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However, that is exactly what they have done. Their duty rises have clobbered the majority of responsible drinkers. Across-the-board rises hit responsible drinkers, but fail specifically to target problem drinkers or drinking with antisocial consequences.

What other solutions have been proposed? A major controversy is the ability of the supermarkets and the off-trade more generally to absorb the rises in duty compared with the on-trade. France has looked at a scheme to reduce VAT on served food, versus that paid in supermarkets, and has suggested doing the same for the duty paid on served drinks. I would be grateful for a word from the Exchequer Secretary as to whether the UK has been looking at such schemes.

Mr. Todd: Would not a differential between cask beer and beer served in bottles and cans have a similar effect?

Mr. Hands: The hon. Gentleman makes an important point. My understanding—I think we will discuss EU regulation in due course—is that that would not be possible under the EU directives. However, I am not entirely sure, and I would be grateful for a word from the Exchequer Secretary, who may be able to give us a more definitive account.

The Exchequer Secretary to the Treasury (Angela Eagle): I may as well deal with that point now. Our advice is that the cask differential is unlawful as the EU directives are currently written, but there is an attempt to see whether we can change that. The hon. Gentleman will know, however, that that can sometimes take longer than we would all hope.

Mr. Hands: That clarification is helpful, but in my experience—as a long-standing member of the European Scrutiny Committee, I do not know how many EU directives we receive every week—it is easy to look at those directives, and pick and choose a little bit from them, but we have to study them and go through them in totality to try to find ways around them to do what we want to do. That is what other European countries have been doing. I would appreciate the Exchequer Secretary’s explanation as to whether the UK has been looking at schemes to reduce, for example, the cost of served drinks, which is what the French have done and is a possible way forward.

Rob Marris: Does the hon. Gentleman favour some kind of minimum pricing scheme for alcohol? A great deal of alcohol abuse comes from drinks such as extremely cheap cider—cider that has never seen an apple—that is sold at off-licences and drunk by people who go on to behave antisocially. Does he favour a minimum price for alcohol as a way of addressing those issues?

Mr. Hands: I thank the hon. Gentleman for that intervention. In due course, I shall discuss in detail the Scottish National party amendment on minimum pricing and consider problem drinks such as the type of cider that he mentioned.


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I have set out at some length the situation that we face. There are difficult problems, but there are also ways forward.

Mr. Goodwill: Although having differential rates of duty for cask beer and for beer in bottles and cans may be against European Union legislation under articles relating to the single market, surely articles relating to the environment could be used to encourage the use of returnable containers such as casks, rather than bottles and cans, which are generally disposed of in another way.

The Chairman: Order. I suggest that the hon. Member for Hammersmith and Fulham (Mr. Hands) does not develop that point.

Mr. Hands: I thank you for your guidance, Sir Alan. However, it is always good to see colleagues using previous experience. My hon. Friend the Member for Scarborough and Whitby (Mr. Goodwill) was a Member of the European Parliament for some time; the Government could learn a little more from those who know more about EU directives, to try to find a way through the maze.

We believe that the structure of taxation needs to be changed. That will not solve every problem, but taxing problem drinks and giving a price advantage to low-strength alternatives will stop the penalising of responsible drinkers. It will also provide a nudge in the right direction. [Interruption.] I am not sure whether the deputy Chief Whip wants to intervene; he is certainly talking from a sedentary position. Would he like to intervene?

Mr. Jeremy Browne rose—

Mr. Hands: I shall take an intervention from the hon. Member for Taunton (Mr. Browne).

Mr. Browne: If I remember correctly, during debates on last year’s Finance Bill, the Conservative party tabled an amendment relating to the taxation structure. Why was the decision taken not to table such an amendment this year?

Mr. Hands: The hon. Gentleman is right to raise that interesting question. We still have the policy that we had last year. However, the calculation this year would be different. A revenue-neutral position looking at different percentages of beer would not be the same this year because of the background changes in the overall beer pricing regime. Our policy is very much the same, but we simply have not done the exact calculations this year that were done last year.

The Government’s duty increases last year had the opposite effect from what we are considering. Under those increases, problem and non-problem drinks alike went up in price. Since the last Budget, tax on beer has gone up by 8p a pint and tax on wine by 28p a bottle. It is worth pointing out that almost all wine consumed in this country is imported, so Labour’s devaluation has added a 30 to 35 per cent. premium on top of that. Meanwhile, duty on a bottle of spirits has risen by about 47p on average.

We want the Government to consider and evaluate a smart alcohol taxation regime, focusing on the drinks most closely linked to problem drinking, such as alcopops and high-strength beers and ciders, and using the proceeds
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to reduce duties on lower-strength alternatives elsewhere. We should look at what has happened in Australia and Germany, where such approaches have been used to good effect. The Government should seriously consider introducing such reforms here, instead of using health concerns as a cover for a blanket tax rise for responsible drinkers.

