Chancellor of the Exchequer Rishi Sunak presented this year’s autumn budget on 27 October. In advance of the event, CAMRA had written to him with its submission and had also asked its members to lobby their MPs for the following.
To help pubs:
•A new draught beer duty rate;
•A fairer business rates system for pubs;
•A permanent VAT cut for hospitality businesses.
For a strong and diverse brewing sector:
•Positive reform of Small Brewers’ Relief;
•Increasing the ABV threshold for the lower strength beer duty band.
For supporting cider makers:
•A progressive duty system for cider producers;
•Raising the minimum juice content for cider.
So what did we get? Let’s look at business rates first. The existing 50% discount on rates bills up to £110,000 for hospitality businesses is to continue for another year. The detailed criteria for eligibility will be published ‘later this year’ but, at face value, this is not much help for many pubs in London, given our rateable value levels. Some progress has been made on the much needed review of the system, with the publication of the review’s initial results.
It looks however as if there will be no substantial change. From 2023, revaluations will move to a three year cycle and the Government has promised adequate funding to implement this. The basis of the valuation will remain ‘Fair Maintainable Trade’ and, as well as lease and rent information, the ratepayer will be required to submit details of any changes to the property each time. Consideration is being given to allowing businesses to invest in property improvements, especially ‘green’ technology, without their being penalised by an immediate increase in rates arising from their increasing the value of the property.
As regards VAT, nothing. The reduced rate for hospitality businesses of 12.5% will still only run to 31 March next year, with the full rate of 20% applying from 1 April. There was no increase in the registration threshold. This remains at £85,000.
As regards beer, the ‘cost of living’ (RPI) increase in duty that was due next year has been cancelled and duty rates have been frozen until the new system comes into effect. As we had hoped, a welcome concession has been made to the existing duty reduction for beers below 2.8% ABV. This will be extended upwards to 3.5% ABV.
So, now we get to the fun bit: the new system. We have got something akin to what we were asking for but not in the format that we were expecting. Brewers pay duty ‘at the brewery gate’ on what they sell so the effect of any reduction affects the price that they charge. Duty rates for draught beer and cider will be reduced by 5% but there are conditions:
•It only applies to beer/cider sold in containers of a minimum of 40 litres;
•That container must be designed to be connected to a dispense system;
•It only applies to beer/cider with an ABV below 8.5%.
A firkin (72 pints), incidentally, is 40.9 litres.
It’s hard not to suspect that the Government was guided by the input from the big brewers because of the volumes involved. To put the situation into some sort of perspective, Molson Coors turn out three million pints of beer a day at their Burton on Trent plant. That said, from the outset, let us be positive. The principle of a reduced rate of duty for draught beer and cider has been conceded. This is progress and, given that it does not come into effect until 1 February 2023 and is subject to consultation, changes are possible. I’m sure that readers will immediately appreciate that the size limit disqualifies craft brewers who operate using 20 and 30 litre kegs, as well as cider producers who sell in ‘bags in boxes’. That has to change. The requirement for connection to a dispense system also needs clarification. For example, is a gravity tap a dispense system?
There are also changes to the small cider producers’ relief scheme and, of course, the new arrangements for Small Brewers’ Relief have still to be settled. I will cover these at a later date.
To sum up, CAMRA’s National Chairman, Nik Antona, said, “The chancellor has listened to thousands of CAMRA members who have long called for a change in the way alcohol is taxed. A new, lower rate of duty for draught beer and cider served in pubs and clubs establishes an important principle in the taxation system – that pubs are a force for good in our communities and should be supported to help them survive and compete with the likes of supermarkets. Our task before this new duty rate is implemented in 2023 is to make sure that the new, lower draught duty rate applies to beer and cider served in smaller containers too, so that as many pubs, breweries and consumers as possible can benefit.
We will be using the government’s consultation on how this new system should operate in practice to make this case. In the meantime, measures like duty freezes and a 50% cut in business rates in England for another year will be welcomed. Our pubs and breweries are still recovering from the pandemic, face rising bills and costs and will continue to need as much support as they can get so they can rebuild their businesses and thrive in the years to come. Cutting tax for lower ABV drinks will incentivise lower-strength alcoholic drinks, while new financial support for smaller producers – including cider producers – and continuing discussions around a 50% minimum juice content are encouraging news for both cider makers and consumers. These measures should help to improve quality and choice at the bar. CAMRA will continue to engage with the government on the planned reforms to small brewers’ relief and call for a solution that doesn’t require some of the smallest breweries to have to pay more tax.”