Well, what a massively disappointing budget for the pub trade, brewers and pubgoers alike in the UK. George Osbourne upheld the excise duty escalator (as put in place by the former Labour government) which will have disastrous effects on the industry and actually bring in less revenue for the treasury! It is estimated 10,000 jobs will be lost across the industry from breweries to pubs, so that’s another 10,000 people on benefits too! If they all receive £10,000 in mixed benefits (jobseekers allowance, housing etc.) that is an extra £100 million a year out of the taxpayers’ pockets! Not to mention the loss of revenue from 10,000 people who were actually paying into the system with national insurance and PAYE!
There were parts of the budget which seemed quite good on the surface with some free thnking ideas, such as the reduction of corporation tax. To some this would appear to be giving big companies a tax break, but in reality most small businesses are also limited companies who pay corporation tax, so this is putting more money back into their business which they can hopefully use to invest in themselves. Cutting taxes encourages people to work harder as they get to keep more of the rewards for themselves.
Increasing taxes such as excise duty – which also has VAT charged on top! – will only penalise already struggling businesses. Historically every time the treasury has increased excise duty they have actually received less money as people consume less. It is estimated this duty rise will reduce their income by £40 million in the coming year – plus another £8 million in VAT of course. So by my reckoning that makes us £148 million worse off, with more people out of work and more UK manufacturing lost.
So why have they done it?
The supermarkets regularly sell alcohol way below cost, make a loss and claim VAT and tax relief on the loss. They don’t care what products they use as loss leaders as they can make the difference up on another product. After all they now sell food, booze, TVs, fridges, homeware, clothes, insurance, mobile phones, garden sheds…… the list is endless. Pubs on the other hand have one main product – alcohol, with some doing food or accomodation. Increasing excise duty will hammer the already suffering pubs who have no other income stream to switch to. 25 a week closed last year, and we can expect that to increase dramatically this year. The government had the chance to rebalance the regulated on-trade and the unregulated off-trade sale of alcohol with the recent proposed minimum pricing scheme. They buckled under pressure from the supermarkets and came up with a minimum pricing structure which is completely useless and ineffective. They could have simply brought in a new tax on the sale of alcohol for off premise consumption which would have brought in hundreds of millions of pounds for the treasury and protected the 10,000 pub related jobs that are now under threat. Not to mention cleaned up the anti social behaviour on our streets, and relieved the pressure on the NHS and police. Instead they have backed the duty escalator which will cost us another £148 million per year!
The supermarkets will be delighted by this duty increase – it will further damage the pub industry and give a greater market share to them. But what does the UK government get out of it? Perhaps they believe we have too many pubs. Close another 10,000 and with the new legislation to sidestep local planning for change of use on it’s way, they could be turned into affordable housing?
The current government contains some of the most intelligent ministers we’ve seen in 15 years. I can only presume they have some end goal in mind – or is it just one sector they’re not interested in, and they genuinely have scored a huge own goal? I sincerely hope not, but right now I’m not convinced. I welcome any comment from anybody who can shed some light on this financial suicide.