Select Committee on Scottish Affairs Minutes of Evidence


Memorandum from the Brewers' and Licensed Retailers' Association of Scotland (BLRAS)

1.1  BACKGROUND

  The BLRAS is a trade association made up of a mix of both brewing and brewery owned retail members representing the industry in Scotland.

  As Brewers we brew, package and distribute our products to every licensed premise in Scotland, ie c 20,000 outlets. We are also major financial providers to pubs, hotels and clubs the length and breadth of the country.

  As Retailers we own and manage many of Scotland's major leading edge pub sites.

  Members: Full members are made up of companies who carry out their trade in Scotland. They are made up of both Brewers and Retailers. Included are Scottish and Newcastle Plc through Scottish Brewers and Scottish and Newcastle Retail, Bass with Tennent Caledonian Breweries and their retail arm Bass Leisure, Whitbread with Whitbread Beer Co and Whitbread Inns, Carlsberg Tetley Scotland, Belhaven Brewing Company, McClay Group Plc, Caledonian Brewing Company Limited, Guinness Brewing and Broughton Ales.

1.2  BLRAS AIMS

  Our main aims are to continue to be a major contributor to the economic and social well-being of Scotland through:

    —  Employment.

    —  Investment.

    —  Training.

  These aims are underpinned with our primary objectives, which are as follows:

    (1)  To negotiate, liaise with and ascertain the view of government departments and other national and international bodies, and to co-operate with other bodies at all levels of commercial, technical and professional competence whose objectives and purposes may be related to those of the Association.

    (2)  To foster co-operation between its members on matters pertaining to the brewing industry and licensed trade in Scotland.

    (3)  To promote understanding between all sections of the Wholesale and Retail Licensed Trade of Scotland.

    (4)  To co-operate with the Brewers and Licensed Retailers Association (the BLRA) and others in the general interest of brewers and licensed retailers.

2.1  LICENCES IN SCOTLAND

  There are over 17,000 Licences in Scotland, which fall under local licensing board control. (See detail under separate attachment "Beer and Pubs in Scotland"[1]).

  It is important to understand that whilst the structure is changing with a build up of more multiple pub owners some 65 per cent of the pub sector is independently owned and represents the small independent trader. Parliamentary changes can be potentially damaging to this sector.

2.2  EMPLOYMENT

  The sector including pubs, hotels and clubs in Scotland is a massively important employer. It is estimated some 127,000 people are employed which is ahead of the financial, agriculture and construction sectors. Pubs and hotels are of course a vital part of the tourist economy in Scotland.

2.3  CONTRIBUTION

  Beer brewed in Scotland raises more than £250 million in beer duty and £200 million in VAT every year.

  Scotland's pubs and other retail outlets turnover more than £1.2 billion per year.

2.4  INVESTMENT

  Scotland's pub operators are investing more than £125 million a year on improving amenities for customers. New pub developments are a rich source of additional employment.

  Pub operators pay £11 million on business rates annually.

  Transport costs through fuel, road tax, etc cost some £5.1 million.

2.5  TRAINING AND DEVELOPMENT

  The industry is a major trainer and supporter of lifelong learning schemes. The industry supports:

    —  Scottish Vocational Qualifications.

    —  Graduate Training Schemes.

    —  Scottish Licensee Certificate.

    —  Sponsored professional qualifications.

    —  The New Deal.

2.6  BEER EXPORTS

  Figures for Scottish beer exports are not available centrally: statistics are collated on a UK-wide basis as follows:

  British beer exports have quadrupled over the last 10 years to 2,352,800 barrels in 1998, at a value of £241 million. Every day more than 1.8 million pints of British beers are consumed in overseas markets. One in every 15 pints brewed in the UK is exported. British beer is exported to over 90 countries: in 1998, 1,205,600 barrels of beer were exported to the European Union, while the United States, the UK's biggest single market, imported 881,500 barrels, equivalent to 2 per cent of the UK's national production.

  The national trade association, the Brewers and Licensed Retailers Association, has set up "British Beer Exports" to raise awareness of British beer exports and build on the growing success of this sector of the beer market.

  N.B.  Attached separately is our pocket guide booklet to Beer and Pubs in Scotland[2] expanding on these areas and including other key information on the sector in Scotland. We trust you find this of use.

Parliamentary issues affecting our industry

3.1  GENERAL

  We have reserved our comments in this section to reserved issues and focused on only a few of the areas we feel are most current and relevant, such as taxation. We are of course working with the new Scottish Parliament on devolved issues such as licensing, ratings, transport, law and order, etc.

3.2  SPECIFIC TAXATION

Excise duty

  An estimated 1.5 million pints of beer are brought to the UK from across the Channel every day and HM Customs and Excise estimate that around 75 per cent of this is destined for illegal resale, ie smuggled. The duty on a pint of beer in the UK is approximately 32 pence, compared to 4 pence a pint in France—this represents a direct economic incentive for personal imports, smuggling and fraud. The cross-Channel trade in beer has trebled since the UK joined the Single Market and continues to grow, despite tougher penalties and the deployment of more front-line Customs Officers.

  On 30 December 1999, the BLRA, our national body, published estimates showing that there has been an 11.9 per cent increase in the number of vans carrying smuggled beer across the Channel from Calais. The problem is a national one, and not confined to SE England. There is plenty of evidence that bootlegged beer is widely sold in Scottish cities and towns.

  High duty rates threaten pubs, clubs, off-licences and convenience stores, creating unemployment rather than new jobs.

  High duty rates have serious social consequences. The Excise Alliance (a joint initiative between Customs and Excise and the trade) has exposed evidence of wide scale criminality particularly associated with the "van trade" in bootlegged beer. For example, bootleggers sell to children and undermine the liquor licensing system for controlling sales of alcohol. Small shopkeepers are intimidated to stock bootlegged alcohol, often leading to "protection" violence and undermining respect for the law.

