Alistair Darling offered little relief to the struggling pubs sector on Wednesday after the chancellor ignored industry calls for a cut in beer duty in his pre-Budget report.
Pub operators, which have been hard hit by the effects of the smoking ban and the economic over the past 18 months, had hoped that the extra 8 per cent duty added to alcoholic drinks when the value added tax was cut to 15 per cent last year would be removed when VAT returns to 17.5 per cent on January 1.
Instead, Mr Darling confirmed that VAT will be raised and the extra duty will remain. However, he did not indicate any plans to increase duty further.
“The industry had to endure an 8 per cent increase in beer duty last December, which cancelled out the VAT cut enjoyed by every other sector,” said Brigid Simmonds, chief executive of the British Beer and Pub Association.
“Since the Budget of 2008, our tax bill has gone up by £600 million during one of the deepest and longest recessions in living memory. Taken together, this amounts to a stealth tax on brewers, pubs and their customers. It is time for Government action to support the economic, community and social value of pubs.”
Tobacco companies also expressed dismay that the extra duty levied on their products when VAT was temporarily reduced last year would not be reversed.
“When VAT returns to 17.5 per cent, there will not be a compensatory reduction in excise duty,” said Christopher Ogden, chief executive of the Tobacco Manufacturers’ Association.
“Therefore, the raising of VAT from January 1 will lead to increases of between 13p to 18p on a pack of cigarettes …and will lead to a significant increase in smuggling and associated criminality, threatening the viability of retailers and impacting on the economy as a whole.”
Bingo hall operators appeared to have won a small victory, however, after the chancellor announced plans to cut bingo duty from 22 per cent to 20 per cent from 2010.
But as Chris Sanger, head of tax policy at Ernst & Young, pointed out, the cut comes after bingo duty was raised from 15 per cent to 22 per cent last year.
“This move to 20 per cent may still represent a considerable net tax rise for some of the sector,” he said.
The view was echoed by Daniel Anning at Gerald Eve, the surveyors, who described the duty reduction as “far too little far too late” to arrest the rate of closures of bingo halls across the country.
“Given that more than 100 bingo clubs have recently closed and that the Bingo Association calculates that four bingo clubs a month have closed since the Budget in April 2009 I would say this tax reduction is far too little far too late. It is unlikely, in my opinion, to arrest the rate of decline in the industry,” he said.
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