Finance Bill

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Mr. Boateng: I shall come to the hon. Gentleman's argument about whether the measure is revenue raising or health motivated. It is a mixture of both. The hon. Gentleman's specific point goes back to the pertinent point made in an earlier debate, I think by the right hon. Member for Fylde, in relation to particular categories. I have not seen any figures showing what impact prices have on, for instance, young women or young men. If people rely on handouts from mum and dad or on a Saturday job, a price increase may limit their drinking. I have not seen the detailed analysis of that.

What we and the analysts in the industry say is that demand in this area is not price-sensitive but led more by brand preference. The amendments seek to maintain, perhaps indefinitely, the concessionary treatment of these drinks. That is the crux of the debate. Opposition Members apparently believe that the concession should continue. They have made some interesting arguments as to why it should. The hon. Member for Christchurch spoke about the damage that the measure would do to the growth of the sector. I hope that I have dealt with that argument by quoting the view of the marketing manager at Beverage Brands. The reality is that pubs and other retailers are generally responding to the change with an increase of 10p a bottle, in line with our estimates. That does not seem to be having a marked impact on demand.

The hon. Gentleman also suggested that there was confusion in the industry about whether certain drinks are to be treated as spirits. He made the fairly bizarre suggestion that Customs is setting itself up as an approver of recipes. Customs does not approve recipes. It gives assessments of duty liabilities on drinks that have been produced. That is its role.

The only people who know and approve the recipes for these drinks are the manufacturers themselves: it is a commercial decision that they take. They know whether their drinks are based on spirits. The leading brands, which account for most of the market, know that their drinks are spirits. That is precisely how they

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market them. If any manufacturer needs advice or guidance from Customs on the proper duty classification for its drink, it can contact Customs. Many have done so over the years. They did so when the right hon. Member for Fylde was in office and they do so now, and they receive a binding classification.

A number of hon. Members referred to the health impact—a significant issue, particularly in relation to certain sections of the community. My hon. Friend the Member for Glasgow, Maryhill referred to the undoubted socially damaging impact on young women, who increasingly binge drink. My hon. Friend the Member for Cardiff, West (Kevin Brennan) likewise expressed concerns about that.

However, we do not consider the primary function of alcohol duties to be the control of alcohol consumption. Most people drink sensibly, and in general the problems of alcohol misuse are best tackled by a combination of social legislation, public policy and trade self-regulation. Reference has been made to the work of the Portman Group. That stands close examination as an excellent example of the way in which an industry seeks to promote socially responsible drinking, and I think that we would all commend it. However, when we are considering whether this type of drink should retain favourable or concessionary treatment, we cannot ignore the fact that, in a report that raised concerns about increased alcohol consumption among young people, the chief medical officer singled out designer drinks. We could not pretend that he had not singled out those drinks in terms of problematic drinking among young people, to return to the point that the hon. Member for Epsom and Ewell (Chris Grayling) made on cider. Of course we have in mind what the chief medical officer said, which was:

    ''Recent years have, in particular, seen younger drinkers attracted to new ranges of 'designer' drinks with a relatively high alcohol content.''

The right hon. Member for Fylde, among others, commented on the structure of the UK duty regime and competition in the drinks market. Some hon. Members came very close to arguing for what sounded like a system of unitary taxation, where drinks would be taxed according to their alcohol content. We had a rather good debate a few weeks ago on the Floor of the House, in which the right hon. Gentleman shared with us an insight into his contribution to thought at the Treasury. He told us of an idea that was then radical, which he had shared with Treasury officials and his ministerial colleagues. It did not make much headway at the time, but he nevertheless shared it with us. Perhaps during his time at the Treasury he was a great proponent of unitary taxation, although we would not have known it. I would not be made privy to it, because we are never told what our predecessors have tried to do—I am sure with good reason.

Mr. Jack: Before the Financial Secretary ascribes to me every policy area of the previous Government, successful or otherwise, may I remind him that my principal area of responsibility was, in effect, direct, not indirect taxation? However, like him, I then accepted the collective responsibility of dealing with those policies.

