Clause 11 — Rates of alcoholic liquor duty

Surface Water and Highway Drainage Charges (Exemption) Bill – in the House of Commons at 9:45 pm on 12th May 2009.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury) 9:45 pm, 12th May 2009

I beg to move amendment 10, page 5, line 35, at end insert—

'(6A) No further amendment may be made to section 5 of ALDA 1979 within three years of the commencement of this section, unless the condition set out in subsection (6B) has been satisfied.

(6B) The condition referred to in subsection (6A) is that the Chancellor of the Exchequer shall have compiled and laid before the House of Commons a report containing an assessment of the impact of the increases in alcohol liquor duty on—

(a) the competitiveness of licenses premises, and

(b) the level of employment in alcohol-related industry, and the House of Commons shall, by resolution, have approved that report.'.

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The Second Deputy Chairman:

With this it will be convenient to discuss amendment 12, page 5, line 37, at end insert—

'(8) The Treasury will, prior to the 2009 Pre-budget statement—

(a) publish an assessment of the level of revenue yield anticipated from alcohol liquor duty based on it being levied on the rates of duty in this section, and

(b) publish an assessment of the level of alcohol liquor duty required to be levied on each type of drink on an equitable basis based on the alcohol content to generate the same level of revenue yield.'.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Amendment 10, which has been tabled by me and by some of my hon. Friends, seeks to prevent increases in alcohol duty for three years unless or until a report on its impact on the pubs and industry sector is undertaken and approved by the House in the meantime.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I will, although I have hardly started.

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

I am slightly confused by the amendment. It states

"No further amendment may be made to section 5 of ALDA 1979", but that section appears to apply only to spirits. The amendment does not mention section 36, which deals with beer, section 62, which deals with cider, or schedule 1, which deals with wine. Is it the hon. Gentleman's intention that only spirit duties be frozen for three years, or it is his intention that all duties be frozen for three years?

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

It is my intention that the Government examine their policy on alcohol taxation, which is of great concern to my constituents and, I believe, to those of many other Members. Some Members will be particularly concerned with the issue of whisky, which I know is a preoccupation of many who represent Scottish constituents, but others are concerned about other aspects of alcohol duty.

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

Will the hon. Gentleman make the position entirely clear? Is he suggesting that there should be no freezing of cider duty, for instance? That is what his amendment implies.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Conservative Members always labour under the misapprehension that no one in Taunton drinks anything other than cider. They have me bang to rights, because my constituents will be unable to enjoy any sort of social life if measures affecting cider are passed. Sadly, that used to be truer than it is now. Cider is not as widely drunk in my constituency as it once was—

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

It is widely drunk in Somerton and Frome, though. I give way to my hon. Friend.

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Photo of David Heath David Heath Shadow Leader of the House of Commons

I merely wish to make it clear that the social life in my constituency would be considerably impaired if cider were not available.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I am not saying that it would not be impaired in my constituency. I am merely saying that it would not be completely compromised.

The effect of the amendment is on the amendment paper for all to see, but I think it would be useful to expand my arguments so that all Members can understand the context not just of the amendment, but of Government policy as I understand it, and the impact that it will have in Taunton, in Somerton and Frome, and indeed in every constituency in the country.

I am pleased to see that the current debate is relatively well attended compared with our earlier deliberations, because what we are discussing has a profound impact. The Government's current policy is to increase the duty on alcohol over and above the rate of inflation. Conservative Members may remember when Mr. Clarke introduced the fuel duty escalator. This is the equivalent of that, except that it affects alcohol rather than fuel.

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Several hon. Members:

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Photo of Tony Baldry Tony Baldry Conservative, Banbury

The hon. Gentleman says that the purpose of the amendment is there for all to see. In fairness, however, he has not yet answered the point put by my hon. Friend Mr. Hands. With respect, I am not really interested in cider. What I, in north Oxfordshire, am interested in is Hook Norton beer, and I want to know whether the amendment will apply to beer. Why has the hon. Gentleman selected only whisky? Has he done so in order to placate the Scottish nationalists and others on the Benches behind him, and why is the Liberal party not concerned about the future of the English pub and English beer?

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Whisky is, indeed, important, and I would not wish to diminish its importance—I know that the Conservative party has almost no representation in Scotland, which may have some bearing on its thinking on this matter. My concern is across the board: I am extremely concerned about the impact on people who drink beer, cider and every other alcoholic drink on which Members may wish to offer representations or make some special pleading.

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Several hon. Members:

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I will give way in a moment. This is a wider debate; the overall concern is the impact on pubs, brewers and people who work in this industry. I regret that no amendments were tabled either by Labour Back Benchers or by any Conservative Member.

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Several hon. Members:

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

As what I have just said is the case, I think it is best that I make a little headway for the moment, and try to explain why I think the Government's alcohol escalator acts to the detriment of a good number of our constituents.

Ministers frequently make the point that there have been changes in lifestyle patterns in the United Kingdom, and that the rates of taxation charged on alcohol of all types is not the sole determining factor of demand for those products. I accept that: people behave differently and society is different from how it was 20 or 30 years ago, and people have modified their behaviour quite outside how that is influenced by duty levels on alcohol. Also, although the popular perception is that alcohol consumption is soaring, the reverse is the case: the total UK sales of most types of alcohol are declining. Within that overall big picture, there are changes in the way that people consume alcohol, such as the extent to which they consume it at home as opposed to in licensed premises. That is one consideration, and I do not say that the Government are responsible for those changing lifestyle patterns. Indeed, in some regards they may even have advantages, although in other regards they may have disadvantages.

There are additional factors. The smoking ban, for example, has undoubtedly had an impact on some establishments. Establishments that specialise in serving food alongside the sale of alcohol may even have benefited from the smoking ban, but it has undoubtedly had an adverse effect on the business of institutions that do not have food so high up their pitch to their customers. I think all Members would accept that. There will be Members present who voted in different ways. I voted against the smoking ban, but I was in a small minority. Most Members voted for its introduction in England, but the ban has undoubtedly had an adverse impact on a number of bars, pubs and restaurants in England.

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Photo of Philip Dunne Philip Dunne Opposition Whip (Commons)

Not only do the Liberal Democrats no longer represent Shropshire in this House, but I can reasonably confidently predict that they will barely represent Shropshire at the local authority level on 5 June.

I, too, voted against the smoking ban, and one of my reasons for doing so was to allow pubs in my constituency to continue to attract customers, many of whom have smoked. Many pubs also have breweries attached to them. I am told by the Society of Independent Brewers, whose best bitter I judged in Ludlow castle on Sunday, that my constituency has more independent brewers than any other, and they are extremely concerned about the increases through the beer duty escalator proposed in this Budget.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury) 10:15 pm, 12th May 2009

Sir Michael, that intervention may have been of a better length if the hon. Gentleman had cut out all the predictions about the local elections, which do not seem to have a direct bearing on clause 11. Let us not go through every county and make predictions about the local elections, not least because whenever the Conservatives in my area make such predictions they always look stupid afterwards. Who knows what the future holds? Everybody has their turn in the spotlight.

I regret that some Members of other parties seem to place less importance on the matter before us than I do. We are dealing with the impact that Government policy on alcohol taxation is having on pubs, brewers—the hon. Gentleman rightly pointed that out—and people who work in the entertainment industry. It is well known that pubs are closing at an alarming rate in this country. It is not our duty in this House to try to ensure that pubs that are unable to attract customers remain in business regardless of their ability to sell their product at an attractive price to the people who choose—or do not choose—to go to them. Nevertheless, there is a discernable pattern and it is undoubtedly influenced by a number of factors. I mentioned lifestyle changes, and the smoking ban is also a factor, but price—specifically the price differential between sales in licensed premises and in off licences—is certainly a factor. Most people would accept that that is having an impact, on pubs in particular.

I am told by the British Beer and Pub Association that 70 per cent. of people oppose this increase in duty. That does not necessarily surprise me, but it is strange that it has become almost the received wisdom in political circles that putting higher duty on alcohol is popular. When I leave Westminster I find far fewer people who are enthusiastic about increasing alcohol duty than I do when I talk to think-tanks and others here, who tell me what a very good idea it is.

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Photo of John Redwood John Redwood Conservative, Wokingham

Does the hon. Gentleman agree with the publicans, who have lobbied most of us in this House, that this latest duty increase could be the straw that breaks the camel's back, given the recessionary influences also bearing on the pub trade?

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Not only do I agree, but the evidence is there for all to see. Six or so pubs are closing on a daily basis, so the camel's back has been broken for them. The margins are fine on so-called liquid sales; the profit made by the publican, be it on spirits, beer, cider or any example that one chooses to highlight, is very modest. That is why so many pubs have, understandably, diversified into food and accommodation, but the situation is difficult for publicans if they are not able to make some sort of meaningful profit from their core business of selling alcohol.

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Photo of Bill Wiggin Bill Wiggin Opposition Whip (Commons)

Will the hon. Gentleman say something about the tremendous amount of work that all sorts of bodies, in particular the National Association of Cider Makers, have done on responsible drinking? The Government's idea that increasing duty will be beneficial is counter-intuitive and does a great deal of damage to those bodies, which are working so hard. While I am on the matter of health, has he seen the Government deputy Chief Whip, who normally appears at these later hours—he certainly appeared at all times during consideration of the Apprenticeships, Skills, Children and Learning Bill—and does the hon. Gentleman know whether he is all right?

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

If I think about it, perhaps I will be able to work out what the second half of that intervention meant. Perhaps I should just address myself to the first half. Sheppy's Cider is based in my constituency—sadly the only cider manufacturer left in Taunton Deane—and produces an excellent product. It is noticeable that, when people drink cider or other alcoholic drinks on the premises in traditional pubs, they are drinking in a controlled environment so it is much less likely to be detrimental to their health than if they were drinking in other circumstances. That is partly why community pubs have a civilising influence in many cases that would not be so obviously witnessed with other forms of retailer. Many people think that alcohol consumed in those circumstances is better than alcohol consumed in others.

I said that the majority of British people—I accept that this is unsurprising—oppose an increase in duty and an increase over and above inflation year on year, but I am told by the British Beer and Pub Association that 49 per cent. of Labour MPs oppose the increase. That is a very precise figure, and not quite half of Labour MPs. I am pleased to see much better representation on the Labour Benches than has been the case for other aspects of the Bill. It is still a modest turnout, but I hope that those Labour Members who have attended have come to champion the interests of their constituents, licensed premises, brewers and people who work in the entertainment sector in their constituencies.

VisitEngland, the organisation that is given money to promote tourism, has awarded the English pub industry its Enjoy England award for outstanding contribution to tourism. Previous winners include Sir Paul McCartney, the Queen and the Harry Potter films, so that is a measure of how much we value the traditional pubs in our society. They are enjoyed not only by all our constituents but by people who visit this country and regard visiting a pub and drinking the sort of drinks that are only available in this country as essential to the intrinsic appeal of being a tourist here.

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Photo of Dan Rogerson Dan Rogerson Opposition Whip (Commons), Shadow Minister (Communities and Local Government)

I know that my hon. Friend is a great supporter of the fight to keep open pubs in his constituency. Has he had the benefit of work by the Pub is the Hub campaign, which underlines the contribution that pubs make to the local community—it is much wider than their direct business contribution? For example, in my constituency the Tree inn in Stratton now has a post office. It has reopened in the pub and is providing a fantastic service for the people of Stratton. Is that not a fine example of the contribution that pubs make?

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

It is a perfect example. In many villages, the pub just selling alcohol to the residents of that village is no longer a viable economic business model, for the all the reasons I have touched on. Pubs are having to diversify and if they have done so well, they have often been very successful. Some provide more food for Sunday lunches or evening meals, and some provide accommodation—

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I shall come to skittles later in my contribution. Pubs also offer other services that are not necessarily part of the core offering of the pub. Postal services have been mentioned, but if a village no longer has a shop or any other outlet where the public can gather, the pub can be where people learn about social activities, or where the Rotary club meets. It would be a mistake to see pubs solely as an outlet for alcohol, but I fear that Ministers, when they proposed these above-inflation increases, failed fully to understand the wider social impact of their policies.

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Photo of John Hayes John Hayes Shadow Minister (Education)

It is indeed important that we defend these great British institutions. Skittles has been mentioned, but may I make a plea for darts? The game of darts is characteristically British and intimately associated with public houses, which is usually where people first learn and practise the game. What could be closer to the aesthetic of Britishness than the game of darts played in a pub with a warm pint of bitter?

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The Second Deputy Chairman:

Order. May I ask the hon. Gentleman to concentrate on the amendment, before we start to talk about dominoes?

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Sir Michael, your guidance is invaluable. The only thing that I would say is that I visited Andy Fordham's pub when he won the world darts championship a few years ago. It was fantastic to see the world darts trophy behind the bar, next to the crisps and peanuts on sale there. Darts, right up to the highest level, is intrinsic to people's enjoyment of pubs.

