Brewers loses beer battle

UK beer will continue to be taxed at its present rate after independent brewers Shepherd Neame lost a long-running court case against the government (see Alert, number 2, 1997 and number 1, 1998). The brewer, which is one of the oldest in the country, had taken the action after the Chancellor increased beer duties by a penny a pint in his 1998 budget. The legal argument was that this was a breach of European Union rules on tax harmonisation.

Whilst deciding against Shepherd Neame, the three Court of Appeal judges said they were "sympathetic" to the brewery and others fighting for lower beer taxes. However, they went on to say that there was "no legal obligation on the UK to abstain" from raising the tax on beer.

True to the spirit shown so far, the Kentish brewer has vowed to fight on. After the court refused to refer the matter to the European Court of Justice, Shepherd Neame declared that they will appeal to the House of Lords. A director of the company, Jonathan Neame, said: "We are obviously disappointed but the judgement was favourable to us in many ways. This may be just the loss of one battle in a long war to remove unfair taxes." Shepherd Neame and other independent brewers had argued that high beer taxes in the UK were driving them out of business, because more and more people were importing large amounts of cheap beer from France.

Beer sold in the UK carries taxes eight times higher than those in France - 32 pence a pint compared to 4. As a result, it is claimed, thousands of Britons cross the Channel for a day trip to France, where they stock up on beer, wine and other cheap goods. However it is argued that, contrary to the brewers' claims, much if not most of the price differential on beer between Britain and France is not due to higher British excise duties but to the higher prices set by the brewers and the retailers themselves. Also it is by no means clear that the beer purchased in France simply replaces that which would have been bought in UK pubs. Drinking patterns have been changing for some while, with a move away from the traditional pint in the local, and a significant proportion of beer bought in the hypermarkets of Pas de Calais represent additional consumption. Of course, the supplies brought in by smugglers are distributed throughout the country and presumably affect Shepherd Neame no more than any other brewer.

Nevertheless, Shepherd Neame blames the flood of cheap beer for the closure of 50 of its pubs since 1993. The company believes that one in three pints of beer drunk in Kent are now coming from across the Channel. Because of those changing patterns, this probably damages off-licence trade at least as much as that of pubs. The Court of Appeal decision was welcomed by Her Majesty's Customs and Excise, where Barbara Roche is financial secretary. She said their lordships had upheld "the important principle that Parliament can legitimately set excise duties in the UK, subject to minimum rates agreed with our EU partners".

Shepherd Neame began its court action in 1997 and has spent an estimated £300,00 in legal costs so far