Row grows over beer duty change: Industry accused of hiding benefit

THE ROW between Customs and Excise and the brewing industry over the recent change in the way duty is levied on beer escalated yesterday.

Brewers, who claim that the new system will cost them millions of pounds in extra duty, were accused by Customs of being less than forthright with the financial facts.

A Customs spokesman said yesterday: 'We are giving as good as we get. It is a bit of putting the record straight.'

The attack was aimed at recent comments by the Brewers' Society, the trade body, which clearly blamed Customs for the financial problems arising from the duty change.

Robin Simpson, the director of the Brewers' Society, said: 'We are distressed at the public slanging. We have tried to avoid a slanging match as far as the blame is concerned.'

Bass, Courage and Carlsberg-Tetley have reduced the alcoholic strength of many leading beers to compensate for the financial cost of the new duty system.

The alcohol content of Holsten Pils, for example, has been reduced from 6 to 5.5 per cent.

In a letter to the Brewers' Society, Sir John Cope, the Paymaster General, says he is surprised by the claims that brewers are being penalised by the new duty rate.

He added that the society failed to mention that 'the changes will benefit the industry as a whole by some pounds 200m in cash flow at the taxpayers' expense. This is clearly a very significant benefit to the industry.'

The pounds 200m figure comes from the time difference arising from switching the payment of duty from before fermentation to the final product - about four weeks on average.

Mr Simpson, however, strongly challenged the worth of the one-off pounds 200m cash-flow benefit. He said: 'This is blatantly misleading.

'The benefit to brewers is paying duty slightly later than before. This is a one-off. It is not cash in hand.'

He added: 'It is equivalent to saving interest on money for a short period - pounds 200m on deposit for four weeks, at say 6 per cent, earns less than pounds 1m.'

The industry claims that it would have paid an extra pounds 64m in duty had the system been in place last year.

The row surfaced just two days after the new duty system took effect on 1 June.

In essence, a 113-year-old system of calculating duty on original gravity, the ability to produce alcohol before fermentation, has been replaced by one that taxes the volume content of alcohol of the finished product.

The change, as agreed between Customs and the industry, should have been fiscally neutral. However, the brewers now say that high alcoholic strength lagers are unfairly penalised by the new system.

(Photograph omitted)