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Finance Bill

Finance Bill

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Standing Committee F

Tuesday 14 May 2002


[Mr. Joe Benton in the Chair]

Finance Bill

(Except clauses 4, 19, 23, 26 to 29, 87 to 92, 131 and 134 and schedules 1, 5 and 38)

Clause 3

Duty on beverages made with spirits to be at spirits rate

Amendment proposed [this day]: No. 1, in page 2, line 18, leave out subsection (1) and insert—

    '(1) The Treasury shall lay before Parliament on or before 31st December 2002 a report on the operation of duties on alcoholic beverages that shall include—

    (a) information about the market in lower-strength alcoholic beverages;

    (b) an estimate of the impact on consumption of the rates of duty on beer, cider, wine and spirits in comparison with the rates of duty on those beverages falling within the provisions of section 1(9) of the Alcoholic Liquor Duties Act 1979;

    (c) a summary of any representations received by the Treasury after the day on which this Act is passed relating to section 1(9) of the Alcoholic Liquor Duties Act 1979.'.

4.30 pm

Question again proposed, That the amendment be made.

The Chairman: I remind the Committee that with this we are taking amendment No. 2, in line 22, leave out subsection (2).

Mr. Michael Jack (Fylde): I begin by welcoming you to the Chair, Mr. Benton. You were absent this morning for the beginning of our proceedings, but tribute was paid to you in your absence. It is nice to be able to do that in your presence. I also acknowledge the Economic Secretary, who is with us this afternoon—a change in Front Bench talents. I have no doubt that we shall enjoy what she has to say.

Before the luncheon interval, we were debating the amendments tabled by my hon. Friend the Member for Christchurch (Mr. Chope). I wish to address the remainder of my remarks to amendment No. 1, which properly asks for more information to be provided to Parliament about the taxation of alcoholic beverages. Just before the break, I was discussing what appears to be a new taxation principle employed by the Treasury and by Customs and Excise of considering what the market will bear. The explanatory notes indicate that the duty on alcopops was increased because it was thought that, as a proportion of the retail price, it was too low for a spirit-based designer drink. The explanation would have been a little more straightforward if the notes had simply said that the Treasury had decided that it was time that the taxation on that spirit-based drink fell into line with other spirits. However, they did not say that but described a new way of determining policy.

The explanation has flushed out some inconsistencies in the way that alcohol per se is

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taxed. For interest's sake, I asked for the assistance of the Library of the House to draw up a comparison on a common denominator basis of the way in which different alcoholic beverages are taxed. The Library converted tax into the common denominator of pounds per litre of alcohol. We find that spirits will bear a duty of £19.56 per litre after the measure in the clause comes into play. However, wine with 15 per cent. alcohol content bears a duty of £10.31 per litre of alcohol. A less alcoholic wine by volume bears a tax of £15.47, and beer bears a tax of £11.89. There appears to be a delicious inconsistency in the way that alcohol is taxed, when compared on a like-for-like basis. The amendment gives Treasury Ministers an opportunity to address the inconsistencies.

Paragraph 6 of the explanatory notes refers to the medical implications of a large consumption of alcopops, but the tax on beer will, effectively, be nearly half the now-enhanced rate of taxation on alcopops. If there were genuinely a health case to be made, why not have an equivalence in the tax on alcohol? If we are to understand the logic behind the measure, we need an explanation, and amendment No. 1 provides an opportunity to get one. I look forward to hearing Ministers explain both why there are different rates and why the numbers are what they are, which will allow us to understand the inconsistency in the way in which alcoholic beverages are taxed in this country.

Chris Grayling (Epsom and Ewell): I echo the remarks welcoming you to the Chair this afternoon, Mr. Benton.

I raised a number of issues in the discussion of the cider amendment. I particularly want to pick up on the comments made this morning in an intervention by the hon. Member for Glasgow, Maryhill (Ann McKechin). She referred to the clear fact that the existence of alcopops has generated substantial new drinking among, in particular, young women, and has led to problems of alcoholism. I do not dispute her comments, but in making them she highlighted an important issue that underlies the inadequacy of the step that the Government are taking.

My hon. Friend the Member for Christchurch rightly said that if steps of the kind set out in clause 3 are to be taken, they need to be taken on the back of a proper assessment of the situation. The comments by the hon. Member for Glasgow, Maryhill highlighted the fact that that has not been done. In my experience, women do not originate antisocial behaviour of the kind that is a bane to so many residents of town centres. This is not an exclusive situation, but generally speaking it is not women who go around vandalising property, putting graffiti on walls and smashing up cars late at night, but young men. The hon. Lady unwittingly highlighted the fact that clause 3 will not address the problems of excessive drinking in young men. It will, perhaps, discourage alcoholism in young women, but it will not deal with antisocial behaviour.

