Clause
9
Rates
of alcoholic liquor
duty
Mr.
Jeremy Browne (Taunton) (LD): I beg to move amendment No.
7, in
clause 9, page 4, line 39, at
end insert—
‘(5A) Within six
months of the commencement of this section, the Chancellor of the
Exchequer must lay before the House of Commons a statement setting out
the purpose of alcoholic liquor duty, and must seek the approval of the
House of Commons, by resolution, for such a
statement.’.
The
Chairman:
With this it will be convenient to discuss
amendment No. 6, in clause 9, page 4, line 41, at end
add—
‘(7) No further
amendment may be made to section 5 of ALDA 1979 within three years of
the commencement of this section, unless the condition set out in
subsection (8) has been
satisfied.
(8) The condition
referred to in subsection (7) is that the Chancellor of the Exchequer
shall have compiled and laid before the House of Commons a report
containing an assessment of the impact of the increases in alcohol
liquor duty on—
(a) the
competitiveness of licensed premises,
and
(b) the level of employment
in alcohol-related
industry,
and the House of
Commons shall, by resolution, have approved that
report.’.
Mr.
Browne:
I ought to declare an interest because I am member
of the Campaign for Real Ale and a very keen supporter of the licence
and brewing trade in Somerset and across the country. I have spoken to
many people who will be affected by this aspect of the Bill. The 2008
Budget announced a 6 per cent. rise across the board in alcohol duty,
which equates to 3p on the average pint of cider, 4p on a pint of beer,
14p on a bottle of wine and 55p on a bottle of spirits. That is way in
excess of inflation. What also upset a lot of people who are interested
in these matters is that the Chancellor announced what is in effect a
tax escalator for alcohol in future years, so we know that the price of
alcohol will continue to rise above the rate of
inflation.
I—and
I am sure everyone in the Committee—share the concern which has
been expressed by many of our constituents about the phenomenon that is
widely described as binge drinking. Nobody who has been out in a town
centre—particularly on a Friday or Saturday night—and has
seen people who have drunk to the point of illness and needed to go to
accident and emergency wards for treatment, can regard that as anything
other than a serious social phenomenon. However, I am sceptical about
the impact of price on binge drinking. We have talked previously about
price elasticity of demand, and we come to that again with reference to
alcohol. The Government appear to be
telling us that the measures are to address public concerns about
excessive consumption of alcohol and binge drinking. However, the
Committee has to ask itself whether it believes that, for example, one
of our constituents who goes out with his or her friends and drinks 10
pints of premium alcohol will be deterred significantly by the cost of
their evening rising by 40p. If they are, they may choose to drink only
nine and a half pints of premium alcohol instead of
10. I find it hard to
believe that the impact on binge drinking would be profound. The
measures have already come in, so we know that they have not had the
desired effect, unless members of the Committee can assure me that when
they go out in town centres on a Friday or Saturday evening they find
that everybody is sipping low-alcohol or soft drinks and the idea of
getting drunk has not occurred to them. My suspicion and concern is
that those who are most price-sensitive regarding alcohol are those who
do not intend to drink to excess, for example, a retired person who
likes having a couple of pints of beer in the early evening in a
village pub, who may be likely to have one and a half pints rather than
two. The impact on binge drinking will be non-existent, but the impact
on the pub trade may be significant, and the impact on the individual
obviously is
significant.
Patrick
Hall (Bedford) (Lab): I have heard Ministers justify the
increase in terms of helping to fund the increase in the winter fuel
payment and trying to deal with child poverty, but I am surprised that
the hon. Gentleman said that price has no effect on binge
drinking. Surely—perhaps he will come to
it—the incredibly low price in supermarkets must affect the
accessibility of alcohol to many people, including
children.
Mr.
Browne:
I am grateful for that intervention, and I shall
come to the issue of sales. I hope that I did not say that price has no
effect. I am just sceptical about how profound that effect is, and I
believe that for some categories of consumer it has close to no effect.
The point that was I trying to make is that the consumer who is most
prone to binge drink is probably also the consumer who is least
affected by price. The consumer who drinks in moderation—I cited
the example of an older drinker in a village
pub—may be more susceptible to price as a factor in their
consumption.
The
Exchequer Secretary to the Treasury (Angela Eagle):
I do
not want to divert the hon. Gentleman too much from his speech but I
would like to say, in case he wishes to develop the argument further,
that the Government do not and have not said that the increases in
alcohol duties announced in the Budget address binge drinking. That is
not our
argument.
Mr.
Browne:
I am grateful for that intervention but also
confused by it, because I read that the Minister of State, Department
of Health, the right hon. Member for Bristol, South (Dawn Primarolo),
told the British Medical Association’s public health conference,
which is an audience that is likely to be persuaded of the virtues of
trying to improve the health of the nation:
“Our estimates suggest
that higher taxes, if they do feed through to price, will mainly affect
the 7 per cent. of the population who drink one third of all alcohol
consumed in Great
Britain. And that, in England alone, the total number of lives saved up
to the end of March
2013” will be
“3,250 lives by the
Department’s
calculations.”
We are now
in a confusing position where the Treasury maintains that those
measures have nothing to do with public health, but the Department of
Health, when talking to the BMA, claims that those measures will save
3,250 lives by 2013. For the Committee’s benefit, that is
roughly half the number of people killed annually in road traffic
accidents in the UK, which is a large number. We do not know which
Department is making the most persuasive case, but perhaps we will hear
now.
Angela
Eagle:
We need to be precise in the terms that we are
using. I have just reminded the hon. Gentleman that the Government do
not claim that the increase in the Budget will “address binge
drinking”, which is the phrase that he used initially in his
speech. If the Minister of State, Department of Health was talking
about price, people need to be aware that she used the
caveat,
“if they do feed
through to
price”,
in
reference to the duty increases. In those circumstances, there might be
a positive effect, not necessarily on binge drinking, but on overall
levels of alcohol consumption, which is not the same as binge drinking,
as the hon. Gentleman will know if he is being
reasonable.
Mr.
Browne:
Perhaps the Exchequer Secretary will clear this
matter up at the end. If she is arguing that the tax changes are not
designed to have an impact on binge drinking at all, the Government
ought to make that message clearer to a wider audience, because some of
the signals that are being sent out are confusing. When the hon. Member
for Bedford intervened, he appeared to make the case that the benefits
of those tax increases would be used to tackle child poverty and for
other desirable features of public policy that have nothing to do with
alcohol consumption. Some Ministers appear to be saying that they
believe that the measure will have a beneficial impact, but that that
will be directly linked to the issue of alcohol consumption, and some
might just regard it as a general revenue-raising
measure.
Justine
Greening (Putney) (Con): I hate to bring the hon.
Gentleman on to his actual amendment, but is he saying that the Liberal
Democrats think that this tax could only have one
purpose?
Mr.
Browne:
No, I think that taxes can have a variety of
different impacts at the same time. We have discussed, with regard to
tobacco and environmental taxation, that it is possible to affect
behaviour and raise revenue simultaneously, which is a point that many
Labour MPs in particular, but not exclusively, have not hitherto
grasped. No doubt they will rapidly wake up to it when asked to vote on
this set of
proposals.
Justine
Greening:
In that case, is the hon.
Gentleman’s amendment, which mentions setting out the purpose of
alcoholic liquor duty, a mistake?
Mr.
Browne:
Not at all. If it had been a mistake, I would not
have tabled it. The amendment was tabled because I
think that it is reasonable that the Government make it clear why they
are choosing to increase massively the tax on all the ranges of alcohol
that I talked about at the beginning of my contribution. We can have
lots of slightly glib exchanges about the proposals in my amendment,
but the crux of the matter is that 27 pubs close on average every day.
Last year, 1,409 pubs closed in Britain. Of course, lots of others are
affected by that, including brewers and small brewers across the
country. It is only reasonable for publicans and the people who are
affected by that business to know the Government’s motivation
for pricing their customers out of their front door. If the motivation
is public health, some people may think that that is a reasonable
trade-off. Some hon. Members may think it is worth those pubs closing
because there will be a benefit in terms of the number of lives saved.
From her quote, the Minister of State, Department of Health seemed to
say that that was a worthwhile trade-off. Some people may think that,
considering the extra revenue raised, it is worth losing some pubs to
benefit child poverty, which was mentioned in the intervention I took
from the hon. Member for Bedford. It is reasonable to ask the
Government to set out why they think the price of losing businesses
across the country every single day is worth paying, as the previous
Chancellor said.
Emily
Thornberry (Islington, South and Finsbury) (Lab): Will the
hon. Gentleman help to clear up some confusion in my mind about Liberal
Democrat policy on that matter? Although he gives the impression that
he is a big supporter of real ale, I understand that Vince Cable is a
big supporter of smoothies and says they are good for people. He wants
to reduce VAT on smoothies from 17.5 per cent. to 5 per cent. to
encourage people to drink them, presumably in public houses. He would
like to make up the lost revenue by raising tax on alcohol. What is the
hon. Gentleman’s
position?
5.15
pm
Mr.
Browne:
I am grateful to the hon. Lady for quoting my hon.
Friend the Member for Twickenham (Dr. Cable)—that is the normal
format of referring to hon. Members. I am all in favour of people
drinking smoothies if that is what they wish to do. I do not have
medical expertise, but I understand it is more healthy to drink
smoothies to excess than to drink alcohol to excess—although
perhaps anything in excess is not particularly good for
people.
We are
considering what the Government are putting forward. The two amendments
I have tabled ask the Government to review what the impact of duty
rises is on businesses and to give a statement about
the purpose of those duty rises. It does not seem unreasonable to ask
why the Government are, as a matter of policy, making it harder for
thousands of businesses across the country to operate and why we are
losing those businesses, namely pubs, at record rates. I am surprised
that the Committee does not think that that is a reasonable subject to
examine.
What are the
current problems for pubs and, in some cases, brewers? One problem is
cheap off-sales, which was mentioned in an intervention. That is
causing
difficulty in the industry because it is almost impossible to go to a
supermarket and not find a promotion being offered on beer in
particular and on other forms of alcohol. Obviously, that makes it
harder for publicans. Another problem is changing
leisure patterns. Some people stay at home, stay in their gardens, or
watch DVDs at home instead of going to the pub. The smoking ban, which
I voted against—although I know there are a
range of opinions in all political parties—has compounded the
problems for some publicans. The effect varies considerably from one
pub to another depending on the customer base of the
establishment.
