Last Orders: What Can The Government Do To Save Your Local Pub From Supermarkets?

By George Goldberg

The historical roots of mankind drinking beer can be traced back to the Stone Age [1], but it took until the invasion of the Roman Empire, with their taverns, for Great Britain to be introduced to what we now call a pub. Almost 2,000 years later, having a drink at a local for some has become an integral part of British culture.

Forming a focal point for many of the country’s communities, poet Hilaire Belloc once declared, “When you have lost your inns, drown your empty selves, for you will have lost the last of England” [2]. But gone are the days where, as in 965 AD, alehouses were commonplace enough to need a law to cap the number to no more than one per village. Now, more than 11,000 pubs have closed in the UK in the last decade – a fall of almost a quarter [3].

The Pub Industry contributes £23.1 billion to the economy each year [4], but is under pressure. There have been calls by Campaign for Real Ale (CAMRA) and the British Beer and Pub Association for the government to do more to protect pubs and the beer industry.

Pubs 2.jpg
Why are so many pubs closing?

Ask any publican and they will say the ban of smoking in public places just over ten years ago has played a part, driving away customers and causing the number of shisha bars on the high street to balloon by 210% [5]. But many will urge for a level playing field with supermarkets.

Tim Martin, founder and chairman of the pub chain Wetherspoon, asserts that the tax man collects more in business rates and VAT from pubs than supermarkets [6]. Mr Martin reports that for business rates, a tax paid on non-domestic properties, pubs are assessed at rates around 12% of sales, while supermarkets pay only 2%. And when it comes to VAT, a tax on the sale of most goods and services, whilst pubs pay the stan- dard rate of 20% VAT on food sales, most food in supermarkets is charged 0%, allowing them to subsidise the price of alcohol [7].

With these cost pressures pushing up the price of a pint in a pub, off-trade, primarily from big supermarkets, can provide relatively cheap access to alcohol. The majority of Britons believe the price of a pint of beer in a pub is already unaffordable8, on average 60 pence more than they are willing to pay — at £3.609. When supermarkets sell craft beer for about £1.50, and mass-produced lagers and bitters for less than £1 [10], it probably won’t come as a surprise that the amount of beer sold off-trade surpassed the volume sold in pubs, clubs and restaurants (on-trade) back in 2014 [11]. Many millennials now choose to drink at home, rather than head off to their local [12].

Pubs continue to price out consumers, but to make matters worse they also haven’t kept up with changing tastes. The number of those aged 16 to 24-years-old in the UK who don’t drink alcohol rose to 29% in 2015 [13], with nearly a third of Britons admitting to have reduced or limited their alcohol intake in the 12 months leading up to 2017 [14]. Amongst those who do drink there has been a steady building in the popularity of wine, along with cider and alcopops creeping in and out of fashion. These alternatives are clawing market share from the more traditional choices of beer on offer [15]. Pubs are being forced to evolve to present a more diverse offering, but with them closing at a rate of 18 a week [16], many are struggling to face the new market forces in play.

What can the government do?

One suggestion is to review taxation. While some campaigns seek to lower alcohol duties (alcohol tax), as Tim Martin has highlighted, this would also benefit supermarkets, as pubs and supermarkets pay the same rates [17]. Another way could be to provide pubs relief on business rates. However, European Union regulations which govern state aid may mean some lose out. Back in 2017, Chancellor Philip Hammond set up a £25 million fund to give 90% of pubs a discount of £1000 on their business rates. But EU rules, which limit governments giving an advantage to firms, restrict the amount given to each business to €200,000 (£174,000) over three years. The belief is that any greater sum would distort competition across the trade zone. Because of this, one in four pubs eligible for the government assistance were prevented access [18]. Instead, to ease the pressure faced from supermarkets, the government may want to introduce nationwide minimum unit pricing (MUP),a minimum price below which a unit of alcohol cannot legally be sold. This legislation prevents the sale of cheap off- trade alcohol, and seeks to encourage consumers into pubs. This is already a policy in Scotland, Where once a two-litre bottle of strong cider (7.5 abv) could have been bought for as little as £2.50, under MUP it costs at least £7.50 [19]. Largely, on-trade was unaffected by the new rules, as pubs would have had to be selling a pint of lager for about £1.14, more than two pounds below the current average price of a pint [20].

Or perhaps the government should do nothing? It may be times for pubs to adapt rather than rely on government intervention. Some pubs are doing just that, adopting tech-based innovations to cater to modern consumer preferences. Wetherspoon customers can save their elbows and order food and drinks to their table through their app and Stonegate provide complimentary use of a printer, USB ports or phone chargers!. In some cities, you can even get a cold beer delivered to you without leaving your desk or giving up your spot at the park through food courier Deliveroo, which partnered with BrewDog in 2016 [21].