That takes me neatly—and conveniently in terms of not incurring your wrath, Sir Michael—back to the representations that I have had from my constituents on this matter. I have received an enormous volume of correspondence from people in my constituency and from institutions. They are extremely upset that the Government's policies are likely to make it far harder for pubs and other entertainment retailers to stay in business. Indeed, in the past few weeks alone I have received representations from "The Westgate Inn" in Taunton; the "Allerford Inn" in Norton Fitzwarren; "The Blagdon Inn" in Blagdon Hill, just outside Taunton; "The Bear Inn" in Wiveliscombe, which was Somerset Campaign for Real Ale pub of the year last year and has, I think, a very good skittles alley; "The Crown Hotel" in Exford; "The Holywell Inn" in Taunton Deane; and many others, including "The Swan", "The Bell Inn", "The Cottage Inn", "The Bridge Inn" and "The Waggon Inn". I list those institutions only because those who are less familiar with Taunton Deane than I am—a large number of Conservative MPs visit my constituency, however, so perhaps I will take the opportunity to show them some of these institutions—will not know that that list contains a wide range of different pubs. Some are in Taunton, which is a reasonably sizeable town, and others are in quite isolated villages, but they all share the concern held by me and many other hon. Members that the Government's proposals will impact adversely on their businesses.

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Photo of Roger Williams Roger Williams Opposition Whip (Commons), Shadow Secretary of State for Wales, Shadow Minister (Environment, Food and Rural Affairs)

My hon. Friend is making a very powerful case. Does he agree that when pubs shut it is very difficult for the planning authority to resist an application for change of use? When such applications are resisted, the pub in question can often be resurrected and can be profitable and secure in the future. "The Old Barn Inn" in Three Cocks and "The Shoemakers" in Pentrebach are now doing very well indeed.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I am delighted to hear that. Perhaps you might seek to encourage Members to talk about pubs they enjoy visiting in their constituencies, Sir Michael. The general point is an extremely good one. When pubs close, they rarely reopen and are lost to the community. The planning laws make it hard for pubs to reopen in many cases, but when they do it can be an extremely successful venture. It is also worth noting, in passing, that when new housing estates are built—the Government still aspire to have 3 million new houses, although progress has been slower than they might have hoped in that regard—they are rarely built with community amenities such as village halls, churches or pubs. People who live in many new developments keenly feel that their community would be greatly enhanced by a gathering point, such as a pub, where people can go for a sociable drink and also get to know other people, attend Rotary club meetings and so on. That only serves to highlight the importance of the sector, and why it is so clearly unwise of the Government to try to penalise people in it.

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Photo of Peter Bone Peter Bone Conservative, Wellingborough 10:30 pm, 12th May 2009

I am following the hon. Gentleman's powerful speech with great interest, but will he tell the Committee how many pubs in his constituency have closed already? At least three in my constituency have and the one in Little Irchester, where the Hell's Angels always used to gather, has been flattened. That is a great loss to the town, and things will only get worse. What has been the impact in Taunton?

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I carry out extensive research into the well-being of the pub sector in my constituency, as you might be able to tell, Sir Michael. I cannot give the hon. Gentleman a precise figure, but a number of pubs have closed. What is alarming and notable is that they have closed everywhere—in Taunton itself, which is a reasonably sized town with a population of 63,000, and in villages too. It is extremely unusual for villages to have two pubs, as was common even 10 years ago. The sector is contracting the whole time.

As I said earlier, it is not in our gift to ensure that all businesses are successful. Some pubs that are failing to meet their customers' expectations may not be viable businesses, but the amendment asks whether the Government, as an act of policy, should be making it even harder for businesses to be profitable and successful. I maintain that they should not.

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Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I am absolutely in favour of the pub culture in our way of life, but does the hon. Gentleman agree that there are two reasons why pubs are suffering? First, the drink-drive laws mean that people drink at home and, secondly, people can buy cheap alcohol in supermarkets. Would it not be more sensible to raise the price of alcohol in supermarkets to help the pubs?

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

There are a number of reasons why pubs are suffering. I touched on changing lifestyles, and I suppose that one could incorporate the drink-drive laws in that. Certainly, there have been big changes in what is regarded as socially acceptable, although the relevant laws have not changed for a while. The hon. Gentleman did not mention the smoking ban, the effect of which I acknowledge has been chequered: although it may have had a positive effect in some establishments, in most it was probably a negative one.

However, Kelvin Hopkins makes a very fair point about alcohol off-sales. Anyone who goes shopping will know just how cheap alcohol is in supermarkets compared with pubs. I observe that customers seem keen to buy alcohol sold cheaply in supermarkets. The public do not greet it with great hostility, but the differential involved makes it that much harder for pubs and other licensed establishments to be successful.

The differential also makes it harder for traditional brewers to be successful, because they are rarely able to offer to the supermarkets the heavily discounted alcohol that the large international brewers can offer. Therefore, they are at a price disadvantage even within the supermarket, because the economies of scale are not sufficiently big for them to be able to manufacture to the level that means that supermarkets will offer their products at a great discount.

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Photo of Philip Davies Philip Davies Conservative, Shipley

Surely the hon. Gentleman does not want the many thousands of people who visit Asda in Taunton to pay more for their shopping than they need to. Does he want to penalise all those people who drink perfectly responsibly but who want to do so at home, or the many hundreds of people who work at Asda in Taunton? Surely not.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Asda in Taunton is the company's south-west regional training centre. It is an extremely important and significant local employer, as are Sainsbury, Tesco and Morrison. All of them do very well in Taunton.

I said that lifestyles are changing and that people want to buy alcohol from supermarkets to drink at home while they are watching a DVD or the football. I am not saying that the Government have it within their gift to change that—lifestyles are changing. My point is that for someone who is trying to run a pub in Taunton or anywhere else, the above-inflation duty increases are making business harder, which is creating problems at precisely the point when those other factors are militating against publicans.

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Several hon. Members:

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Perhaps no one else will need to make a speech—I shall just use the opportunity of mine to give everyone a chance to speak. I give way to Mr. Weir.

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Photo of Michael Weir Michael Weir Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Environment, Food and Rural Affairs)

I agree with much of what the hon. Gentleman says. Obviously, rising duty is one factor, but is not another the way in which the pub trade is now run, in many cases by large pubcos? They are putting huge costs on those who are trying to run pubs, and adding the duty on top of that is often the last straw.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I agree with the hon. Gentleman. I think we all agree that there are a large numbers of relevant factors, but whatever they are, the increase in duty is the last straw. On that point, he is united with Mr. Redwood, who also thinks it is the last straw.

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Photo of Mark Todd Mark Todd Labour, South Derbyshire

I was fortunate enough to miss the start of the hon. Gentleman's speech. He may have covered this point in his oration, which has lasted half an hour or so, but I am puzzled about how his proposal relates to the competitive position of a pub against another provider of alcohol. If one simply reduced the duty or altered how the Government increase the duty, it would affect all sellers of alcohol equally. The competitive position of pubs would not be altered one iota.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I regret giving way to a Member who, first, was not interested enough in the subject to turn up at the beginning of the debate—it is not as though we are early in the working day—and, secondly, was so discourteous. However, I shall answer the hon. Gentleman's point. I think that drinking in pubs is quite price sensitive—more so than other environments in which people consume alcohol. Pubs are more price sensitive than bars that sell in large volume. I am not convinced that the Government's policy will have a profound impact on binge drinking: people who go and drink 12 pints of very strong lager are unlikely to modify their behaviour, and if they do, it will take the form of drinking 11 and a half pints of very strong lager, the effect of which will be little different. On the other hand, people of more modest means who drink in a pub, in a village or an urban area, can be more price sensitive: they may choose not to visit the pub, or to have only one pint, rather than one and a half. There is a price factor.

As I said, a pub has a range of social dimensions, and the impact on them of sales taking a different form may not be so keenly felt. However, my hon. Friend Mr. Heath, who defers to no one in his knowledge of Somerset as a whole, mentioned skittles. Readers of Somerset County Gazette will see among all the reports of how well Somerset's cricketers are doing the publication of the skittles leagues. Those leagues, like the darts leagues, are based around pubs: most pubs have skittles alleys which are about the length of this Chamber and as wide as the area between the red lines, and many people visit pubs to play skittles as part of teams against another pub team. When they are there—

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The Second Deputy Chairman:

Order. I would find it helpful if the hon. Gentleman explained how his remarks relate to his amendment—directly, I mean.

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Photo of John Hayes John Hayes Shadow Minister (Education)

The amendment refers to a report on competitiveness. I appreciate that this may take some time, but could the hon. Gentleman outline the substance and nature of that report? Could he add an element of quantification in his analysis, and could he tell us how the report will be drawn up with reference to whom will it be drawn up, who will be consulted, and what form will it take?

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I am grateful for that intervention. I hope that a wide range of people will be consulted, including skittles teams, publicans, brewers and others. Subsection (6B) of my amendment refers to

"(a) the competitiveness of licenses premises, and

(b) the level of employment in alcohol-related industry".

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Photo of Robert Smith Robert Smith Shadow Deputy Leader of the House of Commons, Opposition Whip (Commons)

An important message that the Government have to take on board when it comes to the competitiveness of the alcohol industry is that we should have regard to the export industry that we have built up, in particular on the back of the expertise in the whisky industry. My point relates not just to whisky, but all the spirits industries that have grown up in Scotland on the back of the whisky industry. The export industry depends on access to other markets, and if our own Government are penalising the product at home, it is much more difficult to argue about opening up markets abroad.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

My hon. Friend is a champion of the industry and makes the point perfectly.

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Photo of Peter Bone Peter Bone Conservative, Wellingborough

Before the hon. Gentleman concludes his opening remarks, could he explain subsections (6A) and (6B) in his amendment? I am trying to make up my mind whether to vote for it. Would subsection (6A) restrict Parliament's ability to reduce duty? It seems to say that we could not reduce it in the next three years. I would like his views on that.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

That is an interesting point. I hope that the review would consider it and make recommendations. I am sure that the Exchequer Secretary to the Treasury could, if she was so minded, say that the reason why the Government wish to oppose the amendment was that they had had a complete change of mind and were upset that the amendment would restrict their ability to cut duty in future years. That would give me a good reason to withdraw it.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I was keen to get on to the impact on brewers, but I give way to the hon. Gentleman.

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Photo of Brooks Newmark Brooks Newmark Opposition Whip (Commons)

I have just one supplementary question to those asked by my hon. Friend Mr. Hayes. He asked a number of important questions about proposed new subsection (6B), but another important question is how much the report that Mr. Browne proposes to compile will cost the taxpayer.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I think that the cost will be considerably less than the cost to the taxpayer of the industry continuing to suffer as it does, due to the number of pub closures and the number of other licensed establishments affected. Of course, the precise cost would depend on how many people were consulted. I think that the consultation should be broad, because there are so many groups affected by the issue, including those responsible for postal services and Rotary clubs that meet in pubs in my constituency. In the grand scheme of things, the cost is tiny compared to the huge social impact that is felt when the sector is under threat.

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Photo of Philip Davies Philip Davies Conservative, Shipley

The hon. Gentleman glossed over the question asked by Mr. Todd, who made the point that if duty went up equally on the alcohol in supermarkets and the alcohol in pubs, pubs would be at no competitive disadvantage. Does Mr. Browne agree that whereas pubs sell only alcohol, and therefore have to increase the burden on the customer when duty goes up, supermarkets sell many products, and so can occasionally absorb the cost of increased duty to keep prices low and attract people in? It therefore affects pubs disproportionately when duty goes up on beer.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

The hon. Gentleman makes a fair point. I do not want to stray too far, but there is also a difference between pricing a product competitively and deliberately selling it at less than the cost price to drive competitors out of business. That is a legitimate point. I tried to give a comprehensive answer to the question asked by Mr. Todd, who was insufficiently interested to turn up at the beginning of the debate. What I said was that the impact was experienced differently in different sectors. I thought that that was the case 10 minutes ago, and I still think that it is the case.

Before I conclude, I want to deal with the effect on brewers, because Members who are not as familiar with Taunton Deane as I am may not know that there are four distinguished beer brewers in my constituency.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Cotleigh Brewery, which is based in Wiveliscombe—its leading beer is tawny beer, which I strongly recommend to anyone who visits the area; Exmoor Ales, which is also based in Wiveliscombe, and is the producer of the award-winning Exmoor gold; Taunton Brewing Company which, confusingly, is not in Taunton, but has a brewery in the village of West Wagborough in my constituency; and Quantock Ales which, confusingly, is not in the Quantocks but is on the edge of Wellington in an area called Chelston. All four brewers are much appreciated and valued by people in my constituency. The first two—Cotleigh Brewery and Exmoor Ales—have about 10 employees each, so they are not insubstantial operations. The second two are much smaller businesses—they employ only one or two people. As I said, Cotleigh Brewery and Exmoor Ales employ about 10 people each and produce well over 1 million pints of beer a year, which are widely sold in pubs throughout Somerset and the south-west, Dorset and Devon.

Not only are those breweries significant local employers but they are part of the heritage and fabric of the community that I represent. The first two breweries are based in Wiveliscombe, which has a population of just over 2,000, and has a brewing tradition that goes back hundreds of years and is intrinsic to the town's character. Not only do those breweries produce excellent beers that people in my area enjoy drinking either in bottled form from shops and supermarkets and pubs but they contribute just as much as the pubs to the character of the area that I represent. Moreover, as the comments from Visit England show, they contribute to the overall character of the country. I am sure that many Members enjoy, as I do, different drinks depending on where they are in the country. If I visited Yorkshire, there are excellent beers and other drinks in Yorkshire that I would—

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The Second Deputy Chairman:

Order. Will the hon. Gentleman direct his remarks to his amendment? These are serious matters for people involved in these industries, and he ought to concentrate on his amendment.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Thank you, Sir Michael. I was seeking to be serious, and I shall conclude.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Yes, but I shall first explain just how many different areas of public life in this country are taken up with alcohol-related sales and production, and quite how profound the impact of Government increases in duty over and above the rate of inflation will be on all those individuals and sectors of society. It is important that a report of the type envisaged in amendment 10 is conducted before further increases are introduced. It is quite wrong for the Government to proceed blindly in increasing duty on alcohol, which has had a profoundly adverse impact on many people in the past, without their being fully aware of the consequences for all those different people.