Commodity prices have also had
a sizeable impact on pubs and on the brewing industry generally. Of
course, pubs must pay their utility bills and heat and light their
premises. In addition, like most small businesses, they have to pay
petrol prices to transport alcohol and other goods and services. Most
important of all from the point of view of brewers—and this is
often passed on to pubs—the ingredients of, for example, beer
have become much more expensive to acquire. Brewers are struggling to
hold their prices down and probably take a lower share of profit on
each pint that they sell on to the pub. In turn, pubs are trying to
hold prices down at a time when consumers are feeling the pinch. As a
result, the profits of both brewers and the pub sector are being
squeezed. That state of affairs upsets many people in the brewing
industry because they feel that their problems are being compounded by
above-inflation increases not only in this Budget, but in future
Budgets.
Amendments
Nos. 7 and 6 would require the Government to review the impact of duty
rises on businesses and set out what the effect would have been if the
duty rises had not gone forward. We would then be able to consider for
next year’s Finance Bill whether future above-inflation
increases ought to take place. In addition, the Government would be
required to make a statement on the purpose of duty rises so that this
Committee and the House could have some clarity on the intention behind
the Government policy. We would then be able to see whether the
trade-off of the loss of business and livelihoods in the brewing and
pub sectors was a worthwhile price to pay for whatever the overall
policy is. We are currently unclear about the policy that the
Government are
pursuing.
Justine
Greening:
I did not hear the hon. Gentleman talk
specifically about his amendments. He talked a lot about the issue that
we are all concerned about, which is that pubs are closing down all
over the country. For what it is worth, here are my thoughts. I alluded
to my concern about amendment No. 7 earlier. It talks about setting out
a statement of
“the
purpose of alcoholic liquor
duty”.
To me, that does
not seem workable. Governments of all colours will have a variety of
purposes with any tax policy. Some policies will work together and some
will be contradictory and require trade-offs. The chance of there being
only one purpose is very
slim.
Mr.
Browne:
Allow me to explain in more detail. Perhaps I
should not have rushed my speech and I should have given more
background. I will give a direct quote from last year’s Finance
Bill Committee from the
then Financial Secretary when this issue was debated. I was not a member
of the Committee. The hon. Member for Wentworth (John Healey)
said:
“the view that the
Government take—it is the view that we have consistently taken
in the Treasury—is that that sort of social harm and social
concern is best tackled by social legislation and by working with the
trade in self-regulation, rather than by taxation, which, in this
circumstance, is an instrument that is not best suited to deal with the
social problems that we are
discussing.”
He was
talking about excess
drinking.
“In
fact, it would be likely to penalise the vast majority of responsible
drinkers rather than affecting the minority who cause us
concern.”——[Official Report, Finance
Public Bill Committee, 8 May 2007; c.
36.]
He was absolutely explicit
last year that higher taxes on alcohol were not a way of tackling the
social concern of binge drinking. The position of the Treasury on that
is far less clear this year and it seems reasonable that we explore
that.
Justine
Greening:
I hear what the hon. Gentleman is saying, but he
seems to fundamentally miss the concept of price elasticity of demand.
I am afraid that the world is not black and white. It is pretty
clear-cut that, if there is a price increase, according to the figures
used by the Government and the trade, it will almost certainly have a
negative effect on demand at some level. Anyhow, let us move on from
amendment No. 7. It was obviously not worded as the hon. Gentleman
intended, let alone in a way that would be
workable.
I have a lot
of sympathy for the hon. Gentleman’s argument on amendment No.
6. We will come on to why the pub trade and trades associated to
alcohol are so important to the economy in a debate on a future
amendment that I tabled. Again, I was slightly
concerned that he was talking about bringing forward a report within
three years. I think that the problem is more urgent than that. If over
the next three years we lose pubs at the same rate as last year, when
we lost 1,400, an awful lot of pubs will go to the wall with
businesses and jobs lost, before we see the Government getting
to grips with the matter. I have some sympathy with the amendments, but
I do not believe that they would achieve quite what the hon. Gentleman
intended.
Mr.
Mark Field (Cities of London and Westminster) (Con): Like
my hon. Friend the Member for Putney, I can understand where the hon.
Member for Taunton is coming from in tabling the amendments. I think
that they are in part probing amendments to raise this debate. However,
it seems at odds with the Methodist tradition in the Liberal party that
he is promoting more alcohol
consumption.
I, too,
have a lot of sympathy with what is happening in the pub trade.
Fundamentally, the biggest single issue is our different lifestyle
patterns. That is the single most important thing, rather than any
additional taxation. For better or worse, people are spending far less
time in pubs. Perhaps they look towards gastro-pubs or bars where they
can take their family, or they want to spend more time at home, around
the television and the like. The smoking ban has also had its part to
play—one of the great unintended consequences of the smoking ban
is the disruption for people living in the vicinity of pubs and bars,
particularly in our bigger
cities. That is almost the biggest single issue that comes through my
mailbag, except for the antics of the parking department of Westminster
city council—I suspect that many of my colleagues have also
written to me on that ground alone over the past seven
years. I
take on board that the raw ingredients of beer—hops, in
particular—have gone up tremendously in price. The Government
have a difficult balancing act with the alcohol issue. Clearly there
are health reasons for wishing to raise the price of alcohol. My
instinct, when I saw the increases, was not to be wholly
supportive. The Conservatives had some sensible plans on alcopops,
which unfortunately did not see the light of day. However, the reality
is that alcohol has become unbelievably cheap, in relative terms, over
the past 20 years. There is no doubt that that availability has meant
not just a binge-drinking problem, but ever greater consumption of
alcohol. Some people among us cannot synthesise alcohol too well and
have some severe health problems as a result. For others, we can
readily buy and drink a bottle of wine on a daily basis, in a
way that only 20 years ago was beyond the means of most
people.
I felt that
there was a sensible balance being drawn by the Government. We in the
Conservative party had our own plans, which I do not think were wholly
at odds with that, although I was comfortable about the idea of going
through the lobbies when it came to those matters being voted upon. The
misguided element here, from the hon. Member for Taunton, is that
alcohol duty will inevitably have a variety of different causes. I can
see that the pub lobby is understandably concerned about its
longer-term future. The real issue is to be more innovative. Let us
have more gastro-pubs—those have been extremely successful in
London; I see a great success there. Ultimately, I fear that the
old-fashioned British pub is a dying breed, because of changing
lifestyles. Therefore, the pub industry has to innovate and find new
ways of moving
forward.
Inevitably,
any report would probably tell us what we already know. Inevitably, we
are looking at health reasons in part, and social reasons in part.
Obviously, alcohol is an addictive drug of sorts and, as a result, is a
relatively easy hit for taxation. The relative amount of tax on alcohol
today is still considerably lower than was the case some 20 or so years
ago. Moves in that direction—perhaps driven by revenue concerns,
which I can understand as well—are broadly things that we in the
House should support, as part and parcel of an overall approach to the
whole issue of alcohol in our society. Many of us will be spending time
abroad in mainland Europe in the months ahead. How alcohol is
consumed there—across the Mediterranean
particularly—is very different from
here.
Mr.
Browne:
One goes to southern Europe and sees people
consume alcohol in far lower quantities, but by and large it is cheaper
to buy in southern Europe than it is in the United Kingdom. I am
confused by the hon. Gentleman’s argument. He seems to be saying
that people are primarily motivated by price, but then he draws the
opposite conclusion from his travels
abroad.
Mr.
Field:
The hon. Gentleman is probably confused because I
have only got about a third of the way through my argument. The
societal attitude towards alcohol in the Mediterranean countries is
different
from here and, in a negative direction, different again in Scandinavia.
As a result, we need to look at all those things in the round. It is
perhaps all too easy to suggest that a 5 per cent. increase in the
price of alcohol will close down hundreds of pubs across the country.
It is a far more complicated situation than that. Fine, let us have a
report and ensure that we have a sensible, balanced policy, but there
are some real problems in our society with how alcohol is consumed and
what alcohol consumption means, and the way in which drinking alcohol
to excess is somehow seen as being cool, clever or something that our
celebrities get up to with impunity. All those factors should be borne
in mind when looking at this issue, rather than simply trying to equate
one budgetary year’s increase in alcohol levy with pub
closures.
5.30
pm
Ben
Chapman (Wirral, South) (Lab): May I tell the hon.
Gentleman that drinking patterns may be slightly different outside
London? In my constituency the local traditional pub is still at the
heart of both rural and urban communities. It would be interesting to
know what calculation has been made of the effect of the changes on
those traditional pubs. Also, in out-of-London constituencies we now
have many micro-breweries and it would be similarly interesting to know
what the effect would be on those.
Mr.
Field:
I am the one whom the hon. Gentleman criticises for
being too London-centric, but I hope that he will forgive me, given my
own experience. In the 7 square miles that make up my
constituency we have the highest number of licensed premises of
anywhere in the country and one of the biggest watchwords has been
innovation.
Mr.
Bob Blizzard (Waveney) (Lab): Has the hon. Gentleman
visited all of
them?
Mr.
Field:
I am working my way through, and if my liver will
stand it, I am sure that it will be a joy to come to both sides of the
Wirral to see some real old-fashioned English pubs in action.
Mr. Cook, I am sure that we do not want this discussion to
go even further off the point than I have already been veering. Suffice
it to say that I hope that the hon. Member for Taunton will consider
withdrawing the amendment, but this has been a worthwhile debate and I
look forward to hearing what the Financial Secretary has to
say.
Stewart
Hosie (Dundee, East) (SNP): I have a deal of sympathy with
amendment No. 7. There is significant merit in knowing the reasons
behind any tax, including alcoholic liquor duty. The problem with
amendment No. 7 is that it calls on the Chancellor to bring forward a
statement on his purpose, but the Chancellor’s purpose for
alcoholic liquor duty is revenue yield; it stops and starts there. To
be fair to the Financial Secretary—I think that this may be a
first—the Government were explicit in this year’s Budget
in not making any claims to implement an attack on binge
drinking or ill health, or any of the other good social things that one
would want to see tackled by a rise in duty. This was about revenue
yield, pure and simple.
The amendment would have been
better had it asked for Ministers to bring forward the purposes
of alcoholic liquor duty, in the opinions of their Departments or
themselves. I am sure that the Justice Secretary would have said that
the purpose was to resolve crime and binge drinking. I am sure that the
Minister with responsibility for public health would have said exactly
the same as his counterpart in Scotland, that it is to try to drive
down chronic ill health caused by too much alcohol consumption over
either a very short or a very long period. Of course, the Treasury
would stick to its view that it is about revenue yield. While I am
sympathetic to the amendment—and it would be useful to bring all
the information together so that it is not sat in different ministerial
silos, to understand why we are doing things and what the consequences
might be, and if for no other reason, to make sure that there were no
contradictions between different Department policies—it simply
does not do what I suspect the hon. Member for Taunton expected it to
do. I therefore join the chorus from the rest of the Committee and hope
that he will withdraw it and that perhaps it might see the light of day
again in a slightly more finessed form, when it might command a little
more support—or
not.
