Clause 27 - Power to clarify tax treatment of devolved social security benefitsClause 27

Finance (No. 2) Bill – in the House of Commons at 4:45 pm on 19 April 2023.

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

Photo of Eleanor Laing Eleanor Laing Deputy Speaker and Chairman of Ways and Means, Chair, Standing Orders Committee (Commons), Chair, Standing Orders Committee (Commons)

With this it will be convenient to discuss the following:

Clause 47 stand part.

Amendment 25, in clause 48, page 39, line 32, at end insert—

“(aa) section (exemption: Scotch Whisky),”.

This is a paving amendment for NC9, which would exempt Scotch Whisky from the increase in duty on spirits.

Clause 48 stand part.

Amendment 7, in schedule 7, page 334, line 18, leave out “£31.64” and insert “£28.74”.

That schedule 7 be the Seventh schedule to the Bill.

Clause 50 stand part.

That schedule 8 be the Eighth schedule to the Bill.

Clauses 51 to 54 stand part.

That schedule 9 be the Ninth schedule to the Bill.

Clauses 55 to 60 stand part.

New clause 9—Exemption: Scotch Whisky—

“(1) The rate of duty on spirits shown in Schedule 7 shall not apply in respect of Scotch Whisky.

(2) The rate of duty in respect of Scotch Whisky shall continue to be the rate that applied before this Act came into force.

(3) For the purposes of this section, “Scotch Whisky” has the meaning given in regulation 3 of the Scotch Whisky Regulations 2009 (S.I. 2009, No. 2890).”

This new clause would exempt Scotch Whisky, as defined in the Scotch Whisky Regulations 2009, from the increase in duty on spirits

Photo of James Cartlidge James Cartlidge The Exchequer Secretary

We have had pensions and energy, and we conclude with alcohol, and of course one other minor matter is covered. We are specifically debating clauses 27, 47, 48 and 50 to 60, and schedules 7 to 9, which cover powers to clarify the tax treatment of devolved social security benefits—that is the measure not relating to alcohol—as well as the change to alcohol duty and the introduction of two new reliefs for alcohol duty.

Clause 27 introduces a new power to enable the tax treatment of new payments or new top-up welfare payments introduced by the devolved Administrations to be confirmed as social security income by statutory instrument. The changes made by clause 27 will allow the UK Government to confirm the tax treatment of new payments or new top-up payments introduced by the devolved Administrations within the tax year, rather than their being subject to the UK parliamentary timetable.

I will now turn to the main issue of alcohol duty, and specifically clauses 47 and 48, which set out the charging of alcohol duty, and schedule 7. In line with our plan to manage the UK economy responsibly, we are reverting to the standard approach of uprating the previously published reformed rates and structures by the retail price index, while increasing the value of draught relief to ensure that the duty on an average pint of beer or lower-strength cider served on tap in a pub does not increase. Most importantly, these clauses introduce the Government’s historic alcohol duty reforms: the biggest overhaul of the alcohol duty system in over 140 years, made possible by our departure from the European Union.

The current alcohol duty system is complex and outdated. The Institute for Fiscal Studies has said that our system of alcohol taxation is “a mess”; the Institute of Economic Affairs has said that it “defies common sense”; and the World Health Organisation has said that countries such as the UK that follow the EU alcohol rules are

“unable to implement tax systems that are optimal from the perspective of public health.”

As such, at Budget 2020, the Government announced that they would take forward a review of alcohol duty. This legislation is the culmination of that review, and makes changes to the overall duty structure for alcohol. It moves us from individual, product-specific duties and bands to a single duty on all alcoholic products and a standardised series of tax bands based on alcoholic strength.

The clauses we are debating today repeal and replace, with variations, the Alcoholic Liquor Duties Act 1979 and sections 4 and 5 of the Finance Act 1995. Specifically, clause 47 provides for alcohol duty to be charged on alcoholic products, clause 48 explains where the rates of alcohol duty can be found—that is, in schedule 7—and schedule 7 itself provides the standard or full rates of alcohol duty to be applied to alcoholic products. This radical simplification of the alcohol duty system reduces the number of duty bands from 15 to six, and has only been made possible since leaving the EU. Now, thanks to the Windsor framework, I can confirm that these reforms can now also be implemented in Northern Ireland. The new alcohol duty structures, rates and reliefs will take effect from 1 August this year, which brings me to the new reliefs.

Photo of Bob Stewart Bob Stewart Conservative, Beckenham

As a member of the Campaign for Real Ale, may I ask the Minister whether that means beer that is not very strong will come down in price?

