Clause 178 - Rates of alcoholic liquor duties

Finance Bill – in a Public Bill Committee am 4:00 pm ar 13 Mehefin 2013.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury) 4:00, 13 Mehefin 2013

I beg to move amendment 107, in clause 178, page 106, line 4, at end insert—

‘(2A) The Chancellor of the Exchequer shall within six months of the passing of this Act provide a report to Parliament on the differential impact of the increase in the rate of alcohol liquor duty under subsection (2) on—

(a) the level of UK sales in the Scotch whisky industry, and

(b) the level of employment in the Scotch whisky industry.’.

Photo of Sir David Amess Sir David Amess Ceidwadwyr, Southend West

With this it will be convenient to discuss clause stand part.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

The clause provides for increases in the rates of excise duties charged on spirits, wine and made-wine, and cider and perry, and for overall reductions in the rates of excise duty on beer, to have effect on or after 25 March 2013.

As members of the Committee will be aware, pubs and the beer industry have been calling for a cut in the beer duty for a while now. Members will also remember that the Opposition have long been calling for the Government to review the impact of the beer duty on the industry during these tough economic times. During proceedings on last year’s Finance Bill, my hon. Friend the Member for Easington (Grahame M. Morris) tabled an amendment calling for a review of the impact of the duty regime on the pub trade, which the then Economic Secretary—now at the Cabinet Office—opposed at the time. Again, in November 2012, the Opposition supported  a motion in the Chamber calling for just such a review, a motion that the Government at that point rejected. We supported it because the beer duty escalator was hitting the pub and beer industry hard.

Brewing and pubs are a vital part of the UK economy, and 1 million jobs depend on them. Around 85% of pubs are small and medium-sized enterprises, and some 46% of those employed in the sector are aged between 16 and 24, so the industry is particularly relevant to youth employment as well. During the current economic difficulties, those small firms have been increasingly unable to absorb duty and other brewing cost increases. The Government’s decision to raise VAT to 20% alone increased the price of a pint by 5p; UK taxpayers now pay 40% of the EU beer tax bill while consuming only 13% of the beer. With household incomes falling, pub goers are becoming increasingly price sensitive. The effect of those pressures on the pub industry has seen, on average, 18 pubs shutting up shop in the UK every day and the loss of more than 5,000 jobs in 2011 alone.

Photo of James Duddridge James Duddridge Chair, Regulatory Reform Committee, Chair, Regulatory Reform Committee

I ask this question with trepidation, having always been told never to ask a question I do not already know the answer to: the change on beer duty is a small and welcome one, but I genuinely cannot remember the last time there was any cut in beer duty. Can he remember?

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I cannot help to illuminate the historical quest that the hon. Gentleman is on. Perhaps we can both visit the House of Commons Library later to ask for advice—or even the Strangers Bar, afterwards. We will think about that one.

James Duddridge rose—

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

Maybe the hon. Gentleman has had some inspiration.

Photo of James Duddridge James Duddridge Chair, Regulatory Reform Committee, Chair, Regulatory Reform Committee

Alas, my inspiration is not quite as fast as the Minister’s is normally. Perhaps we could urge him to be inspired later on in the debate if he recollects, because he is a great intellect, has a great memory and I am sure that he has much greater resources than I do.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

Like the hon. Gentleman, I do not know the last time that duties on wine, spirits and Scotch whisky, or other forms of duty on alcohol, were changed. Again, maybe the Minister could tell us when they were last changed—in which particular year.

In general, however, it is important for the Government to recognise that this industry is one that needs support, and there is more that they can do to help it. We welcome the Government’s partial U-turn on the eve of the Opposition day debate that my hon. Friend the Member for Chesterfield (Toby Perkins) called for, during which he pushed for improved regulation of the pub industry. We were part of a broad coalition that called for a proper statutory code to support landlords, to protect local pubs and to help to turn around the rising tide of pub closures. So we welcome the fact that Ministers eventually decided to think again and accept that their self-regulatory model was not working in terms of establishing a fair relationship between the big pub companies and their landlords.

I have a question for the Minister on that point. I would be grateful if he could update the Committee on what stage the Government are at in bringing forward the proposals for the proper statutory code this year, which is obviously an issue that many hon. Members are concerned about. Can he also say what progress the Government are making to clamp down on alcohol duty fraud in this country, which is estimated to cost in the order of £1 billion a year? It would be useful if he could briefly allude to that point.

Regarding the amendment, which relates in particular to the Scotch whisky industry, the Minister will know that that industry is an incredibly important part of the economy, supporting 35,000 jobs across the UK, particularly in economically challenged parts of the country. He will also know that the decision on beer duty comes at the same time that the Government have introduced a 5.3% increase in spirits duty, which was obviously met with some disappointment by the Scotch whisky industry. The Scotch Whisky Association called it an

“unfair and incomprehensible blow to Scotch whisky.”

