Clause 11 — Rates of alcoholic liquor duty

Parliamentary Commissions of Inquiry – in the House of Commons at 9:00 pm on 7th July 2009.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury) 9:00 pm, 7th July 2009

I beg to move amendment 38, page 4, line 34, at end insert—

'(3A) After subsection (1A) insert—

"(1AB) The rate under section 36 (1AA)(a) shall be reduced by 2 per cent. for the tax year 2010-11 and by a further 2 per cent. for each subsequent tax year."'.

By the time the Finance Bill reaches this stage, it is like one of those not very good musicals where the main tunes are reprised throughout so everybody gets an opportunity to hear them several times. That is certainly true of the main themes of this Bill, as we have had further opportunities to discuss income tax and other matters that have already been touched upon both in the Committee of the whole House and in the Public Bill Committee.

I make no apologies, however, for returning to a theme that I have already visited: Government taxation of alcohol. As several Members have raised this point, let me say at the outset that the amendment deals specifically with beer duty but that I want it to be regarded as illustrative of a wider concern that has been expressed to me: about the Government's approach to alcohol taxation as a whole. Other Members may, of course, wish to speak about different forms of alcohol, and I do not wish to give the impression that I am concerned solely about beer. For many people beer is probably the most high-profile illustration, however, although I and other Members are also concerned about the taxation of cider, spirits, wine, sparkling wine, whisky and other forms of alcoholic beverage.

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

I am sure many Members are concerned about all sorts of unfairness in the duty regime, but the bit of the Bill that the hon. Gentleman's amendment seeks to change is only about beer. I am not quite sure how, without stretching the patience of the Chair, we can go beyond beer, and the fact that that stands on its own makes all this slightly odd.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Well, let us just talk about beer then, shall we Madam Deputy Speaker?

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

I think that is an excellent idea, Mr. Browne.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Perhaps we should do that at nine o'clock every evening, Madam Deputy Speaker.

I shall focus on beer, therefore. The British Beer and Pub Association estimates that 39 pubs are closing every week in Britain, which means that about half a dozen pubs close every day. I do not pretend that it is the role of Government to ensure that every pub stays open indefinitely. I notice that the Conservative party has come up with some uncosted proposals to try to ensure that nothing ever changes in any rural communities regardless of economic circumstances. That is not my view. I realise that good pubs will thrive and become more profitable—and may even expand, if they get planning permission to do so—and that pubs that cannot attract customers are likely to go out of business. I am not trying to question that basic economic assumption.

There is an underlying problem, however, that goes beyond just changes in lifestyle and drinking practices, although I recognise that more people than in the past now wish to consume beer at home, perhaps while watching a DVD—or the Ashes on television tomorrow—and that they may not be as tempted as they once were to visit a pub. I want to put it on record that there are such changing circumstances, because it is impossible to have a balanced debate if we do not acknowledge that. Even given those considerations, however, we should be concerned that 39 pubs on average are closing every week in Britain, because pubs are more than just businesses: many of them are also the social hub of their community.

Photo of Lembit Öpik Lembit Öpik Liberal Democrat, Montgomeryshire

I am grateful to my hon. Friend for raising this issue, which is of great concern to many Members. Does he agree that, especially in rural communities, the pub is often the social focal point and meeting place for people? The Crown in the town of Montgomery, the Four Crosses pub in Four Crosses and the Lion in Llandinam are all—

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. I think we have got the gist of what the hon. Gentleman is trying to say.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I think I understood the point being made by my hon. Friend. It would have helped me a bit if he had been able to give a few more examples from his constituency, but I agreed with his basic point. It is no coincidence that so many soap operas are set in and around pubs, because they are such an obvious setting in everyday life for social interaction and for opportunities to exchange views and information. I am sure that that is very much the case not only in my constituency, but in the constituencies of other hon. Members present.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Secretary of State for Communities and Local Government

Does my hon. Friend agree that the beer duty increases will have an impact not only on rural communities where the pub is the hub, but on a lot of smaller breweries, which are very important employers? They will be indirectly affected by any such changes and we should seek to protect them too.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I strongly agree with that observation; I was going to talk about breweries later in my speech, but perhaps I should discuss them right now.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Well, before I do that, I shall give way to my hon. Friend.

