Schedule 1 — Beer from small breweries: reduced rate of duty

Orders of the Day — Finance Bill – in the House of Commons at 4:00 pm on 8th May 2002.

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Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport) 4:00 pm, 8th May 2002

I beg to move amendment No. 17, page 110, line 32, at end insert—

'(3) Beer produced in a small brewery for export shall not count towards the maximum production levels specified for small breweries elsewhere in this Part.'.

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

With this it will be convenient to discuss the following amendments: No. 4, page 112, line 2, leave out "30,000" and insert "200,000".

No. 5, page 112, line 14, leave out "30,000" and insert "200,000".

No. 7, page 112, line 17, leave out "30,000" and insert "200,000".

No. 6, page 112, line 20, leave out from "that" to end and insert—

'beer produced under licence is not small brewery beer'.

No. 8, page 112, line 26, leave out "30,000" and insert "200,000".

No. 9, page 113, line 9, leave out "30,000" and insert "200,000".

No. 10, page 113, line 13, leave out "30,000" and insert "200,000".

No. 11, page 114, line 19, leave out "30,000" and insert "200,000".

No. 12, page 115, line 10, leave out "30,000" and insert "200,000".

No. 13, page 115, line 13, leave out from "that" to end and insert—

'beer produced under licence is not small brewery beer'.

No. 14, page 115, line 22, leave out "30,000" and insert "200,000".

No. 15, page 116, line 42, leave out "30,000" and insert "200,000".

No. 16, page 116, line 46, leave out "30,000" and insert "200,000".

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

The amendments would introduce common sense into the eligibility rules entitling small breweries to a reduced rate of duty on their first 5,000 hectolitres of production. In this debate, we shall have to refer quite a lot to hectolitres. People following the debate may wish to know that a hectolitre is 100 litres—almost 22 gallons, or 176 pints. Unfortunately, the Bill refers to hectolitres.

Amendment No. 17 would exclude from the calculation of annual production for the purpose of assessing eligibility production for export, which is already exempt from the penal rates of beer duty on domestic sales. However, the amendment is not as far reaching as amendment No. 4 and the consequential amendments Nos. 5, 7, 8, 9, 10, 11, 12, 14, 15 and 16. Those amendments would extend relief to all brewers producing up to 200,000 hectolitres per annum, instead of limiting it to those producing up to 30,000 hectolitres per annum. It is because amendment No. 4 goes to the core of the argument that I shall seek to divide the Committee on that amendment rather than amendment No. 17.

Amendment No. 4 would make about another 25 small breweries eligible for relief at a cost to the Exchequer of about £3 million or £3.25 million—about one tenth of 1 per cent. of total beer duty yield. The Financial Secretary referred to regional brewers as though only they were excluded from this scheme. He may be interested to know about the Ringwood brewery, close to my constituency. It is not a regional brewery but a popular local brewery and it produces between 40,000 and 50,000 hectolitres per annum. It is a family firm, founded in 1978; it originally had one employee and now employs 44 people. Within any definition, it is a small business and a small brewer. It was gravely misled, because it assumed that the benefit would apply to it, but it will not.

The Chancellor told the House and the nation in the Budget that he would

"encourage one group of small businesses, the nation's small breweries".

He went on to say:

"I have decided that the duty paid on their own beer will be halved."—[Hansard, 17 April 2002; Vol. 382, c. 584.]

The Ringwood brewery thought that it would be one of those small breweries, but the small print shows that it does not qualify.

The situation is pretty serious, not just for the Ringwood brewery but for a number of other independent family breweries. The Independent Family Brewers of Britain says:

"We had asked the Government to follow the European model and allow tax relief for small brewers producing up to 200,000 hectolitres a year . . . The 30,000 hectolitre limit proposed in the Budget affects under 2 per cent. of the market and will leave many small brewers out in the cold."