Sales of Scotch whisky in the UK have dropped in recent years, and the amount of duty is—I think—48% more than the duty that a beer drinker pays. There are a number of comparable issues that are worthy of further consideration. A report examining the differential impact of the increase in the rate of alcohol liquor duty, particularly looking at the UK level of sales in Scotch whisky and the level of employment in the Scotch whisky industry, would be very welcome indeed.

The purpose of our amendment is to probe the Government’s thinking in this area and it would be very helpful if the Minister could give us his thoughts and tell us what consideration he has given to the impact of these measures generally on the Scotch whisky industry. Has he taken time to meet representatives from that industry? If so, can he give us a sense of how he has taken their concerns into account in these proposals?

Photo of Brooks Newmark Brooks Newmark Ceidwadwyr, Braintree

I was not expecting to speak. Anybody who knows me knows that I am pretty much a notorious teetotaller; I do not really drink. However, I am here to represent my constituents.

First, this cut in beer duty is welcome. Anybody who represents a rural area will know that the pub industry in rural areas has been particularly hard hit, not only by past increases in alcohol duty but by the ban on smoking. I do not smoke either, but I believe in freedom of choice. However, I will not get into the debate about the rights and wrongs of allowing smoking in pubs now.

This important step change shows that the Government are not just supporting the beer industry, but are helping pubs, which are struggling throughout the country, especially in Essex, in my constituency of Braintree. I hope that this is the first of many Government cuts in beer duty to come in the years ahead.

Photo of Pamela Nash Pamela Nash Llafur, Airdrie and Shotts 4:15, 13 Mehefin 2013

I cannot claim that I am a teetotaller like the hon. Member for Braintree; I enjoy a whisky or two. That is one reason why I support amendment 107.  I am proud of Scottish whisky, which is a success story for Scotland and Britain. Wherever Scots go in the world, they can see a bottle made somewhere near their own home, such as Old Pulteney, which is bottled in my constituency. I am disappointed and concerned that sales in the UK, which is the third biggest global market for whisky, have dropped 12% in the past five years, in part due to increased duty. The latest increase in the Finance Bill will not help at all.

The Scotch Whisky Association is quick to state that whisky drinkers pay 48% more duty on their drink than beer drinkers. That is not to say that I do not support the measure on beer. I welcome any support for pubs at the moment, including the 1p cut in the price of a pint, however small a help that is.

I was a member of the Finance Bill Committee in 2011 and I remember the then Exchequer Secretary being proud of what her Government were doing in raising duty on high-strength beers, while simultaneously bringing down duty on low-strength beers, in an attempt to encourage people to reduce the strength of the beer they were drinking.

Photo of Brooks Newmark Brooks Newmark Ceidwadwyr, Braintree

I am enjoying what the hon. Lady is saying. Again, although I am not an alcohol expert, I am aware of fake substitutes going around. Other countries are calling whisky “Scotch” when it is not Scotch. To help the Scotch industry in Scotland, perhaps the Government—I hope that the Minister is listening—can go more vigorously after eastern European countries in particular, which I will not name, that tend to brand whisky as Scotch, when it may be made in Poland. To protect the brand name and help support the Scotch industry in Scotland, which is unique and special, we can go after those countries and companies that do not label whisky clearly as not being Scotch when it is not.

Photo of Pamela Nash Pamela Nash Llafur, Airdrie and Shotts

I welcome the hon. Gentleman’s intervention. I would fully support that and anything that the Government can do to protect Scotch whisky as a brand. Such legislation is determined at EU level and Members of the European Parliament are already fighting for that cause. I would be pleased if the UK Government were supporting them.

Photo of Fiona O'Donnell Fiona O'Donnell Llafur, East Lothian

My hon. Friend is making a powerful speech in support of the Scotch whisky industry. She almost answered the point that I was going to raise. It is important that the Government do not act alone. We need co-operation at European level, which is why the Scotch Whisky Association is engaging on this matter and recently attended a conference in Rome, to press the case against food and drink fraud.

Photo of Pamela Nash Pamela Nash Llafur, Airdrie and Shotts

Yes, we need co-ordination and co-operation across Europe and globally on this issue. We have huge emerging markets for Scotch whisky in India and China, and still a large market in the United States, which I hope that the Government will support and facilitate.

In 2011, I agreed with the Government’s argument that high-strength beers posed a particular problem for problem drinkers, particularly those who are alcohol-dependent. The “1p off a pint of beer” headline has  been great for the Government in recent weeks, I have to admit. However, I think that it has had the unintended consequence—I hope that it is unintended—of reducing the overall duty on high-strength beer, a change that only two years ago the Government were pushing against. My understanding from the figures that we have is that the total duty for high-strength beer will now be reduced by 0.75%. Will the Minister tell us whether the Government are still committed to increasing taxes on high-strength beer and discouraging those drinking high-strength beer by using taxation to persuade them to drink lower-strength drinks?