Photo of Don Foster Don Foster Shadow Secretary of State for Culture, Media and Sport

Before my hon. Friend moves on, he should continue to list the benefits of pubs in our communities, because they are not just the hub. Surely they are also a place where people can drink much more responsibly than they often do when they have bought pocket-money-priced booze in our supermarkets and off licences. Therefore, will he suggest that instead of going ahead with this ridiculous beer tax and the other increases on duty, the Government should be considering minimum pricing so that we can cut down on the supermarkets' cheap booze in order to solve many of our problems?

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

That is a very valid point, which also illustrates people's wider concerns about losing pubs. Although people go to pubs to drink beer, in many cases they also enjoy eating in that environment. It has been notable how many pubs have modified their offering to their customers in order to provide food. Pubs also provide entertainment, for example, quizzes and music; karaoke may be popular with some customers, although less so with others. A range of attractions in pubs help to make them part of their community and popular with their customers.

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

My hon. Friend has consistently pushed the case for defending pubs on the duty issue—last year and this. I hope that he is also aware of the many services that are often provided in pubs. In recent weeks there have been polling stations in pubs, and my constituency contains a post office in a pub at Stratton—there is also a proposal to bring a post office back to St. Issey in this way. These are the sorts of thing that the pub, as often the last institution in the village, can preserve.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

That is also a very good point. The Prince of Wales has campaigned on the notion that "The Pub is the Hub". As services get consolidated in rural communities, there will increasingly be a desire for pubs to diversify into not only other aspects of their business, such as food and accommodation, but areas of business that have not previously been associated with pubs—for example, providing stamps and basic groceries such as bread and eggs. Where it is possible to consolidate a post office in a pub and that is thought to be desirable for the community involved, there is no reason why that cannot be sensitively handled in a way beneficial to the people who live in the area, just as a pub and a village shop can be consolidated on one site.

I was discussing how many pubs are closing each week, but perhaps that point is even better illustrated by looking at what has happened over a slightly longer time scale. Since the 2008 Budget—that is not too long ago—2,200 pubs have closed across Britain.

According to industry sources, the cost in jobs has been 20,000. Over the same period, beer sales have fallen. It is a common myth that more people are drinking more beer than ever before. There are some people who consume alcohol—in beer or in other forms—to excess, especially on Friday or Saturday evenings. I take the point made by my hon. Friend Mr. Foster that often it is better and safer for them to do that in a well run and responsibly managed pub than to buy off-licence alcohol and drink it in a park or somewhere similar. If the Government's motivation for levering up taxes is an attempt to choke off demand for beer, I am afraid that that is happening already, to the detriment of both publicans and brewers.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

The hon. Gentleman is, as usual, making a powerful speech. I just wanted to make the point that this is not only happening in rural areas. In my constituency, many small family pubs have closed. The result is that more teenagers are drinking in parks, leading to antisocial behaviour.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

The hon. Gentleman makes a fair point. My constituency contains a large town—Taunton—and a second town, Wellington. Three quarters of my constituents live in those two towns, so large parts of my constituency have urban characteristics, and I see the phenomenon that he has described. In the more rural areas, I see how important pubs are—in some cases, they are the only retail outlet in a village, once the post office and shop have gone. So, if people want to put up notices about a local playgroup or information about the village fete, they have to put them up in the pub, because there is no other suitable place.

Photo of Lembit Öpik Lembit Öpik Liberal Democrat, Montgomeryshire

Does my hon. Friend agree that in many small communities where shops and post offices have closed, the public house actually provides social cohesion, without which the villages would become dormitory villages for larger towns? In those circumstances, the school is also likely to close and the sense of community, which made the village such an attractive place, will be dissipated.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

That is true, and it is noticeable in rural communities that very few villages have more than one pub, if they have one at all. Those pubs are valued by those who have lived in the village for a long time, but they are also often the main attraction for people looking to move into a rural community, perhaps because they have reached retirement age. They look at a village, say in Somerset, to see whether it would be an attractive place to spend their retirement, and one of the main attractions is a village pub with a nice atmosphere and some good local beers. It is important that both newcomers and long-standing residents support the pub, as it needs sufficient customers to be a viable business for the person who owns and runs it.

