Reference

Impact of the 2008 Budget on the brewing industry
22.10.2008

In the 2008 Budget, excise duty on beer was increased by 9.1%. This will add 4 pence to the price of a pint in 2008/9. In subsequent years, it is planned to increase alcohol duty rates by 2 per cent above the rate of inflation. This report investigates the impact the Budget changes on beer sales; excise duty, VAT and other tax receipts; and employment in the brewing and hospitality industries.

The main points are:

• In 2008/9, the increase in duty is estimated to reduce sales of beer by 995,000 barrels compared to the quantity that what would have sold if duty had been frozen at its 2007/8 level. Most of the lost sales (698,000 barrels) are from the on-trade. The reduction in sales volume cost 14,610 people their jobs, mostly bar staff. HM Treasury is estimated to gain £51 million in extra tax (duty, VAT and employment) receipts.

• If the impact of the 2008 Budget changes are compared to a duty freeze over the next five years (2008/9 to 2012/13) just over 13,000,000 barrels of sales are lost. The lost sales are split roughly two thirds from the on-trade and one third from the off-trade. Over 43,000 people lose their jobs. Duty, VAT and employment tax receipts are £120 million lower than would have been the case if beer duty had been frozen.

• If the 2008 Budget duty rises are compared to an increase equivalent to the rise in RPI inflation, sales volumes are 646,000 barrels lower (again mainly lost from the on-trade) this financial year. Employment in the brewing, on-trade and off-trade is estimated to be 9,090 people lower. But total tax receipts are estimated to be £34 million higher.

• If the 2008 Budget changes are compared to RPI inflation rises over the next five years (2008/9 to 2012/13), just over 7,000,000 barrels of beer sales are estimated to be lost. This is predicted to cost just under 25,000 jobs. Tax receipts are expected to be £62 million lower.