BEER DUTY - the blog

Beer Duty Escalator

Appropriately enough I'm kicking off this blog with a personal view of the iniquity and resulting inequities of the Beer Duty Escalator.

To nail my colours firmly to the mast – I am against indirect taxation in any form and Beer Duty has seemed one of the most inappropriate indirect taxes (why not Coffee Duty?). However the point of this particular post is to discuss the Beer Duty Escalator, as there is a swell of public resentment to this ridiculous practice at the moment. Most notably there was a debate in House of Commons last month which garnered cross-party support for a review of the Beer Duty Escalator and CAMRA has organised a Mass Lobby of the Houses of Parliament to take place on 12th December 2012.

Having looked at the various articles written about the Beer Duty Escalator available online from journalists and bloggers there seems to be some confusion about what the escalator is and its origins and effect. So, in a nutshell, the situation is this:

  • The Beer Duty Escalator ensures that the duty payable on beer increases by inflation (RPI) plus 2% each year irrespective of any other changes and will continue to do so until 2014-15
  • Alistair Darling introduced the Beer Duty Escalator back in the heady days of 2008 when the Labour government at the time believed there would be no end to the “good times”
  • Disaster struck, the economy took a nose-dive and the Conservative / Lib-Dem coalition became our government in 2010.
  • The Treasury decided to keep the inherited beer duty escalator, so did nothing in 2011 thereby ensuring that duty rose by at least inflation plus 2%
  • The Treasury decided to continue to do nothing in 2012. And, to quote the current Treasury Minister, Sajid Javid, in a letter to my local MP on 18th Novemeber 2012, “The Government values the beer and pub industry, recognising that pubs and brewers make an important contribution to local communities and to the wider economy, in addition to providing local employment and promoting responsible drinking. This is why at Budget 2012 the Government announced no further changes to alcohol duties, beyond the increases pre-announced at Budget 2008 by the previous Government. As part of a fiscally neutral Budget it was not possible to proceed without these inherited measures” (I’ll dissect that statement later on in the blog).

Overall revenue from alcohol duty to the Treasury for the first six months of this tax year has risen by 0.4% above the receipts for the same period last year. However, beer duty revenue has fallen by 1% over the same periods. (source – HM Revenue and Customs https://www.uktradeinfo.com/statistics/pages/taxanddutybulletins.aspx)

The whole idea of a Beer Duty Escalator is wrong, whichever way you look at it. Here is Alistair Darling's justification for the Beer Duty Escalator,

“Mr Deputy Speaker, as incomes have risen, alcohol has become more affordable.

In 1997, the average bottle of wine bought in a supermarket was £4.45 in today's prices. If you go into a supermarket today, the average bottle of wine will cost about £4.

From midnight on Sunday, alcohol duty rates will increase by 6 per cent above the rate of inflation. Beer will rise by 4p a pint, cider by 3p a litre, wine by 14p a bottle and spirits by 55p a bottle.

Alcohol duties will increase by 2 per cent above the rate of inflation in each of the next four years.

Mr Deputy Speaker, it is only because I have taken these decisions on alcohol and on closing tax loopholes that I am able to provide additional support for families and lift more children out of poverty.”  (Source – National Archives 2008 Budget Speech)

You could argue, as the Chancellor did, that greater disposable income justifies these actions. However, even if one believed it back then, why a year later when the country was going into the worst economic crisis in a long time, did the Chancellor decide to increase the duration of the escalator by an additional 2 years bringing it up to 2014-15. The escalator should have been abolished at this point, which brings me back to the current Treasury Minister’s letter. The Minister seems to be trying to tell us one thing whilst presenting us with a completely contradictory justification. If brewers and publicans are great for the economy and help promote responsible drinking, how can it be good for them to shoulder the burden of a 5% increase in duty? It seems to me that the Treasury’s actions are hurting the very people they should be helping if they are serious about rebuilding the economy and bringing alcohol consumption back into the pubs and bars where more responsible drinking can be promoted. The Minister appears to think the Government is doing us a favour by only increasing duty by 5%!

When the coalition government took over, one of its promises in May 2010 was to "review alcohol taxation and pricing to ensure it tackles binge drinking without unfairly penalising responsible drinkers, pubs and important local industries." (Source www.politics.co.uk). Clearly it is failing in this promise.

We have an appointment to discuss this issue with our local MP Rt Hon John Redwood on 12th December 2012 as part of CAMRA’s lobby and I hope he, along with the MP’s being spoken to by other CAMRA members, will take notice and get the Government to see sense over this issue. I’ll report on the day’s events, hopefully with pictures too.