Photo of David Taylor David Taylor Labour, North West Leicestershire

If the hon. Gentleman is building the hypothesis that pubs are a good thing but 2,000 a year are closing because of beer duty, it is not a very sound one. He has already mentioned social change and the availability of cheap beer in supermarkets, which are much more important factors. A third—and most important—factor is the attitude of the pubcos, which seem to be less concerned about the pubs that were once part of the chains that they owned and more concerned about maintaining their volume through their various other outlets, including supermarkets. Surely we can encourage them to take a more imaginative approach.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury) 9:15 pm, 7th July 2009

I agree with that point. Actually, I agree with all three of the points that the hon. Gentleman made and I would probably add a fourth, which is the smoking ban. I accept that in some pubs that might have attracted more customers, particularly those pubs that have a reputation for serving food. Customers, in many cases, like to eat food without people smoking in the same building. There are other pubs where many of the customers might have felt that their enjoyment of the pub was closely linked to their ability to smoke in that environment, too. That is opening up another debate that I do not wish to open now, but I acknowledged at the outset—perhaps I should have acknowledged it in slightly greater detail—that a number of social and, in some cases, legislative factors have impacted on the ability of pubs to attract customers and to be profitable. I accept that that is the case, but my point is that that difficult economic situation is compounded by above-inflation increases in beer duty.

Let me explain that point, because it is very important that people understand. I am not simply making a sentimental case for pubs, although I do have a sentimental attachment to them. There are some hard figures that should give the Government cause for reflection. In January—four or five months from now—VAT will increase again by 2.5 per cent. when the Government's temporary VAT reduction expires. In April 2010 and April 2011—this has already been factored in—beer duty will increase by 2 per cent. above inflation. That is the so-called duty escalator that was announced last year, so that beer is priced out of the range of people who are seeing, if they are lucky, inflation increases in their salaries. Some people are not even seeing that. A pint of beer is becoming more expensive for people as a proportion of their income and in real terms, too. That is a deliberate instrument of Government policy. That leaves aside whether, for example, the core ingredients are becoming more expensive.

In other words, fundamental costs are being borne by brewers and passed on. They will eventually go through the pubs to the customer, and so the customer will have to meet that extra cost. For example, they will have to meet brewery or transportation costs, with fuel duty and other considerations of that type. Beyond all those factors there is a built-in increase of 2 per cent. above inflation each year on duty on beer.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Secretary of State for Communities and Local Government

My hon. Friend is being generous in giving way. Although David Taylor identified a number of other issues that impact on pubs, the reality is that for many pubs, such as the Trengilly Wartha—I spoke to the landlord there just a few weeks ago—the margins are so small that these changes, which appear to be small on the surface, have a big knock-on effect on their economic viability.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I completely accept that point. That is why I hope that hon. Members from all parties will support amendment 38 tonight. It is very important for all our constituencies.

Photo of Simon Hughes Simon Hughes Shadow Secretary of State for Energy and Climate Change

My hon. Friend has waxed lyrical about rural pubs, and I join him in that, but some of us have very urban constituencies. I just want to put it on the record that the same issue applies. The pubs that people would like to go to are the family pubs and the pubs that sell the traditional beers—in my constituency, the Fuller's pubs, the Young's pubs and the Shepherd Neame pubs. They do not want to go to the supermarket unless they have to. The pubs that the tourists would want to go to are certainly not better replaced by the supermarket. Tourists want to go to a traditional pub and they want an incentive to do so. The argument applies, and as the son and grandson of a brewer I have to say that I think that the Government are strangling the industry in a way that will be detrimental to urban communities as well as rural and suburban ones.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I completely accept my hon. Friend's point. Let me illustrate my acceptance of his point with an example from my constituency. One of the games widely played in pubs in Somerset, as my hon. Friend Mr. Heath will be aware, is skittles. I am a keen player of skittles and people associate skittles with rural pubs. There are skittles leagues and teams attached to village pubs across Somerset and other parts of the west country.

