Opening shots fired in 2012 Budget battle

Drinks trade bodies have fired the opening shots in the battle to convince the UK government to go easy on the industry in next month’s Budget.

The British Beer & Pub Association (BBPA) is demanding a freeze in the government’s controversial duty escalator to avoid, it claims, “the loss of 16,000 jobs”, while the Wine and Spirit Trade Association (WSTA) argues visitors to this year’s Olympic Games in London would pay significantly more for drinks than they would in other major European capitals.

In March 2008, then-chancellor Alistair Darling announced a four-year tax escalator whereby duty rates on alcohol would increase by 2% above the rate of inflation each year.

In March 2010, Darling announced that the escalator would remain in place for two further years, until 2014-15.

The BBPA says the government is “shooting itself in the foot” by clinging to the policy, with job losses likely to hit younger people working in pubs.

Beer tax hikes are set to reach 42% per cent since the Budget of March 2008, when the escalator policy was introduced by the previous government.

In a submission to the government, the BBPA makes clear the extent of the relationship between beer and pubs and the ramifications taxation can have for both industries.

A statement said: “With beer accounting for seven out of every 10 pub drinks sold, huge tax rises in beer have been shutting Britain’s much loved locals and costing jobs.

“With real incomes falling and VAT having already added six pence to a pint, the escalator is long past its sell-by date.”

According to latest figures, duty and VAT have now reached £1.05 per pint, a level of tax that the BBPA claims is totally unsustainable.

“At 12 times the beer duty level in Germany, Britain’s beer drinkers are now paying 40% of the entire EU duty bill, despite only drinking 13%,” continued the BBPA statement.

“As a result, beer sales have continued to fall, with the a drop of 3.4% in pub sales in 2011 – equivalent to 140 million pints, fuelling the current loss of pubs, which is still running at 16 per week.

By way of an alternative, the BBPA wants a growth strategy for pubs, which could secure 16,000 jobs over the next three years, mainly for young people, by tackling both tax and red tape in the sector.

BBPA chief executive Brigid Simmonds said: “We are facing a further, punitive tax rise of over 5% in the Budget, so action is needed now.

“We need policies that support pubs, and to put an end to these totally unsustainable tax rises.

“We need a tax policy that creates vital jobs for young people, at a time when this should be the government’s top priority.”

Meanwhile the WSTA is calling on the Treasury to “spare hard pressed businesses and consumers from another alcohol duty rise in this year’s Budget”.

A WSTA statement said: “The alcohol tax escalator threatens to deliver a 7.2% increase in March, even though duty and VAT already account for three quarters of the average price of a bottle of vodka and half the price of a bottle of wine.

“The rate of alcohol taxation in the UK is now so out of step with our European neighbours that visitors to the London Olympics will face paying 50% more for an average bottle of wine than if the Games were being held in Paris and triple what they would pay in Madrid.

“Pressure on the drinks industry is mounting, with the volume of UK alcohol sales falling by 3% in 2011.

“In pubs and restaurants, sales of wine dropped by 7% last year and spirits by 3%. Shops also reported a drop in sales of wine and spirits.”

WSTA interim chief executive Gavin Partington added: “We recognise the pressure there is on the public finances. However easing the duty burden on the drinks industry would boost growth and investment, helping the sector to play its part in the UK’s economic recovery.

“By scrapping the planned duty increase, the chancellor would also be providing some much needed relief to consumers whose household budgets are already being squeezed.

“With thousands of extra visitors heading to the UK for the Olympic Games, this is no time to force drinks prices up even further.”