Calm before the storm

On March 12 Chancellor Alistair Darling will step out of Number 11 Downing Street clutching a small red briefcase containing his first Budget as Chancellor of the Exchequer.

As we look to be heading for a period of economic downturn, attention will not be focused on duty on beer, wine and spirits. And that's a shame.The anti-alcohol lobby has been in overdrive in the last 12 months stating that the only way to solve Britain's drinking problem is to whack a hefty dose of tax increases on the already bowed shoulders of the industry.

We could get into an argument about the ineffectiveness of this policy as a means of controlling people's drinking behaviour and supermarket pricing. But that is for another time.

What is most pressing to ask is what a tax hike on beer could do to the brewing industry. Brewing, which has suffered more duty increases than any other drinks category in the last 10 years; brewing which has seen duty rise by 27 per cent in the last 10 years…

There is an old Greek proverb which states: "Milk the cow but do not pull off the udder," and it is the industry's strong belief that another duty rise in March, especially a large duty rise (as the anti-alcohol lobby is calling for), may well pull off the udder.

Why another beer duty hike is the WRONG thing to do Impact on brewing

Beer duty has increased 27 per cent in the last decade. While brewers have managed to absorb this tax hike in previous years, the atmosphere in 2008 is more precarious - energy prices are soaring and crop prices have increased by more than 100 per cent.

British brewers are facing, as Keith Bott, owner of Titanic Brewery in Stoke-on-Trent, recently put it, "the perfect storm". Impact on the Treasury

Successive duty hikes have actually resulted in the government receiving LESS tax than it forecast.

Tax on beer has gone beyond the point of revenue maximisation. The British Beer & Pub Association estimates the government has experienced a £250m shortfall on beer duty forecasts in the last three years.

Part of this is down to a huge fall in VAT revenues. Put it like this - would you rather charge VAT on a pint of beer at £2.50 (as you would in the average pub) or 50p a pint (as you would in the average supermarket)?

Paul Hegarty, director of communication at Coors Brewers, says that the government needs to take into account the damage it is doing to pubs through duty.

"We've seen beer duty rising ahead of duty in other drinks categories in recent years leading off-trade retailers to actively discount beer," he says.

"This is bad for beer and therefore bad for pubs. Another duty rise would continue the pain for the licensed trade, which is facing a set of very tough challenges at the moment anyway.

"We would really like to see the government standing up for beer and pubs."