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Liz Saville Roberts (Dwyfor Meirionnydd) (PC)
Diolch yn fawr iawn, Ddirprwy Lefarydd.
I, like the vast majority of Members of this House, am proud to speak up for the excellent independent breweries of my constituency. These include inspiring beers from Cwrw Llŷn of Nefyn, Cader Ales in Dolgellau, and Porthmadog’s Mŵs Piws—which I imagine does not need translating as Purple Moose—as well as Myrddins Brewery and Distillery of Barmouth. Other bragdai bach of the county of Gwynedd include Bragdy Lleu in Penygroes, Snowdonia Brewery of Waunfawr, and Cwrw Ogwen in Bethesda.
This debate is not intended to be a language lesson, but I think Members will know the meaning of the words “cwrw” and “bragdy” when we have finished. The word “bragdy” is very similar to “brewery” because it is the same thing. “Cwrw” is an old Celtic word—Welsh word—meaning beer, but Members may recognise it from other places with words such as “cerveza”. There is a real pedigree to these words. I will not indulge myself any further, because given half a chance I will.
All in all, Wales is home to about 90 independent breweries. However, these small breweries have to hold their own against the global beer companies that dominate the pub handpulls, the bar taps and the supermarket shelves. The small breweries relief scheme was launched in 2002 to allow them to compete and to compensate for lack of market access. It gave independent breweries a fighting chance to get their beers out to a public thirsty to taste something new and different.
Jim Shannon (Strangford) (DUP)
I am very pleased to see how many people have arrived in the Chamber, so there is a common denominator that brings us together. I congratulate the right hon. Lady on bringing this debate forward; she does so well in doing so. With one in eight staff in the pubs and breweries industry already having been made redundant so far, does she agree that any relief scheme must include an extension of business rates holidays, with consequentials for the Northern Ireland Assembly and the other devolved Administrations to do the same, as with other areas? This must be extended to suppliers and to their business premises. These companies can continue to produce but have no market to sell to. There really needs to be something done, and we look to the Minister to give us the response that we are after.
Liz Saville Roberts
It is of course an honour to be intervened upon by the hon. Gentleman. I really appreciate his intervention, and I will touch on that matter further. In the time in which we find ourselves, our breweries have been affected as much as the pubs that have been closed, and the pubs have received considerably more support than the breweries in the difficult recent months.
Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)
I am grateful to my right hon. Friend for securing this debate and bringing this issue before the House. She mentioned the tax relief that helped small brewers to compete against the large companies. Does she suspect that these large companies have been bending the ears of the Treasury?
Liz Saville Roberts
I am sure that the small handful of global beer companies have a very effective lobbying system. It is of course our job to lobby here as well on behalf of our constituencies and small breweries.
Mrs Maria Miller (Basingstoke) (Con)
I commend the right hon. Lady for calling this debate today. I am just reflecting on what she is about to talk about, which is the uncertain business environment that our small breweries face and the fact that the consultation that led to the Government recommending this change in rate relief was carried out at a very different time. Does she agree that perhaps this is time to pause so that breweries such as Andwell Brewery in my constituency can get the certainty that they need as we move forward?
Liz Saville Roberts
I entirely agree with the right hon. Member. At this time now, even if the changes were to be introduced in January 2022, we are, none the less, presenting the breweries with uncertainty that they desperately do not need. The timing of this is really significant and now is not the time to be mentioning these changes, let alone to be moving ahead with them.
I wish to move ahead, although I truly welcome all the contributions from the many Members here, because I am sure that we are all doing the best for the brewers in our constituencies.
Alison Thewliss (Glasgow Central) (SNP)
Before the right hon. Lady moves on, I wanted to mention Niall Kennedy of the excellent Wee Beer Shop in Pollokshaws Road in my constituency. As a small independent business, it sells lots of the beers that come from these breweries. Does she agree that the Government should look at this more widely, because those small shops have also struggled through coronavirus, and they rely on the beers that come from these companies, too.
Liz Saville Roberts
The fortune of these shops—I have a similar one, Stori, in Bala in my constituency—is dependent on the success and the flourishing of the small breweries.
