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Mr. Howard Flight (Arundel and South Downs): As usual.
Mr. Chope: As my hon. Friend says, that is usual. I hope that we will hear an explanation of why the Chancellor spoke at such length to give the impression to people listening to his Budget that they would be able to get cheap beer after 1 June, when the reality is very different.
I shall not say any more about clause 4, because it is important to get on to the amendments. If we accept the principle, we need to ensure that we come up with a workable system. At the moment, it is not workable.
4 pm
The Financial Secretary to the Treasury (Mr. Paul Boateng): The Opposition were characteristically carping, cavilling and mealy-mouthed. After many years of campaigning for this change by many sectors of the industry and the pub-going public—backed by some Liberal Democrat and Conservative Members—when the day finally arrives, we hear nothing but whining and attempts to undermine a real achievement for the industry. It will bring new hope to nine out of 10 UK breweries, which will make savings of up to £120,000 as a result of this measure. That includes all microbreweries and local breweries.
What we should have heard from the Opposition was some acknowledgement that they supported the change. Successive Governments have sought to support the diversity of the British beer market, notably by use of regulations allowing independent brewers access to tied estates. As the number of tied estates has fallen and pub companies have come to the fore, it has become increasingly difficult to promote diversity and market access through regulation. When we are asked for the rationale behind the scheme, it is an attempt to meet that concern and recognise the particular difficulties that small breweries face when seeking to grow their business and compete for access in today's beer market.
We estimate that the savings will help small breweries to remain profitable when selling beer to pub companies at discount rates and, for many, will allow them to invest in their own pubs, which will offer them a more secure and stable outlet for their products. Of course, the choice is theirs; it is not for the Government to dictate how small breweries should make use of the savings now available. Some may choose to cut their prices, but others will seek to re-invest the savings to enable them to compete against medium and large breweries. That is why we, too, found convincing the arguments put to us by the Small Independent Brewers Association.
The scheme has been under active consideration by successive Governments since at least 1989, when it was recommended by the Monopolies and Mergers Commission. Indeed, we have been in close consultation with the brewing industry since announcing that we were considering the scheme in the 2001 Budget. That consultation demonstrated exactly what we have announced and the veracity of the rationale that lies behind the measure. The suggestion by the hon. Member for Kingston and Surbiton (Mr. Davey) that this was a Budget wheeze thought up a few days before to grab some headlines does not do him justice. He gives these matters greater consideration than that cheap jibe would suggest. I hope that he does not intend to continue in that vein for the rest of the consideration of this Finance Bill.
Mr. John Bercow (Buckingham): I hope that he does.
Mr. Boateng: The shadow Chief Secretary says from a sedentary position, "I hope that he does." I wonder how often the hon. Gentleman will turn up in Committee. He will not have to endure the hon. Member for Kingston and Surbiton—
Mr. Boateng: Good. We look forward very much to the continued attendance of the shadow Chief Secretary, as we want to put him to the test. He has not had any testing yet, and it is time that he had some.
Mr. Boateng: I see the shadow Chief Secretary is itching to respond, but he will have plenty of time to do so in the Committee's deliberations. He must restrain himself just a little longer, while I give way to the hon. Member for Kingston and Surbiton.
Mr. Edward Davey: I am grateful to the Financial Secretary for giving way, although I am sorry to stop him in his rather tedious tracks. So far, he has failed to say whether he will publish the analysis performed by the Treasury before the policy was decided. The right hon. Gentleman has said that there has been consultation. Have the results been published? If so, where are they available? If not, when will they be published?
Mr. Boateng: I am not going to fall for that one. I would not want to be tedious and bore the Committee this afternoon in the way that the hon. Gentleman suggests. I am only too happy to write to him to outline the general nature of the consultation, but I do not intend to publish the details. The hon. Gentleman can do what he will with the letter that I shall write to him on the subject, but he needs to understand why the small breweries so welcome the measure.
The measure will help to level the playing field. Small brewers will be able to compete more effectively with the big regional and national breweries. They will be able to use the savings that they make to invest in their own pubs, or to offer increased discounts when selling their beer.
The proposed relief will provide support for small brewers throughout their growth—from the first barrel that they produce until they reach the £2.5 million turnover of regional brewers. The relief is focused and will meet the needs of those who require it most. It will retain for the UK the rich diversity of its brewing industry, and protect consumer choice in an age when multi-million pound pub companies dominate the retail market.
