Alcoholic Liquor Duties (Definition of Cider) Order 2010

The Committee consisted of the following Members:

Chair: † Mr Edward Leigh 

† Cruddas, Jon (Dagenham and Rainham) (Lab) 

† Dakin, Nic (Scunthorpe) (Lab) 

† Danczuk, Simon (Rochdale) (Lab) 

† Field, Mr Frank (Birkenhead) (Lab) 

† Goodwill, Mr Robert (Scarborough and Whitby) (Con) 

† Greening, Justine (Economic Secretary to the Treasury)  

† Hanson, Mr David (Delyn) (Lab) 

† Horwood, Martin (Cheltenham) (LD) 

McDonagh, Siobhain (Mitcham and Morden) (Lab) 

† Murray, Sheryll (South East Cornwall) (Con) 

† Newton, Sarah (Truro and Falmouth) (Con) 

† Norman, Jesse (Hereford and South Herefordshire) (Con) 

† Nuttall, Mr David (Bury North) (Con) 

† Ollerenshaw, Eric (Lancaster and Fleetwood) (Con) 

Shannon, Jim (Strangford) (DUP) 

† Sharma, Alok (Reading West) (Con) 

† Smith, Angela (Penistone and Stocksbridge) (Lab) 

† Williams, Stephen (Bristol West) (LD) 

Ben Williams, Committee Clerk

† attended the Committee

First Delegated Legislation Committee 

Monday 25 October 2010  

[Mr Edward Leigh in the Chair] 

Alcoholic Liquor Duties (Definition of Cider) Order 2010 

4.30 pm 

The Economic Secretary to the Treasury (Justine Greening):  I beg to move, 

That the Committee has considered the Alcoholic Liquor Duties (Definition of Cider) Order 2010 (S.I. 2010, No. 1914). 

It is a pleasure to serve under your chairmanship, Mr Leigh. 

The order meets the commitment that we made at the June Budget to introduce secondary legislation to increase tax on cheap, strong ciders. These products cause much concern to health and homelessness groups, which rightly identify them as cheap sources of alcohol. The cider industry, too, has shown concern because these so-called industrial ciders bear no resemblance to the traditional products consumed by reasonable drinkers. I am sure that many of us on this Committee will have drunk cider and fall into the category of responsible drinkers, so we will share those concerns about industrial ciders. Consequently, industrial ciders should not benefit from the same rate of duty for cider that helps to support an important local and national industry. 

The order intends to tackle the problem by introducing a new standard for products to be considered as cider for duty purposes. Those products that do not meet the standard will have to pay duty at the significantly higher made-wine rate. The order will introduce a new minimum juice content for products to be considered as cider. First, it requires that the mixture from which the cider is fermented must contain at least 35% fruit juice. That will ensure that the products made by fermenting high-strength sugar solutions containing minimal amounts of apple or pear juice no longer qualify as cider. 

Secondly, the order requires that the final product must also contain at least 35% fruit juice, which will prevent producers from making a very strong cider and then watering it down after fermentation. The order also requires that that fruit juice is of a minimum level of concentration. That minimum specific gravity prevents manufacturers from circumventing the new requirements by using fruit juice that has been highly diluted. Taken together, those three requirements will ensure the minimum standard. 

This is not a blanket measure that will affect all cider producers. It is targeted at those who choose not to listen to the Government’s messages about responsible drinking. Artisan cider makers already make products that will meet the new standard. The smallest producers of cider will continue to be exempt from duty. 

Mainstream cider products that have become increasingly popular in recent years will continue to pay duty at the same rate, but makers of those industrial ciders will have to change their cider recipe or pay significantly more tax. Either of those two options will increase the

cost of producing and selling these products and that should result in price increases that will help to reduce the consumption of those high-strength products. Alternatively, some producers may cease to make those products and so reduce their availability. 

The order, which comes into force on 1 September 2010, demonstrates our intent to deliver on the promises we made in the Budget. It also ensures that industrial ciders that do not meet the new standard will have to pay duty at the more appropriate and higher made-wine rate. It is a good example of the Government working with the industry and stakeholders, including the health lobby, to ensure that we have common objectives in tackling problem drinking. I am pleased to say that we work closely with the National Association of Cider Makers. I commend the order to the Committee. 

4.34 pm 

Mr David Hanson (Delyn) (Lab):  May I welcome you to the chair of this Committee, Mr Leigh? I believe that it is your first opportunity to chair a Committee. I hope that it is a long career and that you enjoy this short excursion into the statutory instrument before us today. 

