Clause 2 - Rate of duty on beer
Finance Bill
9:45 am
Mr Michael Jack (Fylde, Conservative)
I want to follow the line of my hon. Friend the Member for Huntingdon and take the Economic Secretary through one or two arguments on which I would be grateful for his comments. Every time the Government of the day return to the hackneyed old favourite of raising money by revalorisation—on this occasion, of the duty on beer—we hit a problem. I had not realised that one of the effects on the product itself was a potential downgrading of some of our better known beers. I declare an interest. I am principally a wine drinker, but occasionally I like to go into The Taps in Lytham, which is an excellent community pub, and enjoy a pint of Boddingtons beer. I had thought that it was a good north-west brew of traditional style, but I discovered recently that instead of containing good English-grown hops, the beer is being reformulated to contain hop oil. Those who like their beer brewed the traditional way will reflect on the fact that a range of hops and the contribution that whole hops make to the flavour of beer will be denied them. What many traditional beer drinkers would think of as an inferior product will be the one that is available.
Brewing and the retailing of beer are under considerable pressure on the margin and returns that they give, so manufacturers reformulate the product to try to sustain their financial returns against a background of rising prices. That background is occasioned by the clause. I am concerned because there are potential knock-on effects on agriculture. If brewers adjust the formulation, in the light of the rising price of the product, the net result will be that hops grown in the United Kingdom will suffer. The Government have made great play of their policies on the importance of rural Britain and sustainability. The inch-by-inch increase of the price of beer occasioned by the clause acts against the Government's professed interest in sustaining rural Britain and its communities.
That brings us back to where we started: namely, in the pub. The Countryside Agency's recent report on rural Britain places strong emphasis on the important role that the pub plays as the centre of rural communities. However, the inexorable rise in the price of beer has its effect on depressing the viability of not just rural pubs, but pubs in general. There is a circularity to the argument. The more the Government carry on increasing the price of beer, the more they affect not only the returns to the landlord, but also the quality of the product.
The Economic Secretary did not comment on another aspect. The increase in the price of beer is not the same as the increase in the price of duty. Retailers of beer will take a retail margin on the extra tax, so the percentage increase that he mentioned will be multiplied by the retail margin, especially in the case of supermarkets, off-licences and other purveyors of alcoholic drinks. That raises the question of how much analysis the Treasury has undertaken of the knock-on effect of what seems on the face of it a modest proposal. Can the Economic Secretary enlighten the Committee on what will happen?
Beer is deemed a natural beverage. Many would ascribe to it health-giving properties. I contrast that with many of the comments made on, for example, drinks available to children—fizzy pop, to give the generic term—which are high in sugar content. They can bring all kinds of problems, such as the onset of type 2 diabetes, which results in a cost to the national health service. However, such drinks have so far remained untouched by the Government in terms of taxation. It proves an interesting contrast that a natural beverage, beer, is continually under price pressure from the Government while other beverages that may have health disadvantages remain untouched.
Rob Marris (Wolverhampton, South-West) rose—