There has been some controversy in this country about the German experiment on higher duty rates on alcopops, introduced on 1 July 2004. Like this country, Germany had a real problem with alcopops among teens. Those relatively high-strength drinks were particularly prone to getting youths drunk quickly; the sweet flavours camouflaged the high and bitter alcohol content. Many have said that the tax increases that the Germans introduced did not work, as youths simply switched to other forms of alcohol.

The issue cropped up at some length in debates on last year’s Finance Bill. In an attempt to separate fact from fiction, I decided to see for myself by talking to a number of those involved in the changes in Germany; the Government’s Treasury team will recall that I maintain a regular dialogue with a number of German politicians. I also studied the reports of the Bundeszentrale fĂ1/4r gesundheitliche Aufklärung, the federal institute of health information, and the federal Government’s own report about the effects of the alcopop tax law on the consumption of alcohol by youths aged 18 and about the market development of alcopops and similar drinks. I recommend that the Minister look at that report, because she would learn a great deal from it.

12.15 am

The German tax increase on alcopops—we must bear it in mind that alcopop consumption is generally falling, but that alcopops nevertheless remain a problem drink—was quite severe: a whole euro was put on top of the price of a 275 ml bottle. Labour Members’ criticisms of the changes during the debates on last year’s Finance Bill were partly correct. There was a switch from alcopops to mixed drinks based on beer and wine, but let us look at the figures in terms of pure alcohol drunk. In the year following the alcopop tax rise, wine and beer-based drinks consumption by those aged 12 to 17 rose from 3.9 g per person per week to 5.3 g as a result. By contrast, there was a staggering fall in consumption of spirits-based drinks from 8.5 g per person per week to only 2.2 g. In other words, spirits-based consumption quartered, while wine and beer-based consumption went up by only 35 per cent. In terms of pure alcohol consumed, there was a net change from 12.4 g per week to just 7.5 g. Under the German tax change overall, alcohol consumption by those aged 12 to 17—a very important part of the population whom we do not want to have drinking in general—fell by some 40 per cent., which is a huge success.

Rob Marris: The hon. Gentleman has clearly done a huge amount of research that underlines the point I made earlier—we do not need the amendments. I am not much of a scientist, so can he explain why earlier in his speech he was citing comparative figures about alcohol in pure litres, whereas he is now talking about alcohol in grams? I thought that grams were to do with weight, not volume.


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Mr. Hands: The hon. Gentleman makes a probing point. I am merely going on the figures used in the German Government’s report. If he likes, I can print him off a copy and we can discuss it, but I have not yet converted the figures into units that he might find acceptable.

The German experiment has been a great success, as has the Australian experiment on beer strength, and we should be looking at these options. Various observers have endorsed our approach to tackling problem drinks by increasing the tax rate and giving relief on drinks of a lower alcoholic strength.

I want to mention a couple of problems with the SNP amendment. The SNP is in favour of minimum pricing. A noteworthy feature of its scheme is that spirits would be practically the only drinks not to face steep hikes in duty. In fact, its Justice Minister, Kenny MacAskill, confirmed that last week while touring a whisky distillery—exclusively for fact-finding purposes, I am sure. He said:

If whisky prices do not fall, that can only mean that beer, wine and cider prices will have to rise to compensate.

Mr. Alan Reid (Argyll and Bute) (LD): In the present circumstances, whisky and other spirits are treated unfairly compared with beers and wines because the duty per unit of alcohol is much higher. If duty is being imposed for health reasons, it should be based on units of alcohol, so duty on spirits should come down and duty on beers and wines should go up. Is the hon. Gentleman suggesting that spirits should be taxed more highly than beers and wines?

Mr. Hands: The hon. Gentleman raises an interesting point. In general, as I have said, we are in favour of lower duty on lower-alcohol drinks. I do not want to get into more specifics about spirits.

Stewart Hosie: The hon. Gentleman is conflating two different issues. The first is duty, and amendment 12 calls for the Government to assess what duty level would be required to have fair pricing based on alcohol content only. The second is minimum pricing, which is a retail issue designed to tackle binge drinking and antisocial behaviour. The two things are completely separate. We are talking about alcohol duty, which is what the amendment is about. Minimum pricing is completely unrelated.

Mr. Hands: I understand what the hon. Gentleman says, but it is still my understanding that if price and duty on whisky are kept frozen, they have to be raised on other drinks. I appreciate that he has a different view.

The official Opposition are not opposed to the kind of study outlined in the Liberal Democrat or SNP amendments, but we are wary of a three-year duty freeze while we await the study. We will therefore abstain if amendment 10 is put to the vote. Secondly, we believe that the pub and drinks industry is in some degree of trouble, thanks in part to various measures introduced by this Labour Government, duty being one of them. Thirdly, we believe that alcohol price, and therefore duty, can have an influence on drinking behaviour. It is clearly not the only influence, but duty and price can play a role in combating some of the negative effects of
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our drinks culture without penalising the vast majority of responsible drinkers. We need a new approach to these matters, and we on the Conservative Benches look forward to providing it as soon as the Prime Minister is ready to face the voters.

