Clause 2 - Rate of duty on beer
Finance Bill
10:15 am
Mr John Healey (Economic Secretary, HM Treasury; Wentworth, Labour)
I hope that I can answer the hon. Gentleman's points during my brief remarks on the clause. Clause 2 increases the rate of excise duty charged on beer by 3.01 per cent. in line with general inflation. As the hon. Gentleman said, that has generally been accepted, and I, like him, have received no fierce representations against the rise. Excise duties on alcohol provide a crucial £7 billion a year for investment in public services and other Government spending. Beer accounts for more than 40 per cent. of alcohol duty receipts. The inflation-only increase, which together with VAT is equivalent to about a penny a pint, is necessary to maintain an important source of revenue. Since coming to office in 1997, the Government have made no real-terms increases in beer duty. This modest increase, which is a freeze in real terms, comes after freezes in beer duty in three of the previous five Budgets.
As with tobacco, it has been said that our levels of excise duty on alcohol are too high in comparison with those of continental European neighbours and that the inflation-only increases will somehow strengthen the motivation to buy beer and wine on the continent. Our commitment to the right of individual citizens to shop freely across borders in the EU for consumption for their own personal use is absolute. It is important not to view excise duty in isolation. A large proportion of cross-border shopping by the British is done in Belgium, the Netherlands and France, and it is true that those countries generally have lower rates of excise duty on alcohol. However, figures from the Organisation for Economic Co-operation and Development show that the UK is a relatively lightly taxed economy with one of the lowest total tax burdens in the EU, certainly far lower than the average.
The hon. Gentleman asked specifically about the level of revenue receipts following previous Budget decisions. If he cannot find the references in the Red Book—I cannot do so immediately—I will write to him with them. He points to a significant shift in the way in which people buy their beer, from on-trade to off-trade. I have discussed that with members of the all-party beer group in Parliament and the British Beer and Pub Association. It is a matter of concern to the pub and drinks industry and of interest to the Treasury. We are doing what we can to track and analyse the matter, and the industry has undertaken some useful analysis.
The matter does not lend itself easily to fiscal decisions that might follow because it is not easy to see how it might be possible to distinguish between on-trade and off-trade sales in determining fiscal policy. My conclusion is that there is a significant shift in consumption patterns which we need to understand, but we have limited scope in fiscal policy terms to influence that or to respond directly.