I was invited by the Society of Independent Brewers (SIBA) to give a speech at their annual conference last week, immediately after a joint presentation by Andrew Griffiths MP and Brandon Lewis, Pubs’ Minister. While not doubting the sincerity of the efforts of the two MPs in their work on behalf of pubs and brewing, I argued that the perception of last year’s budget, including the beer duty cut, was badly misconceived.
This is because excise duty for pubs actually INCREASED in last year’s budget, with rises in wine and spirit duty outweighing the decrease in beer duty. For Wetherspoon, as an example, the overall excise duty we pay increased by about £1.5 million per annum more than it would have done had all drink duties been frozen. Since the UK already pays about 40% of Europe’s excise duty, with only 13% of the people, a further increase was not a great victory.
I pointed out to the brewers in the audience that if beer duty had been cut, but their business rates had increased, at the same time, by more than the duty cut, then they would not have been better off- yet that, in effect, is what happened to pubs, which had to fork out more tax as a result of the budget changes.
Unfortunately, the government’s tax changes in the 2013 budget did not stop there. A further sleight-of-hand resulted in a little-publicised change to VAT rules in respect of fruit machines.
These changes resulted in a £2.5 million tax increase for Wetherspoon, creating a total £4 million budget tax hike.
The toxic factor for pubs is that the fruit machine tax changes did not apply to supermarkets, further worsening the disparity between the two types of business. The impact of this sort of stealth tax, as well as the inequalities in VAT and rates, are where pubs are really getting clobbered- it is especially dangerous for the industry to look at individual taxes, such as beer duty, in isolation.
The truth exists, as one historian said, but it’s hidden in a fog by lack of perspective. It’s the job of industry leaders and commentators to see through the fog, but their record in this respect is patchy at best.
These arguments seemed to resonate strongly with SIBA members, just as they do with individual tenants, the general public, the press and many MPs of all parties. Some industry leaders, perhaps displaying signs of being out-of-touch, have a tendency to swallow the “historic beer duty cut” argument, hook, line and sinker. The reality is that pubs need tax equality with supermarkets to survive in the long run.
It doesn’t help the industry to indulge in back-slapping self-congratulation over illusory economic benefits, however well-intentioned the promoters of these views are. In addition, if we were happy with an illusory cut last year, we’re more likely to be offered the same thing this year. Guys, if you think last year’s budget was so great, how come so many pubs are continuing to close?