If there is to be a proper assessment, it should reflect the point made by my hon. Friend the Member for Christchurch that young men tend to drink beers and ciders, particularly when they are underage, far more than alcopops. A broad-ranging assessment of the

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differing impacts of different kinds of alcohol and the differing impacts of differing levels of duty on different kinds of alcohol would lead the Government to come forward with a coherent strategy that said, ''We have a problem in our society. It is not helped by aspects of the excise system, which we therefore need to modify.'' That would give them credible authority to take the steps that they hope to take, but there is nothing in the one-off clause that enables them to do so.

The reference to the chief medical officer's report can be interpreted as an alibi for a revenue-raising measure, which, as my hon. Friend the Member for Christchurch has said, will damage parts of the industry. The Government must do better. They must come up with a clear assessment of the impact of alcohol on antisocial behaviour and put forward proposals, which can be openly and clearly debated, about the way in which the excise system can be structured to help tackle that problem. That argument is not addressed by clause 3. The amendment put forward by my hon. Friend is one way in which to begin a proper debate about the differing impact of excise levels on different kinds of alcohol, and it deserves the Committee's support.

Mr. Mark Hoban (Fareham): I also welcome you to the Chair for this afternoon's proceedings, Mr. Benton.

In his amendment, my hon. Friend the Member for Christchurch has addressed the problem with clause 3. When we discussed clause 2 this morning, there was an issue about whether cider should be subject to a higher tax because it has a greater alcohol content. When one compares the contents of that debate with clause 3, there appears to be a discrepancy in the Government's case. It is not clear whether the measure is being brought forward for health reasons to reduce binge drinking, in which case the argument for reducing the duty on cider is not appropriate, or simply to raise revenue.

The explanatory notes state that there has been an increase in demand for alcopops in recent years. If that price increase is to be believed, demand has increased off the back of steep price increases, although I note that my right hon. Friend the Member for Fylde (Mr. Jack) referred to the ACNielsen report, which indicates that the price increase during the past couple of years has been only 20p. I wonder whether the Government are targeting those drinks simply as an easy revenue raiser, knowing that they are popular and in demand and that, even with an increased price, the yield on the tax will continue to be very sound and will benefit the Exchequer. Consequently, it may be misleading to try to dress up the tax increase as though it were on health grounds, given the earlier comments on cider.

We must also consider what will happen if the amendment is rejected and the tax increase goes through. I fear that more young people, rather than using the relatively low alcohol alcopop drinks, will switch straight to drinking shots—neat spirits. Certainly, what I believe are called sidekicks are available in off-licences. They are shot measures of

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spirits, which will get people more drunk more quickly, and possibly more cheaply, than alcopops. We must look at the health debate in the wider context of what else is available to young people to get them drunk quickly, cheaply and, from their perspective, efficiently.

The amendment gives the Committee and the House time to pause and think about why the measure has been introduced and about how we can address antisocial behaviour and binge drinking in a more considered and mature fashion, looking at all rates of duty on alcohol, not simply those on cider or, as in this case, alcopops in isolation.

The Financial Secretary to the Treasury (Mr. Paul Boateng): May I join colleagues in welcoming you to the Chair, Mr. Benton? You have arrived in the middle of an informative and interesting debate, with important contributions from both sides. I hope to give you a flavour of it in the course of my response.

Spirits-based coolers are also known as alcopops, premium-packaged spirits, ready-to-drinks, designer drinks, pre-mixed spirit drinks or, as we have now learned from Opposition Members, FABs—I suspect that that will be a new term for you, Mr. Benton, although perhaps you move in more esoteric circles than I—which means flavoured alcoholic beverages. Call me old-fashioned, but I prefer spirits-based coolers. [Interruption.] It has a ring of truth to it, because it is spirits-based coolers that we are taxing. FABs are a much broader category of drink. No doubt we shall come to recipes in due course, because several hon. Members have referred to them.

Typically, the drinks are simply a mixture of a spirit—usually vodka or white rum—a fruit juice or flavouring and water. In terms of their alcoholic content they have been taxed at around the same level as beer. In terms of duty as a proportion of retail price, they have become during the past two years the most lightly taxed of all alcoholic drinks.

While you were away, Mr. Benton, we were given a very interesting insight into the club—the Conservative club—of the hon. Member for Christchurch. That is a very interesting place. Apparently, the people in it are young. [Interruption.] Well, at least, young at heart. We are also told that they are fashionable. According to the hon. Gentleman, we can deduce that by reference to the fact that they drink something called WKD. One does not have to be Ali G to know that WKD, when spoken, is pronounced ''wicked''. I see a look of bemusement on the face of the hon. Member for Christchurch. That is surprising. Given the picture that he painted of his Conservative club, I would have thought that it was full of ageing Ali Gs. I cannot help responding positively to the murmured suggestion by my hon. Friend the Member for Enfield, North (Joan Ryan) that, were it to be allowable under standing orders, we might visit the hon. Gentleman's club.

We are an inclusive Government but we have not yet reached the stage at which fiscal policy is judged by the mores of the Christchurch Conservative club.


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