We want a beer industry in which 500 brewers have access to the market, and not just the largest 50. That is why the small brewing industry has welcomed the measure with such warmth. The proposal is right in principle, which is why it will be capable of withstanding the detailed scrutiny of the Committee.
I commend the principle and its outcome to the Committee.
Clause 4 ordered to stand part of the Bill.
Schedule 1
Mr. Chope: I beg to move amendment No. 17, page 110, line 32, at end insert—
'(3) Beer produced in a small brewery for export shall not count towards the maximum production levels specified for small breweries elsewhere in this Part.'.
The Chairman of Ways and Means (Sir Alan Haselhurst): With this it will be convenient to discuss the following amendments: No. 4, page 112, line 2, leave out "30,000" and insert "200,000".
No. 5, page 112, line 14, leave out "30,000" and insert "200,000".
No. 7, page 112, line 17, leave out "30,000" and insert "200,000".
No. 6, page 112, line 20, leave out from "that" to end and insert—
'beer produced under licence is not small brewery beer'.
No. 8, page 112, line 26, leave out "30,000" and insert "200,000".
No. 9, page 113, line 9, leave out "30,000" and insert "200,000".
No. 10, page 113, line 13, leave out "30,000" and insert "200,000".
No. 11, page 114, line 19, leave out "30,000" and insert "200,000".
No. 12, page 115, line 10, leave out "30,000" and insert "200,000".
No. 13, page 115, line 13, leave out from "that" to end and insert—
'beer produced under licence is not small brewery beer'.
No. 14, page 115, line 22, leave out "30,000" and insert "200,000".
No. 15, page 116, line 42, leave out "30,000" and insert "200,000".
No. 16, page 116, line 46, leave out "30,000" and insert "200,000".
Mr. Chope: The amendments would introduce common sense into the eligibility rules entitling small breweries to a reduced rate of duty on their first 5,000 hectolitres of production. In this debate, we shall have to refer quite a lot to hectolitres. People following the debate may wish to know that a hectolitre is 100 litres—almost 22 gallons, or 176 pints. Unfortunately, the Bill refers to hectolitres.
Amendment No. 17 would exclude from the calculation of annual production for the purpose of assessing eligibility production for export, which is already exempt from the penal rates of beer duty on domestic sales. However, the amendment is not as far reaching as amendment No. 4 and the consequential amendments Nos. 5, 7, 8, 9, 10, 11, 12, 14, 15 and 16. Those amendments would extend relief to all brewers producing up to 200,000 hectolitres per annum, instead of limiting it to those producing up to 30,000 hectolitres per annum. It is because amendment No. 4 goes to the core of the argument that I shall seek to divide the Committee on that amendment rather than amendment No. 17.
Amendment No. 4 would make about another 25 small breweries eligible for relief at a cost to the Exchequer of about £3 million or £3.25 million—about one tenth of 1 per cent. of total beer duty yield. The Financial Secretary referred to regional brewers as though only they were excluded from this scheme. He may be interested to know about the Ringwood brewery, close to my constituency. It is not a regional brewery but a popular local brewery and it produces between 40,000 and 50,000 hectolitres per annum. It is a family firm, founded in 1978; it originally had one employee and now employs 44 people. Within any definition, it is a small business and a small brewer. It was gravely misled, because it assumed that the benefit would apply to it, but it will not.
The Chancellor told the House and the nation in the Budget that he would
- "encourage one group of small businesses, the nation's small breweries".
- "I have decided that the duty paid on their own beer will be halved."—[Official Report, 17 April 2002; Vol. 382, c. 584.]
The situation is pretty serious, not just for the Ringwood brewery but for a number of other independent family breweries. The Independent Family Brewers of Britain says:
- "We had asked the Government to follow the European model and allow tax relief for small brewers producing up to 200,000 hectolitres a year . . . The 30,000 hectolitre limit proposed in the Budget affects under 2 per cent. of the market and will leave many small brewers out in the cold."
- "We are delighted that the Conservatives are asking the Chancellor to help brewers like ourselves and fully support their suggested amendments to raise the production threshold for tax relief to 200,000 hectolitres from the proposed 30,000 hectolitres and also to allow beer produced in small breweries for export not to count towards these maximum production levels."
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