Photo of James Cartlidge James Cartlidge The Exchequer Secretary

That is an excellent question from my right hon. Friend. As he will appreciate, there is obviously a difference between the duty and the price—we control the duty. As I am about to explain, we are doing everything possible, and I hope he will be interested, because I know that members of CAMRA have great fondness and support for our brilliant pubs up and down the country.

The first of the two new reliefs, which is our new draught relief, applies to alcoholic products under 8.5% alcohol by volume intended to be sold on draught. This draught relief is historic, because as Members will remember, in the EU, we had a thing called the EU structures directive. Under that directive, as a country, we could of course vary our alcohol duty—we could increase it, decrease it or whatever—but what we could not do was charge differential duty between the on trade, meaning pubs, and the off trade, meaning supermarkets, retail and so on. For the first time, we will have that differential draught relief, and I am pleased to confirm that in the Budget, we brought forward two very important measures in relation to that relief. It had been anticipated that we would set the draught relief at 5%, but the Chancellor confirmed in the Budget that it would be increased to 9.2%. I can therefore confirm to my right hon. Friend Bob Stewart that as a result of that increase in the draught relief, when the new system comes in this August, the duty on the average pint of beer or lower-strength cider that people buy in pubs will still be frozen.

More importantly, we have issued our Brexit pubs guarantee. As I say, this change would not have been possible in the EU, and we are using this opportunity to send a very powerful message to our pubs: to guarantee that from August onwards, the duty on a pint in a pub will always be lower than the duty on the equivalent in a supermarket.

Photo of Mark Jenkinson Mark Jenkinson Conservative, Workington

I thank the Minister for giving way. I just wondered whether an impact assessment was done on the benefits of such a change to the on trade.

Photo of James Cartlidge James Cartlidge The Exchequer Secretary

My hon. Friend asks an excellent question, and I will be more than happy to write to him setting out more detail on the benefits, but I hope he agrees that the key point is this: we in this House all know that pubs suffered terribly in the pandemic, if we are honest. We literally legislated to close them, obviously for a very good reason—to support public health and stop the spread of that terrible disease—but the fact is that doing so was costly to pubs, so we had to support them. In addition, since then they have seen their energy bills surge on the back of the invasion of Ukraine. We want to do what we can to support them.

Photo of David Evennett David Evennett Conservative, Bexleyheath and Crayford

Pubs are so important in our communities. My constituents in Bexleyheath and Crayford find their pubs pivotal to the social environment. We have a very good micropub in Crayford, the Penny Farthing, which I occasionally go to at lunchtime. My hon. Friend makes an important point. We need these pubs. They are centre stage for our local communities. They do a good social job, and also they are a safe place for people to go to. What the Government are doing is commendable.

Photo of James Cartlidge James Cartlidge The Exchequer Secretary

We have had strong support from public health groups for the differential duty, because the evidence shows that is healthier to drink in a social environment than privately. That is another significant benefit.

Photo of James Cartlidge James Cartlidge The Exchequer Secretary

This is a popular area of the debate. I give way.

Photo of Alistair Carmichael Alistair Carmichael Liberal Democrat Spokesperson (Home Affairs), Liberal Democrat Spokesperson (Northern Ireland), Liberal Democrat Spokesperson (Justice)

I think the Minister has a sound case in relation to what the Government have done on beer duty. What is less clear, however, is why they have chosen to treat spirits so differently. Spirits are also an important part of the on trade. What will the impact be on the spirits trade from the differential that the Minister has now baked into the duty system?

Photo of James Cartlidge James Cartlidge The Exchequer Secretary

There are spirits that will benefit from the differential—not spirits served from what I think are called optics, but spirits served on tap. There are mixers served on tap that will benefit from a more generous differential duty. On spirits, I am more than happy to set out further detail when I respond to the relevant amendments, because I think they are specifically focused on Scotch whisky, and I understand the concerns there.

I just want to finish my point on our Brexit pubs guarantee. Just to underline what we are doing, we are giving pubs a new permanent competitive advantage. We are levelling the playing field against supermarkets. Following the difficult times that pubs have had with the pandemic and higher energy costs, that hopefully gives them a new narrative for their communities with more positive times to look forward to ahead. That is what we want for our pubs. As my right hon. Friend Sir David Evennett said, they are so important for our communities and our economy. We continue to do everything possible to back the great British pub.

Photo of Bob Stewart Bob Stewart Conservative, Beckenham

It seems that we will finish early tonight, in which case I am going straight to the Jolly Woodman in my constituency. I hope I will be able to tell it that the price of its beer will come down. Is there any possibility that there can be a differentiation to encourage real ale, speaking as a member of the Campaign for Real Ale?