Photo of Marcus Jones Marcus Jones Ceidwadwyr, Nuneaton

The right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) is rarely in this House these days, but the amendment seems to have his fingerprints all over it; it is a continuation of the policy he pursued when he was Chancellor.

We must put the matter in perspective. During that time, if I recall correctly, rarely, if at all, was Scotch whisky touched by increases in duty. It is absolutely telling that when someone goes into a supermarket now to buy a bottle of whisky, it is not that much more expensive, in relative terms, than it was 20 years ago. We need to look at the issue extremely carefully and weigh the situation up, particularly if we compare whisky with a product that is far lower in strength—beer.

We talk about health a lot in this place. The Opposition were talking a lot about smoking prevalence and the health issues related to that this morning at questions to the Leader of the House. There are obviously many health issues related to drinking. If we ask whether we should prioritise having a better tax regime for Scotch whisky over one for lower-strength products such as beer, I think beer would win out every time, because it is a lower-strength product. While, like everything, it needs to be drunk in moderation, it is generally better for people.

I congratulate my hon. Friend the Economic Secretary and his colleagues in the Treasury on dispensing with the beer duty escalator, as it was destroying the beer and pub industry in this country. Beer duty has increased by 42% since the escalator was implemented by the Opposition in 2009. Dozens of pubs were closing every month and thousands of jobs were being lost. It is likely that many more thousands of jobs would have been lost from the industry if we had kept pursuing that policy.

The Opposition have often criticised the fact that the beer duty has been reduced by only 1p. However, I think that it is the first time that beer duty has been reduced since the 1950s. The removal of the beer duty escalator is a symbolic sign for the beer and pub industry. I was speaking to some people from that industry last night. They told me that it has breathed new life into the industry and instilled new confidence in companies involved to invest in their pub estate, the industry and great new jobs. My hon. Friend the Economic Secretary and his colleagues have pulled a masterstroke, which I know my local CAMRA members are extremely happy with. I am going to join them in a beer festival in a couple of weeks—[Interruption.] The hon. Member for Islwyn is absolutely welcome to Nuneaton’s beer festival. I am sure that the people there will be absolutely delighted, and I will join them in a celebratory pint in a couple of weeks.

Photo of Fiona O'Donnell Fiona O'Donnell Llafur, East Lothian

I hope that the drop in beer duty will make a difference to the future of the pub industry, particularly in rural areas such as mine, which may have lost their community hall, meaning that the pub is absolutely the centre of the community. It is a meeting place for people moving into the area and it prevents social isolation. I hope that the change makes a difference and that the Treasury keeps an eye on it and talks to the Department for Business, Innovation and Skills to see whether it is making a difference.

One of the biggest challenges the pub industry is facing —I am sure CAMRA would agree with me—is the contracts it enters into with some of the pubcos. It will be interesting to see whether the pubcos pass on the drop in duty to their customers. I very much hope that we will see some transparency for the many pub owners who are struggling to make ends meet. Many of them have to resort to tax credits, which seems incredible. The industry used to enable people to earn a healthy living.

I want to talk about the increase in the duty on spirits and the Scotch whisky industry. I have a distillery called Glenkinchie in my constituency, on the outskirts of the village where I live. I know that we Scots often look and sound parochial, and maybe we sometimes are a little, but Scotland’s export markets are narrower for the food and drink sector. Salmon and whisky outshine all other produce, and I recommend both to anyone following this debate.

Has the Minister considered the impact that the duty increase will have on the Scottish economy? Some island communities have few options for employment other than the Scotch whisky industry. I promise I did not partake of any whisky before I spoke this afternoon; I must confess that I do not like whisky. When I last visited Islay—it is a beautiful island—I think it had six operating distilleries, and whisky is vital there, not only in terms of the jobs within the distilleries, but in terms of the supply chain and the tourist industry. So many people rely on it. My family was reliant on the Scotch whisky industry for 15 years to keep my children in shoes and school bags.

Photo of Rory Stewart Rory Stewart Ceidwadwyr, Penrith and The Border

The hon. Lady is making a good speech, and is it not partly an argument for why it is important for Scotland to remain in the United Kingdom? Scotland has had great success in specialising brilliantly in various things, from oil through to whisky and salmon. The Union offers the diversification, breadth and security of belonging to an economy that contains many other elements that can complement Scotland’s specialities.

Photo of Fiona O'Donnell Fiona O'Donnell Llafur, East Lothian

I am very grateful to the hon. Gentleman for his intervention. As he often does, he speaks with such sense and tolerance on the issue. He makes the case that we are better together and that Scotland is better able to promote itself and grow its industries in the Union. Of course, England is a major exporter for Scotland. Why would we erect a barrier between Scotland and our biggest market and let that interfere with the prosperity of our country? I absolutely agree with him.

