Tax on pints is about to fall – but don’t expect to pay less for beer

Rising costs of raw ingredients such as barley expected to cancel out lower duties

Britain’s alcohol duty system is set for its most radical shakeup in 50 years next week – but the reforms are expected to do little for the price of a pint.

The cut to duties on draught beer, hailed by the then-Chancellor Rishi Sunak as “a long-term investment in British pubs” in 2021, will knock 11p off a pint in the pub compared with beer sold in supermarkets and is due to come in on August 1.

But while some industry leaders welcome the duty relief, which Jeremy Hunt, the Chancellor, extended in the Spring Budget, others have warned that brewers will still face having to pass on mounting costs to consumers as the duty freeze on bottles and cans comes to an end.

Emma McClarkin, chief executive of the British Beer and Pub Association (BBPA), said it sounded great, but added in reality overall rising costs would wipe out any benefit.

She said: “It’s a really simple process making beer: water, barley and a bit of yeast and hops…The reality is that cost pressures on our brewers right now are vast.”

She said that breweries had seen a 50pc increase in the cost of barley, while other raw materials had rocketed in price since the war in Ukraine.

She added: “We need the Government now to guarantee that there will be no future increases to duty. We simply cannot take any more costs. A lot of small breweries have already closed their doors for good.”

The boost in tax relief on draught beer honours the Government’s “Brexit pubs guarantee”, which aims to keep duties on pints sold in pubs less than in supermarkets. But, at the same time, the temporary alcohol duty freeze on bottled and canned beer is to come to an end as brewers are taxed according to the ABV of drinks.

The BBPA, which represents brewers producing 90pc of the beer made in the UK and 20,000 pubs, said that the sector will face £225m in extra costs as a result of the changes in duty pricing for non-draught beer.

Inflation is also expected to dampen the impact of the duty cuts. While prices on other consumer goods have risen by 24pc on average, brewers have shielded drinkers from higher costs by passing on “minimum” inflation of approximately 11pc, according to the BBPA.

The average price of a pint of lager saw a year-on-year rise from £4.09 in June 2022 to £4.57 this year, while the price of bitter climbed from £3.50 to £3.81 in the same period, according to the Office for National Statistics.

Under the Chancellor’s reforms to alcohol duties, beers not sold on draught, as well as wines and spirits are expected to surge in price next month by more than 10pc, in line with the Retail Price Index, as drinkers are hit with the steepest increases on some bottled and canned alcohol in more than 20 years.

Tim Dewey, chief executive of brewers Timothy Taylor & Co, said: “It’s never welcome, a duty increase. [However] I do think given the fiscal pressure the Government is facing, the fact that they’ve held duty for pubs and have only increased it on bottles and cans in supermarkets, I do think that’s a reasonable compromise given the state of the public finances.

“On the other hand they’re trying to combat inflation and clearly increase the price of duty. It will pass through to the consumer. I always try and look at it holistically and look at the option the Chancellor has on his plate and try and solve his problem, but [for it to be] the best outcome for the industry.”

Jonathan Neame, chief executive of Shepherd Neame, said: “We are pleased that the Government has taken steps to simplify alcohol taxation by introducing a duty system aligned to strength, as it previously unfairly disadvantaged beer and lower-strength products.

“We are also pleased to see the freeze on duty for draught products, which will provide a welcome boost for our pubs, although we will be impacted by the overall duty increase for our bottled beers.”

A Treasury spokesman said: “This change will protect the price of pints in pubs with the Brexit Pubs Guarantee which will make the duty on draught up to 11p lower than the duty in supermarkets. It will also lower the duty for many popular drinks on supermarket shelves, including 3.4pc ABV 500ml bottles of beer which will see a 25p tax cut.”

She added: “On top of that, the changes will help small producers expand through the new Small Producer Relief, free up business time spent on admin, and is a huge simplification to the system based on the common-sense approach of taxing drinks according to strength.”