Thursday, 24 March 2011


A long, dull quote to do that synergistic thing with a much more reasoned post from Pete Brown. 

I'm not presenting this well, am I? A fascinating summary of the tax burden imposed on British brewing. That's better.


At the outbreak of the war there were some who were sanguine enough to hope, after the disastrous experience of the Snowden duties on beer in 1931 to 1933, that the beer duty at the figure at which it then stood would be regarded as making a sufficient contribution to the national finances, But even those who did not share this optimistic anticipation could not foresee that before the war was a year old the duty would have been raised by successive increases to a point at which the consumer would be paying threepence more on the pint of beer of average strength than he paid before the war. The most recent addition was made by Sir Kingsley Wood almost perfunctorily. He offered no excuse or apology, and he did not, as he did with reference to a relatively smaller addition to the tobacco duty, express satisfaction that consumption was being maintained. Indeed, as his expectation of the yield from the increased duty was £13,000.000 in a full year as compared with Lord Simon's estimate of £18,000,000 for a similar addition to the duty in April it is clear that Sir Kingsley Wood anticipated a reduction of the standard barrelage. It is significant also that no addition to the tax on whisky was proposed, and it may be assumed that it is recognised that the limit of taxable capacity of that commodity has been reached.

The Chamberlain Duties.

The development of the beer duty as one of the foundations of our national finances is of very recent origin. The old tax on beer, which was abolished in 1830, had evidently been extremely unpopular, and readers of Tom Brown's School Days will remember how its repeal was celebrated in a popular song which gave the credit to "Billy our King" for "'bating the tax on beer." The beer duty came to life again in 1880, when Mr. Gladstone abolished the malt and liquor duties. At 6s. 3d. the standard barrel the new beer duty could hardly be considered excessive, but a proposal to increase it by 1s. in 1885 led to the defeat of the Government of the day, and an increase of 6d. in 1894 and of Is. in 1900 to meet the expenses of the Boer War were the only additions made to the duty up to 1914. in which year the yield of the tax was about £13,500,000. During the war of 1914-18 the beer duty was increased by successive steps from 7s. 9d. to 50s. the standard barrel, but restrictions on output limited the consump- tion and the amount collected in 1918 was only £19,000,000. In 1919 the duty was raised to 70s. With the removal of controls on production and the post-war boom the consumption increased and the yield of the duty in the fiscal year 1919-20 was upwards of £170,000,000. The duty was increased to 100s. in 1920 and, in the fiscal year 1921-22, the duty at this rate yielded no less than £122,000,000, though the consumption at about 30 million bulk barrels was somr 5 million bulk barrels less than in 1919-20. In 1923, Mr. Baldwin (as he then was) reduced the price to the consumer by Id. a pint by allowing a rebate of 20s. per bulk barrel, the brewers being required to bear the other 4s. His estimate was based on a consumption of 26 million barrels, and until 1928 the annual consumption remained about this figure; and the average annual yield of the tax in this period was about £76,000,000.

Following upon the imposition of the Snowden duties in September, 1931 (14s. a standard barrel with a rebate of 20s. per bulk barrel) the figures of consumption showed a sharp decline, and in the fiscal year 1932-33 they reached the record low figure for a period of unrestricted production of just under 18 million bulk barrels. Nor was this all. The average gravity of the beer brewed which before the war of 1914-18 had been 1053 degrees, and in the period from 1924-30 about 1043 degrees fell in 1932-33 to 1039.52 degrees. The duty collected in the fiscal year 1929-30 was over £71,000.000: in the years in which the Snowden duties were in operation (1931-32 and 1932-33) the amounts collected were about £69,000,000 and £67,000,000.

