Economics of the mad house

That old saying "With friends like these, who needs enemies?" could be directed at the national brewers by drinkers and licensees. The latest round of price increases announced by the big brewers suggests they couldn't give a fig if more pubs close. Five pubs a day closing? To quote Al Jolson: "You ain't seen nothing yet!"

Last week, Carlsberg announced it would put its prices up by 2.8% in March. That means between 5p or 6p on the price of a pint. But, by the time the beer hits the pumps, that will be rounded up to 10p.

March! Nice timing, Carlsberg. That will coincide with Alistair Darling's budget when he will use his "duty escalator" to increase tax on alcohol. As the escalator is tied to the rate of inflation and as inflation has dropped, the increase should not be more than 2%. But that will still mean an extra 2p to 3p on a pint.

Carlsberg is not alone in driving more people out of pubs and into the cold embrace of the supermarkets. InBev, with a great swathe of brands that includes American Budweiser and Stella Artois, is putting 7p on the price of a pint. Both Guinness and Scottish & Newcastle have announced increases of 5.4% — or around 8p on a pint in real money. If the Carlsberg increase seems relatively modest, don't forget the Danish company boosted prices twice last year, amounting to 4.3% in total.

The major impact on pubs in 2008, of course, was the two duty increases imposed by Darling. These amounted to a swingeing 17%. The result was that beer in pubs was priced beyond the reach of millions of beer drinkers. They stayed at home with slabs of heavily-discounted cans while over-worked carpenters hammered more squares of wood over the windows of closed pubs.

Let no one say the supermarkets also have to bear this burden. They tell suppliers to only marginally put up their prices or they needn't bother to call. The specialist chain Bargain Booze had a simple message for brewers following last year's Budget increase: absorb the increase in its entirety or your brands will not be stocked. I can't describe this as *****mail, as it would not be considered politically correct.

The price-cutting infamy of the supermarkets can be seen in my local branch of Budgens: that sweet Italian Lambrusco on sale for around £2.20 a bottle. In common with the stacks of Carlsberg and Stella alongside, only Budgens will make money from these massive discounts.

So why do brewers — or Italian wine makers — agree to such deals? For the simple reason that if you make eye-wateringly large amounts of fizzy lager or sweet fizzy wine, even a marginal profit of a penny on a bottle or a can will add up to large amounts of income.

Meanwhile, it's the poor bloody infantry, those of us that gallantly battle through the snowdrifts to get to our locals, who pay a heavy price for this brewer/supermarket pact. We are the milch cow — dictionary definition: a person that is a source of easy profit.

The British still — just about — drink more beer on draught than in packaged form. So until the last pub in the land pulls down the shutters, the brewers will bleed us dry through heavy prices to boost the thin profits made from the off-trade.

This is "short-termism" of an especially mad kind. Relentlessly jacking up the price of draught beer can only mean more and more pub closures. It's a case of making hay before the sun goes down for ever.

Not only do the big brewers have a pact with the supermarkets, they seem to have also joined forces with the Government to destroy the British pub. Darling and Brown hammer the pub twice a year with duty increases while the brewers wait round the corner to put the boot in with hefty price increases.

The Government doesn't get the message. If it froze or even cut duty, people would return to the pub in droves. That would mean a bigger take for the Government in terms of duty, VAT and income tax as pubs took on more staff.

It would also tackle such social problems as binge drinking if people abandoned supermarkets and drinking in the street in favour of the communality of the pub.

The brewers in turn would reap bigger profits if they sold beer at reasonable rather than inflated prices in pubs. But, as my old mum used to say, their eyes are bigger than their bellies — they are fixated by the volumes of packaged beer they can shift through supermarkets even if the income they derive is marginal.

It's the economics of the madhouse. Eventually not only will more and more pubs close but sooner or later a national brewer will crash, unable to sustain itself on the slender profits it makes from off-sales.

Then I will be able to say "I told you so" — if there's anyone left to listen.