Beer duty dominates frustrating spring budget for pubs

The extension of the government's Draught Relief initiative was the main takeaway for pubs and bars at the spring budget, with many other hospitality concerns, including energy contracts and business rates, left unmentioned.

Chancellor Jeremy Hunt extended the Draught Relief from 5% to 9.2%, meaning the duty on an average draught pint of beer served in a pub or bar does not increase from August and will be up to 11p lower than the duty in supermarkets. The disparity between the two sectors in VAT paid on food was not addressed.

The commitment to duty on a pub pint being lower than the supermarket was called the “Brexit Pubs Guarantee” by the chancellor, who highlighted how this change will also apply to every pub in Northern Ireland following the Windsor Framework agreement.

Elsewhere, a new voluntary employment scheme for disabled people and those with health conditions called Universal Support will be funded in England and Wales. The government says it will spend up to £4,000 per person to find them a suitable role and cater to their needs, supporting 50,000 places per year once fully rolled out.

Taxation

A ‘full expensing’ policy will be introduced from 1 April 2023 until 31 March 2026 alongside an extension to the 50% first-year allowance in the same period. Full expensing will allow businesses to deduct 100% of the cost of certain plant and machinery from their profits before tax. If eligible, for pubs and bars this could include computers, office equipment and kitchen fit-outs. 

The 50% first-year allowance allows businesses to deduct 50% of the cost of other plant and machinery, known as 'special rate assets', from their profits during the year of purchase. This includes long life assets such as solar panels and thermal insulation on buildings. This was previously due to end at the end of March 2023, but has been extended by three years. 

Reaction

BBPA

"The cut to draught duty as part of the alcohol duty reform is positive and we hope that it will result in a boost for our pubs this summer," says Emma McClarkin, chief executive of the British Beer & Pub Association. "However, the fact is our industry will be facing an overall tax hike, not a reduction, come August. Duty on non-draught beer will rise and the measures introduced today won’t rebalance the catastrophic impact soaring inflation and unfair energy contracts are having on both pubs and the breweries that supply them.

"As 1 April rapidly approaches, businesses are also nervously awaiting what’s next for their energy costs, and a lack of support in today’s announcement will have a direct impact on their ability to keep their lights on and doors open. We need the chancellor to unlock growth opportunities for businesses of all shapes and sizes. We look forward to seeing how his measures on investment, people and skills will lay the foundations to allow our pubs and breweries to continue to create jobs and help regenerate local economies in every part of the country.

"The chancellor highlighted how our pubs are the most treasured community institution, and we appreciate his efforts to provide some relief, but a lack of immediate support in today’s budget will still put the future of many of them at risk."

UKHospitality

"With hospitality businesses continuing to struggle with vacancies running at 56% higher than pre-pandemic levels, the measures announced today are significant in incentivising people back into work and hopefully alleviating crippling labour shortages," says UKHospitality chief executive Kate Nicholls. "The significant reforms to childcare and the measures to help the over 50s re-enter the workforce are both areas on which UKHospitality has been calling for action and we’re pleased the chancellor has recognised the help it can offer tackling the enormous vacancies in hospitality.

"It remains the case that we need to see urgent action on the market failures identified by Ofgem in its non-domestic review update [on 14 March]. The current timeline of further action by the summer is not good enough.

"The reduction in draught duty is positive and we hope this will incentivise more visits to our pubs, restaurants and hotel bars. Addressing draught duty is a good start and I would urge the government to consider rolling out this type of tax cut across the wider drinks market.

"With duty primarily paid by suppliers, such as breweries, it’s essential that any benefit is passed through to venues to help deliver the government’s objective of reducing inflation and growing the economy."

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