Angela
Eagle:
It is a pleasure to respond to this brief
debate. I am contemplating the hon. Member for
Taunton, who is a member of CAMRA, in his woolly jumper tucked into his
trousers, with his open-toed sandals, voting against the smoking ban
and trying to maintain the culture of UK pubs. Of course, I met
representatives of CAMRA as part of the Budget process and its members
did not turn up in woolly jumpers, but I now have that vision of him.
He announced with such pleasure his membership of the
organisation at the beginning of his speech.
Clearly, it is important that
we think about the effect of excise duties on alcohol. As the hon.
Member for Putney pointed out, there is often more than one purpose. It
is over-simplistic to think that there could always and forever be one
set purpose to either shifting upwards, downwards or leaving the excise
duties the same in all circumstances and as circumstances change. That
is the nature of Budgets; different things have to be
balanced.
As has been
pointed out, clause 9 increases all alcohol duty rates charged on beer,
wine or made-wine, cider, and spirits by 6 per cent. above the rate of
inflation with effect from 17 March 2008. Together with VAT, that is
equivalent to 4p on a pint of beer, 14p on a bottle of wine and 55p on
a bottle of spirits. I understand as well as anybody the nature of and
pressure on pubs. There has been a fair, if brief debate, on some of
that in response to the hon. Member for Taunton’s amendments
today and I have sympathy.
I noticed in the newspapers
today that thousands of pubs have put 10p on a pint, not 4p, because
when excise duties go up, pubs take the opportunity to reflect some of
their other costs. The hon. Member for Taunton is right to talk about
the cost of the basic commodities that make beer, for example. However,
pubs tend to claim that the increase is all somehow
down to tax, which it clearly is not. If the
supermarkets and the off-trade carry on discounting and the pubs pass
on more than the cost of excise duty increases, the differential
between the on-trade and the off-trade gets wider and that makes it
harder for pubs to survive in the way that they did in the
past. The hon.
Member for Cities of London and Westminster was right when he pointed
out that because we have had a period of sustained economic growth and
incomes have risen, alcohol has become increasingly affordable. That is
one issue that we looked at when we were considering the appropriate
price of excise duties in the Budget. At today’s prices, an
average bottle of wine in a supermarket in 1997 would cost £4.44
and it costs £4 today. Despite the passage of the years,
and, I accept, partially because of what is happening in the off-trade
rather than the on-trade, alcohol has gone down in price and become
much more affordable. We felt that it was time to increase the
duty.
The hon. Member
for Dundee, East is an astute and an assiduous reader of the Red Book
and he was right when he pointed out that no claims were made this year
for the effects of the increase in alcohol duty rates, other than
raising revenue to ensure that we can continue to tackle child poverty,
help pensioners, and support families in a time of global
uncertainty.
Justine
Greening:
The Minister said that she felt that alcohol was
becoming more affordable so this was a good mechanism to increase tax
and help deal with child poverty. Did she do any analysis of the group
of taxpayers who will end up paying more tax when it is passed on in
prices compared to the people to whom she is likely to be giving the
money back in tax credits? It may well be that they are one and the
same. Has the Treasury done any analysis of the net
effect?
Angela
Eagle:
When you have an on and off-trade and there is no
direct relationship between the levels of excise duty and price, the
net effect of excise duties is complex. With alcohol there is a complex
relationship between the levels of excise duty and pricing, and it
varies depending on how the alcohol is being retailed. For example, the
off-trade tends to continue discounting while the on-trade, as we have
seen from newspaper coverage today, can put prices up higher than
excise duty rates in pubs. It is complex and it is difficult to find
models that would work with any degree of certainty. We would have to
make so many assumptions to come out with a response as to how it would
work that, except in general terms, it is not possible to do in detail
what the hon. Lady suggests.
Amendment No. 7 would require
the Chancellor to make a statement about the purpose of the increases
in alcoholic liquor duty. Opposition Members have been quick to point
out, quite rightly, that there might be more than one purpose. It might
seem trivial but it is true. Excise duties often exist for more than
one purpose, and the relative importance of those purposes can change
over time. The idea that there could be one statement about “the
purpose” that would last for all time is rather fanciful. The
reasons for the increase in duty are fairly obvious, and have often
been repeated. We changed the duties in that way to assist us in
financing the extra winter fuel payments for people over 60, and to
assist with the help that we give families with children to help them
out of poverty. We do not
need an annual statement about that in the way that
the hon. Member for Taunton’s amendment would require.
Amendment No. 6 would
require the Government to produce a report on the impact of increases
in alcohol duty on licensed premises and on employment in the alcohol
sector. My hon. Friend the Member for Wirral, South mentioned small
brewers, and I would like to point out the very positive effect of
small breweries relief. It is not an issue in the amendment, but it
exists in the structure. It was introduced a few years ago to encourage
the thriving of small breweries and it has been extremely successful.
There are other things that the Government can do—when they can
get past the European Commission—to assist in other areas. Small
breweries relief is a prime example, which my hon. Friend will see when
he speaks to any small brewers whom he might come across. We now have
increasing diversity in the small, specialist brewing companies and
that is very welcome.
Amendment No. 6 would require
the Government to produce a report on the impact of increases in
alcohol duty on licensed premises and on employment in the alcohol
sector. As with all tax policy decisions, we will be monitoring the
impact of alcohol duty on a range of factors, including its impact on
the industry. To that extent, the amendment is superfluous as it is
something that we do all the time with all our excise duties.
However, there are a number of
factors—again they have been hinted at and mentioned explicitly
by the hon. Member for Cities of London and Westminster—which
have an impact on competitiveness and jobs in any industry. It would be
difficult to identify the specific impact of alcohol duty rise against
other factors, such as changing the culture of the pubs and their
customers and people have also mentioned the smoking ban. I am aware of
current pressures on the pub trade, and I met representatives from the
trade several times in the run-up to the Budget, to hear people present
their views on the current situation and the cost pressures in the
industry.
Hon.
Members will acknowledge that there has been a general change
in people’s habits, which has contributed to the decline in the
numbers of pubs. Innovation and a different kind of response and
leisure approach, which the hon. Member for Cities of
London and Westminster mentioned, is also important. In other words,
tax and especially excise duty, are not, I dare suggest, the main
issues for pubs.
We
have great sympathy for anyone running a business and trying to attract
new customers. There are those in the pub trade who wanted us to
introduce excise duty that was aimed more specifically at the
off-trade, which at the moment does discount—sometimes
greatly—the cost of alcohol as a result of which excise duties
are not passed on in off-trade prices. However, constraints on how the
European Union rules apply on alcohol duty mean that it is not possible
for us to have differential rates for the same drink if bought in a
supermarket rather than a pub. Trying to level the playing field a bit
more between the on-trade and the off-trade is not legal nor is it one
that we can
pursue.
5.45
pm
When making
decisions on alcohol duty rates, we took account of several factors and
listened to the views of the alcohol industry in all its diversity as
well
as the retailers in their diversity. Following a sustained period of
rising real incomes and the fact that alcohol is much more affordable
now than it was in 1997, we believed that it was right that alcohol
duty should play a part in tackling some of the challenges of child and
pensioner poverty, and it provided us with tax revenues in order to do
so.
Justine
Greening:
: Did the Treasury work out in respect of the 27
million drinkers in the United Kingdom an estimate of the average
amount of duty each drinker would pay? Is there an assessment of how
much it would cost a typical
drinker?
Angela
Eagle:
It depends on how much people drink. Such
calculations can be pretty meaningless, and depend on individual
behaviour, what sort of drinks people drink, how often they drink them
and whether they buy them from the supermarket. Obviously, the excise
duty would be the same whether they bought drinks from the on- or the
off-trade but, with regard to the effect of prices, it is almost
impossible to provide a model that would capture the cost for each
drinker, as their behaviour affects what the costs are likely to be.
Where people buy their alcohol contributes to the price, so we would
not expect to carry out such calculations along the lines suggested by
the hon. Lady.
Given
that alcohol is more affordable than it was in 1997, we believe that
alcohol duty increases could play a part in tackling the challenges and
helping to finance our action on child and pensioner poverty. I hope
that the hon. Member for Taunton will withdraw the amendment and, if
not, I urge colleagues to reject
it.
Mr.
Browne:
I am grateful for the opportunity to make some
concluding remarks to what has been a useful
discussion. I regret deeply the fact that the Minister took such a
condescending and stereotypical approach to people who enjoy
traditional British beer. I say so with all sincerity, because millions
of people throughout the country do not buy into the metropolitan view
of the world that new Labour has hitherto advanced with diminishing
success. A lot of them will in time come to think that the rather
dismissive remarks and attitudes of the Treasury are not
necessarily to their
taste.
Angela
Eagle:
It was a joke, Jeremy.
Mr.
Browne:
Quite a lot of people who run pubs and
small brewers do not think that the joke is as funny as is thought by
those at the
Treasury.
Mr.
Siôn Simon (Birmingham, Erdington) (Lab): Is the
hon. Gentleman saying that the Minister is being
beerist?
Mr.
Browne:
No. I am saying that there are people outside the
metropolitan elite circles with which the hon. Gentleman takes pride in
acquainting himself who do not think that the closure of village pubs
and above-inflation increases in the price of beer as a matter of
Government policy at a time when brewers are struggling with other
factors is as big a joke and as funny as lots of Labour Members
think.
Angela
Eagle:
The hon. Gentleman must not put words in my mouth.
All right, I confess that I had a little joke about CAMRA. He revealed
himself as a member of that organisation, and I made a little
stereotypical joke about CAMRA members, many of whom I met in the run
up to the Budget. I find them perfectly reasonable. He must not put
words in my mouth and say that I think that pub closures are fine and
that I do not care about such things. He must take the time to listen
to what I say and not distort my words. I also ask him, in the weeks
ahead, to develop a sense of humour. It might help us
all.
Mr.
Browne:
I apologise if the Minister’s flippant
attitude towards this issue did not amuse me as much as it should have
done. I only wanted to touch on that issue. Let me declare a few more
interests. There are a number of small beer and cider brewers
in my constituency who provide a significant source of employment.
Dozens of people in my constituency and thousands of people across the
country work in small breweries. Beer sales have gone down in Britain
in recent years: much of the slack in alcohol consumption has been
taken up by wine drinking, as was mentioned earlier in the discussion
about social changes. However, nearly all wine is imported, whereas
quite of lot of beer is brewed in this country.