Photo of James Cartlidge James Cartlidge The Exchequer Secretary

I hope my right hon. Friend is welcomed with open arms in the Jolly Woodman, having given it fulsome promotion. I might make do with Strangers Bar downstairs. Real ales will benefit from the differential duty, particularly those served on tap. There are lower rates for those with lower alcohol by volume, which will hopefully encourage innovation. I hope that will support our craft brewers, not least with the second relief, which replaces and extends small brewers relief with a small producer relief applying to alcoholic products under 8.5% ABV produced by those making less than 4,500 hectolitres of alcohol per year. That will be precisely those sorts of craft brewers.

Clauses 50 to 53 introduce the new draught relief and clauses 54 to 60 provide for the new small producer relief. Taking each clause in turn quickly—I will canter through them—clause 50 explains that alcohol duty is charged on qualifying draught products at the reduced rates shown in schedule 8. Clause 51 sets out the eligibility criteria for draught relief. Clause 52 defines repackaging for the purposes of draught relief and introduces a penalty for repackaging that is not authorised. Clause 53 provides assessment and penalty consequences for a person repackaging qualifying draught products in a way not allowed under clause 52. Clause 54 provides for discounted rates to be charged on all small producer alcoholic products and explains how the discounted rate is calculated. Clause 55 defines small producer alcoholic products.

Clause 56 introduces the criteria for determining whether premises used to produce alcoholic products are small production premises. Clause 57 explains the alcohol production amount used for the purposes of determining eligibility for the duty discount and calculating the duty discount for small producer alcoholic products. Clause 58 sets out the circumstances, other than not meeting the eligibility conditions, in which alcoholic products are not small producer alcoholic products. I hope hon. Members are all following. Clause 59 and schedule 9 set out how to calculate the duty discount used to determine the discounted rate for small producer alcoholic products, and clause 60 allows the commissioners to assess alcohol duty that is due in circumstances where the small producer rate has not been applied correctly. The remaining clauses concerning alcohol duty will be debated in the Public Bill Committee.

Each of the clauses I have discussed will help us to reform the tax system. On devolved social security benefits, clause 27 will provide the Government with the flexibility to confirm the tax treatment within the tax year, rather than be subject to the UK parliamentary timetable. The alcohol duty clauses replace the existing nonsensical alcohol duty system, initially created by a complex web of EU law, with a more consistent, simplified approach to taxing alcohol according to its strength. This will help to better meet our public health objectives and is in line with this Government’s commitment to tax simplification. We are also introducing two new reliefs to help businesses grow and thrive, not least to support our precious pubs.

Photo of Daisy Cooper Daisy Cooper Liberal Democrat Spokesperson (Health and Social Care), Deputy Leader, Liberal Democrats 5:00, 19 April 2023

The Minister has talked about the Government’s ambition to simplify the tax system, but he will be aware that the most adversely affected businesses are the port and sherry traders, which will feel the force of a full £20 million increase, despite fortified wine being only 3% of the total wine trade. They have asked for this process to be simplified further by taxing fortified wine at the midpoint of 17.5% ABV. Is that something the Government might still consider?

Photo of James Cartlidge James Cartlidge The Exchequer Secretary

It is a fair point from the hon. Lady. I do think this is a significant simplification. We are moving from 15 bands to six. I would love it to be 15 to one, but unfortunately “Fifteen to One” is going to remain the name of a quiz programme. If she looks carefully at the new rates—I am more than happy to share a copy of the bands with her—she will see that it is a significant simplification. It provides many benefits to the wine trade, particularly with our differential duty and the small producers relief.

To conclude, I will be happy to respond to the amendments on Scotch whisky at the end, but in the meantime I commend to the Committee clauses 27, 47, 48 and 50 to 60, and schedules 7 to 9.

Photo of Alistair Carmichael Alistair Carmichael Liberal Democrat Spokesperson (Home Affairs), Liberal Democrat Spokesperson (Northern Ireland), Liberal Democrat Spokesperson (Justice)

Thank you, Dame Eleanor. It is perhaps not a novelty to see you back in the Chair, but it is still a great pleasure none the less. I am delighted to serve with you in control.

I rise to speak to amendment 7, which stands in my name and those of my hon. Friends. In doing so, I should indicate at this stage that it is my intention to divide the Committee and establish opinion on it. The effect of amendment 7 would be to freeze the level of duty on the production of spirits. The Minister kept saying these are Scotch whisky amendments. He maybe knows me too well, but I would readily concede that many other spirits will be affected by this, and they are just as important. I think Kirsty Blackman will speak to her amendments, which do relate specifically to Scotch whisky, but I have had discussions with her, and she tells me that SNP Members are in fact minded to support our amendment, instead of pursuing their own. She will doubtless speak for herself, as she always does, later in the debate.

