June 2017

Back on the Escalator

The Chancellor has sneaked in a return to the alcohol duty escalator

IN HIS 2011 Budget, George Osborne mentioned in passing that “there would be no changes to previously announced alcohol duties”, which many media outlets wrongly reported as meaning that they would be frozen, whereas in fact the dreaded duty escalator remained in operation.

In March this year, Philip Hammond pulled the same stunt, which led to widespread confusion as to what the duty implications actually were. One well-known brewer, who will remain nameless, even said on Twitter that they didn’t think there had been any changes. The situation was so bad that the British Beer and Pub Association felt compelled to issue a statement clarifying the position.

Even the official government announcement was distinctly disingenuous, saying “This measure increases the duty rates on alcohol manufactured in, or imported into, the UK by reference to the retail prices index (RPI).” Anyone reading this would assume that duties had been increased in line with RPI, but in fact the term “by reference to” meant that the dreaded duty escalator had returned, with rates going up by RPI plus 2%. The main rate of beer duty rose by 3.86%, meaning that a pint of 4% beer now incurs duty plus VAT on duty of 52p, a rise of 2p over the previous level.

It’s easy to dismiss such rises as trivial and say people will take them in their stride. But every price increase is a step too far for someone who is already at the limits of their budget. And, over time, successive above-inflation increases in duty will make alcoholic drinks significantly more expensive in real terms and reduce the demand. Although obviously not the sole factor, it is noticeable how the rate of decline in the pub trade in the three years since the escalator was shelved in 2014 has been considerably less than in the preceding years.

It would have been understandable, if regrettable, if the government had returned to raising duties each year in line with inflation. But it has been made clear that the duty escalator was never scrapped, merely suspended, and is now back with a vengeance.

Sadly, all the hard work that CAMRA and drinks trade bodies devoted to campaigning against it and pointing out its negative effect on one of Britain’s biggest business sectors has been thrown back in their faces. The process is going to have to be restarted, and this time it must be made clear that the objective is to drive a stake through the escalator’s heart, not just to put it into suspended animation.

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Brewer before Taxman?

Higher beer prices harm pubs, regardless of whether the brewer or the Exchequer benefit

EARLIER this year, I wrote about how many small brewers were finding it a struggle to make a decent living. One answer to this has been to suggest that we’re not really paying enough over the bar for our beer. However, given that in many pubs the typical pint is now well north of £3, most people would hardly think beer was cheap, and over the years pub prices have increased by more than the general rate of inflation. If there’s a problem, it’s how the cake is distributed, not that it’s too small overall.

Given the amount of effort that has been expended in campaigning against the duty escalator, it is surely shooting yourself in the foot to want to negate all the benefits by putting the price back up again. It’s basic common sense that cheaper beer makes for healthier pubs and, regardless of where the extra money goes, higher prices are going to deter some customers, especially those who are already financially stretched.