Monday, 15 July 2013

The tax increase that changed British beer

The budget in 1931 had a huge impact on British beer. It was an attempt by the British government to raise more cash in response to the worldwide slump that follwed th stock market crash of 1929. It didn't work out anything like chancellor Snowden hoped.

The tax on a standard barrel of beer (36 gallons of beer with an OG of 1055º) had been 80 shillings since 1924. Quite a long period, by modern standards. In 1931 it was increased to 114 shillings, which raised the average price of a pint from 6d to 7d. At a time of high unemployment and stagnant or even falling wages, what happened is no surprise. Consumption fell.

Decrease of Three-quarters of a Million Barrels in Six Months.
A decrease of over three-quarters a million standard barrels of beer produced in the first half of this year, compared with the first half 1930, is indicated in a written answer to the Chancellor of the Exchequer in a written answer to a question put by E. Winterton (Lab., Loughborough).

Mr Snowden states : The number of standard and bulk barrels of beer produced in Great Britain and Northern Ireland during the half-years ended June 30, and 1931, respectively, and during the months of July and August, in the years 1930 and 1931, was as follows

Standard Barrels.  Bulk Barrels.
Six months ended—  

June 30, 1930 9,115,427 11,685,770
June 30, 1931  8,314,279 10,733,878
July, 1930  1,918,455 2,523,103
July, 1931  1,777,613 2,347,465
August, 1930  1,577,375 2,055,363
August, 1931 1,464,800* 1,921,700*

* Approximate."
Western Daily Press - Thursday 08 October 1931, page 9.
Two things buggered the amount of tax collected: a fall in consumption and a fall in gravity. Rather than increase the price of mass consumption beers such as Mild, brewers simply lowered the gravity so they sould sell it at the same price. The average gravity of Mild dropped from 1043º to 1037º.

After two years the government reversed the increase, but the damage had been done. Rather than raise the gravity of Mild back to the 1930 level, brewers merely reduced the price from 6d to 5d. Which meant that the tax generated fell even more in 1934.

By 1938 production levels had returned to a similar level to in 1930, but, because of the fall in average gravity, tax receipts were still lower. It was only when the tax was increased in 1940 to 104 shillings a standard barrel that the sum generatedexceeded that of 1930.

UK beer production and tax receipts 1930 - 1940
Total Tax £ bulk barrels  standard barrels average OG
1930 71,254,674 25,061,956 19,550,867 1042.9
1931 69,269,299 23,900,213 1042.54
1932 68,710,020 20,790,812 15,514,209 1041.04
1933 67,097,581 17,950,303 12,658,324 1039.52
1934 53,884,405 20,182,308 15,043,120 1040.99
1935 53,582,335 20,864,814 15,577,836 1041.06
1936 55,451,926 21,969,763 16,386,985 1041.02
1937 57,318,585 22,724,450 16,985,231 1041.1
1938 61,241,404 24,205,631 18,055,539 1041.02
1939 62,370,034 24,674,992 18,364,156 1040.93
1940 75,157,022 25,366,782 18,738,619 1040.62
1955 Brewers' Almanack
Brewers' Society Statistical Handbook 1988, p.7
Brewers' Society Statistical Handbook 1973, p.11

Brewers had been perfectly aware of the likely impact of the tax increase and had warned the government. Here's one from a favourite character of mine, Calder, the canny Scot who rescued Allsopp:

A striking speech on the injury to the revenue and to British trade by the additional beer duty imposed by the Supplementary Budget was made last night by Mr. J. J. Calder, managing director of Allsopps Brewery Company, at the annual dinner of the Nottingham and Nottinghamshire Licensed Victuallers and Beer and Wine Trade Association Nottingham.

Mr. Calder declared that a gigantic mistake had been made, and that the tax, while it will fail to yield additional revenue, will seriously affect the employment brewery workers, ruin the market for barley and hops, and injure every industry which depends on the brewery trade.

The sale of beer had gone down by a percentage which was disastrous from the point of view of the revenue, of the brewer, and particularly of the licence-holder."
Western Morning News - Thursday 26 November 1931, page 8.
Slumping prioduction also had a knock-on effect on brewery profits and share prices:

The outstanding feature of the Stock Exchange was the sharp set-back to Breweries, the market being very disappointed at the maintenance of the beer duty.

Courages and Guinness both lost over 5/-, while Watney deferreds and Meuxs both shed 4/9. Hoares slipped back to 40/-, while Benskins, Bass, Barclays, Allsops, Ind Coopes, and Taylor Walkers all showed appreciable losses."
Gloucester Citizen - Wednesday 20 April 1932, page 12.

How did the tax rise change British beer forever? It created modern Dark Mild. For the first time standard Mild fell below 4% ABV. A place it's been ever since.


Martyn Cornell said...

Strange, though, that there seems to have been no great complaint by the British drinker as his pint becoming weaker ... presumably, at a time of economic depression, the nearly 30 per cent drop in the price made up for it being weaker.

Strange, too, that the man who, effectively, watered the workers' beer wasn't a very fat capitalist but a very skinny Socialist ...

Jeremy Drew said...

Here is a rather fun, original recording I found on Youtube for those wondering about Martyn's reference.

Matt said...

Snowden started out as a temperance lecturer. Here he is arguing that the "abolition of the liquor traffic would abolish unemployment". He would have introduced prohibition if he had thought he could have got away with it.

Trevor Poe said...

Really interesting, I love it when my interests in beer, history and tax policy find a common outlet.