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Several hon. Members:

rose —

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I wonder whether it would be better for Members to make speeches.

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The Second Deputy Chairman:

Order. If the hon. Gentleman is encouraging other Members to make speeches, given the time available, perhaps he would like to conclude his own.

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The Second Deputy Chairman:

Perhaps after giving way, the hon. Gentleman will conclude his speech.

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Photo of Philip Davies Philip Davies Conservative, Shipley

I very much support the hon. Gentleman's comments about the importance of breweries. The recently established Saltaire Brewery in my constituency is thriving. It supplies local pubs, virtually exclusively. If the duty on beer and alcohol puts some of those pubs out of business, the hon. Gentleman will have been absolutely right to stress that that will be devastating not only for those pubs, their customers and the local communities, but for the small breweries that rely on those pubs to supply their wares.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

The hon. Gentleman has summed up my case perfectly and eloquently. I fear that the Government are on the wrong side of this debate and I hope very much that hon. Members, including Labour Members who have their constituents' interests at heart, will unite in support of amendment 10.

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Photo of John Redwood John Redwood Conservative, Wokingham

The amendment invites us to change clause 11. The substance of the argument, as we heard in that interesting opening, is that the increases in duty proposed by the Government are too high and could damage jobs and the industry. An alternative mechanism is proposed for further review so that there would be no further increases in the duty rates unless and until we had taken proper advice about their impact on jobs. That has a lot to recommend it, and I look forward to hearing what my party's Front Benchers think about it.

When the Minister responds, it would be helpful if she explained a little more about the workings of the increases and the escalator in clause 11 so that we can judge what account, if any, the Government have taken of the impact of these high and rising duty rates on the business and why she might think that another proposal is not necessary.

In the explanatory notes to the Bill, we are told that clause 11 increases the duty by a nominal 2 per cent. However, if we look at what the clause actually says, we see that, for example, the standard rate of duty on beer is to rise from £14.96 to £16.47—a rise of a little over 10 per cent.

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Photo of David Taylor David Taylor Labour, North West Leicestershire

The right hon. Gentleman is well known for his erudition and knowledge about a whole range of issues. To back up the comments that he is making, will he tell the House how much a pint of beer is at his local pub? When did he last buy one?

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Photo of John Redwood John Redwood Conservative, Wokingham

Sir Michael, I would be wandering far wide of the amendment if I were to go into all my drinking habits. I do not see this as an opportunity to take the hon. Gentleman on a conducted tour of all the pubs in Wokingham, although he can rest assured that I fully support my local pubs—just as he supports his, I am sure.

My argument relates to the impact on the national picture of these duty rates. I take the hon. Gentleman back to where we were. I was pointing out that the standard rate of duty on beer shows an increase of more than 10 per cent.; I appreciate that there are VAT changes as well. There is also an increase in duty per hectolitre on sparkling cider from £188.10 to £207.20, also an increase of more than 10 per cent. The duty per hectolitre on non-sparkling cider whose strength exceeds 7.5 per cent. also increases, from £43.37 to £47.77—again, a rise of more than 10 per cent. The rate of duty per hectolitre in any other case increases from £28.90 to £31.83, which is yet another increase of more than 10 per cent. It would be useful if the Minister took us through her figure work to give us some idea of what, over the period covered by the amendment, the Government have in mind under the alcohol duty escalator that they are designing.

The structure of clause 11 also reminds us that there are large steps up in duty on categories of wine, depending on whether it is sparkling and on its alcoholic strength. There is a duty increase of about 40 per cent. between wines of 3.9 per cent. strength and wines of 4.1 per cent. strength. There is more than a doubling of the duty if the strength goes up from 5.4 to 5.6 per cent. For some reason, sparkling wine in the 5.5 to 8.5 per cent. bracket is slightly cheaper than the equivalent non-sparkling wine, but for sparkling wine with a strength of more than 8.5 per cent. there is an increase of some 30 per cent. in duty over the standard amount. That does not seem to be particularly tidy or fair, and it will mean different impacts on different elements in the industry. Some people feel that duty is becoming penal at the higher levels, and there is no necessary correlation between drinking too much and the strength of the drink. On some occasions, people are much more careful with stronger drinks, for obvious reasons, and one has to be a little careful about the gradations.

We need some background on how these duties are tabled. Without a better explanation of why they are fair and just and related to wider social aims, it seems attractive on the surface that there should be a pause in the escalator and a proper review of its impact.

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Photo of Bob Spink Bob Spink Independent, Castle Point

Does the right hon. Gentleman think that one problem with the Liberal amendment is that it would prevent any decrease in, or indeed the removal of, the escalator over the next three years?

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Photo of John Redwood John Redwood Conservative, Wokingham

I think that latecomers should refrain from making comments that have already been made by hon. Members who have decided to take this rather more seriously. As you rightly reminded us, Sir Michael, it is an extremely serious issue for a very large number of businesses and constituents throughout the country. We have all been impressed by the energy of those who are desperately trying to save their industry and their local pubs. They have been to see us here in the Palace of Westminster, they have been to see Ministers, they have sent a great number of e-mails and personal correspondence, and they have often been to Members' constituency advice surgeries. It well behoves anybody in the House not to try to turn this into some kind of knockabout but to see that it involves big issues about jobs, prices, communities and ways of life that matter a great deal to our constituents.

As we have heard—I do not wish to bore the House by repeating it—a point can be reached where an increase in taxation can suddenly tip over into doing far more serious damage. My worry is that we are reaching that point against the background of recession. It may well be that in more normal years there was agreement across the House that there needed to be a certain level of duty, or even an increase in duty, for health or revenue-raising reasons. However, against the background of great pressure on the economy, a squeeze on many people's incomes, a squeeze on company cash flow, and businesses experiencing difficulty in raising from the banks working capital or money for their wider purposes, the Government should pause to reflect on whether this is the appropriate moment to introduce such a tax increase and whether they have done a proper study of what impact it may have on jobs and individual businesses. We have already heard examples of small brewers who could be knocked sideways if demand fell too sharply, and we all know of pubs at risk in our own constituencies and in the wider country.

I am also concerned about the impact on prices. It is dangerous to be as cavalier as the Government appear to be about the inflation risk. One of the attractions of the Liberal Democrat amendment is that it is trying to create a pause in the rate of increase of this particular set of prices in our economy. I find it extremely worrying that at a time when output is falling precipitately, and when redundancies and unemployment are soaring, as we are tragically seeing again today, with about a quarter of a million extra unemployed so far this year—an alarming development—we still have price inflation, on the Government's preferred measure, of about 3 per cent. Although there is clearly a lot of deflation in the system, there is still quite a lot of inflation as well, part of which is on imports. That is certainly true in the drinks industry, because wines and so forth are imported from much stronger currency areas and the devaluation, along with the increased duty, is increasing price tensions.

However, the price tension is not due to that alone; it is also due to the impact of Government action. The Government have to be very careful about the impact on price inflation of duty hikes and other tax rises, at a time when incomes are not going up at all in many cases, and when some people's incomes are falling because bonus payments have been removed, or because people are doing only three or four days' work a week, or missing one week in four or whatever.

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Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North 11:00 pm, 12th May 2009

Does the right hon. Gentleman not accept that the depreciation of the pound or the appreciation of the euro, however one likes to look at it, is actually of benefit to the economy? We are starting to see a turnaround in our chronic balance of trade deficit, and demand is being directed towards domestic producers of other things. That is helping employment and the economy. Is the depreciation of the pound not a very good thing indeed?

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Photo of John Redwood John Redwood Conservative, Wokingham

We must be careful not to make this a wider economic debate, and we have dealt with that matter in such debates. I have always said that devaluation should help domestic manufacture relative to overseas manufacture and should start to make some correction to the balance of payments. However, what we are concerned about this evening is the sectoral impact of a particular tax increase on the jobs and prosperity generated by the alcohol and entertainment industry. I am adding that point that inflation is also harmful, and there is a double whammy of inflation in the alcohol sector. That is coming partly through the sterling effect, to the extent that drinks are imported, but more importantly there is a direct inflationary impact from the measure that we are discussing this evening. We are also discussing the attempt to prevent future increases, at least for a period pending further review, as suggested in the amendment.

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Photo of Brooks Newmark Brooks Newmark Opposition Whip (Commons)

Kelvin Hopkins made an important point about the currency shift when we have a declining currency. The Prime Minister made an interesting observation in 1992 when he was shadow Chancellor, saying:

"A weak currency arises from a weak economy which in turn is the result of a weak Government".

The hon. Gentleman says that a declining currency is good, but the Prime Minister also made an interesting observation about a weak currency.

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Photo of John Redwood John Redwood Conservative, Wokingham

That is quite right, although it takes us into a wider, general economic matter that is not strictly the point at issue in the amendment. The issue that we must consider is the adverse impact of duty escalators on both jobs and prices. The two are related, of course. This is a time when people may be losing a week or two of work a month because a factory is partially closed. They may have lost overtime or one or two days' work a week, or they may even be off work for three or six months because of the temporary closure of big factories, for example in parts of the motor industry. This extra price increase on something that they like to do for relaxation is not good news, and the Government might be underestimating the impact it could have on hard-pressed budgets.

If alcohol costs too much, fewer people will go to the pub. If fewer people go to the pub, it is more likely that the pub will close. The Government will then be fuelling a vicious cycle of driving more people out of work and causing a further reduction in effective demand, which I am sure they do not intend to do. They tell us that they will do whatever it takes to turn this recession around, but this is another case of their taking actions that cannot be helpful, and that in parts of the entertainment and alcohol industry will be extremely damaging. It is wrong for us to ignore or underestimate the power and passion of the lobbying that we have seen in recent weeks.

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Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

I share some of the right hon. Gentleman's concerns, especially about the price of beer. Marston's, the third biggest pub chain, has its headquarters in my constituency. However, will he also take into account the fact that a major input cost, particularly for breweries, is energy, and their energy prices have decreased considerably compared with 12 months ago?

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Photo of John Redwood John Redwood Conservative, Wokingham

Some breweries may experience some benefit on energy, but there may not be benefits on other input prices. For example, I doubt whether their water bills have decreased. Perhaps the news is therefore not as good as the hon. Gentleman thinks, but anything that offers some relief is clearly welcome.

The amendment states:

"No further amendment may be made to" the relevant section of the legislation to which it applies

"within three years of the commencement, unless" a further condition is fulfilled. My hon. Friend Mr. Hands teased out the important point that the amendment unfortunately does not appear to apply to all the types of alcohol we would like it to cover. That may be a slip in the drafting, but it puts hon. Members in a slightly difficult position because we would like to support the whole alcohol industry, not only the spirits sector. I would like the amendment to cover beer, cider and domestically produced wine—that would mean covering all wine—as well as spirits.

Under the amendment, the condition that must be fulfilled before a further increase is allowed is

"that the Chancellor of the Exchequer shall have compiled and laid before the House of Commons a report containing an assessment of the impact of the increases in alcohol liquor duty on... the competitiveness of licensed premises, and... the level of employment in alcohol-related industry, and the House of Commons" would have a chance to consider and vote on the report.

One colleague asked a perfectly good question about the cost of the report. It is right to show concern about runaway public spending, even when it comes down to such relatively small details. However, given the wide range of civil servants, and the substantial recruitment of civil servants that the Government have undertaken in recent years, I hope that existing teams could absorb the task. I am sure that the industry would make any evidence and information available to those compiling the report. I therefore hope that that worry will be allayed if the Government promise to act in a value-for-money spirit and ascertain whether the report could be covered in the normal course of their operations.

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Photo of Peter Bone Peter Bone Conservative, Wellingborough

Assuming that there is a new Conservative Government in the next year and that they want to cut duty immediately so that the people of the United Kingdom can celebrate with gusto, we could not do that if we accepted the provision.

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Photo of John Redwood John Redwood Conservative, Wokingham

My hon. Friend is right to say that we could not do it under the provision that we are considering, but if we are in the fortunate position of having a majority, we could use it to change the law in any way we liked. I am sure that a Government who got better value for money generally and could set lower tax rates would be welcome to the House. That would do more to speed us out of recession than some of the measures that we have considered in other debates.

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Photo of Robert Goodwill Robert Goodwill Shadow Minister (Transport)

Notwithstanding the point that Rob Marris made about energy prices, which have an impact on beer prices, is my right hon. Friend aware that the price of malting barley has been rising in the past three weeks? It is now 25 per cent. higher than it was in the futures market in October, so that will wipe out any advantage from energy prices.