The letter continues:

"We are delighted that the Conservatives are asking the Chancellor to help brewers like ourselves and fully support their suggested amendments to raise the production threshold for tax relief to 200,000 hectolitres from the proposed 30,000 hectolitres and also to allow beer produced in small breweries for export not to count towards these maximum production levels."

That is a good third-party endorsement for the common sense encapsulated in the amendments.

Photo of Edward Davey Edward Davey Shadow Chief Secretary to the Treasury, Shadow Minister (Olympics and London), Liberal Democrat Spokesperson (Olympics and London), Liberal Democrat Spokesperson (Chief Secretary to the Treasury)

I am grateful to the hon. Gentleman for giving way, especially after reading out that press release. Did it go on to say what it thought about the Conservatives' record in failing over 18 years to introduce a reduced rate?

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

No, it did not. I understand that my right hon. and noble Friend Lord Cope went to Europe and signed a document on this in 1993 or 1994. Unfortunately, he was not in a position to bring a measure before the House. However, it ill behoves the Government to suggest that they have been quick to remedy the situation.

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

It has taken them five years, as my hon. Friend Mr. Key says. What did they do when they first got into office? They added 2p duty to a pint of beer—a further anti-competitive measure introduced by this Government. Now, late in the day, after five years in office, they propose this measure. Although we welcome it, let us not delude ourselves into thinking that the Government were quick off the mark as soon as they got elected in 1997. I am sure that, had we been returned to office in 1997, we would have introduced such a measure much sooner.

One of the key elements of the proposal is a cliff edge that will adversely affect breweries as soon as production exceeds the 30,000 hectolitre point. A brewery that crosses that threshold will immediately forfeit £120,000 in duty relief. I have been advised that to compensate for that, a brewery would have to double its production to about 60,000 hectolitres before it became worthwhile to stay in business at that level of production, instead of reverting to a production level of less than 30,000 hectolitres. That is why the measure is so damaging to breweries in the production range of 30,000 to 60,000 hectolitres. It will act as a perverse incentive on those breweries to reduce their production, which is quite the reverse of what the Chancellor seemed to intend. Moreover, it will provide no incentive whatever for breweries that are below the 30,000 hectolitre limit to push up their production and expand to beyond that level.

Photo of Robert Key Robert Key Conservative, Salisbury 4:15 pm, 8th May 2002

My hon. Friend hits the nail on the head. What were once microbreweries have grown, and the cliff-edge approach is wholly wrong. I thank him, on behalf of the management, work force and customers of the Hopback brewery in my constituency, for tabling the amendment. The Ringwood brewery is pretty good, but of course Hopback is much better, and is acknowledged to be so all over the country.

The amendment is wholly sensible, and I hope that the Minister will listen to our argument. The tapered approach is much more likely to achieve what the Chancellor wants—a level playing field for smaller brewers.

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

I am grateful to my hon. Friend and pay tribute to the work that he has done with the Hopback brewery in promoting the amendment and in trying to get the Government to listen. That brewery is expanding, and wants to do so in order to become significant in the marketplace.

Total production by breweries that produce less than 200,000 hectolitres a year is only about 5 per cent. of overall total beer production. Only the six very large breweries, which are largely international, and six or seven other large breweries, which are quoted on the stock exchange, have production levels of substantially above 200,000 hectolitres a year. If the Government are really interested in helping small breweries, they should extend the definition of a small brewery to cover all those with production levels below 200,000 hectolitres. European legislation refers to that 200,000 limit. As we have by far the highest beer duty of any country in Europe, why are the Government so churlish about introducing the European maximum level for allowing such concessions to be made? That would not involve much cost to the Exchequer.

I hope that the Government will accept this common-sense amendment, which would allow the Bill to work to the advantage of small and growing breweries and redound to the benefit of those breweries and their loyal customers.

