Beer and Pub Taxation

(Limited Text - Ministerial Extracts only)

Wednesday 5th February 2020 Westminster Hall

[The Exchequer Secretary to the Treasury (Mr Simon Clarke)]

I join hon. Members in paying tribute to my hon. Friend the Member for Dudley South (Mike Wood). He has done the unusual thing of bringing half of Parliament along to a Westminster Hall debate, which is not only a great tribute to his popularity as chairman of the all-party parliamentary group, but a reflection of the importance that we all ascribe to this issue, which affects our communities.

I thank all hon. Members who have contributed to the debate. As has been said, there has been a tone of great unity on the issues. There is a clear consensus about the centrality of pubs and the beer industry, and about the solutions that exist in terms of making sure we help the sector to thrive long into the future. It must be said that asking elected representatives to talk about lowering the burden of tax on beer and pubs may be the nearest thing we ever get to motherhood and apple pie in this place, but it is a serious issue that goes to the heart of community life, as the hon. Member for Barnsley East (Stephanie Peacock) said. Pubs are places to meet and socialise, and breweries are important regional employers.

In his delightful speech, my hon. Friend the Member for Clacton (Giles Watling) reminisced about his trips to Stratford. As we know, Shakespeare has a line for everything, including the following from “A Winter’s Tale”:

“a quart of ale is a dish for a king.”

He was, of course, right—we can surely all agree on that. With that in mind, it is a great tribute to the United Kingdom that we have over 2,000 small breweries, and beer exports accounted for almost £500 million-worth of sales last year.

[Alex Chalk (Cheltenham) (Con)]

Does the Minister agree that, with a benign tax regime, independent British brewers can be an even greater exporting strength? The DEYA brewery in my constituency has achieved extraordinary international strength over the past five years. Has the time not come to back independent British brewers to go global?

[Mr Clarke]

I could not agree more, and that is the spirit of Brexit. We need to take advantage of opportunities to drive exports. It is something that we want to do across the piece to ensure that we deliver a successful economy, have a competitive business tax regime and support businesses large and small. That is what the Government have been intent on doing. Our employment allowance changes reduced national insurance contributions by up to £3,000 for over 1 million employers. We have cut corporation tax and frozen or cut beer duty in six of the last seven Budgets, which means that beer duty is now at its lowest level in real terms for over 30 years, and we have repeatedly given support to pubs through the business rates system.

[Jim Shannon]

UKHospitality has said that these businesses represent 10% of UK employment and generate £39 billion of tax for the Exchequer. Does the Minister agree that engaging with the sector would help businesses to survive and to grow?

[Mr Clarke]

The hon. Member is an assiduous attender of Westminster Hall debates, and I am absolutely delighted to say that his persistence will be rewarded. My officials and I will always be glad to engage with the sector.

One of the most important issues that came up in the debate was raised by the hon. Member for St Albans (Daisy Cooper) and my hon. Friends the Members for Devizes (Danny Kruger) and for North West Durham (Mr Holden): the impact of business rates and the associated challenges. Since 1 April 2019, eligible pubs with a rateable value below £51,000 have received a one-third discount on their business rates bills. As my hon. Friend the Member for Totnes (Anthony Mangnall) rightly pointed out in his excellent speech, they will receive even greater support from 1 April as we increase the discount from one third to 50% and introduce a new £1,000-worth of relief for pubs with a rateable value below £100,000. Eligible pubs will be able to claim both reliefs.

[Robert Largan (High Peak) (Con)]

I am pleased about the support the Government are putting into pubs. As hon. Members have mentioned, they are the centre of our communities. I want to highlight a pub in my constituency, The Pride of the Peaks in New Mills, which this Christmas gave 50 hampers and Christmas meals to elderly people to help combat loneliness. Does the Minister agree that pubs are the absolute heart of our communities?

[Mr Clarke]

My hon. Friend’s intervention draws attention to precisely the social value that pubs add. His constituency is a rural one in Derbyshire, and many small pubs currently benefit from 100% rural rate relief, as well as small business rate relief. Those are the kinds of reliefs that we want to encourage in order to ensure that we support businesses in all areas of the country, not just in our big towns and cities.

All pubs will continue to benefit from wider reforms to business rates, most notably the switch from RPI indexation to CPI indexation, which took place in April 2018. That change alone is saving business rate payers over £6 billion over the next five years. More widely, the Government are committed to carrying out a fundamental review of the business rates system, and further details will be announced in due course.