Photo of Pamela Nash Pamela Nash Llafur, Airdrie and Shotts

On that point, 80% of UK whisky sales take place south of the non-existing border. I will stop using that phrase in the lead-up to the referendum  campaign. Even though there could be a strong effect on the producers of Scotch whisky in Scotland, the rise in duty will also affect those selling whisky throughout the rest of the United Kingdom.

Photo of Fiona O'Donnell Fiona O'Donnell Llafur, East Lothian

I am surprised; I know my hon. Friend quite well, but I had no idea her knowledge of the whisky industry was so extensive. I will have to catch up with her later to find out when she has had the opportunity to conduct that research.

It is absolutely clear that the rise in duty will impact on sales for Scotland in the rest of the United Kingdom. The hon. Member for Nuneaton spoke about how the duty on Scotch whisky does not appear to have increased so much comparatively in recent years. Indeed, there are many own label brands that are cheaper. It is not so cheap in this place, however.

Photo of John Pugh John Pugh Democratiaid Rhyddfrydol, Southport

Perhaps the hon. Lady can help me with my lack of knowledge on the Scotch whisky industry. What percentage of Scottish whisky is exported and therefore not subject to this duty?

Photo of Fiona O'Donnell Fiona O'Donnell Llafur, East Lothian 4:30, 13 Mehefin 2013

I would like to refer to my notes, because I am not exactly clear what percentage is exported, but my hon. Friend the Member for Airdrie and Shotts said that 80% comes to England, so if we add on however much we consume in Scotland—I am sure it is not a great deal—it is a significant proportion in terms of Scotland’s balance of payments, and its ability, willingness and enthusiasm to contribute to the rest of the UK’s balance of payments. It is a significant factor.

My understanding from the last Scotch Whisky Association’s figures is that the quantity was going down, but that more premium brands were being exported because in countries such as China it is prestigious to have a bottle of Scotch whisky, especially one of the premium brands. I will not mention any of them, apart from Glenkinchie which is produced in my constituency.

Photo of Stephen Doughty Stephen Doughty Llafur, De Caerdydd a Phenarth

My hon. Friend is making a strong and eloquent case with my other hon. Friends. Is she aware that whisky is also distilled in Wales by the top independent distiller, Penderyn? I have a constituency interest because its wash or wort comes from Brains Brewery in my constituency. I would be interested to know the Minister’s views on the impact on the Welsh whisky industry as well as the Scotch industry, which is much larger.

Photo of Fiona O'Donnell Fiona O'Donnell Llafur, East Lothian

I am grateful for my hon. Friend’s intervention. It may be whisky, but it is not Scotch whisky, and that is the distinction. The Irish also produce their own whiskey. The answer to the hon. Member’s question about exports is that in the five years to 2012, the volume of Scotch whisky exported increased by 10% from 1.1 billion to 1.2 billion bottles a year. The volume of UK sales declined between 2007 and 2013 from 102 million 70 cl bottles to 90 million, which is considerable.

The industry is doing well and Scotland is incredibly proud, but I hope that the Minister—perhaps he will pay attention—will talk to the sector about the likely  impact. Will he tell us what discussions he has had, subject to the announcement in the Budget, with the Scottish Government, the Scotch Whisky Association, particularly with regard to the island communities, which will be particularly concerned? They are fragile communities and precious to the diversity of the UK. We want them to have a healthy future. All we are asking—it is becoming clear over the weeks and months that this all we can ever ask—is that the matter will be reviewed so that we are absolutely clear about the impact and that it does not inadvertently harm the great relationship between Scotland, the rest of the UK, and those communities in Scotland that depend on this industry.

Photo of Sheryll Murray Sheryll Murray Ceidwadwyr, South East Cornwall

It is a pleasure to follow the hon. Lady. I am surprised by the amendment, which prompts the question: does the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) still have influence on Labour party policy? The amendment specifically mentions Scotch whisky but, as we have heard, we have other whisky production companies in Wales and in England—the English Whisky Company—so perhaps the amendment shows a little favouritism.

Photo of Fiona O'Donnell Fiona O'Donnell Llafur, East Lothian

Perhaps I could point out to the hon. Lady that there are several forms of pasty, but that did not prevent me from welcoming the U-turn on Cornish pasties recently.

Photo of Sheryll Murray Sheryll Murray Ceidwadwyr, South East Cornwall

I know I am straying, Mr Amess, and I apologise, but it was a pasty tax, not a Cornish pasty tax. There was no discrimination.

I want to highlight the words of my constituent, Mr James Staughton, the managing director of St Austell Brewery, who said:

“By deciding to freeze the tax on beer through the removal of the beer duty escalator—and then going even further by lowering duty by 1p a pint—”— the Chancellor

“has moved to boost jobs in pubs, and in a way that will not hit the Treasury’s bottom line. It is a boost for pub goers and recognises the government’s support for local community pubs and brewing; a key UK manufacturing sector. It will allow the industry to invest, save 2,000 jobs in this year alone, create new jobs, and contribute to economic growth.”

