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Clause 9

Finance Bill – in a Public Bill Committee at 5:00 pm on 13th May 2008.

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Rates of alcoholic liquor duty

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I beg to move amendment No. 7, in clause 9, page 4, line 39, at end insert—

‘(5A) Within six months of the commencement of this section, the Chancellor of the Exchequer must lay before the House of Commons a statement setting out the purpose of alcoholic liquor duty, and must seek the approval of the House of Commons, by resolution, for such a statement.’.

Photo of Frank Cook Frank Cook Labour, Stockton North

With this it will be convenient to discuss amendment No. 6, in clause 9, page 4, line 41, at end add—

‘(7) No further amendment may be made to section 5 of ALDA 1979 within three years of the commencement of this section, unless the condition set out in subsection (8) has been satisfied.

(8) The condition referred to in subsection (7) is that the Chancellor of the Exchequer shall have compiled and laid before the House of Commons a report containing an assessment of the impact of the increases in alcohol liquor duty on—

(a) the competitiveness of licensed premises, and

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

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I ought to declare an interest because I am member of the Campaign for Real Ale and a very keen supporter of the licence and brewing trade in Somerset and across the country. I have spoken to many people who will be affected by this aspect of the Bill. The 2008 Budget announced a 6 per cent. rise across the board in alcohol duty, which equates to 3p on the average pint of cider, 4p on a pint of beer, 14p on a bottle of wine and 55p on a bottle of spirits. That is way in excess of inflation. What also upset a lot of people who are interested in these matters is that the Chancellor announced what is in effect a tax escalator for alcohol in future years, so we know that the price of alcohol will continue to rise above the rate of inflation.

I—and I am sure everyone in the Committee—share the concern which has been expressed by many of our constituents about the phenomenon that is widely described as binge drinking. Nobody who has been out in a town centre—particularly on a Friday or Saturday night—and has seen people who have drunk to the point of illness and needed to go to accident and emergency wards for treatment, can regard that as anything other than a serious social phenomenon. However, I am sceptical about the impact of price on binge drinking. We have talked previously about price elasticity of demand, and we come to that again with reference to alcohol. The Government appear to be  telling us that the measures are to address public concerns about excessive consumption of alcohol and binge drinking. However, the Committee has to ask itself whether it believes that, for example, one of our constituents who goes out with his or her friends and drinks 10 pints of premium alcohol will be deterred significantly by the cost of their evening rising by 40p. If they are, they may choose to drink only nine and a half pints of premium alcohol instead of 10.

I find it hard to believe that the impact on binge drinking would be profound. The measures have already come in, so we know that they have not had the desired effect, unless members of the Committee can assure me that when they go out in town centres on a Friday or Saturday evening they find that everybody is sipping low-alcohol or soft drinks and the idea of getting drunk has not occurred to them. My suspicion and concern is that those who are most price-sensitive regarding alcohol are those who do not intend to drink to excess, for example, a retired person who likes having a couple of pints of beer in the early evening in a village pub, who may be likely to have one and a half pints rather than two. The impact on binge drinking will be non-existent, but the impact on the pub trade may be significant, and the impact on the individual obviously is significant.

Photo of Patrick Hall Patrick Hall Labour, Bedford

I have heard Ministers justify the increase in terms of helping to fund the increase in the winter fuel payment and trying to deal with child poverty, but I am surprised that the hon. Gentleman said that price has no effect on binge drinking. Surely—perhaps he will come to it—the incredibly low price in supermarkets must affect the accessibility of alcohol to many people, including children.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I am grateful for that intervention, and I shall come to the issue of sales. I hope that I did not say that price has no effect. I am just sceptical about how profound that effect is, and I believe that for some categories of consumer it has close to no effect. The point that was I trying to make is that the consumer who is most prone to binge drink is probably also the consumer who is least affected by price. The consumer who drinks in moderation—I cited the example of an older drinker in a village pub—may be more susceptible to price as a factor in their consumption.

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

I do not want to divert the hon. Gentleman too much from his speech but I would like to say, in case he wishes to develop the argument further, that the Government do not and have not said that the increases in alcohol duties announced in the Budget address binge drinking. That is not our argument.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I am grateful for that intervention but also confused by it, because I read that the Minister of State, Department of Health, the right hon. Member for Bristol, South (Dawn Primarolo), told the British Medical Association’s public health conference, which is an audience that is likely to be persuaded of the virtues of trying to improve the health of the nation:

“Our estimates suggest that higher taxes, if they do feed through to price, will mainly affect the 7 per cent. of the population who drink one third of all alcohol consumed in Great  Britain. And that, in England alone, the total number of lives saved up to the end of March 2013” will be

“3,250 lives by the Department’s calculations.”

We are now in a confusing position where the Treasury maintains that those measures have nothing to do with public health, but the Department of Health, when talking to the BMA, claims that those measures will save 3,250 lives by 2013. For the Committee’s benefit, that is roughly half the number of people killed annually in road traffic accidents in the UK, which is a large number. We do not know which Department is making the most persuasive case, but perhaps we will hear now.

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

We need to be precise in the terms that we are using. I have just reminded the hon. Gentleman that the Government do not claim that the increase in the Budget will “address binge drinking”, which is the phrase that he used initially in his speech. If the Minister of State, Department of Health was talking about price, people need to be aware that she used the caveat,

“if they do feed through to price”, in reference to the duty increases. In those circumstances, there might be a positive effect, not necessarily on binge drinking, but on overall levels of alcohol consumption, which is not the same as binge drinking, as the hon. Gentleman will know if he is being reasonable.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Perhaps the Exchequer Secretary will clear this matter up at the end. If she is arguing that the tax changes are not designed to have an impact on binge drinking at all, the Government ought to make that message clearer to a wider audience, because some of the signals that are being sent out are confusing. When the hon. Member for Bedford intervened, he appeared to make the case that the benefits of those tax increases would be used to tackle child poverty and for other desirable features of public policy that have nothing to do with alcohol consumption. Some Ministers appear to be saying that they believe that the measure will have a beneficial impact, but that that will be directly linked to the issue of alcohol consumption, and some might just regard it as a general revenue-raising measure.

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

I hate to bring the hon. Gentleman on to his actual amendment, but is he saying that the Liberal Democrats think that this tax could only have one purpose?

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

No, I think that taxes can have a variety of different impacts at the same time. We have discussed, with regard to tobacco and environmental taxation, that it is possible to affect behaviour and raise revenue simultaneously, which is a point that many Labour MPs in particular, but not exclusively, have not hitherto grasped. No doubt they will rapidly wake up to it when asked to vote on this set of proposals.

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

In that case, is the hon. Gentleman’s amendment, which mentions setting out the purpose of alcoholic liquor duty, a mistake?

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Not at all. If it had been a mistake, I would not have tabled it. The amendment was tabled because I think that it is reasonable that the Government make it clear why they are choosing to increase massively the tax on all the ranges of alcohol that I talked about at the beginning of my contribution. We can have lots of slightly glib exchanges about the proposals in my amendment, but the crux of the matter is that 27 pubs close on average every day. Last year, 1,409 pubs closed in Britain. Of course, lots of others are affected by that, including brewers and small brewers across the country. It is only reasonable for publicans and the people who are affected by that business to know the Government’s motivation for pricing their customers out of their front door. If the motivation is public health, some people may think that that is a reasonable trade-off. Some hon. Members may think it is worth those pubs closing because there will be a benefit in terms of the number of lives saved. From her quote, the Minister of State, Department of Health seemed to say that that was a worthwhile trade-off. Some people may think that, considering the extra revenue raised, it is worth losing some pubs to benefit child poverty, which was mentioned in the intervention I took from the hon. Member for Bedford. It is reasonable to ask the Government to set out why they think the price of losing businesses across the country every single day is worth paying, as the previous Chancellor said.

Photo of Emily Thornberry Emily Thornberry Labour, Islington South and Finsbury

Will the hon. Gentleman help to clear up some confusion in my mind about Liberal Democrat policy on that matter? Although he gives the impression that he is a big supporter of real ale, I understand that Vince Cable is a big supporter of smoothies and says they are good for people. He wants to reduce VAT on smoothies from 17.5 per cent. to 5 per cent. to encourage people to drink them, presumably in public houses. He would like to make up the lost revenue by raising tax on alcohol. What is the hon. Gentleman’s position?

