|Soon he’ll be the only person the country who can afford a pint
It’s nearly budget time again. On 23rd March, the Government will yet again add inflation plus two per cent to the tax on beer. This will bring the total tax rise on beer since the duty escalator was introduced in 2008 to about 45%. The Conservative government has committed to the duty escalator until 2014. Even if they don’t add any other taxes – and we can’t rule that out – what was already the second highest duty rate in Europe will almost double within a decade.
It makes no sense. This is a Treasury measure to raise revenue, not a Department of Health measure to reduce drinking. But word reaches me from one source that an MP very close to David Cameron has admitted that they are now into diminishing returns – each time the duty escalator goes on, the total amount of revenue goes down, because it’s killing volume so much.
I’ve written a lot before now about how the duty escalator is hurting pubs. But the other day I was with a family brewer who is seeing their business shafted by this relentless punishing of the industry. I hadn’t thought it through before, but it goes like this:
Say inflation is 4%. Which it is. So the duty on beer goes up by 4% + 2% = 6%.
But that’s just the duty – inflation is still 4% on top of that. Which means the cost to the brewer of making beer is also going up by 4%.
So if a brewer just wants to stay still, with no increase in profit at all, the duty escalator means the price of their beer must go up by 10%.
The public won’t accept this. The supermarket and the pub trade won’t accept this. So the brewer has to take a hit and see his profit margins sliced. Every year this happens, those slices get thinner and thinner.
To make matters worse, that 4% inflation figure is an average across everything. Some of a mid-size brewer’s biggest costs are transport, energy, packaging and barley – all of which are increasing much more rapidly than the headline rate of inflation. With the above maths in place, there’s absolutely no question of them being able to do anything other than take a hit on these costs.
If this carries on, there soon won’t be a reason for many brewers to stay in business – some could make more money demolishing their breweries and turning the space into car parks, which is what’s happening to Tetley’s.
This equation impacts different sized businesses in different ways. Microbrewers aren’t hit as hard because they get tax relief if they brew below a certain volume. So that’s good news for fans of eclectic, interesting beer. But they still face the same business pressures, and many use this tax relief to sell their beer to pubs cheaper than bigger brewers can, further shrinking the profitability of beer overall.
Multinational brewers are hit hardest, with their profits reduced to an average now of around 1%. They’ll survive as businesses because they’re big enough to invest in developing markets. South America, Asia, Africa and Russia are the countries that interest these guys now. You might say good riddance to them, but they’re not going to abandon Europe and America – they’re just going to relentlessly cut costs to remain competitive – lowering the strength of their beers, using cheaper ingredients and compromised processes, lowering the quality of mainstream beer even further.
And then in the middle you’ve got Greene King, Fullers, Wells & Young’s and Marstons and so on, and the family brewers like Black Sheep, Batemans, Robinsons etc. These brewers are too big to get duty relief, and too small to go anywhere else. They’re being squeezed to death, facing a situation where it’s hard for them to actually make beer at a profit.
If you’re a blinkered fan of micros, you might welcome this. You might say you don’t need boring brown beer and that pubs would be better places if they were only stocked by micros. But I’m afraid you’re wrong. Who do you think installs cellar equipment and services it, guaranteeing the quality of all beers on the bar? Who do you think puts most of the hand pumps on the bar that the micros use? Who do you think offers staff training and quality management services? Who do you think microbrewers phone up when they want to start bottling beers but don’t have a bottling line of their own? Who do you think funds brewing research and laboratory services? There are many wonderful things about microbrewers, but the whole appeal of them is that they are small and nimble. They don’t have huge staff to support so they can take risks. They don’t have huge pub estates so they don’t have to invest in lots of cellar management resource. However much you love them, and I do, they couldn’t survive on their own – as they’d be the first to admit.
This middle tier is getting shafted the hardest by the relentless duty escalator. They are small to medium sized manufacturing businesses, a rarity in Britain these days, and yet they’re the very businesses David Cameron believes will save the economy. As he said last year:
“There’s only one strategy for growth we can have now and that is rolling up our sleeves and doing everything possible to make it easier for businesses to grow, to invest, to take people on. Back small firms. Boost enterprise. Be on the side of everyone in this country who wants to create jobs, and wealth and opportunity.”
He said that. We can’t let him get away with doing the direct opposite to one of the best manufacturing industries we have.
I’ve hated the Tories with venom ever since I grew up during the miner’s strike and watched them turn the apparatus of the state – including the army and secret service – on their own citizens and destroy communities including the one in which I grew up. But this issue is not a party political one. This cursed duty escalator was introduced by a Labour government, and last week Andrew Griffiths, the Tory MP for Burton-on-Trent and current chair of the Parliamentary Beer Group, introduced an Early Day Motion to debate the duty escalator in Parliament.
But we have it in our power to force another debate.
Last week Hobgoblin beer launched a campaign to get 100,000 signatures on an e-petition which would force the issue to be debated in Parliament again. The wording of the petition is as follows:
Every year, the beer tax escalator increases the tax on beer by 2% above the rate of inflation, thus adding considerably more pressure on the British pub, the cornerstone of many of our communities. Removing the beer duty escalator at the next budget will help keep beer more affordable and go a long way to supporting the institution that is – the great British pub. Going to the pub is a core British tradition and so is enjoying great beer. If you want to continue enjoying your fresh pint in your local pub then it’s crucial that you support our campaign to grind the beer duty tax escalator to a halt. If we don’t show our support for the great British pub, we risk losing more pubs and more jobs within our local communities. Support great beer in the great British pub and sign our e-petition now….. British Pubs Need You.
There are 135,000 members of CAMRA. And there are millions of people who are not CAMRA members who are passionate about great pubs and great beer. If we can’t get 100,000 signatures on this petition, we don’t deserve an affordable pint.
Sign it. Now.
And then make your friends sign it.
It’s not as if it take any effort – it’ll take you about a minute, and the link is here. And while it probably won’t do anything this year, it just might have an effect next year. They’re not making any money off this; they’re killing the brewing industry; they’re threatening thousands of jobs in pubs, and they’re making our pints almost unaffordable.
This is politics – Governments can’t be seen to U-turn without good reason, but this is a chance to provide that reason, to allow them to scrap a misguided measure that benefits no one. It makes sense whatever you drink, and whatever your politics.