Increasing Draught Relief would assist take handbrake off hospitality, says brewers boss

Who can forget those dark days of Covid – we were stuck at home, unable to socialise and prevented from enjoying even a pint in the local pub. It reminded us how important these simple pleasures are and how essential local businesses are to our communities.

Many people responded to the pandemic by supporting businesses such as their local independent breweries where they could. These breweries have a special place in our society. They are respected in their heartlands, offering sought-after local beer and providing a way to reconnect with friends and families after the pandemic.

Over the last few years, as the country recovered from the pandemic, demand has been strong for independent beer. Yet in the past year we’ve seen three breweries a week close for good in the UK. That’s 140 valued community assets and thousands of local jobs have been lost.

Part of the problem is the heavy tax burden carried on the shoulders of these small businesses. The brewing and pub industry is one of the most taxed sectors in the UK. Breweries pay an astonishing 40 per cent of their turnover in tax while online tech giants and gambling companies pay a fraction of this rate. This squeezes out any cash that could be invested in our hospitality sector into the Treasury’s money box. While at the same time online businesses, many owned abroad, go from strength to strength. You can see the impact of this on every high street across the UK.

The recent furore over business rates for pubs and the eventual U-turn this week clearly demonstrated the damage that this broken system is inflicting on our communities. Business rates are an analogue system in a digital age crying out for real and meaningful change. We live in hope that they will be reformed as the Government has promised.

Our sky high alcohol duty rates are also part of the issue. Beer duty was first introduced in 1643 so has been part of national life for generations. But we now pay the second highest rates of it in Europe which nets the Treasury £3 billion a year. To make it worse, in a few days on 1 February it will rachet even higher as it jumps by 3.66 per cent.

Helping hand: Draught Relief means tax on a barrel of beer sold in community pubs is charged at a lower level than cans and bottles sold in supermarkets

But there is an opportunity to improve it. The previous Sunak government introduced a mechanism, called Draught Relief, where tax on a barrel of beer sold in community pubs is charged at a lower level than cans and bottles sold in supermarkets. The Treasury could widen this gap to reflect the unique role of our community pubs and independent breweries and the additional costs of running venues that bring people together.

Research we commissioned by the Centre for Economic and Social Research (Cebr) found that increasing this gap to 20 per cent could create an additional 2,200 jobs in the on-trade beer market, contributing £70 million to local economies. If the Chancellor wanted to go further, a 50 per cent differential could create nearly 9,000 jobs and generate £265 million.

In short it would help take the handbrake off business to help create more jobs and invest in their venues.

The policy also helps the government hit its public health objectives by encouraging people to consume alcohol in the controlled environment of a pub rather than at home. It’s a rare policy that wins on many levels.

It has been refreshing to see pubs at the heart of the national debate for the last few weeks. The only regret is that it took an existential crisis to bring that about and to remind people just how much they would miss them once they are gone.

The Government acknowledged the error they made on business rates and vowed to help rejuvenate the sector over the next few years. Business rates reform will be a challenge but fine-tuning beer duty will also help create a fairer playing field in the digital age.

I am sure you will all raise a glass to that!