JOINT STATEMENT FROM SIBA CHAIR IAN FOZARD & CHIEF EXECUTIVE JAMES CALDER ON TREASURY SBR ANNOUNCEMENT
There has been understandable anger and concern expressed by many small brewers and commentators following this week’s Treasury announcement that the threshold for reduction in Small Brewers Beer Duty Relief (SBR) will be reduced from 5000hl annual production to 2100hl from, it is understood, 2022. However, no details surrounding the rate of withdrawal of relief have been supplied leaving brewers who are affected extremely worried about the impact on their businesses.
SIBA opposes this move and, whilst it has called for SBR reform, SIBA has always insisted that this should never be at the expense of the smaller brewer.
Given the lack of details from the Government there has been a great deal of speculation which is understandably causing unnecessary concern amongst small brewers. We therefore wanted to set out the facts and the next steps:
SBR was introduced in 2002 following a successful campaign by SIBA to create a fair system of taxation that recognises that smaller brewers have significant dis-economies of scale and therefore much higher production costs than larger brewers. Up to 5000hl annual production attracts duty relief at 50% and this rapidly tapers down to 25% relief at 10000hl. This created a “cliff edge” between 5000hl and 10000hl which has been recognised for years as an unintended fault in the SBR system and which clearly acts as a disincentive to brewers who wish to grow their business.
Put simply, this reduction in relief adds £8 a firkin (9 gallons) to a brewer’s costs at 10000hl and this increase overwhelmingly exceeds any possible reduction in production costs from economies of scale. Moreover, this extra cost is not recoverable in a highly competitive beer market.
The relief continues to be withdrawn above 10000hl up to 60000hl but at a much more gradual rate.
In 2017, the Small Brewers Duty Reform Coalition (SBDRC) was formed. It was initially a group of around 70 brewers who, it is understood, signed up to call for duty reform, specifically to deal with this “cliff edge”. Many of those who signed up were apparently unaware that the SBDRC, in calling for reform, were intent on withdrawing relief from small brewers and have subsequently stated that they no longer wish to be associated with the SBDRC for this reason. It is also not currently known how many supportive members the SBDRC has – they will not publish a list of their members. This lack of transparency is, at best, unhelpful.
The SBDRC duly published proposals for reform which made it clear that to solve the “cliff edge” problem, relief should be redistributed from smaller to larger brewers arguing that this should be revenue neutral to the Treasury.
SIBA, in turn, published proposals demonstrating that the problem could be resolved with no harm to smaller brewers at a cost of only around £9m to the Treasury (less than a quarter of 1% of total annual beer duty receipts).
This matter has been the subject of repeated discussion and lobbying to Government by both parties over the last two years. SIBA, in support of its proposals, has produced hard evidence from its Cost Bench-marking surveys which show the low profit margins of most small brewers and that the dis- economies of scale experienced by them is vastly exceeded by the current duty increase above the cliff edge.
It is unfortunate that during this period there have been four different Treasury Exchequer Secretaries in post, each of whom appears to have declined to fully address the issue. This week’s announcement that the Treasury had concluded its SBR review is, unfortunately, a misnomer. Whilst announcing that the withdrawal of relief would start at 2100 hl production, reduced from 5000hl, they did not specify what the rate of withdrawal would be, instead stating that a “technical consultation” would occur in the Autumn with any reforms taking effect at the end of 2021.
SIBA has been informed by the Treasury that there is no further detail and the revised shape of the “curve” is yet to be decided.
What this partial announcement has done is to cause significant concern and uncertainty for over 150 small brewing businesses, already suffering from the effects of the Covid 19 lockdown, small brewers not having had any sector-specific Government support and also under huge market pressure from global brewers.
Whilst the SBDRC are crowing that this is a “done deal”, there is still everything to play for.
Remember the ill – fated “pasty tax” that was overturned by public opinion?
SIBA urges all small brewers, whether directly affected or not, to write to their MP expressing concern about this ill thought through decision and asking them to lobby the Government to change its mind. We can overturn this decision if we all act together!
Ian Fozard James Calder
SIBA Chairman SIBA Chief Executive