This is not a matter only of breweries in general or of beer in general; it is very significant for those of us who enjoy real ale, because about half of the total production of real, or cask, ale comes from small independent brewers. They are the ones who have introduced choice; they are maintaining a key element of our British way of life. Some of their beer may be served warm and some of it may be served at cricket grounds where our former Prime Minister can sip it as he watches the game.

The amendments, if accepted, will ensure that there is more growth in cask ale production than heretofore. They will be good for British brewing. I commend them to the Committee.

Photo of Edward Davey Edward Davey Shadow Chief Secretary to the Treasury, Shadow Minister (Olympics and London), Liberal Democrat Spokesperson (Olympics and London), Liberal Democrat Spokesperson (Chief Secretary to the Treasury)

My right hon. and hon. Friends and I support the amendments proposed by the Conservative Opposition. If it is right to support small and microbreweries, the Government must get the legislation right. They must get their analysis right, which is why, in our previous debate, I called for their analysis to be published. At least we would then have information that would help us to debate the issue.

If the Financial Secretary to the Treasury writes to me with acceptable evidence, there will be no problems with the schedule on Report. However, like Mr. Chope, we have some concerns about what the Government are doing. The 30,000 hectolitre limit seems wrong. Not only does it run counter to the European directive that allows an upper limit of 200,000 hectolitres—it is surprising that the Government have not given the industry the support that it is allowed under that legislation—but it is a bizarre use of taxpayers' money. In the first year, the 30,000 hectolitre limit will cost the taxpayer £10 million, and in subsequent years, £15 million.

Evidence from the brewing industry shows that raising the limit from 30,000 to 200,000 hectolitres would cost only a further £3.2 million. If the Government challenge that figure, perhaps Ministers will give us further information on those costs. There are only 27 breweries in that sector of the market, while 350 breweries would fall below the 30,000 hectolitre limit. The tax advantage would apply only to a small number of breweries, so the extra cost would be relatively small. There cannot, therefore, be a cost argument against increasing the limit as the cost is marginal.

The brewing industry is concerned about the measure's impact on competition. The hon. Member for Christchurch touched on that, but did not go into detail. I do not pretend to be an expert on the brewing industry, but it seems to be divided into three groups: at one end, there are microbreweries—small local breweries and pubs that brew their own tipple; at the other end are the huge brewing companies that have developed during the past decade or so; and in the middle, there are medium-sized independents. Some of them have a brewing capacity of more than the 200,000 hectolitre limit, so they would not benefit from the amendments. However, at least such breweries would accept the restrictions imposed by the EU legislation.

The 27 breweries to which I referred include Brakspear, St. Austell brewery, in the constituency of my hon. Friend Matthew Taylor, Harveys brewery, in the constituency of my hon. Friend Norman Baker and Hook Norton brewery. Those breweries would benefit if the Government extended the limit. In order to ensure that an important segment of the brewing industry is not disadvantaged and that we do not create distortion in the market, the Government would be well advised to accept the amendments.

On a political point, I would counsel the Government not to be too concerned by the contents of the press release that the hon. Member for Christchurch read out. Although the amendments were tabled by Conservative Front-Bench Members, I believe that they enjoy the support of hon. Members in all parts of the House; I hope that Labour Back Benchers will take part in the debate. If the Financial Secretary realises that, he will not be frightened out of accepting the amendments simply because they were tabled by Conservative Front-Bench Members.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I am not familiar with the economics of running breweries, although I have toured two in my time, but it seems possible that economies of scale are much more critical for very small breweries than they are for the breweries that the hon. Gentleman is speaking about, and that the Government's proposals are aimed at helping very small breweries to survive and proliferate—we hope, to make beer even more varied than it is now.