When we consider that 70% of the gin produced in this country is, in fact, produced in Scotland—my constituency has no fewer than four gin distilleries, and we find that situation replicated across Scotland—the impact of rises in duty are not just going to be felt by areas that produce Scotch whisky. We have also seen a number of distilleries appearing in recent times—a much smaller number, but it is significant none the less—producing rum. So it is important that we have a coherent strategy for the excise duty on these products. The difficulty I have with what I hear from the Treasury Minister is that it is difficult to discern exactly what the Government are trying to achieve in this Budget.

Scotch whisky in particular is very important to the UK as part of our manufacturing base. Indeed, it is an enormously important part of our export portfolio. It is also critical for many of the most economically fragile communities that can be found around the highlands and islands of Scotland. I was born and brought up on Islay, and people will know the importance of the whisky industry, and in recent years the growth of whisky tourism to that economy. In my constituency we have Highland Park and Scapa. Occasionally other interests are declared, but we still have only two producing distilleries. They are very important to our local community, not just in relation to the jobs they provide directly, but because of the spin-offs—the visitor centre, the merchandising, and the visitors that those distilleries bring to the community. Whisky tourism is enormously important, and it is it enormously important that the whisky industry has confidence that the Government are on their side. I am afraid that the signals we have seen from this Government in recent months have been, if I am to be kind to them, mixed at best.

The Chancellor was right to say in December that there would be a freeze on duty. We welcomed that, as I am sure did others. Three months later, to then turn around and whack a duty increase on spirits in the region of something just north of 10%, makes us wonder what the Government are trying to achieve. When I was Secretary of State for Scotland, along with Danny Alexander, who was Chief Secretary to the Treasury, we argued successfully for a 2% duty cut. In 2015, the Red Book of the day said that that would bring with it a reduction in the amount of duty received and revenue brought in, but in point of fact we brought in more revenue with a lower level of duty than had been the case before it was cut.

If we are trying to do something that will bring in more money to the Treasury, surely a duty freeze, at the very least, should be on offer. Indeed, Treasury data illustrates the point well, because a recent history of cuts and duty freezes has actually had a beneficial effect on revenue brought in. For some reason, we now seem determined to introduce a duty increase that will have an inflationary impact, and for some of the most economically fragile communities in the country that will have the effect of stymying growth.

The position laid out by the Minister on sales of beer was exceptionally interesting. He will be aware that spirits account for one third of the serves of alcohol consumed in this country, but less than one fifth of the units consumed. On the other hand, beer has 60% of the units consumed but accounts for less than 50% of the serves. It is clear that the effect of this measure will be inflationary and have a detrimental effect on the economic growth that we are all supposed to be pursuing.

The Chief Medical Officer tells us that we should safely consume 14 units per week—I think I have read this correctly—per week. If we are to consume 14 units of cider, we pay £1.13 in tax. If we consume 14 units of wine, we pay £3.36 in tax. But if we consume 14 units of spirits, we pay £4.06 in tax. To put it another way, Scotch whisky, and spirits as a whole, are taxed 256% higher than cider, and 16% higher than wine.

It was presumably for that reason that the Secretary of State for Scotland is reported in The Scotsman as having argued against it. This was not some source quoted as saying that, but the Secretary of State himself. He said that he was disappointed the Chancellor acted in the way he did. I think we can all very much share the disappointment of the Secretary of State for Scotland. For the avoidance of doubt, I did let him know that I would be referring to him in the course of my speech. Our real disappointment, however, is that, having publicly disagreed with the Government on the matter, I have a strong suspicion that if it is put to a Division he will be in the other Lobby. It is all very well to wring your hands, but if, when the moment comes and the Division bells ring, you are not prepared to do what you know is right for such an important industry in Scotland in so many of our communities, then I feel we are, as politicians, failing in our duty to our constituents and those whom we seek to serve.

We heard a lot from the Minister about the harmonisation of duties, but the House has heard the truth of the matter. The position in relation to on-sales consumption of beer will widen the gap. It simply makes no sense. If the Minister can answer no other question when he comes to respond, can he answer this: what strategy are the Government seeking to deliver by bringing forward a duty increase in excess of 10%? I do not see it. It flies in the face of the Treasury’s own data and contradicts it. It is difficult to understand what the purpose of it is, other than simply an attitude that says, “Well, you’ve had it good for a few years now, so we’re going to treat you differently and it’s time for you to take some of the pain.” An industry as important as the production of spirits deserves rather better consideration from the Treasury.

Photo of Jamie Stone Jamie Stone Liberal Democrat Spokesperson (Armed Forces), Liberal Democrat Spokesperson (Digital, Culture, Media and Sport)

I rise in support of my right hon. Friend Mr Carmichael, who speaks for my constituents as much as he does his own.

