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Neame: government must act to stop beer tax killing pubs and the working man's pint

Added: Wednesday, September 5th 2012

It’s time for the British public to say “enough is enough” and tell the government to stop destroying pubs with swingeing increases in beer duty and VAT – that’s the view of Jonathan Neame, chief executive of Shepherd Neame and current chairman of the British Beer and Pub Association (BBPA).

“We need to mobilise drinkers and publicans,” he says. “We need to speak with one voice – pubgoers, publicans and producers. No other industry has such devoted followers.”

Jonathan has worked for his family’s brewery for 21 years. Shepherd Neame, based in Faversham in the heart of the Kent hop fields, dates from 1698 and is England’s oldest brewery. It owns 360 tied houses and supplies 2,000 other outlets and Jonathan can see at close hand the impact the annual increase in duty and beer prices has on pubs.

He feels strongly that there’s a major imbalance in the way tax is levied against beer and other forms of alcohol in Britain.

“In 1991, Ken Clarke [then Chancellor of the Exchequer] hiked beer duty and reduced the duty on wine. In 1997, duty on spirits was frozen for 10 years. Cider has enjoyed lower rates of duty than Progressive Beer Duty for small brewers.

“Politicians are intuitively pro pub. David Cameron is regularly seen with a pint in his hand. He wants to celebrate the pub. But the Treasury has picked up the mantra of the health lobby that we have a health problem caused by alcohol and tobacco. But it’s an intellectually flawed argument. The impact on health and the body from tobacco and alcohol is very different – and beer is different to other alcohols.

“The level of duty on beer is a tax on socialising. It’s a tax on communities, on jobs and investment. The average working man wants to have two pints with his mates after work. It’s dangerous for society if the price of beer is pushed so high that people on low incomes are forced out of the market.

“If pubs become the domain of the well-off it will undermine what the pub is about.”

Jonathan Neame says the “beer duty escalator”, introduced by the last Labour Chancellor, Alistair Darling, locks in the imbalance against beer. Duty on beer has increased by 42% since the escalator was created in 2008 and that, Jonathan says, has increased the gap between beer and cider.

He feels the Treasury has lost its moral authority. “The only tax the government has reduced is the 50p rate for top earners. The Chancellor says no tax can be levied if the yield is so low – around 4%. But the yield on beer tax is less than 4%. The government is stimulating the richest in society, not the working man.

“The levy from the escalator since 2008 has resulted in a £1.1 billion increase in rate or price for the consumer. But the additional revenue raised by the Treasury was only £396 million over the same period – the tax has gone up but in a very inefficient way, with huge collateral damage on the industry by way of accelerated pub closures in low income areas and less investment and job creation than would normally be expected. It’s a bad tax that needs rethinking.

“If all other taxes are taken into account, such as VAT and National Insurance, it’s arguable that the Treasury has made no additional revenue at all from the escalator. This is supported by independent economic research commissioned by the BBPA.”

Jonathan Neame is bullish about the pub and feels the government doesn’t appreciate its role in society. “Most pubs are family businesses,” he says. “The sole driver of the business is to be here next year. If they have income and margin, they will employ staff, builders etc and will put money into the community.

“The pub trade is the only industry that has an economic reach into every community in the land. But sucking all the money into the centre leaves a pathetic fraction in the industry – and that will drive out both pubs and brewers.

“The government is determined to stick to its austerity programme. But we need people to start spending again and go to the pub. Pubs should be a major engine of growth. Some are doing brilliantly – the food side is flying – but high duty and VAT means too much of the pie is going to the government.”

 Minimum pricing: the jury is out

The Shepherd Neame chief executive is not convinced of the case for introducing minimum pricing for alcohol to stop the sale of cheap drink from high street retailers.

“The government intervening in pricing is fraught with difficulties,” he says. “What’s the problem that needs to be tackled? In 2004 there was extreme abuse of alcohol and unsocial behaviour. But sophisticated mechanisms have been used to tackle the problem involving brewers, publicans and the police. As a result, there’s been a massive reduction in alcohol disorder.

“The Local Government Association says it’s not convinced by the arguments in favour of minimum pricing. It believes local authorities should be left to sort out the problem.”

He points to two “great events” in 2012 that show the overwhelming majority of British people handle alcohol sensibly. “The Royal Jubilee was celebrated in pubs throughout the country without any problems. There were 12 arrests at the Olympics – and they were mainly ticket touts. The people celebrated with alcohol and they did so responsibly.”

He feels that minimum pricing would not tackle the problem of alcohol misuse by a minority and is unlikely to reduce consumption. And he’s not convinced that higher prices on the high street would send people back to the pub.

“Beer drinking has declined by 35% since 1979. Consumption is falling and teenagers are drinking less. The brewing industry is sensible. We want customers to lead healthy, active lives and beer is part of that."

 Faversham upbeat

In spite of the problems of duty and price, Shepherd Neame is performing well. “The larger regionals find the competition from micros challenging,” Jonathan Neame says. He admits that some of his premium cask ales, such as Spitfire, are doing less well but the brewery has diversified to boost sales.

“Our premium bottled ales are a major growth area. A wider range of bottled products stimulates the consumer.”

Shepherd Neame produces 250,000 barrels a year and half of that production is now packaged. It brews as much lager as ale and Asahi Japanese lager, brewed under contract, is doing especially well. The brewery has just added Samuel Adams Boston Ale to its range and a bottled version is planned.

There’s been a big investment in the brewery’s pub estate. “We want our pubs to be the number one family experience,” Jonathan says. “In the past five years, we’ve bought 30 pubs and sold 50. Some of the dispersals were smaller community pubs – and it doesn’t mean they have closed as pubs: they could become free houses.

“We’ve bought four pubs from Enterprise Inns and three of them are on beaches. They are prime destinations. The questions we ask all the time are: Are our pubs good enough? Is the beer good enough? Is the food good enough?”

*The Faversham site a small pilot brewery for cask beer that can produce four barrels at a time. This is where Canterbury Jack, now a regular part of the range, started life. At the moment, a 6.1% IPA, a 4% Old Ale and a 5.2% Double Stout are planned.

Canterbury Jack