I welcome the Minister’s comments. The Labour party, as the official Opposition, supports the motion and welcomes the measure to strengthen the technical definition of cider to ensure that products resemble wines more closely and are taxed appropriately. I welcome the fact that the Government are setting minimum standards, but I wish to ask a few questions about the order. 

The Committee has been provided with a document entitled, “Amendment to the definition of cider for excise duty purposes”, and one of the key features of the amended definition is that a 

“minimum of 35 per cent apple or pear juice must be included overall in making the final product.” 

However, the document also states: 

“Juice, for the purposes of the new definition, is the natural juice extract from apples or pears, but can include juice that has been diluted with water, or juice that has been concentrated or come from the dilution of concentrated juice.” 

I am new to this particular brief, but will the Minister provide clarity on what 35% apple or pear juice actually means? I accept that 35% apple or pear juice is a reasonable target, but if juice that has been diluted with water can be included, is it not possible that the 35% target could be circumvented by people who use water or concentrated juice? We share the Government’s objectives of helping to ensure that cheap cider is not available and of achieving a minimum standard of quality in cider production, but I would appreciate some clarity from the Minister. 

Mr Frank Field (Birkenhead) (Lab):  May I say how much the Opposition welcome the Government’s efforts to make what has hitherto been cheap, commercial cider more expensive? On Friday evening, I met a constituent who has been associated, either as a full-time or part-time worker, with homeless individuals with drink problems. He said that, over the past 18 months, the real change that has occurred in relation to the help that he has given to the project is that he has attended six funerals of people who died from drink. Over some 30 years, he had never before attended the funerals of

people who had died from cheap drink. That is certainly a problem in my constituency and my guess is that it is also true of everybody else’s constituency. 

Mr Hanson:  I am grateful to my right hon. Friend for his intervention. It is serious that cheap cider is available in supermarkets and off-licences. It can be a drink of choice and if the price is lower simply because of the quality content, as we have already discussed, that is a factor and has a bearing on the ability of individuals to purchase it. It can also lead to difficult and, as he has mentioned, fatal circumstances. 

Will the Minister provide clarity on what 35% juice content means and whether my reading of the watering down of that juice content is a problem and a challenge? How will she overcome that issue? 

The Minister said that she had consulted the National Association of Cider Makers on the final requirement. That is obviously an important group to consult, but a range of other groups that deal with alcoholic beverages, including those who produce beer and wine, may also have an interest in the outcome of a rise in price for cider. Did the Minister consult any such groups? If so, what was their response? Does she intend to monitor the order’s impact following its implementation to see how it impacts generally on the sale of alcoholic beverages? We share some objectives, but other interested parties may have a view on those issues. 

The order comes into force on 1 September. If the Committee did not approve the order today and overturned the Minister’s wishes, what steps could she take to implement the order retrospectively? What are her views on that issue? That is only as a test and as a matter of interest for me. It is important that we have parliamentary scrutiny and that we do not have orders that just come into effect and that are subject to post-parliamentary scrutiny. If we overturned it today, we would have seven or eight weeks of cider production and taxation. How does she unpick those issues? 

I want to touch on an associated but slightly tangential issue. The Minister knows that the former Labour Government announced plans to increase the duty on cider by 10% above inflation in the March Budget this year. That proposal was dropped in the wash-up when the election was called. On 30 June, this Government announced that they would not progress the alcohol duty on cider. If the Minister wishes to tackle cider drinking and cheap cider, surely she could have looked at raising revenue, which, in itself, would have raised the cost of cider and also raised additional revenue for the state, which is taking away tomorrow, under her stewardship, the pregnancy grant from pregnant women, and money from the child trust funds and from the savings gateway. Small but significant contributions could have been made through a rise in cider duty, which would also have supported her objective of making cider more difficult to purchase, while not damaging the cider industry, for which we have great respect. People who drink responsibly would pay the extra duty and would be assured that the Government met the obligation of using the extra duty to fund other aspects of state expenditure. 

We support the order, but I would welcome clarification on the definition, on the order coming into force on 1 September, on consultation generally and on why the Government have ditched extra taxation on cider when they are taking money from pregnant women. 

4.42 pm 

Justine Greening:  I shall take the right hon. Member for Delyn’s questions in turn. He is right to raise the issue of fruit juice. To explain how the statutory instrument works, there are three parts to it: the first is about monitoring the percentage of fruit juice going into the process; the second is about monitoring the percentage coming out; and the third is about gravity, which tackles the point that he raises. We have to define how strong the fruit juice should be. That is what the 35% is about. 

