UK: Budget 2006 – Missed chance for British Beer, according to British Beer and Pub Association

Gordon Brown's decision to raise beer duty is a missed opportunity to create a clear, long-term strategy for beer taxes and correct a long-standing tax distortion between beer and wine, the British Beer and Pub Association commented on March 22.

“The Chancellor’s inconsistency is shown in his decision to freeze tax on spirits and cider,” said Mark Hastings, Director of Communications at the British Beer and Pub Association. “It seems curious that the strongest alcoholic drinks, such as spirits and wine, have enjoyed consistently better tax treatment than beer, which has suffered a 22 per cent tax hike since 1997.

"Rather than the annual Budget merry-go-round, what business needs is a clear strategy for beer duty that delivers the stability we need for planning. Instability, uncertainty and pressures on the sector have cost 1000 jobs in the brewing industry over the last 12 months.

“The Government's unequal treatment of the beer and wine taxes is now costing the Treasury an estimated £200 million a year. Stronger beer is taxed more than weaker beer, but stronger wine is taxed the same as weaker wine. Consequently, because wine has increased significantly in strength it is now taxed less relative to beer. All we are looking for is a level playing field and a tax regime that doesn't favour imported wine over British Beer.

"The Chancellor is now facing the law of diminishing returns. The irony is the more he puts up beer taxes, the less he actually gets back because sales fall, creating a black hole in Government revenues. The Chancellor has everything to gain by pursuing policies that minimise distortions and build stability.”

The British Beer and Pub Association is the UK’s leading organisation representing the brewing and pub sector. Its members account for 98% of the beer brewed in the UK and own more than half of Britain’s 60,000 pubs.

The BBPA has commissioned Oxford Economic Forecasting (OEF) to undertake an econometric study into how duty rate changes actually impact on the beer market and government revenue. The main findings are that beer duty increases do not yield projected revenues and that the current duty rate is close to the revenue-maximising level.

BEER FACTS

‾ UK brewers use 40% of the malting barley crop and sustain hop farming in the UK.
‾ The sector supports around 1 million jobs, with more than 630,000 directly employed in brewing, distribution and the UK’s pubs and bars.
‾ The average pub spends £75,000 in its local economy every year.
‾ 28 million pints of beer are sold every day.
‾ The brewing and pub sector contributes over £22 billion to the UK economy – 2% of GDP.

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