I recently had the pleasure to visit, as a customer, the Oxford Inn in Halcon in east Taunton, one of Somerset's most urban and socio-economically poorest parts. It has a skittles alley and offers all sorts of entertainment and social events, and it also puts on food buffets built around people's enjoyment of skittles and other activities. The points that I am making are not exclusively true of rural areas: they are very much true of rural areas, but they apply to urban and suburban areas as well.

I promised my hon. Friend Julia Goldsworthy that I would talk about the breweries in my constituency. I do not want to let her down by neglecting to take up her invitation.

There are four beer brewers in my constituency, and a BrewFest is taking place in Wiveliscombe in my constituency later this month. That will be an opportunity for people from all over that part of Somerset, and even perhaps from Devon, to visit Wiveliscombe and enjoy the beers brewed there by Cotleigh Brewery Ltd and by Exmoor Ales. Both produce large numbers of popular beers for pubs and off-licence sale, in my constituency and further afield.

The other two brewers in my constituency are much smaller. Confusingly, Quantock Brewery is based not in the Quantocks but in a place called Chelston just outside Wellington, while Taunton Brewing Company is not in Taunton but in West Bagborough

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. Some of the breweries may not be where they should be, according to the hon. Gentleman, but I hope that he will concentrate his remarks a little more on the amendment.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Sadly, Madam Deputy Speaker, that is the sum total of breweries in my constituency, but I am doing my best to make setting up new ones an attractive proposition for people.

My point is that all those breweries are directly affected by reductions in beer sales. That may sound like a statement of the obvious, but we tend to concentrate on the business at the end of the supply chain—that is, the pub landlord selling a pint of beer to the customer. However, the breweries are also employers in my area. They are more than just employers, too, as they are also part of the heritage and fabric of the area.

People in Taunton Deane or Somerset as a whole enjoy having their local breweries, believing that they add to the character of the community and that there is something distinctive about them that helps to define our area. Indeed, people visiting on holiday from London, Birmingham or elsewhere in the country feel that having an opportunity to drink in a pub in my constituency a pint of beer that has been brewed in Wiveliscombe or somewhere else in Somerset is part of their enjoyment as a visitor to the county. It would be extremely sad if that were to be affected.

As I said, I accept that people can choose soft drinks, wine or something else instead of beer. I am not trying to compel people to drink beers brewed in breweries in my constituency, although I sometimes think that they would benefit from the experience. It may be that their life would be poorer if they missed that opportunity, but I am not compelling anyone to drink them. What I do not want, however, is businesses to be placed in jeopardy as a direct consequence of the Government's imposition of above-inflation duty increases on beer.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

Before the hon. Gentleman concludes, will he explain what amendment 38 means? It seems to set up some sort of reverse escalator, but will he go through the mechanics of how the amendment might work?

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I will, but I am trying to put in place a simple measure to do precisely what the hon. Gentleman says. If the Government felt that the amendment was technically deficient, I would be happy if they sought to make changes to it. As has happened in previous years when emergency measures have been introduced in the PBR, more emergency measures could be brought in this autumn, if the Government felt that they were needed.

The simple fact is that the Government are increasing beer duty by 2 per cent. above inflation every year—the so-called duty escalator, as I have said. The amendment would not change the duty for this year, as that has been passed and set in stone already, but it would reduce the duty by 2 per cent. next year and in subsequent years. What I am effectively trying to do, and I hope the mechanism achieves that objective, is to cancel out the effects of the so-called escalator which, for the reasons that I have given, I regard as damaging.

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

On a technical point, the first part is correct—

"shall be reduced by 2 per cent. for the tax year 2010-11", but the amendment then reads

"and by a further 2 per cent."

