Taxation on beer and pubs
A Westminster Hall debate on the ‘Taxation on Beer and Pubs’ has been scheduled for Wednesday 5 February 2020 from 2.30-4 pm. The debate has been initiated by Mike Wood MP.
Background
Excise duties are levied on three major categories of goods – alcoholic drinks, tobacco products and road fuels.[1]
Generally excise duties are charged a flat rate: a certain number of pence per pint, per litre, per packet - though tobacco is subject to an additional ad valorem tax. Duty rates across these categories, and the share of the selling price taken in duty, and tax, as of April 2016, are illustrated below:[2]
Duties on alcoholic drinks are forecast to raise £12.6 billion in 2019/20 – split between beer & cider, £4.1bn; wine duties, £4.6bn, and spirits duties, £3.9bn. In this year fuel duties and tobacco duties are forecast to raise £28.4 billion and £9.1 billion respectively.[3]
Further statistics on the receipts from alcohol duties are published by HM Revenue & Customs.[4]
As flat-rate duties are expressed in cash terms, they must be revalorised (ie, increased in line with inflation) each year in order to maintain their real value.
In its last year in office the Labour Government proposed that the rates of duty on alcoholic drinks would rise each year by 2% in real terms at least until 2014/15. A commitment to raise duty rates by a specified percentage each year is called a duty ‘escalator’.
In its first Budget in June 2010, the Coalition Government launched a review of the taxing and pricing of alcohol “to ensure it tackles binge drinking without unfairly penalising responsible drinkers, pubs and important local industries.”[5] Subsequently two changes were made to the structure of beer duty: an additional tax on high strength beers and a reduced rate of duty on low strength beers.[6] The review did not offer a view on the level of duty rates, though it noted there was little consensus on the right level of tax as “the debate about the absolute level of alcohol duty rates is often polarised.”[7] That said, many commentators attributed the difficulties being faced in the pub trade at this time to the impact of the duty escalator on the price of beer.[8]
In his 2013 Budget the then Chancellor, George Osborne, announced that the rate of beer duty would be cut by 1p and the duty escalator would be removed from this drink category.[9] In the 2014 Budget Mr Osborne announced the duty escalator would be scrapped from other drinks,[10] and in Budgets over the next three years the rate of beer duty was cut by 1p on two occasions, and then frozen.
In his Spring 2017 Budget the then Chancellor, Philip Hammond, announced duty rates for alcohol go up in line with inflation for the coming year.[11] In addition the Government launched a consultation on options for reform to ensure that “duty rates better correspond to alcoholic strength”; specifically, a new duty rate band to target cheap, high strength ‘white’ ciders, and a new lower strength still wine band, to encourage the production and consumption of lower strength wines.[12] Subsequently in his Autumn 2017 Budget the Chancellor confirmed that the Government would introduce a higher duty rate on white ciders, although duty rates on alcohol would be frozen.[13]
In the last Budget in October 2018 the then Chancellor Philip Hammond announced the rates of duty on beer, cider and spirits would be frozen for the coming year. The Chancellor also announced that the duty rate on most wine and higher strength sparkling cider would be increased in line with inflation from 1 February 2019, while the new duty rate band on ‘mid-strength’ still cider and perry (6.9%-7.5% abv) would come in from this date. These measures were forecast to cost £165-£185m a year from 2019/20.[14]
No further changes to alcohol duty rates have been made since then.
Following the postponement of the Budget due to the timing of the General Election, the Chancellor Sajid Javid has announced the next Budget will be on 11 March 2020.[15] In its Election Manifesto the Conservative Party stated that in government it would “review alcohol duty to ensure that our tax system is supporting British drink producers.”[16] No further details have been published to date.
In answer to a recent PQ on the Government’s approach to beer duty, Simon Clarke, the Exchequer Secretary said the following:
- Fiscal changes to alcohol, and tax rates are kept under review, and further announcements to duty changes will be made in due course. To date, since 2010, government has scrapped the beer duty escalator, making the price of a typical pint 14p cheaper than it otherwise would have been. Pubs are also able to benefit from wider reforms including the Pubs Code and reductions to business rates.[17]
[1] Duty rates on alcoholic drinks, tobacco products, and road fuels, are on Gov.uk.
[2] Institute for Fiscal Studies, A Survey of the UK Tax System, November 2016 p19. The tax burden on these different excise goods reflects the fact that both duty and VAT is charged on their sale
[3] OBR, Economic & Fiscal Outlook, CP 50, March 2019 p76 (Table 4.3: current receipts); and, Fiscal Supplementary Tables (Table 2.11)
[4] HMRC, Alcohol Bulletin, Last updated 29 November 2019
[5] Budget 2010, HC 61, June 2010 para 2.96
[6] HC Deb 30 November 2010 c65WS. The new duty rates came into effect from 1 October 2011.
[7] HM Treasury, Review of alcohol taxation, November 2010 para 2.2
[8] For example, Society of Independent Brewers press notice, BPA, SIBA and CAMRA publish ‘The Story of Beer Duty’ setting out damage caused by Beer Duty Escalator, 11 November 2016
[9] HC Deb 20 March 2013 c943
[10] HC Deb 19 March 2014 c791
[12] Budget 2017, HC 1025, March 2017 para 3.33; HMT, Alcohol structures consultation, March 2017
[13] HC Deb 22 November 2018 c1053
[14] HMRC, Alcohol Duty Uprating – tax information & impact note, 29 October 2018. see also, HM Treasury press notice, Treasury backs British brewers with duty freeze, 1 February 2019.
[15] HMT press notice, Chancellor launches Budget process to usher in ‘decade of renewal’, 7 January 2020
[16] Conservative Party, The Conservative and Unionist Party Manifesto 2019, December 2019 p46
1.Further reading
Taxation of Beer and Pubs: Briefing, Society of Independent Brewers, January 2020
Beer: Excise Duties, House of Commons Written Answer, 28 January 2020
Return of the small pub met with cautious welcome, Morning Advertiser, 16 January 2020
Economies of ale: changes in the UK pubs and bars sector, 2001 to 2019, ONS, 16 January 2020
Beer tax freeze or cut 'most direct way' of keeping pubs open, Morning Advertiser, 24 December 2019
Time at the Bar?; They were once bastions of cultural heritage but numbers have dwindled for years, with independents bearing the brunt of the decline. Mick O'Hare looks back at the history of the Great British Pub and finds not all hope is lost, The Independent, 15 December 2019 [Intranet link]
Trade reacts to Conservative election win, Morning Advertiser, 13 December 2019
Alcohol taxation and the pubs trade, House of Commons Library, December 2019
Alcohol tax review proposal ‘good first step’, Morning Advertiser, 8 November 2019
Beer duty: guidance, HMRC, November 2019
'I'm not a person who believes we can keep every pub open', Morning Advertiser, 18 October 2019
Treasury Beer and Public Houses: Taxation, House of Commons Written Question, 3 September 2019 Pub Statistics, House of Commons Library, 31 July 2019 The fight to secure the pub's future, Morning Advertiser, 24 July 2019 Public Houses: Closures, House of Commons Written Question, 3 July 2019 Beer Duty Rates, House of Commons Westminster Hall debate, 24 June 2019 Beer Taxation and Pubs, House of Commons debate, 28 March 2019 Pubs: Business Rates, House of Commons Westminster Hall debate, 1 January 2019 Alcohol Duty Uprating, HMRC, 29 October 2018Alcohol duties, Office for Budget Responsibility, 2018
2.Parliamentary material on pubs (2017-)
3.Websites
British Beer and Pub Association - Beer duty campaign
Society of Independent Brewers