There is an impact on brewers
and employment not only in areas like mine but right across the
country, as a result of bringing in measures that could suppress demand
for beer and other alcoholic products. I was simply asking for an
assessment to be made of that impact and whether it was a trade-off
with which the Treasury was happy. The Minister said that those matters
were kept under constant review, but that simply is not the case. If it
were, the Chancellor would not have announced above-inflation increases
as an escalator for the next three years. Even if the review finds an
adverse effect on businesses and employment, the Government are
committed to above-inflation increases, so the matter is not under
constant review at all. It will not be reviewed during the lifetime of
this Parliament. Not until after the next general election can we step
back in the Treasury and see whether damage has been done to this
sector.
Damage is
potentially being done to employment. It is also being done to real
communities. The hon. Member for Cities of London and Westminster made
a good point about changing social and drinking patterns. I tried to
make that point in my earlier contributions, and I will try to make a
point now that does not contradict it but expands upon it. The social
heart of many villages and small towns in areas like my constituency is
removed when their post office, their shop or their village pub is
closed. It is not the job of Government to prop up businesses that are
unable to attract customers—I am not saying that—but
neither is it the job of Government, when those businesses are
teetering on the brink, to make it harder for them to remain viable.
That is undoubtedly the impact of this
proposal.
I may have
had another humourless moment, but the Minister went on to say that pub
landlords routinely increase their beer prices by more than the taxes
that the Treasury have imposed, and that they use the Treasury as an
excuse for a wider set of price rises. I
assume that her point was that they are trying to make their businesses
more profitable while blaming the Government for raising the prices
that they charge their customers. The people who run many of these
businesses work extremely long hours, and they probably do so for low
profitability. If one added up the number of hours and worked out the
profitability, many of them would be working for less than the minimum
wage on an hourly basis. The idea that these people are
not trying to squeeze out every penny of competitive advantage to try
to attract new custom, and have the luxury of being able to afford to
charge their customers far more because those customers are just
rolling through the door and are completely insensitive to
price increases, is delusional. If any of the Treasury Ministers spent
a day with a rural publican who is struggling to make ends meet they
would come back to this House less likely to believe that they are
artificially inflating their
prices.
I finish with
an observation made by the then Treasury Minister, the hon. Member for
Wentworth, in Committee last
year:
“the general case
for using taxation as a means of regulating consumption has not been
made. It is not best suited to this area of
policy.”——[Official Report, Finance Public Bill
Committee, 8 May 2007; c.
36.]
My view—and I
maintain it regardless of the scorn of the Exchequer Secretary or
anybody else—is that it is simply disingenuous to claim that the
backdrop for the increases in duty on alcohol is not wider public
concern about excessive drinking in some sections of the population,
about binge drinking, about people being sick in town centres and about
increased rates of liver disease. That is the political and social
backdrop against which the Budget took place, and in the minds of
millions of our fellow citizens, the changes have been put through
because in some way they go towards addressing a wider social problem
about which people are genuinely concerned. People who run
pubs and small breweries see themselves as victims of a
Government who are able to bring in above-inflation increases year
after year, despite any assessment made by the Treasury, on the back of
a perfectly legitimate wider social
concern.
Justine
Greening
:
Amendment No. 6 states that a
report has to be laid before the House within three
years. It may be useful to obtain the Treasury’s view of the
impact on the industries, which say that it is dramatic. My concern is
that three years is too long to wait to press the Treasury to look at
that more carefully, and I wonder whether there is a reason why the
hon. Gentleman has given the Treasury that
long.
Mr.
Browne:
It is within three years, and if
the Treasury—it appears that it does not—shared the
concerns that I have expressed and to which the hon. Lady has alluded,
it would no doubt wish to bring forward a review more quickly. I was
talking about the lifetime of above-inflation increases, which will
compound the problem for many people in those industries year on year.
If they think that it is bad now, they will find it harder next year
and even harder the year after
that.
I will finish
with this observation. Ten or 20 years ago there was a joke that the
best way to make sure that a politician lost votes was to go to the
electorate and
say, “I’m going to put up the price of your beer”.
It is extraordinary that the Government now regard that as a popular
Budget measure. On that note—I detect that others do not share
my concerns—I beg to ask leave to withdraw the
amendment.
Amendment,
by leave,
withdrawn.
The
Chairman:
We now come to amendment No.
59.
Justine
Greening:
I beg to move amendment No. 59, in
clause 9, page 4, line 41, at
end insert—
‘(7) The
Treasury must, not later than Budget Day 2009, lay before the House its
assessment of the impact of the amendments made by this section on
consumption rates of alcoholic liquor (as defined in section 1 of ALDA
1979).’.
I
should have said earlier that it is a pleasure to serve under your
chairmanship, Mr. Cook. This is a probing amendment, and it
follows some of the concerns that the hon. Member for Taunton
expressed. It designed is to press the Government to outline whether
they have a clear understanding of consumption, as well as the revenue
impact of the above-inflation changes. The modelling that the HMRC does
was first produced in 2003 by Chao-Dong Huang, and it includes a range
of price elasticity assumptions for beers, both on- and off-trade,
spirits, wines and cider. I want to ask the Exchequer Secretary whether
there are any plans to upgrade and update that model. I understand that
it uses out-of-date statistics, and the price elasticities that the
industries believe are present for today’s consumers are greater
than those used in the model. That is important, because it goes to the
heart of where the tax revenue maximisation point
is.
6
pm
Mr.
Simon:
I used to work in the drinks industry, so I would
be interested to know whether the hon. Lady thinks that the industry is
likely to be the best source of impartial advice about price elasticity
for the Treasury. Should we perhaps assume that the Treasury is more
likely to do a better job of coming up with an impartial view of price
elasticity, and does not the drinks industry have even more of a vested
interest than the
Treasury?
Justine
Greening:
If we had seen a better track record from the
Treasury, certainly in the past few months, on getting things right
first time, I might put a lot of store in the model. I simply make the
point that the model was created five years ago, and as has been said,
there has been a lot change in taste and preference over those five
years. We know that the industry, which has to get these things right
to understand profitability, has a different view of price elasticity.
All that I am saying is that this is a probing amendment to find out
the Government’s view, whether they look at updating that
model—I presume that they do—at some point, and if so,
what process they go through, how transparent and open that is, and
whether they will work with the industry to try to understand why there
is such a gap between the different estimates.
In fact, there really should
not be conflicting objectives, because if we have gone past the tax
revenue maximising point—I think that the level of alcohol duty
that is being paid is flat, and perhaps brought in
less than was expected by the Treasury last year—that is bad, not
only for the Treasury, which does not get the revenues that were
expected, but for the industry, which sees a greater drop-off in value
than the Treasury expected. That is the purpose of the amendment, so I
look forward to the Minister’s
response.
The
Chairman:
I should have said earlier that with amendment
No. 59 it will be convenient to discuss the following
amendments: No. 60, in clause 9, page 4, line 41, at end
add—
‘(7) The Treasury will,
prior to the 2008 Pre-Budget
statement—
(a) publish
an assessment of the level of revenue yield anticipated from alcohol
liquor duty based on it being levied on the rates of duty in this
section, and
(b) publish an
assessment of the level of alcohol liquor duty required to be levied on
each type of drink on an equitable basis based on the alcohol content
to generate the same level of revenue
yield.’.
No.
67, in
clause 9, page 4, line 41, at
end insert—
‘(7) The
Treasury must, not later than the date of the Budget 2009, lay before
the House revenue-neutral proposals
for—
(a) decreased rates
of duty on beer of a strength not exceeding 2.5 per cent. and cider of
strength not exceeding 3.0 per
cent.;
(b) increased rates of
duty on beer of a strength exceeding 5.9 per cent. and cider of a
strength exceeding 5.5 per cent.;
and
(c) a new category of duty
on “ready-to-drinks”, at a rate higher than the duty on
spirits.
(8) For the purposes
of subsection (7), not later than the date of the Budget 2009, the
Treasury must make regulations setting out the definition of
“ready-to-drinks”.
(9)
Regulations under this section are to be made by statutory
instrument.
(10) A statutory
instrument containing the first regulations under this section may not
be made unless a draft of the regulations has been laid before, and
approved by a resolution of, the House of
Commons.’.
The
hon. Lady may choose to amplify the comments that she has already
made.
Justine
Greening:
I certainly will, Mr. Cook. I was
slightly thrown when you mentioned only amendment No. 59, but I went
along with your advice and am grateful for your
clarification.
The
Chairman:
Please accept my apology. I apologise from my
very
bottom.
Justine
Greening:
That is absolutely no problem whatsoever.
Perhaps it conjured up a particular image in my mind, so let us move
rapidly on to amendment No. 67.
Before speaking to the
amendment, I notice that the hon. Member for Ealing, North is in his
place. I am pleased about that, because before you took the Chair,
Mr. Cook, we had a brief discussion about the weather on
Sunday. I was in London, and the weather that day was quite
interesting, because it started off lovely and sunny, but by the end of
the afternoon it was odd.
There was a ray of sunshine on Fulham, but Chelsea
looked slightly cloudy for some reason—I could not quite work
out why. Moving
properly on to amendment No. 67, there is no doubt that the pub
industry in particular is facing problems at the moment. We need to be
careful about the implications, because the industry is estimated to
contribute £14 billion to the Exchequer annually. The whole
industry, including off-trade pubs, hotels, restaurants and related
trades, provides employment for 1.6 million people, which is about 5
per cent. of the nation’s active population. However, pubs are
closing, as we have quite rightly heard and discussed.
My concern about the
Government’s approach is that even within their own ministerial
ranks, there was little discussion between the Treasury and the
Department for Culture, Media and Sport before the announcement of the
policy. The Under-Secretary of State for Culture, Media and Sport, the
hon. Member for Bradford, South (Mr. Sutcliffe), who has
ministerial responsibility for licensing, has expressed concerns about
duty rises on the industry, and urged it to make a strong case to the
Treasury. If there was an discussion, it seems to have been pretty much
one way: from the Treasury to the Department for Culture, Media and
Sport. Certainly, the Opposition had hoped to see a slightly more
measured approach to alcohol taxation and duty.
We want taxation to be used as
part of an overall package to tackle problem drinking. We do not want
further revenue extracted from the public, who largely drink
responsibly, and the industry when both have to deal with financial
pressures. Amendment No. 67 was tabled to address that issue. It would
give a lot of latitude to Ministers on how it is implemented. It says
simply that by the time of the next Budget, Ministers must introduce
tax-neutral proposals that increase tax on higher-strength beer, cider
and “ready-to-drinks”, otherwise known as alcopops.
Correspondingly, the proposals reduce duty on beers and ciders with a
lower alcohol content. We want binge drinking to be tackled, but we do
not think that that should be used as an excuse for more stealth
taxes.
