Finance Bill

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Mr. Flight: Could the Financial Secretary make it clear whether the 27 per cent. figure is for recorded cigarette sales or whether it includes an allowance for the expected assessment of smuggled tobacco?

Mr. Boateng: I believe, and I shall be corrected if I am wrong, that it includes an allowance for the expectation of smuggled tobacco. I sense from movement to my left that I am right in that belief.

This is a complicated and complex issue. We believe that we have got the balance right. My hon. Friend the Member for Wimbledon (Mr. Casale) was spot on—

Mr. Chris Pond (Gravesham): As usual.

Mr. Boateng: As usual, as my hon. Friend, who sadly must be silent through these Committees normally, says from a sedentary position. The Government of whom the right hon. Member for Fylde was a member introduced the tobacco duty escalator, which ensured above-average inflation price increases. It was 3 per cent. in 1993 and it was increased to 5 per cent. in 1997, when the right hon. Gentleman was Financial Secretary to the Treasury. We abandoned that in November 1990, although there was, as has been said, the 5 per cent. increase in Budget 2000. That has historically been the pattern of taxation in this country, as the right hon. Member for Rushcliffe—

Mr. Flight: And learned.

Mr. Boateng: The right hon. and learned Member for Rushcliffe—although it has been some time since he practised the arts of the law. He has always been an inveterate practitioner of the arts of politics—and a smoker, too, which I suspect some in his party might have wished he had given up, but he has given up neither of those activities. He pointed out with a great deal of force that

    ''traditionally, for I think about 200 years, we have always raised far more revenue from alcohol and tobacco. We are entitled to make our choice; it is our national pattern of taxation and it always will be''.—[Official Report, 8 December 1994; Vol. 251, c. 486.]

That is what the right hon. and learned Member for Rushcliffe said in December 1994, and it is what I say now. On that basis, I commend the clause to the Committee.

12 noon

Mr. Chope: I am grateful to the Financial Secretary for being so open with the Committee and giving us much of the information for which we asked. I am convinced that the Government wish to get tough on smuggling, but I am less convinced that they are

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prepared to get tough on the causes of smuggling. Conservatives are concerned that one of the main causes of smuggling may be that we have the highest tobacco tax in the world.

The right hon. Gentleman said that, according to information from Customs and Excise, a 10 per cent. increase in price leads to a 3 per cent. reduction in consumption. For the legitimate market, the price of cigarettes has gone up by about 45 per cent. since 1997, yet consumption has gone up by about 5 per cent. That suggests that the rules that normally apply, which are used by officials in Customs and Excise, are not operating in the UK market. In 1997, a child who wished to smoke cigarettes would have bought them at £3.12 for 20. Today, because of the enormous market in illegally imported cigarettes, a child can buy cigarettes at £2 or £2.50 for 20. That is a concern. We shall consider the right hon. Gentleman's comments in deciding whether we wish to come back with a specific amendment on Report.

Mr. Davey: The Financial Secretary failed to answer my question about the change in policy on excise duties for hand-rolling tobacco. I hope that he will write to me about it if he is unable to take the opportunity to answer now.

Question put and agreed to.

Clause 1 ordered to stand part of the Bill.

Clause 2

Rates of duty on cider

Question proposed, That the clause stand part of the Bill.

Mr. Boateng: I hope that the Committee will unite in agreement on the clause, which reduces the excise duty rates on cider and perry by 2 per cent. with effect from 28 April 2002. The duty reduction represents a real-terms cut of 3.9 per cent., which, including VAT, is equivalent to a penny per pint of cider or perry. The reduction will boost the traditional cider industry, which is an important part of the rural economy that accounts for half of UK apple production and provides a steady source of income for many farmers. The reduction has already been warmly greeted by many outside the House, including John Thatcher—no relative—who is chairman of the National Association of Cider Makers. He says that

    ''given the fragile state of the industry this reduction is most welcome.''

I hope that that welcome will be shared and echoed by all Committee members.

Mr. Chope: Conservative members of the Committee certainly welcome the reduction. I should be grateful if the Financial Secretary would explain where the reduction fits into the concern that the Government express about under-age and binge drinking. Jean Coussins, director of the Portman Group—a highly respected body that works closely with the Government to try to reduce binge drinking—said:

    ''All major research studies have shown that the most popular drinks amongst regular underage drinkers are traditional beers, ciders and lagers''.

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For cider with a strength of more than 8.5 per cent., the duty paid on a 275 ml bottle—about half a pint—is some 10.6p. For ciders with a strength of less than that, duty is significantly less. In any event, the duties are much lower than the proposed duties for so-called ''spirit coolers'', which we shall address in clause 3. One justification that the Government have offered for the changes in duties on spirit coolers is the evidence of the proliferation of under-age and binge drinking. Can the Minister explain the link between that and the rationale to reduce the rate of duty on cider, which, according the Portman Group, is a beverage more traditionally consumed by young people.