If it said, "by 2 per cent. for subsequent years", I would understand that, but

"by a further 2 per cent." indicates to me, if I have read it correctly, a reduction in the level of duty, rather than a stabilisation of it and the reversal of the escalator only.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

That would be an extremely popular measure, but it is not my intention. [Interruption.] Mr. Hands says that is what the amendment says. I suppose it depends how one interprets the word "further". The effect that I sought to achieve was to say that the Government should feel free to put up duty in line with inflation. Most people would accept that that is a reasonable way to proceed, but the escalator that is over and above inflation is damaging pubs and breweries, for the reasons that I have given.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I was about to conclude to give others an opportunity, but I give way to the hon. Gentleman.

Photo of David Taylor David Taylor Labour, North West Leicestershire

I am pleased that the hon. Gentleman had not yet concluded. It was all too easy in the past to be critical of Liberals, who were rather relaxed about fiscal policy and did not put figures to the changes that they were suggesting. What would be the reduction in Government revenue resulting from amendment 38, and how would the hon. Gentleman replace that revenue?

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I am entirely sure that I accept the premise of the hon. Gentleman's intervention. Perhaps I did not explain clearly enough at the beginning. Beer sales dropped by 8.2 per cent. in the first quarter of 2009, and since the Budget last year 2,200 pubs have closed. The opportunities for people to buy beer are diminishing rapidly as pubs close, and the total beer sales in all outlets are falling, so the amount of revenue that the Government are collecting is off a diminishing base. I fear that any assumptions that the Government make about increasing revenue from above-inflation beer duty increases may not be borne out by their experience when they come to add up the money that they hope will come into their coffers. That is quite apart from the wider social benefits that I touched on earlier in my speech. They are difficult to quantify, but everyone would acknowledge that in both urban and rural areas, there are those wider benefits. I caution the hon. Gentleman about knowing the price of everything and the value of nothing, as people used to say. That would be an unfortunate position for the Labour party to adopt, and the costs in this case are unlikely to be a consideration that need unduly concern Ministers.

On Friday 17 July I will be pulling a pint at the Maypole Inn in Thurloxton—

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. The hon. Gentleman will relate that, I am sure, to the amendment that we are discussing.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Indeed, Madam Deputy Speaker. I will be celebrating Proud of Pubs week. I thought that would be a suitable way to demonstrate the pride that I have in pubs in my constituency, and I hope that all Members present who are proud of pubs and of breweries and who see the benefit of those institutions flourishing in their community will support amendment 38.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

It is always a pleasure to follow Mr. Browne. I, too, will be celebrating Proud of Pubs week on the same evening, but almost certainly in a different establishment. I enjoyed sparring with the hon. Gentleman in Committee on this and many other duties. I agreed with a great deal of what he had to say; I just thought it a pity that he did not properly explain the amendment before us, because it has a number of problems that need probing.

Nevertheless, we seem to be making a habit of debating alcohol duty only very late at night or at the end of the day. [Hon. Members: "Last orders!"] Last orders indeed, although not quite, under the old world. During Committee of the whole House on 12 May, I spoke on alcohol duties for an hour and a quarter either side of midnight—well after what I used to think of as closing time. I shall not repeat my arguments and certainly will not go on for as long, but we had an entertaining debate about the serious subject of alcohol duties, and various Members joined the debate late, including Colin Challen, who intervened on a Liberal Democrat Member at two minutes past 1 in the morning to say that

"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."

He went on to ask at six minutes past 1 in the morning:

"How does the price of whisky, with which I must admit I have a certain affinity, compare with the RPI?"—[ Hansard, 12 May 2009; Vol. 492, c. 822-823.]

We had various other contributions from a collection of Members from all-party groups, some of whom appeared to have come straight out of intense discussions on the various duties involved. I do not know whether we can expect such interventions this evening, but alcohol duties are a serious matter, affecting not only a huge number of consumers but a large number of employers and employees. There are also issues about problem drinking and alcohol-induced crime.

The hon. Member for Taunton pointed out that the sector is under pressure, and on that point I very much agree. Part of that tale of woe is due to the big increases in beer duty, so let us examine what the Government have done since they introduced their duty escalator at the previous Budget. They put duty up across the board by 6 per cent.; then it went up again by a further 8 per cent. when VAT fell in the pre-Budget report; and we now have a 2 per cent. across-the-board increase in this year's Budget.

