VAT RISE IN BUDGET WOULD HIT BEER AND PUBS HARD

WITHOUT CUT IN DUTY, SAY EXPERTS

 

• VAT hike would increase price of a pint in pubs by 6p and cost more than 7,000 jobs, says independent report

 

• Increasing VAT but reducing duty would net the Treasury more than £100m a year in tax receipts

 

• Consumer and industry groups unite to call on George Osborne to support Britain's beer and pub sector

 

An increase of VAT to 20% would increase the price of beer by 6p a pint in pubs causing the loss of more than 7,000 jobs a year unless there was a compensatory cut in duty, according to independent research published today by beer and pub groups.

 

The report by Oxford Economics forms part of a budget submission to the Chancellor by the British Beer and Pub Association, the Campaign for Real Ale and the Society of Independent Brewers.

 

It is the first time the three organisations, representing all parts of the sector - brewing, pubs and consumers - have joined forces in this way.

 

The submission calls on the Chancellor to freeze duty for a sustained period to support community pubs and to set out plans for a fairer tax system that recognises beer's status as a lower strength British-produced drink.

 

If, however, VAT is increased to 20% then the three associations call for a compensatory cut in duty rates of 4% to ensure that beer in pubs was not taxed more.  Such a move would also increase tax receipts to the Exchequer by £114 million in 2010/11 and £134 million in 2011/12, according to Oxford Economics.

 

Pubgoers are being urged to lobby the Chancellor in advance of his emergency budget on 22 June by going to  /support-us/postcards/chancellor-june.aspx

 

The report found that:

 

• An increase of VAT to 20% would increase the cost of a pint of beer by 6p, increase the rate of decline in beer sales and cost more than 7,000 jobs a year;

 

• A VAT rise would widen the price differential between the on and off-trade and particularly hit beer as opposed to other drinks because of its high reliance on pub sales.

 

• To offset the impact on the price of a pint of beer in pubs from a 2.5% rise in the VAT rate, duty would have to be cut by 1.6p per pint (or 4%).

 

• Implementing a 2.5% increase in VAT and a 1.6p cut in duty on beer would raise Exchequer receipts from beer by £114 million in 2010/11 and £134 million in 2011/12.

 

Brigid Simmonds, chief executive of the British Beer and Pub Association, said:

 

"This report shows that a decision to raise VAT would have a disproportionate effect on beer and pubs at the expense of the off-trade.

 

"With dozens of community pubs closing each week in the UK such a move would have a devastating effect on local communities and on the beer and pub industry with more than 7,000 jobs being lost every year.

 

"That's why we are calling on the Government to reduce duty in the event that VAT is increased to ensure that pubs are not unduly affected by the change.  In doing, so the Treasury will benefit from more than £100 million more into the coffers through additional tax receipts."

 

Mike Benner, Chief Executive of CAMRA, said:

 

"Pubs provide the vibrant heart of thousands of communities across Britain.  An increase in VAT would have a devastating impact on community pubs by forcing yet further pub price hikes in the midst of an already unprecedented crisis for pubs.

 

"Tax on beer has rocketed by 26% since the start of 2008 and enough is enough.  We are therefore calling on the Government to avoid hitting pubs with any further duty or VAT increase.

 

"These are difficult times for the public purse, but the Chancellor needs to support pubs to save jobs and ensure ordinary people can continue to afford to drink sociably in community pubs. Well run community pubs are essential to our society and should be not be subjected to excessive levels of taxation."

 

Julian Grocock, Chief Executive of SIBA, said:

 

"Members of the new government have put on record their support for British pubs, British beer and responsible British drinkers. Now it is time for them to put their words into action and show how they are different from their predecessors.

 

"This is a joined-up strategy from a beer and pub coalition for a sustainable industry that will pay its way in a reviving economy. Surely we can expect this administration to understand the power of coalition and co-operation."