The hon. Member for Barnsley East mentioned the impact of pub closures on the high street, which is something the Government take into account. We have initiated the future high streets fund, which is designed to mitigate the pressures on the high street due to changing retail patterns.

[James Daly (Bury North) (Con)]

One of the main burdens on pubs in my area is the disgraceful expulsion of Bury football club from the Football League. Anything that can be done to assist pubs in my area and the rebirth of Bury football club would be an eminently good thing.

[Mr Clarke]

I was genuinely saddened by the expulsion of Bury. I am a football fan myself, and Middlesbrough came very close to expulsion from the Football League in 1986. I know the damage that it does to a community and the fear that it strikes. We will do everything we can to support pubs in Bury and elsewhere in the March Budget.

As hon. Members will know, recent data from the Official for National Statistics are more encouraging, showing that the number of pubs in the country has increased for the first time in a decade. The number of pubs employing fewer than 10 people also grew, showing that the revival extends beyond the big chains. I appreciate that it is early days, and we are certainly not claiming that we have reversed all the challenges facing the pub trade, but it is good to see data showing that the cumulative impact of the changes we are making is positive. In fact, pub revenue is at its highest level since 2010, and employment is at a high not reached since 2001. Those are fantastic results for the sector and show that the pub remains a vital part of modern Britain.

I now turn to future possibilities. The Conservative manifesto committed the Government to review the structures of our alcohol duties now that we are free to determine our own priorities outside the European Union, and the Chancellor will make announcements about this in due course. The hon. Member for Mitcham and Morden (Siobhain McDonagh) referred to our review of small brewers relief, which is obviously really important—indeed, the hangover has persisted for too long.

[Sarah Atherton (Wrexham) (Con)]

A few years ago, I owned and ran a microbrewery, so I know some of the difficulties facing breweries, including the fledgling Magic Dragon brewery in Wrexham. I urge the Minister to support the cut in beer duty and increase small brewers relief.

[Mr Clarke]

We absolutely want the Welsh dragon to be roaring, so I take my hon. Friend’s point. As a serial entrepreneur, she has a lot of experience in this area. We want to ensure that the operation of small brewers relief helps to drive innovation and growth, and we will shortly make further announcements about that through the Budget process. I want to reassure the hon. Member for Pontypridd (Alex Davies-Jones) that the review is not about whether to abolish small brewers relief; it is about its operation and ensuring that it is working effectively.

My hon. Friend the Member for St Austell and Newquay (Steve Double) referred to the 85 pubs in his constituency, which I look forward to going round when I come down to Cornwall in due course. He referred to the burden of taxation. Obviously, when we are doing these things as part of the Budget process, a cut to alcohol duties represents a significant loss in revenue for the Exchequer. The effect of inflation means that, in real terms, beer duty has been cut every time that we have frozen it over the past several years. Even in nominal terms, beer duty is now lower than it was in 2012, but we will continue to review all taxes.

[Grahame Morris]

Can the Minister clarify his thoughts about the cliff edge after the production of 5,000 hectolitres, to which several hon. Members have referred? Will there be a taper?

[Mr Clarke]

I am a big fan of the Castle Eden brewery. As a fellow north-easterner, I used to pass it regularly. Treasury policy is to avoid precipitate cliff edges that distort behaviour. Clearly, I cannot pre-announce any of the findings of the review. There are a range of factors and representations that need to be borne in mind, but we will issue clarity to the sector in the next few weeks.

[Dave Doogan]

I appreciate what the Minister says about prior notice, but will he take a look at the disproportionate effect of tax on on-sales compared with off-sales? It is unsustainable, notwithstanding the issues of public health, public nuisance and community support.

[Mr Clarke]

I take the hon. Member’s point. Clearly, we want to support drinking in social settings such as the pub. It has clear societal benefits as well as business benefits, and the Treasury takes that into account.

The Treasury keeps all taxes under review and is deeply sensitive to the range of challenges facing the pub sector and brewery sector, which we are keen to support. The support of all hon. Members present is powerful, and it speaks to the fact that this is a decision we need to get right. I know that all hon. Members will keep us under close scrutiny about the decisions we make.

I thank my hon. Friend the Member for Dudley South for securing the debate. What has happened today is a great tribute to his leadership on these issues, and he deserves our thanks.