Tim Martin: Settling VAT differences over a pint

I recently met with Andrew Griffiths MP, Chairman of the All-Party Parliamentary Beer Group, with whom I have had exchanged strong words in the trade press about the Vat Club. 

Surprisingly, after a couple of pints of Adnams Broadside, agreement was reached on most issues – at least, that was my understanding.  The settling of differences over a pint is indeed an often under-valued aspect of our pub culture.

Blank sheet​

Mr Griffiths agreed that no sensible government, starting with a blank sheet, would give supermarkets a tax break that did not also apply to pubs.  It was agreed, in terms, that the VAT situation, whereby pubs pay 20% for food sales, but supermarkets pay nothing, is unfair. 

The question for Mr Griffiths is one of ‘affordability’.  In his opinion, the Vat Club needs to back up its arguments with a report from independent economists which shows that creating a level VAT pitch will create jobs and taxes for the government.  I agreed to relay this message to the Vat Club and additional research in this area is being commissioned. 

Everyone knows and agrees that each pint sold in a pub creates far more jobs and taxes than a pint sold in a supermarket.  A pint sold for £3 in a pub creates taxes of one sort or another of about £1.20 and creates wages for management and staff of about 75p.  A supermarket pint creates about half the tax (less VAT, less PAYE, less rates etc.) and only creates about 5p of wages, according to my calculations.  This is because supermarket wages are only about 10% of their sales, compared to 30% for pubs, but there is also a much higher number of pints sold per transaction in a supermarket. 

Economists​

The question for economists, therefore, becomes ‘Will customers use pubs more if taxes are equalised and the price per pint or per meal is reduced?’.  The answer is certainly yes, in my opinion.  As the price differential between supermarkets and pubs has increased, mainly as a result of government tax policies, the percentage of beer sales, for example, taken by supermarkets has increased dramatically.  Publicans can see the effect every day with their own eyes and we all know examples of previous pub customers who now drink exclusively or mainly at home. 

I explained to Mr Griffiths the Vat Club arguments about the effects of pub closures on the high street generally, especially high streets in less well-off areas, where the price differential creates even bigger problems for pubs. 

Pub closures​

Mr Griffiths agrees that the ‘pub is the hub’ and that pub closures have a knock-on effect on shops and other businesses in high streets.  I explained our anxiety that the current tax policy is encouraging pub companies to locate away from high streets in similar locations to the majority of supermarket sites, which are in drive-to positions. 

This point appeared to resonate with Mr Griffiths and he suggested that the Vat Club should contact Brandon Lewis MP, the minister who is responsible for the regeneration of high streets. 

In summary, no Chairman of the All-Party Parliamentary Beer Group wants to be remembered for the 10,000 pubs which have closed down in the last decade and, indeed, no government wants to be regarded as responsible for such a social and economic catastrophe. 

The Vat Club is making great progress in the recruitment of new members and is now actively engaging with MPs and Ministers to explain our case.  Intelligent publicans instinctively understand that creating a level tax playing field with supermarkets will create more jobs and taxes for the government, not less, as well as many well-documented social benefits. 

Paradoxically, companies like Marston’s, Greene King and Enterprise have had almost nothing to say on the issue of VAT equality.  If their CEOs do not nail their colours to the mast soon, their own shareholders and customers will surely start to query their comprehension of the economic issues facing pubs. 

Tim Martin is chairman of JD Wetherspoon​