Clause 2 - Rates of duty on cider

Finance Bill – in a Public Bill Committee at 12:00 pm on 14th May 2002.

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

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

I hope that the Committee will unite in agreement on the clause, which reduces the excise duty rates on cider and perry by 2 per cent. with effect from 28 April 2002. The duty reduction represents a real-terms cut of 3.9 per cent., which, including VAT, is equivalent to a penny per pint of cider or perry. The reduction will boost the traditional cider industry, which is an important part of the rural economy that accounts for half of UK apple production and provides a steady source of income for many farmers. The reduction has already been warmly greeted by many outside the House, including John Thatcher—no relative—who is chairman of the National Association of Cider Makers. He says that

''given the fragile state of the industry this reduction is most welcome.''

I hope that that welcome will be shared and echoed by all Committee members.

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

Conservative members of the Committee certainly welcome the reduction. I should be grateful if the Financial Secretary would explain where the reduction fits into the concern that the Government express about under-age and binge drinking. Jean Coussins, director of the Portman Group—a highly respected body that works closely with the Government to try to reduce binge drinking—said:

''All major research studies have shown that the most popular drinks amongst regular underage drinkers are traditional beers, ciders and lagers''.

For cider with a strength of more than 8.5 per cent., the duty paid on a 275 ml bottle—about half a pint—is some 10.6p. For ciders with a strength of less than that, duty is significantly less. In any event, the duties are much lower than the proposed duties for so-called ''spirit coolers'', which we shall address in clause 3. One justification that the Government have offered for the changes in duties on spirit coolers is the evidence of the proliferation of under-age and binge drinking. Can the Minister explain the link between that and the rationale to reduce the rate of duty on cider, which, according the Portman Group, is a beverage more traditionally consumed by young people.

Photo of Kevin Brennan Kevin Brennan Labour, Cardiff West

Surely, the point is not what is the most popular drink among young people, but what is the rate of market growth for particular drinks. The evidence is that the market for alcopops and spirit-based coolers has grown hugely in recent years. Beer and cider may remain the most popular, but that is not necessarily where the growth in drinking is.

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

The argument that the hon. Gentleman deploys is extraordinary. He says that a product, even though it has no greater alcohol content, should be penalised because it is more popular; perhaps we should drive people towards products with greater alcohol content, such as cider. I am happy to defend the traditional British cider industry, and I hope that even more of the apples used in cider will be grown in the United Kingdom instead of elsewhere. The Financial Secretary quoted the statistic that half the UK apple production goes into the cider produced in this country. A heck of a lot of the apples from France and overseas also goes into our cider production, but that is a separate issue.

If we want to link the issue of binge drinking with spirit coolers, we must be logical. The debate will probably demonstrate that the fact that spirit coolers are popular among people is no basis for penalising them; penalising cider producers because many people find that cider provides the maximum amount of alcohol for the minimum duty would not be sensible either.

Photo of Kevin Brennan Kevin Brennan Labour, Cardiff West

The evidence is that consumption of spirit-based coolers has more than doubled between 1999 and 2001. Surely, that is what is important.

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

Unless there is something inherently wrong with those drinks, the hon. Gentleman's comment is like saying that the demand for lemon barley has increased and the demand for orange squash has decreased. So what? What is important is whether the individual drinks are regarded as inherently dangerous because of their alcohol content. Cider and cider products have more alcohol content than most spirit coolers. The argument that the Government are trying to deploy in sustaining the increase in duty on spirit coolers is that such drinks cause binge drinking, but that is not compatible with clause 2, which we support. The clause provides for a modest reduction in duty on cider, which would cost only about £6 million. I think that the answer to the hon. Gentleman's intervention is that the Government can secure some publicity for £6 million, particularly in the rural parts of the country that produce cider, but they would more than recoup that through a £170

million tax increase on those who consume spirit coolers. However, we shall tackle that debate in more detail when we come to the next clause. I hope that the Financial Secretary can explain the rationale behind the relatively low duty that is payable on cider—even cider of a strength in excess of 8.5 per cent.—compared with equivalent drinks.

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

May I back up the request by the hon. Member for Christchurch that the Government give some rationale for their alcohol taxation policy? Are the Government following the previous Government's view that spirits and cider have been taxed more heavily than other forms of alcohol and that a gradual adjustment was needed? During the period since 1995, we have seen a significant real-terms reduction in the excise duty on cider through measures taken by both the previous Conservative Government and this Government. That may fit in a rational framework, but it is important, particularly as we are thinking about the debate on the next clause, that the Government show us that it does. I hope that the Financial Secretary can describe that, so that we can have a clear strategy and guidance on policy in that area.

It seems that the representation from Liberal Democrats from the south-west are having an effect.

Photo of Chris Grayling Chris Grayling Shadow Minister (Health)

May I echo some of the comments made by my hon. Friend the Member for Christchurch? There seems to be a great inconsistency in the Government's approach to using excise duties to combat the issue of binge drinking in our society, of which we are undoubtedly aware. Undue levels of alcohol consumption have a corresponding knock-on into antisocial behaviour in far too many town centres on Friday and Saturday nights. The clause that we shall debate subsequently contains a clear indication that the Government are minded to use excise duties to tackle that problem, but there is a stark inconsistency in the provisions related to cider.

I would not want in any way to take steps that had an adverse effect on the cider industry, but it seems clear that there is a difference in social impact between standard cider, which is a popular drink throughout the country, and some of the strong ciders that are undoubtedly used as cheap access to strong alcohol by teenagers at the weekend. It is surprisingly inconsistent for the Government to cut the duties on strong ciders and raise the duties on alcopops.

