Its no secret that pub numbers have been in decline for decades, but less clear is the role duty and tax policies may have played. Ahead of the 2018 budget, a number of industry-led campaigns have again been vying for the Chancellor's attention in calling for freezes on alcohol duties.
However as seen in the run up to previous budgets, questions over who really gains and who loses from alcohol duty freezes have been raised, with some stating that cuts or freezes actually harm pubs. Whilst clear or publicly available evidence may be lacking, some have pointed out that cuts and freezes to beer duty have seen falls in supermarket prices, but actually rises in pub prices. During the duty escalator period of 2008-2013 (for beer) the rising gap between pub and supermarket beer prices appeared to have been halted, as put forward in an IAS briefing on 'The rising affordability of alcohol' [pdf] and seemingly supported by evidence on tax changes in a 2012 RAND report.
The large shift in beer consumption away from pubs and towards home drinking has undoubtedly contributed to the decline in pubs, with 2016 representing a landmark turning point at which off-trade beer sales surpassed pub and on-trade sales for the first time. Whether or not primarily driven by an increasing on-off trade price gap, other factors such as changes in licensing legislation, the smoking ban and overall drop in alcohol consumption since 2004 may also have played roles. Whilst pubs have been in decline, total numbers of licensed premises have in fact been gradually rising since 2008, though with higher rates of off-trade growth in most years. Others may note that the particular types of pub is also significant, whereby pubs need to diversify their offerings to survive, particularly through food and hot or non-alcoholic drinks.
Save the local?
Meanwhile a £9 million 'Long live the Local' campaign has been underway calling for a cut in beer duty, recently delivering a petition to Downing Street with the backing of celebrity publican Jodie Kid. The campaign comes from the Britain’s Beer Alliance, a new organisation formed of a range of beer and alcohol industry bodies including big players such as SAB Miller, Carlsberg, Heineken - businesses who undoubtedly also derive very large incomes from off-trade sales. Meanwhile the British Beer and Pub Association (BBPA), also supported by some very big names and a long term campaigner for duty cuts, has also called for an extension of the £1,000 business rate given to the majority of pubs in the last budget. In 2016 a number of leading pub operations challenged the BBPA's claims that duty cuts had led to significant job growth and investment.
It is not only the beer sector calling for duty cuts. The Wine and Spirit Trade Association (WSTA) has also been pleading significant financial pressures on other drinks sectors. The WSTA says it has 'serious concerns over a planned increase to spirits duty at the Budget this month' and been calling on the Chancellor to back Britain's booming gin industry by again freezing duty on spirits. Miles Beale, Chief Executive of the Wine and Spirit Trade Association, said raising alcohol duty would be "stifling the spirits industry" but by freezing spirit duty the chancellor "would be allowing industry to invest, create jobs and grow while at the same time boost Treasury coffers.” The WSTA has also said pubs would be under threat from duty rises and that English wine makers are also being restricted by the 'significant tax burden'.
Duty increases: treatment, NHS funding and prevention?
Earlier this year Balance, the North East's regional alcohol group, conducted a survey which found 89% of publicans said alcohol duty cuts had no impact on their business, whilst 64% believed increasing supermarket prices would help the pub trade. This week a Morning Advertiser article also argues supermarkets selling pints for as little as 79 pence is 'adding pressure to pubs' as they 'fight a losing battle' against supermarkets, but calls for duty cuts in response.
Balance also recently announced findings from a survey indicating nearly half (49%) of North Easterners support increasing alcohol taxes if the money raised went into funding public services impacted by alcohol use, such as the NHS and police. Balance says cuts in alcohol duty since 2013 have cost the government £4 billion in lost revenue – equivalent to the salaries of almost 40,000 GPs or more than 120,000 social workers.
Health and alcohol groups of course tend to call for duty rises, usually as a population level pricing lever but also as a means to raise funding for services. The charity formed by the merger of Alcohol Concern and Alcohol Research UK recently called for a 1% increase in alcohol duties to raise £100 million each year which it says if invested in alcohol treatment 'could save the NHS and other public services around £300 million annually.
The hypothecated tax, dubbed a treatment levy, comes as ongoing cuts to treatment budgets have resulted in a 'crisis' which is likely to be behind falling numbers of people receiving formal help. Concerns that the situation will worsen have also been raised as a new public health funding structure comes into effect in 2020. In 2015 Alcohol Concern also called for a spirit duty rise of 4% above inflation to protect children on the basis that as children accessing alcohol treatment consume more spirits than any other type of alcohol.
Where next for pubs and pricing policy?
Whilst the run up to the budget consistently sees various forms of alcohol duty calls and lobbying, Scotland's introduction of Minimum Unit Pricing (MUP) may soon provide some valuable information on the role of price in relation to the wellbeing of the pub. Whilst tax changes may have various impacts on consumption and business activities, the ability of large supermarkets or producers to absorb or offset tax rises has been well noted.
In contrast, many feel MUP may help towards levelling the playing field by reducing the price gap between the on and off-trade, albeit that MUP’s main goal is to reduce rather than shift consumption amongst heavy drinkers. The pub though remains an important part of the British economy, and indeed as part of the cultural experience sought by many visitors to the UK. Others also consider the pub a valuable community asset and indeed as safer, regulated environment for drinking than the home. The fate of the pub, and indeed the role of future tax and pricing changes in relation to it, remains to be seen.
Beer duty cuts actually damage pubs, by reducing relative price of alcohol in supermarkets #Budget2016 pic.twitter.com/nG8qtFNEg4
— AHA UK (@UK_AHA) March 15, 2016
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