Duty-bound to help pub trade

Tim Martin, the founder of JD Wetherspoon, rang my chimes last week when he said (MA, 9 September) the British tax regime was causing "devastation" in the pub trade. The crippling level of excise duty is driving drinkers out of pubs and into the arms of the supermarkets and Martin was right to highlight the fact that pub closures have the most impact in areas of low wages and high unemployment.

I'm writing this in the comparative comfort of St Albans, a small market town close to London, with many well-heeled commuters.

We have 60 pubs, including two JDW outlets, and we seem almost immune to pub closures. We've lost a few in recent years but they've not been failures — two have become curry restaurants, one is now a Harvester and the fourth made a tidy packet for Whitbread when it was converted to new housing.

It's a different story, as Tim Martin says, if you travel north where industry has collapsed and people suffer from long-term unemployment and deprivation. When money is tight, the difference between a £3 pub pint and six cans of supermarket lager for £6 makes it easy to decide where to buy your beer.

So more landlords will pull down the shutters and more pubs will close unless someone in government sees sense and stops taxing beer out

of existence. The last government increased excise duty by 25% over a disastrous two-year period.

At present, close to 85p of the price of the average pint goes in tax and that proportion will increase to close to £1 when the VAT rise is implemented.

Britain is the most

heavily-taxed beer-producing country in the European Union. Finland has a higher rate of excise duty but a population of around 5.5 million, so in real terms, Britain with 61 million people pays far more duty than the Finns.

Belgium, the Czech Republic and Germany, which like Britain are major brewing nations, pay a fraction — less than 10p in a pint — of the duty raised here.

Voodoo economics​

It's voodoo economics, as Dr Vince Cable used to say before he got a ministerial car. The more tax levied on beer, the less we drink. This means the Government actually gets less tax from the pub trade every time it raises excise duty and VAT. When pubs close, the Government also takes less in income tax as people lose their jobs — and then it has to pay them unemployment benefit. There seems to be a distinct lack of joined-up thinking in the Treasury.

Let me present to ministers an alternative strategy. Freeze the duty on beer or, better still, cut it when the next Budget is announced. At the same time, remove draught beer from the January VAT increase.

Force supermarkets to stop selling beer as loss-leaders and set a minimum price for a unit of alcohol. If beer in pubs gets cheaper and the price rises in supermarkets, people will return to pubs. The result will be an increase in tax revenues for the Government.

The present strategy is hammering one of Britain's last great industries. Brewing and pub retailing are responsible for around 350,000 jobs. The sector is second only to banking where jobs are concerned and it's a safe bet that brewing and pubs give greater pleasure to most people than banks.

And yet while bankers are given the green light to continue with dodgy deals and fat bonuses, ministers are determined to rip the heart out of brewing and retailing. It's a home-grown industry. Almost 85% of the beer sold in Britain is brewed here, while 99.8% of wine retailed here is made outside the country. Brewing is one of our last great British industries. You might think the Government would be proud of it and would nurture it, giving it tax breaks to help it recover from the recession and stop pubs closing.

On the contrary, George Osborne and his Treasury team give brewers the choice of the rack or the thumb-screws. "Would you like an increase in excise duty or perhaps you'd prefer a rise in VAT? The choice is yours, gentlemen."

Crippling​

No other European country cripples its brewing industry in such a crude fashion. Two years ago, the Irish

government cut duty to help struggling brewers. In Britain, the Government prepares the soil for the entry of the coffin.

The full enormity of the way in which brewing and pub retailing are hammered here can be seen from the following statistics.

The total amount of excise duty raised annually from the 27 member countries of the EU is €11.2bn (£9.1bn). In Britain, excise duty collected in 2008-09 was €3.9bn (£3.1bn).

This means that the hard-pressed, moderate drinkers of the Benighted Kingdom of Great Britain and Northern Ireland pay 35% of all the duty raised within the EU — that's more than one third.

Suicide pill, anyone?