I will, if I am allowed, go back in time to 2002. My understanding is that the Government of the time decided to introduce reduced rates of duty for three reasons, and I think we should pay attention to these. The first was the poor profitability of small breweries relative to that of larger breweries, which enjoyed better economies of scale of production.
Jane Hunt (Loughborough) (Con)
Charnwood Brewery in Loughborough is successful as a local brewery, with a local supply chain and a local distribution area. These small independent breweries serve their customers well. They do not want to merge and they do not want to grow. They are happy as they are. Does the right hon. Lady agree that small breweries relief enables businesses to remain viable and to remain small?
Liz Saville Roberts
It does indeed. One thing that characterises our small independent brewers is their stake in their local community and that is something that is precious to all of us.
Let me move ahead. The second of the three points from 2002 that the small breweries relief was to address was the difficulties faced by small breweries in bringing their goods to market and in competing with larger breweries, which would offer bigger discounts to wholesalers, and I believe that that very much still holds true. The third point is the importance of maintaining diversity within the beer industry and preserving choice for the consumer. We should respect these underpinning principles today as well. Despite the boom in craft brewing over the past decade—
Darren Henry (Broxtowe) (Con)
May I congratulate the right hon. Lady on securing this important debate? After hearing from many of my constituents in Broxtowe in this trade, not least Ginny and Rob Witt who own the microbrewery Totally Brewed, I, too, am concerned that small breweries are falling through the cracks with little support, despite their vital role in the hospitality business. Does she share my concern that we need to support and offer clear guidance to be laid out for small breweries and hospitality supply chain businesses?
Liz Saville Roberts
I entirely agree with the hon. Gentleman. Of course we can all agree that there is support for the hospitality industry, but the small breweries industry is an integral part of that. If we see that collapsing, it somehow begs the question that there is a discrepancy there.
Let me move ahead now. Despite the boom in craft brewing over the past decade, it remains the fact that nearly 90% of beer consumed in this country is still produced by a handful of global companies, and, despite their numbers, small breweries still only represent about 7% of all the beer sold in the United Kingdom.
The small breweries relief scheme allows independent brewers to pay a proportionate amount of duty to the Treasury, just like income tax. Its success is self-evident with at least one brewery in every constituency. The numbers who are here tonight pay credit to that.
Jonathan Gullis (Stoke-on-Trent North) (Con)
I would like to add my name to the long list of others who have thanked the right hon. Lady for securing this very important debate. I am proud to represent Titanic Brewery in the constituency of Stoke-on-Trent North, Kidsgrove and Talke, which benefited in 2002 from the small breweries rate relief. Those from the brewery said to me in advance of this debate that they are really shocked. Even though now, with the amount they are able to brew, they would not benefit from the scheme, they find it “perverse”—that is the word they have used—that we would see such market interference and reduced competition in the marketplace. Does she therefore agree with me that this, as she has already stated, is completely the wrong thing to do at the present time?
Liz Saville Roberts
I agree with him entirely, and the hon. Gentleman is reading my mind, because that is exactly the subject I would like to move on to now. As I have said, many of us have at least one brewery—many of us, far more than that—in our constituency.
Duncan Baker (North Norfolk) (Con)
The right hon. Member is most generous in giving way, and I thank her so much for bringing such an important debate here this evening. I recently visited the fantastic small brewery of Moon Gazer ales in a small village called Hindringham in my North Norfolk constituency. The right hon. Lady is coming on to the small breweries relief in a minute, but this brewery is now eight years old. It was set up by a husband and wife team—David and Rachel Holliday—and it is just one of 150 that would be disproportionately affected by the Government’s cutting of the small breweries relief. That impact alone would cost them a potential extra £100,000, with no ability to expand because of the rural market they are in. Does she agree with me that the Government must be sensible and look carefully at the 150 brewers that will be significantly caught by these changes?