That is what the gravity provision is about—it is about effectively and scientifically saying, “This should be the concentration of fruit juice”. Water might be added to the process because some producers ship over juice in concentrate and then create workable fruit juice to put into their fermenting process in the UK. That provision is to ensure that there is no impact on the process of making cider that we did not want. I can assure the right hon. Gentleman that the aspect of the statutory instrument relating to gravity specifically ensures that the concentration of fruit juice—how concentrated it needs to be—is well established. We talked to the National Association of Cider Makers and were careful to ensure that we had its agreement and had it at the right level. 

The right hon. Member for Birkenhead mentioned his concerns about problem drinking, and we share his concern. We also talked to Alcohol Concern when constructing the order to ensure that it went some way towards tackling problem drinking. I shall briefly address the final point that the right hon. Member for Delyn made about problem drinking and cider duty at the end. 

On the question of the broader consultation, the right hon. Gentleman may be aware that we are currently conducting a review on problem drinking. That review involves not only the Treasury—he will be aware that the Home Office is also looking at how to tackle binge drinking. The Treasury has a role—during the summer we launched an informal consultation on the role of tax in tackling problem drinking. We had a series of workshops—as a Minister, I attended one—which covered the entire industry, including the beer industry. We therefore had a good chance to hear comments and concerns about how the measure fits in with the broader alcohol duty regime. We are happy that that now strikes the right balance. The right hon. Gentleman is quite right to raise the issue of problem drinking, as is his right hon. Friend the Member for Birkenhead. 

On the issue of how the 1 September time line would work if the right hon. Gentleman’s party were to oppose and defeat the statutory instrument, it is difficult to say exactly what the impact would be. At its most basic, the existing structure of cider duty would remain in place. We would not have a chance to tackle problem drinking via this mechanism. 

Mr Hanson:  My point—it is one that I tried to undertake as a Minister—is to ensure that we do not retrospectively legislate on issues. If this is an important issue, it could have been dealt with by 1 November, rather than 1 September—a date that just says to the House of Commons that we can have a chat or discussion about it and pray against it in the recess, but it does not matter what we say because it is already in place. I do not happen to disagree with the measure. However, as a Minister, I tried to ensure that the House of Commons had the chance to debate—and reject—such measures, even though today, as I said, we support this measure. 

Justine Greening:  These measures were widely discussed and debated in the summer. In addition, as the right hon. Gentleman alluded to, the previous Government first put in place the ability to amend the definition of cider, which I presume is now being done in a similar way. 

The right hon. Gentleman raised a point about the current Government reversing the previous Government’s increase on cider duty. The reality is that many people, pubs and stakeholders in an industry that employs thousands all across the country were very concerned about the previous Government’s plans to raise cider duty. That came against a backdrop of a broader rise in alcohol duty—in some cases an increase of 26%—in the previous two years. Many pubs were under increasing financial pressure, and we have seen probably unprecedented pub closures around the country. The rise in cider duty was going to hit the overwhelming majority of responsible drinkers. We needed a more thoughtful approach—not just to cider duty, but to alcohol duty—and this Government have sought to do that. 

Martin Horwood (Cheltenham) (LD):  I completely agree with the Minister. The potential increase in cider duty was regarded by cider producers as very damaging, whereas the measure will give a boost to higher-quality cider manufacturers such as Friels Cider in my constituency which, being 100% pure apple cider with no additives whatsoever, will comfortably meet the criteria. I think the measure will be very welcome indeed. 

Justine Greening:  That is a helpful intervention. The hon. Gentleman is right to point out that much of this industry is based in the UK. A lot of the manufacturers are small brewers in rural parts of our country, and they support their local economies. To understand how the industry works, earlier in the summer, I visited Aspall—a cider manufacturer in Suffolk—to talk about some of the challenges that it faces. During that visit, I had the opportunity to meet up with the National Association of Cider Makers and talk about its concerns on how any change in the definition of cider would work. He is right to point out that real jobs and businesses would have been hit by an across-the-board increase in cider duty. That is what we wanted to avoid. No doubt, they will be worried to hear that the Opposition still feels that that is a sensible measure to introduce. 

Overall, I am pleased that we have some consensus on the SI. I think that it strikes the right balance between protecting our industry and changing the rates of duty on the so-called ciders that we know are particularly associated with problem drinking. With that, I commend the order to the Committee. 