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Photo of John Redwood John Redwood Conservative, Wokingham

I am grateful to my hon. Friend for his expertise in that agricultural sector. I knew that agriculture prices were generally soaring again—because, I suspect, of quantitative easing in Britain and America, which fuels speculative, early moves into commodities, as one might expect from such inflationary actions. My hon. Friend is right to say that it will more than wipe out the possible benefits from energy prices. I was cautious about the extent of those benefits, because they depend on individual brewers' contractual positions—several have long-term contracts, which mean that they do not get the automatic pain or pleasure when market prices move.

As I was saying, the cost of the report is a reasonable cost and one that can be contained by a sensible Government. It would be a good idea to conduct a wider study and get some information about what the impact might be on jobs and prices. Indeed, that would be necessary in order to make an assessment of the impact on employment.

When I tried to tease out the view of the mover of the amendment, Mr. Browne, on the balance of forces that are causing so many pub closures, he said he felt that at the moment price increases could be an important factor. I certainly agree with him that social change is also an important factor. There are people who like to drink drinks other than beer who perhaps associate beer rather more with the pub. There are also people who want to drink their drinks at home or in some other social setting, rather than in the local pub. There are all sorts of social changes under way, which has meant a trend against the pub. However, the hon. Gentleman is right—and many hon. Members agree with him—to say that at this juncture prices could be particularly damaging and that, for a pub or a small brewer, they could be the straw that breaks the camel's back. We know that the rate of pub closures is unacceptably high.

The requirement laid out in amendment 10 is that the report should look into

"the competitiveness of licenses premises," although that should perhaps be "licensed premises". I take that to mean that the report would have to consider carefully the relationship between pricing and demand and the impact of the duty on that pricing. If the Government's idea is a permanent escalator, we will need to think through the compound arithmetic and see what impact it might have. The Government also need to do those calculations to see what impact the change could have on the level of duty collected, because there will come a point at which it is self-defeating.

The amendment also invites the Government to comment on the kernel of the argument being put forward this evening, which is the level of employment in the alcohol-related industry. The industry has different components: it has the producers of alcoholic products and all the people involved in marketing, sales and distribution, but it also has those involved in hospitality and leisure who use alcoholic products as part of a wider offering to the public. That is the feature that has led so many hon. Members to be so passionate about the defence of their local pub trade and their local pubs, as important establishments in suburbs, communities and villages.

When she responds to this debate, I hope that the Exchequer Secretary will understand that the House is responding not just to the amendment before us, but to what lies behind it, which is a very big lobby indeed. That lobby is warning the Government that the industry is particularly exposed and that the Government's revenue-raising actions are increasing the agony that businesses are experiencing generally from the impact of the wonky monetary policy, the credit crunch, and the over-extension and then the sharp withdrawal of credit, all of which have characterised the unfortunate performance of the economy in the past three years.

I hope that the Minister will remember to explain to the House a little more how her clause 11 operates, because that will stand part of the Bill if the amendment is not passed. I hope that she agrees that the increases in the Bill are very large for an economy that, we are told, should be operating at zero inflation. There are also some big steps up in the duty on wine, which do not make a lot of sense to quite a lot of people trying to wrestle with what the Government are seeking to do.

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Photo of Stewart Hosie Stewart Hosie Shadow Chief Whip (Commons), Shadow Spokesperson (Treasury) 11:15 pm, 12th May 2009

Amendment 12, which stands in my name, is about alcohol duty generally, not the whisky industry in particular, although that is an important sector and I may make a number of references to it.

Let me start with the comments of the Scotch Whisky Association about last year's Bill. It said that the 2008 Budget had been greeted with

"extreme dismay...following the Chancellor's decision to raise the duty on Scotch Whisky by a punitive nine per cent.

Distillers said that the Chancellor had effectively abandoned government moves towards a fairer alcohol tax policy, worsening the duty discrimination against Scotch Whisky."

Those sentiments are broadly shared again this year. The association has described the proposed rise, following last year's cumulative 13.5 per cent. hike—the largest rise since the 1970s—as

"a blow to the industry that comes at the worst possible time".

This year's rise has been described by the SWA as a real-terms 5 per cent. rise, and the association suggests that the Treasury is actually likely to see

"lower receipts as the duty rise aggravates already tough market conditions in the UK, the industry's third largest market".

It goes on to say:

"The duty rise sets an unwelcome precedent for other governments around the world who are also seeking to raise revenues."

That matter has been alluded to before.

In general terms, the industry considers this year's rises bad news. They are particularly bad news for an industry that employs 10,000 people directly and 40,000 directly and indirectly in Scotland, and a total of 65,000 directly and indirectly in the UK. It is not only the whisky industry that will be affected but the drinks sector generally, which has already asked the Government to abandon the 2 per cent. above inflation tax escalator on alcohol.

That request has been based in part on the work done by Oxford Economics, which has looked at the effect of last year's 17 per cent. average leap in excise duty and at the implications of the four-year tax escalator. Its five-year study estimates that there will be about 75,000 job losses in the drinks industry. In the teeth of a recession, having a policy that is likely to lead to job losses is foolish. The study predicts that alcohol sales will drop by over 11 per cent. and that tax revenue from alcohol will be £1.6 billion lower than the Treasury originally estimated.

For all those reasons, we need to find a better, fairer, evidence-based way of taxing alcohol. We simply cannot go on with the unfairness in the system that results in a half-pint of beer costing 23.06p in duty and a 125 ml glass 26.75p, while a 35 ml glass of whisky costs 31.7p in duty, especially when all those measures contain precisely the same amount of alcohol. That clearly demonstrates the unfairness in the way in which duty is levied on different forms of alcoholic drinks.

I have not called for the duty rises to be cancelled, although that would be very welcome. However, my amendment 12 calls for the evidence that would allow evidence-based policy making and for the Treasury to tell us by the time of this year's pre-Budget report how much duty is raised from each of the different kinds of alcoholic drink. The amendment also calls for the publication of an assessment of

"the level of alcohol liquor duty required to be levied on each type of drink on an equitable basis based on the alcohol content to generate the same revenue yield."

We need that information in order properly to determine, on the basis of real evidence, how to tax alcohol fairly, across the board, and how to protect the vitally important Scotch whisky industry. Other hon. Members will have their own industries, such as cider houses and breweries. We also need the evidence to ensure that, whatever we do, there are no unintended consequences. I am conscious of the pressures on the brewing industry and the pub trade, but also conscious of the unfairness when it comes to the duty levied on whisky.

For all those reasons—and ignoring the arguments that the Minister made last year about how difficult this might be and how Europe would not let us do it—I think that it is reasonable to ask for an assessment of the duty taken on the different kinds of drinks, and of the level of duty that would be necessary to create equitable taxation in future. With that, I will sit down. I have heard a number of very long speeches today that went all round the houses and missed the point. I hope, Sir Michael, that people will be grateful for a short, concise speech.

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

Order. I am sure that Sir Michael would have been delighted, but he is not in the Chair at the moment.

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

Thank you, Sir Alan. It is a pleasure to follow Stewart Hosie. I shall return to his amendment in due course, but I was greatly entertained and interested by his passionate defence of the Scotch whisky industry—so much so that I thought that amendment 10 had actually been tabled by the Scottish National party. We are, of course, speaking to the Liberal Democrat amendment, which is designed to freeze spirit duty only, while allowing beer and cider duty to continue to rise.

It is also a pleasure to follow my right hon. Friend Mr. Redwood, who spoke, as always, with a great deal of sense. I look forward to the Minister's explanation of the duty figures and to her response to his question about the tipping point, the revenue-maximisation point and other issues facing the industry.

In speaking to his amendment, Mr. Browne recovered well after a difficult start, but it is worth repeating that the amendment says that he will freeze only spirit duties for three years, while he seems quite happy for the above-inflation increases to continue for wine, beer and cider.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I caution the hon. Gentleman about failing to see the wood for the trees. I made it extremely clear in my speech—I do not think many would accuse me of not speaking for long enough—that I am very keen to help those producing beer, cider, wine and other alcoholic drinks. If he feels that the amendment is not drafted satisfactorily, I regret that he has not tabled a better-drafted one, as I would not wish to let the Government off the hook by his splitting hairs on this issue, when it is very clear that I wish to represent alcohol producers as a whole.

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

The hon. Gentleman raises an interesting point. Although I am relatively new to the Finance Bill, I did not believe that it was possible to table an amendment to an amendment, so I am not sure how I could have tabled an amendment to his amendment. It is important to be clear about what we are discussing and amendment 10 deals only with the spirits industry, but I appreciate the spirit in which the hon. Gentleman says that he actually means the whole industry. I will try to move on from that.

The only other thing I would say about the amendment is that it is also clear that no reduction in duty would be possible until such time as the report is presented—a point made very ably by my hon. Friend Mr. Bone and, albeit some hours afterwards, by Bob Spink, who in his customary fashion has been in and out rather quickly. Having said all that and having listened to the speech of the hon. Member for Taunton, I agree with the great majority of what he had to say about the issues facing the industry.

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Photo of John Hayes John Hayes Shadow Minister (Education)

I know that my hon. Friend is anxious to move on, but it would be remiss of him not to say something about the relationship between this amendment and the Intoxicating Liquor (Licensing) Bill of 1872, for much of the same argument was used then as was heard in the Chamber this evening. The issues that Mr. Browne articulated with such style and eloquence about the relationship between licensing and the ability of grocers to sell alcohol more cheaply than licensed premises are directly pertinent to the amendment.

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

As ever, my hon. Friend makes a telling point, dwelling on the history of many of these issues. I look forward to hearing the Minister's response about that Bill and its impact.

The amendment is wide ranging and talks about reaching

"an assessment of the impact of the increases in alcohol liquor duty on... the competitiveness of licenses premises, and... the level of employment in alcohol-related industry".

I intend to speak around most of those issues this evening.

One of the main reasons for my speaking tonight is that I am going to outline why we voted against this year's rises in alcohol duties. We see them as blanket rises that hit all consumers, without making any attempt to curb problem drinkers. There are also significant holes in other aspects of Government policy. For example, while Labour's alcohol duty escalator appears still to exist, it does not seem to apply when the retail prices index is negative. We were told that the escalator was there to provide stability, but that stability went within a few months with the new duty rises in the pre-Budget report, and stability and certainty have been eroded further in the Budget.

We must ask whether the RPI measure looks forward or backward. We must also ask what will happen to alcohol duty when VAT goes up next new year's eve as "Auld Lang Syne" rings out. Earlier, I think that we heard a concession from the Financial Secretary, who suggested that the change might be made in the early hours of new year's day rather than on new year's eve. A further question is whether the Government's huge duty rises are a result of health concerns or of a desperate effort to plug the gaping hole in the public finances, or perhaps a little bit of both. However, I thought that first we should conduct an examination of exactly what has happened over the last 14 months in relation to alcohol duties.

When the Government introduced their duty escalator at the last Budget, they raised duty by some 6 per cent. across the board. It rose again by 8 per cent. when VAT was reduced in the PBR, and we have a further increase of 2 per cent. across the board in this year's Budget. Over two Budgets and the intervening PBR, duty on a typical pint of beer has risen by 8p in a year. A bottle of wine now carries duty of £1.61, compared with £1.34 previously. That is an increase of 27p.

Spirits are up. A bottle of gin carries 82p more duty, and a bottle of whisky carries an additional 86p—although without the Government's embarrassing U-turn in the PBR, the amount would have been even greater. Cider and perry are also up, as is champagne—which does have some impact on the Treasury, judging by last year's photographs of large-volume deliveries to it and to other Government premises on and just off Whitehall.

Let me first outline some of the current health concerns about alcohol and their relevance to duty and then to the problems facing the sector, before examining the Government's recent record and setting out some of the Conservative solutions. Health issues have been and will be a key part of the debate. There are 37 million responsible drinkers in the United Kingdom, but there are also about 3 million adults who have some form of alcohol dependency and another 8 million who have some kind of alcohol-use disorder. That is the picture among adults, but under-age drinking is a problem that is often highlighted as well. A tenth of final-year primary school children at least say that they drink regularly, and the number rises to 45 per cent. of 14 to 15-year-olds. I understand that, in this context, "regularly" is taken to mean at least weekly. A fifth of 10 to 15-year-olds say that they get drunk regularly. In 2005-06, more than 1,400 children under 14 were admitted to hospital in the United Kingdom as a result of conditions caused by alcohol abuse.

We all know that alcohol is a major contributor to crime and antisocial behaviour. Half of all violent crime is drink-related. It probably happens in every one of our constituencies, and it is probably happening now, at this late hour. One of the interesting aspects of being an inner-London Member of Parliament without a second home to return to in the evening is leaving this place after a 10 pm vote and arriving at Fulham Broadway tube station between 10.30 and 11 pm. The scene is not yet in full swing, but the thumping music makes the whole street vibrate. Drunken youths are already marauding, and on some occasions fighting has started. That is one of the many reasons why Hammersmith and Fulham council is clamping down on late licences, as far as it can under Labour's disastrous Licensing Act 2003. It was the first council in Britain to pay for 24-hour beat policing teams in both Fulham Broadway and Shepherd's Bush town centres.

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Photo of John Hayes John Hayes Shadow Minister (Education)

I am delighted that my hon. Friend is making such a strong case for the link between alcohol and lawlessness. If the Minister had studied the 1872 Act and the debate on it in more detail, she would know that the same argument was used in the debate on then.