I want to make a clear distinction. Although Mr Staughton has tied tenants in many of his pubs, he is not in the same league as the national pubcos, as previously mentioned, and he does look after his tenants. One of his beers is called Tribute, and I would like to pay tribute to my constituent and also to the Minister for his announcement.

Photo of Chris Evans Chris Evans Llafur, Islwyn

Thank you, Mr Amess. [ Interruption. ] I did say it right. It is my accent. I thought, when I complimented you earlier, you would call me earlier. I shall try again. You are a wonderful Chairman, Mr Amess. It is a pleasure to serve under your chairmanship.

On hearing the hon. Member for Braintree—I did not think that I would ever think this in the House of Commons—an Adam Ant song came to mind: “Goody Two Shoes”. The hon. Gentleman don’t drink, don’t smoke. Well, what does he do?

I am slightly embarrassed to speak, having heard the lilting accents of my hon. Friend the Member for Airdrie and Shotts and the hon. Member for Nuneaton. When I was younger, I worked in the betting industry. There is a similarity in the way in which the betting and pub industries are treated. The betting industry is often treated as a purveyor of anti-social behaviour that somehow drags people in and corrupts them. It sometimes feels the same way when we talk about the pub industry. Sometimes people do not want to go to the pub, because they believe that trouble spills out. I have some sympathy with the idea of minimum alcohol pricing and I am disappointed that that was not included in the Queen’s Speech. I hope that the Government will revisit that decision and look at other ways to stamp out anti-social behaviour.

When I look at the Government’s plans for raising duty on high-strength lagers while bringing it down for beer, I think that in some ways it is misguided. I have come to that decision because, if I go into the pub, which I do sometimes––very rarely––I notice that, while I am sipping an orange juice or a lemonade, or sometimes I will push the boat out and have a pint of Coke—

Photo of Chris Evans Chris Evans Llafur, Islwyn

With ice, of course, and a slice of lemon. Sometimes, if I am really feeling in the mood and it is a special night, I will put a slice of lime in there as well.

Photo of Fiona O'Donnell Fiona O'Donnell Llafur, East Lothian

Before my hon. Friend descends any more, forgets the valleys and becomes a real city slicker, when he talks about fairness, does he understand that whisky drinkers are now paying 48% more duty than beer drinkers? Although I wish the beer industry a healthy future, there is a sense of a lack of fairness on this issue.

Photo of Chris Evans Chris Evans Llafur, Islwyn

If my hon. Friend had allowed me, I would have developed that argument further. I was making a general point that most pubs that people go into, especially the pubco sort of pubs that we see springing up, are not serving the traditional ales. In all honesty, the only place that I have ever seen traditional ale is downstairs in the Strangers bar. We have sometimes seen Tribute on the tap, and also S.A. Brains, the beer of Wales—I will not call it by its colloquial name. I think that the problem is that most people are drinking strong lagers.

However, I do not think that the issue is the problems that we have seen with pubs. I feel sad when I walk down the street and see a pub I remember from when I was young boarded up. Nobody seems to want to take on the tenancies any more. The reason why pubs are failing is more complicated than simply taxation. I welcome the duty reduction on beer, mostly because it is mainly micro-breweries and small breweries that produce those beers. It will enable them to compete in some way against the bigger brewers such as Heineken or Tennent’s.

I come to the amendment. I will tell a little story about whisky that a Member related to me when I first came to the House. He said that the chairman of his Labour party asked him for a bottle of House of Commons whisky to raffle for the Labour party. He said, “I will do that.” He had just taken over as the MP  a month earlier, and when he handed the bottle over, the chairman said, “Oh they are making proper sizes now. They have been miniatures for years.” A frugal MP there.

We cannot deny that the Scottish whisky industry creates 35,000 jobs across the UK, but it is facing a particularly tough time. The price of whisky has gone up by 47p—a jump from £12.42 a bottle to £12.89. That is a 5.3% increase. The problem drinkers are not whisky drinkers or spirit drinkers. The people who have problems with antisocial behaviour are usually tanked up with six or seven pints of high-strength lager, and go out looking for a fight. The whisky industry supports people. As my hon. Friend the Member for East Lothian said, it supports people in the highlands and it supports small communities. The Government have talked enough about an export-led recovery. Well, Scottish whisky is export-led.

Photo of Chris Evans Chris Evans Llafur, Islwyn

Who will I pick? I will come back to the hon. Gentleman.

Photo of Fiona O'Donnell Fiona O'Donnell Llafur, East Lothian

Will my hon. Friend also speak about the benefit to the UK economy, because a quarter of UK food and drink exports is the Scotch whisky market?

