Get off the escalator, Ms Smith

Open Letter to Chloe Smith MP, Economic Secretary to the Treasury.

Dear Chloe Smith,

How many more pubs do you want to see close? I was prompted to ask the question following your intervention in a debate in parliament this month when MPs representing constituencies with breweries raised their concerns about high levels of beer duty.

Andrew Griffiths, the member for Burton and chairman of the Parliamentary Beer Group, singled out the particular problem of the Beer Duty Escalator, which automatically increases duty in the annual budget without recourse to parliament.

Your reply was breathtaking. “The duty increase forms a vital part of the government’s plan to tackle the debt left by the previous government. It would be worse for everybody if we did not tackle that debt. I mean beer drinkers, cider drinkers, spirit drinkers, wine drinkers, brewers and publicans.”

Worse? It’s difficult to see how things could be worse for beer drinkers, brewers and publicans than they are at present. Since the duty escalator was introduced by the Labour Chancellor Alistair Darling in 2008, beer duty has increased by 42%. Between 2009 and 2012, 4,500 pubs closed. You may consider there is a connection between these two statistics.

The life is being squeezed from British breweries and pubs as a result of punitive taxes paid on beer. Here are some facts produced by the British Beer & Pub Association (BBPA) and the Campaign for Real Ale (CAMRA) about the levels of beer duty levied in Europe. For every pint of 5% beer, the amounts are as follows:

Ukraine 4p; Germany 5p; Spain 5p; France 7p; Czech Republic  8p; Portugal 12p; Croatia 14p; Russia 14p; Italy 14p; Greece 15p; Netherlands 16p; Denmark 17p, Ireland 39p; Sweden 47p and...Britain 55p.

Yet, in the debate, you said the tax on beer in Britain was not “an overwhelming or unreasonable amount”. You bring a whole new meaning to the word “unreasonable”.

It beggars belief that you feel beer drinkers, brewers and publicans should foot the bill for the economic problems allegedly created by the previous government. This is neither the time nor the place to discuss who was responsible for the economic disaster that hit the world in 2008. But it certainly wasn’t drinkers who would like to visit their pubs for a few pints of bitter without extending their bank overdrafts before they leave home.

To put the plight of British beer drinkers into even sharper focus, here’s another startling fact: duty in Britain accounts for 40% of all the beer taxes levied within the European Union, yet the British consume only 13% of all the beer brewed and consumed in the EU.

In short, Miss Smith, brewing and pub retailing in Britain is being driven to the edge of the cliff as a result of government taxation. You made the startling claim in your response to MPs that “the government would lose £35m in 2013 if the escalator was cancelled”. I would be interested to know how this figure was arrived at: it sounds like an example of what your government colleague Dr Vince Cable used to call “voodoo economics” when he was in opposition.

The reality is that the government loses far more than £35m every year as a result of the impact of the eye-watering levels of duty and VAT levied on beer, brewing and pub retailing. Every time the government increases duty, fewer people go to the pub. When the consumption of beer goes down, less duty is paid to the Treasury. The same holds true for VAT.

When a pub closes, you lose the VAT paid on food and drink in that outlet.

Employees who lose their jobs will no longer pay income tax. On the contrary:  the government will have to pay them unemployment benefit. Perhaps you could ask the Treasury to analyse how much income – in the form of duty, VAT and employment taxes -- has been lost in the period 2009-12 which saw 4,500 pubs close.

In the past 10 years, the consumption of all forms of alcohol in Britain has fallen by 20%. Some of that decrease may be accounted for by life-style changes, but a substantial proportion is the result of people being priced out of the market.

Your government promised to be “pub friendly” when it came to office. It has been nothing of the sort. By continuing to operate the escalator, you are forcing pubs to close. Your prime minister believes in the Big Society but such a society will wither on the vine if pubs, at the heart of their communities, go out of business.

Both your prime minster and home secretary have encouraged people to drink in pubs, where alcohol is consumed moderately and sensibly. But it’s a hollow objective if pubs are driven out of business as a result of ruinous levels of duty and VAT.

Beer taxation is not “reasonable”, Miss Smith. On the contrary, it’s killing the British pub. It’s time for a U-turn.

Yours sincerely,

Roger Protz

*This article first appeared in the Publican’s Morning Advertiser, 12 July 2012.