Escalators, curves and pinheads

Last night there was a debate in the House of Commons about the beer duty escalator.

No, the e-petition hasn't reached critical mass and been fast-tracked into contention. It was an adjournment debate, one that lasts for half an hour at the end of the day's sitting and allows for an MP to speak and a minister to reply. Last night saw Gavin Williamson address the house on the beer duty escalator and the Economic Secretary to the Treasury, Chloe Smith, reply to his concerns.

You can read the transcript over at Hansard or watch the debate on the BBC Democracy Live website. I say debate, but it was more of a procession of MPs mentioning their local pub / brewery whilst agreeing that the beer duty escalator was A Very Bad Thing.

It was interesting to hear Williamson state that "the simple reality is that beer duty is getting to the point where it is too high and it is pricing people out of the market". According to HMRC figures, the percentage of a pint's retail price that's made up of duty has been consistently around 13-15% since 1994. Revenue from beer duty has continued to increase. He may fear that beer is about to peak its Laffer curve; maybe instead it's riding the peak of its revenue wave.

Various Members suggested tax breaks for cask beer ("those ales are available only in pubs") and for real ale (due to its "increased cost of production"). Not sure where that leaves take-home minicasks, nor that all kegged beer is cheaper to produce. One of them - come on down, Alec Shelbrooke - proposed raising duty on canned beer. He may just as well campaign for extra tax if the beer's name rhymes with darling...

But this is all dancing-on-pinhead stuff, isn't it? Chloe Smith was by turns forthright and dangerously ambiguous; "The revenue from (escalator) increases was included in the public finance projections at that time (of the Budget). It would now require the raising of other taxes to pay for removing them", she affirmed. Sounds fairly damning from a repeal point-of-view. As to exactly what the cost would be - £35 million in both 2013-14 and 2014-15 (as Office of Budgetary Responsibility's budget tax measures database suggests) or £105 million over both years (as some commentators have suggested) - I'm unsure. Smith did say "The value of removing the escalator would be £35 million for 2013-14 and £70 million after that". £70 million in total or £70 million in 2014-15? I've tweeted both Smith and the Treasury for clarification.

One thing is for certain. Duty revenue from wine is on track to overtake beer duty revenue sometime soon. The escalator isn't just beery - and beer's contribution is becoming less important. The spirit industry is lobbying hard to keep their contribution down, so I'd be very afraid if I were a cider producer. Something's got to give. I'll bet it won't be the alcohol revenue that attracts a greater export value.

1 comment:

  1. well keep in mind this is the same Chloe Smith who magicked up 550million, or was it 1.5billion, via "department underspends" vs Jeremy Paxman in regards postponing fuel duty for just 4months!! so 35million, 70million (for the record the Pasty tax u-turn cost the treasury 70million), 100million over two years, who cares its tiny in terms of revenue take for the government and the public finance projections,the national debt increases by more than amount that in a single day.

    And yet we know the crippling effect on pubs, breweries,real businesses that the beer duty escalator is having and will continue to have, so more fool the MPs involved in the debate for not making those points and not fighting or pushing the government harder on this issue.

    for all the hopes of getting the beer duty petition debated in parliament, if this is the kind of level of verve the MPs take the issue with and can be batted off with, then frankly whats the point.