The politics of size

Microeconomics is no small beer - Financial Times Letters
Published: May 18 2010 03:00 | Last updated: May 18 2010 03:00
From Mr Stephen Pugh.

Sir, Martin Wolf argues that the former prime minister was less to blame than some have suggested for the UK’s economic plight (“The economic legacy of Mr Brown”, May 14). It is quite plausible that another administration might have done little better. Mr Wolf’s focus is on macroeconomic failure, but I believe that it is in microeconomics where Gordon Brown failed where others might not have done.

The undeniable truth that markets do not always create an optimal outcome was taken by Mr Brown as an excuse to regulate and tinker to an unprecedented extent, often with unforeseen consequences.

An example from my own industry is the introduction of “small breweries’ relief” in 2002. The taxpayer now provides a small brewer producing around 5,000 hectolitres of beer with an annual duty subsidy of about £170,000 (and even more for those brewing stronger beers). The relief is so highly tailored to the small brewer that those brewing slightly more are likely to be in the position that even if they could brew their beer for nothing, their duty bill would still make them more expensive than a microbrewer.

I hope that the incoming government is less prone to believe that microeconomic changes will inevitably improve the operation of markets and if George Osborne is looking for some savings I have a suggestion ...

Stephen Pugh,
Finance Director,
Adnams PLC,
Sole Bay Brewery,
Southwold, Suffolk, UK

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Dear Stephen,

“The relief is so highly tailored to the small brewer that those brewing slightly more are likely to be in the position that even if they could brew their beer for nothing, their duty bill would still make them more expensive than a microbrewer.”

That suggests a micro-brewer is capable of brewing beer with a non-duty cost of brewing below £55 per barrel. It simply isn’t possible, not from where I’m sitting.

I’m not close minded to the various arguments but there is a distinct lack of data from which to work. If you’d like to suggest to SIBA that we form a working group to look analytically at the situation I’d fully support it and push to be involved. We can’t continue throwing the debate backwards and forwards without evidence.

Let’s hope George Osborne chooses not to take up your advice in the meantime for it will result in the closing of a bright, successful local business (in an area that is desperately short of such) and the loss of 4 full time jobs.

Regards

Eddie

Eddie Gadd
The Ramsgate Brewery Ltd
1 Hornet Close
Pyson's Road Ind Est
Broadstairs
Kent CT10 2YD
01843 868453
07967 660060