"The testimony on all hands was as strong as testimony could be that every advancing hour of the night brought with it an increasing ratio of drunkenness...something like from 43 to 45 per cent. of the drunkenness occurred after 11 o'clock".—[ Hansard, 11 July 1872; Vol. 212, c. 965.]

That was what was said then, linking it directly to crime and disorder—a link that my hon. Friend is making now.

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

My hon. Friend makes an important point. It is worth mentioning that the problems I have just outlined, and of which we are all aware, are not new problems, but problems that have been with us for some time. That does not abrogate the Government's responsibility to do something about them, however, and I shall outline how we might be able to use the duty regime to do something.

There are, of course, other effects of alcohol abuse. Since the 2003 Act came into force, there has been a 25 per cent. increase in violent crime reported between 3 am and 6 am. I do not have up-to-date figures on the impact of alcohol on domestic violence, but we are all aware from our constituencies that there is a strong correlation. These are serious problems. It in no way downplays their severity to note that they involve a small minority of drinkers. It would also be wrong to put them entirely at the door of the industry, which is taking action of its own, although it could, and should, be doing even more.

First, let us take a look at the condition of Britain's fragile drinks sector.

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Photo of Mark Todd Mark Todd Labour, South Derbyshire 11:30 pm, 12th May 2009

Does the hon. Gentleman agree that disorder is rather less likely to emanate from the supervised environment of a public house than from off-licence sales of alcohol, freely distributed to those who may drink it in the street, and distribute the packaging all over the road?

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

I thank the hon. Gentleman for that intervention. He makes the telling point that a well-supervised, well-staffed, professionally run licensed establishment will be able to look after such problems quite well. The real problems, of course, start to arise outside the establishment or later on, which is, again, something the industry has to consider.

Contrary to popular perception, alcohol consumption is falling, and actually peaked a few years ago. The total amount of alcohol sold in the UK fell by 6 per cent. between 2004 and 2008. Consumption per head of pure alcohol per annum is down from a peak of about 9.5 litres in 2004 to about 8.7 litres today, although that is still above the figure of 7.5 litres for 1993. This is not to deny that there are problems in the UK with alcohol consumption, but it goes to show that the sands are shifting. This is not the occasion to digress into a full debate on the healthiness or otherwise of alcohol consumption, as we are, after all, looking at the effect on licensed premises, but we need to strike a careful balance between the interests of the great majority who drink in sensible moderation as against addressing the people who abuse alcohol and are responsible for mayhem and disorder in our town centres, not to mention issues such as domestic violence and the expense caused, to low-income households in particular, by dependency and addiction.

Beer consumption peaked in 1979, and since I left university in 1989 beer consumption in pubs has halved. I am not for a moment suggesting a link between those two facts, but that does put into perspective how quickly this sector has changed. This is not a plea to reject the zeitgeist and return to a golden age of cricket and warm beer in our local pub, but we need to recognise that the competitive environment facing pubs is, in many places, difficult.

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Photo of David Drew David Drew Labour, Stroud

As someone who admits to being a teetotaller, may I say that pubs could be much fairer by recognising that there are people who do not drink alcohol and by not charging the outrageous mark-up that they put on non-alcoholic drinks for those of us who like to go into pubs but do not want to drink alcohol? Does the hon. Gentleman agree that if we were to address such issues, we could change the whole debate?

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

I am not sure that I quite agree with that. There is a limit to how much soft drink prices can be regulated, and I would be slightly nervous about suggesting there should be such regulation. I share the hon. Gentleman's frustration, however; when I am out with my wife, who rarely drinks alcohol, she constantly talks about how expensive an orange juice is relative to the price of beer, in this country at least. That is a fair point.

Beer duty was increased by a staggering 17.8 per cent. last year, with two big increases in the space of just nine months. UK pub beer volumes have fallen by 9.3 per cent. in the past 12 months. The proportion of beer sold through the off-trade has risen from about 10 per cent. in 1979 to just under 50 per cent. today, and the trend is accelerating. The rate of decline in beer consumption overall, across both on and off-trades, which is clear over 30 years, is accelerating. According to the British Beer and Pub Association, between March 2006 and March 2007, consumption fell by some 600,000 barrels, between 2007 and 2008 it fell by 1.1 million barrels—that is about twice the rate—and between 2008 and 2009 it fell by some 2.2 million barrels. It seems that almost every year the rate of the deceleration of beer consumption doubles. We are down to a level where just 28.6 million barrels are consumed, across both the on and off-trades and covering all types of beer.

Meanwhile, wine consumption fell for the first time this year since records began. According to the World Health Organisation, in 2003 the UK's overall alcohol consumption level was only just above the EU average and was about the same as that of Switzerland and Portugal. The UK will have fallen further down that league table in the five or six years since. Again, that is not to say that this country does not have a problem with alcohol consumption, because it does, but it is worth remembering that consumption has decreased and the type of consumption is changing. These figures show that our problem is less related to overall volumes of consumption and more related to the types, patterns and, especially, the effects of alcohol consumption. In 2003, the UK's consumption per head was already lower than that of either France or Spain—countries that many of us would view as having a more responsible attitude and approach to drinking in general. All that implies that the overall volume of consumption in this country is not necessarily the problem.

A recent study that Oxford Economics published in 2008 forecast that, with Labour's alcohol duty escalator in place at retail prices index plus 2 per cent., the sales volume will fall by between 11.5 and 12.4 per cent. over the five financial years following the 2008 Budget. Oxford Economics expects that these rises will

"cost between 75,000 and 80,000 people their jobs."

The decline in alcohol consumption may be welcomed by many in this House, but none of the evidence points to a decline in consumption among problem drinkers. The duty rises are just a blanket increase in expense for the great majority who drink responsibly, and I shall return to that point in due course.

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Photo of Stewart Hosie Stewart Hosie Shadow Chief Whip (Commons), Shadow Spokesperson (Treasury)

Is the hon. Gentleman saying that although price may be a factor in, and its use a tool to control, problem drinking, he does not see duty being part of that? Does he think that instead another mechanism unrelated to duty such as minimum pricing in supermarkets could be used?

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

The hon. Gentleman makes a telling intervention. Obviously, price is an important determinant of consumption patterns, but the one way in which the Government can increase price directly is through duty, and I shall suggest how we might be able to do that in due course.

I wish to discuss the number of pubs and bars in England and the commercial pressures that are being put on them, which have been mentioned by a couple of hon. Members. There are some 57,000 pubs and bars in England and Wales, which, according to the Association of Licensed Multiple Retailers, have a combined annual turnover of approximately £25 billion, which is equivalent to about 2 per cent. of our GDP. More than 500,000 people are directly employed in the industry—about a third as bar staff—which is more than are employed in construction, agriculture and mining put together. According to ALMR, a third of pub revenue goes to the Exchequer in alcohol and gaming duties. Additional revenues are generated through VAT, PAYE and other local and national taxes, so the typical pub contributes about £155,000 per annum to the Treasury.

However, the number of pubs is falling. More than 4,000 have closed since 2004, pre-dating the start of Labour's recession. The trend is now accelerating, with more than 3,000 of those closures taking place in the past two calendar years. What was a closure rate of five a week between 2004 and 2007 has become 40 a week in 2008. What was the weekly closure rate just a couple of years ago has become the daily closure rate.

It would be unfair to blame alcohol duties exclusively for that trend. Labour's Licensing Act 2003 must also bear part of the blame, as must the increased competition from supermarkets and the smoking ban.

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Photo of John Howell John Howell Conservative, Henley

Does my hon. Friend agree that today's debates will also affect those businesses? We have debated corporation tax for large and small businesses, and the VAT decrease and increase. The alcohol duty increase is just the last in the chain. By design or accident, there is a direct causal link with everything that we have debated today, and it is all coming together to affect this industry.

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

My hon. Friend makes a powerful point. He has spoken well in all four of the debates, and he ties together the overall impact of Labour's mismanagement of the economy with reference to the beer and pub industry.

The pub and bar trade is under pressure elsewhere too. A couple of weeks ago I was delighted to be hosted by my right hon. and learned Friend Mr. Ancram and my hon. Friend Dr. Murrison to see at first hand how town and village pubs were coping. I say that as someone who represents an inner-London constituency. Perhaps I should get out a little more. One of the most striking aspects was being shown the entirety of the documentation that a pub operator or landlord needs to complete when opening, and again each year, even before a single pint is sold. According to the industry, publicans spend an average of eight hours a week dealing with paperwork, and one in five gives red tape as a reason for becoming uncompetitive. According to ALMR, which represents large parts of the pub and bar industry, the average running costs of a pub are some 51 per cent. of turnover, even before rent and the cost of sale are taken into account. Employment costs have increased—

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Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

The hon. Gentleman makes a powerful case for voting down amendment 10, which calls for research into the competitiveness of licensed premises and the level of employment in alcohol-related industries. Judging by the hon. Gentleman's speech, he appears to have done all that research already. Will he confirm that he will vote against the amendment?

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

I thank the hon. Gentleman for that intervention. It is fair to say that we will not vote for amendment 10, for many of the reasons that I have already outlined. It does not really make any sense and has many flaws. As for pre-judging any report, I have certain views about the overall trade, which are shared by many hon. Members on both sides of the House.

On my visit to Wiltshire, I looked at the problems facing licensed premises and the levels of employment in alcohol-related industries—

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Photo of Brooks Newmark Brooks Newmark Opposition Whip (Commons)

I invite my hon. Friend to come to Braintree, which is a bit closer to London. My constituency is semi-rural and contains more than 40 villages. The pub is the heart and soul of many of those villages, but Labour's policies are destroying them, one by one. That not only costs jobs, but affects the whole nature of the village. Many of the villages in my constituency no longer have pubs, when they did have them five years ago.

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury) 11:45 pm, 12th May 2009

My hon. Friend makes a powerful point. I would be delighted to accept an invitation to go to Braintree. I feel from looking at the statistics that I mentioned earlier that it is likely that the picture that he paints is being repeated all over the country.

According to the industry, publicans spend an average of eight hours a week dealing with paperwork. One in five blamed it for their becoming uncompetitive—it represents 51 per cent. of turnover. Employment costs have increased by almost 59 per cent. over the past decade and ALMR is calling for the 0.5 per cent. rise in national insurance contributions next year to be scrapped—

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The Chairman:

Order. I must remind the hon. Gentleman of the terms of the amendment. It excludes that particular point. It is about the impact of the increases in alcohol liquor duty, rather than the other matters that he is now describing.

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Photo of Tobias Ellwood Tobias Ellwood Shadow Minister (Culture, Media and Sport)

On a point of order, Sir Alan. In the previous clause that we debated, it was considered that clause stand part would be discussed as well as the detail of the amendments. Will you advise us on whether the same rule applies to this clause?

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The Chairman:

The ruling that I have made is in connection with the terms of the amendment that we are discussing, which is about the impact of the increases in alcohol liquor duty on various matters. Those are the terms of the amendment and those are the guidelines that we must follow for debate on this amendment. If other matters arise later on, I can deal with them then. As far as this amendment is concerned, I hope that Mr. Hands will observe what I am saying.

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

I shall certainly try my best, Sir Alan [ Interruption. ] I shall do more than my best.

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Photo of John Redwood John Redwood Conservative, Wokingham

Although I can understand my hon. Friend's reluctance to vote for the amendment, because it will not address the issues that we want to address—the beer problem and the pub problem—will he issue a strong warning to the Government, as many of us would like him to do, that their policies are doing untold damage to the pub and licensed trades and that they really ought to think again?

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

We are; that is what my speech is all about—the fragile state of the industry and the damage that is being wrought on it by the Government.

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Photo of John Hayes John Hayes Shadow Minister (Education)

You have guided us to the exact issue of the amendment, Sir Alan, and it makes specific reference to the relationship between duty and competitiveness and the survival of the industry, as my hon. Friend has made clear. If we are not going to vote for the amendment—I will be guided by my Front Benchers, of course—should not the Government at least conduct some sort of thorough research such as that which my hon. Friend is articulating and that which is argued for in the amendment?

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

My hon. Friend is absolutely right. More research needs to be done and the Government should be aware of all these issues and their impact on the industry.

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Photo of Peter Bone Peter Bone Conservative, Wellingborough

I gather that my hon. Friend is referring to subsection (6B) of the amendment, which concerns the competitiveness of the industry. I have obviously not decided how I will vote on the amendment, but is not the crux of his argument that we do not need this report about the competitiveness of the industry because we already know the situation?

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

Yes. I think that we are aware of most of the problems facing the industry. I would not be opposed to a further study but we need action now rather than awaiting such a study.

The drinks trade and pub businesses are vital employers. According to the Oxford Economics study, some 31,000 people are employed in the UK in drinks manufacture. I shall try to relate this point to duty. Just over half are employed in producing beer, some 35 per cent. in producing spirits, 6 per cent. in producing cider and wine and the 6 per cent. remainder in producing other drinks. Much of that employment is in rural communities, where other jobs on offer are limited. It helps to sustain them, as my hon. Friend Mr. Newmark and others have noted. People involved in beer production in England and Wales are 50 per cent. more likely to live in a rural community than the national average for those in employment overall.

The breweries are doing no better. I am in constant correspondence about duty levels with Fuller, Smith and Turner, which is located just outside my constituency and makes the excellent London Pride beer. I mentioned that I was in Wiltshire with some colleagues a few weeks ago, and we went to the Wadworth brewery in Devizes to see at first hand how one of Britain's medium-sized firms was faring under the big increases in duty. It is surviving, partly thanks to the quality of products such as 6X and some of the lighter brews.