Angela Eagle: We have had a debate that has been a bit like shadow-boxing, on amendments 10 and 12, which were tabled by the Liberal Democrats and the Scottish National party respectively. At least they had the courage to get their amendments on the Order Paper. We then had an extremely long peroration from the hon. Member for Hammersmith and Fulham (Mr. Hands), who dealt with all the amendments at great length. He thereby proved that amendment 10, which is about doing research, is erroneous, because as my hon. Friend the Member for Wolverhampton, South-West (Rob Marris) pointed out, as a lot of the research already exists. The hon. Gentleman then said, after all that, that he would be abstaining.

Rob Marris: May I gently suggest to my hon. Friend that it is often better to abstain when it comes to alcohol?

Angela Eagle: My own father took the pledge when he was 15— [Interruption.] No, 15, not 50. I have not quite managed to live up to the high standards of his Methodist upbringing. Perhaps we all aspire, at least, to moderation.

Amendment 10 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. The Government do not support the amendment. One reason, which has been demonstrated at great length tonight, is that there is plenty of such information already available. As with all tax decisions, the Government will monitor the impact of alcohol duty changes, including on the industry.

Many hon. Members have acknowledged that competitiveness and employment levels in any industry depend on a range of factors. It would therefore be very difficult to identify the specific impact of alcohol duty rises alone, against other factors such as a change in the culture of pubs and their customers and increased competition for leisure time.

The Government value the contribution that pubs make to employment and local communities, although EU tax legislation means that it is not possible to provide tax reliefs targeted specifically at pubs, such as taxing beer sold in supermarkets differently from that sold in pubs.

Mr. Hayes: Does the Exchequer Secretary believe that it is impossible to produce the sort of report that the amendment recommends because of the scope of the research? Leaving aside the argument about whether it is possible to distil the research and make it intelligible to Members, there must be Treasury modelling about the impact of changes in duty, specifically on employment and the other matters that the amendment covers. Will she make that modelling available to hon. Members by placing it in the Library?


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Angela Eagle: There is always Treasury modelling, some of it based on tax returns, which are confidential and cannot be shared—I am sure that the hon. Gentleman knows that.

The Oxford Economics model assumes that alcohol consumers are significantly more price sensitive than the Treasury model suggests. It fails to account for the fact that increases in the price of one type of alcohol often lead to switching to another. It therefore suggests that if beer sales decrease no other type of alcohol is drunk, which is clearly not true.

Mr. Redwood: Will the Exchequer Secretary give way?

Angela Eagle: I was about to answer the right hon. Gentleman’s questions, but if he must intervene, I shall give way.

Mr. Redwood: Why does the Exchequer Secretary think that pub closures have increased so much in recent months?

Angela Eagle: There are many reasons why particular pubs might close. Some businesses were possibly never viable and we are also in the middle of difficult trading conditions, as the right hon. Gentleman pointed out. We cannot assume that alcohol excise duties have a direct relationship to the pub closures, as some have argued.

Mr. Lindsay Hoyle (Chorley) (Lab): Is it not fair to say that many pubs are in trouble because of pub companies charging high rents and because they are tied to buying the beer through those companies? The 2p can make a difference, but the real reason is the prices that the pub companies charge.

Angela Eagle: My hon. Friend is a distinguished member of the Select Committee on Business and Enterprise, and a report on the subject is due soon. I look forward to reading it. Clearly, the tie is important and it has been brought to our attention in much of the evidence that we have taken.

The measures that we have introduced to support all businesses also support the British pub. They include enabling pubs to spread payment of this year’s inflation uprating to business rates over three years. The business payment support service has already allowed 116,000 businesses to defer more than £2 billion of tax, and that has benefited many pubs. There is improved access to finance for small businesses through the enterprise finance guarantee, which is now available for the first time to tied pubs. There is also support through low cost loans and advice on energy efficiency for small businesses, including many pubs, in order to make savings on their energy bills.

There was much talk of the balance between the on and the off trade in the debate. Many hon. Members know that we cannot charge a different rate of excise duty for the same product if it is sold in a different context. We cannot discriminate by setting a lower duty for pubs than for supermarkets. When alcohol excise rates increase, pubs often put up their prices by 5p. The duty increases are 1p extra on beer this time round, yet the prices in many places are going up by 5p. That exacerbates the difference between the on and the off price of beer and causes difficulty.


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I want to spend a short time dealing with the questions that the right hon. Member for Wokingham (Mr. Redwood) asked. He did not seem to know that the national average cost of a pint is £2.51. One can get a pint for £3.20 at the “Westminster Arms” over the road, but the right hon. Gentleman could have bought a pint for 99p at “Gig House” in his constituency from January because Wetherspoon had a special price for beer.

The right hon. Gentleman asked why some of the changes in excise duty were higher than the 2 per cent. announced in the Budget. That is because the Finance Bill, as I suspect he knows only too well, includes the legislation that will put into effect the increases that were introduced in the pre-Budget report, as well those in the Budget.


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