The headline figure from the 2014 Budget from a drinkers point of view was that beer duty is being cut by 1p a pint, the fuel duty escalator was being officially scrapped and that cider and whisky duty is being frozen.  But if you delved deeper into the figures, the changes are a bit more nuanced than that.

The change in beer duty is changing according to strength and the lower the alcohol levels in the beer the more the tax is being reduced.  Taking the government figure that normal strength beer is cut by 1p a pint, equating to beer duty being cut by 2%, low strength beer duty (below 2.8%) is being cut by 6% or 3p per pint and high strength beers above 7.5% are being cut by 0.4p (duty cut of 0.75%).

The cider rates are staying the same with a premium in duty being charged for sparkling ciders over 5.5%, with a similar premium level kicking in at 7.5% for still ciders.  The difference between normal and high strength still ciders is not insignificant with you paying 34p a pint in duty vs 22p a pint for the weaker variety.  But with sparkling ciders, the gulf is huge, with premium strength paying £1.47 per average pint, whilst normal strength pays the same 22p per pint as still ciders (http://www.hmrc.gov.uk/rates/alcohol-duty.htm, based on 175 pints to a hectolitre, 2013 rates).

Lets look at the reality of all this in the big picture.   Farmers are having a nightmare this year.  In the south, large areas of land are only just re-appearing from the water and are not likely to be producing the same yields of beer creating crops such as hops and barley as they would after a normal winter weather cycle. Across the country, fields are taking longer to be ready for crop seeding after a winter soaking.  The reality is that many of the flooded fields will not be producing any useful crops at all this year.

This is going to push up prices of the raw materials which makes our beer, especially some of the big brands who use British hops for the majority of production.  For those brewers who source more of their hops from the new world and America, the effect is somewhat mitigated, however barley price increase will affect brewers large and small, craft and mainstream on a more consistent basis.  The effect of this cost price increase when it reaches the customer over the summer will more than balance out the cut of between 3p and 0.5p on a pint of beer. Cider makers will be hit by the effects of flooded orchards and damaged trees from the heavy winds over winter.  especially when you consider that the source of much of our cider apples is in the South and South West.

Several pub companies have already promised to pass on the cuts to their pubs in regard to the cost of beer and cider.  Greene King is one of them.  However what they forgot to mention is that each year they increase the price of beer to the tied pubs they lease out by up to double figures in pence.  For example, after the price of beer was cut by 1p in the 2013 budget, Greene King increased the price of beer by up to 11p just a few weeks afterwards.   Other pub companies were not shy in doing something similar.

The amount of corporate and trade backslapping after yesterdays duty cut is totally out of proportion to what has been achieved.  Mike Benner, Chief Executive of CAMRA said “CAMRA is delighted…not only about keeping the price of a pint affordable in British pubs but helping an industry…on its long road to recovery”.  A cut of 1p does not make a pint any more affordable.  I probably drink 500 pints a year (on and off trade), on this basis,  I will save £5 a year or 1½ pints, not exactly a stimulant for trade recovery.  SIBA seem to treat themselves as a one man campaigning machine stating “This evidence of an industry buoyed by the duty cut, which we presented to Government both centrally and locally, through our members’ lobbying of their MPs, is one reason why we have been given what we asked for” .  James Armitage, head of marketing at Enterprise Inn said “This reduction in duty will be welcomed by all of our Publicans not to mention pub-goers across the country.”, but forgot to mention the effects won’t last for long before a nice jump in prices is introduced across the estate.

Lets put this in perspective.  Most other drinks are going up in price, cost of living is not being matched by wages, life is hard for many people, 1p off beer is nothing compared against this  greater problem.

  1. Curmudgeon says:

    It’s not just a 1p per pint cut, though, it has to be compared with an increase of at least 5p a pint and probably more like 10p if duty had been indexed to inflation. Two consecutive 1p cuts compared with two years of duty escalator means that a pint in a pub is now around 20p cheaper than it otherwise would have been. And the escalator, while its effect may have seemed trivial in each year taken in isolation, over a period of time really ratcheted up, as CAMRA kept saying.

    I take the view that this year’s budget represents a very significant sea-change in the government’s general approach to alcohol taxation and thus is well worthy of celebration – even more than last year’s.