Patrick
Hall:
The hon. Lady’s remarks on
amendment No. 67 focus on the effects of the measures on the on-trade
or pub trade. Surely, the main factor affecting alcohol consumption is
the differential between the on-trade price and the off-trade price, in
particular at the supermarkets. She may respond if she wishes, but it
seems to me that whatever one charges in excise duty or differentials
within that, the supermarkets are able to absorb it. Therefore
amendment No. 67 misses the point, because the great difference would
still
remain.
Justine
Greening:
I agree with the point that the hon. Gentleman
is making, which is that whatever the policy on alcohol duty, it must
be part of a broader package of policies. Interestingly, in February,
Tesco, Asda and some other supermarkets withdrew super-strength beers
from their shelves, which I welcomed. He is right that I am trying to
set out one part of the package for a successful overall policy. I do
not pretend to claim that this measure alone is the solution; of course
it is not. We have heard that there are issues relating to the Home
Office, to the Department of Health, and on education. A range of steps
need to be taken, which complement each other.
In amendment
No. 67, I am trying to set out an approach, at least within the duty
piece of the jigsaw, that could help to tackle the issue in a more
measured way. I will come on to why I think that is the right approach.
When we look at what has happened in other countries, there is evidence
to suggest that that is a sensible approach compared with the one that
we are using, which raises duty for absolutely everybody. We have heard
that 37 million drinkers in Britain drink responsibly, and the measure
has had an impact on the
trade.
I will come on
to explain more about my approach, but I want to set out the issue of
problem drinking and how it relates to the highest-strength ciders and
beers, and alcopops, to which I refer in amendment No. 67. We have a
problem-drink issue in Britain. Overall, the level of alcohol
consumption is falling slightly, but I am talking about the cohort of
people who do not drink responsibly, and we should look at what we can
do to tackle that. In Britain, 3 million adults have some form of
alcohol dependency, and 8 million people have an alcohol use
disorder.
On under-age
drinking and future health problems, one in 10 final-year primary
school children—that is children aged 10 to 11—say that
they drink alcohol regularly. That rises to 45 per
cent. of 14 to 15-year-olds, who say that they drink on a weekly basis.
A fifth of 10 to 15-year-olds say that they regularly get
drunk. The number of young people treated for alcohol abuse has
risen by 40 per cent. in a year. In 2005-06, over 1,400 children under
14 were admitted to hospital for conditions caused by alcohol
abuse.
Alcohol abuse
is a time-bomb epidemic, and we know that its impact is much broader
than the effect on the health of people who are drinking too much. Half
of all violent crime is drink related. Alcohol abuse is a key factor in
the antisocial behaviour and intimidation that affects all our town
centres and, indeed, my constituents, who live in
London.
Mr.
Browne:
The statistics that the hon. Lady is reading out
are interesting and are of concern to many millions of people. However,
does she think that she is wasting her time, given that the Minister
has said that none of those factors have received any consideration
from her or her Treasury colleagues, because she regards them as
irrelevant to taxation on beer, wine and other alcoholic
drinks?
Justine
Greening:
I take on board the hon.
Gentleman’s critique, but I have proposed an amendment that
would reach an outcome on alcohol duty tax that offers something more
and that I believe he would prefer. My proposal would create a balance
between revenue raising and an element of the duty structure that would
discourage problem drinking. My understanding of the Budget—and
this is a matter of concern—is that this tax rise has nothing to
do with tackling binge drinking. In fact, that surprised me, because I
expected the policy to be structured around trying to address what is a
growing problem.
As I
have said, there is a lot of violent crime, half of which is known to
be drink- related. Much antisocial behaviour and intimidation is caused
by alcohol misuse. As a result of the Home Office review of the 24-hour
licensing law change, we know that there has been a
25 per cent. increase in violent crimes committed
between 3 am and 6 am since the start of the new
laws. The Government should not be particularly surprised about that,
because back in 2001 the Government—the Labour party—sent
a now famous text to young people that said, “If you don't give a
XXXX for last orders, vote Labour on Thursday for Extra
Time”.
Essentially, the
message was that if people voted for Labour, they would be able
to drink more. With hindsight, that probably was not the most
responsible piece of electioneering we have ever
had.
Mr.
Mark Todd (South Derbyshire) (Lab): It certainly was not
used in my
constituency.
Justine
Greening:
No doubt the hon. Gentleman was pleased about
that. Let us consider the super-strength ciders, beers and alcopops
that I am talking about, so that we can perhaps understand a bit more
about what these drinks represent. A single can of super-strength beer
or cider contains more than the daily recommended alcohol limit for
men, and double the recommended limit for women. Three litres of 7.5
per cent. white cider is available in shops for under £3. That 3
litres constitutes seven times the recommended daily alcohol
consumption limit. According to a recent Alcohol Concern report, cans
of strong lager, which is a young person’s drink, are now more
affordable than they were in 1998. In fact, the report was entitled,
“Cheap at Twice the Price: Young People, Purchasing Power and
Alcohol”. An analysis from the Wine and Spirit Trade Association
states
that
“super-strength
lagers were linked to binge-drinking precisely because of their high
alcohol content and the type of consumption patterns they were seen to
encourage.”
That report
also cites evidence from alcohol preference experts about the increasing
prevalence of strong lager consumption. As I said to the hon. Member
for Bedford, in February, Tesco, Waitrose and Threshers stopped selling
super-strength lager and cider in some city centre stores to try to
tackle binge drinking. Clearly, the off-trade and all the industry
participants have a role to play in working alongside whatever the
Government are doing to try to tackle
this.
If we consider
the ready-to-drink market, we know from Alcohol Concern that a fall in
real-terms duty on alcopops, as they are often known, means that an
average young person’s pocket money enables them to buy
alcopops, which constitute four times the daily adult recommended
alcohol limits. The Government have unwittingly played a role in making
ready-to-drinks more affordable, because tax on alcopops has fallen in
real terms since 2002. We know that alcopops are the most popular drink
for young girls and women aged 11 to 24—specifically, they were
most popular among women drinking more than 15 units a week.
We hope to secure cross-party
support for action towards the proposal in my amendment. In October
2006, the then Secretary of State for Health, the right hon. Member for
Leicester, West (Ms Hewitt), called on the then Chancellor, now the
Prime Minister, to increase taxes on alcopops and other drinks popular
among young
people:
“I am
asking Gordon Brown, when he comes forward with the Budget next year,
to really increase taxes on alcohol. And particularly things like
alcopops and some of the stuff that quite a lot of teenage boys and
girls are drinking, because we’ve got a real problem with binge
drinking among young
people.”
6.15
pm
Ben
Chapman:
To what extent does the hon. Lady think that the
sale of alcopops and drink to young children is down to the level of
taxation on those drinks? Or is it down to the marketing policies of
the drinks
manufacturers?
Justine
Greening:
The answer is clearly a
combination of the two. I will come on to what happens in other
countries when tax has been increased. For example, in Germany, where
the level of consumption fell 50 per cent., teenagers who had
previously consumed alcopops said specifically that tax increases were
the primary reason for stopping. Price mattered to them. There is
evidence that pricing affects younger people, perhaps because they
simply do not have as much disposable income and cannot go to the cash
point and get
credit.
Mr.
Simon:
Was the evidence for the level of
consumption going down by 50 per cent. for alcopops or
alcohol?
Justine
Greening:
It was alcopops. I will come to that later, and
answer the hon. Gentleman in more
detail.
There is some
evidence that what our amendment proposes could have some beneficial
impact as part of an overall package of steps to tackle under-age and
problem drinking. The amendment proposes an approach
that mirrors successful approaches taken in other countries—for
example, Australia, Germany and, more recently, France, which has
introduced a tax on alcopops
specifically.
Let us
take a look at what happened in Australia, which put an extra tax on
high-strength beer some years ago, adding an extra rate for
mid-strength beer in 2000. Industry and Government data suggest that
those changes in excise rates contributed to significant changes in
consumption patterns. Recent data suggest that low and mid-strength
beers now make up 20 per cent. of the total beer market in Australia,
with mid-strength the fastest growing beer category in the country. By
comparison, in our UK market, it is estimated that low-alcohol beer,
which is under 2.5 per cent., comprises less than 5 per cent. of the
market. Also, since 2000 in Australia, there has been
a significant fall in the proportion of teenagers reported drinking
beer and a fall in the proportion of young people consuming alcohol.
According to a recent academic study—in a publication called
Addiction—despite Australia’s reputation
for heavy and highly culturalised consumption of alcohol, the
international league tables indicate that Australia is generally doing
well in how it deals with alcohol.
Germany introduced a tax on
alcopops in July 2004, increasing it by around 80 cents per bottle.
That resulted in the consumption of alcopops by young Germans falling
by 50 per
cent.
Stephen
Pound (Ealing, North) (Lab): I was trying to catch the
hon. Lady’s eye before she moved from the public bar of
Australia to the saloon bar of Germany. She will be aware that the
first alcopop ever sold in the world was manufactured by a
Mr. MacGillivray, an Australian who found himself with four
lorry-loads of lemons, to which he added alcohol, creating
alcopops—condemnation be upon him. Does the hon. Lady
accept that one of the problems in Australia
is that all the fiscal mechanisms tried have totally
and utterly failed to address problem drinking among
certain groups within Australian society? Other mechanisms would have
to be used, as with this Government and public health mechanisms.
Fiscal mechanisms alone have simply not worked in
Australia.
Justine
Greening:
What I was trying to get at earlier during my
questions to the Financial Secretary is that there is
clearly a need to segment the market of problem drinkers. I accept
that, in dealing with long-term alcoholics, one may need measures that
should include education, support and information on a whole range of
health issues. We are trying to ensure, as part of that overall
package, that the duty system plays its role in reaching a good
conclusion. That could involve going down this particular route and
looking at evidence in Australia, Germany, and I understand similarly
in France, where it has had a positive effect. Such measures can
help.
Mr.
Simon:
I do not know whether the hon. Lady was going to
say more about Germany and alcopops. So far she has said that German
kids stopped drinking alcopops, but she has not said whether they drank
any less alcohol. Will she come on to that?
Justine
Greening:
I am pleased that the hon.