Photo of Edward Davey Edward Davey Shadow Chief Secretary to the Treasury, Shadow Minister (Olympics and London), Liberal Democrat Spokesperson (Olympics and London), Liberal Democrat Spokesperson (Chief Secretary to the Treasury)

The hon. Gentleman makes a fair argument, but if he talks to those particular brewers he will find that they still have problems competing with the larger breweries, who have huge economies of scale and huge selling power, and can therefore operate at an extreme competitive advantage. Thus many of the breweries that we are arguing for tonight would benefit. Moreover, many of them, because they are traditional brewers, occupy very traditional premises, which are in themselves almost part of the cultural heritage. If they are to reap some of the modern benefits of economies of scale that the hon. Gentleman referred to, many of them would have to move premises, leave their traditional roots and, possibly, their local setting, which often gives its name to their brew. If the hon. Gentleman were to talk to brewers in that category, he would be reassured.

Finally, I want to raise a point of principle. Obviously, any limit creates distortions against growth, because some brewers will naturally come up against that limit as they expand. However, we have a cross-Europe limit, imposed by the European Union, of 200,000 hectolitres, so it is odd that the Government have chosen a lower one.

Mr. James Staughton from St. Austell Brewery Company Ltd. explained to me that his brewery was currently looking to expand. Its total production is just under 30,000 hectolitres, so it would benefit, but if it expands as it intends to, its production would go over the limit. The company is in the very difficult position of having to decide whether to halt its planned expansion in order to get the benefit of the reduced duty rate, or go ahead with the expansion and lose that new advantage. Thus the limit has already affected a commercial decision by that brewer.

I am sure that many other brewers, either currently or in the future, will have to make that difficult decision. It is bad when the Government produce a tax relief that affects ordinary commercial decisions. There would be a logic to a 200,000 hectolitre limit, because that would fit EU legislation; there is no logic to the 30,000 hectolitre limit.

Photo of Chris Bryant Chris Bryant Labour, Rhondda

Does the hon. Gentleman accept that subsection (10) of proposed new section 36C on page 112 would not create the cliff-top situation mentioned by Mr. Chope earlier? Actually, the individual brewery will receive the benefit up to 30,000 hectolitres in that year, and then will pay duty only on the amount in excess of the limit. Future decisions might be affected, but in the specific year the brewery will not suddenly face that collapse.

Photo of Edward Davey Edward Davey Shadow Chief Secretary to the Treasury, Shadow Minister (Olympics and London), Liberal Democrat Spokesperson (Olympics and London), Liberal Democrat Spokesperson (Chief Secretary to the Treasury)

The information that I have received from the brewers is that many will have their commercial decisions affected in the way that I describe, so I cannot necessarily agree with the hon. Gentleman. There is a taper in the new relief, but it applies below the threshold, not quite in the smooth way that he seemed to imply above the threshold.

Moving away from the principle behind the amendments, may I seek clarification from the Minister on one or two specific points? Many brewers who are reading the Bill do not understand what the Government are trying to do. For example, the first condition, which is set out on page 114 in proposed new section 36E(4), refers to the eligible amount of beer produced in the previous year. Obviously, breweries can calculate that amount from their sales figures, but the second condition refers to the amount that is expected to be brewed in the future. Brewers will have to try to work out whether they are eligible for that relief, but they are not sure which production level will count. So they need guidance from the Minister, or from Customs and Excise officials, to work out whether they will be eligible. What baseline should they use to judge their eligibility?

Other concerns have been raised with me. For example, some people have queried the fact that the Government have chosen to use the figure 365 in the calculation that appears on page 114 in proposed new section 36E(5). Obviously, that figure refers to the number of days in a year, but the Independent Family Brewers of Britain informs me that no brewer brews every day of the year. That association wonders why the Government have based their calculation on something unrelated to brewers' production schedules.

The final point on which various brewers have asked me to seek clarification relates to proposed new section 36C(3), in which the Government try to define a relevant brewery—for example, whether it can consist of a group of breweries and how the brewery is formed. The concern is that the Government suggest in part of that section that the definition relates to the employees. If an employee is a member of a brewery or a group of breweries, he or she can attract the relief. However, the implication is that if that person decides to change jobs in that year and works for another brewery that is not a member of the group of breweries, the first employer will not be entitled to the relief.

