by Gareth Groves
According to the Chancellor, 10,000 pubs have closed in the last decade. Yesterday, George Osborne announced that he was going to help the industry by not only ending the beer duty escalator but cutting a whole penny off the current duty figure. He’s generous like that.
The policy strikes me as both positive and pointless.
‘Positive’ because ending any of the alcohol duty escalators is to be welcomed. The policy masquerades as a ‘sin tax’ to deter us from crippling the NHS and trashing city centres. In reality it is much simpler than that. It is just a nice little earner for Number 11, a never-ending source of cash to help fill the barer-than-ever Treasury coffers. The fact of the matter is wine duty has gone up 50% since 2008 and the start of the economic crisis. Bibendum MD Michael Saunders elaborates on this theme over at the Huffington Post.
‘Pointless’ because the Chancellor didn’t extend the policy to wine and spirits – and given that wine and spirits make up over 40% of the drinks bought in pubs the chances are that our local hostelries are not going to be any better off.
It’s all very well taking 1p off beer duty but if you are going to put 10p on every bottle of wine (or 3.33p on every large glass to put it another way) then nothing is going to change.
It’s a classic budget day policy: good for a quick headline (London’s Evening Standard went with “Things can only get bitter”); good for a jolt of patriotic fervour (there’s nowt more British than a proper pint in a proper pub); and good for the annual tax revenue figures. Populism in action.
It’s just a shame that the coalition could have adopted an alternative policy that would have actually supported the on trade and had wider benefits for the economy.
The EU allows member states to introduce a differential rate of VAT for accommodation, food and drink in the hospitality sector. This policy was introduced to recognise the importance of this sector to jobs. France adopted it recently and created an extra 29,500 jobs in the first twelve months. Imagine if the government did the same over here, now that really would be a boost to the pub sector.
The long and the short of it is, George Osborne could have opted to encourage growth and jobs. Instead he penalised responsible drinkers and businesses whilst claiming he was doing the exact opposite. Another wasted opportunity.