Budget: Beer duty cut for a third year in a row

18 March 2015 by
Budget: Beer duty cut for a third year in a row

Chancellor of the Exchequer George Osborne has cut beer duty by 1p a pint - the third year in a row that he has made such a cut.

The announcement came in Osborne's sixth Budget as chancellor, held just 50 days before the next General Election.

Osborne said that feedback from the pub and brewing industries showed that 16,000 jobs had been created as a result of the previous cuts in beer duty, and used this as justification for cutting it once again.

He also announced that cider duty would fall 2%, and that Scotch whisky and other spirits would also see a 2% reduction. Wine duty has been frozen.

The announcements came as part of a budget in which Osborne tried to paint an upbeat picture of the state of the UK economy. "We took difficult decisions in the teeth of the recession and it worked. Today I can confirm that in the last year we have grown faster than any major advanced economy anywhere in the world," Osborne said.

He pointed to revised Office for Budget Responsibility (OBR) figures, which predicted 2.5% growth in GDP in 2015, followed by 2.3% in 2016, 2017, and 2018, and 2.4% growth in 2019.

The Chancellor also confirmed the news that the national minimum wage would be rising by 20p an hour to £6.70 an hour this autumn, with a record rise for apprentices, up 20% to £3.30 an hour.

He also mentioned several times that he wanted to support the regions outside of London, mentioning several times that the government wanted to create a "northern powerhouse", and promising £7b of transport infrastructure improvements for the South West among other measures.

Other announcements likely to affect hospitality businesses included:

• The government will make various changes to the Seed Enterprise Investment Scheme (SEIS), Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) to ensure that the UK offers support to businesses in line with new EU rules.

The government will: require that companies must be less than 12 years old when receiving their first EIS or VCT investment, except where the investment will lead to a substantial change in the company's activity; and introduce a cap on total investment received under the tax-advantaged venture capital schemes of £15m, increasing to £20m for knowledge-intensive companies.

• The annual investment allowance for businesses will not be cut to £25,000 in 2016. There had been fears among businesses that this cut was too deep, although there is no news yet on what it will now be cut to.

• The personal tax free allowance for income tax payers has been extended to £10,800 in 2016, and £11,000 the year after that, to help boost workers' disposable income.

• Class 2 national insurance contributions for self-employed people have been abolished.

• Self assessment tax return forms for people running small businesses have been abolished and will instead be replaced by an online system that can be completed at any time of the year, in a bid to save on administration costs for small businesses. Osborne called the move a "revolutionary simplification of tax collection".

• A planned rise in fuel duty for September has once again been frozen, with the aim of helping small businesses.

Reaction to the Budget

Commenting on the news that beer duty would be cut, Mike Benner, managing director at the Society of Independent Brewers (SIBA) said: "This is a great day for British independent brewers, pubs and consumers."

"We applaud the chancellor's decision to support British beer with this historic third cut in beer duty. It continues the momentum of the cuts in 2013 and 2014 and will boost growth, employment and investment in the independent brewing sector."

Clive Watson, chairman of City Pub Company said: "The 1p reduction in beer duty is great news for pub companies like us and I am delighted to share the benefit with customers by reducing the price of our locally brewed beers by 5p a pint across our estate. We serve a wide selection of outstanding cask-conditioned and craft beers and I'm sure the lower price will make them taste that little bit better."

"The Coalition decision to reduce beer duty for the third consecutive year is unprecedented and extremely encouraging for the pub sector and of real benefit to the consumer. In appreciation for the Coalition's recognition of the industry's need for lower duty, City Pub Company will also be donating £25,000 to the Coalition."

BII chief executive Tim Hulme said: "The British Institute of Innkeeping welcome a third successive beer tax cut by the Chancellor and the positive impact this will have on the thousands of BII members across the country. The 1p reduction in duty on beer, the 2% reduction on cider and spirits and the freezing of wine duty will help many independent operators. Importantly, the measures combined with the abolition of NI contributions for apprentices will further boost industry's confidence in investing in its workforce. There is much work to be done though, particularly in supporting young people into a sector where more than half of the workforce is younger than 30."

Greene King chief executive Rooney Anand said the group was pleased to see the chancellor had cut beer duty for a third straight year.

He added: "The penny off a pint will be passed directly onto our hard-working licensees with immediate effect while, in our retail business, we will pass on the potential saving by investing it in creating additional jobs and delivering further customer service improvements in our pubs."

However, Graham Wason from the campaign to Cut Tourism VAT was not so happy with the content of the Budget and criticised the Chancellor for missing "a great opportunity" to boost the UK economy and give a much-needed break to British hoteliers, tourism operators and holidaying families by reducing VAT.

"Cutting VAT on accommodation and attractions from 20% to 5% would have generated £3.9bn for the economy over the next 10 years and created 123,000 jobs," he said.

"In a short space of time the campaign has secured the support of 118 Members of Parliaments of all parties thanks to concerted industry engagement. The recognition of the huge benefits of a Tourism VAT reduction continues to grow, and the campaign will be pursuing this vigorously in the new parliament."

Meanwhile the Food and Drink Federation (FDF), which represents the interests of the UK's largest manufacturing sector, welcomed the Chancellor's focus on business.

Jim Moseley, interim director general of the FDF, said: "Contributing £81.8b in turnover, responsible for feeding millions, and employing 400,000 across the country, food and non-alcoholic drink manufacturing is at the heart of the recovering national economy. The drop in corporation tax, promise of increased investment funding and support for British farmers will be supported by food and drink manufacturers large and small."

He went on to say that while plans to abolish National Insurance for under 21s this April and young apprentices next April was also appreciated, the FDF is urging Government to go further and extend this to adult apprenticeships too.

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