Mr. Bercow laughs, but that is the commercial reality. People want to know whether their employment decisions and the decisions that their employees take will change their eligibility for the relief. I hope that the Government will provide clarification on that matter.

Photo of Boris Johnson Boris Johnson Conservative, Henley 4:30 pm, 8th May 2002

I rise in wholehearted support of the amendment moved by my hon. Friend Mr. Chope. I speak on behalf of one of the 27 breweries not to be favoured by the Bill, unlike the other 320 that are to be favoured by it. Like my hon. Friend, my heart leapt when I heard the Chancellor speak of measures in the Budget to help small breweries, because I thought that he must mean Brakspear in my constituency.

Hon. Members will be familiar with Brakspear's bitter. If they are not, they jolly well ought to be. I do not mean to cast aspersions on any of the other excellent beers that are brewed in my hon. Friends' constituencies, but they will agree that Brakspear's is the finest because it is brewed by the traditional double-dropping method and therefore contains a higher quotient of hops than most normal beers. Indeed, when I was at school, my school had a contract with Brakspear. We were supplied with Brakspear's beer every Sunday. I am a living testament to the benefits of that drink.

Photo of Andrew Mitchell Andrew Mitchell Conservative, Sutton Coldfield

It was not Ashdown house, was it?

Photo of Boris Johnson Boris Johnson Conservative, Henley

No, it was not Ashdown house.

Imagine how surprising and saddening it is not just for me, but for a great many people in my constituency and elsewhere, to find that Brakspear is now, after more than 200 years, at serious risk of ceasing to brew. It is highly likely that Brakspear will no longer be able to brew the bitter for which it is famous. Inspector Morse used to drink Brakspear's bitter. It is a great shame that that traditional English beer should be coming to an end.

Why is it coming to an end? Brakspear is facing adverse trading conditions in many different ways. I had a long conversation on Friday night with a chief executive who is extremely alarmed about the national insurance hikes, and so on. He is extremely upset by the Chancellor's decision to favour 320 microbrewers and not to favour the 27 other brewers about which Mr. Davey spoke eloquently. Plainly, the 27 others—including Brakspear—should be included in the exemption outlined in the Budget. I see absolutely no reason why the threshold cannot be raised to 200,000 hectolitres, given that, as has been repeatedly pointed out, that falls in line with European Union recommendations anyway.

Brakspear is a small brewery, it is a local brewery and it is under serious threat of ceasing production. It makes an absolute nonsense of the Government's claims to favour choice, diversity and old businesses to push through a measure that could expedite its closure. It should be helped, and I hope that the Financial Secretary will respond creatively and imaginatively to the sensible amendments that have been supported by both main Opposition parties, and do his level best to save Brakspear in Henley from ceasing to brew. That would be a great disadvantage not just to my constituency but to the brewing community and to the drinking public.

Photo of Mr Paul Boateng Mr Paul Boateng Financial Secretary, HM Treasury, The Financial Secretary to the Treasury

Tempting though it is, I shall not be drawn into discussing the merits of individual brews and breweries—

Photo of Mr Paul Boateng Mr Paul Boateng Financial Secretary, HM Treasury, The Financial Secretary to the Treasury

The shadow Chief Secretary will appreciate the problems of discussing the individual tax affairs of individual companies at the Dispatch Box. He would be the last person to encourage me to go down that route. Hon. Members who have breweries in their constituencies are perfectly right to raise their constituents' concerns, however, and I know that Customs and Excise is still in discussion with several of those breweries. We await with interest and eager anticipation the outcome of that discussion as to whether those breweries qualify, at least in part, for relief.

