The taxing issue facing pubs

By Roger Protz

- Last updated on GMT

Related tags: Vat, Alcoholic beverage

'The government has to support pubs with a VAT cut', writes Roger Protz
'The government has to support pubs with a VAT cut', writes Roger Protz
I blinked in disbelief when I heard a BBC business reporter announce that one reason for a fall in the rate of inflation was a drop in the price of alcohol. “Take me to your pub!” I yelled at the television set.

But of course he wasn’t talking about the price of a pub pint. If the cost of alcohol fell during the run-up to Christmas, it was due entirely to our much-loved friends who run the nation’s supermarkets.

And mini-markets as well. I now have three Tesco Express outlets within walking distance and they sell booze at prices designed to make publicans reach for the suicide pill.

The supermarkets are destroying the pub trade. Every time I see a boarded-up pub I wish I had a spray gun so I could write on the quietly decaying front of the former boozer: “Thanks, Tesco.” Or Sainsbury’s. Or Asda. Or Morrisons. Take your pick.

You may recall David Cameron promising a “pub-friendly government” in 2010. Can you hear a horse laughing? Many hundreds of pubs have closed since that false dawn.

The current government, in common with the previous lot, stand in awe of the supermarket bosses. Nothing must be done to dent their power or stop the onward march of Tesco Express.

Tim Martin of JD Wetherspoon stressed the power imbalance between pubs and high-street retailers last week when he announced his firm’s latest results. Pubs, he said, had to pay VAT on food, while supermarket food is VAT-free. That’s only half the story.

Supermarkets do pay VAT on alcohol but — and I advise you to sit down and pour yourself a stiff one — they can claim back the tax if they sell beer at cost or below-cost.

The high-street chains have it every which way. The off-trade accounts for 60% of alcohol sales but the Government gets more in VAT from the on-trade as a result of the supermarkets and their creative accountancy.

They can sell alcohol cheaply — and claim back VAT — because customers who come in for cheap booze also buy a large weekly shop. Drinkers visiting the Frog & Nightgown, on the other hand, are unlikely to return home with a bag of spuds, a litre of milk and a new polystyrene suit.

If David Cameron would like to help the embattled pub, he should listen to the likes of Tim Martin and Paul Wells, chairman of the Independent Family Brewers of Britain (IFBB).

They are backing the Europe-wide campaign to reduce VAT on restaurant food, drink and accommodation. The campaign is led by Jacques Borel, who once ran the Sofitel hotel group before becoming a lobbyist for the hospitality industry.
Borel, a Frenchman who spends a lot of time in Britain at present — he stays in a Sofitel hotel, of course — says that a cut in VAT from 20% to 5% would create between 140,000 and 320,000 jobs in the British hospitality industry.

Borel has been successful in Belgium, France, Germany and Sweden. In his home country, a reduction in VAT from 19.65% to 5% led to the creation of 21,700 jobs in the first year.

Paul Wells, who runs Wells & Young’s as well as chairing the IFBB, knows the pub trade inside-out with an estate of some 250 outlets.

He says: “Although this could be a long road, we believe that campaigning for a VAT reduction is a really useful way to help our licensees, by making the cost of eating out that bit more affordable for consumers.

“When you consider that people who buy food in pubs are now paying 20% VAT, compared to zero VAT in the supermarket, the eating-out market needs this cut. If we can increase custom in pubs, it’s also a great way to increase employment, especially among the young, in a sector that already employs almost one million people.”

We need to go further than food. Britain has a different eating-out culture from the likes of France and Germany. We are pub-led, not restaurant-led — and one way to increase custom in pubs and win back trade from the supermarkets would be to reduce VAT on drink as well as food in pubs.

CAMRA, the Campaign for Real Ale, believes that the reduction should be on draught cask-conditioned beer, as this move would specifically boost the fortunes of British breweries rather than the global lager brands.
Every time a pub goes out of business, the Government loses not only VAT but income tax and other taxes derived from sales and employment. Breathing life back into the pub trade would be good for business and also good for the public purse.

It would be good for communities — ie the Big Society — as local communities wither and die when their pubs close. And one sure way to tackle alcohol abuse, with the knock-on costs for the NHS, would be to get people drinking responsibly in pubs instead of buying cut-price, own-label vodka from supermarkets.

I must stop. There’s a man at the door with a large cheque book. He wants to build a Tesco Express in my back garden. I get a free case of Stella. Every week, VAT-free.

Related topics: Beer