The recent gains in the Budget require an even more concerted effort from trade organisations to win further concessions, says Jon Collins, chief executive of specialist on-trade consultants CGA Strategy.
Budget 2013 could well prove to be a tipping point in the pub industry’s (and thus the wider on trade’s) relationship with Government. The pendulum had moved in an ever more regulatory direction since the Labour Government (heavily lobbied by the police) got cold feet over the implementation of the Licensing Act 2003. Alcohol Misuse Enforcement Campaigns (AMECs), Cumulative Impact Policies, closure powers, Alcohol Disorder Zones, Early Morning Restriction Orders (EMROs) and, of course, a ‘re-balanced’ Act courtesy of the coalition, all built the arsenal of regulatory powers available to local authorities and the police.
But, somewhere between the debate last November on the beer duty escalator and the Budget, things began to shift. That debate gave a platform for multiple MPs to, for the first time in decades, talk up the pub and the virtues of drinking in these community hubs. This clearly struck a chord with the Treasury, evidenced in Osborne’s statement during his Budget speech that, “our pubs - should not pay the price for the problems caused by others. The sad fact is that we’ve lost 10,000 pubs in the UK over the last decade”.
Two things leap out from that statement, the reference to ‘our pubs’ meaning the Chancellor has explicitly aligned himself with the sector and the use of the pub closure number to graphically underline the need for action. It has been a source of no little frustration for CGA that, for some years now, the pub closure number has been our most high profile statistic. Throughout though we have understood that, unless a problem is clearly and repeatedly set out to Government, action is unlikely to follow.
If as the Chancellor has recently stated, the beer duty cut, ”is just the beginning” of Government help for the pub industry then there are a number of debates in the coming months that will benefit from his intervention. Not least with his colleagues over at the Home Office where both recent legislative change and prospective further reform could seriously compromise ability to trade. This point was made particularly clear to me in my role as chairman of the National Licensing Forum when the agenda was dominated by discussion on how best to ensure sensible implementation and creation of licensing legislation.
At the forefront of most contributors minds were the twin threats of EMROs and the Late Night Levy (LNL). Both measures are required to be evidence based and should only be considered as a last resort. The risk is that budgetary pressures will lead police forces to lobby hard for their introduction.
An EMRO would reduce labour costs as earlier closing would mean an earlier end to the shift for attendant police officers. The financial motive for a late night levy is clear, though the benefits to the trade far from it. While the appetite appears low across councils for either measure right now, experience tells us that interest can spread rapidly if a measure is introduced in a single area and appears to have a positive effect, such as the ban on glass bottles that took hold in the south west of England in the 1990s.
The debate over EMROs and LNLs is under way across England and Wales, our trade organisations need to ensure industry input is informed, robust and persuasive. This was done successfully during the local level discussion on Alcohol Disorder Zones. For their part, we will look to the Home Office to ensure these measures are considered carefully and, if ever implemented, done so only on a sound evidence base.
Another reform with a strong financial motivation is the imminent regulations enabling local authorities to set fees for the premises licence at a level consistent with their costs of administration and enforcement. That can only mean fees going up as councils have long argued that the fixed fees introduced under the 2003 Act were leading to a loss for their licensing team.
Appropriate funding which delivers efficient administration and effective enforcement is in the interests of industry. What would not be welcomed is a fee level that allows licensing to part fund other council functions. The worst case scenario would see the council ramp up its enforcement function in the knowledge that this cost would be covered through an increase in the licence fee.
Fees are to be set on the basis of full cost recovery. Again, this needs to be evidence based or will be wide open to challenge. With regulations set to be introduced this summer and new fees most likely to be set for the next financial year this is another item for the ‘to do’ lists of our busy trade organisations.
While opinion is clearly split across the trade, public and, most importantly, the Cabinet, as to the merits of minimum unit pricing (MUP), steps to increase the price of alcohol in supermarkets (and the wider off trade) appear inevitable. Indeed, the Chancellor stated as much in the Budget, “The Government will shortly respond to its alcohol consultation, including with proposals to deal with deeply-discounted alcohol in supermarkets and other stores”.
Until very recently it appeared that MUP was the most likely vehicle for this intervention. If recent media speculation is correct and the Home Office is to push this measure into the long grass (probably giving the legal challenge in Scotland as their reason) then the proposed ban on multi-buy promotions in the off trade looks likely to be brought forward.
There is a possibility that the Government could also return to a ban on ‘below cost’ selling to tackle ‘deep discounting’ if MUP is truly a non-starter. We will know more once the Home Office has issued a statement on the implementation of the alcohol strategy (expected imminently).
Returning to Budget measures, the Treasury’s shift from viewing the ‘alcohol’ industry as almost a single entity (producer or retailer, on or off, beer, wine, cider or spirits) is to be welcomed. However, the fact is that beer is less important than ever to the present day pub. While long alcoholic drinks (LADs) remain approaching 70% of wet sales value in a typical community pub, this falls to around 50% in the more food led concepts that lead openings in to trade. And that’s LADs remember, the long alcoholic drink category that beer shares with cider and RTDs.
The success of the beer lobby will have given the other alcoholic drinks associations pause for thought. Not least when one considers the growing importance of cider, wine and spirits to community pubs (a growing proportion of sales, particularly in newly opened premises). Their logical next step would be to build on the BBPA/CAMRA arguments and set out the increasing importance of their products to the modern day pub. Such a move could see the full alcohol duty escalator scrapped in the not too distant future.
Moving from wet to dry, the Chancellor could really turbo charge the pub sector by listening to the trade once more and reducing VAT on food in licensed premises to 5%. With food now making up over half the total sales value in those outlet types leading the reshaping of the on trade (new wave bars and food-led pubs) any action to reduce the disparity with the supermarkets would be a real boost.
The Chancellor stated that he had become convinced by the economic argument that, with a reduced tax burden, the pub industry could be a driver for economic growth and job creation. Convincing his colleagues, primarily in the Home Office, to support this position and shape future regulation accordingly would allow good businesses to prosper.