Liz Saville Roberts
While we have a success story that we can all celebrate, we have to recognise how vulnerable it is at present. Again, in the interventions during this debate, we are hearing about the life’s work and the dream for many people in a constituency. They have this wonderful business, which is fully functional, and now it is faced with a threat. We will be hearing, I am sure, about the 150 small breweries that specifically fall into the remit of the change for the small breweries relief, but there is actually a wider concern about another aspect of the announcement that the Government made back in July, which I will touch on later, and that is the change from a percentage to a cash basis.
Craig Mackinlay (South Thanet) (Con)
This debate is fantastic, and we all have a story to tell of great breweries in our constituencies, many of which are fairly new because of this relief, without which they would never have happened. I think we would all salute the great work of CAMRA—the Campaign for Real Ale—and other organisations that have promoted this huge variety of very local, very flavoursome, fantastic ales that we would not otherwise have had. I remember—people have to be of a certain age to remember—the real scare stories of the whole market being dominated by the big boys. We should be encouraging these craft local companies that are wedded to our communities, and I am thinking particularly of the Ramsgate Brewery in my constituency, headed up by a fantastic head brewer, Eddie Gadd.
Liz Saville Roberts
We now have a vast choice, with a fantastic variety of beer on offer. We have the greatest number of breweries in the United Kingdom since the 1930s, and I think that is something to celebrate. The SBR has broken the monopoly of production, if not yet that of consumption. It has unleashed a pioneering spirit of independent brewery enterprise, which is something to which we can all raise our glasses, even the Tory party.
Kevin Hollinrake (Thirsk and Malton) (Con)
I am very grateful to the right hon. Member for bringing forward this very important debate. I have met Bad Seed Brewery and Brass Castle Brewery from Malton to discuss these essential changes. Does she agree that we should always look for incentives for small and medium-sized enterprises to establish in whatever sector, but not least in the brewing sector? We should also try to avoid any disincentive for businesses to grow, as can sometimes happen with artificial thresholds. I know this is part of the consultation, and perhaps it is something we should consider in more detail.
Liz Saville Roberts
Whatever the incentive, it is evident since 2002 there has been an incentive to increase the number of breweries, and we need to be alert to what could be disincentives, and to uncertainty and how that can operate as a disincentive.
Elliot Colburn (Carshalton and Wallington) (Con)
The right hon. Lady is being incredibly generous in giving way, and I would like to add my thanks to her for calling this debate this evening. I have met small breweries such as Anspach & Hobday and Signal Brewery in my constituency of Carshalton and Wallington. Both breweries have expressed many similar concerns to those mentioned by the right hon. Lady. On the subject of incentives, does she agree that now is the wrong time to be disincentivising business growth in the sector, especially in the context of the pandemic—now is not the time to be doing that?
Liz Saville Roberts
The hon. Gentleman has exactly summarised where I want to go. Progress is under threat, and now is not the time for this. The Government have recently made these proposals, and, forgive me, but it seems to me that the Treasury is intent on cutting the support to small breweries, which produce only a fraction of what the global breweries put out, and making sure that they will therefore have to pay more duty to the Chancellor.
In July, the Minister announced that the 50% threshold for the small breweries relief scheme would be reduced from 5,000 hectolitres to 2,100 hectolitres. For those not fluent in brewers’ terms, this means more than halving the support for small breweries from about 900,000 pints to about 370,000 pints. At least 150 small breweries will see a considerable tax rise as a direct result. To make matters worse, Ministers have failed to supply details; all small breweries have to go on is a couple of lines in written statement from the Financial Secretary to the Treasury published on 21 July. The Minister has provided no detail of the changes, no detailed response to the consultation, no impact assessment and no comfort to the small breweries, which have been given no idea by this Government how much extra they will have to pay.
My Plaid Cymru colleagues and I have written several times to the Chancellor about this regressive policy, but have yet to receive a detailed evidence-based answer. Perhaps the Minister can confirm today when we will get the technical consultation mentioned in the written statement in July, which was due in the autumn. I think it is safe to say that the hops and barley are long since safely gathered in, but the consultation is nowhere to be seen.