Photo of Chris Evans Chris Evans Llafur, Islwyn

That is the point. I do not like saying this—my hon. Friend the Member for Cardiff South and Penarth will not like it—but although Penderyn whisky is quickly becoming the whisky of Wales, it is Scotch whisky that most people want. When people want a prize, they ask for House of Commons Scotch whisky, not Penderyn whisky, which is served in the Welsh Assembly. There is a lesson to be learned by us Welsh and people from regions such as Cornwall from how the Scottish nation has managed to export its culture in terms of whisky, the food it produces and other things as well.

Photo of Stephen Williams Stephen Williams Democratiaid Rhyddfrydol, Bristol West

My friend, the hon. Member for Islwyn, has dealt with the point I was going to make. I was getting a bit tired of him referring to Scottish whisky, and I thought he ought to be referring to Welsh whisky, in particular Penderyn. But I have not yet heard him say which valley Penderyn whisky is made in, and I wonder why that is.

Photo of Chris Evans Chris Evans Llafur, Islwyn

I am not going to indulge the hon. Gentleman. He knows very well where Penderyn whisky is made.

Photo of Stephen Williams Stephen Williams Democratiaid Rhyddfrydol, Bristol West

The hon. Gentleman has forgotten his roots.

Photo of Chris Evans Chris Evans Llafur, Islwyn

I have not forgotten my roots, sir. Some of us stayed and fought for seats in the valleys and fought for the people we grew up with, and did not bother wandering off to Bristol. I did go to the south-west once. I did not like it much, and they did not like me much.

The point I am trying to make is that with UK sales falling, and total tax, including VAT and excise duty, now accounting for 80% of the price of a bottle of Scotch whisky, this duty really needs to be reviewed. It would be a tragedy if we lost an industry simply because of a tax regime. I will say that Government have made progress in reducing the duty on beer. That has to be welcomed, especially for small breweries. But this is a draconian measure that needs to be reviewed.

My final point, which my hon. Friend and the hon. Member for Braintree touched on, is that there is a lot of fake whisky around. A lot of people are importing and selling what they term “Scotch” when it is nothing of the sort. It is important that the Minister has a review so that we can tackle fraud, not only for whisky, but for alcoholic drinks such as vodka and other spirits.

Photo of Brooks Newmark Brooks Newmark Ceidwadwyr, Braintree 4:45, 13 Mehefin 2013

On that point—perhaps I denigrated my friends in eastern Europe more than I should have—one of the biggest potential export markets for Scotch, and where I know a lot of branding of Scotch takes place, is China. The Chinese create their own blend, which they market and sell at prices well below real Scotch whisky, yet they brand that as Scotch and sell it to people in China. With a rising middle class in China, and with China wanting to become part of the World Trade Organisation, it is important that we get the message to the Chinese that they had better ensure that they have clear labelling on products such as Scotch whisky.

Photo of Chris Evans Chris Evans Llafur, Islwyn

The hon. Gentleman mentions the problem with Scotch whisky. If I may digress a little, I have a large packaging manufacturer in my constituency that is having a problem with different blends and fibres of paper being imported from China. Although that is not quite the same thing, he has hit the nail on the head: if China really wants to become part of the global economic community, that behaviour needs to be stamped out. However, for that to happen there needs to be some sort of level playing field. When the Minister responds, I hope that he will take on board the idea of a review, because that is so important for such a small-scale industry.

Photo of Steven Baker Steven Baker Ceidwadwyr, Wycombe

Despair is the conclusion of fools. If Disraeli, who is associated with my constituency, had not come up with that aphorism, I might well despair at the course of this debate and the previous one for a number of reasons.

First, when I look at the explanatory notes, I tend towards despair—of course, I do not wish to despair—when I see the level of interventionism we have in relation to taxes on different kinds of drinks. Really, to be setting out different rates for high-strength beer, low-strength beer and sparkling cider versus still cider makes me ask what right do politicians have to intervene to that extent in people’s lives?

Secondly, it seems as though we are trying to pick up pennies in front of a steamroller. For the public, we are talking plus or minus a few pence on a pint. Overall, the total duties on alcohol in 2013-14 are due to raise £10 billion, with £2.9 billion from spirits, £3.6 billion from  wine and £3.5 billion from beer and cider. However, total managed expenditure is expected to be £720 billion. To put that in context, the defence budget is £40 billion, so it turns out that drinkers are paying for about a quarter of the defence budget. I regret that I did not catch your eye in the previous debate, Mr Amess, because on a related note I might have pointed out that fuel duty was raising £5 billion a year more than the transport budget.

That brings me on to the third reason why I am grateful to Disraeli for my avoiding despair: the absurdity of all this is that we have the public paying for health, welfare, education and debt interest, which is 74% of Government spending, by going to the pumps and going to the pub. We have ended up with the poor paying for the services that they receive. There is an old lie that the rich will pay, but it turns out that it is the poor who will pay.

When I look at this debate on alcohol duty and I hear Members from both sides, but particularly Opposition Members, talk about the damage that tax does, it makes me think that it is time that we revisited some of our assumptions. If we know that tax is damaging, and we know that the poor are paying these taxes, it is time to start thinking seriously about the harm that the state is doing to ordinary people.