Photo of Lembit Öpik Lembit Öpik Liberal Democrat, Montgomeryshire 9:30 pm, 7th July 2009

The hon. Gentleman may be coming to this point, but does he agree that, given the level of pub closures and the change in drinking habits, it seems extremely improbable that the Government made any holistic analysis of the net effect on the economy? Leaving aside our discussions on pubs, as a result of the changes there has probably been a net reduction in revenue to the Government, rather than an increase.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

The hon. Gentleman makes a very strong point. In fact, the amount of revenue has undershot Red Book projections for each of the past two years, so that point would seem to bear out evidence that the sector is under severe pressure.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I strongly support the Government's policy on alcohol prices, so will the hon. Gentleman not accept that over several decades the real price of alcoholic beverages has fallen substantially; that that is a major contributor to the current rather excessive alcohol consumption by young people, in particular; and that there are health as well as revenue concerns?

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

The hon. Gentleman makes a reasonable point, although it ignores the fact that beer consumption has fallen steadily for the past 30 years, and that alcohol consumption overall has fallen for the past four. Although he refers to a long trend, it may have reversed over the past three or four years.

I shall now discuss the amendment itself.

Photo of Don Foster Don Foster Shadow Secretary of State for Culture, Media and Sport

Just before the hon. Gentleman moves on, I note that he said that Kelvin Hopkins made a reasonable point. Surely, however, the key differential that influences the appalling behaviour on the streets of many of our towns and cities is that between the cost of beer in our pubs and the ridiculously cheap price of beer in our supermarkets. The same is true of other drinks. That is the differential we ought to address.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

The hon. Gentleman makes a good point, although we must recognise that there are difficulties concerning the duty regime on beer and other alcohol served in pubs, vis-à-vis supermarkets. Nevertheless, he makes a strong point, which we would like to look at.

We have not spoken about amendment 38 in any detail. As the hon. Member for Taunton knows, I pay close attention to the text of his amendments, and I have to say that his amendment would insert its new Subsection (3A) in the wrong place. It would insert his reverse beer escalator in line 34, between two subsections on low and medium-strength cider. It should actually be inserted in line 30. Furthermore, the Lib Dem amendment, taken in totality with the Bill's existing provision on beer duty, would see beer duty first rise this year by 10.5 per cent. and then fall each year by 2 per cent. because of that insertion into line 34. That seems an odd policy—less an escalator and more an escarpment, with a steep increase this year followed by a shallower descent for all years thereafter.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

I will not because we are short of time. According to the amendment, the new beer escalator—in effect a reverse of Labour's current RPI plus 2 per cent. escalator—would go on for ever. Nor is it clear whether the annual 2 per cent. reduction in duty would mean 2 per cent. off today's figure of £16.47 in the original clause or 2 per cent. off the figure as amended. In other words, are the 2 per cent. reductions linear or cumulative? In the second year, would the figure be 98 per cent. of the original figure, or 98 per cent. of the 98 per cent. that was affected the previous year?

If the reductions are linear, the Lib Dem amendment implies that beer duty would be eliminated entirely in 50 years' time; it might even imply that beer duty would go negative from the year 2060. That raises the tantalising prospect of the Liberal Democrats paying people to drink beer. That gives a new twist to their populist policies; they are like a desperate candidate in a student union election in their efforts to court the popular and youth votes. It appears, at least from amendment 38, that they are already reaching out to my grandchildren with an offer of booze not only free of tax, but subsidised by the state from 2060. Here we have it: the Liberal Democrats seemingly proposing that the state should pay people to drink beer. That cannot make any sense, and that is why we cannot support amendment 38.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I want to make two brief and simple points. The chief medical officer has suggested that alcohol should be taxed according to the alcoholic content of beverages. That would have the enormously beneficial effect of raising prices in supermarkets and having little effect on pub prices. That would help the pub trade and reduce irresponsible drinking.

