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- Written by Mel James-Henry
- Category: Beer Taxation
MPs debate beer taxation, pubs and breweries (but few local representatives show up).
By the time you read this edition of Merseyale, Rishi Sunak MP will have delivered his first budget as Chancellor of the Exchequer. What was in the Chancellor’s red box for pubs and beer? Perhaps another freeze on “beer duty”, perhaps even a cut? Has the price of your pint gone down? Probably not. It is more likely that we will see beer prices increase, even if there is a tax freeze, such being the way pub companies work. Maybe there was a series of measures to stop the decline in numbers of the British pub. According to recent research, the total number of pubs in the UK has dropped by 2% (994 venues) from December 2018 to December 2019.
Whatever has been revealed, we can only hope that Mr Sunak’s decisions (if they are favourable) have been influenced by his fellow MPs. On the 5th February 2020, a group of MPs from across the House of Commons met in Westminster Hall to discuss beer and pub taxation.
The debate was called by Mike Wood MP (Dudley South) who, in his introduction stated: “Beer and pubs in the UK are a home-grown manufacturing success story. The industry supports almost 900,000 jobs in all corners of the country”. Some MPs mentioned how integral the pub is to many towns and villages, often being the only centre for social activity in some places and providing extra services such as a local shop or post office. However, much of the debate centred on business rates, taxation, and Small Brewers Relief (SBR). This SBR gives small breweries various levels of tax relief depending on the amount made. Producing up to 5000 hectolitres (hl) per year can give a 50% duty relief. After this, the relief is tapered to a limit of 60,000 hl. After this full duty is paid on all production. One MP noted that one of his local breweries would need to produce and sell an extra 20,000 hl to offset the additional tax burden after the 60,000 hl limit. It is not surprising that in some circles there has been talk about changing the current system to encourage breweries to expand, increase their output, and even take over or merge with other breweries, whilst not losing those tax breaks.
Throughout the debate local voices were largely absent, one exception being Bill Esterson MP (Sefton Central), who mentioned an email from Les O’Grady of Neptune Brewery in Maghull. Mr Esterson said: “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?” Comments answering this last question praised how effective SBR has been in encouraging people to open new, small breweries, but there was a distinct trend towards making changes to it so that breweries can grow and even amalgamate. Do we want to see much loved small brewers gobbled up by their neighbours just because the latter have expanded faster?
Several MPs at the debate mentioned the effect business rates have on pubs and their survival. The recently announced extension of the pub-specific rate relief takes £1,000 off the bills of pubs with rateable values of less than £100,000. This may help certain pubs. However, the way pub valuations work ls flawed. 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. Every extra pound on the business rates bill makes it harder for a pub to survive. An MP gave an example of a pub in their constituency which had had its rateable value reassessed, going up by 281% from £27,000 to £76,000. The licensee now must sell an extra 22,000 pints a year to cover the increase, not easy now that many people stay at home more. A fundamental review of business rates is needed to ensure that local pubs survive.
Some speakers mentioned the price differentials between beer bought in pubs and that purchased in supermarkets and off-licenses. One of these was another local MP, Marie Rimmer (St Helens South and Whiston). She spoke about the tax burden and how it relates to health and the availability of cheap alcohol. Ms Rimmer commented that the current beer duty arrangement “makes it extremely difficult for local pubs to compete with massive supermarkets and large pub chains”. She quoted from “The Green Budget 2016” published by the Institute of Fiscal Studies (IFS) which said: “The current structure of alcohol duties is not well targeted at harmful alcohol consumption.” Ms Rimmer mentioned “pre-loading” causing people to drink excessively at home before going out, because of the differences in the price of beer in pubs and clubs. On the subject of competition from supermarkets, Mike Wood (Dudley South) gave some hope for pubs by suggesting that as the UK has left the European Union, with the implementation period ending at the end of 2020, there could be an opportunity for a review of how duties are structured. Currently duty must be levied equally. It is possible that duty could be levied at a lower rate for beer sold in pubs, particularly when it is levied on draught beer, compared with small-pack cans, bottles and multi-buys in supermarkets.
From the debate, it is clear that several MPs love and, in many cases, support their local pubs and breweries. They acknowledge excise duty is high in the UK compared to that in some European countries. Some think it should be cut, which sounds nice to the taxpayer but seldom results in a price drop at the bar, it just puts more money in the pockets of the big producers compared to small ones. There may be an argument for some revision of Small Brewers Relief (SBR), but it must be done in a way that avoids a wave of small brewery takeovers. It is also heartening to see support for rate reforms. This would go a long way to keeping pubs viable as licensees cannot continue to cover these rises with increased sales. It is also good to see some MPs contemplating duty changes so that pubs don’t have to compete with “loss-leaders” in supermarkets.
In the end this was just a debate. No decisions were taken, or motions raised. We can only hope that the ideas above have filtered through to the Chancellor of the Exchequer and that he incorporates them into his budgets.
Reference: Beer and Pub Taxation. Westminster Hall debate. House of Commons Hansard. 05 February 2020. Volume 671. https://hansard.parliament.uk/Commons/2020-02-05/debates/B29500ED-980F-4325-95B2-0B6AD864442A/BeerAndPubTaxation
Contains Parliamentary information licensed under the Open Parliament Licence v3.0.
Tony Morgan
STOP PRESS – STOP PRESS
Merseyale contributor proven wrong (mostly).
In the March 2020 budget the Chancellor of the Exchequer, Rishi Sunak, froze beer duty for another year. Some news outlets expected beer duty to rise this year, but duty on all alcohol has been frozen. Beer drinkers will be told this is a good thing, but prices are still likely to go up due to other factors. Apparently, a pint of beer is 1p cheaper than it would have been if it had risen with inflation. Think about that when you are looking for that extra 10p when buying your next pint. The Chancellor has decided that leisure businesses, including pubs, with a rateable value of less than £51,000 will pay no rates for the next 12 months. This will be a welcome relief for some struggling licensees, and we can only hope that this moratorium continues next year. Sunak also announced that the “pub discount” given to bars with a rateable value of up to £100,000 will increase from £1,000 to £5,000 this year. Again, another welcome bit of news. On Small Brewers’ Relief (SBR), the Chancellor said that the government will publish the results of a review into SBR in the spring. Let us hope he consults widely and wisely.
Tony Morgan
