Roger Protz: An Open Letter to Chloe Smith, Economic Secretary to the Treasury

The letter reads as follows:

Dear Chloe Smith,
How many more pubs do you want to see close? I was prompted to ask the question following your intervention in a debate in Parliament this month about high levels of beer duty.

Andrew Griffiths, member for Burton and chair of the All-Party Parliamentary Beer Group, singled out the problem of the beer-duty escalator, which automatically increases duty in the annual Budget without recourse to Parliament.

Your reply was breathtaking. “The duty increase forms a vital part of the Government’s plan to tackle the debt left by the previous Government. It would be worse for everybody if we did not tackle that debt. I mean beer drinkers, cider drinkers, spirit drinkers, wine drinkers, brewers and publicans.”

Worse? It’s difficult to see how things could be worse for beer drinkers, brewers and publicans than they are now. Since the duty escalator was introduced by the Labour Chancellor Alistair Darling in 2008, beer duty has increased by 42%. Between 2009 and 2012, 4,500 pubs closed. You may consider there is a connection between these two statistics.

The life is being squeezed from British breweries and pubs as a result of punitive taxes paid on beer – 55p on a pint of 5% beer. Beer duty in Britain accounts for 40% of all the beer taxes levied within the European Union, yet the British consume only 13% of all the beer brewed and consumed in the EU.

In the debate, you said the tax on beer in Britain was not “an overwhelming or unreasonable amount”. You bring a whole new meaning to the word “unreasonable”. It beggars belief that you feel beer drinkers, brewers and publicans should so disproportionately foot the bill for economic problems they didn’t cause.

In short, Miss Smith, brewing and pub retailing in Britain is being driven to the edge of the cliff due to Government taxation. You say “the Government would lose £35m in 2013 if the escalator was cancelled”. I would be interested to know how this figure was arrived at: it sounds rather like what your Government colleague Dr Vince Cable used to call “voodoo economics” when he was in opposition.

The reality is that the Government loses far more than £35m every year as a result of eye-watering levels of duty and VAT levied on beer, brewing and pub retailing. Every time the Government increases duty, fewer people go to the pub.

When the consumption of beer goes down, and when pubs close, less duty is paid to the Treasury. The same holds true for VAT. Employees who lose their jobs will no longer pay income tax. On the contrary, the Government will have to pay them unemployment benefit.

In the past 10 years, the consumption of all forms of alcohol in Britain has fallen by 20%. Some of that decrease may be accounted for by lifestyle changes, but a substantial proportion is the result of people being priced out of the market.

Your Government promised to be “pub-friendly” when it came to office. It has been nothing of the sort. On one hand your PM and Home Secretary say they prefer people to drink in pubs, where alcohol is consumed moderately and sensibly. And on the other they are driving pubs out of business with ruinous levels of duty and VAT.

Beer taxation is not “reasonable”, Miss Smith. On the contrary, it’s killing the British pub. It’s time for a U-turn.
Yours sincerely,
Roger Protz