My other point is that we have a vast ocean of untaxed, cheap alcohol coming in from Europe, and the Government get almost no revenue from it. If we reduced the amount of alcohol coming in and taxed it properly, Government revenues would increase and there would be less irresponsible drinking. Those two points should be taken on board by the Government and everybody in the Chamber. I hope that, in time, we move in that direction.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

I shall not detain the House for long, although I should say that it is a pleasure to speak at slightly earlier than 10 minutes to midnight, as I did in Committee.

I entirely agree with my hon. Friend Mr. Hands, who exposed the technical faults in the amendment tabled by Mr. Browne. However, the hon. Gentleman's heart is entirely in the right place. It is wrong for there to be a duty escalator on alcohol, going up and up. The Government should decide at each Budget what the duty should be, depending on the economic circumstances. I have seen pubs close in Wellingborough, Rushden and Irchester, and this is not the time for a duty escalator. Although I cannot support the hon. Gentleman's amendment, I certainly think his heart is in the right place.

Photo of Sarah McCarthy-Fry Sarah McCarthy-Fry Parliamentary Secretary, HM Treasury

I, too, have read the Hansard report of the debate in Committee of the whole House when alcohol duties were debated. It went down many highways and byways, and I hoped that we would not have a repetition of that this evening, because I would have had to bone up on all the pubs that I have visited in my constituency. I can tell hon. Members that in the 1960s there were more than 300 pubs on Portsea island alone, because a friend of mine wrote a book about them. However, I am sure, Mr. Speaker, that you would not want me to go down that road.

Alcohol duties play an important role in contributing to the public finances. The amendment would significantly reduce the revenue that the Government receive, thus weakening the public finances, notwithstanding the arguments made by Mr. Browne. The amendment deals only with beer duty, not that on other alcohol products. On the rate of duty, my predecessor, my hon. Friend Angela Eagle, noted in Committee of the whole House

"that, for fairness, it was right to have 2 per cent. across the board this time round".—[ Hansard, 12 May 2009; Vol. 492, c. 815.]

Furthermore, it would not be possible for us to accept the amendment as the European Court of Justice has ruled that duty on beer should be maintained within a set ratio with duty on wine. Such a continued reduction in beer duty would breach that ratio in the absence of similar provisions for wine. There are several constraints in EU law as regards alcohol. Beer must be taxed at an equivalent rate to wine and in direct proportion to degrees of alcohol strength. We are allowed to have reduced rates for small breweries, and we do so. It is also possible to set a reduced rate on beer with a strength of below 2.8 per cent. alcohol by volume. The pub industry proposed a zero rate for low-strength beers, its rationale being that it is easier to manufacture ale and stout. However, when we looked at the possible consequences, there was no evidence to suggest that people would opt to drop down to those reduced strengths.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

Can the Minister explain how the Government's escalator currently works? Is it still based on RPI plus 2 per cent.? If so, at a time when RPI is negative, why was the increase in beer duty nevertheless 2 per cent.?

Photo of Sarah McCarthy-Fry Sarah McCarthy-Fry Parliamentary Secretary, HM Treasury

Because we work on a zero base. It is an increase of 2 per cent. on zero, and it would not go back below that figure even though inflation is negative, so it is staying at 2 per cent.

As with all tax policy decisions, the Government will monitor the impact of alcohol duty, including the impact on the pub industry. However, I am sure that hon. Members will acknowledge—indeed, they have done so—that the competitiveness and employment levels in any industry depend on a large range of factors. The pub sector has been adversely affected by the economic downturn, as well as by changing tastes and lifestyles over a longer time period—nowadays there are many more ways to spend leisure time. Increased input costs for suppliers and the smoking ban have also had an effect.

Changes in duty are unlikely to be the answer to tackling those problems. Indeed, the proportion of tax—duty and VAT—in the price of a pint of beer in a pub has remained broadly constant in real terms since 1994. In the Treasury Committee on 28 April, a member of the experts panel, Mr. Weale from the National Institute of Economic and Social Research, said:

"with beer...All the evidence is that" it is

"not terribly price sensitive."

