Cut in beer duty is welcome tonic for Britain's suffering pubs

The public house is more than just a retail business: it plays an important role at the heart of many local communities

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One of the loudest cheers during the Chancellor's budget speech came when he announced a cut in beer duty by 1p from tonight. It was a classic budget ‘white rabbit’.  The cut is very welcome news. More significant in the long term is the abandonment of the beer duty escalator so that beer duty will no longer rise by 2 per cent a year over and above the rate of inflation, which it has done since 2008.

This will bring some welcome relief to Britain's pubs, which have for many years been in a state of crisis. The latest figures show that 18 pubs are closing every week, as shown by the proliferation of vacant public houses on Britain's estates and high streets.

What are the causes of this crisis? The beer duty escalator has been an important factor - increasing the duty paid on beer by 40 per cent since 2008. But pubs have been hit by a wider set of factors which together have created a perfect storm wreaking havoc on the industry. The wage squeeze and the recession have hit people's disposable income, leading to falling levels of alcohol consumption.  Consumption patterns have changed: we have gone from an overwhelmingly beer-drinking country to a nation with more continental tastes, in particular a growing love for wine. Those pubs that have relied on beer and little else have suffered as a consequence.

Even more significant for the pub trade has been the shift towards drinking at home. The proportion of beer being sold in pubs and bars fell from over 90 per cent in 1975 to just 56 per cent in 2007.  The key driver here is price: supermarkets have been selling alcohol as a loss leader and in some shops beer is cheaper than soft drinks.

Finally those pub landlords running tied pubs have been hit as the large pub companies have put up their prices. Their tied leases mean that they have to buy their beer from their pub company and cannot purchase it more cheaply on the open market.

But does any of this matter? I think it does - the public house is more than just a retail business: it plays an important role at the heart of many local communities, providing a hub through which social networks can be maintained and extended. An opinion poll conducted by IPPR found that outside the home the pub scored the highest of any location as a place where people "meet and get together with others in their neighbourhood". People also said the pub was the most important place locally where they mixed with people from different backgrounds.

Moreover, pubs have an important civic role. They provide rooms for local charities and voluntary groups and often, in small villages, offer the only community meeting space. The average pub raises around £3000 a year for charitable causes.

The beer duty cut and the abandonment of the escalator will be good news for the majority of Britain's community pubs, for whom beer sales are the core of their business. The duty cut combined with the fact that the government is looking at blocking bargain-basement prices in supermarkets strikes the right balance between protecting pubs and tackling excessive and anti-social drinking. This comes on top of Vince Cable's welcome announcement of a tougher code of conduct to govern the relationship between the large pub companies and their tenants.

There is space to go further: the government should look at business rate relief for community pubs, for instance, and should tighten planning laws to make it harder for developers to convert pubs into flats and knock pubs down without permission.

There is no one magic bullet that will simultaneously solve the problems facing Britain’s community pubs. However, today's beer duty cut is a welcome step in the right direction.

Rick Muir is Associate Director at IPPR and the author of Pubs and Places. The social value of community pubs .

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