Tim Dewey: Budget can ease pubs' financial hangover

WHILE much political and media attention is focused on Brexit (and Donald Trump), it is easy to lose sight of some of the important domestic challenges that face our economy.
Will beer duty be cut in the Budget?Will beer duty be cut in the Budget?
Will beer duty be cut in the Budget?

A matter dear to my heart is the raft of issues that the brewing and pub industry face when it comes to taxation and legislation. These include business rates, the implementation of the National Living Wage, the Apprenticeship Levy and auto-enrolment for pensions. All of which put an increased burden on our industry which will either need to be absorbed or, ultimately, passed on to consumers (who, we know, face their own financial challenges).

One of the most pernicious issues is the business rates system which has remained un-reformed, even as our country’s economy and business activity shifts dramatically in the digital age. It might surprise you to know that while the pub industry accounts for 2.8 per cent of business rates it only makes up 0.5 per cent of rateable business turnover. Recent changes by the Government will actually raise business rates for over 15,000 pubs, with many facing huge increases.

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Media reports might suggest that this is primarily a problem for London, but if I tell you that one of our own pubs, The Lord Rodney in modest Keighley, has seen an increase in its rateable value from £29,500 to £72,000, you will get a sense of the issues being faced by pub landlords throughout the United Kingdom, and not just in the so-called ‘prosperous South.’

I have written before of the challenges faced by our industry by the introduction of the National Living Wage. While we all want to see higher wages, the target of £9 per hour implies an average annual wage increase of 5.8 per cent a year and will have a knock-on impact throughout company’s pay scales. It also enshrines age discrimination into law – why should a 25-year-old be legally entitled to a higher wage than a 24-year-old doing the same job?

Faced with these challenges, our 
sector could really benefit from positive action from the Government. Cutting beer duty in the Budget is one way that the Treasury could act to keep costs for us, and prices for you, down.

Beer duty is still too high. This despite the abolition of the controversial ‘duty escalator’ four years ago, which saw beer tax rise by 42 per cent from 2008 to 2013.

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While we have seen a hat-trick of beer duty cuts and, last year a freeze, the Treasury still collects around £12.6bn each year in beer duty, and our duty rates are around three times the EU average. For example, in comparison with Germany, British drinkers pay 13 times more tax on their pint. In fact, at a penny a year, it would take 35 years to bring our duty rates down to a position where they were in line with rates seen in our neighbouring countries.

Seventy per cent of all alcoholic drinks sold in pubs are beer and 82 per cent of this beer is brewed in Britain (compared to less than one per cent of wine consumed in pubs originating in the UK). This means that a lower duty rate on beer benefit both the pub and the brewing industry.

A thriving pubs sector is good news for jobs. We are now seeing the benefit of the cuts in the duty rate previously secured. The British Beer & Pub Association has recently released figures showing employment in the beer and pub sector is up by 29,000.

The beer and pub sector is deeply embedded in Yorkshire’s economy – we have over 4,600 pubs in our region and as a sector we employ over 83,000 people, 46 per cent of whom are young people 25 or under.

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There are also 144 breweries across Yorkshire and the Humber, all of which would greatly benefit from the enhanced opportunity to invest in their business and their people that a cut in beer duty would help to promote.

As I stated at the outset, beer duty is not the only important tax issue we face. We must continue to work with Government to reform the unfair system of business rates so that they work better for our industry. This will take time, and the complex policy challenges an issue such as this presents will have knock-on effects for other sectors, and for the Government’s coffers.

That is why the focus should be on a cut in beer duty. It is a measure that the Government has turned to in the past and it provides real, immediate and targeted benefit to our sector and pubgoers. It’s a simple step to take, and one that costs the Government relatively little.

Tim Dewey is chief Executive of Timothy Taylor’s.