Kevin Brennan: Surely, the point is not what is the most popular drink among young people, but what is the rate of market growth for particular drinks. The evidence is that the market for alcopops and spirit-based coolers has grown hugely in recent years. Beer and cider may remain the most popular, but that is not necessarily where the growth in drinking is.

Mr. Chope: The argument that the hon. Gentleman deploys is extraordinary. He says that a product, even though it has no greater alcohol content, should be penalised because it is more popular; perhaps we should drive people towards products with greater alcohol content, such as cider. I am happy to defend the traditional British cider industry, and I hope that even more of the apples used in cider will be grown in the United Kingdom instead of elsewhere. The Financial Secretary quoted the statistic that half the UK apple production goes into the cider produced in this country. A heck of a lot of the apples from France and overseas also goes into our cider production, but that is a separate issue.

If we want to link the issue of binge drinking with spirit coolers, we must be logical. The debate will probably demonstrate that the fact that spirit coolers are popular among people is no basis for penalising them; penalising cider producers because many people find that cider provides the maximum amount of alcohol for the minimum duty would not be sensible either.

Kevin Brennan: The evidence is that consumption of spirit-based coolers has more than doubled between 1999 and 2001. Surely, that is what is important.

Mr. Chope: Unless there is something inherently wrong with those drinks, the hon. Gentleman's comment is like saying that the demand for lemon barley has increased and the demand for orange squash has decreased. So what? What is important is whether the individual drinks are regarded as inherently dangerous because of their alcohol content. Cider and cider products have more alcohol content than most spirit coolers. The argument that the Government are trying to deploy in sustaining the increase in duty on spirit coolers is that such drinks cause binge drinking, but that is not compatible with clause 2, which we support. The clause provides for a modest reduction in duty on cider, which would cost only about £6 million. I think that the answer to the hon. Gentleman's intervention is that the Government can secure some publicity for £6 million, particularly in the rural parts of the country that produce cider, but they would more than recoup that through a £170

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million tax increase on those who consume spirit coolers. However, we shall tackle that debate in more detail when we come to the next clause. I hope that the Financial Secretary can explain the rationale behind the relatively low duty that is payable on cider—even cider of a strength in excess of 8.5 per cent.—compared with equivalent drinks.

Mr. Davey: May I back up the request by the hon. Member for Christchurch that the Government give some rationale for their alcohol taxation policy? Are the Government following the previous Government's view that spirits and cider have been taxed more heavily than other forms of alcohol and that a gradual adjustment was needed? During the period since 1995, we have seen a significant real-terms reduction in the excise duty on cider through measures taken by both the previous Conservative Government and this Government. That may fit in a rational framework, but it is important, particularly as we are thinking about the debate on the next clause, that the Government show us that it does. I hope that the Financial Secretary can describe that, so that we can have a clear strategy and guidance on policy in that area.

It seems that the representation from Liberal Democrats from the south-west are having an effect.

Chris Grayling (Epsom and Ewell): May I echo some of the comments made by my hon. Friend the Member for Christchurch? There seems to be a great inconsistency in the Government's approach to using excise duties to combat the issue of binge drinking in our society, of which we are undoubtedly aware. Undue levels of alcohol consumption have a corresponding knock-on into antisocial behaviour in far too many town centres on Friday and Saturday nights. The clause that we shall debate subsequently contains a clear indication that the Government are minded to use excise duties to tackle that problem, but there is a stark inconsistency in the provisions related to cider.

I would not want in any way to take steps that had an adverse effect on the cider industry, but it seems clear that there is a difference in social impact between standard cider, which is a popular drink throughout the country, and some of the strong ciders that are undoubtedly used as cheap access to strong alcohol by teenagers at the weekend. It is surprisingly inconsistent for the Government to cut the duties on strong ciders and raise the duties on alcopops.

The Government need to take a long, hard look at how they use excise policies. During the past 20 or 30 years, strong alcohol has become more prevalent in our society. It is cheaper in volume and price terms to get drunk today than it was when I was a teenager—[Hon. Members: ''Ah!'']—or when hon. Members across the Committee were teenagers. It is far easier today to buy a pint of strong cider or lager, which may be, as my hon. Friend the Member for Christchurch said, as strong as 8.5 per cent. compared with half that level for a conventional bitter or cider.

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Excise duties should be structured in a way that discourages excessive alcohol consumption and does not steer young people in one direction rather than another in terms of which strong alcohol they choose to purchase. I hope that the Financial Secretary has an explanation for that apparent contradiction and can show the Committee that the Government are mindful of the role that strong alcohol plays in some of the antisocial disorder that our society is experiencing, and will give us a sense of how his strategy for excise duties will help to tackle that.

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