These are small businesses employing, say, half a dozen people, operating in an extremely competitive industry characterised by tight profit margins. They are battling the impact of covid-19, having seen sales sink by 80% during lockdown. They did not receive access to the hospitality grants, nor have they benefited from business rates holidays, as we heard. They are facing difficult decisions on whether to bring staff back from furlough, whether to invest in their businesses, or even whether to continue. Many of us have heard sad stories of breweries that are no longer in business. The Government’s decision not to include small breweries in grants and the business rates holiday means that already two small breweries a week are closing for good. If the changes to small breweries relief go ahead, many others are likely to follow.
The Minister also claims that the changes will not affect the vast majority of small breweries, but the move to a cash basis also announced in July’s written statement will mean that the support offered to all small businesses is under threat and looks set to be eroded over time. Instead of being assessed as a percentage, the Chancellor will get to decide the cash rate at each Budget, and there is no guarantee that the rate will improve, or even keep up with inflation. Currently, the top rate of beer duty is £19.08 per hectolitre; the small breweries relief is at 50% and therefore stands at £9.54 per hectolitre. The proposed change creates immense uncertainty. If the purpose of July’s announcement was to support growth and boost productivity, breweries must surely be able to plan over the long term. That is not what is proposed in the written statement.
There is an alternative to the Treasury’s proposals which will guarantee a future for our small breweries. The Society of Independent Brewers, which represents 80% of professional brewers, has proposed changes that maintain the 50% rate at 5,000 hectolitres and allow the scheme to be reformed to address the cliff edge, which was a cause of concern, and barriers to growth in the current scheme without any brewer being worse off. I urge the Minister to study those proposals carefully as a way forward, so that we do not lose our small brewers, which, let us remember, are responsible for 6,000 jobs across all the nations of the United Kingdom, and which contribute £270 million a year to gross domestic product, and who knows what to gross national happiness?
The Minister now has the chance to bolster our small breweries, to guarantee their future and to ensure that they can continue to serve their communities, create jobs and support the economy. I urge her to alter course and not to make changes to relief for any brewers below 5,000 hectolitres and not to introduce the cash basis, and by doing so to give hope to all our small breweries, in my constituency and beyond. In her reply to the debate, will she respond to the following questions? When will the technical consultation be published? How will she take the impact of covid-19 on the industry into account when considering changes? Given the number of people who have contributed to this debate, will she please consider meeting a deputation of MPs to discuss the issue in greater detail?
We are coming—forgive me—to closing time. Those of us who have partaken of Largo, Cwrw Llŷn’s legendary pilsner, named after a fisherman who lost his heart to a mermaid, know this to be a time when, pwyll biau hi, sense and restraint must prevail. Otherwise, later we may sorely regret the error of our ways when, like Largo and his mermaid, we realise what we have cast away.
Grahame Morris (Easington) (Lab)
I congratulate and thank the right hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts). With a name like “Morris”, I should really be able to speak Welsh, and I am fifth generation Welsh. We are discussing a really important subject and I am pleased to have the opportunity to make a few brief points in this debate which, unexpectedly, is a little longer than originally planned.
It is tempting to lapse into puns and humour, but this is a serious business. As you know, Mr Deputy Speaker, I love beer, me—I love Indian pale ale, I love the ruby reds, I love a craft lager. I love all beers. Tonight we are talking not about the mass production of the big six brewers; we are talking about small breweries of which there are 90 in Wales, and 2,500 across the country, including Castle Eden Brewery—I must mention my one brewery, or they would never forgive me, and it produces what is probably among the finest beer in the world.
Grahame Morris
Castle Eden ale. I highly recommend it.
As the right hon. Lady indicated, we are talking about the important issue of whether the Government, intentionally or unintentionally, are introducing anti-competitive practices. It has been suggested, perhaps not without foundation, that the large breweries have the ear of Ministers. Let us be in no doubt: the abolition of small breweries relief will be the death knell for many small brewers across the country, including in Wales and the whole United Kingdom.
As has rightly been pointed out, the introduction of small breweries relief led to a renaissance in British brewing. Those reforms should go towards strengthening the small, independent and craft brewers that we are so proud of, and that tourists and indigenous people on these islands love in equal measure. I hope that the Government will not make any changes to breweries that produce below 5,000 hectolitres, as to do so would threaten our craft beer industry, and local jobs in constituencies such as mine. Even worse, consumers such as me would ultimately lose out, with less variety and choice of beer. We should celebrate the diversity of brewers and different beers and tastes, and we should not do anything that will jeopardise that.
