Monday, 20 March 2023

Widening the gap

Last year, the government announced that, as part of the general restructuring of alcohol duties to come into effect from 1 August this year, they would introduce a 5% duty discount for draught beer. In his budget last week, Chancellor Jeremy Hunt sprung something of a surprise by almost doubling this discount. However, the way he achieved this was to freeze the duty on draught beer (and cider) but to increase it on all other alcoholic drinks by the full amount of RPI inflation, resulting in a differential of 9.2%. The full details of the new duty rates are set out on this page.

In practice, this won’t make a huge difference to prices. The duty isn’t actually being cut, just frozen, so no prices will fall, they will simply rise more slowly. For a pint at 4% ABV, it’s worth about 5p when the VAT is added on, equating to 10p over the bar once a typical markup has been added on. That’s not enough to change people’s behaviour, but that isn’t the point. Essentially it is giving financial support to pubs by reducing the tax burden on a product that is only sold in pubs and other on-trade outlets.

Likewise, some have complained that most of the benefit will accrue to the brewers and drinkers of mass-market lagers, but of course most of the draught beer sold in pubs *is* mass-market lagers. I was amused, though, to see it labelled as the “Brexit pubs guarantee”, as it’s a change that could not have been made if we were still members of the EU, something that will no doubt stick in a few craws.

It wouldn’t really make much sense if it was intended to change behaviour. Fiddling about with tax rates rarely makes much difference to purchasing patterns, especially if it’s going against the grain of what people want to do. Halving the duty on beers of 2.8% or below didn’t lead to any kind of boom in sales. And, as I wrote here, would shaving a few pence off the purchase price of beer really prompt most people to drink more in pubs? I also tend to take the view that reducing the burden on things I happen to like, however tempting it may seem, isn’t usually a sound basis for taxation policy.

All the talk about the reduction in draught beer duty has to some extent obscured the fact that Jeremy Hunt has imposed the largest increase this century in the duty on all other forms of alcoholic drinks. This must account for 85% of all alcohol sold in this country, and includes all the production of small distilleries and a growing proportion of the sales of small independent breweries.

After several years of either duty freezes or minimal increases, this will be a real kick in the teeth for consumers, especially at a time when the price of pretty much everything else they buy in the shops is rocketing too. Tom Utley certainly wasn’t impressed. And, as usual, smokers, who typically are less well-off than the average person, have been clobbered by an above-inflation increase.

The wine lobby are understandably aggrieved that the changes will lead to the duty on a typical bottle increasing by as much as 45p, although in fact, while one might quibble about the ahsolute level of duty, a move to taxing wine by alcoholic strength rather than at a flat rate is long overdue.


  1. I had to laugh when I discovered that differential duty on draught & packaged alcohol may be something CAMRA have campaigned for, but .....

    An unintended consequence is the takeouts, growlers etc are now illegal.

    You can't tax a take home at the draught rate.

    There's a feature of camra beer festivals disappearing.

    1. Surely people should have been aware of this when the draught beer discount was first announced last year. And I would have thought the discount could easily be extended to takeaways in the same way as the 40 litre cutoff was reduced to 20 litres. I can't see it leading to people replacing slabs of Carling with growlers to save 5p a pint.

    2. You can't package draught beer. Its illegal now. Ho Ho.

    3. Growlers aren't 'illegal' at all. The duty applies to alcohol packaged by the brewer, not draught that is post-packaged. What happens to the beer after it leaves the brewery is irrelevant.

    4. I suspect the OP is talking bollocks. But I haven't seen any corroboration one way or the other.

    5. I refer you gentleman to a blog post from another beer blogger by way of support to my argument.

      are CAMRA festivals going to be licensed to repackage draught beer?

      Ho, Ho.

    6. BassElAlmaDeBurton23 March 2023 at 08:20

      Diesel is coloured red in the UK to denote it's not road diesel and is taxed lower.

      Maybe draught beer needs a food dye to denote it is draught and prevent it being packaged?

  2. Beer people are good people are they?

    In that case beer people should be happy to pay their taxes. Beer tax should be higher. The schools, the hospitals, everything needs more money. Pay up, support it and be happy to do so.

    All I see among CAMRA folk and Craft beer kids is performative left wing virtue signalling. They are all left wing, all love Corbyn, all want the government to pay for more things. Fine. Then pay your taxes. Put up beer tax and be happy paying it.

    CAMRA folk and Craft beer kids demanding special pleading for beer tax is rank hypocrisy.

  3. "Every man is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be"

    Lord Tomlin 1936

    Most Craftheads and CAMRAs are still left leaning though

    1. I get the impression someone is arguing with himself here...

    2. The taxing of a pint in Ireland is criminal 55 cents and it is more if is 5 percent abv

  4. NotYourUsualTrolls24 March 2023 at 08:05

    A complicated tax system benefits no one. Why should anyone running a business need to be an expert in taxes to run a business? You should only need to be an expert in the good or service of your business. The Beer Nouveau post highlights that an attempt to tweak a system to give privilege or advantage to one set of producers over another creates complexity.

    Complexity primarily benefits business of scale that can afford a dedicated accountant rather than the services of an accountant with many clients.

    CAMRA can be considered well meaning fools, in so far as they campaign for special privilege without considering unexpected consequence or the requirement for a brewer to become a tax expert.

    A simpler tax system would benefit all. I bet you are all thinking now that tax is lower on draught beer than packaged beer. It is not. VAT at twenty percent, and draught beer being 4 times the retail price of packaged beer means VAT paid on a pint of draught beer is 4 times the amount of packaged. The amount of tax paid on your pint of Bass is more than the tax paid on your can of Bass.

    Packaged beer drinkers pay less tax on their pleasure. A tweek to duty has no more effect than making it difficult to work out by how much and what tax is paid on what product, without an excel spreadsheet or writing it down in a ledger.

    A campaign to abolish VAT but increase duty to compensate the treasury, if successful, would result in the tax paid on both products being equal. It would be tax neutral for draught beer and increase the price of packaged beer. It would be justifiable from a fairness point of view as a tax equalisation measure rather than special pleading.


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