As it was thus apparent that the high rates of duty were not only actually yielding less than the lower rates previously in operation, but would, unless some remedy were applied, permanently impair this important source of revenue, Mr. Neville Chamberlain, in 1933, decided that it was necessary to revert to the Baldwin rates of duty and, if possible, to raise the average gravity of the beers consumed to their pre 1931 level. He abolished the standard barrelage basis for calculation of the duty which was in future to be charged at the rate of 24s. per bulk barrel up to and including a gravity of 1027 degrees, and to increase by 2s. for each additional degree of gravity. The duty on a barrel of beer of a gravity of 1055 degrees was 80s., as it was under the Baldwin scale, but on beers of lower gravities the duty was somewhat less, e.g., at 1044 degrees, 58s. against 60s., and at 1033 degrees, 36s. against 40s. A "gentleman's agreement" with the brewers secured the raiding of the gravities of beers by two degrees. As a result of this statesmanlike measure and the loyal observance by the brewers of the agreement as to gravities, the consumption of beer gradually increased until in the fiscal year 1938-39—the last pre-war year - it reached tho figure of 24,675,000 bulk barrels, and the average gravity rose from 1039.50 to 1041 degrees.

The War Increases.

The adoption by Mr. Chamberlain of a basic rate of 24s. for beer of a gravity of 1027 degrees with an increase of 2s. for each additional degree of gravity made it possible to secure that, if the basic duty were increased by 24s. a barrel and the price to the consumer by 1d. a pint, the additional taxation would fall equally on beers of all gravities and would be collected in its entirety into the Exchequer, provided, of course, that gravities generally were maintained. In his first war Budget in September, 1939, Sir John Simon (as he then was) took this course and increased the duty by 24s. This increase of duty necessarily removed the understanding with the Chancellor of the Exchequer in 1933 as to gravities, but the Brewers' Society made to its members the recommendation that there should be no concerted movement to reduce gravities as it was their bounden duty in a time of crisis to assist the Chancellor to raise as much revenue as possible. In the fiscal year 1939-40, for alxmt half of which the increased duty had been in operation, the consumption of beer was about 25.5 million bulk barrels of an average gravity of 1040.63 degrees and the yield of the duty about £75,000,000.

In framing his Budget of April, 1940, Sir John Simon had evidently come to the conclusion that the maintenance of gravities could no longer be expected because be abandoned the symmetrical arrangement introduced by Mr. Chamberlain and increased the basic duty by 17s. instead of 24s. and raised the increment for each degree of gravity from 2s. to 2s. 6d. The only explanation which he vouchsafed for this departure was that it was made for reasons of revenue protection connected with the very complicated formula under which this duty is charged." The effect was that the increased duty upon beers of a lower gravity than 1040 degrees was less than 24s., upon beers of 1040 degrees exactly 24s. and upon higher gravity beers more than 24s.; upon beers of 1055 degrees the increase amounted to 31s. Following the precedent set by Lord Simon, Sir Kingsley Wood in his July interim Budget increased the basic duty at 1027 degrees by 16s. to 81s. and made the increment for each additional degree 3s. The duty on the bulk barrel at the moment, therefore, is exactly 3s. for each degree gravity. Thus at 1055 degrees the duty is 165s., as against 80s. before the war. The increase at this gravity is. therefore, 13s. per barrel, more than a charge of 3d. extra a pint to the consumer would represent. At 1040 degrees the increased duty is 70s., or 2s. a barrel less than the extra 3d. a pint. As already mentioned. Lord Simon estimated that his April increase would produce i 18,000,000 in a full year, while Sir Kingsley Wood's estimate for his increase, which is only Is. a barrel less, is ^13,000,000. From an increase in the charge to the consumer of 2d. a pint the aggregate estimated revenue thus amounts to £31,000,000. There is nothing in the most recently published figures of production to indicate that the Chancellors could not safely base their calculation on an estimate of 24 million bulk-barrels, and as this production at 2d. a pint would yield upwards of £57,000.000, it seems clear that both estimates include a substantial allowance for change-over by the public to cheaper beers and an all-round lowering of

Beer and Inflation.

