Big brewers cut strength of top beers: Industry set for clash with Government over alleged losses caused by change in way excise duty is calculated
Monday 07 June 1993
The action has again put the industry on collision course with the Government, which two weeks ago was severely criticised by a select committee for the havoc it has wreaked over the past three years by forcing the big brewers to sell 11,000 pubs.
The Brewers' Society, the industry's trade body, says that if the duty change, imposed on 1 June, had been in place over the past year it would have cost the industry pounds 64m. Duty rates, previously charged on a basis of degrees of original gravity before fermentation, are now imposed when beer leaves the brewery.
Bass, Courage and Carlsberg- Tetley, respectively numbers one to three in the industry, are all reducing alcohol strengths on beer brands such as Hofmeister, Holsten Pils, Webster's Yorkshire Bitter, Tennents Pilsner and Worthington Best Bitter.
Ironically, it was the brewers who requested a change in the duty system, which came into being in 1880, and they have spent the past two years working hand-in-hand with Customs and Excise.
Under the old system, brewers were allowed a wastage allowance of 6 per cent. In practice, efficient brewers have been making tax savings by containing wastage to 2-3 per cent.
Customs is adamant that, as agreed between government ministers and the brewers, the duty change will be fiscally neutral. It says the Brewers' Society has not substantiated its claim.
However, a society spokesman said: 'It is now clear that the initial duty rate is not fiscally neutral. The practical effect is an extra imposition of 3 per cent excise duty on top of the 5 per cent increase in the March Budget.'
He added: 'When this change was discussed with the industry, ministers gave a categorical assurance that it would be fiscally neutral, with the overall amount of duty collected across the industry being the same under the new system.
'The industry now calls on ministers to honour their pledge of fiscal neutrality, as a matter of urgency. This rectification cannot await the November Budget without serious commercial consequences.'
Customs responded that the duty change was imposed only after the society had surveyed its members about volume and strengths of beers produced and sold in 1990. The survey covered 97 per cent of UK-produced beer, and a 'representative sample' of the data was revalidated for 1991.
Customs has offered to examine any data provided by the society to support its claim that the new duty rate should be reduced. It added: 'The data, together with any relevant information, will be taken into account by ministers in the course of designing the next Budget.'
Courage, owned by Fosters of Australia, said the duty changes would cost it pounds 20m and it was reducing the declared alcohol content of 10 beers to avoid passing on the tax increases in the form of higher prices. Hofmeister lager is being reduced from 3.5 to 3.4 per cent, Holsten Pils from 6 to 5.5 per cent, and Webster's Yorkshire Bitter from 3.8 to 3.5 per cent.
Bass is adjusting 19 of its 63 brands, including a reduction from 3.8 to 3.6 per cent in keg and cask Worthington Best Bitter, and from 3.5 to 3.4 per cent in canned Tennents Pilsner.
Carlsberg-Tetley has yet to disclose its changes, although the Carlsberg lagers will not be affected. Whitbread, the fourth-largest brewer, says it is unaffected by the duty changes.
To compensate for any potential loss of flavour and body, the brewers are having to increase the original gravity - the potential to produce alcohol - in most of the affected beers.
Bass, for example, is increasing the original gravity on Worthington Best Bitter from 1036.5 to 1038 and on canned Tennents Pilsner from 1031.5 to 1034.5.
The reductions in alcohol strength have come amid the annual round of price increases. Bass is next month raising the wholesale price of a 36-gallon barrel of beer by an average of 3.58 per cent, or pounds 6.62.
Carlsberg-Tetley, the joint brewing venture set up by Carlsberg of Denmark and Allied-Lyons, has yet to say by how much prices will rise, but the increases are understood to be lower than Bass's.
Whitbread last month increased the price of a pint of cask beer by 2p and of everything else by 4p.
Scotch on the rocks, page 25
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