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2 Nov 1999 : Column 196

Beer Duty

Motion made, and Question proposed, That this House do now adjourn.--[Mr. Kevin Hughes.]

9.13 pm

Mr. Tony Baldry (Banbury): I am grateful for the opportunity to raise this issue. I am introducing the debate because of the significance of the Hook Norton brewery in my constituency. This year the brewery is celebrating 150 years of brewing beer, and it still uses the buildings that it used in the last century. Much of the original brewing equipment is still used, it is still producing first-class beer, and earlier this year, Her Royal Highness the Princess Royal opened a new business centre.

Hook Norton brewery employs 38 people, whose families have worked with it for many years, and owns 36 pubs, 12 of which are in my constituency. The names of Hook Norton's beers evoke much that is appreciated in rural England--Haymaker beer, for midsummer, Twelve Days Beer, for Christmas, and Old Hooky for all the year round. Hooky beer is renowned throughout the country.

In January the then Financial Secretary to the Treasury said in a written answer:

How can excessively high beer tax be in the interest of UK consumers, UK jobs or our countryside?

Duty rates on beer in Britain are considerably higher--I stress that--than those in several of our fellow European states. In this country, duty on beer of 4 per cent. strength is £43.28 a hectolitre, whereas, in France, duty on beer of equivalent strength is only £8.44 per hectolitre--a staggering difference of £35. Duty is even less in Germany, and, in Spain, is only £6.36. The Government are eager to be seen as the consumer's friend, yet they are overseeing a blatant rip-off.

Pubs are obliged to have glasses that mark distinctly a full pint. Perhaps there should be a second marking on the glass, to show how much of the cost of a pint goes to the Treasury in tax--a tax level. When the single market was introduced in the European Union, a target rate of tax was set of about 8p on the price of a pint, with the aim of harmonising beer duty rates in the EU. All those EU countries whose rates were significantly above that figure have reduced their duty--with the exception of the UK, which has increased its duty rate by 13 per cent. That is wrong. Such a difference is absurd, and--for reasons that I shall give--can have only a detrimental effect on the British economy.

The high rate of duty on beer especially hurts the rural economy and is yet another Government attack on the countryside. It hurts not only the farmers, who grow the raw materials for beer, but small country pubs, which offer a sound source of village employment and are also centres of the local community.

That staggering variation in beer prices provides shoppers with a considerable incentive to purchase beer from the continent, rather than from pubs and brewers in Britain. Frenzied booze-cruise trips are especially damaging to the rural economy. Surveys show that43 per cent. of pub visits involve journeys of less than one mile, thus country pubs, with small catchment areas,

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suffer the most from beer bootlegging. The abolition of import allowances, as part of the single market, acts as another incentive to smugglers to bring in bootleg beer from abroad and resell it illegally in this country. It is clear that that illegal trade jeopardises the jobs of decent, hard-working people in the UK. By beer bootlegging, I mean simply taking Transit vans across to France and elsewhere in Europe to bring beer back--not for people's own consumption, but to sell it at a profit. Those bootleggers are almost running a business.

The Chancellor of the Exchequer seemed to recognise the scale of the problem, when he announced in the July 1997 Budget--the first after the general election--that beer duty required

Those are precisely the issues that cause such concern to me, my constituents and many people in this country. However, as the House will recall, the Chancellor produced only a halt to increasing beer duty. The matter now needs some further careful consideration; a reduction in beer duty is clearly required to bring it in line with the duty charged in other EU member states.

That is especially true because of the Government's reaction to bootlegging. They claimed to have provided about £35 million to fight that problem, yet, a year later, it is estimated that a staggering 75 per cent. of beer imports are still illegal. I do not suggest that the staff of Customs and Excise are not trying to do their job, but even their hard work cannot combat a highly sophisticated and highly organised network of beer bootleggers. Would it not be preferable to fight the problem by reducing the tax in the country where the damage is done than by spending huge sums on enforcing new customs schemes? Otherwise, the risks of smuggling might increase, but the rewards will remain.

The legal importation of beer is another equally devastating blow to our country's brewing industry. It appears that the Government have not listened hard enough to accounts of the plight of brewers that is caused by the massive importation of cheap foreign beer: one pint in every 20 drunk in this country is imported from the continent, resulting in an annual average loss in sales of £12,000 to every pub in the country. That is hard for rural pubs, many of which exist on the edge of economic viability.

This year, the Financial Secretary to the Treasury announced in the House that the Treasury estimated that the Government had lost £50 million to cross-border shopping for beer alone in 1997 and at least £140 million to cross-channel beer smuggling in 1998--a total of£190 million, which is a substantial sum that could have gone into the economy of this country. There is a patent link between lower revenue and higher imports which the Government appear reluctant to tackle. Conservatives recognised the link between loss of revenue suffered by the Government and high duty and made the tax share of the price of a pint of beer the lowest in 30 years.

That point is important, because of the great concern that if beer duty were cut, a large amount of Government revenue would suddenly disappear. That argument would be understandable were it not unfounded. The Treasury's

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own figures show that considerable economic benefits would accrue from a 20 per cent. cut in beer tax spread over three years. Inflation would fall by 0.5 per cent. and at least 60,000 additional jobs would be created, both because of cheaper beer and the trade won back from the bootleggers. Perhaps the most attractive figure for the Government is that the public sector borrowing requirement would fall by more than £800 million.

I emphasise that any loss of revenue would be short term. It stands to reason that reduced duty rates in Britain would boost domestic consumption, more than outweighing any effect that lower rates might have on revenues. It also stands to reason that if people are not sat at home drinking beer bought in France, they are more likely to be sat in a pub drinking beer bought in Britain. When the Conservative Government reduced the top rate of tax from 60 per cent. to 40 per cent., we found that the total tax take increased. If the Government were to cut beer tax, they would make the same discovery: reduce the tax and the tax take increases. In addition, rural areas would be helped. Surely the Government understand all those long-term benefits.

If duty remains as it is on the continent--so much lower than it is here--it will encourage more smuggling and more shopping overseas, which, in turn, mean less revenue for the Government. That is already happening: the consumption of beer in pubs has declined by almost 2,000 barrels, whereas the importation of beer has increased by 25 per cent. year on year. That is not surprising, given that a Transit van can carry as much beer in one journey as is sold in a small pub in one week. Bootleggers import the equivalent of the beer sales of 5,000 small country pubs, which is almost the number of pubs in Dorset, Somerset, Devon and Cornwall. That is the scale of the problem. With the UK's duty rate starting as the highest in Europe and then rising, it is entirely predictable that consumers have decided to save money by travelling to France to buy beer. That is all hugely damaging.

Jane Griffiths (Reading, East): Is the hon. Gentleman aware that the illegal trade in beer is increasingly moving away from the white Transit van trade to paper fraud, which involves beer that has never left the country and which is on sale, not at car boot sales, but in corner shops and other places where people buy beer, believing that they are buying it legally?

Mr. Baldry: That is an extremely good point. If such a huge differential in rates of duty persists, there will be continuing incentives for all sorts of fraud and smuggling. That is especially damaging to small rural pubs, which rely heavily on the sale of beer and often operate at the margins of profitability. Approximately 2,700 small rural pubs have closed in the past 20 years, in spite of Conservatives' attempts to free pubs from ties to national brewers and to enable them to have greater access to the market.

The beer and pub industry is a major employer--often one of the main employers in its locality. Pubs are at the heart of the rural economy and rural social life. Thus their effect on the rural economy derives from being a direct employer and a focus for rural life.

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