The government are currently consulting on ways to change the system of alcohol duty. The main objective is to improve incentives for lower-alcohol products, but that hasn’t stopped various bodies adding their two penn’orth. One suggestion that has been made is to reduce the level of beer duty for products sold in the on-trade in an attempt to give pubs a boost. However, an obvious problem with this is the possibility of pubs selling beer for consumption off the premises, and it would clearly be administratively complex and confusing to customers to apply two separate prices.
One way of getting round this would be to confine the duty concession to draught beer, which by definition is only sold in the on-trade. While a tiny amount may be taken home in carry-outs, in the overall scheme of things it is trivial. This was proposed by SIBA in their general election manifesto.
However, it’s hard to avoid the conclusion that this is just another case of special pleading, where a trade body calls for lower taxation on the particular products made by their members. And, as I have argued before, it’s highly tendentious to argue that on-trade drinking has any claim to being intrinsically “better”.
It’s also questionable whether a duty cut would make any significant difference to the balance of consumption. It’s generally recognised that minor tweaks to relative taxation levels have little effect on consumer behaviour. Despite the duty on them having been halved, sub-2.8% beers have made little progress in the market because people basically aren’t interested in drinking them.
The duty plus VAT on a pint of 4% beer comes to 52p. Even if that was completely removed, it would only reduce the price of a pint from £3.50 to £3. Is that really going to make much difference to levels of pubgoing? I’ve made the point in the past that, while relative price is a factor to some extent, the main reasons deterring people from drinking in pubs are non-financial. In any case, the likelihood is that pub operators would very often take the opportunity to fatten their margins rather than passing all the savings on to drinkers.
The conclusion must be that this is just another case of a trade body wanting a favour from the government for its members. There’s a good case for a general cut in beer duty, if it could be afforded, but having differential rates for packaged and draught beer would be ineffective and divisive gesture politics.
And, of course, most of the benefits would accrue to the brewers of Carling and Stella, not the members of SIBA!