Beer Duty

Jessica Morden Excerpts

Tuesday 7th March 2017 Westminster Hall

[Steve Double]

I wholeheartedly agree. Not only are pubs great places for community cohesion, but they promote responsible drinking in a safe environment, which we should wholeheartedly support.

[Jessica Morden (Newport East) (Lab)]

I thank the hon. Gentleman for giving way again; he is very generous. On responsible drinking, another change has been the move to lower alcohol beer. Is the hon. Gentleman aware that beer with an alcoholic strength of less than 3.5% is subject to 66% more duty than very high-strength cider at 7.5%? Does he agree that we could do more to incentivise the consumption of beers under 3.5%?

[Steve Double]

I agree. We do need to look in particular at the amount of duty on high-strength ciders, because it is disproportionately low and should be increased. The duty on lower strength beers should also be looked at, to encourage their consumption. The industry was challenged by the Government to reduce consumption of alcohol units by 1 billion by 2015. By reformulating and introducing lower alcohol drinks, the industry surpassed that target ahead of schedule, which we should acknowledge and welcome. There is also a fall and clear downward trend in problems relating to under-age drinking in pubs, as licensees—pub landlords—have become more responsible in their approach to that matter.

The problems associated with drinking have less and less to do with pubs and more and more to do with sales of cheap alcohol in supermarkets and other off-licence establishments. It is clear that pubs can and do have a very positive impact on their local communities. Pubs are experiencing a revolution. They have caught the spirit of the times and of this Government: there is a belief and a strategy about getting best value for money and a happier, better outcome for everyone by making best use of what we have and combining our efforts.

Let us take as an example the village of Nanpean in my constituency of St Austell and Newquay. Once a bustling, busy community, almost solely reliant on the booming china clay industry, it has declined in recent years. That and changing shopping habits over the years meant that the Co-op supermarket, four general stores, the butcher’s, the bakery, the fish and chip shop and the post office all had to close. No shop remained—none was viable as a stand-alone unit; none could survive with separate overheads and wage bills. Thanks to innovation, though, the Grenville Arms pub in Nanpean now houses the post office and a shop, and the combination of the three has proved a great success. Each one helps the others to provide key services to the local community of about 2,000 people. The shop sells essentials and locally produced food, and the return of the post office is a real asset to the whole community. The scheme has created new jobs and, with its fresh role at the centre of village life, the pub has become a community meeting point.

All that was achieved by converting a disused room. Of course, there was a cost. That was met by the licensee and an organisation that was originally the inspiration of His Royal Highness the Prince of Wales. Pub is The Hub is a voluntary, not-for-profit organisation helps pubs in rural communities to innovate and thrive. By working with all interested parties—breweries, licensees, councils and local communities—it has had success in bringing together talents and opportunities and meeting needs. It gives guidance to groups seeking to buy their local pub to save it from closure. Besides advice, it gives grants—modest sums of money that make a big difference. Pub is The Hub says that, on average, for every pound in grant provided, an additional £1.60 is forthcoming from other sources.

I am very grateful to the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Brigg and Goole (Andrew Percy), who is responsible for pubs. He continues to champion Pub is The Hub and has this year supported the organisation further with a £50,000 grant. Heineken matched the funding, giving Pub is The Hub further assistance to continue its excellent work across England and Wales and now, I believe, in Scotland.

A revolution is under way in the pub trade, and we need to do a lot more to support it. The simplest and best way to do that is by continuing the process of reversing the crazy, punitive, unfair and mean-spirited hikes in beer duty imposed by the previous Labour Government. The UK’s excise duty rate for beer is much higher than that in most European countries. Despite the three duty cuts by the Conservative Government in recent years, the UK has the third highest duty rate in the European Union. Forty per cent. of all beer duty paid in the EU is paid by the UK, yet we drink only 12% of the beer.

Tax on beer has been a sorry story. From 2008 to 2012, there were steep and relentless tax increases, with a staggering 9.1% hike in March 2008 and an 8% increase in December of the same year. Then came the beer duty escalator, which increased beer duty by 2% above inflation every year. By 2012, beer duty had increased by 42% since 2008. Although other factors played their part, that was a disaster for the industry, with thousands of pubs closing and tens of thousands of job losses. Despite the hike in duty, revenues rose by just 12%. Punitive taxes do not work.

In 2013 the beer duty escalator was, mercifully, dropped. Then came further relief with three 2% cuts and a freeze in 2016. There is revived confidence in the sector. Beer sales have increased, which in turn has led to higher levels of investment in pubs and breweries. Tax cuts work. They boost trade at home and give this major exporting industry extra confidence in its future. In 2016 the value of UK beer exports was a healthy £584 million; it was up 17% on the previous year. So there we have it: a multimillion-pound industry that exports the world over, employs the young in record numbers, attracts visitors to our shores and yet has in its sights ensuring that villagers still have a post office and the lonely have a place to go and be part of the local community.

