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Reform of energy efficiency taxation for pubs and breweries - what the 2016 Budget told us

On 22/03/16

The 2016 Budget contained a vast range of measures that will affect the day-to-day running of a brewery or a pub. We have produced a summary of the full list of measures, which is available here. An area that has been mostly overlooked is proposed changes to energy efficiency tax and regulation.

The Government announced a consultation into the energy efficiency policy landscape at the Summer Budget in 2015. The BBPA alone responded to this on behalf of the brewing and hospitality industry with four key points.

Simplification of reporting - energy policy has become very complicated and business is expected to make a number of submissions to various Government agencies, in addition to their own internal monitoring and reporting commitments. The BBPA supported a move towards a single data return.

Continuation of Climate Change Agreements - brewing is an energy intensive process that can be heavily affected by energy taxation. To ensure the competitiveness of the British brewing sector it was essential that CCAs, which provide substantial discounts on the Climate Change Levy (CCL), was continued. For electricity this is a 90% discount and for gas it is 65%. Energy taxation increases could feed through to the price of the final product.

Abolition of Carbon Reduction Commitment - the CRC is a burdensome scheme for business that fails to deliver equivalent energy and carbon savings. The BBPA called for this to be abolished.

Protection for small businesses from increased taxation - the Government made clear that any revenue that was lost through the abolition of the CRC would need to be recouped through an increase in the overall rate of CCL. This would shift the burden of energy taxation from large businesses to small businesses who had hitherto been unaffected by CRC.

The 2016 Budget delivered on three of our four proposals. Overall this is a hugely positive outcome but there remains major uncertainty.

Reporting on energy use will be simplified. CCAs will be continued, protecting the UK brewing industry, which provides 85 per cent of the beer we drink in this country. And the irksome Carbon Reduction Commitment has been abolished, from 2019.

The fly in the ointment remains the lack of a commitment to protect small businesses like pubs from the Government's CRC reclaim. The headline rate of CCL will increase substantially from 2019. The rate for electricity will increase by 53 per cent and by 76 per cent for gas. This could affect many community pubs who we intend to fight to protect.

The Government has said they will continue the small business exemption from CCL but this is at fairly low level. Pubs pay no CCL on electricity if they use less than 1,000 kWh of electricity each month, and no gas levy if this is below 4,397 kWh per month. The BBPA strongly believes that this level needs to be increased to protect pubs from these major tax increases. But there should also be an onus on small pubs to take measures to reduce energy usage, not least because it contributes to the bottom line.

In light of these measures, and last year's Energy Savings Opportunity Scheme (ESOS) audits, the BBPA will be holding a Pub Industry Energy Symposium on 5th May at the DoubleTree Hilton West End in London. This will include a presentation from senior officials working on these reforms, the outputs from the ESOS audits and the launch of new best practice support for pubs.

Energy is going to be a colossal issue for the UK and this will affect the bottom line of brewers and pubs. The BBPA will continue to lobby to reduce the tax impact on the industry whilst promoting best practice to make the sector more sustainable. Join us on the 5th May to find out how.

The BBPA and its members are committed to improving the impact of the sector on the environment. We have set out the considerable efforts already made by the sector and our future aims in our environmental commitment, Brewing Green.


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