I worry that the decision to convert small breweries relief from a percentage to a cash basis threatens the long-term value of that rate, if it does not keep pace with the main rate. We get lost in numbers. What does 5,000 hectolitres mean? That is 3,000 old brewers barrels. My brewery, Castle Eden Brewery, produces just over 3,000 barrels, or 5,000 hectolitres. Compare that not with one of the big six or big four that produce millions of hectolitres, but with Camerons Brewery in Hartlepool, which is a producer of fine beer and produces 1 million hectolitres. It is impossible for a small brewery to compete with the economies of scale that a large brewery can bring to bear. Unless careful thought is given to it, the taper above 5,000 hectolitres will effectively bring an end to this prized and valued sector.
I promised to be brief, so I have just a couple of questions for the Minister, having listened to several debates and questions on the issue. Does she accept that cutting the threshold will lead to small breweries paying more duty? Does she understand that that will result in some small breweries closing? We must remember that the premise of the relief was that it would be revenue-neutral. How will she judge the success of the policy: by the number of UK small breweries, by the number of people employed by the industry, or by the reduction in market share of the big four that dominate? I would very much like to know what the Treasury’s objections are and how it will measure success.
The Exchequer Secretary to the Treasury (Kemi Badenoch)
I congratulate the right hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts) on securing the debate, and thank right hon. and hon. Members for their contributions to it.
In recent years, the UK has been home to something of a craft beer renaissance. Time-honoured brewing methods that were slowly starting to disappear have gained a new lease of life. Customers have benefited from an exciting and far wider choice of beers and ales, while the number of small brewers has increased tenfold over the past three decades. The craft brewing trend is an international phenomenon that predates small brewers relief, but the relief has undoubtedly helped to encourage new breweries to enter the market and compete against larger and more established businesses.
The layperson may therefore wonder: if the relief is seemingly so effective, why are the Government reviewing it? The answer is simple: because the industry asked us to. As hon. Members may be aware, small breweries relief is not uniformly popular in the brewing sector. In fact, the beer writer Martyn Cornell once suggested that a surefire way to start a fight was to mention the subject at a brewers convention.
Liz Saville Roberts
It was to be anticipated that the Minister would mention the industry’s requests, but what the industry requested was that the cliff edge be addressed. When addressing the cliff edge, there is no reason to reduce the 50% rate below 5,000 hectolitres. That does not affect the cliff edge; it just moves it.
Kemi Badenoch
I disagree. It does affect the cliff edge: a taper smooths it out and stops the point at which growth is actively discouraged.
Two main charges are levied at small brewers relief by its critics: that it unfairly distorts competition and that it fails to match the true nature of industry production costs. It is argued that that penalises the best producers, inhibits growth and disrupts normal business activity. I should point out that those criticisms were made not by the multinationals that dominate the global market, but by local and mid-sized regional brewers. As hon. Members might imagine, no two brewers will agree on absolutely everything, but a lack of consensus should not be a barrier to action where it is required.
The Treasury therefore announced in 2018 that it would review the relief to consider the views of the whole market on the topic. Since then, we have considered a range of evidence, from direct submissions from individual breweries to independent academic research. We will publish more information about the evidence that we have received as part of our upcoming consultation on small brewers relief later this year.
Mrs Miller
The evidence that the Government need includes a baseline of production so that they know how many breweries are producing however much beer over a period of time and can then calculate the appropriate rate of tax relief so that it is cost-neutral. How will the Minister do that when over the past six months there has been such a distortion in the market with regard to production rates? Many of the breweries that would previously have been well above the 5,000 hectolitre barrier will probably now be well within it. Will that not make her life very difficult? Would it not be better to delay things until the industry has settled down again?
