Delivering his third Budget as Chancellor, Osborne announced no further changes to the current policy on alcohol duty. However that means the continued policy of an escalator that will see duty on beers, wines and spirits rise at the rate of 2 per cent above inflation until 2015. The 5 per cent rise in alcohol duty will come into force at Midnight on Sunday.
Kate Nicholls, strategic affairs director at the Association of Licensed Multiple Retailers (ALMR) said the Budget left the on-trade at a competitive disadvantage to supermarkets and Osborne had been misleading by describing policy as unchanged.
“We needed the additional costs and burdens of today’s Budget like a hole in the head. The Chancellor may have said 'no change' but a 5 per cent increase in excise duty is nothing to be sneezed at. It will be felt immediately in price increases across the bar. Operators were already warning that the UK’s tax regime for pubs and bars is threatening investment and the Budget has done nothing to address that," she said.
According to the British Beer and Pub Association (BBPA) the continued escalator will see the cost of an average pub pint of lager rise to £3.17. Brigid Simmonds, chief executive of the BBPA, said the Chancellor was continuing to ignore the views of industry, consumers and some 100 Parliamentary colleagues who have signed an Early Day Motion condemning the policy.
“This is a huge lost opportunity to put British jobs and pubs first. Beer tax has now risen by 42 cent since the misguided escalator policy was introduced just four years ago. It means the loss of over 5,000 jobs this year, and hundreds of pub closures," she said.
"Since 2004, the tax on beer has risen by 60 per cent, but tax revenues have fallen far short, with only a 10 per cent rise in duty revenues despite the huge toll in lost jobs and pubs – and lost revenue through VAT as beer sales have fallen by 25 per cent. It beggars belief that further hikes are planned next year. The Government must rethink this damaging policy before even more harm is done to the British brewing and the pub trade," Simmonds added.
The BBPA has joined with the Campaign for Real Ale (CAMRA) and the Society of Independent Brewers (SIBA) in calling for those against the duty rise to sign an 'e-petition' against the escalator.
Mark Hunter, chief executive of brewing company Molson Coors UK & Ireland said the alcohol duty escalator was continuing to hurt the UK disproportionately in comparison to the rest of Europe.
"The escalator has lost all sense of proportion and logic. Beer drinkers in Britain already pay a whopping 40 per cent of all European beer tax and yet drink only 13 per cent of the beer and we are disappointed that the government has chosen not to end this crippling policy,” he said.
The Chancellor also announced a major change to the duty paid on gaming machines in pubs in the Budget. A new Machine Gaming Duty (MGD) will replace the Amusement Machine Licence Duty (AMLD) and VAT from 1 February 2013. The new rate of 20 per cent is too high and a 'punitive' move which could see fruit and quiz machines disappear from pubs and bars, according to Simmonds.
“This is a bitter blow. For this new tax to be revenue neutral it should not have been more than 15 per cent. It will cost the pub sector £14 million in extra taxes next year," she said. The ALMR claimed it would add 10 per cent to pubs bills.
Despite describing the Budget as rewarding work and backing business, Osborne omitted the pub or hospitality sector from the list of good British industries the Government was backing.
There was positive news with a doubling in the planned cut in corporation tax, no rises in fuel duty, investment in enterprise zones and super-fast Broadband cities and help for businesses requiring loans. However there was no cut in VAT for hospitality businesses and a consultation on tax stamps on cans or bottles of beer to prevent duty fraud was not welcomed by the industry or the BBPA.
A consultation was announced to look at loopholes in VAT such as in the levels on takeaway food vs. the rate paid by supermarkets. However Tim Martin, chairman and founder of JD Wetherspoon said while the cuts in corporation tax would make Britain more competitive, the pub sector would remain at a disadvantage to supermarkets on the issue of VAT.
“We are also very disappointed that pubs will continue to pay 20 per cent VAT on food when supermarkets pay nothing, enabling them to cross subsidise their prices for alcoholic drinks,” he said.
Osborne also said the Office for Budget Responsibility (OBR) was predicting a drop in inflation and that unemployment would peak this year at 1.67m and the tax system would be made fairer with an increase in the personal allowance. It was also confirmed Sunday trading laws were to be eased during the Olympics,
However Nigel Wright, chief operating officer of managed pub group TCG, said any knock-on benefits to pub operators would be negligible.
“Customers in our local pubs in particular will feel the benefit of a few extra pounds in their pockets as a result of the increased personal tax allowance. The tragedy is that the feel-good factor is wiped out by the sharp increase in beer prices through the continuation of the duty escalator," he said.
More details that could impact pubs and the hospitality sector as a result of the Chancellor's 2012 Budget can be found here.