MP calls on Chancellor to protect small breweries and reverse proposed tax changes

South Lakes MP Tim Farron has joined calls for the Chancellor to reverse proposed tax changes which could threaten the future of small breweries.

Monday, 21st December 2020, 11:01 am
Updated Monday, 21st December 2020, 11:02 am
Tim Farron with the team from Kirkby Lonsdale Brewery during Cumbria Day in Parliament last year.

Mr Farron has joined 102 other cross-party MPs in signing a joint letter to Rishi Sunak, arguing that changing Small Breweries’ Relief (SBR) would devastate local brewers at a time when many businesses are already struggling to survive.

Small Breweries’ Relief was introduced in 2002 to help up and coming breweries become profitable and compete with the big brewing companies.

The relief currently gives any brewer producing less than 5,000 hectolitres (hl) (880,000 pints) annually a 50 per cent discount on beer duty.

But Mr Farron said the Government wants to reduce that upper limit to 2,100hl, resulting in smaller breweries being slapped with a big tax hike.

He said: “At a time when small breweries have been crippled by the pandemic, it frankly beggars belief that the Chancellor would introduce new measures to penalise them further.

“Small breweries are absolutely vital to our local economy here in the South Lakes.

“I’m proud to stand alongside 100 other MPs from across the political divide, to tell the Chancellor that now is not the time to turn his back on small breweries.”

The full text of the letter signed by 103 MPs is below:

Dear Chancellor

A great British success story under threat

The craft beer industry is a great British success story, the envy of the brewing world, and leading the way in innovation and the development of new and exciting beers.

There is a small brewery in nearly every constituency, making around 7% of the beer produced in the UK, employing 6,000 FTE jobs, and directly contributing £270 million to GDP each year. This is something we can all raise our glasses to.

This has, in no small part, been propelled by the Small Breweries’ Relief (SBR) scheme introduced in 2002, which has provided the basis for growth and innovation. You will be aware that SBR means that small breweries pay a proportionate amount of duty to the Treasury. Those producing up to 5,000 hectolitres (hl) a year (approximately 900,000 pints) pay 50% of the full duty rate. Above 5,000hl, brewers pay beer duty on a sliding scale, up to the same 100% rate paid by the largest, multinational corporates.

However, changes proposed by the Government to SBR stands to put this success story at risk.

Proposed changes to Small Breweries’ Relief

As a cross-party group of MPs, we are concerned by the recently announced conclusion of the Treasury review of SBR, which proposes to reduce the threshold for the 50% rate in beer duty from 5,000hl to 2,100hl. This will have a devastating impact on at least 150 small breweries brewers across the country, including the Pennine Brewery in your constituency. The proposed move to a cash basis could also lead to the support for all brewers receiving SBR being eroded away as there will be no guarantee the rate will change at all or keep up with inflation.

The review of SBR represents a long-awaited opportunity to fully assess and address the inconsistencies within the duty system but it must be done so in the right way. The current ‘cliff edge’ of relief at 5,000hl does act as a disincentive to growth, and needs to be addressed, but this should not be at the expense of the smaller breweries.

The decision to reduce the starting level to 2,100hl redistributes relief from smaller to larger brewers and is against the original principles of SBR – it will no longer be a progressive beer duty. Fifteen Members from across the House took part in in an adjournment debate on Monday 9th November 2020, demonstrating the interest in this subject.

We therefore urge you to reconsider this approach and look at alternatives that will allow the cliff edge to be smoothed out to incentivise growth without withdrawing any relief for any brewer below 5,000hl.

Now is not the time to penalise small breweries

We are aware that the proposed changes are not expected to come into effect until 2022 but, as we all know, it will take some time for the country and the brewing sector to recover from the impacts of Covid-19. The anxiety caused by the delay in the technical consultation and what the new system might look like only also adds to the uncertainty faced by the sector over the past few months.

The industry emerged from the initial lockdown where brewers lost 80% of their sales due to the closure of pubs, and small breweries have poured away 5 million pints of spoiled beer. Even as pubs opened over the summer, sales were down 50% on a normal July, and breweries were not eligible for the Business Rates holiday or £25,000 grant. This is already taking its toll: two small, independent breweries are going out of business every week.

Research by the Society of Independent Brewers (SIBA) shows that 58% of small breweries are delaying investment, 51% are delaying employing new staff, whilst 49% are delaying increasing capacity because of the uncertainty caused by these proposed changes.

We believe that now is not the time to burden this sector further. It will reduce consumer choice by reversing the revolution in new and innovative breweries, pulling up the ladder for breweries who want to grow.

We also hope that you will continue to engage with sector representatives like SIBA to ensure that the reformed SBR promotes and sustains the craft beer revolution, rather than hinder it.