Mr Hanson:  Before the Minister finishes, may I ask her to write to me with an indication of the differential between the cost of duty on cider and beer of equivalent strength? Before this measure, there was a 29p alcohol taxation differential between cider and beer. That was one reason why we were keen to consider raising the taxation on cider, to ensure that it was not seen as a cheap alternative to beer. The measure will make a change in that approach. I am interested to learn the Treasury’s assessment of the differential in taxation between cider and beer, when the measure has settled in. 

Justine Greening:  To respond to the right hon. Gentleman in brief, our main focus around the review of alcohol duty has been on problem drinking. I am happy to write to him with the statistics on how cider compares with other forms of alcohol, including beer. He will be aware that the differentials between drinks can be considered in a number of ways. I am happy to set those out. 

Mr Hanson:  Let us take an example. The duty on a pint of 5% alcohol cider is currently 29p less than on an equivalent pint of beer. I think that those figures are correct; they appeared in an early-day motion earlier this year. Will this measure and others shorten that differential? Price is a key driver of why the constituents of my right hon. Friend the Member for Birkenhead and the other people whom he has noticed drinking cider are doing so. 

Justine Greening:  Clearly, for the industrial ciders affected by the measure, it does produce that differential. On the right hon. Gentleman’s broader point, as I said, there are a number of ways to consider the relative taxation between different drinks. Beer has £17.32 of duty per hectolitre, whereas cider has £33.46. Different arguments are made across the industry about units of consumption. Our broad concern is to ensure that we have an alcohol duty regime that starts to go further in addressing the problems associated with problem drinking. I understand that the last Government’s view on alcohol duty was broadly to introduce rises on all fronts. 

Stephen Williams (Bristol West) (LD):  While we are on the subject of variations in taxes and duties, this is a fruit drink. Fruit as a substance is not subject to VAT, whereas cider and alcohol are. Smoothies, which consist entirely of fruit, are subject to VAT at the standard rate. Part of the problem with problem drinking is that alternative healthy drinks are too expensive. Will the Minister agree to look at that? 

The Chair:  Order. The debate is starting to get wider with every further intervention. Perhaps the Minister could get back to the subject. 

Justine Greening:  I will happily do so, Mr Leigh. I am sure that you would not want me to reprise the speech that I made on smoothies during the consideration of the Finance Bill 2008; it went on for about 30 minutes and was exhaustive in its analysis of the issue. 

I hope that I have tackled all the questions that the Committee has asked, and I thank hon. Members for their contributions to the debate. I hope that the measure is broadly welcomed by Members on both sides of the Committee, the National Association of Cider Makers, health groups and homelessness groups, who were keen to see the measure brought forward. I hope that this sensible measure shows that, when Government and stakeholders in the industry work together, we can come up with a statutory instrument that is in everybody’s interests, and I commend it to the Committee. 

Jesse Norman (Hereford and South Herefordshire) (Con):  As an MP for Herefordshire—a county that is full of cider manufacturers and cider drinkers—I welcome the measure as a tool in the fight against alcoholism and, in particular, under-age drinking. I spent the weekend at the Herefordshire food fair, which had a bewildering

array of small and large cider producers and artisan producers, and I am thrilled that one of the great achievements of my predecessor was to introduce Weston’s to the Commons Bars, as that shows what good cider really tastes like. 

In response to the right hon. Member for Delyn on the repeal of the cider duty, one of the reasons for that historical anomaly, as he saw it, was the nature of cider, which is a long-term business. It involves orcharding and growing apple trees, from which one would not expect to see any economic return for seven or eight years. It is right that there should be a more targeted measure that identifies groups that are at risk and that prevents or impedes the dangers that they face. The measure is a welcome replacement for the wide-ranging blunderbuss that was the previous measure. I ask the Minister, if I may, why has an upper threshold of 8.5% been imposed in the order? I would be grateful if she clarified that. 

The Chair:  Order. Mr Norman, I know that you are a new Member, but, for future reference, what generally happens is that the Minister speaks first, then the

Opposition spokesman speaks, and then there is a general debate, which the Minister sums up. If you speak after the Minister, she has to repeat her summing up, which keeps everybody from their cups of tea. Does the Minister want to respond to the hon. Gentleman’s question? 

Jesse Norman:  I am sorry. I understood that the Minister was not merely summing up, but responding to the previous comments. 

The Chair:  No, the Minister was summing up. 

Justine Greening:  I am happy to respond to my hon. Friend. The 8.5% upper threshold aligns with the existing range over which cider duty currently refers. There are two bands: one that is up to 7.5% and one that is from 7.5 to 8.5%. That part of the statutory instrument ensures that there is alignment with the existing duty rates. 

Question put and agreed to.  

4.59 pm 

Committee rose.