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury) 5:15 pm, 13th May 2008

I am grateful to the hon. Lady for quoting my hon. Friend the Member for Twickenham (Dr. Cable)—that is the normal format of referring to hon. Members. I am all in favour of people drinking smoothies if that is what they wish to do. I do not have medical expertise, but I understand it is more healthy to drink smoothies to excess than to drink alcohol to excess—although perhaps anything in excess is not particularly good for people.

We are considering what the Government are putting forward. The two amendments I have tabled ask the Government to review what the impact of duty rises is on businesses and to give a statement about the purpose of those duty rises. It does not seem unreasonable to ask why the Government are, as a matter of policy, making it harder for thousands of businesses across the country to operate and why we are losing those businesses, namely pubs, at record rates. I am surprised that the Committee does not think that that is a reasonable subject to examine.

What are the current problems for pubs and, in some cases, brewers? One problem is cheap off-sales, which was mentioned in an intervention. That is causing  difficulty in the industry because it is almost impossible to go to a supermarket and not find a promotion being offered on beer in particular and on other forms of alcohol. Obviously, that makes it harder for publicans.

Another problem is changing leisure patterns. Some people stay at home, stay in their gardens, or watch DVDs at home instead of going to the pub. The smoking ban, which I voted against—although I know there are a range of opinions in all political parties—has compounded the problems for some publicans. The effect varies considerably from one pub to another depending on the customer base of the establishment.

Commodity prices have also had a sizeable impact on pubs and on the brewing industry generally. Of course, pubs must pay their utility bills and heat and light their premises. In addition, like most small businesses, they have to pay petrol prices to transport alcohol and other goods and services. Most important of all from the point of view of brewers—and this is often passed on to pubs—the ingredients of, for example, beer have become much more expensive to acquire. Brewers are struggling to hold their prices down and probably take a lower share of profit on each pint that they sell on to the pub. In turn, pubs are trying to hold prices down at a time when consumers are feeling the pinch. As a result, the profits of both brewers and the pub sector are being squeezed. That state of affairs upsets many people in the brewing industry because they feel that their problems are being compounded by above-inflation increases not only in this Budget, but in future Budgets.

Amendments Nos. 7 and 6 would require the Government to review the impact of duty rises on businesses and set out what the effect would have been if the duty rises had not gone forward. We would then be able to consider for next year’s Finance Bill whether future above-inflation increases ought to take place. In addition, the Government would be required to make a statement on the purpose of duty rises so that this Committee and the House could have some clarity on the intention behind the Government policy. We would then be able to see whether the trade-off of the loss of business and livelihoods in the brewing and pub sectors was a worthwhile price to pay for whatever the overall policy is. We are currently unclear about the policy that the Government are pursuing.

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

I did not hear the hon. Gentleman talk specifically about his amendments. He talked a lot about the issue that we are all concerned about, which is that pubs are closing down all over the country. For what it is worth, here are my thoughts. I alluded to my concern about amendment No. 7 earlier. It talks about setting out a statement of

“the purpose of alcoholic liquor duty”.

To me, that does not seem workable. Governments of all colours will have a variety of purposes with any tax policy. Some policies will work together and some will be contradictory and require trade-offs. The chance of there being only one purpose is very slim.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Allow me to explain in more detail. Perhaps I should not have rushed my speech and I should have given more background. I will give a direct quote from last year’s Finance Bill Committee from the  then Financial Secretary when this issue was debated. I was not a member of the Committee. The hon. Member for Wentworth (John Healey) said:

“the view that the Government take—it is the view that we have consistently taken in the Treasury—is that that sort of social harm and social concern is best tackled by social legislation and by working with the trade in self-regulation, rather than by taxation, which, in this circumstance, is an instrument that is not best suited to deal with the social problems that we are discussing.”

He was talking about excess drinking.

“In fact, it would be likely to penalise the vast majority of responsible drinkers rather than affecting the minority who cause us concern.”——[Official Report, Finance Public Bill Committee, 8 May 2007; c. 36.]

He was absolutely explicit last year that higher taxes on alcohol were not a way of tackling the social concern of binge drinking. The position of the Treasury on that is far less clear this year and it seems reasonable that we explore that.

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

I hear what the hon. Gentleman is saying, but he seems to fundamentally miss the concept of price elasticity of demand. I am afraid that the world is not black and white. It is pretty clear-cut that, if there is a price increase, according to the figures used by the Government and the trade, it will almost certainly have a negative effect on demand at some level. Anyhow, let us move on from amendment No. 7. It was obviously not worded as the hon. Gentleman intended, let alone in a way that would be workable.

I have a lot of sympathy for the hon. Gentleman’s argument on amendment No. 6. We will come on to why the pub trade and trades associated to alcohol are so important to the economy in a debate on a future amendment that I tabled. Again, I was slightly concerned that he was talking about bringing forward a report within three years. I think that the problem is more urgent than that. If over the next three years we lose pubs at the same rate as last year, when we lost 1,400, an awful lot of pubs will go to the wall with businesses and jobs lost, before we see the Government getting to grips with the matter. I have some sympathy with the amendments, but I do not believe that they would achieve quite what the hon. Gentleman intended.

Photo of Mark Field Mark Field Conservative, Cities of London and Westminster

Like my hon. Friend the Member for Putney, I can understand where the hon. Member for Taunton is coming from in tabling the amendments. I think that they are in part probing amendments to raise this debate. However, it seems at odds with the Methodist tradition in the Liberal party that he is promoting more alcohol consumption.

I, too, have a lot of sympathy with what is happening in the pub trade. Fundamentally, the biggest single issue is our different lifestyle patterns. That is the single most important thing, rather than any additional taxation. For better or worse, people are spending far less time in pubs. Perhaps they look towards gastro-pubs or bars where they can take their family, or they want to spend more time at home, around the television and the like. The smoking ban has also had its part to play—one of the great unintended consequences of the smoking ban is the disruption for people living in the vicinity of pubs and bars, particularly in our bigger  cities. That is almost the biggest single issue that comes through my mailbag, except for the antics of the parking department of Westminster city council—I suspect that many of my colleagues have also written to me on that ground alone over the past seven years.

I take on board that the raw ingredients of beer—hops, in particular—have gone up tremendously in price. The Government have a difficult balancing act with the alcohol issue. Clearly there are health reasons for wishing to raise the price of alcohol. My instinct, when I saw the increases, was not to be wholly supportive. The Conservatives had some sensible plans on alcopops, which unfortunately did not see the light of day. However, the reality is that alcohol has become unbelievably cheap, in relative terms, over the past 20 years. There is no doubt that that availability has meant not just a binge-drinking problem, but ever greater consumption of alcohol. Some people among us cannot synthesise alcohol too well and have some severe health problems as a result. For others, we can readily buy and drink a bottle of wine on a daily basis, in a way that only 20 years ago was beyond the means of most people.

I felt that there was a sensible balance being drawn by the Government. We in the Conservative party had our own plans, which I do not think were wholly at odds with that, although I was comfortable about the idea of going through the lobbies when it came to those matters being voted upon. The misguided element here, from the hon. Member for Taunton, is that alcohol duty will inevitably have a variety of different causes. I can see that the pub lobby is understandably concerned about its longer-term future. The real issue is to be more innovative. Let us have more gastro-pubs—those have been extremely successful in London; I see a great success there. Ultimately, I fear that the old-fashioned British pub is a dying breed, because of changing lifestyles. Therefore, the pub industry has to innovate and find new ways of moving forward.

Inevitably, any report would probably tell us what we already know. Inevitably, we are looking at health reasons in part, and social reasons in part. Obviously, alcohol is an addictive drug of sorts and, as a result, is a relatively easy hit for taxation. The relative amount of tax on alcohol today is still considerably lower than was the case some 20 or so years ago. Moves in that direction—perhaps driven by revenue concerns, which I can understand as well—are broadly things that we in the House should support, as part and parcel of an overall approach to the whole issue of alcohol in our society. Many of us will be spending time abroad in mainland Europe in the months ahead. How alcohol is consumed there—across the Mediterranean particularly—is very different from here.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

One goes to southern Europe and sees people consume alcohol in far lower quantities, but by and large it is cheaper to buy in southern Europe than it is in the United Kingdom. I am confused by the hon. Gentleman’s argument. He seems to be saying that people are primarily motivated by price, but then he draws the opposite conclusion from his travels abroad.