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

The clause makes changes to alcohol duties with effect from 25 March 2013. It cuts general beer duty by 2% to help support pubs; the overall tax on an average pint will fall by 1p. It also increases the duty on cider, wine and spirits by 2% above inflation.

The Government inherited a policy to raise all alcohol duties by 2% above inflation until 2014-15; the previous Administration included those receipts in the public finances before the revenue had been received. Given the state of the public finances, it was not possible to reduce all alcohol duties at the Budget. Therefore, we decided not to make any changes to the policy that we inherited for cider, wine and spirits.

The clause adds 1p to a pint of cider, but the duty on an average pint of cider remains at about half that of an average pint of beer. This Government reversed at the June 2010 Budget the previous Administration’s significant real increases in cider duty. The clause adds 12p to the price of a bottle of wine. In keeping with EU law, duty on average-strength wine and beer will continue to be broadly similar. The average strength of wine has increased in recent years, so wine duty has increased by less than beer duty on a per unit of alcohol basis. The clause also adds 46p to a bottle of spirits. However, more than 90% of Scotch whisky is exported and unaffected by the duty regime.

Photo of Fiona O'Donnell Fiona O'Donnell Llafur, East Lothian

I got a slight fright there when I thought the Minister talked about a duty on innkeeping, then I realised it was in keeping. This is not just about whisky manufacturers, it is about whisky drinkers in this country. Does the Minister understand that there is a sense of unfairness that their favourite tipple is being taxed so much more heavily than beer?

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

I assure the hon. Lady that the Government are not proposing a tax on innkeeping. I listened carefully to her both now and earlier. I will turn to Scotch in a moment. It is best to start with some comments on amendment 107.

The amendment would require the Government to publish a report on the impact of alcohol duties on the Scotch whisky industry. The Government keep all taxes under review and regularly monitor the impact of all alcohol duty rates on consumers and producers. We will continue to do that, and so believe that the amendment is unnecessary and I ask the hon. Member for Nottingham East to withdraw it. However, I understand the shared desire of the Committee to have a successful Scotch whisky industry, as we heard from the hon. Members for Airdrie and Shotts, for East Lothian and for Islwyn. That is why, as part of the UKTI support, Scotch whisky will shortly feature as one of the first products in the great food and drink campaign. That will give whisky a high visibility internationally in key markets. HMRC has taken on the role of verification authority for Scotch whisky to assess the quality of the product and its protection from adulteration.

It is worth emphasising again that 90% of Scotch whisky is exported. I was asked about the matter earlier in debate. Given that exports are not subject to the UK duty regime—they are duty-free—they will be completely unaffected by any changes in spirits duties.

Photo of Pamela Nash Pamela Nash Llafur, Airdrie and Shotts

Does the Minister not think it is damaging to the brand of Scotch whisky that in the past five years sales have gone down across the UK from 102 million to 90 million bottles a year? I think that is partly due to the cost and increase in tax. Why would we sell a product to other countries that we are not drinking ourselves any more because of the cost?

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

Despite what the hon. Lady says, it is fair to say that we clearly are still drinking a large amount of whisky. I think she herself mentioned earlier that the UK remains the third largest single market for Scotch whisky, which is a considerably important market for the UK.

I also hope the hon. Lady will agree that although, as was rightly pointed out, spirits duties on a per unit basis are generally higher than those on beer and wine, it is true throughout the EU, so that most of our neighbouring EU countries have the same policy. If one looks on a per ratio basis—the ratio of beer duty to spirits duty—our ratio is one of the lowest. It is interesting to note, as I did when I researched the subject and looked into changes that we might make in the Budget, that during the 13 years Labour was in office, spirits duty on a per unit basis rose, on average, a lot less than beer duty. To put it another way, beer duty was rising at a faster rate, on a per unit basis, than Scotch. I wonder why; I am sure that it had nothing to do with the then Chancellor or Prime Minister.

It is also important to point out that the plans that the Government have implemented on spirits are no different from those that it inherited from the previous Government. The hon. Member for Airdrie and Shotts will know that the changes to spirits duty were planned by the previous Labour Government. Lastly on whisky, my hon. Friend the Member for Braintree raised the important question of protecting the designation of “Scotch” whisky. Scotch whisky is a geographically protected product, and HMRC is working with the Scotch whisky industry on the verification regime. The Scotch whisky industry welcomes the plans, which will help to protect its rightly high reputation.

Photo of Fiona O'Donnell Fiona O'Donnell Llafur, East Lothian

The Minister said that the previous Labour Government had planned such an increase in due course. Does he acknowledge the fact that the previous Government, which had planned to increase duty on whisky, listened to the industry and froze it instead?

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

The hon. Lady makes an important point. She also knows that the revenue raised by alcohol duty—as we heard earlier, it is billions of pounds—is important for funding government services, so we need to keep an eye on the impact that duty changes have on revenues. The Government decided that a change in duty, where we could afford one, would be best focused on beer and the pub industry more generally.