Kemi Badenoch
My right hon. Friend asks a really good question. The truth is that there is never a good time according to the industry; there is never a perfect time. When people have a dispute, it depends on which side of the argument one listens to. This will be addressed in the technical consultation. We must remember that this measure is not coming in until 2022, so there will be time. We will publish more information about the evidence that we have received as part of our upcoming consultation, which will be towards the end of the year.
Ben Lake
I appreciate the Minister’s point that there is never a good time to try to get consensus from the industry, but surely we can agree that the past nine months has seen quite exceptional circumstances that have had an impact on the entire industry, whether that is small breweries or the bigger ones, particularly given the uncertainty with the on-trade. Breweries such as Mantle Brewery and Penlon Brewery in my constituency of Ceredigion are also so dependent on tourism. Surely introducing these changes at a time of such uncertainty is unwise and should be reconsidered.
Kemi Badenoch
That point would be valid if it were proved that every single business was going to be negatively affected. If hon. Members let me get to the point, they will see that that is not actually the case. My officials could probably give me enough material to talk about this issue alone for an hour. However, I will summarise and make the key points. All the evidence points to the fact that small breweries relief does not match industry production costs. Economies of scale in brewing are rather gradual and do not match the all-or-nothing approach adopted by the current scheme. In fact, some of the evidence suggests that there is a growth trap, whereby brewers in a certain range enjoy lower production costs than brewers many times their size as a result of small breweries relief. This is not healthy for any industry.
The amount spent on the scheme has grown rapidly, from £15 million in 2002 to over £65 million in 2019, despite the fact that beer volumes were down over 30% during this period. We owe it to taxpayers to make sure that these growing sums are being used in the most effective way.
Grahame Morris
I am sure that the Minister is responding in earnest based on her officials’ advice, but as someone who has taken a bit of time to meet small breweries and their organisations, I know that it is impossible for a small brewery to compete with the larger breweries. I am not just talking about the big four or the big six, but even the larger regional breweries. The economies of scale mean that it is impossible. Without small breweries relief, we will lose the diversity and choice that we all value so much, including Members across the Chamber on the Government Benches. Will she please look again at that advice, because the information that we are getting shows that this change is going to have a devastating effect on small brewers?
Kemi Badenoch
I am a constituency MP as well as a Minister. This is not just officials’ advice. I spoke to many industry stakeholders and pubs on the day of the announcement, and there are breweries in all Members’ constituencies that will benefit from this change. If we had done the opposite, those breweries would have written to Members and I would be standing here making exactly the same sorts of protestations about why we had made a different decision. There are no easy answers here. There is no solution that will make everyone happy. We all have constituents on each side of the fence. If the hon. Gentleman would like, we can give him the details of breweries in his constituency that have benefited from this decision.
Let me return to the announcement in July of the review’s first outcomes. First, we said that we would change the scheme’s taper so that relief was withdrawn more gradually over a wider range of production. In particular, the taper would start at 2,100 hectolitres— just over 1,000 pints a day—to match more closely the empirical evidence relating to production costs. Secondly, we said would look at whether there should be transitional relief for breweries that merge. Thirdly, we said that we would convert the relief to a cash basis, as Members have mentioned, so that it would index with the nature of industry costs, rather than changes to the headline beer duty rate. I will return to the cash business point shortly.
I am aware that the July announcement has been the source of a great deal of discussion in the industry, the trade press and all our inboxes. I reassure hon. Members that the Treasury is not abolishing the relief. Some will know that, but not everyone realises that the reverse is true. We will continue to use small breweries relief to channel tens of millions of pounds into craft brewing.
Not every criticism of our policy has been accurate—indeed, there has been a degree of hyperbole from brewers who perceive that they will be commercially disadvantaged. Let us address some of the criticisms of the policy head on. First, there is the idea that no brewers support these reforms. On the contrary, as I mentioned, many, such as Lancaster Brewery, Hogs Back and Theakston, have welcomed them. Those are not gigantic multinationals but local and regional champions of craft beer and real ale.
Secondly, there is the allegation that the change is being made at the behest of a small number of brewers to drive competitors out of business. Nothing could be further from the truth. In fact, during our review we engaged with over 300 brewers of many different sizes to understand the impact on every aspect of the industry. We have no intention of favouring one group over another. It is quite sad that the hon. Member for Easington (Grahame Morris) and others have insinuated that. We have no intention of doing that.