Photo of Mark Field Mark Field Conservative, Cities of London and Westminster

The hon. Gentleman is probably confused because I have only got about a third of the way through my argument. The societal attitude towards alcohol in the Mediterranean countries is different  from here and, in a negative direction, different again in Scandinavia. As a result, we need to look at all those things in the round. It is perhaps all too easy to suggest that a 5 per cent. increase in the price of alcohol will close down hundreds of pubs across the country. It is a far more complicated situation than that. Fine, let us have a report and ensure that we have a sensible, balanced policy, but there are some real problems in our society with how alcohol is consumed and what alcohol consumption means, and the way in which drinking alcohol to excess is somehow seen as being cool, clever or something that our celebrities get up to with impunity. All those factors should be borne in mind when looking at this issue, rather than simply trying to equate one budgetary year’s increase in alcohol levy with pub closures.

Photo of Ben Chapman Ben Chapman Labour, Wirral South 5:30 pm, 13th May 2008

May I tell the hon. Gentleman that drinking patterns may be slightly different outside London? In my constituency the local traditional pub is still at the heart of both rural and urban communities. It would be interesting to know what calculation has been made of the effect of the changes on those traditional pubs. Also, in out-of-London constituencies we now have many micro-breweries and it would be similarly interesting to know what the effect would be on those.

Photo of Mark Field Mark Field Conservative, Cities of London and Westminster

I am the one whom the hon. Gentleman criticises for being too London-centric, but I hope that he will forgive me, given my own experience. In the 7 square miles that make up my constituency we have the highest number of licensed premises of anywhere in the country and one of the biggest watchwords has been innovation.

Photo of Bob Blizzard Bob Blizzard Assistant Whip

Has the hon. Gentleman visited all of them?

Photo of Mark Field Mark Field Conservative, Cities of London and Westminster

I am working my way through, and if my liver will stand it, I am sure that it will be a joy to come to both sides of the Wirral to see some real old-fashioned English pubs in action. Mr. Cook, I am sure that we do not want this discussion to go even further off the point than I have already been veering. Suffice it to say that I hope that the hon. Member for Taunton will consider withdrawing the amendment, but this has been a worthwhile debate and I look forward to hearing what the Financial Secretary has to say.

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

I have a deal of sympathy with amendment No. 7. There is significant merit in knowing the reasons behind any tax, including alcoholic liquor duty. The problem with amendment No. 7 is that it calls on the Chancellor to bring forward a statement on his purpose, but the Chancellor’s purpose for alcoholic liquor duty is revenue yield; it stops and starts there. To be fair to the Financial Secretary—I think that this may be a first—the Government were explicit in this year’s Budget in not making any claims to implement an attack on binge  drinking or ill health, or any of the other good social things that one would want to see tackled by a rise in duty. This was about revenue yield, pure and simple.

The amendment would have been better had it asked for Ministers to bring forward the purposes of alcoholic liquor duty, in the opinions of their Departments or themselves. I am sure that the Justice Secretary would have said that the purpose was to resolve crime and binge drinking. I am sure that the Minister with responsibility for public health would have said exactly the same as his counterpart in Scotland, that it is to try to drive down chronic ill health caused by too much alcohol consumption over either a very short or a very long period. Of course, the Treasury would stick to its view that it is about revenue yield. While I am sympathetic to the amendment—and it would be useful to bring all the information together so that it is not sat in different ministerial silos, to understand why we are doing things and what the consequences might be, and if for no other reason, to make sure that there were no contradictions between different Department policies—it simply does not do what I suspect the hon. Member for Taunton expected it to do. I therefore join the chorus from the rest of the Committee and hope that he will withdraw it and that perhaps it might see the light of day again in a slightly more finessed form, when it might command a little more support—or not.

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

It is a pleasure to respond to this brief debate. I am contemplating the hon. Member for Taunton, who is a member of CAMRA, in his woolly jumper tucked into his trousers, with his open-toed sandals, voting against the smoking ban and trying to maintain the culture of UK pubs. Of course, I met representatives of CAMRA as part of the Budget process and its members did not turn up in woolly jumpers, but I now have that vision of him. He announced with such pleasure his membership of the organisation at the beginning of his speech.

Clearly, it is important that we think about the effect of excise duties on alcohol. As the hon. Member for Putney pointed out, there is often more than one purpose. It is over-simplistic to think that there could always and forever be one set purpose to either shifting upwards, downwards or leaving the excise duties the same in all circumstances and as circumstances change. That is the nature of Budgets; different things have to be balanced.

As has been pointed out, clause 9 increases all alcohol duty rates charged on beer, wine or made-wine, cider, and spirits by 6 per cent. above the rate of inflation with effect from 17 March 2008. Together with VAT, that is equivalent to 4p on a pint of beer, 14p on a bottle of wine and 55p on a bottle of spirits. I understand as well as anybody the nature of and pressure on pubs. There has been a fair, if brief debate, on some of that in response to the hon. Member for Taunton’s amendments today and I have sympathy.

I noticed in the newspapers today that thousands of pubs have put 10p on a pint, not 4p, because when excise duties go up, pubs take the opportunity to reflect some of their other costs. The hon. Member for Taunton is right to talk about the cost of the basic commodities that make beer, for example. However, pubs tend to claim that the increase is all somehow  down to tax, which it clearly is not. If the supermarkets and the off-trade carry on discounting and the pubs pass on more than the cost of excise duty increases, the differential between the on-trade and the off-trade gets wider and that makes it harder for pubs to survive in the way that they did in the past.

The hon. Member for Cities of London and Westminster was right when he pointed out that because we have had a period of sustained economic growth and incomes have risen, alcohol has become increasingly affordable. That is one issue that we looked at when we were considering the appropriate price of excise duties in the Budget. At today’s prices, an average bottle of wine in a supermarket in 1997 would cost £4.44 and it costs £4 today. Despite the passage of the years, and, I accept, partially because of what is happening in the off-trade rather than the on-trade, alcohol has gone down in price and become much more affordable. We felt that it was time to increase the duty.

The hon. Member for Dundee, East is an astute and an assiduous reader of the Red Book and he was right when he pointed out that no claims were made this year for the effects of the increase in alcohol duty rates, other than raising revenue to ensure that we can continue to tackle child poverty, help pensioners, and support families in a time of global uncertainty.

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

The Minister said that she felt that alcohol was becoming more affordable so this was a good mechanism to increase tax and help deal with child poverty. Did she do any analysis of the group of taxpayers who will end up paying more tax when it is passed on in prices compared to the people to whom she is likely to be giving the money back in tax credits? It may well be that they are one and the same. Has the Treasury done any analysis of the net effect?

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

When you have an on and off-trade and there is no direct relationship between the levels of excise duty and price, the net effect of excise duties is complex. With alcohol there is a complex relationship between the levels of excise duty and pricing, and it varies depending on how the alcohol is being retailed. For example, the off-trade tends to continue discounting while the on-trade, as we have seen from newspaper coverage today, can put prices up higher than excise duty rates in pubs. It is complex and it is difficult to find models that would work with any degree of certainty. We would have to make so many assumptions to come out with a response as to how it would work that, except in general terms, it is not possible to do in detail what the hon. Lady suggests.

Amendment No. 7 would require the Chancellor to make a statement about the purpose of the increases in alcoholic liquor duty. Opposition Members have been quick to point out, quite rightly, that there might be more than one purpose. It might seem trivial but it is true. Excise duties often exist for more than one purpose, and the relative importance of those purposes can change over time. The idea that there could be one statement about “the purpose” that would last for all time is rather fanciful. The reasons for the increase in duty are fairly obvious, and have often been repeated. We changed the duties in that way to assist us in financing the extra winter fuel payments for people over 60, and to assist with the help that we give families with children to help them out of poverty. We do not  need an annual statement about that in the way that the hon. Member for Taunton’s amendment would require.