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Photo of Tobias Ellwood Tobias Ellwood Shadow Minister (Culture, Media and Sport)

My hon. Friend is making a powerful argument about the level of duty. The duty hits the breweries. They were told that it would be only temporary and that it would act as an offset to the VAT cut—which was also supposed to be temporary. However, the Government have not said that because VAT is about to head back up, alcohol duty will head down again.

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

My hon. Friend makes a powerful point, which highlights how much duty has risen in the past 14 months and the appalling effect that that is having on our breweries and pubs across the country.

Since 1997, under Labour, the following big breweries have closed down part of their operations in certain towns—Brakspear, Ruddles, Morrells, Whitbread and Young's. Other names have disappeared entirely from the scene.

How will the industry survive the recession? I do not have statistics for previous recessions, but I recall reading or hearing that the pub trade suffered a great deal but was still more recession-proof than some sectors. That might well no longer be the case: an interesting survey by YouGov showed the entertainment that households expected to cut down on as the recession bit into their budgets. The least affected things were TV subscriptions, gym memberships and the hiring of DVDs, but two of the three biggest losers were going to pubs and eating out.

The Oxford Economics study published in December 2008 examined the direct impact of the Budget and pre-Budget report measures on the pub sector in 2008-09. It also estimated the measures' impact over the next five years, with the escalator in place. The study said that the cumulative loss thanks to the duty escalator in sales and economic activity would amount to 16.7 million barrels of beer, or 4.8 billion pints. It also said that more than 59,000 jobs would be lost in the beer supply chain, and that overall tax revenue, including duty, VAT and employment taxes, would fall by some £79 million.

Beer is part of Britain, and it is most popular among lower and middle income groups. Interestingly, people with manual or routine jobs drink less overall, but they drink 50 per cent. more beer than the managerial classes, and the figure is even higher for cider. The impact of the big duty rises has been felt in urban constituencies, but not as much as in the rural or suburban communities where pubs are more integral. That struck me most clearly a fortnight ago in the village of All Cannings outside Devizes. The King's Arms is the village's main amenity and it is in good health, but many other pubs are not. We need to be aware of that.

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Photo of John Howell John Howell Conservative, Henley

My hon. Friend mentioned the Brakspear brewery, but he may not be aware that the company has decided to freeze prices to keep tenants in business through the year—something that not many companies can do. The pub in the village of Sydenham in my constituency was going to close, but three public spirited inhabitants of the village have used their own money to buy it. Does he agree that pubs like that are the ones most at risk, because they are very vulnerable to any changes that come along?

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

I thank my hon. Friend for that intervention, and I add my congratulations to his constituents in Sydenham on being so public spirited and on realising the important role that village pubs can play in our society. I also commend some of the breweries for keeping a close eye on their pubs and making sure that livelihoods are protected.

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Photo of John Hayes John Hayes Shadow Minister (Education)

Like my hon. Friend, I make a strong case for rural public houses—indeed, just a week ago, I was in "The Bell Inn" in Weston Hills in my constituency attending a "save our pubs" campaign meeting, which illustrated to me the communal effect of pubs. Have the Government conducted a study—there are certainly no background notes—of the wider effect of the trade and its impact on employment and social value in our rural areas? If not, why not?

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The Chairman:

Order. I hope that Mr. Hands will content himself with the satisfaction of knowing his hon. Friend's experience of visiting the pub. The debate on this amendment is not the appropriate place to have a wider debate on the licensed trade, yet that seems to be what we are moving towards. I think that we should move back from it.

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

I thank you for that guidance, Sir Alan.

It is worth remembering that the VAT cut—the Government's much vaunted scheme to inject a bit of life into the economy—which was linked to the big rises in duty in the pre-Budget report, provided almost no benefit to pubs and breweries, because the VAT cut was netted against all the duty increases. It also caused big problems elsewhere, costing businesses a huge amount when making the necessary changes to prices. Industry sources estimate that the changes in autumn—both the VAT cut and the duty changes in the PBR—cost every pub or bar an average of £570, which does not take into account any management or staff time involved. The industry believes that the cost will be the same, or similar, when VAT goes back up again, but this time, it appears that it will not be offset by a reduction in beer, wine and spirits duties.

The wine trade has also been suffering, with sales falling for the first time in many decades. There was a very small fall during the last recession, but the figures are nothing like the present ones. Although it is not alone, it is Britain's beer and pub sector that is under pressure, and many outlets will not survive the downturn.

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Photo of Robert Goodwill Robert Goodwill Shadow Minister (Transport)

My hon. Friend describes the impact of the duty changes on pubs, but does he agree that they will also have a big impact on the traditional working men's clubs in Yorkshire and the north of England? If the Government are not prepared to fight for the rights of those who use those clubs, the Conservative party certainly will.

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

I certainly agree with my hon. Friend, but I fear that if I comment on that, I shall stray away from the purpose of the amendment. Alcohol duties are only one part of the picture, but they are an important part.

On the Government's approach and specific points arising from the Budget and the duty changes, so poorly thought through has been the Government's response to the industry's difficulties that, for the first time, the five UK alcoholic drinks trade associations made a joint submission on this year's Budget on duty levels. Their letter talked about

"spiralling redundancies and short-time working across the alcohol sector and the unprecedented number of pub closures."

Their letter combined two main requests: first, to freeze alcohol duties and, secondly, to withdraw the proposal for the alcohol duty escalator.

I would like the Exchequer Secretary, when she responds, to reflect on whether alcohol duties are close to reaching, or even outstripping, the revenue maximisation point. Given the decline in alcohol consumption in this country since 2004, there is some evidence, albeit perhaps not conclusive, that that point has been reached. The hon. Lady may well say that she is not in a position to give answers to theoretical questions, but I remind her that in the debate on last year's Finance Bill she stated a quite definitive view that tobacco duties had reached the tax maximisation point, saying:

"duty rates are close to revenue maximisation, which is why there has been no greater increase than revalorisation in the Budget." ——[ Official Report, Finance Public Bill Committee, 15 May 2008; c. 221.]

Will she tonight offer a view on whether alcohol duties have reached that point?

I am told that the Treasury model appears to show that the tax maximisation point has been reached or is close to being reached, but I am also informed that many in the industry, at least, doubt the robustness of the Treasury modelling.

As their joint submission showed, producers have felt for some time that the Government are refusing to listen to their concerns and failing to recognise the issues they face. That was most apparent in the pre-Budget report. Now, of course, Ministers claim that the increases in duty were offset by the cut in VAT. I will examine that claim in a moment, although hon. Members who remember the backtracking on whisky will already be sceptical.

The Government's claim overlooks a key distinction: producers pay duty, whereas the retailers pay VAT. I have met wine producers and importers who, safe—or so they thought—in the knowledge that the Government had introduced a duty escalator to enable long-term decision making, had entered into contracts to supply wine to supermarkets and others at a set price. Producers' and importers' margins are so tight that every bottle they produced after the PBR was produced at a loss until the contracts expired months later, as they had not factored in the additional rise in duty in the PBR. As they were the ones who paid duty, they suffered. Meanwhile, they watched the retailers whom they were supplying charge less VAT, but not always a lower price.

The Minister will understand that the claim that the duty increase for producers was offset is held in utter contempt in the industry. We have seen time and again that the Government's failure to consult, and their rush to implement duty changes, produced problems they did not foresee. To promise the industry a three-year horizon of stability, and then provide less than a week's notice of a major change only six months later, perhaps marks a new low in the Government's miserable record.

The VAT cut offset was hardly that, anyway. The PBR suggested that the changes would leave the total VAT and duty on products "broadly unchanged". I suppose that that depends on how broadly one defines the word "broadly", but the whisky increases proved too broad for even Labour's tradition of semantic hair-splitting to spin away. The proposed rise of 8 per cent. in duty on spirits in the PBR had to be cut to 4 per cent. when the Government were forced to admit that they had got their sums wrong. The Scotch Whisky Association, in particular, showed that the rise would have added 47p to a £20 bottle of whisky. The muddle on wine duties that occurred at the same time was never resolved. The increase in duty was supposed to offset the decline in VAT. For wine, that was true only of bottles priced at £6.07 or more, and 92 per cent. of bottles sold in the retail trade are priced at less than £6. That meant that under the PBR four out of five shoppers ended up paying more for their wine as a result of the duty changes and VAT changes combined. The position was not at all neutral for wine buyers.

The Government claimed that when they introduced the alcohol duty escalator, it would bring certainty about future duty rises. After the PBR blunder, this year's Budget has actually added to that uncertainty. Traditionally, the indexation element of any duty rise was linked to the retail prices index that prevailed in the September before the Budget. This year's increase applies the RPI forecast for the September following the Budget. Clearly, that dampens the rise in duty in this instance, but it would be helpful to know whether the Government see that as a permanent change in their methodology; if it is not, the promised certainty on those duties has been eroded yet further.

The uncertainty reached in the industry in the past year beggars belief; there have been hefty duty increases in two Budgets and in the intervening PBR, as well as the introduction of an escalator and a change in the RPI date used for its calculation. That totally throws out the whole certainty argument, which was introduced a year ago along with the escalator. The uncertainty wreaks havoc with pricing, contracts and overhead costs, not to mention the administrative costs of implementing the price changes such as those due on new year's eve. If duty is not put back down when VAT returns to 17.5 per cent., the industry will take another hit. If the escalator is 2 per cent. per annum, why is the industry in practice facing a total rise of 4.5 per cent. in this financial year? That is a critical question that Ministers must answer tonight. At the moment, Labour's escalator appears to contain no certainty whatsoever.

We need to look at what the purpose of alcohol tax is in the first place. After the pre-Budget report, the Exchequer Secretary said in a debate in Committee in January, when these duties were last raised, that taxation was a very blunt instrument with which to deal with a minority of drinkers and that in her view tax did not have a major role to play. She meant to attack Conservative policy, but we believe that the blanket duty increases have far less impact on health than targeted measures directed at problem drinks and problem drinkers. Her comments on duty were also rather at odds with those of her colleagues in the Department of Health. The Minister of State, Department of Health, Dawn Primarolo told the public health conference held by the British Medical Association last year that

"our estimates suggest that higher taxes, if they do feed through to price, will mainly affect the 7 per cent. of the population who drink one third of all alcohol consumed in Great Britain. In England alone, the total number of lives saved up to end of March 2013 will be 3,250 by the Department's own calculations."

My hon. Friend John Howell wanted to know whether there were any Government studies. There was a recent study—the community pub inquiry, by the all-party parliamentary beer group—and the Government's response to it was quite fascinating:

"It is important that any Government interventions reduce harm without impacting unduly on the majority of responsible drinkers".

However, that is exactly what they have done. Their duty rises have clobbered the majority of responsible drinkers. Across-the-board rises hit responsible drinkers, but fail specifically to target problem drinkers or drinking with antisocial consequences.

What other solutions have been proposed? A major controversy is the ability of the supermarkets and the off-trade more generally to absorb the rises in duty compared with the on-trade. France has looked at a scheme to reduce VAT on served food, versus that paid in supermarkets, and has suggested doing the same for the duty paid on served drinks. I would be grateful for a word from the Exchequer Secretary as to whether the UK has been looking at such schemes.

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Photo of Mark Todd Mark Todd Labour, South Derbyshire 12:00 am, 12th May 2009

Would not a differential between cask beer and beer served in bottles and cans have a similar effect?

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

The hon. Gentleman makes an important point. My understanding—I think we will discuss EU regulation in due course—is that that would not be possible under the EU directives. However, I am not entirely sure, and I would be grateful for a word from the Exchequer Secretary, who may be able to give us a more definitive account.

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Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

I may as well deal with that point now. Our advice is that the cask differential is unlawful as the EU directives are currently written, but there is an attempt to see whether we can change that. The hon. Gentleman will know, however, that that can sometimes take longer than we would all hope.

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

That clarification is helpful, but in my experience—as a long-standing member of the European Scrutiny Committee, I do not know how many EU directives we receive every week—it is easy to look at those directives, and pick and choose a little bit from them, but we have to study them and go through them in totality to try to find ways around them to do what we want to do. That is what other European countries have been doing. I would appreciate the Exchequer Secretary's explanation as to whether the UK has been looking at schemes to reduce, for example, the cost of served drinks, which is what the French have done and is a possible way forward.

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Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

Does the hon. Gentleman favour some kind of minimum pricing scheme for alcohol? A great deal of alcohol abuse comes from drinks such as extremely cheap cider—cider that has never seen an apple—that is sold at off-licences and drunk by people who go on to behave antisocially. Does he favour a minimum price for alcohol as a way of addressing those issues?

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

I thank the hon. Gentleman for that intervention. In due course, I shall discuss in detail the Scottish National party amendment on minimum pricing and consider problem drinks such as the type of cider that he mentioned.

I have set out at some length the situation that we face. There are difficult problems, but there are also ways forward.

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Photo of Robert Goodwill Robert Goodwill Shadow Minister (Transport)

Although having differential rates of duty for cask beer and for beer in bottles and cans may be against European Union legislation under articles relating to the single market, surely articles relating to the environment could be used to encourage the use of returnable containers such as casks, rather than bottles and cans, which are generally disposed of in another way.

