George & The Budget

The Beer Duty Escalator scrapped?  AND Beer Duty reduced?  Is Osborne a madman, genius or a glory seeker?

It’s a widely quoted fact that beer duty has risen by around 42% since Labour introduced the Duty Escalator in 2008, and that has had a big impact on beer prices as you would imagine – it has increased it, yes, but also it has cuased the industry to hold off adding other costs to the price of a pint, reducing profitability of pubs, and brewers.  I personally think that as a result beer is around 50p a pint higher than it would otherwise have been, and that if all costs were added, beer would be at least 50p a pint more expensive.  So yes, the industry is rightly celebrating George Osborne’s decision to scrap it – even if we all dearly wish it had never been implemented in the first place (it had patently done nothing to stop alcohol being sold at stupidly low prices).  And the further decision to reduce Beer Duty by 1p a pint was a cause of many choking brewer, publican and drinker.

It would be extremely naive to actually believe for a minute this 1p will be removed from the price of a pint, because it won’t (face it, would a £3.20 dropping to £3.19 make any difference to you, beyond filling your pocket with a penny?).  Of course some pubs will drop a penny as a gimmick, but in reality most won’t.  But importantly what they won’t be doing, is add another 5p or 10p to a pint as a result of the budget.  Prices will still rise at the bar as the years move onwards, as beer, like everything else, is getting more expensive to produce (25% or so more before duty rises over the last 3-4 years is a fair estimate).  And pubs are getting more expensive to run (energy costs etc).

So, look at today as a reduction in the rate of beer price increases over the next year.  And as for George?  Well, what has got all the headlines?  As a business, we are as excited by the changes to business taxes (Corporation Tax, Employers Contributions, Personal Tax Allowances etc) as by the duty cut.  But what is making George all nice and cuddly with the press, and no doubt the public?

Yup, a penny off a pint that’ll you’ll probably never see, and that of course won’t be his fault.  It’ll be ours as an industry, and he’ll be able to beat us over the head with it when any of us challenge any duty rise in 2014, or indeed whatever scheme is devised to replace Minimum Pricing.  He’s a clever man, and possibly an evil genius.  But for now, we quite like him.