Amendment No. 6 would require the Government to produce a report on the impact of increases in alcohol duty on licensed premises and on employment in the alcohol sector. My hon. Friend the Member for Wirral, South mentioned small brewers, and I would like to point out the very positive effect of small breweries relief. It is not an issue in the amendment, but it exists in the structure. It was introduced a few years ago to encourage the thriving of small breweries and it has been extremely successful. There are other things that the Government can do—when they can get past the European Commission—to assist in other areas. Small breweries relief is a prime example, which my hon. Friend will see when he speaks to any small brewers whom he might come across. We now have increasing diversity in the small, specialist brewing companies and that is very welcome.

Amendment No. 6 would require the Government to produce a report on the impact of increases in alcohol duty on licensed premises and on employment in the alcohol sector. As with all tax policy decisions, we will be monitoring the impact of alcohol duty on a range of factors, including its impact on the industry. To that extent, the amendment is superfluous as it is something that we do all the time with all our excise duties.

However, there are a number of factors—again they have been hinted at and mentioned explicitly by the hon. Member for Cities of London and Westminster—which have an impact on competitiveness and jobs in any industry. It would be difficult to identify the specific impact of alcohol duty rise against other factors, such as changing the culture of the pubs and their customers and people have also mentioned the smoking ban. I am aware of current pressures on the pub trade, and I met representatives from the trade several times in the run-up to the Budget, to hear people present their views on the current situation and the cost pressures in the industry.

Hon. Members will acknowledge that there has been a general change in people’s habits, which has contributed to the decline in the numbers of pubs. Innovation and a different kind of response and leisure approach, which the hon. Member for Cities of London and Westminster mentioned, is also important. In other words, tax and especially excise duty, are not, I dare suggest, the main issues for pubs.

We have great sympathy for anyone running a business and trying to attract new customers. There are those in the pub trade who wanted us to introduce excise duty that was aimed more specifically at the off-trade, which at the moment does discount—sometimes greatly—the cost of alcohol as a result of which excise duties are not passed on in off-trade prices. However, constraints on how the European Union rules apply on alcohol duty mean that it is not possible for us to have differential rates for the same drink if bought in a supermarket rather than a pub. Trying to level the playing field a bit more between the on-trade and the off-trade is not legal nor is it one that we can pursue.

When making decisions on alcohol duty rates, we took account of several factors and listened to the views of the alcohol industry in all its diversity as well  as the retailers in their diversity. Following a sustained period of rising real incomes and the fact that alcohol is much more affordable now than it was in 1997, we believed that it was right that alcohol duty should play a part in tackling some of the challenges of child and pensioner poverty, and it provided us with tax revenues in order to do so.

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party 5:45 pm, 13th May 2008

: Did the Treasury work out in respect of the 27 million drinkers in the United Kingdom an estimate of the average amount of duty each drinker would pay? Is there an assessment of how much it would cost a typical drinker?

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

It depends on how much people drink. Such calculations can be pretty meaningless, and depend on individual behaviour, what sort of drinks people drink, how often they drink them and whether they buy them from the supermarket. Obviously, the excise duty would be the same whether they bought drinks from the on- or the off-trade but, with regard to the effect of prices, it is almost impossible to provide a model that would capture the cost for each drinker, as their behaviour affects what the costs are likely to be. Where people buy their alcohol contributes to the price, so we would not expect to carry out such calculations along the lines suggested by the hon. Lady.

Given that alcohol is more affordable than it was in 1997, we believe that alcohol duty increases could play a part in tackling the challenges and helping to finance our action on child and pensioner poverty. I hope that the hon. Member for Taunton will withdraw the amendment and, if not, I urge colleagues to reject it.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I am grateful for the opportunity to make some concluding remarks to what has been a useful discussion. I regret deeply the fact that the Minister took such a condescending and stereotypical approach to people who enjoy traditional British beer. I say so with all sincerity, because millions of people throughout the country do not buy into the metropolitan view of the world that new Labour has hitherto advanced with diminishing success. A lot of them will in time come to think that the rather dismissive remarks and attitudes of the Treasury are not necessarily to their taste.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Quite a lot of people who run pubs and small brewers do not think that the joke is as funny as is thought by those at the Treasury.

Photo of Siôn Simon Siôn Simon Labour, Birmingham, Erdington

Is the hon. Gentleman saying that the Minister is being beerist?

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

No. I am saying that there are people outside the metropolitan elite circles with which the hon. Gentleman takes pride in acquainting himself who do not think that the closure of village pubs and above-inflation increases in the price of beer as a matter of Government policy at a time when brewers are struggling with other factors is as big a joke and as funny as lots of Labour Members think.

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

The hon. Gentleman must not put words in my mouth. All right, I confess that I had a little joke about CAMRA. He revealed himself as a member of that organisation, and I made a little stereotypical joke about CAMRA members, many of whom I met in the run up to the Budget. I find them perfectly reasonable. He must not put words in my mouth and say that I think that pub closures are fine and that I do not care about such things. He must take the time to listen to what I say and not distort my words. I also ask him, in the weeks ahead, to develop a sense of humour. It might help us all.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I apologise if the Minister’s flippant attitude towards this issue did not amuse me as much as it should have done. I only wanted to touch on that issue. Let me declare a few more interests. There are a number of small beer and cider brewers in my constituency who provide a significant source of employment. Dozens of people in my constituency and thousands of people across the country work in small breweries. Beer sales have gone down in Britain in recent years: much of the slack in alcohol consumption has been taken up by wine drinking, as was mentioned earlier in the discussion about social changes. However, nearly all wine is imported, whereas quite of lot of beer is brewed in this country.

There is an impact on brewers and employment not only in areas like mine but right across the country, as a result of bringing in measures that could suppress demand for beer and other alcoholic products. I was simply asking for an assessment to be made of that impact and whether it was a trade-off with which the Treasury was happy. The Minister said that those matters were kept under constant review, but that simply is not the case. If it were, the Chancellor would not have announced above-inflation increases as an escalator for the next three years. Even if the review finds an adverse effect on businesses and employment, the Government are committed to above-inflation increases, so the matter is not under constant review at all. It will not be reviewed during the lifetime of this Parliament. Not until after the next general election can we step back in the Treasury and see whether damage has been done to this sector.

Damage is potentially being done to employment. It is also being done to real communities. The hon. Member for Cities of London and Westminster made a good point about changing social and drinking patterns. I tried to make that point in my earlier contributions, and I will try to make a point now that does not contradict it but expands upon it. The social heart of many villages and small towns in areas like my constituency is removed when their post office, their shop or their village pub is closed. It is not the job of Government to prop up businesses that are unable to attract customers—I am not saying that—but neither is it the job of Government, when those businesses are teetering on the brink, to make it harder for them to remain viable. That is undoubtedly the impact of this proposal.

I may have had another humourless moment, but the Minister went on to say that pub landlords routinely increase their beer prices by more than the taxes that the Treasury have imposed, and that they use the Treasury as an excuse for a wider set of price rises. I  assume that her point was that they are trying to make their businesses more profitable while blaming the Government for raising the prices that they charge their customers. The people who run many of these businesses work extremely long hours, and they probably do so for low profitability. If one added up the number of hours and worked out the profitability, many of them would be working for less than the minimum wage on an hourly basis.

The idea that these people are not trying to squeeze out every penny of competitive advantage to try to attract new custom, and have the luxury of being able to afford to charge their customers far more because those customers are just rolling through the door and are completely insensitive to price increases, is delusional. If any of the Treasury Ministers spent a day with a rural publican who is struggling to make ends meet they would come back to this House less likely to believe that they are artificially inflating their prices.

I finish with an observation made by the then Treasury Minister, the hon. Member for Wentworth, in Committee last year:

“the general case for using taxation as a means of regulating consumption has not been made. It is not best suited to this area of policy.”——[Official Report, Finance Public Bill Committee, 8 May 2007; c. 36.]

My view—and I maintain it regardless of the scorn of the Exchequer Secretary or anybody else—is that it is simply disingenuous to claim that the backdrop for the increases in duty on alcohol is not wider public concern about excessive drinking in some sections of the population, about binge drinking, about people being sick in town centres and about increased rates of liver disease. That is the political and social backdrop against which the Budget took place, and in the minds of millions of our fellow citizens, the changes have been put through because in some way they go towards addressing a wider social problem about which people are genuinely concerned. People who run pubs and small breweries see themselves as victims of a Government who are able to bring in above-inflation increases year after year, despite any assessment made by the Treasury, on the back of a perfectly legitimate wider social concern.

