Beer52’s Struan Logan unpicks the 2002 budget giveaway that sparked an entire industry. Honestly, it’s a lot more interesting than it sounds.
Thursday 28 November 2019
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Whatever else might be said of the legacy of New Labour’s former chancellor and prime minister, Gordon Brown is frequently credited with having enabled Britain’s craft beer revolution, thanks to a relatively minor 2002 tweak to the tax laws. But where did the idea come from, was Brown really a craft beer revolutionary, and how has he not only enabled but also inadvertently shaped the scene we all love today?
When Progressive Beer Duty (PBD) was enacted in 2002, beer in the UK was pretty bleak: wall-to-wall macro-lagers from a handful of giant corporate entities dominated and, unless you popped into your local CAMRA pub, small-batch artisan beer was pretty much unheard of. These, remember, were the days of Budweiser’s execrable WASSAAAAP commercials; annoying on TV, but infinitely worse when yelled into your face in a Wetherspoons. Like I say, bleak.
At this point, small breweries made up a paltry 1% of the UK market and most were struggling to keep going. The Society of Independent Brewers (SIBA) had been lobbying for years for government assistance, so was delighted when the Treasury offered the industry an excellent deal, based on an idea handed down by the EU. Under PBD, breweries producing up to 5000 hectolitres per year (around 880,000 pints) are obliged only to pay half the amount of duty of their larger rivals. This discount rapidly tapers down beyond 5000 hl, but full duty only kicks in at a whopping 60,000 hl (or roughly 10 million pints) per year. To put this into perspective, London cool cat Gipsy Hill’s recent expansion brought it up to the heady heights of 23,000 hl.
While it is now seen as a revolutionary policy that sparked the British craft beer movement, this was never PBD’s intended purpose. Instead it was a lifeline for small local businesses and regional pubs which were seen as embodying a long-held British beer tradition. So, rather more like saving an obscure breed of British moth than kick-starting a revolution.
It also gave Tony Blair’s Labour government the opportunity to say it had saved UK punters a whopping 13p off a pint of micro-brewed beer, alongside other crowd-pleasing measures in the 2002 budget, including extra funding for the NHS and a tax exemption on bingo cards. And the cost to the exchequer of giving every British microbrewery this giant tax break? A mere £6 million per year.
Although it undoubtedly changed the environment, it would be a gross exaggeration to suggest hordes of homebrewers heard of this new policy, quit their day jobs and set up thriving microbreweries within a few weeks. Thornbridge didn’t launch until 2005, Brewdog would start its flashy PR stunts in 2008 and the first big wave of craft breweries we know today began in the 2010s. But what started as a slow burn quickly gathered momentum, and in the 17 years since PBD was introduced, the number of breweries in the UK has exploded from fewer than 400 to 2530.
Not everyone is happy with how the PBD has played out
However, not everyone is happy with how the PBD has played out. There are many breweries in the middle ground that grumble they get neither a tax-break nor feel impervious like their far bigger rivals. When classic British brewery Fuller’s accepted the buyout from Asahi, it cited this squeeze as a reason. A splinter group of SIBA members even created The Small Brewers Duty Reform Coalition (SBDRC) to argue that the scheme incentivises breweries to curtail their growth to retain a cost advantage over those who do expand. Essentially, the group believes some small brewers on the 50% duty discount are being kept afloat artificially, using the subsidy not to invest in growth but to undercut medium-sized competitors on price.
Whether you agree with this view or not, there are solid arguments for updating the Duty to keep up with the industry it helped create. Vocal critics like Black Sheep and Adnams – both well above the 60,000 hl threshold – brew traditional ales of lower percentage, intended to be drunk by the pint. Is it fair that, in the eyes of the SBR, a pint of Black Sheep Brewery’s Best Bitter at 3.8% counts for the same as two half-pints of a microbrewer’s Double IPA at 7.6%?
Whatever its faults though, the relief’s benefits have spread far and wide, from re-energising struggling community pubs to creating a wave of beer-related entrepreneurs. It’s given brewers the commercial freedom to pursue their own styles, experimenting with expensive ingredients and making beers more influenced by America’s craft beer movement. In this sense, it’s also reshaped our national tastes; after all, back in the 2000s, an IPA over 6% was seen as excessively strong, and Thornbridge’s flagship IPA Jaipur was criticised for its punchy, fruity hop character.
It is very rare that such a small tax break, benefitting such a niche part of the economy, delivers such significant and widespread benefits. Just consider the number of staff that have been employed from those 2530 breweries, including brewing assistants and sales reps to financial directors and everything in between. And the break is still working to this day. When the Society of Independent Brewers (SIBA) recently surveyed its 800 members, 70% stated the Progressive Beer Duty was “vital” to their business.
Much like Jimmy Carter’s legalisation of homebrewing in the US, the political points gained at the time were pretty minimal and, despite his pivotal role, Gordon had handed over the keys to Number 10 long before the UK craft scene really took off. It almost makes you nostalgic for a time when politicians thought about their legacy in terms not exclusively defined by Brexit.
So, cheers Gordon, we raise a pint to you. Or at least a schooner, from a small independent brewery producing less than 60,000 hl per annum.
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