Sunday, 24 January 2021

Feeling the draught

It may seem a distant pipedream at present, but the day will eventually come when the pubs are allowed to open again. When it does arrive, the licensed trade will be in need of all the help it can muster to get back on its feet. One idea that has been suggested by CAMRA is to reduce the rate of duty on draught beer only.

This has a number of reasons to commend it. By definition, draught beer is only served on licensed premises (apart from the occasional person buying a cask or keg for a party) and so this would be very accurately targeted. It is clearly defined and virtually impossible to evade. Plus, unlike with reducing duty for all beer, or indeed all alcohol , sold in the off-trade, there would be no possibility of seepage into the off-trade. Even if someone buys a container of draught beer to take home, the pub still gets the benefit, and it can’t really be done on an industrial scale.

However, it’s important not to get carried away. It’s likely that most pubs would use it as an opportunity to rebuild their margins rather than passing it on directly to the customer. The exception, as usual, would probably be Wetherspoon’s.

And how much difference to consumer behaviour would it actually make? The duty plus VAT on duty paid on a pint of 4% beer is 52p. Even if that was halved, it would still only be a gain of 26p, which is well under 10% of the price of most pints. That’s really neither here nor there for most pubgoers and, as I wrote here, isn’t of itself going to tempt them to drink much more in pubs. “Responsible people who aren’t on the breadline, which is most of us, don’t go to the pub because the opportunity doesn’t arise, not because they can’t afford it.”

I’m also inherently suspicious of any attempts to use the tax system to discriminate between “desirable” and “undesirable” activities. For a start, they often have little effect, especially when going against the grain of people’s behaviour. Despite the 50% duty cut, there hasn’t been any upsurge in consumption of 2.8% ABV beers, because people just don’t want to drink them. And, although there aren’t really likely to be significant issues in this case, such policies also tend to lead to “tax break specials” to get around the spirit of the legislation, and have the potential to produce adverse unintended consequences.

Some CAMRA diehards will grumble that the majority of the benefit will accrue to the drinkers of Carling and Stella, not real ale. But the objective is to support pubs, not real ale as such, and it should not be forgotten that two out of every three pints drunk in pubs are lager, while only one in seven is cask beer. It is the lager drinkers who keep the pubs going.

Another question is how such a measure would interact with the existing systems of lower duty for very weak beers, and higher duty for very strong ones, and Small Brewers’ Relief. Plus the anti-drink lobby will be up in arms at any cut in alcohol duty, no matter how worthy the motivation.

Given the current state of the public finances, the likelihood must be that, in his Budget in March, the Chancellor decides to raise alcohol duties across the board. So, even though it may in theory have much to be said for it, don’t expect a cut in draught beer duty to figure on his agenda. And I doubt whether much, if any, draught beer will end up being sold in March anyway.

9 comments:

  1. Tinkering around the edges, won't make a lot of difference. I also feel you are correct about a duty increase, given the perilous state that the public finances must be in, by now.

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  2. The proposal to reduce the rate of duty on draught beer is an excellent way of promoting the sales of Carling which has by far the largest sector of the draught beer market. I do not know whether this is the CAMRA's aim. A better solution may be to lobby for an extension of business rates relief together with a continuation of the reduced rate of VAT for the hospitality industry together with its extension on a time limited basis to alcohol.

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    1. If the intention is truly to help pubs then benefiting Carling and Stella drinkers should not be a problem. Cask ale only accounts for 14% of pub beer sales, and to confine a duty cut to cask would be a drop in the ocean.

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    2. More help can be given by targeting fixed overheads such as business rates which are payable in any event and their benefit to the publican is not dependent on customer levels,relief in this respect,which can perhaps be extended to smaller breweries,will be of more benefit.

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  3. It is the Carling/Fosters/Stella drinkers that were keeping the pubs open. And it is they who can switch to off-sales most easily.

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    1. Thankfully they weren't keeping the pubs open where I drink.

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  4. Professor Pie-Tin25 January 2021 at 19:14

    Not sure there's any need Mudgie.
    When the pubs are open again a tidal wave of punters with wallets full of drinking vouchers saved up for months will come crashing through the front door of every pub up and down the land.
    There's going to be one helluva partaaaay.

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    1. I don't think they will. Many people have been so consumed with fear from all the Covid scaremongering that they'll be very reluctant to venture back into pubs. Plus I would expect pubs to be made to remain in Tier 1 for months, which destroys their conviviality.

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    2. Professor Pie-Tin26 January 2021 at 17:55

      You're right.
      I meant when the whole shebang is over and life is back to some normality.
      I certainly won't go back into a pub where I have to sit at a table social distancing.
      Bollocks to that.
      I want to stand at the bar and look into the eyes of the feller I'm going to take the piss out of ...

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