Peter Aldous backs calls to scrap the beer duty escalator

Waveney MP Peter Aldous has backed calls for an urgent review of the economic and social impact of the beer duty escalator on the brewing and pub sector.

In a backbench business debate, Mr Aldous pointed out that beer duty has risen by 40% since 2008 and that given the impact on jobs and livelihoods, it is high time to adapt the tax to the current economic climate. This is illustrated by the fact that there has been a decrease in investment in the beer industry, a poor harvest, a rise in energy costs and a fall in household incomes, which have led a third of pubs to close in the last four years.

It is based on careful consideration of these factors that Aldous urged an evidence based review of the escalator before decisions are made in next year’s Budget.

The debate was prompted by a Government e-petition signed by more than 100,000 people demanding Government action on the matter.

The escalator introduced by the last Government increases the price of a pint by 2% above inflation and is due to last until 2014-15. This equates to an increase in the price of a pint in the UK by between 5p and 10p every year, with £1 from every pint going on VAT and beer tax, resulting in the closure of 16 pubs a week.

The British Beer and Pub Association (BBPA) claims that the tax on beer has risen by 42% since the escalator was introduced, which Mr Aldous deems unsustainable. It is estimated that putting an end to the escalator could save up to 5,000 jobs in the first year alone.
The bid to axe the escalator was supported by MPs from across the House.

The Economic Secretary to the Treasury, Sajid Javid, responded to these calls by affirming his commitment to keeping taxes under review to make sure that it is fully aware of their impact on the beer industry.

Mr Aldous said:
“This is an opportunity to bring fairness into the pub industry and support breweries.

I have witnessed first-hand the consequences of this alleviated tax in the Waveney area.

We should not build bring down the deficit at the expense of the 600,000 people in the UK who rely on beer and pubs for their livelihood.”

FULL TEXT:

Peter Aldous (Waveney) (Con): I am grateful to my hon. Friends the Members for Burton (Andrew Griffiths) and for Leeds North West (Greg Mulholland) for securing the debate and for their hard work and to the 104,000 people who signed the e-petition. I wish to speak in favour of the motion, and there are compelling reasons for doing so. First, if we do nothing and carry on regardless, an iconic British business will wither on the vine—or should I say the hop? Secondly, small businesses will close at an accelerating rate, with a devastating impact on individuals, families and communities, both urban and rural. Thirdly, it is important to base fiscal policy on well-founded and up-to-date research. Times have changed significantly since 2008.

Indeed, the face of the industry has changed dramatically over the past 30 years. In East Anglia, great names such as Lacon’s, Bullard’s, Mann’s, Tollemache and Cobbold have long gone. Visionary and iconic businesses remain: Adnams, St Peter’s brewery and Green Jack in my constituency, the latter being the most easterly brewery in Britain. We owe it to them to promote a level playing field on which they can develop their businesses, play a full role in the economic recovery and create new jobs.

If we go on as we have been doing, we will kill the goose that lays the golden egg. Beer duty has risen by 40% since 2008, yet the pub trade has shrunk by a third over the same period. Britain pays over 40% of EU beer tax but consumes only 13% of beer sold in Europe. Investment in the beer and pub sector has shrunk dramatically, from over £2 billion in the late 1990s to £600 million in 2010. A sector that employs 1 million people, often young people, needs nurturing, not suffocating.

If there was a rationale for introducing the escalator in 2008, it has long since gone. Time are very different: inflation, VAT and input costs are all higher; there has been a poor harvest; energy costs are higher; and these are compounded by a fall in household incomes. The escalator today is in many respects a straitjacket; it is no longer fit for purpose in these straightened times.

It is important to bear in mind the unique nature of the industry, the effect of the punitive form of taxation and its potential for growth if properly nurtured. It is very much a British industry, with a supply chain that creates a significant number of jobs. As we have heard, one job in brewing supports one job in agriculture, one job in retail, one job in distribution and 18 jobs in pubs and clubs. In my constituency, more than 1,200 people are employed directly or indirectly as a result of the industry, and there are nearly 100 pubs and the industry puts £26 million into the local economy. Some 85% of pubs are small or medium-sized enterprises, the foundation stone on which we must build the recovery. They are particularly vulnerable to rises in duty, being less able to absorb duty and other cost increases. It is also important to take into account the community and social benefits of pubs, both in villages and in urban areas.

Pubs are under attack on all fronts. The landlords who lease from pub companies find themselves confronted with excessive rent increases. Landlords find themselves strangled by red tape; lock-ins have long since gone, having been replaced by late-night sessions of burning the midnight oil and completing VAT returns. Many are told, “You don’t want to rely on beer; you want to get into food.” Yet landlords find themselves competing on an unlevel playing field with supermarkets as they have to charge VAT on their sales.

Andrew Percy (Brigg and Goole) (Con): On that point, I commend the Percy Arms in Airmyn, a pub that has transformed itself, but purely around food, because making money out of beer has become almost impossible.

Peter Aldous: My hon. Friend makes a good point.

It would be churlish not to commend the Government for the good work they have done. They have made it easier for pubs to put on live events, they have introduced the community right to buy through the Localism Act 2011, and the forthcoming proposed introduction of a minimum unit price for alcohol will help to provide a level playing field.

However, the elephant in the room remains. This brings me back to the motion and the need for a full review of the economic and social impact of the escalator before decisions are made in next year’s Budget. Tax policy must be underpinned by proper research. The research that has been carried out shows that there will be devastating unintended consequences if the escalator is retained. Oxford Economic Research Associates has shown that if the rise goes ahead, there will be 5,000 job losses and the additional beer duty received will be offset by a loss of employment, lower revenues from other taxes and an increase in social security spending. I urge the Government to carry out the review with all haste.

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