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E-Malt.com News article: UK: Brewers call for tax freeze in budget to ease smoking ban
Brewery news

Britain’s brewers are calling on the Chancellor to freeze beer duty in next week’s Budget to help ease the pressures created by the forthcoming smoking ban and rapidly escalating energy and supply costs, The British Beer and Pub Association announced March 16.

The British Beer and Pub Association is impressing on Government three critical issues currently facing the nation’s beer and pub sector:

- The sector faces an inevitable fall in beer sales when the smoking ban is introduced on 1st July - despite investing some £70 million to date to try and smooth the introduction of the ban. While recovery is anticipated in the medium term, the evidence from Ireland (beer sales down 7%) and Scotland (beer sales down 6%) clearly demonstrates an immediate downturn is inescapable.• Rapidly escalating energy costs are driving up the direct costs of beer production and distribution and are equally driving up costs to those who supply brewers, with inevitable inflationary consequences.

- Global barley crop failures caused by adverse weather conditions have led to a 50 per cent hike in prices.

- The amount of beer we drink in the UK has fallen by 11 per cent over the last decade. Last year alone, sales of traditional British cask beer fell by 7.5 per cent. This has placed beer producers under exceptional pressures. In the last ten years, 35 breweries have closed, with the loss of around 5,000 jobs. The latest figures for the sector show that while the Treasury makes 59 pence in tax on every pint, the UK's four largest brewers made just 1.6 pence per pint profit - down 50 per cent on the year before. This highlights the potential impact of the Chancellor’s habitual 1p duty increase and the constraint it would place on the industry’s ability to invest and grow.

“To help ease the pressures on British beer and arrest its decline, we are asking the Chancellor to implement a freeze on beer duty in the Budget,” said Rob Hayward, Chief Executive of the British Beer & Pub Association. “We are calling for Government policy to encourage and support Britain's winning businesses. British brewers and beer are of world renown. It's time to give beer a break.”In recent years, beer has been in the front line for tax increases, while other alcoholic drinks have enjoyed more favourable tax treatment. As a result, beer drinking has declined, while other drinks have enjoyed a surge in popularity. Since 1997, the tax and consumption trends have been:

Duty Rate Change Consumption

Beer +23% - 11%
Cider +8% +30%
Wine +12% +41%
Spirits +3% +20%

Research undertaken by Oxford Economic Forecasting shows that the Treasury consistently underestimates the impact of tax increases on beer sales. As a result, Treasury revenues from beer consistently undershoot their projections. Last year, there was a £150 million shortfall in revenue from beer and this year is on course to record a £100 million shortfall. In contrast, those drinks that have benefited from duty freezes, such as spirits and cider, have grown in popularity and boosted tax revenues.

” We believe the benefits that have been enjoyed by other drinks from a tax freeze should be extended to Britain’s national drink – beer,” said Mr Hayward. “Beer is a homegrown product. Ninety per cent of the beer drunk in Britain is made in Britain, contributing more than £19 billion to the economy and generating nearly one million jobs. A tax freeze would not only help reverse the current decline in beer, but would improve Government revenues from beer. It would be good for beer, good for Brown and good for Britain.”

The British Beer and Pub Association is the UK’s leading organisation representing the brewing and pub sector. Its members account for 98% of the beer brewed in the UK and own nearly two thirds of Britain’s 59,000 pubs.

Government revenues from beer (duty and VAT) amounted to £5.9 billion last year.

21 March, 2007

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