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

Amendment No. 6 states that a report has to be laid before the House within three years. It may be useful to obtain the Treasury’s view of the impact on the industries, which say that it is dramatic. My concern is that three years is too long to wait to press the Treasury to look at that more carefully, and I wonder whether there is a reason why the hon. Gentleman has given the Treasury that long.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

It is within three years, and if the Treasury—it appears that it does not—shared the concerns that I have expressed and to which the hon. Lady has alluded, it would no doubt wish to bring forward a review more quickly. I was talking about the lifetime of above-inflation increases, which will compound the problem for many people in those industries year on year. If they think that it is bad now, they will find it harder next year and even harder the year after that.

I will finish with this observation. Ten or 20 years ago there was a joke that the best way to make sure that a politician lost votes was to go to the electorate and  say, “I’m going to put up the price of your beer”. It is extraordinary that the Government now regard that as a popular Budget measure. On that note—I detect that others do not share my concerns—I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

I beg to move amendment No. 59, in clause 9, page 4, line 41, at end insert—

‘(7) The Treasury must, not later than Budget Day 2009, lay before the House its assessment of the impact of the amendments made by this section on consumption rates of alcoholic liquor (as defined in section 1 of ALDA 1979).’.

I should have said earlier that it is a pleasure to serve under your chairmanship, Mr. Cook. This is a probing amendment, and it follows some of the concerns that the hon. Member for Taunton expressed. It designed is to press the Government to outline whether they have a clear understanding of consumption, as well as the revenue impact of the above-inflation changes. The modelling that the HMRC does was first produced in 2003 by Chao-Dong Huang, and it includes a range of price elasticity assumptions for beers, both on- and off-trade, spirits, wines and cider. I want to ask the Exchequer Secretary whether there are any plans to upgrade and update that model. I understand that it uses out-of-date statistics, and the price elasticities that the industries believe are present for today’s consumers are greater than those used in the model. That is important, because it goes to the heart of where the tax revenue maximisation point is.

Photo of Siôn Simon Siôn Simon Labour, Birmingham, Erdington 6:00 pm, 13th May 2008

I used to work in the drinks industry, so I would be interested to know whether the hon. Lady thinks that the industry is likely to be the best source of impartial advice about price elasticity for the Treasury. Should we perhaps assume that the Treasury is more likely to do a better job of coming up with an impartial view of price elasticity, and does not the drinks industry have even more of a vested interest than the Treasury?

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

If we had seen a better track record from the Treasury, certainly in the past few months, on getting things right first time, I might put a lot of store in the model. I simply make the point that the model was created five years ago, and as has been said, there has been a lot change in taste and preference over those five years. We know that the industry, which has to get these things right to understand profitability, has a different view of price elasticity. All that I am saying is that this is a probing amendment to find out the Government’s view, whether they look at updating that model—I presume that they do—at some point, and if so, what process they go through, how transparent and open that is, and whether they will work with the industry to try to understand why there is such a gap between the different estimates.

In fact, there really should not be conflicting objectives, because if we have gone past the tax revenue maximising point—I think that the level of alcohol duty that is being paid is flat, and perhaps brought in  less than was expected by the Treasury last year—that is bad, not only for the Treasury, which does not get the revenues that were expected, but for the industry, which sees a greater drop-off in value than the Treasury expected. That is the purpose of the amendment, so I look forward to the Minister’s response.

Photo of Frank Cook Frank Cook Labour, Stockton North

I should have said earlier that with amendment No. 59 it will be convenient to discuss the following amendments: No. 60, in clause 9, page 4, line 41, at end add—

‘(7) The Treasury will, prior to the 2008 Pre-Budget statement—

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

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

No. 67, in clause 9, page 4, line 41, at end insert—

‘(7) The Treasury must, not later than the date of the Budget 2009, lay before the House revenue-neutral proposals for—

(a) decreased rates of duty on beer of a strength not exceeding 2.5 per cent. and cider of strength not exceeding 3.0 per cent.;

(b) increased rates of duty on beer of a strength exceeding 5.9 per cent. and cider of a strength exceeding 5.5 per cent.; and

(c) a new category of duty on “ready-to-drinks”, at a rate higher than the duty on spirits.

(8) For the purposes of subsection (7), not later than the date of the Budget 2009, the Treasury must make regulations setting out the definition of “ready-to-drinks”.

(9) Regulations under this section are to be made by statutory instrument.

(10) A statutory instrument containing the first regulations under this section may not be made unless a draft of the regulations has been laid before, and approved by a resolution of, the House of Commons.’.

The hon. Lady may choose to amplify the comments that she has already made.

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

I certainly will, Mr. Cook. I was slightly thrown when you mentioned only amendment No. 59, but I went along with your advice and am grateful for your clarification.

Photo of Frank Cook Frank Cook Labour, Stockton North

Please accept my apology. I apologise from my very bottom.

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

That is absolutely no problem whatsoever. Perhaps it conjured up a particular image in my mind, so let us move rapidly on to amendment No. 67.

Before speaking to the amendment, I notice that the hon. Member for Ealing, North is in his place. I am pleased about that, because before you took the Chair, Mr. Cook, we had a brief discussion about the weather on Sunday. I was in London, and the weather that day was quite interesting, because it started off lovely and sunny, but by the end of the afternoon it was odd.  There was a ray of sunshine on Fulham, but Chelsea looked slightly cloudy for some reason—I could not quite work out why.

Moving properly on to amendment No. 67, there is no doubt that the pub industry in particular is facing problems at the moment. We need to be careful about the implications, because the industry is estimated to contribute £14 billion to the Exchequer annually. The whole industry, including off-trade pubs, hotels, restaurants and related trades, provides employment for 1.6 million people, which is about 5 per cent. of the nation’s active population. However, pubs are closing, as we have quite rightly heard and discussed.

My concern about the Government’s approach is that even within their own ministerial ranks, there was little discussion between the Treasury and the Department for Culture, Media and Sport before the announcement of the policy. The Under-Secretary of State for Culture, Media and Sport, the hon. Member for Bradford, South (Mr. Sutcliffe), who has ministerial responsibility for licensing, has expressed concerns about duty rises on the industry, and urged it to make a strong case to the Treasury. If there was an discussion, it seems to have been pretty much one way: from the Treasury to the Department for Culture, Media and Sport. Certainly, the Opposition had hoped to see a slightly more measured approach to alcohol taxation and duty.

We want taxation to be used as part of an overall package to tackle problem drinking. We do not want further revenue extracted from the public, who largely drink responsibly, and the industry when both have to deal with financial pressures. Amendment No. 67 was tabled to address that issue. It would give a lot of latitude to Ministers on how it is implemented. It says simply that by the time of the next Budget, Ministers must introduce tax-neutral proposals that increase tax on higher-strength beer, cider and “ready-to-drinks”, otherwise known as alcopops. Correspondingly, the proposals reduce duty on beers and ciders with a lower alcohol content. We want binge drinking to be tackled, but we do not think that that should be used as an excuse for more stealth taxes.

Photo of Patrick Hall Patrick Hall Labour, Bedford

The hon. Lady’s remarks on amendment No. 67 focus on the effects of the measures on the on-trade or pub trade. Surely, the main factor affecting alcohol consumption is the differential between the on-trade price and the off-trade price, in particular at the supermarkets. She may respond if she wishes, but it seems to me that whatever one charges in excise duty or differentials within that, the supermarkets are able to absorb it. Therefore amendment No. 67 misses the point, because the great difference would still remain.

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

I agree with the point that the hon. Gentleman is making, which is that whatever the policy on alcohol duty, it must be part of a broader package of policies. Interestingly, in February, Tesco, Asda and some other supermarkets withdrew super-strength beers from their shelves, which I welcomed. He is right that I am trying to set out one part of the package for a successful overall policy. I do not pretend to claim that this measure alone is the solution; of course it is not. We have heard that there are issues relating to the Home Office, to the Department of Health, and on education. A range of steps need to be taken, which complement each other.

