Sunday, September 18, 2011

Be careful what you wish for

I have made a few posts recently about the reduced rate of duty for beers of 2.8% ABV or below which is being introduced from October 1st. Several commenters have said this concession would be much more meaningful if extended to beers of 3.5%, and indeed CAMRA have argued for this.

That’s not going to happen because of the potential loss of revenue. However, such a move could prove to be a double-edged sword. I'm old enough to remember when there was very little draught beer available in the UK (or any kind of beer really) over about OG 1040, so I can imagine how a 3.5% cut-off point might be tolerable. In the days when it was brewed at Henley, the 3.4% Brakspear's Bitter was one of my favourite beers, and there were plenty of other flavoursome beers at that strength.

A pint at 3.5% would save 29p in duty and VAT over one at 4%, which would translate to at least 50p at the bar. That would make the 4% category completely unviable. Inevitably, the big hitters like Carling, John Smith’s and Guinness would be brought down to that level, along with all the well-known cask “ordinary bitters”.

It could easily end up imposing a ceiling on the strength of mainstream beers, with only a small number of speciality products available at higher strengths. It could even effectively kill off draught beer at a higher strength – the 5% pint would incur a surcharge of 41p over the 3.5% one, and to choose to buy one in the pub would brand you as a bit of a pisshead.

Of course the absolute level of duty is too high, but in principle the current British beer duty system that directly links the level of duty to the amount of alcohol is a sensible one. Introducing arbitrary cut-off points for higher tiers of duty will inevitably distort the market and may well end up having undesirable and unintended consequences.

On the other hand, as Cooking Lager argues, the wide range of beer strengths may serve to sow confusion in consumers’ minds. Spirits are effectively all either 40% or 37.5% (which is the difference between a 4% beer and a 3.75% beer, i.e. something you wouldn’t really notice), and the overall range in table wine strengths is no more than the difference between a 4% and a 5% beer. You don’t hear constant calls for the strength of spirits or wine to be reduced, and maybe if beer was all the same modest strength it would to some extent insulate the category from criticism. Not an argument I really agree with, but an interesting point nonetheless.