is right that the small business brewing relief is an example of Government forgoing a bit of tax and a huge industry flowering on the back of that. Might he take note of that example for some of his other decisions?

[Robert Jenrick]

It certainly is, and I will talk shortly about the relief the hon. Gentleman mentions, which has played a significant part in that flowering and which I believe we can make better and fit for purpose for the future.

The value of beer exports has risen now to £500 million a year, and we heard earlier about the tremendous results also with respect to Scotch whisky and other spirits.

Small brewer’s relief gives the smallest brewers across the country a 50% reduction in duty and, as we have heard, it has helped fuel the explosion in the number of local breweries; we now have over 2,000 breweries across the country. At the autumn Budget we announced a review of this relief to give brewers the opportunity to share their thoughts on a relief that is now 17 years old and which has not been reviewed systematically over the course of that period. We have opened the review and had over 500 responses which we will carefully consider and report back on in due course.

Our motives at the Treasury have not been to extract more revenue from the sector, and certainly not to end the relief. However, for some of the reasons that the hon. Member for Keighley (John Grogan) and others mentioned, there is some evidence that although the relief has been hugely positive in some respects, it has limited the growth of some businesses that would like to expand and employ more people and that are concerned about the cliff edge that the relief creates. I hope that we will be able to work with breweries and organisations such as the Society of Independent Brewers to work through that and to do something positive for the industry.

With respect to beer duty, we have taken a number of steps over the past nine years to improve the situation in a country that has been widely acknowledged to have high levels of alcohol taxation. We removed the beer escalator, and we have either cut or frozen beer duty in six of the last seven fiscal events, so that the duty on a pint is lower now than it was in 2012. In real terms, this long-term and significant action by the Government has kept prices low for everyone, in contrast to the period from 1997 to 2010, during which beer duty increased by 60%. This was underlined at the most recent Budget with another freeze on beer duty, meaning that the price of a typical pint of beer is now 2p lower than if prices had risen with inflation. I appreciate that there is always more that we could do this respect.

We are also focusing on other alcohol, such as cider and spirits. My hon. Friend the Member for Ayr, Carrick and Cumnock (Bill Grant) talked about the importance of spirits to his constituency and to many others across Scotland. The hon. Member for Aberdeen North (Kirsty Blackman) talked about their importance to the wider Scottish economy. She also asked me a question about post-duty point dilution. We have given this matter considerable thought for some time, and we announced at the Budget that we will be bringing this practice to an end from April 2020. She also asked, as did the hon. Member for Oxford East, about a wider review of alcohol duty more generally. This is a complex area, and there are clearly no easy answers. There are certainly few answers that are fiscally neutral and that would create no losers, which would be important to many who work or own businesses in the sector. It is perhaps premature to conduct a review at this moment, because the greatest flexibility will be available to us after we leave the European Union. A future Chancellor might then have the choice to take action.

We heard from the hon. Member for Strangford (Jim Shannon) and my hon. Friend the Member for Faversham and Mid Kent (Helen Whately) about responsible drinking, and they asked whether we could lower the duty on low-alcohol beers. We are somewhat constrained in that respect by EU law. The EU alcohol structures directive sets the maximum threshold for reduced duty on low-alcohol beer at 2.8%. Her Majesty’s Government charge a reduced duty of 6p a pint on beers with a strength between 1.2% and 2.8%. Until we leave the EU, we cannot raise the threshold for low-alcohol beer above 2.8%, but this is something that we will work on with our partners across Europe, and we could have further flexibility in the years ahead. The Government have taken action in some specific circumstances—with respect to white cider, for example—and our approach is that we will continue to take action as necessary where there is clear evidence that certain alcohol duty rates are causing difficulties for society.

We have heard a great deal about pubs, which are, as we heard from numerous colleagues, the bedrock of many rural and urban communities. As the hon. Member for Chesterfield (Toby Perkins) rightly highlighted, they boost the economy, create jobs and, crucially, act as hubs for our communities. We have heard about their importance in tackling loneliness, and about the issues for older people, whether older gentlemen or others. They are great places for people to work and start their careers in. The pub industry currently employs about 450,000 people, many of whom are younger people, as has been said.

[Bob Stewart]

I rise, again, as an older gentleman. We have been talking about what pubs do. Let us imagine people who live in pretty awful accommodation—a bedsit or something like that. The local pub can provide a really nice, friendly, warm environment. That is the sort of place that those people can go to, and in my view that is the real advantage of local pubs.

[Robert Jenrick]

I agree with everything that my hon. Friend just said.

I will talk briefly about business rates in the short amount of time available to me because they have been an important element of this debate. My hon. Friend the Member for St Albans (Mrs Main) brought some of her publicans to see me at the Treasury to discuss the matter. We have taken several actions to support pubs by lowering their tax burden. The most important of them—this comes into effect on 1 April—is the Chancellor’s Budget announcement that the business rates bills of small and medium-sized retailers, including pubs, will be cut by a third. The policy has been set for maximum impact among retailers and pubs with a rateable value of £51,000 or below. I appreciate that that will have less impact in communities such as my hon. Friend’s, where rateable values are high, but 90% of retailers and between 70% and 85% of pubs across the United Kingdom will benefit, with pubs seeing a tax saving of up to £8,000. We also previously had the £1,000 discount for small and medium-sized pubs, and many pubs will also benefit from up to 100% small business rates relief or the 100% rural rate relief. Of course, all ratepayers are benefiting from the switch from RPI to CPI.

The hon. Member for North Tyneside (Mary Glindon) mentioned the request of many, including the industry, to create a rate of beer duty that differentiates between people drinking in a pub and people purchasing beer in a supermarket or convenience store. 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.

I conclude by thanking the Backbench Business Committee and my hon. Friend the Member for Dudley South and the hon. Member for Stoke-on-Trent North, both of whom gave superb speeches. This debate unified the House and demonstrated the important role that pubs can play in our communities. I will certainly relay the strong feelings from across the House to my right hon. Friend the Chancellor with respect to the next Budget and the future of beer duty. The House’s voice is clear that it wants, like people the length and breadth of the country, further and continued support for beer, breweries and our important pubs.