I have heard the heartfelt pleas of Mr. Johnson, who opined about the imminent demise of a brewery that served his alma mater. I would hate to go down in history as the Financial Secretary responsible for depriving the boys of Eton college of their favourite brew. Deprived and underprivileged as they are, to deprive them of their beer would really be the last straw. We have all heard, with varying degrees of sympathy, the pleas made by hon. Members about individual breweries, but they will understand why I cannot deal with those individual cases.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

I am just a poor state school product from Finchley, so I would not know about the highfalutin matters being described by the Financial Secretary. The commercial pressures faced by brewers on the one hand, and the financial costs incurred by beer drinkers on the other, represent the context of our discussion. Will the Financial Secretary therefore demonstrate his grasp of the issue by telling us, for the current financial year, what proportion of the price of an average pint of beer is accounted for by tax and excise duty?

Photo of Mr Paul Boateng Mr Paul Boateng Financial Secretary, HM Treasury, The Financial Secretary to the Treasury

It would be most unwise, in considering this question, to suggest that small regional breweries are likely to go out of business as a result of anything that this Government have done. [Interruption.] I shall come to the hon. Gentleman's question in a minute. However, it is hard to accept that a brewery with an annual production of 70,000 hectolitres and a turnover of £8 million will be threatened if it does not receive relief worth just 1.5 per cent. of its total turnover. It is similarly hard to accept that such a brewery will be priced out of the market because brewers with a turnover of less than half that receive some relief. To suggest that, as a result of the measure, some brewers will be put at a competitive disadvantage is to over-egg the pudding a bit.

Photo of Kevin Brennan Kevin Brennan Labour, Cardiff West

My right hon. Friend has hit the nail on the head. Can he explain the logic behind the Opposition's argument? They suggest that the measure will not result in a fall in the price of the beer produced by small brewers and yet they claim that the fall in the price of the beer produced by small brewers will put slightly larger brewers out of business. How can the Opposition sustain both propositions at the same time?

Photo of Mr Paul Boateng Mr Paul Boateng Financial Secretary, HM Treasury, The Financial Secretary to the Treasury

I find it very difficult to fathom the logic in the arguments of Opposition Members. They are opposing for the sake of opposing, and that is their right. I suppose that, if we were in their position, we would do likewise. However, we are not likely to be in their position for a very, very long time—partly because of the success of the measures outlined in the Budget.

What got me in the questions of the hon. Members for Buckingham (Mr. Bercow) and for Christchurch (Mr. Chope) was the suggestion that this Government were something other than the friend of the beer drinker and the brewer. I hope that the hon. Member for Buckingham knows what has happened to duty, because it is dangerous to ask a question the answer to which one does not already know. That is why his question is surprising. I feel constrained to point out to him that duty, as a proportion of the retail price of a pint of beer, was 32 per cent. in 1991. Today, it is 29 per cent. That is a fall of 3 per cent. Beer duty has been frozen for the last two Budgets, and that has saved British beer drinkers a very large amount of money.

I challenge the hon. Member for Buckingham—perhaps he will be so good as to take note of the challenge—to write to me to show whether, in any period of the Conservative Administration, he can point to a similar record of support for the industry.

Photo of Mr Paul Boateng Mr Paul Boateng Financial Secretary, HM Treasury, The Financial Secretary to the Treasury

Good. The hon. Gentleman is going to take me on. He will have plenty of time in Committee to share with us the outcome of his research.

Photo of Mr Paul Boateng Mr Paul Boateng Financial Secretary, HM Treasury, The Financial Secretary to the Treasury

I must make progress, because I want to come to the points that Mr. Davey raised.

The hon. Gentleman asked why the limit has been set at 30,000 hectolitres. It is an interesting question, because there are at least 115 reasons in an early-day motion that show why the limit should be set at 30,000 hectolitres. The early-day motion has been signed by Members on both sides of the House, including leading members of the Liberal Democrats.