Grahame Morris
It is important that we realise the distinction. Some of the breweries the Minister quoted are relatively large regional breweries. I am a great admirer of Theakston—its product is fantastic—but it may produce a million hectolitres. I do not know what the figure it is—perhaps she does—but Camerons Brewery in Hartlepool, which she has probably never heard of, produces a million hectolitres. I am not surprised that she is hearing that message from the big six and the large regional brewers, but that is at odds with the interests of the 2,500 small brewers we are arguing for today.
Kemi Badenoch
I am afraid that the hon. Gentleman is still incorrect. I will come to the percentage of brewers that are actually affected in a moment, but nothing could be further from the truth than to say this is being done to help large brewers. It is not.
Thirdly, there is the criticism that the change will lead to the collapse of the small brewing sector. Simple arithmetic shows that critique does not stack up. In 2019, about 80% of brewers produced less than 2,100 hectolitres, so 80% of brewers are not affected. Meanwhile, less than 8% of brewers produce between 2,100 and 5,000 hecto- litres—the 1,000 pints a day point going forward. Modest tax changes affecting a narrow slice of brewers will not spell the end of craft beer.
Hon. Members have made the point about taxing small brewers in the middle of a pandemic. We realise that, but this long-standing issue in the industry well predates covid-19. As I said, the first review was announced in 2018, and brewers were engaged on the topic well before that. The debate has to be settled. We have been clear that reforms will not come into effect until 2022 at the earliest, to give brewers time to adapt.
Andrew Jones (Harrogate and Knaresborough) (Con)
I recognise the strength of emotions that we see across the House and are all showing. The Minister is right to say that this policy has been a source of disagreement within the industry, and it has been going on for years. I had a bit of a role in it, having started some of the work that led to the review. I tried to get the industry to come together to find a solution, but that was not possible. We surely need to create a structure that allows smaller and new businesses to be created while also incentivising growth.
One of the most depressing conversations I had in my research on the subject was when talking to a brewer who said he had stopped exporting because, if he continued to do so, that would have taken him over the cliff edge. That is bad for business and bad for UK plc. There is a problem to solve, and the Minister is doing the right thing in trying to bring it to a conclusion and to incentivise growth in this sector, which we all clearly love very much.
Kemi Badenoch
I thank my hon. Friend for those excellent points. Having done this job himself, he knows the issues at stake.
I will continue to address points raised by hon. Members. I said that 80% of the total brewing population is not affected, because those producing 2,100 hectolitres—1,000 pints a day—will not face any tax changes at all. It was also proposed that we should smooth the taper above 5,000 hectolitres. That would give the large brewers a big advantage at a significant cost to the Exchequer. We do not think we should give small breweries relief to brewers producing tens of millions of pints.
Kemi Badenoch
I will no longer give way to the hon. Gentleman. I have answered the question of who this should benefit.
On why we are converting to a cash basis, brewers provided feedback that the relief was not tracking their true production costs and was increasing in value in real terms. We also know that the amount spent on the scheme has increased significantly. The right hon. Member for Dwyfor Meirionnydd spoke about 2002. It was £15 million then; it was £65 million in 2019, even while brewing volumes have declined. A cash basis conversion allows us to review annually the value of the relief, meaning that we can track it in line with changes to industry costs.
Liz Saville Roberts
I ask the Minister to consider the point that the cash basis is at the heart of the uncertainty that breweries are telling us about. They do not know whether it is worth investing in the here and now. I know that Cwrw Llŷn, for example, is prepared to invest, but the shift from a percentage basis to a cash basis means that breweries have no certainty from year to year what sort of duty they will be paying.
Kemi Badenoch
I take the point the right hon. Lady makes, but the Treasury is not doing this to squeeze small brewers. We are not making any money from it either. The reason we are doing it is that industry has asked us to do it, and not the multinationals or large brewers. There is a dispute that we are settling, and we believe that the cash basis will improve things.