Gentleman mentioned that, as just before the
intervention of the hon. Member for Ealing, North I was coming on to
the 2005 study by the German drug commission. It showed that those
teenagers did not substitute other drinks, and that the proportion of
12 to 17-year-olds who drank alcopops once a month had dropped from 28
per cent. to 16 per cent. One third of those who drank ready-to-drinks
no longer did so in the following year, and the teenagers cited the tax
as the main reason for the changes. My amendment would force Ministers
to come up with a more thoughtful alcohol duty policy that would have a
good chance of starting to tackle problem drinking, while giving the
rest of the British public, and the alcoholic drinks industry, relief
from the Government’s proposals to increase tax by £400
million this year and £1.5 billion over the next three years. Of
course, that must be seen in the wider context of a broader alcohol
strategy designed to tackle binge drinking and under-age drinking. The
Conservative party is committed to prohibiting retailers from selling
alcohol below cost price—no more loss-leaders—and we have
also set out policies to strip retailers of their licences if they are
caught selling alcohol to under-age customers. I am sure that a range
of other measures could be taken to complement those.
I hope that Ministers will be
prepared to seriously consider supporting their other
colleagues in Parliament, previous Health Secretaries, licensing
Ministers and whoever else agrees that the duty should not have been
raised across the board, and that a more sensitive and smarter approach
would be that outlined in my amendment. I look forward to hearing the
Financial Secretary’s response.
Stewart
Hosie:
I should probably declare an interest. I am a
member of the Taychreggan Scotch whisky society. I have another
declaration to make in that last year I opened the Fisherman’s
beer festival in Broughty Ferry, in the only pub
ever to have been in every single edition of CAMRA’s
“Good Beer Guide”. I say to the Minister that I did not
have a woolly jersey on, but if she lives to accuse me of that, I will
find it funny.
The Minister
also said in the previous debate—and I think it relates to this
debate—that she had had discussions with all parts of the drinks
industry in the run up to the Budget. Those must have been
extraordinary discussions—either the Minister spoke and they
listened, or they spoke and she did not hear. Within hours of the
Budget being announced, the Scotch Whisky Association began its press
release by saying that across the sector there was,
“extreme dismay...following
the Chancellor’s decision to raise the duty on Scotch Whisky by
a punitive nine per cent. Distillers said that the Chancellor had
effectively abandoned Government moves towards a fairer alcohol tax
policy, worsening the duty discrimination against Scotch
Whisky”,
and so it went
on.
Mr.
Field:
To help elucidate the debate, will the hon.
Gentleman say how much increase in duty on whisky there had been in
each of the previous 10
Budgets?
Stewart
Hosie:
The hon. Gentleman asked me the same question
during other debates on the Budget, and I gave him the correct answer.
I am coming to my amendment in some detail. I thought that explaining
the background to what the sector was saying about the Budget
would be useful. I tabled the amendment because the Finance Bill offers
a discriminatory tax regime against Scotch whisky and
because, fundamentally, I believe that there must be a better and
fairer way of levying duty on alcoholic
liquor.
Given
the soundings that I have taken from the industry, the proposals in the
Finance Bill risk damaging an industry that generates £2.5
billion towards the balance of trade—a balance of trade in total
on goods that is £87 billion in deficit. If too much pressure is
put on the sector, it might risk some of the 65,000 jobs that are
dependent on Scotch whisky one way or another. It also risks reducing
the £1 billion annual spend for other suppliers in the United
Kingdom.
In
addition, the common argument is that the pressure will place an
additional burden on a sector that, like many others, is struggling
with further increases. Whisky, in particular, has seen a 100 per cent.
increase in cereal costs; 60 per cent. in fuel oil; between a 5 and 20
per cent. increase for glass; 5 to 10 per cent. for packaging; 5 to 15
per cent. for transport and 20 per cent. for copper to make
distilleries. Will the Government explain why they took such action in
the Finance Bill that will result in an effective 30 per cent. tax
increase on Scotch by 2013? Will they confirm that their detailed
econometric work demonstrated that the taxation of spirits was already
close to, or perhaps beyond, the revenue-maximisation point? I remember
the tipping point that the previous Treasury team discussed in respect
of tobacco. It was honest and open, and said that there was a tipping
point after which revenues would go down and, indeed, that smuggling
would be
encouraged.
As for the
elasticities published in 2003, those at the Treasury suggested that
the price elasticity of spirits continued to be considerably higher
than that for wine and beer, that there was a clear risk that spirit
duty rises might be counter-productive from a revenue
perspective, and that spirit duty receipts would actually fall. Even if
the estimates of an uplift in spirits revenue were accepted, the
Treasury anticipates that raising just 4 to 6 per cent. more revenue
next year from a 9 per cent. duty rise would show that it expects sales
to fall. I should be grateful if the Minister would confirm
that.
I have
raised the international dimension on several occasions. When
we raise duty, particularly disproportionately—I shall come to
the discriminatory element of it in a
moment—we send out an extraordinary and potentially damaging
message elsewhere in the world saying that large duty increases on
Scotch are acceptable. That is indeed damaging, given that the sector
is trying hard—and successfully over the past little
while—to increase its markets overseas. That signalling effect
that everyone recognises as real is something that we want to
avoid.
Mr.
Field:
While I very much accept the hon.
Gentleman’s valid, economic argument, the specifics of
the Scotch whisky industry are that the terrific demand, particularly
from many of the emerging markets in the far east, is such that it
cannot really deal with the level of demand of its premium end quality
product in the global market. I do not disagree with the basic
thrust of his economic argument, but the specifics of where the
industry is today are in a strong position.
Stewart
Hosie:
The specifics of where we are today are that Japan
referred to the UK system in the recent World Trade Organisation
hearings and observers in India have also pointed to UK budgets as
letting India off the hook in maintaining local duty regimes to
discriminate against Scotch in those emerging markets. We cannot be
complacent. Yes, the industry has done well; yes, it has tapped into a
rising, middle-class and additional disposable income in China and
India, but the growing pressure on income in China and India is such
that there are food price rises. I suspect that even someone
who had been doing relatively well would probably choose to put food on
the family table before buying another bottle of whisky, premium or
otherwise. That is
important.
6.30
pm
My amendment
does not seek to delay the rise, although that would be welcome, but to
have the Government publish a detailed breakdown of the yield from all
forms of alcoholic liquor, and to publish indicative rates for all
types of drinks to show what the duty levels would be if alcohol was
taxed fairly and equitably by alcohol content only. Let me explain why
that is important and show the discriminatory nature of the current
regime. Take three drinks with precisely the same alcohol content: a
half pint of beer with 4.93 per cent. volume has 20.9p of duty;
a 125 ml glass of wine at 11.2 per cent. volume has 24.3p of duty; and
a 35 ml glass of whisky at 40 per cent. volume has 29.9p of duty. So
for exactly the same alcohol content, there is a 30 per cent. uplift on
the duty between beer and whisky and a 20 per cent. uplift on the duty
between wine and whisky. That is fundamentally
unfair.
I am not
seeking to delay this, although that would be good. I am not seeking to
say anything at this point about the escalator, although that will have
to be addressed because it could be very damaging in the medium term.
This is something that could be accepted. Certainly the soundings from
other bits of Government and agencies concerned with things like health
and crime suggest that they would be not too unhappy if we found a duty
regime that taxed fairly on
the basis of alcohol and recognised that cheap
cider, which is massively undertaxed, would have to go up and that very
strong beer and lager—the super lagers that are cheaper than
bottled water—would go up. I am not sure about wines.
Perhaps they would stay much the same. We will have to see what the
analysis said. But the type of rises we have seen with whisky and the
type of rises that are forecast and the continuing discrimination
against it cannot be tolerated. I hope that the Minister, while
probably not wanting to accept this amendment in its present form,
might give us some comfort that she will be prepared to pull together
the assessment the amendment seeks so that we can see what the impact
of fair and equitable duty would
be.
Stephen
Pound:
One learns a lot in these Committees. I am grateful
to the hon. Gentleman. It is interesting that the two most popular
whiskies in India are 100 Pipers, which is distilled in the distillery
built by Scottish soldiers when they were over there, and Johnnie
Walker Black Label. If we follow through the logic of the hon.
Gentleman’s argument, would it not have precisely the same
effect on gin, vodka and all other spirits, or is he making an
exceptional case for something being uniquely wonderful about Scotch
whisky? I say that as someone who finds it difficult to drink any
whisky that has not got an “e” in
it.
Stewart
Hosie:
It would absolutely have the impact on every other
spirit. I make the point in relation to Scotch for rather obvious
reasons. It is an incredibly important industry in Scotland. It
generates the revenues I spoke about and contributes to the balance of
trade. But my proposal would impact on every spirit, which is why I say
we should have the assessment of the total yield and the duty levels
required by alcoholic liquor type across the board to see what that
would look like were we to tax all alcoholic drinks on the
basis of alcohol content and not in any other discriminatory way. With
that I will sit down and hopefully the Minister can give me some joy
when she gets up to
speak.
Mr.
Browne:
I am grateful for the opportunity to speak
briefly. I have tabled no amendments to this clause but I thought that
the comments made by the hon. Member for Dundee, East were interesting
and worth exploring further. Some of the wider points, although not
necessarily the specific amendment, from the hon. Member for Putney
also contributed to the debate. It only left me thinking how valid my
previous amendments were. There seems to be insufficient information on
the purpose of Government policy with regard to taxation of alcohol. We
are no clearer now.
It
was interesting to hear the hon. Member for Putney run through a lot of
the concerns that people have about the social and health impacts of
excessive alcohol consumption. Of course, we know from the comments of
the former Financial Secretary that those factors are not considered
worthy of the considerations made by the Chancellor in the Budget. We
are told that they are considered to be important in the Home Office
and in the Department of Health, but they are not motivational factors
when considering duty on alcohol. That is regrettable because it is
impossible for the Government to form a rounded policy on duty in this
area without taking those factors into account.
I have some
concerns about amendment No. 67. It attempts to single out certain
categories of alcohol. I am not unsympathetic to the motivation behind
that, but the problem with ready-to-drink brands is that there is no
easy definition of what constitutes an alcopop. As I understand it, the
provisions would penalise spirit-based alcopops, but not
fermentation-based alcopops. If so, there may be a movement in the
market from one type of alcopop to another even though the alcohol
content of both may be identical while the method of making them is
different.
Justine
Greening:
I think that the hon. Gentleman has touched on
an anomaly of the current tax system. In amendment No. 67, we want to
set out a definition that would work. He is right to say that half of
alcopops sold are wine-based rather than
spirit-based.
Mr.
Browne:
I am grateful for that intervention. I see that
amendment No. 67 asks the Government to explore the matter further.
This illustrates the difficulty of trying to come up with not only
definitions, but legislation that tackles current fashions in the
market, particularly among young consumers who are prone to change
their drinking habits more rapidly than older
consumers.
My
understanding is that the market for ready-to-drink products is showing
signs of long-term decline and has been superseded by drinking cider,
particularly with ice in it. Many people regard that as an unwise way
to consume cider, but it is fashionable in many quarters. I am told
that even that type of preferential drink is also now in decline.