In amendment No. 67, I am trying to set out an approach, at least within the duty piece of the jigsaw, that could help to tackle the issue in a more measured way. I will come on to why I think that is the right approach. When we look at what has happened in other countries, there is evidence to suggest that that is a sensible approach compared with the one that we are using, which raises duty for absolutely everybody. We have heard that 37 million drinkers in Britain drink responsibly, and the measure has had an impact on the trade.

I will come on to explain more about my approach, but I want to set out the issue of problem drinking and how it relates to the highest-strength ciders and beers, and alcopops, to which I refer in amendment No. 67. We have a problem-drink issue in Britain. Overall, the level of alcohol consumption is falling slightly, but I am talking about the cohort of people who do not drink responsibly, and we should look at what we can do to tackle that. In Britain, 3 million adults have some form of alcohol dependency, and 8 million people have an alcohol use disorder.

On under-age drinking and future health problems, one in 10 final-year primary school children—that is children aged 10 to 11—say that they drink alcohol regularly. That rises to 45 per cent. of 14 to 15-year-olds, who say that they drink on a weekly basis. A fifth of 10 to 15-year-olds say that they regularly get drunk. The number of young people treated for alcohol abuse has risen by 40 per cent. in a year. In 2005-06, over 1,400 children under 14 were admitted to hospital for conditions caused by alcohol abuse.

Alcohol abuse is a time-bomb epidemic, and we know that its impact is much broader than the effect on the health of people who are drinking too much. Half of all violent crime is drink related. Alcohol abuse is a key factor in the antisocial behaviour and intimidation that affects all our town centres and, indeed, my constituents, who live in London.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

The statistics that the hon. Lady is reading out are interesting and are of concern to many millions of people. However, does she think that she is wasting her time, given that the Minister has said that none of those factors have received any consideration from her or her Treasury colleagues, because she regards them as irrelevant to taxation on beer, wine and other alcoholic drinks?

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

I take on board the hon. Gentleman’s critique, but I have proposed an amendment that would reach an outcome on alcohol duty tax that offers something more and that I believe he would prefer. My proposal would create a balance between revenue raising and an element of the duty structure that would discourage problem drinking. My understanding of the Budget—and this is a matter of concern—is that this tax rise has nothing to do with tackling binge drinking. In fact, that surprised me, because I expected the policy to be structured around trying to address what is a growing problem.

As I have said, there is a lot of violent crime, half of which is known to be drink- related. Much antisocial behaviour and intimidation is caused by alcohol misuse. As a result of the Home Office review of the 24-hour licensing law change, we know that there has been a 25 per cent. increase in violent crimes committed  between 3 am and 6 am since the start of the new laws. The Government should not be particularly surprised about that, because back in 2001 the Government—the Labour party—sent a now famous text to young people that said,

“If you don't give a XXXX for last orders, vote Labour on Thursday for Extra Time”.

Essentially, the message was that if people voted for Labour, they would be able to drink more. With hindsight, that probably was not the most responsible piece of electioneering we have ever had.

Photo of Mark Todd Mark Todd Labour, South Derbyshire

It certainly was not used in my constituency.

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

No doubt the hon. Gentleman was pleased about that. Let us consider the super-strength ciders, beers and alcopops that I am talking about, so that we can perhaps understand a bit more about what these drinks represent. A single can of super-strength beer or cider contains more than the daily recommended alcohol limit for men, and double the recommended limit for women. Three litres of 7.5 per cent. white cider is available in shops for under £3. That 3 litres constitutes seven times the recommended daily alcohol consumption limit. According to a recent Alcohol Concern report, cans of strong lager, which is a young person’s drink, are now more affordable than they were in 1998. In fact, the report was entitled, “Cheap at Twice the Price: Young People, Purchasing Power and Alcohol”. An analysis from the Wine and Spirit Trade Association states that

“super-strength lagers were linked to binge-drinking precisely because of their high alcohol content and the type of consumption patterns they were seen to encourage.”

That report also cites evidence from alcohol reference experts about the increasing prevalence of strong lager consumption. As I said to the hon. Member for Bedford, in February, Tesco, Waitrose and Threshers stopped selling super-strength lager and cider in some city centre stores to try to tackle binge drinking. Clearly, the off-trade and all the industry participants have a role to play in working alongside whatever the Government are doing to try to tackle this.

If we consider the ready-to-drink market, we know from Alcohol Concern that a fall in real-terms duty on alcopops, as they are often known, means that an average young person’s pocket money enables them to buy alcopops, which constitute four times the daily adult recommended alcohol limits. The Government have unwittingly played a role in making ready-to-drinks more affordable, because tax on alcopops has fallen in real terms since 2002. We know that alcopops are the most popular drink for young girls and women aged 11 to 24—specifically, they were most popular among women drinking more than 15 units a week.

We hope to secure cross-party support for action towards the proposal in my amendment. In October 2006, the then Secretary of State for Health, the right hon. Member for Leicester, West (Ms Hewitt), called on the then Chancellor, now the Prime Minister, to increase taxes on alcopops and other drinks popular among young people:

“I am asking Gordon Brown, when he comes forward with the Budget next year, to really increase taxes on alcohol. And particularly things like alcopops and some of the stuff that quite a lot of teenage boys and girls are drinking, because we’ve got a real problem with binge drinking among young people.”

Photo of Ben Chapman Ben Chapman Labour, Wirral South 6:15 pm, 13th May 2008

To what extent does the hon. Lady think that the sale of alcopops and drink to young children is down to the level of taxation on those drinks? Or is it down to the marketing policies of the drinks manufacturers?

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

The answer is clearly a combination of the two. I will come on to what happens in other countries when tax has been increased. For example, in Germany, where the level of consumption fell 50 per cent., teenagers who had previously consumed alcopops said specifically that tax increases were the primary reason for stopping. Price mattered to them. There is evidence that pricing affects younger people, perhaps because they simply do not have as much disposable income and cannot go to the cash point and get credit.

Photo of Siôn Simon Siôn Simon Labour, Birmingham, Erdington

Was the evidence for the level of consumption going down by 50 per cent. for alcopops or alcohol?

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

It was alcopops. I will come to that later, and answer the hon. Gentleman in more detail.

There is some evidence that what our amendment proposes could have some beneficial impact as part of an overall package of steps to tackle under-age and problem drinking. The amendment proposes an approach that mirrors successful approaches taken in other countries—for example, Australia, Germany and, more recently, France, which has introduced a tax on alcopops specifically.

Let us take a look at what happened in Australia, which put an extra tax on high-strength beer some years ago, adding an extra rate for mid-strength beer in 2000. Industry and Government data suggest that those changes in excise rates contributed to significant changes in consumption patterns. Recent data suggest that low and mid-strength beers now make up 20 per cent. of the total beer market in Australia, with mid-strength the fastest growing beer category in the country. By comparison, in our UK market, it is estimated that low-alcohol beer, which is under 2.5 per cent., comprises less than 5 per cent. of the market. Also, since 2000 in Australia, there has been a significant fall in the proportion of teenagers reported drinking beer and a fall in the proportion of young people consuming alcohol. According to a recent academic study—in a publication called Addiction—despite Australia’s reputation for heavy and highly culturalised consumption of alcohol, the international league tables indicate that Australia is generally doing well in how it deals with alcohol.

Germany introduced a tax on alcopops in July 2004, increasing it by around 80 cents per bottle. That resulted in the consumption of alcopops by young Germans falling by 50 per cent.

Photo of Steve Pound Steve Pound PPS (Rt Hon Stephen Timms, Minister of State), Department for Work and Pensions

I was trying to catch the hon. Lady’s eye before she moved from the public bar of Australia to the saloon bar of Germany. She will be aware that the first alcopop ever sold in the world was manufactured by a Mr. MacGillivray, an Australian who found himself with four lorry-loads of lemons, to which he added alcohol, creating alcopops—condemnation be upon him. Does the hon. Lady accept that one of the problems in Australia  is that all the fiscal mechanisms tried have totally and utterly failed to address problem drinking among certain groups within Australian society? Other mechanisms would have to be used, as with this Government and public health mechanisms. Fiscal mechanisms alone have simply not worked in Australia.

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

What I was trying to get at earlier during my questions to the Financial Secretary is that there is clearly a need to segment the market of problem drinkers. I accept that, in dealing with long-term alcoholics, one may need measures that should include education, support and information on a whole range of health issues. We are trying to ensure, as part of that overall package, that the duty system plays its role in reaching a good conclusion. That could involve going down this particular route and looking at evidence in Australia, Germany, and I understand similarly in France, where it has had a positive effect. Such measures can help.

