Beer Taxation and Pubs

Part of the debate – in the House of Commons at 3:10 pm on 28th March 2019.

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Photo of Robert Jenrick Robert Jenrick The Exchequer Secretary 3:10 pm, 28th March 2019

It certainly is, and I will talk shortly about the relief the hon. Gentleman mentions, which has played a significant part in that flowering and which I believe we can make better and fit for purpose for the future.

The value of beer exports has risen now to £500 million a year, and we heard earlier about the tremendous results also with respect to Scotch whisky and other spirits.

Small brewer’s relief gives the smallest brewers across the country a 50% reduction in duty and, as we have heard, it has helped fuel the explosion in the number of local breweries; we now have over 2,000 breweries across the country. At the autumn Budget we announced a review of this relief to give brewers the opportunity to share their thoughts on a relief that is now 17 years old and which has not been reviewed systematically over the course of that period. We have opened the review and had over 500 responses which we will carefully consider and report back on in due course.

Our motives at the Treasury have not been to extract more revenue from the sector, and certainly not to end the relief. However, for some of the reasons that John Grogan and others mentioned, there is some evidence that although the relief has been hugely positive in some respects, it has limited the growth of some businesses that would like to expand and employ more people and that are concerned about the cliff edge that the relief creates. I hope that we will be able to work with breweries and organisations such as the Society of Independent Brewers to work through that and to do something positive for the industry.

With respect to beer duty, we have taken a number of steps over the past nine years to improve the situation in a country that has been widely acknowledged to have high levels of alcohol taxation. We removed the beer escalator, and we have either cut or frozen beer duty in six of the last seven fiscal events, so that the duty on a pint is lower now than it was in 2012. In real terms, this long-term and significant action by the Government has kept prices low for everyone, in contrast to the period from 1997 to 2010, during which beer duty increased by 60%. This was underlined at the most recent Budget with another freeze on beer duty, meaning that the price of a typical pint of beer is now 2p lower than if prices had risen with inflation. I appreciate that there is always more that we could do this respect.

We are also focusing on other alcohols, such as cider and spirits. My hon. Friend Bill Grant talked about the importance of spirits to his constituency and to many others across Scotland. Kirsty Blackman talked about their importance to the wider Scottish economy. She also asked me a question about post-duty point dilution. We have given this matter considerable thought for some time, and we announced at the Budget that we will be bringing this practice to an end from April 2020. She also asked, as did the hon. Member for Oxford East, about a wider review of alcohol duty more generally. This is a complex area, and there are clearly no easy answers. There are certainly few answers that are fiscally neutral and that would create no losers, which would be important to many who work or own businesses in the sector. It is perhaps premature to conduct a review at this moment, because the greatest flexibility will be available to us after we leave the European Union. A future Chancellor might then have the choice to take action.

We heard from Jim Shannon and my hon. Friend Helen Whately about responsible drinking, and they asked whether we could lower the duty on low-alcohol beers. We are somewhat constrained in that respect by EU law. The EU alcohol structures directive sets the maximum threshold for reduced duty on low-alcohol beer at 2.8%. Her Majesty’s Government charge a reduced duty of 6p a pint on beers with a strength between 1.2% and 2.8%. Until we leave the EU, we cannot raise the threshold for low-alcohol beer above 2.8%, but this is something that we will work on with our partners across Europe, and we could have further flexibility in the years ahead. The Government have taken action in some specific circumstances—with respect to white cider, for example—and our approach is that we will continue to take action as necessary where there is clear evidence that certain alcohol duty rates are causing difficulties for society.

We have heard a great deal about pubs, which are, as we heard from numerous colleagues, the bedrock of many rural and urban communities. As Toby Perkins rightly highlighted, they boost the economy, create jobs and, crucially, act as hubs for our communities. We have heard about their importance in tackling loneliness, and about the issues for older people, whether older gentlemen or others. They are great places for people to work and start their careers in. The pub industry currently employs about 450,000 people, many of whom are younger people, as has been said.