Beer and Pub Taxation — [James Gray in the Chair]

Part of the debate – in Westminster Hall at 2:52 pm on 5th February 2020.

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Photo of Siobhain McDonagh Siobhain McDonagh Labour, Mitcham and Morden 2:52 pm, 5th February 2020

Thank you, Mr Gray. I am delighted to be called to speak so early. My only problem is trying to rule out a lot of my speech, and the important pub puns I had included in it—there was to be a gift of a pint for those who identified all of them.

My contribution will focus on small breweries and small breweries relief, particularly in relation to the Wimbledon Brewery in my constituency—I cannot imagine why they wanted to call it the Wimbledon Brewery, rather than the Mitcham and Morden Brewery, but I will leave that to Members’ imaginations. Although the relief is vital, the current system stifles growth and profitability for small brewers, discouraging exports and mergers. For the benefit of Members without small breweries in their constituencies, let me explain that if a brewery produces less than 5,000 hectolitres per year, it pays 50% of the full excise duty of the big breweries. That is to help balance the economies of scale from which the biggest breweries benefit, ensuring that the consumer has a greater choice and that smaller breweries can stay in business.

However, the 5,000 hectolitres point is a cliff edge. If production goes above that level, the brewer pays excise duty not just on the additional amount produced over the threshold, but on the whole production. A brewer would need to reach levels of around 20,000 hectolitres to offset the additional tax by the economies of scale. Wimbledon Brewery was in no man’s land, producing around 8,000 hectolitres per year—above the threshold but far below the 20,000 summit. It was therefore burdened with the extra tax, but without the economies of scale. For a business of that size, no man’s land is simply not an option, and it was forced to fall back below the threshold, limiting production and reducing the staff count from 15 to 10.

In its current form, the small breweries relief has punished Wimbledon Brewery’s good business practice and disincentivised its growth. The relief has acted as a barrier to mergers and acquisitions for everyone other than the biggest breweries in the industry. Surely a more progressive scale of relief is necessary, aligned with the industry’s economy of scale, to ensure that all brewers are incentivised to grow. Take the Irish relief for small brewers—the Irish are always good people to look to when talking about alcohol. A proportion of their export volume is excluded, yet such brewers can still obtain the maximum relief.

Urgency is paramount, with small brewers warning me in advance of the debate that a further period of consultation would simply lead to even more unintended consequences. For those brewers, this hangover really has gone on for too long. The upcoming Budget is the Government’s opportunity to support this much-loved sector, to make the system fairer and to support business growth. Long live the local.