A new kick in the teeth

The licensed trade's reaction to last week's move by the Chancellor of the Exchequer to cut VAT but claw back the lost tax revenue with another hike in alcohol duty ranged from sheer disbelief to rock-spitting rage.

Collectively, brewers and pub operators were still fuming after the last government fiscal assault on alcohol, as featured in Alistair Darling's maiden Budget in March this year.

Then, Jonathan Neame, chief executive of Kent brewer Shepherd Neame and head of the British Beer & Pub Association's duty panel, described the 4p duty increase on a pint of beer as a "pathetic, idiotic and shallow political gesture that does nothing to address the issues of alcohol abuse".

This time around, as the Chancellor paraded his economy-boosting VAT cut like some Roman emperor returning in triumph to the Eternal City, he explained how this was to be paid for with increases in duty on petrol, tobacco and alcohol in terms that would make a social engineer blush.

Darling's argument in the Pre-Budget Report (PBR) for the increase in duty on booze was that as incomes had risen, alcohol had become more affordable. "In 1997, the average bottle of wine bought in a supermarket was £4.45 in today's prices," he said. "If you go into a supermarket today, the average bottle of wine will cost about £4".

Such an argument is as gold-plated an exercise in missing the point as you'll ever find. It would be funny if it were not so serious.

Once again the Chancellor and the government have (deliberately?) failed to make the distinction between the British pub as a cultural, social and, no less importantly, an economic edifice, and the off-trade. The issue of pubs already struggling to make ends meet in the current trading environment appears to have bypassed Darling completely.

"Beer will rise by 4p a pint, cider by 3p a litre, wine by 14p a bottle and spirits by 55p a bottle," the Chancellor said. And he reiterated an earlier commitment, namely alcohol duties would increase by two per cent above the rate of inflation in each of the next four years as part of the infamous 'duty escalator'.

Then came Darling's weaseliest words of all: "It is only because I have taken these decisions on alcohol [and others] that I am able to provide additional support for families and lift more children out of poverty." It was enough to make one gag.

So where does the industry go from here? There have been numerous calls before for the pub and brewing sectors to get their act together, to present their case better to government and in a more co-ordinated fashion.

But given its attitude toward the trade in this year alone, will the government ever listen?

Jeremy Blood, chief executive of Heineken UK, believes such work must go on, but he said the Chancellor's move had been "hellishly frustrating".

"I worked with Jonathan Neame and others on the BBPA's duty panel last year," Blood said. "We make business presentations all the time in our day job, to our own boards and to investors, and we know when we've got a good case. We had one in this instance, but we're clearly facing an intransigent government."

Blood said that with VAT on a pint coming down around 5.5p but conversely duty going up by 3p, "no retailer is going to pass the difference on in this market".

Meanwhile, Neame's ire had clearly not abated since the March Budget. "The PBR is an act of gross cultural vandalism," he thundered from his brewery's offices in Faversham, Kent. "The government continues to regard the Great British pub as a tax-collection point on one hand and a social problem on the other."

"Pubs," he went on, "make an invaluable contribution to the UK economy and British culture, yet this government is intent on throttling the life out of them and the communities they serve."

Fuller, Smith & Turner chairman Michael Turner said however fruitless the industry's efforts might prove to be, the struggle to convince government of its argument had to go on. "We have to try," he said.

Turner said the cumulative duty increases - amounting to some 17 per cent in a year - represented the law of diminishing returns. "The latest move is going to cripple the industry and, in turn, it will kill the goose that lays the golden egg," he warned.

Paul Wells, chief executive of Bedford brewer Charles Wells, described the government's move as a "kick in the teeth" for the industry.

"The Chancellor has driven another nail into the coffin of the pub trade, on top of the 10 per cent increase in duty earlier this year," he said.

"This really is a disaster being played out in the bars of community pubs up and down the land.

"Pub operators are going to go bust this winter, and no-one is going to re-open those pubs. But a new car, for example, is thousands of pounds cheaper. Where on earth is the sense in that?"

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What others had to say:

Neil Morgan, head of pubs and restaurants at property agent Christie & Co:​

"The Pre-Budget Report from the Chancellor is a mixed blessing for the hospitality sector. On the one hand, there was the temporary increase in tax relief thresholds for empty properties and more money given to banks to help small firms. On the other, calls to reduce the burden faced by the pub sector have been ignored. The government has missed a trick by not giving a much-needed helping hand to the licensed trade by charging extra duty on off-sales."

Robert Milburn, UK hospitality & leisure leader (H&L) at PricewaterhouseCoopers:​

"The big question for management is how quickly can companies reprogramme their systems to calculate and make the most of this lower VAT? Following the current consultation on tips [for staff] this adds to the head scratching and number crunching the industry faces."

Julian Grocock, chief executive of the Society of Independent Brewers:​

"Alistair Darling must be stone deaf or daft when it comes to tackling the much-hyped problem of binge-drinking in Britain's towns and cities. The best and safest place for people to drink beer is the pub, an environment controlled by responsible licensees and the presence of well-behaved, sensible customers. It is totally ridiculous to lump beer in with other alcoholic products that get people drunk cheaply in unsupervised streets and public parks."