I want to make two simple points. First, the distilleries in my constituency—I could name them all, but I have done that before in this place—are part and parcel of each community in which they are based, and they are important to the people in those communities. They see them as their own. As my right hon. Friend said, the jobs they provide in some of the most sparsely populated and economically fragile parts of Scotland are absolutely crucial. Inver House, a company that owns two distilleries in my constituency, Balblair in Edderton and Old Pulteney in Wick, sponsors the Wick Gala each year. As something that epitomises the culture of Caithness, I would honestly recommend that all right hon. and hon. Members come to Wick and see the Wick Gala—it is something they will not forget. That company is a part of it and makes it happen, which is incredibly important. In my own home town of Tain, Glenmorangie, now owned by the French company Louis Vuitton, has for a number of years pretty well paid for the Tain highland games. Again, I say to Members: come see them and enjoy. So the distilleries are a part of the community and what they do is crucial for the community. It is about rural jobs in sparse areas.

The second point I want to make to those on the Treasury Bench is about levelling up. Those are not the words I would have chosen, but it is a good concept to take parts of the UK that have lost out in the race and bring them up—giving them a leg up—to be equal to the richer parts of the UK. By definition, the areas where there are distilleries are very often some of the more hard-up parts of the Scottish highlands and of Scotland. If Government Members want to go about levelling up, they need to get into the parts of Britain that need help.

Photo of Alistair Carmichael Alistair Carmichael Liberal Democrat Spokesperson (Home Affairs), Liberal Democrat Spokesperson (Northern Ireland), Liberal Democrat Spokesperson (Justice)

As my hon. Friend says, these are often some of the more hard-up areas of the country, but the truth of the matter is that down the years they have contributed enormously to the GDP of this country and they have the potential to do more. We are not looking for any special treatment. We are not looking for any favours or handouts. All we are looking for is a fair crack of the whip.

Photo of Jamie Stone Jamie Stone Liberal Democrat Spokesperson (Armed Forces), Liberal Democrat Spokesperson (Digital, Culture, Media and Sport)

That is an extremely valuable point. I would bolt on to it that we have new distilleries starting up. In John O’Groats, there is a brand new one called 8 Doors. These enterprising local Caithness people have done it off their own bat. To get tourists to go to John O’Groats, we have 8 Doors, which has done it along the coast of Caithness. We have Wolfstone—I think I have that right.

Photo of Jamie Stone Jamie Stone Liberal Democrat Spokesperson (Armed Forces), Liberal Democrat Spokesperson (Digital, Culture, Media and Sport) 5:15, 19 April 2023

You’re dead right—I stand corrected by my right hon. Friend. Tourists love it and it contributes a huge amount to the Exchequer. It matters passionately to my constituents and to me. If I do nothing else for my constituency, I will try to boost the economy in every way I can because every job counts. I rest my comments with that.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Cabinet Office)

I fear that, if I was to talk about the names of all the distilleries in my constituency, the debate would be much shorter than if Jamie Stone were to do so. In fact, I have much more of a tendency to drink gin than whisky, although other spirits are available.

It was interesting to hear the words “economically fragile”. That is an incredibly good point. Rural depopulation is a real issue. The Scottish Government are doing what we can to ensure that it does not continue, but if the UK Government keep working against what we are doing to encourage people to live and stay in our rural communities, we will have a real problem. That is not a small thing.

We tabled our amendments because we specifically wanted the word “whisky” on the Order Paper and we wanted to make the case in relation to whisky. However, I will not be pushing our amendments to a vote, and will support that of Mr Carmichael because I concede that his is better. I am always happy to do that in such situations.

The reality is that Scotch whisky is 4.9% of the Scottish economy. Some £8.1 billion can be attributed to the sale of alcohol, around 60% of which comes from whisky exports. The numbers stated by the right hon. Member about how the differential rates work and how much people are taxed on those 14 units were incredibly interesting. The Government’s purpose is to make money from some of the alcohol measures, but there is also a population behaviour change intention behind what they do with tax on spirits and alcohol, particularly the allowance on draught beer. They have different taxes to encourage a change of behaviour, or differential behaviour in people. The Government may intend to use this tax to shift some of the population, but they are actually discouraging people from buying the very spirits that a huge amount of our livelihoods relies on. It is the case that 90% of spirits in the UK are produced in Scotland. The Government’s measures therefore have a massive negative impact on Scotland.

The average price of a bottle of Scotch whisky is £15.22 at a supermarket in Scotland. Following the new alcohol duty plus the VAT, £11.40 of that £15.22 will go to the Treasury. That is such a significant amount, and does not compare with other alcohol. I appreciate what the Government are trying to do on draught, and it is important that they have laid out their rationale for doing so—that was very helpful—but this is incredibly unfair and risks damaging those economically fragile areas, particularly in rural Scotland. Those areas have already suffered as a result of Brexit, with people’s reduced ability to freely move here.

