Industry fears tax hikes in emergency Budget

Brewers and pub operators are clinging to the hope that next week's emergency Budget does not feature a 'double whammy' of tax increases: beer duty and VAT.

While most accept VAT could rise to 20 per cent when Chancellor of the Exchequer George Osborne takes to the Dispatch Box tomorrow, there are also concerns he might impose a rise in alcohol duty.

In the run-up to May's general election both Conservatives and Liberal Democrats said they wished to protect UK pubs and beer producers and address the issue of taxing alcohol.

The industry was encouraged recently when the coalition government said it would look at introducing a ban on 'below cost selling' of alcohol.

However, recent reports that Osborne was considering another duty hike to boost his deficit reduction strategy were unnerving, although some observers pointed out the reports avoided the mention of beer taxes going up.

Jonathan Neame, chief executive of Kent brewer and pub operator Shepherd Neame, believed there was "no desire" on the part of the government to further penalise pubs with yet another duty hike.

"If reports suggesting the government is considering a five per cent duty increase across the board are proved correct it would be a direct conflict with ministers' earlier pledges," he said.

Ministers said they recognised the benefit pubs brought the economy and that beer, a low alcohol product, did not fuel binge-drinking, Neame said. "Any beer duty increase on top of what we've had in the past few years would be highly unwelcome."

Fuller's Beer Company managing director John Roberts acknowledged these were "desperate times" for the government and its spending cut agenda. But he said raising beer duty, already at "unsustainable levels" having risen 26 per cent in the past two years, "is not the way forward".

Roberts said if Osborne hiked beer duty Fuller's would have no choice but to pass it on to its free-trade and off-trade customers and would have to decide whether to abosrb the increase across its own pub estate.

Nick Bish, chief executive of the Association of Licensed Multiple Retailers (ALMR), said he would not be surprised if Osborne imposed duty increases selectively, for example on cider and spirits. "There is political mileage to be had from sparing beer from any more tax rises at this stage," he said.

Geof Collyer, a pub industry analyst with Deutsche Bank, said since the actual tax take had fallen following recent duty increases it would be a "pyrrhic victory to put it up on Tuesday. It would simply lead to less money going to the Treasury".

But Mark Brumby, of analysts Langton Capital, warned that the government had given itself enough "wriggle room" over the state of the deficit to implement a duty increase.