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The Chairman:

Order. I suggest that Mr. Hands does not develop that point.

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

I thank you for your guidance, Sir Alan. However, it is always good to see colleagues using previous experience. My hon. Friend Mr. Goodwill was a Member of the European Parliament for some time; the Government could learn a little more from those who know more about EU directives, to try to find a way through the maze.

We believe that the structure of taxation needs to be changed. That will not solve every problem, but taxing problem drinks and giving a price advantage to low-strength alternatives will stop the penalising of responsible drinkers. It will also provide a nudge in the right direction. [Interruption.] I am not sure whether the deputy Chief Whip wants to intervene; he is certainly talking from a sedentary position. Would he like to intervene?

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

If I remember correctly, during debates on last year's Finance Bill, the Conservative party tabled an amendment relating to the taxation structure. Why was the decision taken not to table such an amendment this year?

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

The hon. Gentleman is right to raise that interesting question. We still have the policy that we had last year. However, the calculation this year would be different. A revenue-neutral position looking at different percentages of beer would not be the same this year because of the background changes in the overall beer pricing regime. Our policy is very much the same, but we simply have not done the exact calculations this year that were done last year.

The Government's duty increases last year had the opposite effect from what we are considering. Under those increases, problem and non-problem drinks alike went up in price. Since the last Budget, tax on beer has gone up by 8p a pint and tax on wine by 28p a bottle. It is worth pointing out that almost all wine consumed in this country is imported, so Labour's devaluation has added a 30 to 35 per cent. premium on top of that. Meanwhile, duty on a bottle of spirits has risen by about 47p on average.

We want the Government to consider and evaluate a smart alcohol taxation regime, focusing on the drinks most closely linked to problem drinking, such as alcopops and high-strength beers and ciders, and using the proceeds to reduce duties on lower-strength alternatives elsewhere. We should look at what has happened in Australia and Germany, where such approaches have been used to good effect. The Government should seriously consider introducing such reforms here, instead of using health concerns as a cover for a blanket tax rise for responsible drinkers.

There has been some controversy in this country about the German experiment on higher duty rates on alcopops, introduced on 1 July 2004. Like this country, Germany had a real problem with alcopops among teens. Those relatively high-strength drinks were particularly prone to getting youths drunk quickly; the sweet flavours camouflaged the high and bitter alcohol content. Many have said that the tax increases that the Germans introduced did not work, as youths simply switched to other forms of alcohol.

The issue cropped up at some length in debates on last year's Finance Bill. In an attempt to separate fact from fiction, I decided to see for myself by talking to a number of those involved in the changes in Germany; the Government's Treasury team will recall that I maintain a regular dialogue with a number of German politicians. I also studied the reports of the Bundeszentrale für gesundheitliche Aufklärung, the federal institute of health information, and the federal Government's own report about the effects of the alcopop tax law on the consumption of alcohol by youths aged 18 and about the market development of alcopops and similar drinks. I recommend that the Minister look at that report, because she would learn a great deal from it.

The German tax increase on alcopops—we must bear it in mind that alcopop consumption is generally falling, but that alcopops nevertheless remain a problem drink—was quite severe: a whole euro was put on top of the price of a 275 ml bottle. Labour Members' criticisms of the changes during the debates on last year's Finance Bill were partly correct. There was a switch from alcopops to mixed drinks based on beer and wine, but let us look at the figures in terms of pure alcohol drunk. In the year following the alcopop tax rise, wine and beer-based drinks consumption by those aged 12 to 17 rose from 3.9 g per person per week to 5.3 g as a result. By contrast, there was a staggering fall in consumption of spirits-based drinks from 8.5 g per person per week to only 2.2 g. In other words, spirits-based consumption quartered, while wine and beer-based consumption went up by only 35 per cent. In terms of pure alcohol consumed, there was a net change from 12.4 g per week to just 7.5 g. Under the German tax change overall, alcohol consumption by those aged 12 to 17—a very important part of the population whom we do not want to have drinking in general—fell by some 40 per cent., which is a huge success.

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Photo of Rob Marris Rob Marris Labour, Wolverhampton South West 12:15 am, 12th May 2009

The hon. Gentleman has clearly done a huge amount of research that underlines the point I made earlier—we do not need the amendments. I am not much of a scientist, so can he explain why earlier in his speech he was citing comparative figures about alcohol in pure litres, whereas he is now talking about alcohol in grams? I thought that grams were to do with weight, not volume.

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

The hon. Gentleman makes a probing point. I am merely going on the figures used in the German Government's report. If he likes, I can print him off a copy and we can discuss it, but I have not yet converted the figures into units that he might find acceptable.

The German experiment has been a great success, as has the Australian experiment on beer strength, and we should be looking at these options. Various observers have endorsed our approach to tackling problem drinks by increasing the tax rate and giving relief on drinks of a lower alcoholic strength.

I want to mention a couple of problems with the SNP amendment. The SNP is in favour of minimum pricing. A noteworthy feature of its scheme is that spirits would be practically the only drinks not to face steep hikes in duty. In fact, its Justice Minister, Kenny MacAskill, confirmed that last week while touring a whisky distillery—exclusively for fact-finding purposes, I am sure. He said:

"We are very clear that our plans for minimum pricing will not affect this important industry."

If whisky prices do not fall, that can only mean that beer, wine and cider prices will have to rise to compensate.

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Photo of Alan Reid Alan Reid Shadow Minister (Northern Ireland), Shadow Minister (Scotland)

In the present circumstances, whisky and other spirits are treated unfairly compared with beers and wines because the duty per unit of alcohol is much higher. If duty is being imposed for health reasons, it should be based on units of alcohol, so duty on spirits should come down and duty on beers and wines should go up. Is the hon. Gentleman suggesting that spirits should be taxed more highly than beers and wines?

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

The hon. Gentleman raises an interesting point. In general, as I have said, we are in favour of lower duty on lower-alcohol drinks. I do not want to get into more specifics about spirits.

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Photo of Stewart Hosie Stewart Hosie Shadow Chief Whip (Commons), Shadow Spokesperson (Treasury)

The hon. Gentleman is conflating two different issues. The first is duty, and amendment 12 calls for the Government to assess what duty level would be required to have fair pricing based on alcohol content only. The second is minimum pricing, which is a retail issue designed to tackle binge drinking and antisocial behaviour. The two things are completely separate. We are talking about alcohol duty, which is what the amendment is about. Minimum pricing is completely unrelated.

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

I understand what the hon. Gentleman says, but it is still my understanding that if price and duty on whisky are kept frozen, they have to be raised on other drinks. I appreciate that he has a different view.

The official Opposition are not opposed to the kind of study outlined in the Liberal Democrat or SNP amendments, but we are wary of a three-year duty freeze while we await the study. We will therefore abstain if amendment 10 is put to the vote. Secondly, we believe that the pub and drinks industry is in some degree of trouble, thanks in part to various measures introduced by this Labour Government, duty being one of them. Thirdly, we believe that alcohol price, and therefore duty, can have an influence on drinking behaviour. It is clearly not the only influence, but duty and price can play a role in combating some of the negative effects of our drinks culture without penalising the vast majority of responsible drinkers. We need a new approach to these matters, and we on the Conservative Benches look forward to providing it as soon as the Prime Minister is ready to face the voters.

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Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

We have had a debate that has been a bit like shadow-boxing, on amendments 10 and 12, which were tabled by the Liberal Democrats and the Scottish National party respectively. At least they had the courage to get their amendments on the Order Paper. We then had an extremely long peroration from Mr. Hands, who dealt with all the amendments at great length. He thereby proved that amendment 10, which is about doing research, is erroneous, because as my hon. Friend Rob Marris pointed out, as a lot of the research already exists. The hon. Gentleman then said, after all that, that he would be abstaining.

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Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

May I gently suggest to my hon. Friend that it is often better to abstain when it comes to alcohol?

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Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

My own father took the pledge when he was 15— [Interruption.] No, 15, not 50. I have not quite managed to live up to the high standards of his Methodist upbringing. Perhaps we all aspire, at least, to moderation.

Amendment 10 would require the Government to produce a report on the impact of increases in alcohol duty on licensed premises and on employment in the alcohol sector. The Government do not support the amendment. One reason, which has been demonstrated at great length tonight, is that there is plenty of such information already available. As with all tax decisions, the Government will monitor the impact of alcohol duty changes, including on the industry.

Many hon. Members have acknowledged that competitiveness and employment levels in any industry depend on a range of factors. It would therefore be very difficult to identify the specific impact of alcohol duty rises alone, against other factors such as a change in the culture of pubs and their customers and increased competition for leisure time.

The Government value the contribution that pubs make to employment and local communities, although EU tax legislation means that it is not possible to provide tax reliefs targeted specifically at pubs, such as taxing beer sold in supermarkets differently from that sold in pubs.

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Photo of John Hayes John Hayes Shadow Minister (Education)

Does the Exchequer Secretary believe that it is impossible to produce the sort of report that the amendment recommends because of the scope of the research? Leaving aside the argument about whether it is possible to distil the research and make it intelligible to Members, there must be Treasury modelling about the impact of changes in duty, specifically on employment and the other matters that the amendment covers. Will she make that modelling available to hon. Members by placing it in the Library?

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Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

There is always Treasury modelling, some of it based on tax returns, which are confidential and cannot be shared—I am sure that the hon. Gentleman knows that.

The Oxford Economics model assumes that alcohol consumers are significantly more price sensitive than the Treasury model suggests. It fails to account for the fact that increases in the price of one type of alcohol often lead to switching to another. It therefore suggests that if beer sales decrease no other type of alcohol is drunk, which is clearly not true.

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Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

I was about to answer the right hon. Gentleman's questions, but if he must intervene, I shall give way.

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Photo of John Redwood John Redwood Conservative, Wokingham

Why does the Exchequer Secretary think that pub closures have increased so much in recent months?

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Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

There are many reasons why particular pubs might close. Some businesses were possibly never viable and we are also in the middle of difficult trading conditions, as the right hon. Gentleman pointed out. We cannot assume that alcohol excise duties have a direct relationship to the pub closures, as some have argued.

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

Is it not fair to say that many pubs are in trouble because of pub companies charging high rents and because they are tied to buying the beer through those companies? The 2p can make a difference, but the real reason is the prices that the pub companies charge.

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Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

My hon. Friend is a distinguished member of the Select Committee on Business and Enterprise, and a report on the subject is due soon. I look forward to reading it. Clearly, the tie is important and it has been brought to our attention in much of the evidence that we have taken.

The measures that we have introduced to support all businesses also support the British pub. They include enabling pubs to spread payment of this year's inflation uprating to business rates over three years. The business payment support service has already allowed 116,000 businesses to defer more than £2 billion of tax, and that has benefited many pubs. There is improved access to finance for small businesses through the enterprise finance guarantee, which is now available for the first time to tied pubs. There is also support through low cost loans and advice on energy efficiency for small businesses, including many pubs, in order to make savings on their energy bills.

There was much talk of the balance between the on and the off trade in the debate. Many hon. Members know that we cannot charge a different rate of excise duty for the same product if it is sold in a different context. We cannot discriminate by setting a lower duty for pubs than for supermarkets. When alcohol excise rates increase, pubs often put up their prices by 5p. The duty increases are 1p extra on beer this time round, yet the prices in many places are going up by 5p. That exacerbates the difference between the on and the off price of beer and causes difficulty.

I want to spend a short time dealing with the questions that Mr. Redwood asked. He did not seem to know that the national average cost of a pint is £2.51. One can get a pint for £3.20 at the "Westminster Arms" over the road, but the right hon. Gentleman could have bought a pint for 99p at "Gig House" in his constituency from January because Wetherspoon had a special price for beer.

The right hon. Gentleman asked why some of the changes in excise duty were higher than the 2 per cent. announced in the Budget. That is because the Finance Bill, as I suspect he knows only too well, includes the legislation that will put into effect the increases that were introduced in the pre-Budget report, as well those in the Budget.

We have had a good debate. I want now to deal with the points raised by Stewart Hosie in respect of his amendment 12. Amendment 12 seeks to require the Government, before the 2009 pre-Budget report, to publish anticipated yields from alcohol duty and the estimated levels of duty, based on alcohol content, that would need to be levied to maintain that yield. Estimates from the pre-Budget report are available. In 2008-09, spirit duty is estimated to raise £2.4 billion, wine £2.7 billion and beer and cider combined £3.4 billion. Many spirit products produced in the UK are exported and are therefore not subject to UK excise duty. For example, more than 90 per cent. of Scotch whisky is exported, and the level of Scotch whisky exports grew by 8 per cent. in 2008.

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Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

I have been here for two and a half hours, and the hon. Gentleman has not been here for the debate. [Hon. Members: "Give way!"] If the hon. Gentleman is desperate, I shall be only too happy to give way.

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Photo of Alan Reid Alan Reid Shadow Minister (Northern Ireland), Shadow Minister (Scotland)

I am grateful to the Exchequer Secretary. She mentioned exports, but the unfairness of the British duty system, whereby spirits are taxed at a higher rate per unit of alcohol than wines, means that when we complain about other countries unfairly discriminating against whisky in favour of their local brew, they can point to our unfair system. Why, therefore, can we not continue with the system that was in place when the Prime Minister was Chancellor, under which spirits duty was frozen?