Whoever can work out what the next market will be in popular drinks,
particularly aimed at young people, will no doubt make a lot of money
out of it.
It is very
difficult to legislate to address consumption patterns when we do not
know what they are likely to be. There is evidence that the issue of
aiming taxes at people who ought not to be buying alcohol because they
are under the legal age is quite price-sensitive because such people
tend to have smaller amounts of money to spend. At the same time, it is
particularly hard to target. For those in the 18-to-25 age category,
the issue is rather less price-sensitive. All these issues must be
taken into account by the
Treasury.
Although
I think that amendment No. 67 makes some valid points and is an
interesting probing amendment, there are some practical considerations
which mean that it would fail to do what it says on the bottle. On the
wider point of alcohol liquor duty, I look forward to the Exchequer
Secretary’s contribution. From a sedentary position, she has
expressed unhappiness at previous comments that I have made. All I have
sought to do in our deliberations is to put it to her that a lot of
people in the trade of selling and producing alcohol are unhappy with
the above inflation increases. At the least, they want a clear
explanation from the Treasury for the motivation behind
them.
Patrick
Hall:
I have one or two points to make in the light of
this debate, which I have found very helpful, and in the light of
meetings that I have had with senior representatives of Charles Wells,
one of the few wholly British-owned brewers. Some 85 per cent. of
brewing is now foreign-owned, but Charles Wells is located in my
constituency. I have also met members of Bedford PubSafe, which
represents licensees, and the police
licensing officer. I should like to develop the
theme on a separate occasion, perhaps in an Adjournment debate, but I
have one or two points and questions to put to my hon. Friend that
arise from what has been said today and from my recent meetings in my
constituency.
From
what little work I have done on the matter, it is interesting that
there does not seem to be a consensus on easy solutions, because there
are no easy solutions. For example, I was impressed that the licensees
I met in Bedford did not believe that simply raising duty across the
board would in itself tackle antisocial behaviour, but the pub trade
argues that, generally speaking, it is pubs themselves that
provide a safe, sociable, supportive drinking environment, and that if
we just leave it to the market—although there are also small
businesses that believe in the market—they will not be able to
compete on price, given the price differential with supermarkets. A lot
of people, especially young people, seem to drink at home before going
to the pub, with the danger that they arrive at the pub already drunk.
Those are serious matters, but there are no simple
answers.
I have one or
two questions to put to my hon. Friend the Minister. With regard to the
promised accelerator, although it is not in the Bill, Treasury
Ministers have pledged to raise excise duty on alcohol by 2 per cent.
for each of the next four years. Just to test that, can she explain why
2 per cent. and why four years? With regard to special pleading, there
is an issue regarding beer sales in the pub trade. The relative or
absolute decline of beer sales goes back some decades. The Government
indicated an ability to assist the industry when they froze the duty on
cider for four years to help that part of the industry. Is there now a
case for considering doing the same with
beer?
The hon. Member
for Putney addressed the point about differential rates in a measured,
intelligent and helpful way. I thought that my hon. Friend the Minister
said earlier, in relation to another set of amendments on the clause,
that differential rates were not allowed under EU law, yet the hon.
Member for Putney—whose information I have no reason to doubt,
as she approached the matter with reason and clarity—said that
other EU member states used differential rates. If that is not the
case, we will hear from my hon. Friend.
We may have to have a
level playing field in terms of duties and taxes, but we certainly do
not have one in terms of price. Supermarkets’ ability to use
loss leaders, buy one, get one free offers and similar things is surely
part of the problem for some people who abuse alcohol. It would be
helpful if my hon. Friend, if she has time when she responds, could
address those
points.
Angela
Eagle:
I hope that I will be able to address
Members’ concerns in the time left tonight. This has been an
important debate, and a wide-ranging one by definition, and I hope that
I can reply to some of the questions asked and genuine points
made.
No one should
doubt the motivation of anyone on either side of this Committee to see
whether excise duties can have any influence, not on binge drinking,
but on drinking habits. It is clear from reading amendments Nos. 59 and
67 that that is what the main Opposition parties
advance.
6.45
pm
The
hon. Member for Putney spoke to the amendment in some detail. I shall
take the Committee through some of the reasons why her approach will
not work. There are practical reasons, but there are also legal
obstacles. I shall also answer some of the questions asked by my hon.
Friend the Member for Bedford. Amendment No. 67 would require
the Treasury to lay before the House revenue-neutral proposals for
changing the way in which beer, cider and spirit-based ready-to-drink
drinks are taxed. In normal parlance, spirit-based RTD drinks are
alcopops—I say that in case anyone is confused about the
subject. The amendments, however, do not take that into account.
European legislation imposes restrictions on the ability of member
states to determine the structure of their alcohol duty regime and the
rates of that duty.
There are several legal
barriers to introducing the package of changes proposed in the
amendments. I shall start with the proposed changes to beer duty. Under
the current system, beer is taxed in direct proportion to the amount of
alcohol that it contains. For example, duty on a pint of 3 per cent.
strength beer is 26p; the equivalent duty on a pint of 6 per cent.
strength beer is 51p. An additional duty applied exclusively to beer
above 5.9 per cent. would be illegal. Council directives prevent us
from charging duty except as a percentage of alcohol in the drink. As a
result, the hon. Lady’s package will not work. Nor, if it was
legal, could revenue be recycled to reduce the duty on lower strength
beer, because under EU rules any increase in beer duty would have to be
imposed on beers of all strengths with an alcohol content of above 2.8
per cent. or those with no alcohol at all. There are some rigidities in
EU rules, which mean that the hon. Lady’s approach will not
work.
Justine
Greening:
Has the Minister considered how countries like
Germany managed to get over those legal hurdles, and introduced taxes
on
RTDs?
Angela
Eagle:
Yes, but slightly different rules apply here. I
refer the hon. Lady to article 3 of Council directive 92/83 EEC, which
states that beer must be taxed in direct proportion to the degree of
alcoholic strength. That is the issue that I was talking
about.
Another
slightly more obscure provision of Council directive 92/12 EEC allows
an additional excess tax to be imposed provided that it is hypothecated
for a specific purpose. I suspect that the German example is based on
that provision. I shall explain in a moment why that will not work for
alcopops.
Peter
Viggers (Gosport) (Con): Before the Minister goes into
further detail, will she address the general philosophical question of
the Government’s attitude towards the taxation of alcohol? How
do the Government feel about using taxation as a weapon to
help solve the social problems that have been
pointed out so well by the Opposition, and about having differential
rates for different types of alcohol? Will she set out her strategic
framework for taxing
alcohol?
Angela
Eagle:
I am happy to do so. We have 10
minutes left today. I shall try to give the hon. Gentleman a quick view
of our philosophical approach, but given the remarks that I have just
made, I hope that he realises
that we are not completely free of EU regulations on
applying different excise duty rates to different
strengths of alcohol. We do not have a completely free rein. I think
that we would all admit that excise duties can have an effect on the
consumption of particular kinds of alcohol, but not necessarily on
binge drinking or over-indulgence. There is a great deal of evidence
that if one prejudices the use of a particular alcoholic beverage over
another for those reasons, substitution occurs. One may achieve an
initial decline in the kind of drinks that one wishes to see decline,
but in fact, there is a substitution effect. The market is very dynamic
and drinks are often reorganised: the trade has the chance to reduce or
increase strengths to fit in with any excise duties that are created.
It is a dynamic situation and we are subject to certain constraints and
EU rules. That is why the hon. Lady’s suggestions do not hold
together, especially for beer—they are simply illegal and cannot
be done.
Moving on to
ready-to-drinks or alcopops, under the current system, such
products are taxed either as spirits, as came out in the debate, or as
made-wine, depending on the ingredients used in their production. Since
spirit-based alcopops are taxed in the same way as all spirits, they
are already subject to a higher duty compared with other products of
similar alcoholic strength. Under EU rules, we cannot introduce a new
tax for one alcohol product to fund a tax cut for
another product. Revenue from a separate tax on ready-to-drink
products—the German example—would have to be hypothecated
to a specific spend under the EU regulation. I am afraid that for the
hon. Lady’s purposes, that specific spending does not include
meeting other budgetary objectives. Her idea of recycling revenue from
alcopops into reductions of excise duty in other bits of the forest, so
to speak, on other lower strength beers, does not work and is
illegal.
Mr.
Field:
I accept what the Exchequer Secretary has to say,
but surely it is not beyond the wit of man—or
Treasury Ministers and officials—to ensure
that hypothecation could, for example, go on health promotion? There
must be a way of organising matters in that particular way. I, for one,
fully appreciate that health promotion is not, and should not, be the
only issue at stake, but surely that is one obvious way in which there
could be a level of hypothecation, specifically for alcopops and
directed at a very small part of the large alcohol
market?
Angela
Eagle:
That may well be the case—and I will come on
to the German example in a minute—but it renders
unworkable the process set out in the amendments tabled by the hon.
Member for Putney, which propose a higher tax on a particular form of
alcohol and recycle the revenue into lower duty rates in other areas of
the alcoholic beverage jungle.
Mr.
Field:
I fear that I am taking the words out of the mouth
of my hon. Friend the Member for Putney. We wanted to ensure that this
was a revenue-neutral situation, not simply a matter of more and more
stealth taxes on alcohol alone.
Angela
Eagle:
It is a pretty unworkable stealth tax if everybody
has noticed that alcohol duties have gone up by 6 per cent. I have
never been able to understand the
accusation that increases in excise duties are
somehow a stealth tax. The letters that I have to sign, and the
response from members of the industry that I have received since the
Budget, have not exactly indicated that it was a sneaky thing. When I
phoned them up on the day of the Budget to tell them what was in the
Budget, I do not think that I did it by stealth and their reaction did
not have anything very stealthy about it either.
Some hon. Members have argued
that tax changes could be targeted at particular alcoholic drinks, but
it has been our experience that increases in the price of a specific
drink in isolation are not effective in reducing
overall harmful alcohol consumption. Problem drinkers
simply move on to other products. The German experience was cited by
the hon. Member for Putney as a highly successful example of that of
approach. Given that one would need a hypothecated fund that could not
be spent on other budgetary measures, one would have to take the money
from a tax on alcopops and put it into a specific place. In the German
example, it was put it in a hypothecated fund for alcohol education for
young people.
Angela
Eagle:
If the hon. Lady wants to intervene, I am happy to
give
way.
Justine
Greening:
Does the Minster plan to put the tax increase
into an auditable hypothecated fund for child
poverty?
