Beer Duty Escalator

Sandra Osborne Excerpts

Thursday 1st November 2012 Commons Chamber

[Sandra Osborne (Ayr, Carrick and Cumnock) (Lab)]

I greatly welcome the opportunity to participate in today’s debate, and it is a pleasure to follow the hon. Member for Harrow East (Bob Blackman), who made an interesting and insightful speech. I would like to thank the hon. Member for Leeds North West (Greg Mulholland) and others who have kept the all-party group going for a number of years, providing a strong focus for this issue, which is important for all our constituencies. I shall concentrate my remarks on my concern about the pub trade in my constituency.

There are 86 pubs in Ayr, Carrick and Cumnock, which support 877 full and part-time jobs in my constituency. Pubs inject an average of £80,000 into the local economy each year, but these pubs will be under threat if the beer duty escalator remains in place, because, as hon. Members have said, this mechanism is making a pint in the pub unaffordable. In my constituency, many pubs have already closed.

[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.

[Heather Wheeler]

I am interested in the hon. Lady’s point about how many jobs are created by our pubs. The 115 pubs in South Derbyshire employ 1,040 people. It is a hugely important industry for us locally. I am grateful to the hon. Lady for making the point that this is about jobs, industry and growth. I am sure that Ministers will be listening intently to that.

[Sandra Osborne]

I thank the hon. Lady. Another problem is that when many of the small pubs that employ only a few people close, that is not highlighted. With bigger announcements about redundancies, it is always made clear that huge job losses are involved, but I would argue that this is just as insidious for those working in the smaller pubs.

I recognise concerns about alcohol-related harm and the serious problems that alcohol causes, of which we are very aware in Scotland. I recognise, too, that campaigners have called for some time for the Government to introduce a duty rate escalator on alcoholic drinks as part of a wider strategy to tackle the social impact of alcohol consumption.

[Mr Iain McKenzie (Inverclyde) (Lab)]

My hon. Friend makes an impassioned point about the alcohol problems that continue to be encountered in Scotland. Pubs are more sociable places for the consumption of alcohol and are more family friendly nowadays, but what we are seeing is the mass purchase of alcohol in supermarkets for home consumption.

[Sandra Osborne]

That is very true, and I think we should give some credit to UK pubs which they have made great efforts to be family friendly places where people can drink with the assurance that there will be no problem if they take their children with them. That is important.

I share the concern that continued increases would penalise only responsible drinkers and, as stated earlier, drive responsible social drinkers out of pubs and into supermarkets because the price of alcohol is increasing in pubs but decreasing in supermarkets. The current duty system ensures that higher-strength drinks are the cheapest drinks available to consumers. Pubs are already being hit hard by the current economic situation and are suffering further with the escalation of beer duty.

On 23 March 2012 the Government published their alcohol strategy, which seeks to reduce the UK’s relatively high drinking levels and the serious health and disorder problems that are caused by excessive alcohol consumption. The strategy contains a number of proposals to

“reshape our approach to alcohol and reduce the number of people drinking to excess”,

including the introduction of a minimum unit price. As Members will know, minimum pricing has already been introduced in Scotland, but is currently being challenged in court by the Scotch Whisky Association.

Following a recent Adjournment debate, a Minister said that abolishing the escalator would cost the Exchequer £35 million in 2013-14, and that that revenue formed

“a vital part of the Government’s plan to tackle…debt”.

However, the Government would

“continue to keep all taxes under review and monitor the impact of alcohol duty”. —[Official Report, 2 July 2012; Vol. 547, c. 733-36.]

I ask the Government to recognise the tough challenges that face the beer and pub industry, and to take them into consideration. I think it would be a good idea for the Government to cut VAT temporarily and to undertake a wider reform of the industry, including the introduction of a statutory code to regulate pub companies. The last Labour Government introduced a 12-point plan to support community pubs, which was backed by CAMRA, and my colleagues on the Opposition Front Bench have pressed the Government to build on it.

As we have already heard, there is an online “Stop the beer duty escalator” petition, which currently has 104,000 signatures. I ask the Government to note that significant number, to support the country’s beer and pub sectors by conducting a thorough review of the economic and social impact of the beer duty escalator, and to announce before the 2013 Budget that they will abolish it.