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I take the opportunity to ask the Financial Secretary a question. He has suggested so far that alcopops are able, in his judgment, to absorb a higher level of taxation. We are getting an insight into how Treasury thinking on setting taxation levels in that sector operates. Currently, 30 per cent. of the price of beer is taxed, 51 per cent. of that of wine and 61 per cent. of that of spirits. If either of the categories with a lower level shows an increase in sales, will it also have its card marked by the Financial Secretary's approach?

Mr. Boateng: The approach of the right hon. Gentleman, who takes a keen interest in those matters, is intriguing. He attempts to suggest that whether a particular drink could bear an increase in taxation should not be taken into account, that it is unfair to do that, or that if we do that for one drink—one that is, after all, in receipt of a concessionary regime—it opens up opportunities to tax others still further. That is simply not the case. I refer him to paragraph 5.88 in the Red Book, to which I referred earlier, which says that our aim is

    ''a fairer balance in the burden of taxation falling on different alcoholic drinks and different types of drink-producers.''

That is what we have done here. There is nothing underhand or suspicious about it. The right hon. Gentleman cannot jump from the fact that we have taken this particular action on spirit-based coolers to say that, next in line, we have our eyes on beer or spirits.

I had an exchange with the hon. Member for Buckingham on our respective records on beer. He has promised to write to me about that, and I look forward to it, but I should like to share that discussion with a wider audience. I do not think that, when one examines how the Labour Government have related to the spirits and beer industries, one can truly suggest that we have imposed an unfair burden on them or been anything other than understanding of and sympathetic to the issues and concerns that affect them.

Several hon. Members rose—

Mr. Boateng: A surplus of riches. I give way to the hon. Member for Arundel and South Downs.

Mr. Howard Flight (Arundel and South Downs): Will the Financial Secretary be kind enough to clarify my understanding of the clause? I am not entirely clear whether low-alcohol alcopops would end up being subject to the same tax rate as whisky, gin and other spirits. Earlier, I made the gin and tonic point: if an alcopop is one measure of vodka and three measures of fruit juice, the spirits rate should be applied to the spirit element. It would be unfair to tax a low-alcohol alcopop at the same rate as whisky by comparing them volume for volume. For example, wine typically has a 12 per cent. alcohol content, and if an alcopop has a 5 per cent. alcohol content it is nonsense to treat it in that way. Does the clause, as it stands, seek simply to tax the alcohol element and not the rest of the drink?

Mr. Boateng: As is often the case, the hon. Gentleman makes a fair point along a proper line of inquiry. I refer him to my comments about the anomalous imposition of the banded made-wine structure on those kinds of drinks. Under the old

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banded made-wine structure, a spirits drink of 4.1 per cent. bore the same duty as one of 5.5 per cent. As the hon. Gentleman has indicated, that does not make much sense bearing in mind the varied nature of such drinks. In clause 3, we have sought to tax according to the nature of the alcohol that a particular drink contains.

Mr. Burnett: Will the Financial Secretary give way?

Mr. Boateng: No; I want to finish the point.

Clause 3 will be much fairer than the old system because spirits duty will increase in a linear fashion with the alcohol content, meaning that the lower the alcohol content, the lower the duty. Under the new spirits structure, a producer will be able to save 27p per litre by producing at the bottom, rather than the top, of the range covered by the old duty band of 4 to 5.5 per cent. That is obviously relevant to the point made by the chief medical officer. The unfortunate antisocial and health-damaging consequences of binge drinking are less likely if people choose a lower alcohol drink because of a price differential.

Mr. Burnett: I ask the Financial Secretary to justify his earlier assertion that those drinks are the most lightly taxed of any alcoholic beverage. He has just adumbrated the principle behind the tax: the lower the alcohol content of any drink sold across a bar or in an off-licence, the lower the duty. Is that the principle behind the measure?

Mr. Boateng: The principle behind the measure is that it is not right that that particular form of spirits-based alcoholic cooler should remain in the anomalous category of banded made wine. That particular sort of drink was unreasonably lightly taxed as a proportion of retail price, and this is much fairer. Spirits duty increases in a linear fashion, as I have said, with the increase in alcoholic content.

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