In his Budget speech Sir Kingsley Wood enlarged upon the economic problem of fundamental importance which lies behind his formidable financial problem. He said: "Here is the crux of the economic problem — a larger and increasing total of money incomes and a smaller and diminishing supply of consumable goods — and I do not hesitate to say that this is a fundamentally dangerous situation. Behind it there is always the danger that prices might rise, no matter what action was taken to check them, and that a rapid inflationary movement might develop in which people come to distrust money and tried to turn it into goods as soon as they got it, and In which prices and wages chased one another upwards. ... To meet this danger the essential need is to see to it that this demand docs not outstrip production, and this means that in so far as the incomes of the public are in excess of the available supply of goods and services at present prices, the excess must not be used for current purchases. Much the best way of securing this object is to divert this excess of increases to the State by taxation so far us this is practicable and, so far as taxation is not practicable, by the public saving a substantial portion of their incomes and lending the savings to the State."

In saying all this Sir Kingsley Wood was, no doubt, the mouthpiece of the economic "witch doctors," as a contemporary scornlully describes them, whom he has assembled to advise him at the Treasury. To old-fashioned people it may seem that the best way of securing the object which he has in view would be to prevent inflation of wages. As a Member of Parliament said with reference to the new Purchase Tax, it seemed an extraordinary way to combat inflation and the vicious spind by raising prices all round.So far as beer is concerned — and it is obviously a commodity of prime importance in this connection — Sir Kingsley Wood and his experts should bear in mind that these outrageous increases of price press hardly upon those large classes In receipt of fixed wages who have received no war time increases of pay, and that the deprivation of their customary indulgence will induce a demand from them for an increase of their money wages which it will be impossible to resist. A striking proof of the correctness of this prognostication has been seen in the agitation for the supply of tax-free tobacco to men of the Services, which has now apparently taken the form of a demand for an all-round increase of 6d. a day in pay. Such a concession as this would not only absorb the increased taxation on beer and tobacco would thus have been the originating cause of that inflation for which Sir Kingsley Wood suggests that such taxation is the antidote. taxation on beer and tobacco would thus have been the originating cause of that inflation for which Sir Kingsley Wood suggests that such taxation is the antidote.

On August 8th, after the foregoing paragraphs had been written, the Chancellor of the Exchequer announced in the House of Commons that he had given consideration to the representations made from time to time regarding the effect on  members of the Forces of the additional taxation on tobacco and beer imposed since the beginning of the war, as well as increased postal and  railway  charges. In addition he had borne in mind the increase in the cost of living, which in certain respects also affects members of the Forces. He had come to the conclusion that alleviation was warranted and that the fairest method of according it would be by way of grant of increased pay, as a purely wartime measure, and he therefore proposed to make an increase in pay of 6d. a day to warrant officers, non-commissioned officers and men. The cost of this additional grant will be in the region of £9,000.000 a year for each million men, and with the large numbers at present in the Armed Forces will obviously absorb the yield of the last additions to the taxation on beer and tobacco.
"The Brewers' Journal 1940" pages 632 - 634. (Published August 21st, 1940.)



Craig said...

I have to say, I've intrigued by the concept of British beer taxes. I suppose that beer is taxed here in the US. I just don't notice it. Cigarettes are, especially in NY, and you hear about increased taxes on them all the time. Although, I could just be just ignorant of how the beer is actually taxed. Maybe I am, indeed, paying to much for a pint.

Now I'm outraged. Maybe.

Anonymous said...

@Craig. State and federal excise taxes on beer are fairly hefty in the U.S., although not as bad as in the U.K. At the moment, the federal tax is something like $7-18/barrel, with state taxes varying from somewhere between $0.10 and $1.10/gallon. There's lots of information on the subject - but most of it is biased in one way or another. NY isn't so bad for state taxes on beer. They get you on sales taxes and bottle deposits, instead.

Historically, before the federal income tax was imposed, taxes on beer (and other types of alcohol) were one of the major sources of state and federal revenue.