Today, upward of a thousand enthusiasts are descending on Westminster to demand protection for one of the nation’s great heritage assets. Beer.
The Labour government of old was unduly fond of price and tax escalators, which generally take the form of retail price index plus a bit more. I have always regarded this as a rather odd fiscal mechanism because it simply creates a circularity that feeds itself. Costs go up, the RPI duly rises, and costs go up again as a result.
It beats me why the coalition has decided to maintain this blunt policy. Fiscal escalators might be acceptable in times of plenty, but as the economy bounces in and out of recession the circularity begins to consume itself. If prices are raised when money and credit is scarce, people buy less. Businesses are undermined by struggling sales and rising costs. Tax revenues fall and welfare payments rise. People buy less, and the circularity spirals downwards.
This brings us back to beer. The escalator adds 2% plus inflation to beer duty. There has been a 42% increase in duty in just four years and tax is now around one-third of the price of pint. The result is that beer sales are falling and pubs are closing.
Local beers are the vernacular within the international gastronomic landscape of Britain. Britain has a unique landscape of local beers that should be celebrated by the government, not undermined by crude taxation mechanisms. It has a unique network of pubs, many still individual and idiosyncratic in a world dominated by national and international branding. They deserve a chance of survival.
Beer is an indispensable part of the economy of rural areas. Here in Shropshire, around 4,800 are employed in our 651 pubs, and many more in our 18 breweries. They underpin much of the tourist industry – not only by serving food and drink, but by providing a place where tourists can meet local people. Tourists chip in around £50 million a month to our local economy, supporting nearly 16,000 jobs. This is no small beer in a county with a population smaller than that of Southampton.
If beer is priced out of pocket for locals and for tourists, our small breweries will go out of business. The country will once again become swamped with unified brands. The Ghost of Watneys Red Barrel will be resurrected to stalk the land. Pubs, which are often the only social centre in rural communities, will close forever.
The government has seen sense by cancelling the next fuel duty escalator rise. It is time for it to see sense over beer.
* Andy Boddington is a Lib Dem councillor in Shropshire. He blogs at andybodders.co.uk.
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10 Comments
Inflation PLUS 2%!
Those who can no longer meet rising prices without income support will see a cut in their spending power due to Osborne’s changes to social security. Does this mean increasing numbers of brewery workers will lose their jobs?
Does this mean that if Osborne wanted to organise an event in a brewery, it would be more difficult for him?
I agree. A level of tax should be set, and as far as necessary increased in line with inflation to maintain it in real terms, but escalators have no place. Especially considering how duty has already massively incrteased. Both petrol and alcohol; duty should be frozen in real terms.
The motivation for putting in place an escalator seems to be the frog in boiling water strategy. It allows them to raise taxes gradually to the desired level in a series of small, less noticeable steps. The alternatives of raising taxes in one big step, or doing it slowly but having to make a series of announcements each year that yes, taxes are going up yet again this year, are both much less attractive to the politician. With an escalator there is even the opportunity for the politician or his successor to get credit for turning the escalator off at a later time. So it looks as if escalators are here to stay.
To be honest I think it’s about shifting the burden of tax from income based direct taxation to VAT. In the case of beer there’s also the class based faux puritanical i excuse that you are saving the lower orders from themselves. So politicos can filch punters money and pretend it’s a moral duty at the same time. This is why I’m against VAT, It hides massive tax hikes on ordinary people whilst pretending there are TAX cuts. Also it’s counterproductive because it ends up increasing the black market. Ironically, VAT and various other forms of indirect taxation is probably the one area you could drastically reduce in levels and yet take in more money. Look at cigarettes,. In some areas of the country the market is swamped with counterfeit products.
The solution might be to legalize cannabis, and put a hefty tax on it instead of beer.
OMG I remember Red Barrel, I even found it in an ‘English’ fish and chip shop in California where the wrapping was a copy of the Yorkshire Post printed with approved vegetable based inks. Is that the way we are going?
Great name for a beer campaigner 🙂
@Andy
Any relation to the brewer of the same name?
I volunteered at yesterday’s rally which was very impressive in terms of both scale and reach. It was direct democracy at its best with over 1,000 people lobbying or Green Carding their MPs.
The escalator itself was introduced by Alastair Darling (resulting in a flurry of posters in pubs announcing he was barred: as he looks so unlikely to go near one, I suspect no pub need do the same for the current Chancellor). The evidence base is that rising duty is not raising any additional income for the Treasury, as it is reducing beer consumption and adding to inflation in pubs in particular (with VAT on top). Given that unlike wine, the vast majority of beer is produced in the UK with the number of small craft breweries in particular a real success story, the escalator really does make no sense.
We pay something like ten times as much tax on beer as the Germans do. It would be sensible (and popular!) for Liberal Democrats to pull the rug from under this ill-advised and failing policy..
Thanks for your comments everyone.
Let’s hope that yesterday’s lobbying has opened up more MPs eyes to the implications of the duty escalator.
The main problem is that our MPs and civil servants do not understand how micro economies work and how important they are to are to local economies, especially in rural areas. And as for George Osborne, he understands absolutely nothing about nothing at all