I and many other hon. Members present want to thank the former Chancellor and the Government. Despite the enormous task of deficit reduction and the difficulties that lay ahead, they chose to reduce beer duty, seeing the beneficial effects that that would ultimately have. Confidence and investment are returning but now we need another hand up—we need a further reduction in beer duty. Seven out of 10 alcoholic drinks sold in pubs are beer, and 82% of those are brewed in the UK. The most effective way of keeping our community pubs open and trade buoyant is by continuing to support them and giving them the confidence they need. I am calling for a revival of the beer duty escalator, but escalators go in both directions. I want an escalator that goes the other way and reduces beer duty significantly.

--- Later in debate ---

[Graham Evans (Weaver Vale) (Con)]

It is a pleasure to serve under your chairmanship, Sir Roger. I pay tribute to the Backbench Business Committee and the Chairman of Ways and Means for enabling the debate and to my hon. Friends the Members for St Austell and Newquay (Steve Double) and for Gower (Byron Davies) for their speeches. Indeed, I pay tribute to Gower Gold, which is an excellent beer, and to Tribute; I look forward to visiting St Austell brewery in my capacity as chairman of the all-party beer group. I pay tribute to my predecessor, my hon. Friend the Member for Burton (Andrew Griffiths), who did an excellent job in slaying the hated beer duty escalator.

I must confess that I have stopped many a barrel of beer going sour in my life. I met Mrs Evans in a pub when I was a wee slip of a lad in my 20s working behind a bar. My mother was a barmaid and she worked in a pub; my brother and sister worked in a pub; my father spent most of his time in the pub. My auntie and uncle had a pub in Chester on Northgate Street—I am sure the hon. Member for City of Chester (Christian Matheson) knows it well—and it is an excellent coaching inn. I used to stay there for my school holidays. It was haunted—I believe it still is—and it used to scare the life out of me, but that does not stop me going in whenever I visit Chester.

The economic value of pubs and beer is important. The industry employs nearly 1 million people, many of them young, and contributes £23 billion to UK plc and £10 billion in tax to the Exchequer. I welcome the steps taken in the last Parliament on the dreaded beer duty escalator, with the three successive cuts in beer duty before the freeze in the 2016 Budget. Although it is easy to think that a penny or two off a pint does not make any difference, it does make a significant difference, as right hon. and hon. Members have said. The turnaround in confidence since 2013 has seen more than £l billion invested by brewers and pub owners each year, with thousands of pubs across the country being able to keep their doors open.

Yet despite those positive steps, the UK still has the third highest duty rate in the EU. The amount paid per pint is almost three times the EU average. UK beer drinkers pay 52p of duty per pint, whereas those in other major brewing nations such as Belgium, Germany and the Czech Republic pay around 5p per pint. Having recently met the Minister, I know she will be aware of the cross-industry initiative to incentivise the production of low-alcohol beers benefiting from the duty reduction on products below 3.5%. Although the industry has taken some steps with low-alcohol beers, the lower the percentage, the less the flavour, so looking at a stronger strength up to 3.5% ABV gives brewers the opportunity to create tastier beers.

[Jessica Morden]

The hon. Gentleman makes a valuable point on lower-strength beers. Does he agree that AB InBev in my constituency, which is developing more of those products, has a laudable aim in trying to have 20% of its products in the lower strength range by 2025? Does he agree that that is a positive development?

[Graham Evans]

That is a good and powerful point, and I wholeheartedly agree with the hon. Lady. I grew up with a Manchester brewery called Boddingtons; we used to call it the “cream of Manchester”, but sadly it cannot be called that because it is brewed in Luton these days. AB InBev is producing it at 3.5%, which puts it in that low ABV category. I am keen to support the promotion of beers such as the ones made by the company in the hon. Lady’s constituency. At 3.5% Boddingtons is still a tasty beer, although it is not quite how I remember it from the ’70s and ’80s.

Few can argue that 3.5% beers should have 66% more duty imposed on them than 7.5% high-strength cider, which is more associated with problem drinking than any other drink. Hon. Members may remember the question that the hon. Member for North Tyneside (Mary Glindon) asked at last week’s Prime Minister’s questions about her constituent who tragically died while drinking high-strength cider.

We are in a difficult economic position and alcohol excise duty makes an important contribution to reducing our inherited deficit, but beer duty clearly remains a concern to publicans, constituents and hon. Members. I therefore urge my hon. Friend the excellent Minister to carefully consider beer duty’s impact on the profitability of pubs, responsible drinking and the future of our local communities. Some 90% of the beer we drink is brewed in the United Kingdom and supports UK jobs and industry. In a post-Brexit Britain, the Great British pint drunk in the Great British pub will be able to compete on a level playing field with our European and international competition. We are lucky that the Minister loves beer and pubs—she is a member of CAMRA—and I urge her to do whatever she can for the Great British brewing industry.