What are the implications of minimum unit pricing (MUP)?

There is a public appetite for legislation to help pubs out. In a crude poll conducted by myself and colleagues at The Forum in Norwich, while 10% of the public surveyed favoured the government to sit on their hands, 60% preferred minimum unit pricing to be rolled out across the UK. But with any government intervention, there are costs and benefits.

Due to the higher prices, closer to the socially efficient level, over-consumption of alcohol will be discouraged. In Scotland, it is predicted that when their policy comes into full effect MUP will reduce alcohol-related deaths in Scotland by 120 and hospital admissions by 2,000 per year [24].

The government forecasts that the introduction of a 45 pence MUP in England would cause more spending in pubs, rather than consumers ‘preloading’ on cheap alternatives from supermarkets, and increase overall on-trade by 3.0% [27]. This change could alleviate many negative third-party costs associated with binge drinking. This could result in 5,240 fewer crimes being committed each year leading to savings for victim services, police and the criminal justice system of up to £12.9 million annually, [25]. We may also see a reduction in hospital admissions, and an annual saving for the NHS of £220 million yearly [26]. That’s not to mention the quality of life benefits!

However, the enforcement of a national 45 pence MUP comes at a cost (of £500,000) and alcohol duty receipts would fall (by £200 million), with the Treasury taking the hit [29] This is money which could  otherwise be spent on running public services. This expense wouldn’t be recouped directly by the MUP since it is not a tax, any extra revenue from the higher prices will go into the pockets of supermarkets. Along with the consideration that the demand for alcohol is relatively price inelastic [30], where raising prices reduces consumption by a proportion smaller than the amount of the price increase, the policy would be an easy way to bolster supermarket profits. But, overall, the government in its impact assessment believes a MUP of 45 pence would have a net benefit to society [31].

Pubs are facing a new era of change. Supermarkets now dominate alcohol sales, having taken advantage of their comparatively lower tax rates. At the same time, new tastes from the consumer demand a fresh experience from their local. Whether pubs’ saviour will come in the form of minimum unit pricing, wider government intervention, or technological innovation to secure the next two millenniums, one thing can be for sure. As policymakers decide the best course of action, possibly in a shady pub garden, surely they don’t want to be the one responsible to lose ‘the last of England’.

 


References

1 Telegraph. (2012). Bronze age ‘microbrewery’ discovered in Cyprus. [online] Available at: https://www.telegraph.co.uk/news/earth/environment/archaeology/9710875/Bronze-age-micro- brewery-discovered-in-Cyprus.html [Accessed 28 Jan. 2019].

2 The Economist. (2010). Time, gentlemen. [online] Available at: https://www.economist.com/ christmas-specials/2010/12/16/time-gentlemen [Accessed 28 Jan. 2019].

3 ONS. (2018). Economies of ale: small pubs close as chains focus on big bars. [online] Avail- able at: https://www.ons.gov.uk/businessindustryandtrade/business/activitysizeandlocation/arti- cles/economiesofalesmallpubscloseaschainsfocusonbigbars/2018-11-26 [Accessed 28 Jan. 2019].

4 CAMRA. (2018). Pub closures are making us all poorer, says CAMRA. [online] Available at: http://www.camra.org.uk/news/-/asset_publisher/1dUgQCmQMoVC/content/pub-closures-are- making-us-all-poorer-says-camra [Accessed 28 Jan. 2019].

5 ASH Scotland (2013). Smoking shisha. [online] Edinburgh: ASH Scotland. Available at: https:// www.ashscotland.org.uk/media/6025/shisha.pdf [Accessed 28 Jan. 2019].

6 Martin, T. (2016). ‘Taxes killing pubs while supermarkets surge’. [online] Morning Advertiser. Available at: https://www.morningadvertiser.co.uk/Article/2016/11/22/Tim-Martin-on-taxes-and- supermarkets [Accessed 28 Jan. 2019].

7 Ibid.

8 CAMRA. (2018). Majority of Britons find the price of a pint unaffordable. [online] Available at: http://www.camra.org.uk/press-releases/-/asset_publisher/Jq2QU9j7p8eW/content/majority-of- britons-find-the-price-of-a-pint-unaffordable? [Accessed 28 Jan. 2019].

9 YouGov. (2018). The average price of a pint is 60p more than Brits think is reasonable. [online] Available at: https://yougov.co.uk/topics/politics/articles-reports/2018/06/01/average-price-pint-60p-more-brits-think-reasonable [Accessed 28 Jan. 2019].