  High duty rates hurt the rural economy. Not only farmers who grow the raw materials for beer, but country pubs which are a prime source of village employment, as well as centres for the local community. A community village pub often depends heavily on beer sales for its profitability and cannot remain viable in competition with cheap personal imports and bootlegged beer. A village pub which closes is unlikely to be reopened.

  At this stage, it is too early to judge the consequences of the removal of duty-free allowances that took effect from 1 July 1999. However, the industry has concerns that, once there is a wider public understanding that there is an opportunity to bring back unlimited quantities of beer (subject to indicative limits) there will be a green light given to even greater volumes of beer coming across the Channel. Ferry operators will wish to promote the sale of French duty-paid products to replace the loss of duty-free sales.

  Whilst the industry accepts that alcohol duties have an important role to play in financing public services, there is a compelling case for at least a modest cut in duty now. The industry is far from convinced that penalties and enforcement alone will deal with the problem of smuggling. The fundamental problem of the high duty differential between the UK and the continent needs to be addressed.

  On behalf of the whole industry, the Brewers and Licensed Retailers Association has made representations to the Chancellor of the Exchequer in advance of his Budget Statement in the spring. Copies of the industry's Budget Submission can be made available to the Committee, if desired.

4.1  BEER DUTY COLLECTION—A NEW DUTY SURCHARGE

  In November 1999, HM Customs and Excise announced a change in policy with regard to volume filling of large containers. In order to meet the requirements of weights and measures legislation, overfill of containers has hitherto been unavoidable and, in recognition of this, a concession of a 1 per cent overfill tolerance, and reliance on the defence of due diligence was introduced. HMCE now say that, in future, duty is to be calculated on the nominal or actual volume, whichever is the greater. The policy change would apply to kegs and casks in the first instance, and HMCE would return to the issue of small packs.

  The industry is untied in opposition to this sudden policy change, which is seen as a duty surcharge. There will be significant cost implications for the industry, the total cost of compliance for the whole industry is estimated to be £12-15 million per annum, which includes an additional revenue take of about £6-12 million per annum. The costs per unit of production will be higher for small companies, where filling equipment is less sophisticated and overfill is higher. Sampling rates could add significantly to operational costs.

  The industry is currently in discussions with HM Customs and Excise on this issue. We believe that, if implemented, this change in the collection of duty represents a duty surcharge and effectively establishes a trade barrier for the import of kegs from continental Europe and third countries.

4.2  CLIMATE CHANGE LEVY

  The Government intends to introduce the Climate Change Levy with effect from 1 April 2001. The brewing sector is subject to the levy at the standard rate but, as an "energy intensive" sector, will be eligible for an 80 per cent discount on the rate of levy in exchange for participating in a sector energy saving agreement.

  The industry has negotiated terms for the "main agreement" with the DETR a sector target of 10 per cent reduction by 2012. There are significant differences between breweries in the efficient use of energy and, consequently, individual brewing sites will have widely differing targets.

  The cost of the levy to breweries is calculated to be £5.8 million and the discount on offer to be £4.8 million.

  The energy bill in public houses is about 10 times that in breweries, at around £350 million. However, as pubs are not production units, they will be subject to the full climate change levy and can attract no discount.

5.1  DRINK DRIVING

  The Government issued a consultation paper "Combating Drink Driving: the Next Steps" in February 1998, which included a proposal to reduce the permitted blood alcohol concentration limit (BAC) for drivers from the current 80mg/100ml to 50mg/10ml.

  The industry welcomes and supports many of the Government's proposals to focus on the hard core of those drinking above the present blood alcohol limit, but does not believe that a reduction in the BAC level would make a useful contribution to road safety. The UK has the best road safety record in Europe, whilst having a BAC higher than most other European countries. The key factor is not the limit, but public support and effective enforcement.

  The industry has a record over the past 40 years of campaigning against drinking and driving and, as part of its current "Wheelwatch" campaign, has just published a Good Practice guide for licensees. The industry is also currently sponsoring research into the behaviour of repeat drink-drive offenders.

  The Government's decision on the lowering of the blood alcohol limit and any other measures to combat drink driving is still awaited and we understand that any recommendation is likely to be included in a White Paper on Road Safety expected shortly.

5.2  RURAL PUBS

  Rural pubs in Scotland, 40 per cent of which are outwith the Central Belt, face a variety of threats to their future viability. These establishments often operate fairly much at the margins of profitability and depend heavily on a sustained level of beer sales for their continued existence. High beer excise duty rates encourage personal importation and bootlegging, which competes directly with the pub's own trade, and the relative smallness of many rural pubs leaves them no margin for coping with such a loss of trade.

  Many small village pubs have a small but widely dispersed customer base and are not served well by public transport. Often a car is the only means of transport to these pubs. Customers may be less likely to be prepared to go out if one drink will take them close to the drink/driving limit.

  The functions of pubs in rural areas goes far beyond the serving of drink and food. They are at the heart of their communities, often providing the only focus for collective social life and for entertainment, sports and charitable activities. The general threat to the rural pub and the community it serves has been well documented by the Countryside Agency and its predecessors. The Countryside Agency has said that every week six village pubs in the UK are closed—usually sold for housing, and therefore not to be reopened.

5.3  SUMMARY

  We trust the short precise we have provided versus your brief will add value to the Scottish Affairs Committee's deliberations.

  In addition as previously stated we have included separate handouts to provide easy to read additional background[3].

Brewers' and Licensed Retailers' Association of Scotland

January 2000


1   Not published herewith. Back

2   Not published herewith. Back

3   Not printed herewith. Back


 
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