Andrew Griffiths is MP for Burton and Uttoxeter, and is Chairman of the All-Party Parliamentary Beer Group.
Next week, the Chancellor can perform a hat-trick even more popular than Geoff Hurst’s 1966 World Cup winning hat-trick against Germany – by cutting beer duty for an historic third successive time.
There is a clear economic logic to cutting the tax on beer. Britain’s beer and pub sector is vital to the economy of our country; nearly a million people across the UK rely on the industry for work. In my constituency of Burton alone, there are over 5,000 people employed in brewing and pubs. Some 46 per cent of those employed in the industry are younger people aged 16 to 24. Supporting the pub trade and the jobs that it provides is a fantastic way to further reduce youth unemployment and young people not in education, employment or training.
The beer industry is also a true success story for home-grown British manufacturing: 82 per cent of all beer consumed in this country is made in the UK, and there has been a huge increase in the number of micro breweries that have sprung up all over the country. According to the Campaign for Real Ale (CAMRA), there are now 1,285 in operation, with 170 opening in the last year alone. Nationally, the sector adds over £21 billion to the UK economy (£3 billion of this is from businesses in the West Midlands region alone), and it currently contributes over £10 billion in taxation to the Treasury.
The last Labour Government introduced the hated beer duty escalator in 2008, and this measures increased the duty on beer by two per cent above inflation every year. Under the escalator beer duty rose by a staggering 42 per cent between 2008 and 2013. It hit beer sales, made pints less affordable and closed pubs.
When the escalator was introduced, beer consumption in the UK fell by 16 per cent overall and by nearly a quarter in our pubs; almost 7,000 pubs called time for good and more than 58,000 beer-dependent jobs were lost. Beer duty revenues increased but only by 12 per cent. It was a very expensive Labour failure.
George Osborne’s decision to scrap the escalator and cut beer duty by 1p per pint at the 2013 Budget was cheered by Britain’s 32 million beer drinkers. Beer price increases in pubs are at their lowest since the 1980s and, just last month, figures were published showing that beer sales for 2014 were back in growth for the first time in ten years. CAMRA has estimated that 1,047 pubs have been saved as a result of this Conservative action, with 750 million more pints consumed and 26,000 jobs secured.
The tax on a pint is now 8 pence lower than under Labour’s hated duty escalator and, in CAMRA’s estimation, a pint is 16 pence cheaper than it would have been under the old regime.
The Chancellor’s tax-cutting actions have boosted confidence in our brewing and pub businesses, which are likely to invest over £1.1 billion in the next 12 months. I have seen this in my own constituency where both Marston’s and Molson Coors have heavily invested in their sites in Burton in the last couple of years.
And Osborne’s actions have also increased beer sales which has boosted the Treasury’s total tax take from beer. In the twelve months to November 2014, revenue from beer duty increased by £39 million: it is £15 million higher than it was in March 2014. And if you add the additional VAT and jobs-related taxes that have come with this, we can see that cutting beer duty has been positive news for the Treasury.
When we made the case to the Chancellor before the Budget in 2013, we said that if you cut beer duty, sales would go up and the Treasury’s tax take would increase. And this is exactly what has happened. Lower taxes have meant a better return for the Treasury, and you can’t get more Conservative than that. And the last time we saw such a strong performance in the industry was in 1996, under the previous Conservative Government. No coincidence there.
We have come a long way since the duty escalator was scrapped, but we can still go much further. Hard-pressed UK beer drinkers still pay 40 per cent of all Europe’s beer duty despite drinking only 13 per cent of the beer consumed in Europe. And, crucially, seven in ten alcoholic drinks sold in pubs are beer – and that is why action on beer duty remains the most effective way to support community pubs.
The brewing industry’s recovery is real but remains fragile. Pubs continue to close, albeit at a much slower rate thanks to this Government’s range of pro-pub policies. Britain’s growing ranks of brewers have much more growth potential – which would mean more investment and more jobs to underpin our long-term economic plan.
A further cut in beer duty would not only be a great boost to an industry that is so important to our national economy, but also to Conservative prospects in May. So I hope that at the Budget on Wednesday we will see the Chancellor cut beer duty again for the third year in a row – an historic hat-trick that will hear “Cheers, George!” echoed by pub-goers and brewers up and down the land.