Photo of Siôn Simon Siôn Simon Labour, Birmingham, Erdington

I do not know whether the hon. Lady was going to say more about Germany and alcopops. So far she has said that German kids stopped drinking alcopops, but she has not said whether they drank any less alcohol. Will she come on to that?

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

I am pleased that the hon. Gentleman mentioned that, as just before the intervention of the hon. Member for Ealing, North I was coming on to the 2005 study by the German drug commission. It showed that those teenagers did not substitute other drinks, and that the proportion of 12 to 17-year-olds who drank alcopops once a month had dropped from 28 per cent. to 16 per cent. One third of those who drank ready-to-drinks no longer did so in the following year, and the teenagers cited the tax as the main reason for the changes. My amendment would force Ministers to come up with a more thoughtful alcohol duty policy that would have a good chance of starting to tackle problem drinking, while giving the rest of the British public, and the alcoholic drinks industry, relief from the Government’s proposals to increase tax by £400 million this year and £1.5 billion over the next three years. Of course, that must be seen in the wider context of a broader alcohol strategy designed to tackle binge drinking and under-age drinking. The Conservative party is committed to prohibiting retailers from selling alcohol below cost price—no more loss-leaders—and we have also set out policies to strip retailers of their licences if they are caught selling alcohol to under-age customers. I am sure that a range of other measures could be taken to complement those.

I hope that Ministers will be prepared to seriously consider supporting their other colleagues in Parliament, previous Health Secretaries, licensing Ministers and whoever else agrees that the duty should not have been raised across the board, and that a more sensitive and smarter approach would be that outlined in my amendment. I look forward to hearing the Financial Secretary’s response.

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

I should probably declare an interest. I am a member of the Taychreggan Scotch whisky society. I have another declaration to make in that last year I opened the Fisherman’s beer festival in Broughty Ferry, in the only pub ever to have been in every single edition of CAMRA’s “Good Beer Guide”. I say to the Minister that I did not have a woolly jersey on, but if she lives to accuse me of that, I will find it funny.

The Minister also said in the previous debate—and I think it relates to this debate—that she had had discussions with all parts of the drinks industry in the run up to the Budget. Those must have been extraordinary discussions—either the Minister spoke and they listened, or they spoke and she did not hear. Within hours of the Budget being announced, the Scotch Whisky Association began its press release by saying that across the sector there was,

“extreme dismay...following the Chancellor’s decision to raise the duty on Scotch Whisky by a punitive nine per cent. Distillers said that the Chancellor had effectively abandoned Government moves towards a fairer alcohol tax policy, worsening the duty discrimination against Scotch Whisky”, and so it went on.

Photo of Mark Field Mark Field Conservative, Cities of London and Westminster

To help elucidate the debate, will the hon. Gentleman say how much increase in duty on whisky there had been in each of the previous 10 Budgets?

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

The hon. Gentleman asked me the same question during other debates on the Budget, and I gave him the correct answer. I am coming to my amendment in some detail. I thought that explaining the background to what the sector was saying about the Budget would be useful. I tabled the amendment because the Finance Bill offers a discriminatory tax regime against Scotch whisky and because, fundamentally, I believe that there must be a better and fairer way of levying duty on alcoholic liquor.

Given the soundings that I have taken from the industry, the proposals in the Finance Bill risk damaging an industry that generates £2.5 billion towards the balance of trade—a balance of trade in total on goods that is £87 billion in deficit. If too much pressure is put on the sector, it might risk some of the 65,000 jobs that are dependent on Scotch whisky one way or another. It also risks reducing the £1 billion annual spend for other suppliers in the United Kingdom.

In addition, the common argument is that the pressure will place an additional burden on a sector that, like many others, is struggling with further increases. Whisky, in particular, has seen a 100 per cent. increase in cereal costs; 60 per cent. in fuel oil; between a 5 and 20 per cent. increase for glass; 5 to 10 per cent. for packaging; 5 to 15 per cent. for transport and 20 per cent. for copper to make distilleries. Will the Government explain why they took such action in the Finance Bill that will result in an effective 30 per cent. tax increase on Scotch by 2013? Will they confirm that their detailed econometric work demonstrated that the taxation of spirits was already close to, or perhaps beyond, the revenue-maximisation point? I remember the tipping point that the previous Treasury team discussed in respect of tobacco. It was honest and open, and said that there was a tipping point after which revenues would go down and, indeed, that smuggling would be encouraged.

As for the elasticities published in 2003, those at the Treasury suggested that the price elasticity of spirits continued to be considerably higher than that for wine and beer, that there was a clear risk that spirit duty rises might be counter-productive from a revenue perspective, and that spirit duty receipts would actually fall. Even if the estimates of an uplift in spirits revenue were accepted, the Treasury anticipates that raising just 4 to 6 per cent. more revenue next year from a 9 per cent. duty rise would show that it expects sales to fall. I should be grateful if the Minister would confirm that.

I have raised the international dimension on several occasions. When we raise duty, particularly disproportionately—I shall come to the discriminatory element of it in a moment—we send out an extraordinary and potentially damaging message elsewhere in the world saying that large duty increases on Scotch are acceptable. That is indeed damaging, given that the sector is trying hard—and successfully over the past little while—to increase its markets overseas. That signalling effect that everyone recognises as real is something that we want to avoid.

Photo of Mark Field Mark Field Conservative, Cities of London and Westminster

While I very much accept the hon. Gentleman’s valid, economic argument, the specifics of the Scotch whisky industry are that the terrific demand, particularly from many of the emerging markets in the far east, is such that it cannot really deal with the level of demand of its premium end quality product in the global market. I do not disagree with the basic thrust of his economic argument, but the specifics of where the industry is today are in a strong position.

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

The specifics of where we are today are that Japan referred to the UK system in the recent World Trade Organisation hearings and observers in India have also pointed to UK budgets as letting India off the hook in maintaining local duty regimes to discriminate against Scotch in those emerging markets. We cannot be complacent. Yes, the industry has done well; yes, it has tapped into a rising, middle-class and additional disposable income in China and India, but the growing pressure on income in China and India is such that there are food price rises. I suspect that even someone who had been doing relatively well would probably choose to put food on the family table before buying another bottle of whisky, premium or otherwise. That is important.

My amendment does not seek to delay the rise, although that would be welcome, but to have the Government publish a detailed breakdown of the yield from all forms of alcoholic liquor, and to publish indicative rates for all types of drinks to show what the duty levels would be if alcohol was taxed fairly and equitably by alcohol content only. Let me explain why that is important and show the discriminatory nature of the current regime. Take three drinks with precisely the same alcohol content: a half pint of beer with 4.93 per cent. volume has 20.9p of duty; a 125 ml glass of wine at 11.2 per cent. volume has 24.3p of duty; and a 35 ml glass of whisky at 40 per cent. volume has 29.9p of duty. So for exactly the same alcohol content, there is a 30 per cent. uplift on the duty between beer and whisky and a 20 per cent. uplift on the duty between wine and whisky. That is fundamentally unfair.

I am not seeking to delay this, although that would be good. I am not seeking to say anything at this point about the escalator, although that will have to be addressed because it could be very damaging in the medium term. This is something that could be accepted. Certainly the soundings from other bits of Government and agencies concerned with things like health and crime suggest that they would be not too unhappy if we found a duty regime that taxed fairly on  the basis of alcohol and recognised that cheap cider, which is massively undertaxed, would have to go up and that very strong beer and lager—the super lagers that are cheaper than bottled water—would go up.

I am not sure about wines. Perhaps they would stay much the same. We will have to see what the analysis said. But the type of rises we have seen with whisky and the type of rises that are forecast and the continuing discrimination against it cannot be tolerated. I hope that the Minister, while probably not wanting to accept this amendment in its present form, might give us some comfort that she will be prepared to pull together the assessment the amendment seeks so that we can see what the impact of fair and equitable duty would be.

