UK Treasury to raise duty on beers over 7.5%

Posted by on Dec 3, 2010 in Beer Duty | 2 Comments

On Wednesday the Government published a Review of Alcohol Taxation [pdf], the stated aim of which was to address the consumption of cheap, “super-strength” lagers. The outcome was that the Treasury are to raise duty on all beers over 7.5% abv, and reduce duty on all beers under 2.8% abv – ostensibly to encourage producers to explore weaker brews at the expense of stronger ones. The actual amount of duty will be decided in the Spring budget, and implemented from September 2011.

The beer blogosphere has been in uproar over the decision, as the blanket tax increase on all beers over 7.5% will include the strong IPA’s, imperial stouts and imported Belgian ales we all rave over. Everyone seems to agree there is a problem with strong beer – but clearly strong beers are not equal. Westvleteren 12 is not a “super-strength” lager. Neither is Kernel Export Stout. One of the major failings of this report is in not differentiating between the ‘problem’ drinks, and the ‘craft’ drinks.

Actually, paragraph 4.7 of the report does mention “highly-priced, premium beers that are produced at higher strengths” – but then dismisses them as a niche product, constituting only 20 per cent of strong beer sales. It continues with the vaguely insulting “their consumers are not very price sensitive because they choose these beers specifically for their taste and already pay a high price.” So that’s all right then – the old ‘those who can pay, will pay more’ argument.

But the ‘problem drinkers’ are those who cannot pay more – so increasing the duty on their super-strength beers will push them into other drinks. The young binge drinkers don’t touch Carlsberg Special Brew, they go for spirits. The majority of tramps I pass seem to favour strong ciders (and more on cider later). This is the second failing – strong beer constitutes less than 0.5% of total alcohol sales in the UK (according to Brigid Simmons, CEO of the British Beer & Pub Association).

But the Government argue that by reducing duty on beers under 2.8%, it will encourage brewers to come up with low-strength alternatives. Fair enough, but the problems of storage make it hard enough already for them to produce low-abv beers for the pub trade. Not that many pubs serve a wide range of beer over 7.5% as it is. The next failing of this report is the supermarket issue – when you can buy 24 cans of Fosters for £10 in Tesco (as happened last year), why would you send your 2.8% abv beer there to be stocked?

‘Problem drinkers’ at home stock up on these cheap supermarket deals – how many of them are drinking beers over 7.5%? Likewise the images on the news from town centres on Friday nights – how many of those fighters and pukers were in the pub drinking beers over 7.5%? How is raising duty on >0.5% of alcohol going to stop the ten pints and a punch-up brigade? These ‘problem drinkers’ universally drink cheap lager, cider or spirits.

The popularity of cider has boomed over the past few years, with mass-marketing campaigns for Magners, Bulmers etc all over the media. Duty on cider was cut by 2% in 2002 and then frozen over the next four years, encouraging this growth. But then the final Labour budget in 2010 increased duty by 10% on all ciders. Small producers were outraged, quite understandably. The Con-Lib coalition Government then introduced a minimum juice content for a ‘cider’ to qualify as ‘cider’ for duty purposes, to reduce consumption of cheap, industrial versions. This week’s alcohol tax review states that any further changes would unfairly penalise small, traditional cider producers.

The small, traditional beer producers also have some measure of protection – the Small Breweries Relief awards up to a 50 per cent reduction in duty for producers of less than 60,000 hectolitres. However, the Treasury felt that “this relief was considered outside the scope of this review because of the limited links to public health and public order objectives”, and so all brewers, irrespective of size or output, will have to pay the new increased duty.

Paragraph 4.15 goes on to justify this by stating “beers over 7.5% abv represent less than 2 per cent of total production of small breweries” – I’d like to know how they came up with this figure – there are some that specialise in traditional ales, or experiment with stronger styles. How many ‘problem drinkers’ get admitted to the local A&E after abusing Madcap Brewery Liquorice Madness, or Samuel Smith’s Yorkshire Stingo?

The Campaign for Real Ale have taken a bit of flak over the blogosphere for comments made by the Chief Executive Mike Benner. While roundly praising the incentivising of brewers to produce low abv beers following the drop in duty on 2.8% or less beers, he described the raising of duty on 7.5% and above beers only as “disappointing”. I for one would rather drink a higher strength beer than a ‘low strength real ale packed with flavour’ as he put it (and I’m a CAMRA member).

Mind you, this might lead to the revitalising of the British Mild industry. At the end of the day, will this stop us drinking and reviewing high-strength beers from the UK and the rest of the world? No. Will it stop ‘problem drinkers’ ruining their lives and the lives of others? No. They will carry on as before drinking massive quantities of cheap lager below 7.5%, or switch to harder alcohol instead (duty on wines and spirits was unchanged in the report, as wine has ‘no public health risk’ and stronger spirits ‘already pay more duty’).

The problem here is that cheap, strong alcohol will always be available – and people will find it. Supermarkets will continue to stock frantic deals on large amounts of bargain booze. Targeting an alcohol sector that accounts for less than half of one percent of total sales will not have a noticeable effect. Making the raised duty payable by all brewers unfairly punishes small producers. Writing off consumers of premium beers as being ‘not price sensitive’ is insulting. If the Government wanted to have a direct effect on the nation’s health, maybe they should raise tax on food items with a fat content higher than…say…7.5%?

When this legislation comes in next year, we’re making a promise that the BeerCast will only feature beer over 7.5% abv for a month.

2 Comments

  1. Simon
    December 3, 2010

    “beers over 7.5% abv represent less than 2 per cent of total production of small breweries”

    Going over ratebeer there are 17933 beers from british breweries, 672 of which are 7.5 or over. So that’s 3.7% so it’s probably a fair number. Certainly in terms of production I imagine it’s much lower than 3.7. I think the numbers in the report are fine and:

    “their consumers are not very price sensitive because they choose these beers specifically for their taste and already pay a high price.”

    is absolutely a fair comment. If I have to pay 11 pounds rather than 10 for Abstrakt 05 then I’m going to pay, If I have to pay 3 pounds rather than 2 for a bottle of Hardcore IPA then I’ll do that because it’s a fantastic beer.

    Having said that it seems that this is a very strange way of targeting super strength lager – why not impose a minimum price per unit which will have the same impact on lager but relatively little on e.g. the Abstrakts of this world…

  2. Richard
    December 6, 2010

    Thanks for the comment Simon – I think most of the uproar from the beer bloggers stemmed from the seemingly abstract (no pun intended) way the figures had been derived. The most important – the 7.5% abv – was copied over from the cider legislation, yet they are totally different cases. I still think the majority of ‘problem drinkers’ opt for strong cider over strong beer.

    I totally agree about craft beer fans like us paying more – it’s not as if we’re going to stop buying the beers we like – I just think it’s unfair of the Government to assume that’s our position and dismiss us en masse.

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