The right hon. Lady is right to mention uncertainty. I think the answer is for us to move at pace to give business certainty, not to postpone the uncertainty about what we will do on this relief even further into the future.
A point was made about mergers. As hon. Members are aware, when two brewers merge, their entitlement to small breweries relief changes. Many brewers complain that this distorts business activity, as mergers become unviable. My predecessor in this role, my hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones), has given examples of businesses that have not been able to grow. We need to look at the industry in the round, not just at those who fit a particular demographic.
I reiterate that we listened to many small breweries. We listened to a wide range of breweries and reviewed copious evidence related to SBR. I cannot tell Members how many pages and pages we went through in the consultation that just happened, and there is even more consultation coming. We met the Society of Independent Brewers, the Small Brewers Duty Reform Coalition and the British Beer and Pub Association about this issue, and officials and I continue to meet all those stakeholders. The Treasury ran a survey in 2019 that received 335 responses, as I mentioned. I am afraid that the industry is simply divided on this issue. The idea that all small brewers have the same perception of the relief is misplaced.
My hon. Friend the Member for Broxtowe (Darren Henry) spoke about small brewers falling through the cracks, as did my right hon. Friend the Member for Basingstoke (Mrs Miller) and others. We do recognise that. Small brewers are able to benefit from our unprecedented coronavirus response, which includes the job retention scheme, VAT deferral and bounce back loans, as hon. Members will have heard many times before. We have also acted to allow brewers whose beer was spoiled due to pub closures to reclaim excise duty more easily. However, brewers have been able to sell alcohol throughout this period, and thanks to schemes such as CAMRA’s Pulling Together campaign, more than 800 breweries have moved to offer online sales for collection or delivery for the first time. The Treasury is keeping the support it offers to businesses under review as the pandemic progresses.
Liz Saville Roberts
I think the Minister will agree that the feeling among Members of Parliament is very strong and is cross-party. We would all greatly appreciate the opportunity to discuss this matter in a different register to that which can be used in the Chamber. Will she consent to that?
Kemi Badenoch
I am very happy to offer a meeting to a number of Members across the House. This should not be a contentious issue. We may have been written to by certain constituents, but we represent many more people than those who have complained about this issue. If we do offer a meeting, I hope Members will talk to all the breweries, not just the ones who have complained, to get a holistic view of what is going on in their constituencies.
The hon. Member for Strangford (Jim Shannon) talked about pub business rates. We have offered lots of business rate relief. We know that breweries have not been included, but that is partly because they have been able to open. It is an issue that we continue to review.
What are the next steps? The Treasury is moving forward with a further consultation this autumn to examine the more detailed aspects of reform. I invite all hon. Members to encourage any breweries in their constituencies to engage with the process. This is necessary because taper reform is very complicated. It seems like there are as many suggestions for new tapers as there are brewers in the country. That is what we need to focus on. It would not be prudent for the Government to simply pluck one of these solutions out of the air without giving brewers an opportunity to comment on its implications. I should stress that the Treasury has not made any final decisions about the overall shape of reform.
Jonathan Edwards
In terms of the next steps forward, which Finance Bill does the Minister foresee the Treasury bringing the new proposals forward in—next year’s or the one in 2022?
Kemi Badenoch
We have said that these reforms will come in in 2022. We will announce the exact changes at the earliest opportunity post the consultation.
To sum up, the craft brewing boom of the last 30 years is a welcome development, and the Treasury would like to do its bit to help it continue, but we also have a duty to ensure that tax reliefs are not unduly distortive and are an effective use of resources. However, hon. Members should rest assured that we will not stop examining the issues raised by brewers and by hon. Members today, and we will continue working to resolve them. The Government are determined to ensure that the British brewing renaissance continues, and I thank all right hon. and hon. Members for their contributions.
Mr Deputy Speaker (Mr Nigel Evans)
Before I put the Question, all I would say is that covid has had a lot of victims. If it were not for covid, I know exactly where most of us would be heading now. I hope that the good news that came from Pfizer today will give us cause for a lot of celebrations when the pubs reopen throughout the whole of the United Kingdom.
Question put and agreed to.