Increasing beer duty would be immoral and economically illiterate

Ben Ramanauskas

August 16, 2018

Humans have been drinking beer for millennia. There is evidence to suggest that beer was being produced as far back as the Pre-Pottery Neolithic period from 8500 BC to 5500 BC. We know for certain that beer was being enjoyed by the people of the Zagros Mountains of Western Iran in 3500 BC.

In fact, beer helped to form civilisation. Workers in the city of Uruk over 5,000 years ago were paid in beer. Without it, we would not have the Great Pyramids of Giza, as each worker got a daily ration of four to five litres of beer to serve as both nutrition and refreshment.

We find references to beer in some of the world’s oldest writings. For example, some of the earliest Sumerian writings contain a recipe for brewing beer, along with the advice to “fill your belly with good things. Day and night make merry”. The Ebla tablets from ancient Syria also contain a list of beers available at the time. Even the ancient Greek philosopher, Xenophon, refers to beer brewing in his writings. In fact, beer has been so important throughout history that not only did Magna Carta restrain the powers of the King and bestow upon the people of England certain fundamental rights, it also gave us the pint.

Beer is not only important historically, but also of great importance from a social perspective. For centuries, a trip to the pub was, along with attending church and celebrating feasts, was one of the main social activities in the UK. In modern-day Britain, millions of people enjoy having a few pints with their friends in pubs and bars.

But, of course, drinking too much beer can have lots of bad consequences. In the long term, you might suffer from liver disease or obesity which places a burden on the NHS. In the short term, you could end up in A&E after drinking too much and having an accident. Again, which adds more pressure on an already-fragile health service. Also, given the fact that having one too many can make you lose your inhibitions, you might find yourself in trouble with the police and having to spend a night (or even longer) in the cells. As a result, the criminal justice system is brought into the situation.

These are what economists call “negative externalities”, and so governments levy a Pigouvian tax on alcohol to offset these externalities and to decrease their consumption. Given the burden that can be placed on public services as a result of excess drinking, some form of duty does seem appropriate.

In order to raise more money so that the government can increase public spending – and in an attempt to appease the increasingly vocal and fanatical members of the public health lobby – the Chancellor of the Exchequer, Philip Hammond, has hinted that he may increase beer duty. However, this would be wrong for a number of reasons.

First, there are the moral implications of increasing beer duty. To do so for paternalistic reasons in order to deter people from drinking is nothing more than the nanny state telling you how you should live your life. It robs the individual of any responsibility and eclipses personal morality by suggesting that the state does not trust you to make wise decisions about what you choose to put into your body. Human beings are moral agents capable of taking responsibility for their own lives, increasing beer duty undermines this.

Increasing beer duty also doesn’t make sense from an international perspective. Beer duty in the UK is already much higher than in other countries. For example, it is 14 times higher than in beer-guzzling Germany. People in the UK drink only 12 per cent of the beer in the EU but pay 40 per cent of beer taxes.

Not to mention that measures such as this hits the poorest people in society the hardest. Many people in the UK are struggling to make ends meet due to the high cost of living, and beer duty exacerbates this problem. Forget about increasing beer duty, if the Government wants to help those “just about managing”, then cutting beer duty should be its priority.

Cutting beer duty could also lead to higher wages for people who work in pubs and breweries. Beer duty increases the cost of a pint, which means that people purchase less beer. This hits the profit margins of pubs and breweries who are forced to make savings elsewhere. One way they can do this is by keeping wages for the employees low.

Indeed, increases in beer duty destroy jobs. Research by the TaxPayers’ Alliance revealed the correlation between beer duty and employment opportunities. During the period of the beer duty escalator of 2008-2013, beer duty rose by 42 per cent. The consequences were devastating: 7,000 pubs were forced to close down, with the loss of 58,000 jobs – meaning less revenue for the Treasury in the form of income tax and national insurance contributions. Thankfully, though, the beer duty escalator was scrapped which resulted in 21,000 more jobs in the industry.

This point is even more important when you consider in-job training. More than 250,000 people under the age of 25 work in pubs and breweries around the country. It is often their first job and gives them invaluable experience which will equip them with the skills they need to find higher paid work in the future.

And as the UK economy is enjoying a period of record low levels of unemployment, it is important to remember that the beer industry plays an important role in this. It supports employment in every region of the UK with almost 900,000 jobs in pubs and breweries. Importantly, many of these jobs are in regions where poverty rates are high and where unemployment levels are above the national average. As such, the beer industry is providing a vital lifeline by supporting employment in these areas, giving people the chance to escape a life of unemployment and poverty.

Beer and the advancement of civilisation have gone hand in hand throughout history. Drinking beer has, for centuries, been an important activity socially and it remains so today. Although it is right that some form of duty is levied on beer, it would be immoral and economically harmful for the government to increase beer duty. Indeed, instead of raising beer duty, the Treasury should cut beer duty. The result will be more jobs, higher wages and increased investment.


Written by Ben Ramanauskas

Ben Ramanauskas is a research economist at Oxford University and a former adviser to the International Trade Secretary.


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