Clause 2 - Rate of duty on beer
Finance Bill
9:30 am
Mr John Healey (Economic Secretary, HM Treasury; Wentworth, Labour)
I look forward to serving on the Committee under your chairmanship, Sir Nicholas. You said that you were determined that it will be an ordered, structured and positive Committee and that every effort will be made to ensure that important matters are properly debated. My right hon. Friend the Paymaster General and I share your determination.
The right hon. Member for Fylde noted the number of Committee members from the north-west. As I look down the list, it strikes me that almost one in five of us are from Yorkshire, which will ensure a tough, gritty approach. It is probably appropriate that the first clause that we are to discuss concerns beer duty.
The clause increases the rate of excise duty charged on beer by 2.8 per cent., in line with general inflation. Excise duty and value added tax on alcohol provide a crucial £12.5 billion to invest in essential public services such as schools, hospitals and transport and in tackling crime. Beer accounts for more than 40 per cent. of alcohol duty receipts. This inflation-only increase in duty and VAT, which is equivalent to around a penny a pint, is necessary to maintain an important source of revenue. I remind the Committee that that modest increase, which is a freeze in real terms, comes after actual freezes in beer duty in three of the previous four Budgets. Since coming to power in 1997, this Government, unlike the last, have made no real terms increases in beer duty.
Some hon. Members may say that any increases in duty rates, even an inflation-only increase, will fuel the smuggling of beer and wine, the duty on which is increased in line with inflation in clause 3. The Government are absolutely committed to tough action to protect the industry against the effects of illegal smuggling and, as we announced in the pre-Budget report, Customs and Excise have continued to have a significant impact on cross-channel smuggling. The modest duty increases take place against a background, in 2002, of a 22 per cent. reduction in revenue evaded through beer smuggling and a halving in revenue evaded through smuggling of wine and spirits for the second year in succession.
I am aware of the pressures on brewers and the pub industry. They play an important part in our economy, our heritage and, for some of us, our leisure time. This modest inflation-only increase in beer duty recognises their concerns but, at the same time, maintains an important stream of revenue that is necessary to maintain our commitment to improving public services.