Duty decision due in March

Pre-Budget statement gives hope for progressive tax

Small brewers will have to wait until March 2002 to learn if they will be thrown a lifeline in the form of reduced duty rates.

However, chancellor Gordon Brown has given the clearest indication yet that he plans to introduce some form of progressive beer duty as part of a package of measures to help rural communities.

There were strong rumours just before the chancellor's pre-Budget statement earlier this week that a detailed announcement would be made. In the event, however, there was a just a single paragraph buried deep in the statement which said a decision would be announced in the Budget next March.

It also said: "Britain's several hundred small breweries make a valuable contribution to the nation's cultural heritage, particularly in rural communities where the majority are located."

It was later suggested that the source of the rumour that there would be an announcement last week was an over-enthusiastic Treasury official who had incorrectly briefed Financial Times journalists.

Peter Haydon, general secretary of the Society of Independent Brewers (SIBA), said: "If we forget about the hopes that were raised by the articles in the press at the weekend, and just look at what the chancellor said in the pre-Budget statement, then I'm very optimistic. This is as positive a statement of intent from the Treasury as we could have hoped for.

"If it was just a Treasury official jumping the gun, that would seem to indicate that we've made our case and that the Treasury has accepted what we've been saying. In any case, even if there had been a full announcement in the statement, we would still have had to wait until after the Budget in March for the necessary primary legislation."

Progressive duty is likely to be calculated on the basis of barrelage, with a percentage discount for brewers producing less than, for example, 50 barrels per week.

The percentage discount would then get smaller as barrelage increases up to an agreed maximum after which the full duty would be applied.

In the run-up to the March 2001 budget, SIBA made a submission supported by bodies such as The Council for the Protection of Rural England and the Villages Retail Services Association. It was this that convinced the Treasury that there was now a strong case for progressive duty.

The chancellor launched a consultation, and SIBA began working with Customs and Excise to develop a workable scheme. These proposals were submitted to the Treasury in the summer.

SIBA believes progressive beer tax enables small companies to survive, compete, drive up quality, and create local employment. It points to the example of Germany which has long operated progressive duty and has more than 1,200 breweries and a hop industry which exports half its output.