Things can only get bitter – storm brewing over beer relief cuts

Dozens of small breweries across Wales face an added burden due to plans by the UK Treasury cuts Small Breweries’ Relief. The move has been condemned by North Wales MS Llyr Gruffydd.

Around 90 small breweries in Wales, including local brands such as Cwrw Iâl, Big Hand, Cwrw Llyn and Cwrw Lleu, could be affected by this cut being propsed by the Westminster government. It affects the smaller craft brewers who have already seen difficult trading conditions due to the closure of pubs and limited trade in the pandemic.

Llyr Gruffydd, Plaid Cymru’s North Wales MS, raised his concerns in the Senedd’s Environment committee with minister Lesley Griffiths:
“The growth in smaller craft brewers across Wales has been a real feature of the past decade or so – they’ve created strong and distinctive local brands and added to the quality and range of the Welsh drinks industry.

“This has been helped by the Small Breweries’ Relief from the UK Treasury for brewers producing less than 5,000 hectolitres a year. It’s beyond belief that this change, which would mean the relief only applying to those producing under 2,100 hectolitres, is being discussed in the middle of a pandemic that’s led to an 80% drop in their sales.

“What representations has the Welsh Government made to the UK Government to stand up for the small brewers. We’re proud of the growth we’ve seen in this sector and it would a retrograde step if this extra cost was imposed, especially at this particular time.”

In response, the minister said that she was not aware of the proposal and it had not been raised with her directly but she would provide a note to committee.

Speaking later Mr Gruffydd said: “New restrictions on the pub trade will again impact our small local brewers and I want to see the Welsh Government taking a strong stance on this to protect this industry going forward into the future. The Welsh food and drink industry needs every support possible and introducing this cut in support would have a serious impact for some.” 

Backround:

Beer duty is controlled by the UK Government and this (and other alcohol duties) are not devolved.The details of the Small Brewer’s Relief (SBR) can be found in Excise Notice 226: Beer Duty, which deals with matters relating to beer duty. Part 2 of Schedule 1 of the Wales Act 2017 states that Financial & Economic Matters are subject to certain specific reservations, including “taxes and excise duty” at Section A1 (15). Alcohol duty falls under this specific reservation.

The SBR is based on EU Directive 92/83/EEC and mandated a reduction in the General Beer Duty Rate (“the Duty”) for small brewers, depending on output. The above Excise Notice provides for a 50% relief from the Duty where a brewer produced no more than 5,000 hectolitres (hl), or alternatively a tapered discount for breweries producing between 5,000hl and 60,000hl of beer per annum.

Following the UK Government’s Budget 2020 (see section 2.39) and the ongoing review into SBR, a change has been proposed to the structure of SBR, meaning that the 50% discount, under the proposals, would apply to breweries producing  2,100hl per annum or less of beer.

The details of how the relief might work for brewers brewing more than 2,100hl of beer per annum has not yet been announced, with a technical consultation due in Autumn 2020, albeit it appears there will likely be an increase in the present upper limit of 60,000hl for relief. HM Treasury have responded to a petition calling for the change to be reversed, noting that “the taper beyond the 370,000 pints point will not be the same as at present and will be more gradual”. That response also outlines that the final changes will come into effect 1st January 2022.

In relation to Scotland, In a letter dated the 18th August 2020, Fergus Ewing MSP (Cabinet Secretary for Rural Economy & Tourism for the Scottish Government) wrote to George Eustice MP (Secretary of State for Environment, Food & Rural Affairs for the UK Government) to object to the proposed changes. With reference to the Scotland Act 1998, Schedule 5, Part 2, Head A1, it’s confirmed that “taxes and excise duty” is a specific reservation, meaning that alcohol duty in Scotland is also not devolved.

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