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If the reductions are linear, the Lib Dem amendment implies that beer duty would be eliminated entirely in 50 years time; it might even imply that beer duty would go negative from the year 2060. That raises the tantalising prospect of the Liberal Democrats paying people to drink beer. That gives a new twist to their populist policies; they are like a desperate candidate in a student
union election in their efforts to court the popular and youth votes. It appears, at least from amendment 38, that they are already reaching out to my grandchildren with an offer of booze not only free of tax, but subsidised by the state from 2060. Here we have it: the Liberal Democrats seemingly proposing that the state should pay people to drink beer. That cannot make any sense, and that is why we cannot support amendment 38.
Kelvin Hopkins: I want to make two brief and simple points. The chief medical officer has suggested that alcohol should be taxed according to the alcoholic content of beverages. That would have the enormously beneficial effect of raising prices in supermarkets and having little effect on pub prices. That would help the pub trade and reduce irresponsible drinking.
My other point is that we have a vast ocean of untaxed, cheap alcohol coming in from Europe, and the Government get almost no revenue from it. If we reduced the amount of alcohol coming in and taxed it properly, Government revenues would increase and there would be less irresponsible drinking. Those two points should be taken on board by the Government and everybody in the Chamber. I hope that, in time, we move in that direction.
I entirely agree with my hon. Friend the Member for Hammersmith and Fulham (Mr. Hands), who exposed the technical faults in the amendment tabled by the hon. Member for Taunton (Mr. Browne). However, the hon. Gentlemans heart is entirely in the right place. It is wrong for there to be a duty escalator on alcohol, going up and up. The Government should decide at each Budget what the duty should be, depending on the economic circumstances. I have seen pubs close in Wellingborough, Rushden and Irchester, and this is not the time for a duty escalator. Although I cannot support the hon. Gentlemans amendment, I certainly think his heart is in the right place.
The Exchequer Secretary to the Treasury (Sarah McCarthy-Fry): I, too, have read the Hansard report of the debate in Committee of the whole House when alcohol duties were debated. It went down many highways and byways, and I hoped that we would not have a repetition of that this evening, because I would have had to bone up on all the pubs that I have visited in my constituency. I can tell hon. Members that in the 1960s there were more than 300 pubs on Portsea island alone, because a friend of mine wrote a book about them. However, I am sure, Mr. Speaker, that you would not want me to go down that road.
Alcohol duties play an important role in contributing to the public finances. The amendment would significantly reduce the revenue that the Government receive, thus weakening the public finances, notwithstanding the arguments made by the hon. Member for Taunton (Mr. Browne). The amendment deals only with beer duty, not that on other alcohol products. On the rate of duty, my predecessor, my hon. Friend the Member for Wallasey (Angela Eagle), noted in Committee of the whole House
that, for fairness, it was right to have 2 per cent. across the board this time round.[ Official Report, 12 May 2009; Vol. 492, c. 815.]
Furthermore, it would not be possible for us to accept the amendment as the European Court of Justice has ruled that duty on beer should be maintained within a set ratio with duty on wine. Such a continued reduction in beer duty would breach that ratio in the absence of similar provisions for wine. There are several constraints in EU law as regards alcohol. Beer must be taxed at an equivalent rate to wine and in direct proportion to degrees of alcohol strength. We are allowed to have reduced rates for small breweries, and we do so. It is also possible to set a reduced rate on beer with a strength of below 2.8 per cent. alcohol by volume. The pub industry proposed a zero rate for low-strength beers, its rationale being that it is easier to manufacture ale and stout. However, when we looked at the possible consequences, there was no evidence to suggest that people would opt to drop down to those reduced strengths.
Mr. Hands: Can the Minister explain how the Governments escalator currently works? Is it still based on RPI plus 2 per cent.? If so, at a time when RPI is negative, why was the increase in beer duty nevertheless 2 per cent.?
Sarah McCarthy-Fry: Because we work on a zero base. It is an increase of 2 per cent. on zero, and it would not go back below that figure even though inflation is negative, so it is staying at 2 per cent.