Angela
Eagle:
No, but we have made clear where some of the
revenue raised from the increases in alcohol excise duties have gone. I
am anxious to make the point about the German example, of which the
hon. Lady made a great deal in her speech. In that case, the specific
tax on alcopops did not stop young people drinking; they simply drank
something else instead. One year after the introduction of the German
tax, alcopop sales reduced—the hon. Lady was right to point that
out—but sales of other drinks, such as wine-mixed beverages and
beer-mixed beverages, went up by 250 per cent. and 19 per cent.
respectively.
The
proposed changes to alcopop taxation require the Treasury to make
regulations that define ready-to-drinks, and, as the alcohol industry
is dynamic and competitive under any definition, it is likely that it
will simply respond by reformulating products to ensure favourable tax
treatment. The regulations would need to be constantly
reviewed.
I do not
know whether the hon. Lady has looked at alcopop sales recently, but
they have halved since 2002, when they were at 105,194 hectolitres of
pure alcohol, to 51,797 hectolitres of pure alcohol in 2007. The
decline started in 2002, when the Government
removed a concession introduced in 1998 by the Conservative Government,
which basically began the growth in alcopop beverages. Removing that
concession in 2002 put up the price of alcopops and the market for
them, in hectolitres of pure alcohol, halved. Since 2007, it has halved
again. Alcopops are possibly in terminal decline as a beverage, and
people have moved on to other issues. That demonstrates that targeting
particular drinks in a dynamic industry, which can be very innovative
when it wishes, simply does not work. The
hon. Member for Taunton made that point, and I agree
with him. It causes substitution in one area and causes those issues.
We cannot have an excise duty on that basis, and I hope that the hon.
Lady recognises that.
Justine
Greening:
The Minster seems to be slightly ignoring the
rest if the proposal, which would increase the duty on high-strength
and super-strength cider and beers.
Angela
Eagle:
I am moving on to that.
Justine
Greening:
In that case, I wait to hear what she has to say
with interest.
Angela
Eagle:
Following the Budget increases in alcohol duty,
still cider between 1.2 per cent. and 7.5 per cent. is taxed at
£28.90 per hectolitre, and still cider between 7.5 per cent. and
8.5 per cent. is taxed at £43.37 per hectolitre, so strong cider
is already subject to a higher rate of duty. There has been a lot of
interest expressed in strong white ciders. They were certainly
discussed a great deal when representatives of Alcohol Concern came to
see me before the Budget. The product represents only a small
proportion of the overall cider market, which itself accounts for
only 4 per cent. of total alcohol
sales.
7
pm
Stewart
Hosie:
I know that the Minister was accurate when she
spoke about strong cider being taxed at a higher level, but the basic
rate per hectolitre on still cider still goes up to 7.5 per cent. AVP.
That is extraordinarily strong to be paying only £28.90 of duty.
Angela
Eagle:
The hon. Gentleman admirably cantered around the
issues with Scotch whisky. His approach is that alcohol should always
and everywhere be taxed in proportion to its alcoholic
strength—its alcohol by volume. We do not yet have a structure
that is so certain. I am looking at you, Mr. Cook. I am
nowhere near the end of my remarks, and I do not know whether we are
okay for time.
The
Chairman:
There is no time for termination. The next
stoppage will be when the Secretary of State for Children, Schools and
Families pulls the plug on new clause 14 of the Education and Skills
Bill, so please
continue.
Angela
Eagle:
I am happy to do
so.
In summary, the
European Union restrictions make revenue-neutral
changes, as proposed in the amendment, unworkable. Furthermore,
increases in duty on specific products will not reduce overall problem
drinking because consumers will shift their consumption to other
products, so the Government cannot agree to the structure of the
amendment.
Amendment
No. 59 would require the Government to provide an assessment of the
impact of alcohol duty increases on consumption. As with all tax policy
decisions, we monitor the impact of alcohol duty on a range of factors.
When the hon. Member for Putney started this debate, she asked some
questions about the HMRC model. We always examine input and assess
whether our models need to be updated. The model to which she referred
uses the latest market information on prices and
consumption of alcohol, and is based on the elasticity set out in the
published Government
economic service working paper No. 140, about which
the industry has no doubt been writing to
her. The model is also
based on HMRC’s clearance data consumption forecast and the
latest industry prices and strength of alcoholic beverages, which can
change rapidly, as I am sure that the hon. Lady appreciates.
Behavioural effects and elasticities are applied to arrive at an
additional tax revenue generated from duty changes. We assume 100 per
cent. pass through of duty, and inflation is accounted for. That model
comes to the Revenue forecasts that she sees in the Red Book. We keep
it under review, and I hope that she finds my explanation
reasonable.
The
Government do not agree with amendment No. 59. I am sure that
all hon. Members acknowledge that a number of factors have an impact on
alcohol consumption, and it would be difficult to identify the
specific impact of alcohol duty rises against other
factors, including changing consumer patterns, changing and
reformulated drinks, and fashions, as the hon. Member for Taunton
rightly said.
We have
been clear about the purpose of the decision to raise alcohol rates in
the Budget. The principal aim is not the reduction of problem drinking,
but primarily to provide revenue so that we can continue to assist
pensioners and tackle child poverty.
Patrick
Hall:
Could my hon. Friend come to the point before we
conclude—you said that we could go on for a little while,
Mr. Cook—about the accelerator and why it is 2 per
cent. above inflation and why it is for four
years?
Angela
Eagle:
We had discussions earlier about how much more
affordable alcohol had become over the years, and the 2 per cent.
increase is an attempt to change that balance over the next four years
coherently and with advance
advertising.
European
union rules on the structure of alcohol duty rates make a duty regime
under which all the products of a given alcohol strength are subject to
the same duty rate unworkable. Under those rules, wine and cider are
taxed in bands, but we are required to tax spirits and beer directly in
proportion to their alcoholic strength. That makes it impossible to
provide exactly the same treatment for all products of equivalent
alcoholic strength. I hope that that has, to some extent, dealt with
the comments of the hon. Member for Dundee, East. His plan cannot be
brought into being because of EU rules. He is dancing around and I am
happy to let him
in.
Stewart
Hosie:
I am not sure that I was dancing around. I
understand why the changes that might follow from the assessment that I
mentioned might not be able to be made now, or quickly. However, that
would not prevent the assessment from being made and the information
published so that all of us—the industry, and those concerned
about health, crime and politics—could see what the rates should
be were it possible to do it on an equitable basis. If we then thought,
“My goodness, that’s a jolly good idea. It might
help”, we could perhaps take the necessary steps thereafter to
find a way of implementing
it.
Angela
Eagle:
Changing how excise duty rules operate at European
level is not quite as simple as the hon. Gentleman perhaps assumes. I
understand his
point and why he makes it, because it is about the
Scotch whisky industry. That industry—as was pointed out when he
got to his feet—has benefited from nine years of zero increases
in duty. It is not happy about the across-the-board increase in this
year’s Budget. One cannot expect it to be happy, but most of the
rest of the alcohol industry would be very happy to have had nine years
of no excise duty increases. I merely ask him to take that into account
as he surveys the
scene.
The
increase is across the board; it does not target specific alcohol
products. The Budget maintains a differential in duty rates between
Scotch whisky and other alcohol products, although it does not narrow
it as Scotch whisky would have wished. I understand its feelings about
that, but I also note that 90 per cent. of Scotch whisky is exported,
and it is doing extremely well in exports. I hope that Opposition
members will not press the amendments. They are ineffective and
certainly illegal, and for that reason unworkable. If they do press the
amendments, I will ask my hon. Friends to vote against
them.
Justine
Greening:
Apart from being illegal and ineffective, is
there anything that she does not like about them? As the hon. Lady can
imagine, we got legal advice which was that, provided that the duties
were calculated by reference to a product’s weight, quantity or
alcohol content, what we proposed was fine. The argument that she made
about hypothecation did not stack up. I am absolutely sure that it
would be possible to structure the duty system so that, through using
hypothecation and tax reductions or otherwise, one could achieve the
sort of structure that we propose. Therefore I want to press amendment
No. 67 to a vote, because we believe that it is wrong that the pub
industry and ordinary, responsible drinkers are being hit, when we
could have had a much more thoughtful policy that would have given not
only the industry, but ordinary drinkers a break, and would also have
taken at least some steps towards tackling the big issues that we have
with problem drinkers. I will press amendment No. 67 to a
vote.
Stewart
Hosie:
I heard what the Exchequer Secretary said in
relation to the European directives, particularly 92/83 which requires
member states to tax all spirits equally. I understand that articles 19
to 23 of another relevant directive may allow exceptions. I will not
press amendment No. 60 today, but I may bring back a version at a later
stage.
Justine
Greening:
I beg to ask leave to withdraw the
amendment.
Amendment,
by leave,
withdrawn.
Amendment
proposed: No. 67, in clause 9, page 4, line 41, at end
insert—
‘(7) The Treasury
must, not later than the date of the Budget 2009, lay before the House
revenue-neutral proposals
for—
(a)
decreased rates of duty on beer of a strength not
exceeding 2.5 per cent. and cider of strength not exceeding 3.0 per
cent.;
(b) increased rates of
duty on beer of a strength exceeding 5.9 per cent. and cider of a
strength exceeding 5.5 per cent.;
and
(c) a new category of duty
on “ready-to-drinks”, at a rate higher than the duty on
spirits.
(8) For the purposes of subsection (7), not later
than the date of the Budget 2009, the Treasury must make regulations
setting out the definition of
“ready-to-drinks”.
(9)
Regulations under this section are to be made by statutory
instrument.
(10) A
statutory instrument containing the first regulations under this
section may not be made unless a draft of the regulations has been laid
before, and approved by a resolution of, the House of
Commons.’.—[Justine Greening.]
Question
put, That the amendment be
made:—
The
Committee divided: Ayes 4, Noes
12.
Division
No.
4
]
Question
accordingly negatived.
Question proposed, That
the clause stand part of the Bill.
Justine
Greening:
Briefly, we will oppose the clause stand part
for the same reason as I have already mentioned: it is the wrong time
to hit the industry and responsible drinkers.
Question
put, That the clause stand part of the Bill:—
The
Committee divided: Ayes 13, Noes
6.
Division
No.
5
]
Question
accordingly agreed to.
Mr.
Bob Blizzard (Waveney) (Lab): I can hear the sound of the
jazz from below, so I beg to move that further consideration of the
Bill be now adjourned.
The
Chairman:
I could have sworn that it was
a measure of fatigue that had moved throughout the Committee.
Further consideration
adjourned:—[Mr.
Blizzard.]
Adjourned
accordingly at fourteen minutes past Seven o’clock till Thursday
15 May at Nine
o’clock.
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