Photo of Mr Paul Boateng Mr Paul Boateng Financial Secretary, HM Treasury, The Financial Secretary to the Treasury

Yes, there is. We must be fair to the Liberal Democrat party. It has some distinguished members, and a number of them have signed the early-day motion. However, I do not see the signature—perhaps I have missed it—of the hon. Member for Kingston and Surbiton. Still, all who signed the motion call for a limit of 30,000 hectolitres, and that is not surprising. They show a great deal of good sense by calling for that limit, because it is supported by the Society of Independent Brewers. Hon. Members know that that society rather than any other represents small local brewers. It is the voice of the small local brewer and the measure is designed to support them.

The hon. Member for Kingston and Surbiton said that he does not know much about the beer industry but thinks that it is divided into three sectors. It is possible to do that. The 400 microbrewers and the local brewers are usually described as small brewers. If we link them with the 40 regional brewers and the handful of national brewers, that makes three sectors. It is, of course, also possible to divide the industry into four sectors if we disengage the microbrewers and the local brewers, as some people would prefer.

We know, however, that the 40 regional brewers and the handful of national brewers have a different interest from the local brewers and microbrewers. We need to be open and up front about that. The measure is designed to benefit local brewers and microbrewers. Although there is undoubtedly some overlap at the margins—perfectly fair points can be made about that—it is generally accepted that the break between local brewers and regional brewers is at about 30,000 hectolitres.

Photo of Mr Paul Boateng Mr Paul Boateng Financial Secretary, HM Treasury, The Financial Secretary to the Treasury

So the Conservatives will divide the House even though they have got the point. That simply does not make sense.

Photo of Boris Johnson Boris Johnson Conservative, Henley

I do not understand how the right hon. Gentleman can repeat that the measure is intended to benefit local brewers when it is clearly playing a part in expediting the demise of Brakspear's brewing in south Oxfordshire, something that it has done for 200 years. How can that be helping local brewers?

Photo of Mr Paul Boateng Mr Paul Boateng Financial Secretary, HM Treasury, The Financial Secretary to the Treasury

I understand and applaud the hon. Gentleman's perseverance on behalf of his local firm, but when he reflects on the measure and the figures, he will realise that the suggestion that it will put his local brewer out of business is a travesty of the truth.

Photo of Mr Paul Boateng Mr Paul Boateng Financial Secretary, HM Treasury, The Financial Secretary to the Treasury

I want to finish the point. At 30,000 hectolitres, brewers have a turnover of more than £2.5 million. It is fair to say that a measure to benefit small businesses should focus on a break-off point of about £2.5 million. I do not think that that is unreasonable, as I hope the House will recognise in the fullness of time.

Photo of Edward Davey Edward Davey Shadow Chief Secretary to the Treasury, Shadow Minister (Olympics and London), Liberal Democrat Spokesperson (Olympics and London), Liberal Democrat Spokesperson (Chief Secretary to the Treasury)

The right hon. Gentleman told us that the Government have listened to the Society of Independent Brewers. I do not want him or his colleagues to doubt that we applaud the fact that, unlike the last Conservative Government, they have listened. In that spirit, therefore, and as part of their desire to be open to argument, will he agree that if the amendment is withdrawn and there is no Division, he will consult the brewing industry further to determine whether the welcome reduction in beer rates can be extended in the small way that is proposed, and allow us to debate the matter again on Report?

Photo of Mr Paul Boateng Mr Paul Boateng Financial Secretary, HM Treasury, The Financial Secretary to the Treasury

No, I will not. The hon. Gentleman did not table the amendment and he is in no position to make such an offer. I see no response to his suggestion from the hon. Member for Christchurch. It is Liberal Democrat presumption at its height.

Amendment No. 17 attempts to reduce the amount of beer that is taken into account when assessing eligibility for a scheme by excluding exports. Whatever its merits, it would have the fatal drawback of being outwith EC law, the very law that Opposition Members pray in aid in relation to the higher limit and the very law that governs the scheme.

