Tuesday 4 March 2014

Why the price of beer fell by a penny a pint

in 1923. You may have noticed, in my endless series on Mild in the 1920's, that the price of beer fell. But why was it a penny a pint on all beer?

The government wanted to reduce the retail price of beer, but went a funny way about doing it. They gave brewers a 20 shilling per barrel rebate. But it was a flat rebate, no matter what the gravity of the beer. While the tax was charged per standard barrel, that is pro rata pre 36 gallons of 1055 gravity (a standard barrel).

So the discount was on bulk barrels, while the tax was on a standard barrel. Which meant the lower the gravity, the greater, proportionally, the rebate.

"Bass, Ratcliff, and Gretton, Ltd.
The annual general meeting was held at Burton-on-Trent. Colonel John Gretton, M.P., presiding.

In moving the adoption of the report (vide last issue), the Chairman expressed the hope that the shareholders would consider that the result of the year's trading had been satisfactory in all the circumstances. They had had one difficulty to face in the violent fluctuation of foreign exchanges, and items under that heading were included in the administration expenses in the profit and loss account.

It would be within the recollection of them all that in the Budget of this rear provision was made for a reduction in the price of beer of a penny per pint retail, which was equal to 24s. a barrel of thirty six gallons. The reduction in price was not accompanied by a reduction in the taxation of beer. The Government gave a rebate - of 20s. a barrel to the brewer on condition that the price to the public was reduced by a penny per pint, and the brewer, therefore, was required, in order that the retailer might not suffer any loss, to sell his beer at 24s. a barrel less to the retail trade, while he received from the Government only 20s. rebate. That rebate was not a reduction  in taxation. There was another unsatisfactory feature about that to which he thought he should call their attention. The rebate was a flat rate of 20s. per barrel. Whatever might be the quality or strength of the beer at the -  standard gravity — 1055 — on which the tax was levied, the rebate was 20s.; but it was the same if the standard gravity should be only 1030 — 20s. was given back by the Government. It was the same on the strong ales or beers of the higher gravity.

The effect of that was a premium given upon the liquid contents of the barrel — in effect, a premium upon the  water in the weak beers. It was easily worked out. The chairman proceeded to give instances. On 1055 deg. standard the Government, he said, gave 20s. rebate; on 1044 they gave 20s, which was 4s. more than the reduction if worked on the standard of 1055, and was therefore given on the liquid contents, or water, in the barrel. At 1033 the reduction was 20s. a barrel, which, on the standard barrel, would be 12s., but the Government gave 20s. on a barrel of that strength; therefore, it gave back 8s. more than the reduction upon the liquid contents of the barrel — that was to say, water. He thought the public ought to know that; they ought to know that the right way in which to fix the taxation of beer was to make an all-round reduction in taxation, as on former occasions.

He moved the final dividend of 8 per cent., making 11 per cent, for the year, free of tax.

Mr. Gerard Clay seconded tho resolution, and it was carried unanimously.

Colonel John Gretton, M.P., Mr. P. W. Ratcliff, and Mr. Claude N. Burt, the retiring directors, were re-elected."
"The Brewers' journal, 1923", page 473.

 In effect, the government was still trying to impose price controls on beer. They wanted to drop the price of every type of beer by 1d per pint. But were only prepared to pay 20 shillings of the 24 shillings per barrel that would cost. They expected brewers to cough up the other 4 bob a barrel.

It took me a while to get my head around what Colonel Gretton meant with those numbers. It's easiest to explain with a table:

gravity old tax minus rebate tax at 80s per standard barrel
1099 180 160 144
1088 160 140 128
1077 140 120 112
1055 100 80 80
1044 80 60 64
1033 60 40 48

You can see that, had the tax per standard barrel been dropped to 80 shillings, beers with a gravity below 1055 would have paid more tax than with the 20 shillings per barrel rebate. Beers over 1055 were even more disadvantaged.

Why would this be of concern to Bass? Simple - they tended to brew higher gravity beer than most breweries. Their flagship product, Pale Ale, was about standard 1055 gravity at a time when average OG for all beer brewed in the UK was about 10 points lower.

Bass beers 1921 - 1922
Year Beer Style package FG OG ABV App. Attenuation
1921 Pale Ale  Pale Ale bottled 1055.2
1921 Export Stout Stout bottled 1025.2 1079.5 7.06 68.30%
1921 Export Stout Stout bottled 1036 1093.5 7.45 61.50%
1921 No. 1 Barley Wine bottled 1032 1094 8.06 65.96%
1922 Pale Ale  Pale Ale bottled 1055
1922 Pale Ale  Pale Ale bottled 1055.1
1922 Imperial Stout Stout bottled 1032.3 1092.7 7.85 65.16%
1922 Pale Ale  Pale Ale bottled 1010.9 1055.1 5.76 80.22%
1922 Pale Ale Pale Ale bottled 1011 1054.73 5.70 79.90%
Whitbread Gravity book held at the London Metropolitan Archives, document number LMA/4453/D/02/001
Thomas Usher Gravity Book document TU/6/11
Younger, Wm. & Co Gravity Book document WY/6/1/1/19 held at the Scottish Brewing Archive

It would have been very much in Bass's interest to have had the duty reduced to 80s. per barrel rather than have a flat-rate rebate.

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