I want to raise a small flag with the Minister in relation to the Public Bill Committee. When we come to that stage, I will be raising questions around clause 87, which is on post-duty point dilution of alcoholic products. I know there have already been problems in relation to that, so when we come to that stage of the Committee, I would appreciate Ministers being absolutely clear about their reasons for the changes in clause 87. If they are able to lay out those reasons clearly, that will reduce the number of questions I am likely to ask.

In summary, we support the amendment proposed by Liberal Democrat Members. We agree with the Scotch Whisky Association and think that the increase in duty is unfair and hits spirits, particularly Scotch whisky, unfairly. We want to stand up for our constituents, our constituencies, rural Scotland and Scotland as a whole in supporting the amendment.

Photo of Abena Oppong-Asare Abena Oppong-Asare Shadow Exchequer Secretary (Treasury)

I rise to speak, on behalf of the Opposition, to the clauses that are related to the tax treatment of devolved social security benefits and the new alcohol duty regime.

I will address clause 27 briefly. Clause 27 introduces a new power to enable the tax treatment of new or new top-up welfare payments, introduced by devolved Administrations, to be confirmed as social security income through secondary legislation. That will allow the UK Government to confirm the tax treatment of new or new top-up payments within the new tax year rather than be subject to the UK parliamentary timetable.

I note that the income tax treatment of social security benefit is currently legislated for in part 10 of the Income Tax (Earnings and Pensions) Act 2003, and that this clause will introduce a new power to add new benefits to the table of taxable benefits included in the Act. I can see that the clause is largely administrative. Therefore, the Opposition do not take issue with the clause and will support it.

I will now move on to the clauses concerning the new alcohol duty regime. The Bill contains 77 clauses establishing a new structure for alcohol duty, but we will discuss just some of those today, before moving to consider the remainder in Public Bill Committee.

Labour agreed with the principles behind the alcohol duty review. We want to see the alcohol duty system made simpler and more consistent. We recognise that there is a balance to be struck between supporting businesses and consumers, protecting public health, and maintaining a source of revenue for the Exchequer. We have consistently raised concerns about the Government’s rushed and confused messaging on this area.

Before I come to the clauses and schedules, I want to paint a brief picture of the context behind the changes. Back in October 2020, the Government announced a call for evidence, seeking views on how the alcohol duty system could be reformed. At the time, they said this would make the system

“simpler, more economically rational and less administratively burdensome on businesses and HMRC.”

However, what we have seen since then is indecision, U-turns and delays.

Businesses and consumers had to wait until September 2022 for the Government’s response to the alcohol duty consultation. What ensued was chaos. In the shambolic mini-Budget that crushed the British economy, the then Chancellor announced a freeze on alcohol duty that was due to come into force in February 2023, but then the new Chancellor scrapped the freeze in October’s autumn statement. Fast forward to December, and I was back standing at the Dispatch Box responding to another Government’s U-turn, that time deciding that the freeze was back in place until August 2023.

The Government have now confirmed that the freeze will end in August and a new system of alcohol duty will be put in place. Alcohol duty rates will be adjusted in line with inflation and moved to a system that links duty rates to alcohol by volume. Clause 47 sets out the new regime, while clause 48 and schedule 7 specify the new adjusted rates of alcohol duty for different drinks. I note that some sectors are concerned about these changes—particularly wine producers and Scottish whisky producers, as Mr Carmichael highlighted.

The reason the Tories have hit people and businesses with stealth taxes is that they have failed to get the growth that our country needs and have failed to get a grip on inflation. That is what makes the boasts of halving inflation so hollow. Prices are already soaring, hitting industries with steep tax rises.

Photo of Mark Jenkinson Mark Jenkinson Conservative, Workington

Can the hon. Lady set out in detail the Opposition’s plans for alcohol duty and how they might differ from the Government’s plans?

Photo of Abena Oppong-Asare Abena Oppong-Asare Shadow Exchequer Secretary (Treasury)

As I mentioned, we have consistently raised concerns about the Government’s U-turns on the issue. We have scrutinised them and put forward recommendations, which the hon. Member will hear us talk about in further detail in the Public Bill Committee.

It is important that today the Minister lays out what measures the Government will take to support the sectors most affected by the duty changes, as well as what consideration the Treasury has given to the potentially inflationary impact of the increases. The explanatory notes to the Bill state:

“The commencement of changes to approvals will be announced at a later date.”

Perhaps the Minister could give some certainty to businesses by fleshing out some further detail today.