However, the Government recognise and value the contribution that pubs make to employment and local communities. Although under EU tax legislation 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, the Government have introduced a range of measures to support all businesses, including the British pub. Those include: enabling pubs to spread payment of this year's inflation uprating to business rates over three years; HMRC's business payment support service, which has benefited many pubs already; improved access to finance for small businesses through the enterprise finance guarantee; and support through low-cost loans and advice on energy efficiency for small businesses, including many pubs, to make savings on their energy bills.

An approach suggested by the industry has been a reduced rate for cask beer, which, again, is not currently possible under EU legislation. As many hon. Members will be aware, however, there is a planned review by the European Commission of EU alcohol rates and structures, which will provide an opportunity for the beer and pub industry to put proposals to the Commission on a reduced rate for cask beer.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I thank my hon. Friend for giving way. I am somewhat concerned about this emphasis on the EU, because if the EU determined our tax and duty levels they would be substantially reduced, which would be damaging to both revenues and health.

Photo of Sarah McCarthy-Fry Sarah McCarthy-Fry Parliamentary Secretary, HM Treasury

I have already explained some of the constraints in EU alcohol law, but I picked out the ones on beer because that is referred to in the amendment. There are many others, such as the fact that wine must be taxed at the same rate—above 8.5 per cent. and not exceeding 15 per cent.—as must still cider. Those are among the directives that are under review for 2010. When the new Commission is in place, a work programme will be published.

Various strands to that work are currently under discussion, encompassing possible assistance for small and medium-sized enterprises, the classification of alcoholic products with specific attention to mixtures of distilled and fermented alcohols, and possible standardisation of denaturants. The UK has been working closely with the Commission to work towards a more modern structure that supports UK trade. Progress so far has been good, and initial findings have been in line with what the UK has been pressing for.

Photo of Linda Gilroy Linda Gilroy Labour, Plymouth, Sutton

A moment ago, my hon. Friend Kelvin Hopkins mentioned the unit price of alcohol suggested by the chief medical officer for health reasons. Is it likely that the review will enable us to take a serious look at that as a potential policy on alcohol duty?

Photo of Sarah McCarthy-Fry Sarah McCarthy-Fry Parliamentary Secretary, HM Treasury

I am sure that it is possible, but I do not know whether that precise matter is in the terms of reference of the review. As I said, the work programme will not be published until the new Commission is in place. I am sure that Members will appreciate that changes to the European excise rules governing alcohol duties require unanimous agreement from all 27 member states, so it could be a long process.

Given the points that I have made, not least about the legal constraints in the current EU directives and the fiscal consequences of the amendment, I ask the hon. Member for Taunton to withdraw it.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I question the Minister's statement that beer is not a price-sensitive commodity.

Photo of Sarah McCarthy-Fry Sarah McCarthy-Fry Parliamentary Secretary, HM Treasury

May I just clarify that that was not my statement? It was a quotation from one of the expert witnesses to the Treasury Committee.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Let me start again. I question the so-called expert's statement that beer is not price-sensitive, or the Minister's acceptance of that statement, because if it were as self-evidently true as she claims, I would not hear Ministers and others express such concern about happy hours and other forms of alcohol promotion.

I say to the Conservatives that the objective of the amendment is to cancel out and neutralise the escalator that the Government have introduced. I shall leave aside the strange assertion by Mr. Hands that if one takes 2 per cent. off a figure every year, it gets down to zero. I cannot see how it would ever get to zero, but we will leave that bit of innumeracy to one side. I regret that although the Conservatives talk a good game on this matter, I have to ask where their amendment is. Why is it always left to the Liberal Democrats to defend pubs and breweries? Why are the so-called official Opposition so negligent in that regard?

Both because it is the responsibility of my party, and sadly often that of my party alone, to champion this important community interest, and because the arguments made by the Conservative spokesman and the Exchequer Secretary fell short of what I had hoped for, I should like to press the amendment to a Division.

Question put, That the amendment be made.

The House divided: Ayes 62, Noes 311.

Division number 187 Parliamentary Commissions of Inquiry — Clause 11 — Rates of alcoholic liquor duty

Aye: 62 MPs

No: 311 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly negatived.

Ordered, That further consideration be now adjourned. — (David Wright.)

Bill to be further considered tomorrow.