So the 2013 Budget has been announced, not only has the Beer Duty Escalator been scrapped, but duty on a pint has actually been decreased by 1p, the first reduction in beer duty since 1973, hooray! CAMRA, among many others, have been campaigning to stop this punitive tax for some time, I have written to both George Osborne and my MP Bernard Jenkin on the matter.
A few weeks ago got the opportunity to put my point of view directly to Mr Jenkin as he poured pints behind my bar. It is a great relief that all the hard work of those campaigning has not been in vein, a huge heartfelt ‘thank you’ goes out to Mr Osborne and the current Government for listening to the plight of the pub and believing in us.
We campaigned for the escalator to be stopped because we believe less duty per pint will in fact increase sales and in turn provide greater duty revenue. We believe the increased sales will increase jobs in the industry, in particular with younger persons, currently the worst affected by unemployment. This will also help to reduce the strain on the Government in terms of unemployment benefits. We also believe that by encouraging customers to drink beer in a social, monitored environment such as the pub instead of drinking often stronger alcoholic drinks at home we can help to reduce alcohol abuse and related crime rates. The budget wasn’t good news for the whole of the alcohol industry, cider, wine & spirits all saw rises in duty, so was the beer duty reduction just for the headlines? I don’t believe so, higher taxation & pricing on higher ABV drinks will hopefully encourage more drinkers to opt for beer, better for our health & a boost to our British brewing industry.
Since the Duty Escalator was introduced in 2008 beer duty increased by 42% leaving brewers and publicans squeezing their margins each year to keep the cost of a pint down for our customers. However, according to CAMRA, 5800 pubs have closed since 2008 proving that this isn’t sustainable. Is a 1p reduction in duty going to change things overnight or even follow through to a 1p reduction at the till? Possibly not, but this is a glint of hope for an industry recovery, offering a small amount of breathing space, a chance to stem the closures. Here is an opportunity to regain our profit margin to help pay for the other increased costs we have seen over the past five years including general food prices, brewers increases, energy rises, fuel duty hikes, increased minimum wage and holiday pay for staff, higher business rates and the whopping 20% VAT rate.
All of the increases have left us less than competitive against supermarkets and peoples sofas where alcohol consumption often isn’t in a social environment and isn’t monitored or regulated by a responsible licensee. Many of our customers, also feeling the pinch, have understandably taken the cheaper option, especially when deals for 4 litres of 7.5% cider at £5 can be found in off licenses. How can we compete with more than the weekly recommended number of alcohol units for a fiver!
The abolition of the duty escalator is a step in the right direction, the start of something good for pubs. We still have a lot of obstacles to overcome and hopefully this budget is a sign that we will gain more Government support to help us though them. Somehow we need to stop supermarkets offering such irresponsible deals and close the gap between pricing in the pub and the retail giants. Personally I don’t believe minimum pricing is the answer, a reduction in VAT for hospitality is. If we can hold true to our forecasts for increased duty revenue following the scrapping of the escalator perhaps they’ll listen to us when we say the same will happen if VAT for hospitality is reduced too…
Want to know more about Jacques Borel’s VAT reduction campaign? We pulled together as an industry over the escalator, if we can do it again over the next 12 months who knows what we can achieve. Who’s in?