Clause 50 and schedule 8 set out measures for a new draught relief that will provide a reduced rate of duty on qualifying draught products. Clause 51 sets out the requirement that qualifying draught products be under 8.5% ABV and be packaged in containers that hold at least 20 litres and are designed to connect to a dispensing system. Clause 52 sets out the rules on the repackaging of qualifying draught products. Decanting from 20-litre containers into smaller containers will be prohibited unless the products are to be consumed on the premises at which decanting takes place.

Labour supports these measures, which will support and protect the hospitality sector, but our analysis has found that more than 70,000 venues have had to reduce their opening hours because of energy bills. I have seen that in my constituency. These are businesses that enrich our communities and boost our high streets, but they are being let down by the Government and many of these changes will come far too late.

I note that the draught relief has been designed in a way that will exclude the wine sector. Can the Minister explain why? Will he let us know whether the Government will introduce any other measures to support British wine and spirit producers?

Clause 54 lays out measures to replace the small brewers relief with a small producer relief. Clause 55 specifies that eligible producers will be those whose products have an alcoholic strength of less than 8.5% ABV and who produce less than 4,500 hectolitres of alcohol per year. The remaining clauses and schedules lay out precise measures for calculating rates of relief.

Labour introduced the small brewers relief in 2002 and is proud of the effect that it has had by supporting small brewers and creating a vibrant UK beer scene. We therefore support the extension of relief to other producers, but I note that that may not occur under the new scheme, as British wine and spirit producers are largely excluded from these measures. Perhaps the Minister could lay out why the scheme has not been further extended.

In conclusion, Labour recognises the need to simplify the alcohol duty regime while striking a balance between supporting businesses and consumers, protecting public health and maintaining a source of revenue for the Exchequer.

Photo of Alistair Carmichael Alistair Carmichael Liberal Democrat Spokesperson (Home Affairs), Liberal Democrat Spokesperson (Northern Ireland), Liberal Democrat Spokesperson (Justice)

May I take up the point about small producers? Deerness distillery, in my constituency, is a family-owned business that is seeking to move into whisky production. Surely, as a small producer in a market dominated by big corporates, it should be given the same opportunity to grow as a brewer. Why, in principle, should there be any difference in their treatment?

Photo of Abena Oppong-Asare Abena Oppong-Asare Shadow Exchequer Secretary (Treasury)

We, too, are concerned about that, and I have met various stakeholders in the sector who have highlighted their concerns. I hope that the Minister will take the issue on board in his response.

We do not oppose the clauses and schedules, but we want answers to the questions that have been raised, and, most important, we want certainty for the businesses and consumers who have suffered over the past few months and years as a result of the constant chopping and changing that the country has seen from various Conservative Governments.

Photo of James Cartlidge James Cartlidge The Exchequer Secretary 5:30, 19 April 2023

Before I turn to the very good speeches that we have heard during the current debate, let me clarify a point relating to our earlier debate on the electricity generator levy. I mistakenly said that “private wire” was included in the levy, when of course I meant to say that it was excluded.

Let me begin by saying that I welcome the support expressed by Abena Oppong-Asare for the clause relating to devolved welfare payments. As for alcohol duty, Mr Carmichael may not recall the debate that he initiated in Westminster Hall in October 2017, when I was a mere Back Bencher, but I was the first Member to intervene on his speech. All the others were Scottish. I intervened because a leading company in my constituency produces the bottle tops for the whisky trade. That, along with the East Anglian grain that is sent up to Scotland from time to time to help support the sector, underlines the fact that this is a UK industry, and a UK export. We are all proud of Scotch whisky and the role that it plays in our economy. However, I must say this to the right hon. Gentleman, and also to Jamie Stone, who spoke with his usual eloquence and conjured up wonderful images. I understand the importance of the Scotch whisky sector, and we have supported it—in nine of the last 10 Budgets, we have either frozen or cut the tax—but the key point is that not introducing the RPI-linked increase would have a significant cost.

Photo of Alistair Carmichael Alistair Carmichael Liberal Democrat Spokesperson (Home Affairs), Liberal Democrat Spokesperson (Northern Ireland), Liberal Democrat Spokesperson (Justice)

The Minister is making our case himself, so presumably he will be joining us in the Lobby—as, indeed, the Secretary of State for Scotland should be doing—or else accepting my amendment.

Photo of James Cartlidge James Cartlidge The Exchequer Secretary

I had never thought of the right hon. Gentleman as a cheeky chappie, but for that brief moment, he almost was. Let me now address his amendment 7. The Scottish National party Members have, very nobly, effectively withdrawn their amendments to ride on the back of it, which is perfectly fair: they seek, ultimately, to arrive at roughly the same point, which could be described as the protection of spirits, and Scotch whisky in particular, from the RPI-linked increase.