It is to that topic that I now turn. Community pubs are important. They play an important role in community life across the country, and they encourage responsible alcohol consumption. It is, therefore, a sad fact that 10,000 pubs have closed in the past decade. The Government are committed to supporting pubs. Pubs are benefiting from the changes that we have made to business tax, including the reduction in the main rate and the small profits rate of that tax. Regulatory changes have made it easier for pubs to play live music. However, the Government wanted to provide additional support, so we are making a targeted reduction in beer duty, because that will benefit pubs the most. The British Beer and Pub Association estimates that 68% of alcohol sold in pubs is beer. It was also announced at the Budget that the beer duty escalator will end, so beer duty will rise only by inflation next year.

The hon. Member for Nottingham East mentioned the current consultation on pubs. It is important and I am glad that the Government have initiated it. When the consultation ends, the Secretary of State for Business, Innovation and Skills will report back on its results.

Clause 178 reduces the beer duty rate by 2% from 25 March 2013, which is equivalent to reducing the tax on an average-strength pint of beer by 1p. To answer the question of my hon. Friend the Member for Rochford and Southend East, it is the first cut in beer duty since 1973. I am sure that the Committee will be interested to hear that the 1973 cut was also made by a Conservative Government. Compared with the previous Administration’s policy, beer will be 4p a pint lower and its consumption will be 2.2% higher this year.

The reduction in beer duty has been welcomed. Mike Benner, chief executive of CAMRA, said:

“What could have been the final nail in the coffin for our pubs has been decisively avoided by the Chancellor in a move that will spark celebration in pubs across the UK.”

I note the welcome in the debate from my hon. Friends the Members for Braintree, for Nuneaton and for South East Cornwall, and the hon. Member for East Lothian. It has also been welcomed by local brewers, and the Tatton brewery in the Chancellor of the Exchequer’s constituency has issued a celebratory pint called Pennies from 11, which is available in Strangers Bar; next week, importantly, it will be serving Sajid’s Choice from Bird’s brewery of Bromsgrove, which I warmly welcome. I invite you, Mr Amess, and all members of the Committee—I mean all, including Opposition hon. Members—to join me for a celebratory point.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury) 5:00, 13 Mehefin 2013

That is a generous offer. Will the Minister shout a round for the whole Committee?

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

I should not say so, but I will—I am happy to buy a round. It is rare to get a beer named for oneself, after a policy we have implemented, but when Opposition Members drink that beer they will be celebrating not only the cut in beer duty, but the Government’s economic policy.

Photo of Pamela Nash Pamela Nash Llafur, Airdrie and Shotts

I thank the Minister for the offer of a drink for the entire Committee, and I will buy him a whisky in return. I made a specific point in my comments earlier about high-strength beer. Can he address why high-strength beer has been included in the duty drop?

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

I thank the hon. Lady for her offer, which is most welcome. I was about to move on to her point. In addition to the general beer duty rate, there are also additional beer duty rates for high and low-strength beer. In order to reduce the tax on a typical pint of low-strength beer by 1p, the duty strength on low-strength beer is being reduced by 6%. Duty on high-strength beer has two parts: general beer duty and an additional high-strength beer duty. The additional high-strength beer duty is increasing by 4.3%, which partly offsets some of the 2% reduction in general beer duty. The overall duty on high-strength beer therefore falls by 0.75%—so it is falling overall—reducing the duty on a typical pint of high-strength beer by 1p.

Photo of Pamela Nash Pamela Nash Llafur, Airdrie and Shotts

That is the exactly my point. In 2011, the Government were passionate about how they were putting extra duty on high-strength beer to discourage people from drinking it. I understand that the duty is in  two parts, but the overall duty is now dropping, which is the opposite to what was announced with great flurry in 2011.

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

I can answer the hon. Lady’s question. The overall beer duty for high-strength beer forms two parts, one component being the standard beer duty. The two things are connected. When we changed standard beer duty, that had an impact on high-strength beer, but the other component we changed reduced the amount of reduction that would have taken place otherwise. To have done anything else would have unnecessarily complicated our duty regime, so we felt that our action was the appropriate course.

In conclusion, the clause implements the pre-announced increases in cider, wine and spirit duties that we inherited from the previous Administration. Through prioritisation and taking difficult decisions elsewhere, however, Budget 2013 was able to announce an end to the beer duty escalator to support pubs. The clause goes further by reducing the tax on an average pint by 1p, the first cut in more than half a century.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

Given that we have had a useful debate to probe the Government’s thinking on many of the issues, in particular those involving the Scotch whisky industry, and especially as we have managed to extract a concession—that the Minister will buy a pint for the entire Committee—I am happy to beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 178 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned.— (Greg Hands.)

Adjourned till Tuesday 18 June at ten past Nine o’clock.