As with all tax policy decisions, the Government will monitor the impact of alcohol duty, including the impact on the pub industry. However, I am sure that hon. Members will acknowledgeindeed, they have done sothat the competitiveness and employment levels in any industry depend on a large range of factors. The pub sector has been adversely affected by the economic downturn, as well as by changing tastes and lifestyles over a longer time periodnowadays there are many more ways to spend leisure time. Increased input costs for suppliers and the smoking ban have also had an effect.
Changes in duty are unlikely to be the answer to tackling those problems. Indeed, the proportion of taxduty and VATin the price of a pint of beer in a pub has remained broadly constant in real terms since 1994. In the Treasury Committee on 28 April, a member of the experts panel, Mr. Weale from the National Institute of Economic and Social Research, said:
with beer...All the evidence is that
not terribly price sensitive.
However, the Government recognise and value the contribution that pubs make to employment and local communities. Although under EU tax legislation 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, the Government have introduced a range of measures to support all businesses, including the British pub. Those include: enabling pubs to spread payment of this years inflation uprating to business rates over three years; HMRCs business payment support service, which has benefited many pubs already; improved
access to finance for small businesses through the enterprise finance guarantee; and support through low-cost loans and advice on energy efficiency for small businesses, including many pubs, to make savings on their energy bills.
An approach suggested by the industry has been a reduced rate for cask beer, which, again, is not currently possible under EU legislation. As many hon. Members will be aware, however, there is a planned review by the European Commission of EU alcohol rates and structures, which will provide an opportunity for the beer and pub industry to put proposals to the Commission on a reduced rate for cask beer.
Kelvin Hopkins: I thank my hon. Friend for giving way. I am somewhat concerned about this emphasis on the EU, because if the EU determined our tax and duty levels they would be substantially reduced, which would be damaging to both revenues and health.
Sarah McCarthy-Fry: I have already explained some of the constraints in EU alcohol law, but I picked out the ones on beer because that is referred to in the amendment. There are many others, such as the fact that wine must be taxed at the same rateabove 8.5 per cent. and not exceeding 15 per cent.as must still cider. Those are among the directives that are under review for 2010. When the new Commission is in place, a work programme will be published.
Various strands to that work are currently under discussion, encompassing possible assistance for small and medium-sized enterprises, the classification of alcoholic products with specific attention to mixtures of distilled and fermented alcohols, and possible standardisation of denaturants. The UK has been working closely with the Commission to work towards a more modern structure that supports UK trade. Progress so far has been good, and initial findings have been in line with what the UK has been pressing for.
Linda Gilroy (Plymouth, Sutton) (Lab/Co-op): A moment ago, my hon. Friend the Member for Luton, North (Kelvin Hopkins) mentioned the unit price of alcohol suggested by the chief medical officer for health reasons. Is it likely that the review will enable us to take a serious look at that as a potential policy on alcohol duty?
Sarah McCarthy-Fry: I am sure that it is possible, but I do not know whether that precise matter is in the terms of reference of the review. As I said, the work programme will not be published until the new Commission is in place. I am sure that Members will appreciate that changes to the European excise rules governing alcohol duties require unanimous agreement from all 27 member states, so it could be a long process.
Mr. Browne: Let me start again. I question the so-called experts statement that beer is not price-sensitive, or the Ministers acceptance of that statement, because if it were as self-evidently true as she claims, I would not hear Ministers and others express such concern about happy hours and other forms of alcohol promotion.
I say to the Conservatives that the objective of the amendment is to cancel out and neutralise the escalator that the Government have introduced. I shall leave aside the strange assertion by the hon. Member for Hammersmith and Fulham (Mr. Hands) that if one takes 2 per cent. off a figure every year, it gets down to zero. I cannot see how it would ever get to zero, but we will leave that bit of innumeracy to one side. I regret that although the Conservatives talk a good game on this matter, I have to ask where their amendment is. Why is it always left to the Liberal Democrats to defend pubs and breweries? Why are the so-called official Opposition so negligent in that regard?
Both because it is the responsibility of my party, and sadly often that of my party alone, to champion this important community interest, and because the arguments made by the Conservative spokesman and the Exchequer Secretary fell short of what I had hoped for, I should like to press the amendment to a Division.
That the draft Identity Cards Act 2006 (Application and Issue of ID Card and Notification of Changes) Regulations 2009, which were laid before this House on 9 June, be approved. (David Wright.)
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