June 2013

Down Escalator

The success of the duty escalator campaign was due to the entire pub and brewing trade singing from the same hymnsheet

THE NAME of Derick Heathcoat-Amory is not one that is likely to be familiar to the modern-day beer drinker, but his claim to fame is that, in 1959, he became the only post-war Chancellor of the Exchequer to actually cut beer duty. Until now, that is. During the past year, CAMRA led a high-profile campaign to scrap the Beer Duty Escalator, which was introduced by Alastair Darling in 2008 and each year increased the level of beer duty by 2% over and above the rate of inflation.

Many, including myself, were somewhat sceptical of the chances of success, given the dire state of the public finances and the general climate of anti-drink scaremongering. However, in the event, in his budget in March, George Osborne not only scrapped the escalator but went two steps further and actually cut the main rate of beer duty by 2%. This must rank as one of CAMRA’s greatest campaigning achievements in the lifetime of the organisation.

An important factor in this was getting the entire brewing and pub trade speaking with one voice, and bringing industry organisations such as the British Beer & Pub Association (BBPA) and Society of Independent Brewers (SIBA) onside. The argument that the negative impact of the escalator on pubs had wider social implications struck a chord well outside the confines of the trade, and the campaign was given strong support by voices such as the Sun newspaper and the Taxpayers’ Alliance whom some CAMRA members might not regard as natural bedfellows. In contrast, appeals to government based on claims that one section of the industry was gaining an unfair advantage have invariably met with failure. United we stand, divided we fall is a crucial lesson to be learned.

At times the campaign against the escalator was (maybe understandably) guilty of overstating the negative impact it had on the pub trade. Of course it didn’t help, but it was only one of a number of factors working against pubs. Thus the duty cut should not be seen as a magic bullet. One excuse for lack of success has now been taken away, and it is now up to pubs to respond in an enterprising and imaginative manner and deliver more competitive prices to customers. Those who just use it as a means of fattening their margins do not deserve to prosper.

The escalator was maintained for all other categories of alcoholic drinks, leading to some indignation from the wine and spirits sectors. To some extent this was just redressing the balance, as there were at least two occasions during the last couple of decades when Kenneth Clarke and Gordon Brown froze spirits duty while raising that for beer. However, it has been widely pointed out that Britain’s high levels of duty across the board (either second or third in the EU, depending on the type of drink) have severe negative consequences in encouraging smuggling and illegal distilling. Hopefully next year will see the escalator scrapped for all drinks.

Cider is an unusual case, as the general level of duty is much lower than that on beer for products of comparable strength. Traditional cidermakers have defended this on the grounds of the investment needed in orchards and lengthy fermentation periods but, on the other hand, it does give a cost advantage to some industrial products that seem to have little connection with the Herefordshire or Somerset countryside. In 2010, Alastair Darling proposed an across-the-board 10% hike in cider duty, which met with considerable resistance in the West Country and was cancelled by the incoming Coalition government. Maybe a better solution, rather than a general increase that would hit all producers, would be to raise the proportion of pure apple juice required to qualify for the lower rate from the current 35% to something like two-thirds or three-quarters. Products not meeting that requirement would be taxed at the higher rate for “made-wine”, which is similar to that for beer.

6 comments:

  1. Your basic problem with altering the % apple juice is that apple juice = sugar = alcohol.

    You would be giving a tax break to the higher % alcohol stuff.

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  2. Its the alcohol content that costs the NHS money down the line, hence a Pigovian tax to offset this should logically be directly proportional to ABV. The makeup of the rest of the drink is irrelevant really.

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  3. You can make cider any strength you want by watering it down - and I don't think Frosty Jack's is a high juice product.

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  4. Cidre and Magners are 50% apple juice. Imported concentrate but so is your breakfast juice. The other 50% is water. At 100% juice they would be 9% alcohol. Same as white German wine. They are 4.5% abv because they are half water. Your Best Bitter is 95% added water.

    The reason most CAMRA cider buffs are red faced alkies is because they are knocking back 6 pints of something the strength of Reisling or Hock and thinking it is better than that commercial stuff because the apple juice got squeezed out of the apple near the fermenter. Ooo arr.

    Frosty Jacks & other discount products may be corn syrup based, but are a fraction of the market.

    For all the regular commercial stuff increasing apple juice increases ABV.

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  5. No, you're missing the point. The rule is the amount of apple juice as a proportion of fermentable material. It doesn't stop you then diluting it with water. There are plenty of pure juice ciders that are 5% ABV or less.

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  6. So in effect you are proposing considering the ratio of corn syrup to apple juice as a method of determining tax rate.

    In effect taxing corn syrup cider more than apple juice cider. Presumably an attempt to hike the price of Frosty Jacks and leave Merrydown Vintage unaffected. Or is it in the hope that Frosty Jacks leave the market or reformulate?

    Why not just ban corn syrup cider ? Are there other ingredients you want a higher tax rate for? Beer adjuncts?

    A libertarian would simply ask the law to ensure the label states the ingredients clearly with % apple juice, allowing the punter to object at the lack of apples if they so chose. Real ciders could then state they were made without concentrate.

    Why are the ingredients of so much booze unclear? That's one of many vested interests to ponder.

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