The Government need to take a long, hard look at how they use excise policies. During the past 20 or 30 years, strong alcohol has become more prevalent in our society. It is cheaper in volume and price terms to get drunk today than it was when I was a teenager—[Hon. Members: ''Ah!'']—or when hon. Members across the Committee were teenagers. It is far easier today to buy a pint of strong cider or lager, which may be, as my hon. Friend the Member for Christchurch said, as strong as 8.5 per cent. compared with half that level for a conventional bitter or cider.

Excise duties should be structured in a way that discourages excessive alcohol consumption and does not steer young people in one direction rather than another in terms of which strong alcohol they choose to purchase. I hope that the Financial Secretary has an explanation for that apparent contradiction and can show the Committee that the Government are mindful of the role that strong alcohol plays in some of the antisocial disorder that our society is experiencing, and will give us a sense of how his strategy for excise duties will help to tackle that.

Photo of Roger Gale Roger Gale Vice-Chair, Conservative Party

Order. I understand that hon. Members need to communicate with each other, but there is a limit to the number of private conversations that this Chairman is prepared to tolerate.

Before I ask the Financial Secretary to respond, it has been pointed out that some of the matters raised apply to clause 3. It is inevitable in such a debate that arguments will interrelate. It is up to the Financial Secretary whether he chooses to respond to some of the issues relating to alcopops now, or to reserve that response until the proper debate on the subject under clause 3. I am fairly relaxed on the subject.

Photo of Mr Paul Boateng Mr Paul Boateng Financial Secretary, HM Treasury, The Financial Secretary to the Treasury 12:15 pm, 14th May 2002

I am grateful to you, Mr. Gale. I am looking forward enormously to the debate on alcopops, and I shall address the wider points on them then.

Hon. Members have asked me to give a rationale for the Government's approach to the taxation of alcoholic drinks. That is to be found in paragraph 5.88 of the Red Book, and is that we seek to take ''consistent steps to deliver'' what we describe as

''a fairer balance in the burden of taxation falling on different alcoholic drinks and different types of drink-producers.''

We are not motivated, in introducing the proposals, by the rosy recollection of our youthful drinking habits. We are not summoning up the happy memory of 14 pints a day, which the right hon. Member for Richmond, Yorks (Mr. Hague) shared with us. It might well be that the hon. Member for Epsom and Ewell (Chris Grayling) can beat that—I do not know. Perhaps there is a macho competition among Opposition Members to determine who can drink the other under the table. I know not, and I do not particularly care. It is not for us to base our policy on alcohol taxation on the fancies, foibles, fads and fixations of right hon. and hon. Members.

Photo of Chris Grayling Chris Grayling Shadow Minister (Health)

I have to say, representing a constituency in which antisocial behaviour is becoming an increasing problem and where my constituents are very concerned about increasing trouble caused by the over-consumption of alcohol, that they will listen to the Financial Secretary's comments with some dismay and think that he should take the subject more seriously. Does he accept that the much greater presence of strong alcohol in our society, which has increased during the past 20 years or so, is a significant contributor to the troubles in town centres across the country on Friday and Saturday nights?

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

The hon. Gentleman is going to spend many more weeks in close proximity to us all and I suggest, for his own happiness and that of the rest of us, that he lightens up a little. Be that as it may, of course we take seriously antisocial behaviour and binge drinking. What we are addressing here, on the basis of the rationale that I have outlined, is our specific decision about cider.

Why cut the duty on cider? Cider makers' production costs are higher than those of beer makers. Cider makers face the same problems in bringing their product to market as small brewers. A cut in duty will give them a much needed boost in a traditional industry that accounts for half of UK apple growing, forms an important part of the rural economy and has given a commitment to seek to increase the amount of UK apples that it uses to 67 per cent. The hon. Member for Christchurch made the legitimate point, as I should expect of him on the matter, that the industry could do more. It has given an undertaking that it will.

Photo of Michael Jack Michael Jack Conservative, Fylde

Could the Financial Secretary confirm that it has also given an undertaking that the full value at retail of the tax reduction will be passed on to the consumer?

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

No, I cannot. As I said before, on a very interesting and widely followed debate on beer that we had on the Floor of the House, that is a matter for the industry. The right hon. Gentleman would be the last person on earth to expect the Financial Secretary to go around dictating to brewers or cider makers how much of any particular cut in duty they pass on to their customers. That would not be sensible. It is a matter for the markets and for decisions by individual brewers and cider makers.

Photo of Mr John Burnett Mr John Burnett Liberal Democrat, Torridge and West Devon

I welcome you to the Chair, Mr. Gale.

Will the Financial Secretary circulate a copy of that undertaking? It would be interesting if members of the Committee could see it.

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

I shall certainly drop the hon. Gentleman a line about the basis on which I can tell the Committee that the cider industry has pledged to increase the amount of UK-grown apples that it uses. If the matter is of interest to other members of the Committee, they should see the note too. I can see at least one Liberal Democrat Member—the hon. Member for Kingston and Surbiton—who, I should have thought, would normally have a discourse with the hon. Gentleman, but I am happy to send the hon. Gentleman a special copy to share with him.

It is welcome news and an assurance that the Committee is perfectly entitled to seek from the industry, because we want the rural economy to be supported in every way possible. One would want to see that without the cynical motive suggested by the hon. Member for Christchurch. I hope that, in light of that news, the clause will find favour with the Committee.

Question put and agreed to.

Clause 2 ordered to stand part of the Bill.