10 Brignall, M. (2018). Camra: more than half of UK adults struggle to afford to drink in pubs. [on- line] The Guardian. Available at: https://www.theguardian.com/money/2018/aug/06/camra-more- than-half-of-uk-adults-struggle-to-afford-to-drink-in-pubs-price-of-pint [Accessed 28 Jan. 2019].

11 British Beer and Pub Association. (n.d.). UK Beer Market. [online] Available at: https:// beerandpub.com/statistics/uk-beer-market/ [Accessed 28 Jan. 2019].

12 Mintel. (2018). Younger Millennials are the stay-at-home generation. [online] Available at: http://www.mintel.com/press-centre/food-and-drink/the-stay-at-home-generation-28-of-younger- millennials-drink-at-home-because-it-takes-too-much-effort-to-go-out [Accessed 28 Jan. 2019].

13 NHS. (2018). Young people turning their backs on alcohol. [online] Available at: https:// www.nhs.uk/news/lifestyle-and-exercise/young-people-turning-their-backs-alcohol/ [Accessed 28 Jan. 2019].

14 Mintel. (2017). 32% of Brits have reduced or limited their alcohol intake. [online] Available at: http://www.mintel.com/press-centre/food-and-drink/32-of-brits-have-reduced-or-limited-their-al- cohol-intake [Accessed 28 Jan. 2019].

15 Bowers, S. (2016). Supermarket beer sales overtake pubs for first time. [online] The Guardian. Available at: https://www.theguardian.com/business/2016/sep/26/supermarket-beer-sales-over- took-pub-sales-first-time-last-year [Accessed 28 Jan. 2019].

16 CAMRA. (2018). Pub closures are making us all poorer, says CAMRA. [online] Available at: http://www.camra.org.uk/news/-/asset_publisher/1dUgQCmQMoVC/content/pub-closures-are- making-us-all-poorer-says-camra [Accessed 28 Jan. 2019].

17 Martin, T. (2016). ‘Taxes killing pubs while supermarkets surge’. [online] Morning Advertiser. Available at: https://www.morningadvertiser.co.uk/Article/2016/11/22/Tim-Martin-on-taxes-and- supermarkets [Accessed 28 Jan. 2019].

18 Altus Group. (2018). EU Rules Prevent Government Aid Getting To 1 in 4 Pubs. [online] Avail- able at: https://property.altusgroup.com/2018/10/eu-rules-prevent-government-aid-getting-to-1- in-4-pubs/ [Accessed 28 Jan. 2019].

19 BBC. (2018). Scotland calls time on cheap booze. [online] Available at: https://www.bbc.co.uk/ news/uk-scotland-43948081 [Accessed 28 Jan. 2019].

20 YouGov. (2018). The average price of a pint is 60p more than Brits think is reasonable. [online] Available at: https://yougov.co.uk/topics/politics/articlesreports/2018/06/01/average-price-pint-60p-more-brits-think-reasonable [Accessed 28 Jan. 2019].

21 Burgess, M. (2016). Deliveroo will now bring you beer and wine wherever you are. [online] Wired. Available at: https://www.wired.co.uk/article/deliveroo-alcohol-delivery-uk [Accessed 28 Jan. 2019].

22 Mintel (2015). Pub Visiting – UK. Mintel.

23 Eversham, E. (2015). Stonegate pushes forward with technology-focused pub format. [online] Big Hospitality. Available at: https://www.bighospitality.co.uk/Article/2015/02/04/Stonegate-push- es-forward-with-technology-focused-pub-format [Accessed 28 Jan. 2019].

24 University of Sheffield (2016). Model-based appraisal of the comparative impact of Minimum Unit Pricing and taxation policies in Scotland. Sheffield: University of Sheffield.

25 Home Office (2012). A minimum unit price for alcohol. London.

26 Ibid.

27 Ibid.

28 Ibid

29 Ibid.

30 Institute of Alcohol Studies. (n.d.). How does the price of alcohol affect consumption?. [online] Available at: http://www.ias.org.uk/Alcohol-knowledge-centre/Price/Factsheets/How-does-the- price-of-alcohol-affect-consumption.aspx [Accessed 28 Jan. 2019].

31 Home Office (2012). A minimum unit price for alcohol. London.

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Can you tell us a little bit about your background and what brought you to UEA?

This is delving into the distant past – I have been at UEA since 1985! Before then, I had been a very young Lecturer in Economics at the University of York, and a quite young Reader at the University of Newcastle. I was ambitious and decided to start applying for professorships. UEA just happened to be one of the first universities to advertise a professorship after I made that decision. But I think one of the main reasons I was given the job was that UEA was very interdisciplinary and I was working on topics in philosophy and politics as well as economics. Continue reading “Meet the Lecturers: Bob Sugden”

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