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Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

We thought that, for fairness, it was right to have 2 per cent. across the board this time round, although I note that 90 per cent. of Scotch whisky is exported and that the level of Scotch whisky exports grew by 8 per cent. last year.

European rules apply duty in direct proportion to alcohol content for beer and spirits, but the rules do not allow the same application to wine and cider, which accounts for some of the disparities that the right hon. Member for Wokingham talked about. Given those explanations, I ask hon. Members not to press either amendment.

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Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. I now have to decide whether to accept a closure motion. The Minister is only 10 minutes into her response, so perhaps it would not be reasonable to accept a closure motion at this juncture.

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Question put forthwith, That the Question be now put.

The Committee divided: Ayes 275, Noes 56.

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Division number 120 Surface Water and Highway Drainage Charges (Exemption) Bill — Clause 11 — Rates of alcoholic liquor duty

Aye: 274 MPs

No: 55 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Abstained: 1 MP

Abstaineds: A-Z by last name

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Question accordingly agreed to.

Question put accordingly, That the amendment be made.

Amendment 10 negatived.

Amendment proposed: 12, in clause 11, page 5, line 37, at end insert—

'(8) The Treasury will, prior to the 2009 Pre-budget statement—

(a) publish an assessment of the level of revenue yield anticipated from alcohol liquor duty based on it being levied on the rates of duty in this section, and

(b) publish an assessment of the level of alcohol liquor duty required to be levied on each type of drink on an equitable basis based on the alcohol content to generate the same level of revenue yield.'.— (Stewart Hosie.)

The Committee divided: Ayes 41, Noes 272.

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Division number 121 Surface Water and Highway Drainage Charges (Exemption) Bill — Clause 11 — Rates of alcoholic liquor duty

Aye: 40 MPs

No: 271 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Abstained: 1 MP

Abstaineds: A-Z by last name

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Question accordingly negatived.

Question proposed, That the clause stand part of the Bill.

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

As we had started the debate on the interesting but fundamentally flawed Liberal Democrat amendment—the Conservatives also felt unable to support the interesting amendment tabled by the Scottish National party—it was unfortunate that the closure motion prevented five or six other Back Benchers from participating in it.

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Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. First, the last thing that we must do in a clause stand part debate is rerun amendments that have already been debated. Secondly, whether or not a closure motion is accepted is entirely a matter for the Chair, and I suggest that the hon. Gentleman does not stray into that region.

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Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

You are, of course, quite right, Sir Michael. I shall thus discuss the clause itself, on which I do not propose to speak for as long as I did on the amendments. After all, it is well past closing time—or at least the old-style 11 pm closing time. However, we must at least briefly examine the devastating impact of the Government's approach to pubs, breweries and other industries across the UK. I know that that is felt keenly by Members from across this House in terms of the pubs, clubs and jobs in their constituencies.

As I said, duty levels are not the only answer. We propose changes to the duty regime as part of a package of wider measures aimed at tackling binge and under-age drinking, which we need to look at. The Committee needs to register its opposition to the Government's approach of penalising all drinkers, and we therefore call on the Committee to oppose clause 11.

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Photo of Alan Reid Alan Reid Shadow Minister (Northern Ireland), Shadow Minister (Scotland) 1:00 am, 12th May 2009

I, too, wish to oppose clause 11. In my constituency, whisky distilling makes an important contribution to the local economy. It brings jobs to remote communities where alternative employment can often be difficult to find. The increase in alcohol duties in the Budget puts those jobs at risk, and the Government should not increase alcohol duty yet again, after two increases over the rate of inflation in the last 12 months. It is high time that these inflation-plus duty increases were stopped.

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Photo of Colin Challen Colin Challen Labour, Morley and Rothwell

I agree with the hon. Gentleman's general intent, but the increase in duty on beer imposed in the Budget is 1p. In my local, which I attend regularly—I do not know whether the hon. Gentleman attends his—the price of a pint has gone up by 10p. Who does the hon. Gentleman blame for the severe problems that drinkers face in their locals? They always increase prices at the time of the Budget, but they do not explain to customers why the price has gone up far more than the Chancellor's imposition.

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Photo of Alan Reid Alan Reid Shadow Minister (Northern Ireland), Shadow Minister (Scotland)

The hon. Gentleman asks about beer, but I was concentrating on whisky. He has made his point so I will continue my speech. Putting the duty up without a proper assessment of the impact on demand is risky. It could cost the Treasury money. Constant increases are unacceptable without any assessment of the impact on demand or on— [ Interruption. ]

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Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. There is a loud buzz of conversation in the Chamber that is making it difficult for me to hear what is being said. Perhaps those Members who do not want to take part in the proceedings might leave or, at the very least, keep quiet, so that those who do want to take part can hear what is going on.

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Photo of Malcolm Bruce Malcolm Bruce Chair, International Development Committee

My hon. Friend is making an important point. In my area and other parts of north-east Scotland, new distilleries are proposed, but they may be prevented from going ahead by this increase. The issue is not only losses to the Exchequer, but a threat to jobs at a time when unemployment is reaching record levels. This is a serious issue and if the Government really cared about jobs and employment, they would not be destroying jobs in one of our most important industries.

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Photo of Alan Reid Alan Reid Shadow Minister (Northern Ireland), Shadow Minister (Scotland)

I wholeheartedly agree with my right hon. Friend, who makes an important point. The constant increases in duty—the Government have promised another above-inflation increase in next year's Budget—will discourage people from investing in the industry and in new distilleries.

In my constituency, old distilleries have been reopened in recent years—when the present Prime Minister was Chancellor of the Exchequer and froze spirits duty. Under the policy of the present Chancellor, I do not expect to see any more new distilleries opening.

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Photo of Jim Devine Jim Devine Labour, Livingston

Can the hon. Gentleman name one individual who has lost his job in the whisky industry?

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Photo of Alan Reid Alan Reid Shadow Minister (Northern Ireland), Shadow Minister (Scotland)

It is quite obvious that these constant increases in duty will deter investment in the industry, and that will clearly have an effect on employment. One illogical aspect of the present system is that spirits are taxed far more heavily per unit of alcohol that beers or wines. If alcohol were taxed on health grounds, surely the only logical way to tax it would be based on the units. The present Prime Minister, when he was Chancellor, had the policy of freezing the duty on spirits and allowing that on beers and wines to catch up. I am disappointed that that policy has not continued.

Various studies over the years have shown that the sale of spirits is very sensitive to price—far more so than is the case with wine. A policy of reducing the tax on spirits and increasing that on wine to a comparable level would probably bring in more money for the Treasury.

Scotch whisky is the world's leading spirit drink. It can be produced only in Scotland, but it relies heavily on products produced throughout the whole of the UK. It is therefore bizarre that a product that is so important to the UK economy is taxed much more heavily than wines, most of which are imported. I doubt that any other country in the world discriminates against one of its own products in favour of imports in such a way. An unfortunate side effect of that is that it encourages other countries to impose unfair duties on Scotch whisky.

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Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Secretary of State for International Development

On a day when manufacturing trade has reduced by 0.1 per cent., the largest reduction since records began in 1948, is it not folly to be increasing the duty on whisky to such an extent when it is one of our key export industries? We rely on it and other key exports to get us out of recession and to create jobs.

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Photo of Alan Reid Alan Reid Shadow Minister (Northern Ireland), Shadow Minister (Scotland)

I agree entirely with the hon. Gentleman. He makes an important point. Whisky is an important export and, as I was saying, increasing the duty in this country encourages other countries also to discriminate against Scotch whisky. That means that when British trade negotiators protest about others countries' harsh treatment of the Scotch whisky industry, those countries have an easy riposte—they just say, "But your own country also discriminates against whisky."

The Scotch whisky industry is very important to the entire economy. It employs more than 10,000 people directly and supports an estimated 50,000 further jobs through its spending on input products. It also provides a significant boost to our balance of trade. It is also an important local employer in remote areas where alternative employment is hard to find. For example, the many excellent malts produced in my constituency on the islands of Islay, Jura and Mull provide local employment. It would be very hard to find alternative jobs on those islands.

As a result of the Government's punitive actions, the product produced on those islands brings in large sums for the Treasury but only a small fraction of that money is returned to the islands to be spent on public services. If any hon. Members want to spend their holiday on Mull, they will certainly see the disgraceful state of the roads, although they will also see beautiful scenery. Those islands produced great revenue for the Treasury, but they do not see the return in public services.

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Photo of Colin Challen Colin Challen Labour, Morley and Rothwell

How does the price of whisky, with which I must admit I have a certain affinity, compare with the RPI? Sometimes, the question of duty is not accurately portrayed in terms of the general increase in prices. Sometimes, the prices of certain things do not keep pace with the RPI, even after the duty increases. Is whisky—

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Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. I am loth to interrupt the hon. Gentleman, but we covered much of that ground earlier in the debate, when I do not think he was in the Chamber. He has probably given Mr. Reid enough to work on for the time being.

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Photo of Alan Reid Alan Reid Shadow Minister (Northern Ireland), Shadow Minister (Scotland)

The price of whisky is going up, mainly because the Government keep on putting the duty up higher than the rate of inflation. We saw it in last year's Budget and back in December, and we are now seeing it again. A successful industry such as the Scotch whisky industry should be encouraged, not penalised by constant rises in duty.

The Government put forward two arguments for the duty increases—health and the tax yield. However, if health were the reason, the tax per unit of alcohol would be the same for all beverages, with the result that the tax on whisky would come down and that on beers and wines would go up. As for the tax yield argument, there is a severe danger that increasing the duty will lead to a lower yield because of consumer resistance to buying at the higher price.

The constant rises are likely to have a devastating effect on employment in the industry, so I urge the Committee to reject them tonight.

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Photo of John Redwood John Redwood Conservative, Wokingham

In the preceding debate, it was very disappointing that the Minister was unable to explain how clause 11 would work in terms of the duty rates, or what consequences she thought the changes would have for jobs and enterprise in the important businesses and sectors involved. She was also unable to give a forecast of how much more damage would be done. She was not even able to say what she thought was the cause of the big escalation in the number of pub closures in recent months, and she does not seem to have much idea of the impact that the measure will have on business in general.

I am delighted that my Front-Bench team are inviting Conservative Members to vote against the duty measures tonight. If the Government had not spent so much on the banks, or if they were able to control their public spending better, they might not need to raise so much revenue in this rather clumsy way. This change is not the way to get businesses through or out of a recession, but it is deeply damaging to enterprise and prospects.

Some Labour Members have failed to speak up for their constituents at all, while others have treated it as a subject of some frivolity because it involves drinking. All of them should understand that many people in the business are hurting very badly, and that they are looking to the Government for help and a lead. However, we are seeing again tonight that absolutely no help is forthcoming.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I shall be brief, and my contribution will be along the lines of that made by the right hon. Member for Wokingham. Like all hon. Members, I have received a great many representations on this matter from individuals, pub landlords and brewers in my constituency. They have all made it very clear that they consider that increase in duty over and above the rate of inflation proposed in this clause will be detrimental to their businesses.

That is not a hypothetical assertion, as one need only look at the number of pubs closing every day to see that the change is having a very immediate effect. What is more, it is having a considerable social impact on communities in towns, cities and villages right across the country.

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Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. Again, I am not anxious to curtail debate, but I must explain that we are not now going over the amendments that we have had before. With great respect to the hon. Gentleman, he is in danger of doing that.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Thank you, Sir Michael. The new clause is widely drawn and there is scope for overlap, but I was seeking to bring my remarks to a close. The essential point is that the clause will raise revenue on producers, manufacturers and brewers of alcohol. That will damage both them and communities in all our constituencies. I hope that hon. Members of all parties will represent the interests of their constituents by voting against the Government on this matter.

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Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Secretary of State for International Development

I declare an interest as chairman of the all-party wine group. Our group carried out a study of the effect of the Government's proposed duty increases and the escalator. Our conclusion was that jobs and investment would be lost and that revenues would reduce over time, not meet the Government's revenue targets.

Whether we are talking about the increase in duty on wine, whisky or beer, we have to recognise that we live in an increasingly international world. Hong Kong, by reducing its duty to zero, is taking from London the market in wine—selling and cellaring—that has been here for centuries. The Government are doing themselves huge damage with the duty increases. They are reducing investment in the industries affected, reducing the number of jobs and reducing the tax take they receive because they are reducing consumption of wine and whisky. On every count, the measures are counter-productive.

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Photo of John Redwood John Redwood Conservative, Wokingham 1:15 am, 12th May 2009

Does my hon. Friend think that Labour Members are ashamed of what they are doing? None of them has risen to speak in defence of the clause, and the Government curtailed debate on the amendments.

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Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Secretary of State for International Development

My right hon. Friend makes a good point. What the Government are doing makes no sense. If it increases unemployment, reduces investment, reduces consumption and therefore the tax take, what on earth is the point of increasing duties well above the rate of inflation? I shall oppose the clause.

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Question put, That the clause stand part of the Bill.

The Committee divided: Ayes 260, Noes 47.

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Division number 122 Surface Water and Highway Drainage Charges (Exemption) Bill — Clause 11 — Rates of alcoholic liquor duty

Aye: 260 MPs

No: 47 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

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Question accordingly agreed to.

Clause 11 accordingly ordered to stand part of the Bill.

To report progress and ask leave to sit again. —(Mr. Watts.)

The Deputy Speaker resumed the Chair.

Progress reported; Committee to sit again tomorrow.

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