The proposal in amendment 7 would cost an amount between £1.7 billion and £2 billion. An overall RPI freeze would cost £5 billion across the scorecard. We have, of course, supported freezes in the past, and it was I who announced the freeze back in December. Members may recall the reason for that freeze: in view of the August reform, we did not want the sector to go through two separate alcohol tax increases. We supported the industry, but it is expensive, and with the public finances as they are, we feel that the responsible option is to introduce the RPI-linked increase—which, after all, is not a real-terms increase—but, nevertheless, to bring in the differential duty to support our pubs.

Photo of James Cartlidge James Cartlidge The Exchequer Secretary

I will give way to the right hon. Gentleman, for the last time.

Photo of Alistair Carmichael Alistair Carmichael Liberal Democrat Spokesperson (Home Affairs), Liberal Democrat Spokesperson (Northern Ireland), Liberal Democrat Spokesperson (Justice)

The Minister needs to look at the actual data relating to the revenue brought in over these years of cuts and freezes, because the story that it tells is very different from the forecasts on which he relies. He should remember that in 2015 the forecast was for a 2% reduction, but in fact there was a 4% increase. When will the Government become a bit more realistic about the effect of their own policies in this area?

Photo of James Cartlidge James Cartlidge The Exchequer Secretary

I have to disagree with the right hon. Gentleman’s use of the word “realistic”. I have met representatives of the Scotch Whisky Association, whom I greatly respect, and they have said to me that if we freeze the tax we get the revenue. Unfortunately, however, the Government have what I believe is the very important and successful policy of using an independent body, the Office for Budget Responsibility, which makes forecasts independently for Governments on the effects of fiscal measures. [Interruption.] I hear voices behind me saying that they are wrong. The point is that the OBR is not a collection of soothsayers employed to predict, entirely accurately, exactly what will happen in the future. With the greatest respect to everyone, if that was the case, I suspect they would spend rather more of their time looking at accountancy of the turf-related kind rather than trying to forecast the national accounts. The point is that this enables us to ground fiscal events in a forecast of where we are at that time and the fiscal costs at the time, therefore adding credibility to the decisions we make and avoiding the easy situation where we do not have to make the difficult trade-offs that households and businesses know that, in reality, we have to face. If we want to cut one tax, we have to find the money from somewhere else. It is a good discipline.

Photo of James Cartlidge James Cartlidge The Exchequer Secretary

I will take this very last soupçon: a final intervention from the hon. Gentleman.

Photo of Jamie Stone Jamie Stone Liberal Democrat Spokesperson (Armed Forces), Liberal Democrat Spokesperson (Digital, Culture, Media and Sport)

The Minister is nothing if not courteous, but does he not accept that he would increase the revenue base by increasing industry and economic activity? What message does this send to—let me get the names right—Wolfburn in Dunnet or 8 Doors in John O’Groats? These are new distilleries, just starting out. From little acorns, mighty oaks can grow, and those mighty oaks can give the Government lots of acorns in tax revenue.

Photo of James Cartlidge James Cartlidge The Exchequer Secretary

The hon. Gentleman is always courteous, and I send the message to him that for every single business, charity and household in the country, one thing that trumps all is wanting the Government to run the public finances in a stable way so that businesses can have confidence that the investments they make will be in a growing and stable economy. I totally understand where he is coming from, but he has not persuaded me that he has a way to find those billions of pounds. I hope that I have nevertheless offered the assurance needed for hon. Members to retract their proposed amendments, and that clauses 27, 47 to 48 and 50 to 60 will stand part of the Bill as we end our theme of alcohol for the evening.

Question put and agreed to.

Clause 27 accordingly ordered to stand part of the Bill.

Clauses 47 and 48 ordered to stand part of the Bill.

Amendment proposed: 7, in schedule 7, page 334, line 18, leave out “£31.64” and insert “£28.74”—(Mr. Carmichael.)

Question put, That the amendment be made.

Division number 215 Finance (No. 2) Bill Committee of the whole House: Amendment 7

Aye: 53 MPs

No: 287 MPs

Aye: A-Z by last name


No: A-Z by last name


The Committee divided: Ayes 54, Noes 290.

Question accordingly negatived.

Schedule 7 agreed to.

Clause 50 ordered to stand part of the Bill.

Schedule 8 agreed to.

Clauses 51 to 54 ordered to stand part of the Bill.

Schedule 9 agreed to.

Clauses 55 to 60 ordered to stand part of the Bill.

The Deputy Speaker resumed the Chair.

Bill (Clauses 5 to 15, 18 to 25, 27, 47, 48, 50 to 60 and 121 to 312, and schedules 1, 7 to 9 and 14 to 18), as amended, reported, and ordered to lie on the Table.