Ten years on, what is the legacy of the beer duty escalator?

By Victor Haggard.

 

We have lost a quarter of our pubs in the last decade and with one in every £3 spent in pubs going to the taxman, this is hardly surprising. Beer duty is the tax on the production and sale of beer and is calculated on alcoholic percentages. The ‘beer duty escalator’ period between 2008 and 2013 started with the Labour Party’s decision to increase the duty on alcoholic beverages by 6 per cent in real terms. The yearly rise of 2 per cent above the rate of inflation was thankfully put on hold by the coalition government and duty was eventually decreased thanks to the campaigning of the Tax Payers’ Alliance with industry groups such as Fuller’s and the Campaign for Real Ale. However, by 2013, 58,000 people had lost their jobs and 7,000 thousand pubs had closed and it could have been far worse.

Oxford Economics estimated that abandoning the duty escalator has saved 21,000 jobs and their data shows a clear correlation between the increase in beer duty and a decrease in the number of pubs and bars. Richard Kershaw runs Joseph Holt Brewery, a family business with 128 pubs in the Manchester area and took part in the TaxPayers’ Alliance 2017 ‘Cut Beer Tax’ campaign. In the four years leading up to 2016, there were three duty cuts and a duty freeze, which allowed them to reinvest £4.9 million back into their pubs and on new employees. Additionally, with youth unemployment sitting at 11%, investments like this are a big win for 18-24 year olds who make up 44% of the jobs in pubs and bars.


In 2008, the median number of employees per pub was five and in 2018 it is now eight, as larger establishments are replacing smaller pubs. This is because the businesses need serious economies of scale and the addition of food to their offerings to turnover a profit. Chains like Wetherspoons have flourished with this model but smaller pubs may not have the capital and capacity to do the same. The Sportsman pub in Tipton, West Midlands was saved by residents this week, who petitioned the council not to allow it to be converted into a food store. A local resident said that the pub was ‘now the only place left for residents to socialise and support each other’. With the tax on a five percent pint of beer being 54 pence (excluding VAT at 20 per cent), compared to five pence in Germany, the government is not just restricting the growth of these small and medium size enterprises but is clearly damaging communities as well.


The North East, for example, has the lowest number of pubs in England and the worst unemployment in the UK (6.8 per cent in 2017). Low disposable incomes means customers are less likely to eat out and will forsake pubs to purchase booze at supermarkets and off-licenses for loss leader prices. Alcohol abuse costs this region alone over £1.5 billion a year which makes the £3.5 billion beer duty look like a drop in the ocean. More than simply supporting local businesses, with a slash of alcohol duties and business rates, consumers will have the option to drink in a more sensible, social and safe way, at the pub!


The cider industry is tiny compared to the beer industry, with 10,900 employees compared to 900,000, but it generates an astounding £1 billion in apple supply contracts and £100 million in exports. However, there has been a 20 per cent decline in cider sales since 2009 (*cough* duty escalator *cough*) and the industry is crying out for more certainty and support. Farmers need the confidence to invest in apple orchards as their growing cycles work in decades, not seasons. More sympathetic government policies would boost investment in rural employment, strengthen growing contracts and lead to a greater supply of apples, which would lower prices for consumers. The Chancellor’s tax takings are clearly the apple of his eye but these two industries are hard-pressed and further freezes and cuts to duty will unleash their potential and protect both their cultural and economic importance.