Photo of Chris Bryant Chris Bryant Labour, Rhondda

Is it not also true that the argument of Mr. Johnson holds water, or perhaps beer, only if Brakspear is determined that any competition from microbreweries—those we are keen to support—will be a problem for it, so it is trying to prevent competition?

Photo of Mr Paul Boateng Mr Paul Boateng Financial Secretary, HM Treasury, The Financial Secretary to the Treasury

I must maintain my self-denying ordinance and not comment on the tax arrangements for specific sectors and companies in the industry, but my hon. Friend makes a trenchant point in his usual trenchant way.

Photo of Mr Roger Casale Mr Roger Casale Labour, Wimbledon

I simply want to confirm to the Minister that I have today spoken to the Society of Independent Brewers, and it has confirmed that this measure will help independent brewers to survive and flourish. Furthermore, they have been fighting for this measure for over 21 years; indeed, this Bill will amend the Alcoholic Liquor Duties Act 1979. Year after year since then, at Budget time the society made suggestions to Conservative Governments, but those suggestions were rejected and the society was not listened to. Now we are introducing the measure that will help independent brewers, and that is exactly the moment when Mr. Johnson opposes it.

Photo of Mr Paul Boateng Mr Paul Boateng Financial Secretary, HM Treasury, The Financial Secretary to the Treasury

I am very grateful to my hon. Friend. I could not have put it better myself. On that note, I ask the Committee overwhelmingly to reject the amendment.

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

The Minister says that amendment No. 17 would not work because of European law, so obviously I accept that and I will seek to withdraw the amendment.

The problem would not be so bad if the limit were lifted from 30,000 to 200,000 hectolitres. I am disappointed that the Minister has not addressed the point about small local breweries. The Ringwood brewery is a small local brewery; it is also a successful brewery, which is why it can produce as much as it does with only 44 employees. If the Minister takes the view that a brewery with 44 employees is the equivalent of a regional or international brewery and should be exposed to unfair competition from much smaller breweries, he has failed to address the arguments. Ringwood is a founding member of the Society of Independent Brewers and of the campaign for progressive beer duty, and it falls pretty hard on it now to find itself disadvantaged by the measure.

The Minister was unfair to my hon. Friend Mr. Johnson, because he was articulating the views of the management of that fine brewery, Brakspear, not off the top of his head but as they were expressed in a press release on 19 April. Jim Burrows, the chief executive, said:

"This clumsy tinkering with beer duty could eliminate the very British heritage the Chancellor claims to defend."

He went on to say how vulnerable his firm will be to unfair competition from microbreweries.

The Government are obsessed with microbreweries' competition with slightly larger breweries, such as Ringwood and Brakspear. The biggest problem in brewing and the pub trade is the dominance of the very large breweries. By accepting amendment No. 4 and the other consequential amendments, the Minister would enable this great cohort of expanding independent brewers to expand even further and to make an even larger collective impact on the market. They would be able to take on the large breweries that get a great deal of protection because they can offer deep discounts.

I am disappointed by the Government's response and the fact that they have not listened to our points; I hope that the Committee will vote for amendment No. 4 and, when it has a chance, will look at early-day motion 1047, to which the Minister did not refer; 61 Members support a duty on production of up to 200,000 hectolitres, with a concession for brewers producing beer less than that volume. The signatories include quite a lot of Labour Members; it will be interesting to see whether they join the Minister in the Lobby or vote for amendment No. 4, which is consistent with the early-day motion.

On that basis, I beg to ask leave to withdraw amendment No. 17.

Amendment, by leave, withdrawn.

Amendment proposed: No. 4, in page 112, line 2, leave out "30,000" and insert "200,000".—[Mr. Chope.]

Question put, That the amendment be made:—

The Committee divided: Ayes 206, Noes 316.

Division number 226 Orders of the Day — Finance Bill — Schedule 1 — Beer from small breweries: reduced rate of duty

Aye: 206 MPs

No: 316 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly negatived.

Schedule 1 agreed to.