Photo of Steve Pound Steve Pound PPS (Rt Hon Stephen Timms, Minister of State), Department for Work and Pensions 6:30 pm, 13th May 2008

One learns a lot in these Committees. I am grateful to the hon. Gentleman. It is interesting that the two most popular whiskies in India are 100 Pipers, which is distilled in the distillery built by Scottish soldiers when they were over there, and Johnnie Walker Black Label. If we follow through the logic of the hon. Gentleman’s argument, would it not have precisely the same effect on gin, vodka and all other spirits, or is he making an exceptional case for something being uniquely wonderful about Scotch whisky? I say that as someone who finds it difficult to drink any whisky that has not got an “e” in it.

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

It would absolutely have the impact on every other spirit. I make the point in relation to Scotch for rather obvious reasons. It is an incredibly important industry in Scotland. It generates the revenues I spoke about and contributes to the balance of trade. But my proposal would impact on every spirit, which is why I say we should have the assessment of the total yield and the duty levels required by alcoholic liquor type across the board to see what that would look like were we to tax all alcoholic drinks on the basis of alcohol content and not in any other discriminatory way. With that I will sit down and hopefully the Minister can give me some joy when she gets up to speak.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I am grateful for the opportunity to speak briefly. I have tabled no amendments to this clause but I thought that the comments made by the hon. Member for Dundee, East were interesting and worth exploring further. Some of the wider points, although not necessarily the specific amendment, from the hon. Member for Putney also contributed to the debate. It only left me thinking how valid my previous amendments were. There seems to be insufficient information on the purpose of Government policy with regard to taxation of alcohol. We are no clearer now.

It was interesting to hear the hon. Member for Putney run through a lot of the concerns that people have about the social and health impacts of excessive alcohol consumption. Of course, we know from the comments of the former Financial Secretary that those factors are not considered worthy of the considerations made by the Chancellor in the Budget. We are told that they are considered to be important in the Home Office and in the Department of Health, but they are not motivational factors when considering duty on alcohol. That is regrettable because it is impossible for the Government to form a rounded policy on duty in this area without taking those factors into account.

I have some concerns about amendment No. 67. It attempts to single out certain categories of alcohol. I am not unsympathetic to the motivation behind that, but the problem with ready-to-drink brands is that there is no easy definition of what constitutes an alcopop. As I understand it, the provisions would penalise spirit-based alcopops, but not fermentation-based alcopops. If so, there may be a movement in the market from one type of alcopop to another even though the alcohol content of both may be identical while the method of making them is different.

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

I think that the hon. Gentleman has touched on an anomaly of the current tax system. In amendment No. 67, we want to set out a definition that would work. He is right to say that half of alcopops sold are wine-based rather than spirit-based.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I am grateful for that intervention. I see that amendment No. 67 asks the Government to explore the matter further. This illustrates the difficulty of trying to come up with not only definitions, but legislation that tackles current fashions in the market, particularly among young consumers who are prone to change their drinking habits more rapidly than older consumers.

My understanding is that the market for ready-to-drink products is showing signs of long-term decline and has been superseded by drinking cider, particularly with ice in it. Many people regard that as an unwise way to consume cider, but it is fashionable in many quarters. I am told that even that type of preferential drink is also now in decline. Whoever can work out what the next market will be in popular drinks, particularly aimed at young people, will no doubt make a lot of money out of it.

It is very difficult to legislate to address consumption patterns when we do not know what they are likely to be. There is evidence that the issue of aiming taxes at people who ought not to be buying alcohol because they are under the legal age is quite price-sensitive because such people tend to have smaller amounts of money to spend. At the same time, it is particularly hard to target. For those in the 18-to-25 age category, the issue is rather less price-sensitive. All these issues must be taken into account by the Treasury.

Although I think that amendment No. 67 makes some valid points and is an interesting probing amendment, there are some practical considerations which mean that it would fail to do what it says on the bottle. On the wider point of alcohol liquor duty, I look forward to the Exchequer Secretary’s contribution. From a sedentary position, she has expressed unhappiness at previous comments that I have made. All I have sought to do in our deliberations is to put it to her that a lot of people in the trade of selling and producing alcohol are unhappy with the above inflation increases. At the least, they want a clear explanation from the Treasury for the motivation behind them.

Photo of Patrick Hall Patrick Hall Labour, Bedford

I have one or two points to make in the light of this debate, which I have found very helpful, and in the light of meetings that I have had with senior representatives of Charles Wells, one of the few wholly British-owned brewers. Some 85 per cent. of brewing is now foreign-owned, but Charles Wells is located in my constituency. I have also met members of Bedford PubSafe, which represents licensees, and the police  licensing officer. I should like to develop the theme on a separate occasion, perhaps in an Adjournment debate, but I have one or two points and questions to put to my hon. Friend that arise from what has been said today and from my recent meetings in my constituency.

From what little work I have done on the matter, it is interesting that there does not seem to be a consensus on easy solutions, because there are no easy solutions. For example, I was impressed that the licensees I met in Bedford did not believe that simply raising duty across the board would in itself tackle antisocial behaviour, but the pub trade argues that, generally speaking, it is pubs themselves that provide a safe, sociable, supportive drinking environment, and that if we just leave it to the market—although there are also small businesses that believe in the market—they will not be able to compete on price, given the price differential with supermarkets. A lot of people, especially young people, seem to drink at home before going to the pub, with the danger that they arrive at the pub already drunk. Those are serious matters, but there are no simple answers.

I have one or two questions to put to my hon. Friend the Minister. With regard to the promised accelerator, although it is not in the Bill, Treasury Ministers have pledged to raise excise duty on alcohol by 2 per cent. for each of the next four years. Just to test that, can she explain why 2 per cent. and why four years? With regard to special pleading, there is an issue regarding beer sales in the pub trade. The relative or absolute decline of beer sales goes back some decades. The Government indicated an ability to assist the industry when they froze the duty on cider for four years to help that part of the industry. Is there now a case for considering doing the same with beer?

The hon. Member for Putney addressed the point about differential rates in a measured, intelligent and helpful way. I thought that my hon. Friend the Minister said earlier, in relation to another set of amendments on the clause, that differential rates were not allowed under EU law, yet the hon. Member for Putney—whose information I have no reason to doubt, as she approached the matter with reason and clarity—said that other EU member states used differential rates. If that is not the case, we will hear from my hon. Friend.

We may have to have a level playing field in terms of duties and taxes, but we certainly do not have one in terms of price. Supermarkets’ ability to use loss leaders, buy one, get one free offers and similar things is surely part of the problem for some people who abuse alcohol. It would be helpful if my hon. Friend, if she has time when she responds, could address those points.

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

I hope that I will be able to address Members’ concerns in the time left tonight. This has been an important debate, and a wide-ranging one by definition, and I hope that I can reply to some of the questions asked and genuine points made.

No one should doubt the motivation of anyone on either side of this Committee to see whether excise duties can have any influence, not on binge drinking, but on drinking habits. It is clear from reading amendments Nos. 59 and 67 that that is what the main Opposition parties advance.

The hon. Member for Putney spoke to the amendment in some detail. I shall take the Committee through some of the reasons why her approach will not work. There are practical reasons, but there are also legal obstacles. I shall also answer some of the questions asked by my hon. Friend the Member for Bedford. Amendment No. 67 would require the Treasury to lay before the House revenue-neutral proposals for changing the way in which beer, cider and spirit-based ready-to-drink drinks are taxed. In normal parlance, spirit-based RTD drinks are alcopops—I say that in case anyone is confused about the subject. The amendments, however, do not take that into account. European legislation imposes restrictions on the ability of member states to determine the structure of their alcohol duty regime and the rates of that duty.

There are several legal barriers to introducing the package of changes proposed in the amendments. I shall start with the proposed changes to beer duty. Under the current system, beer is taxed in direct proportion to the amount of alcohol that it contains. For example, duty on a pint of 3 per cent. strength beer is 26p; the equivalent duty on a pint of 6 per cent. strength beer is 51p. An additional duty applied exclusively to beer above 5.9 per cent. would be illegal. Council directives prevent us from charging duty except as a percentage of alcohol in the drink. As a result, the hon. Lady’s package will not work. Nor, if it was legal, could revenue be recycled to reduce the duty on lower strength beer, because under EU rules any increase in beer duty would have to be imposed on beers of all strengths with an alcohol content of above 2.8 per cent. or those with no alcohol at all. There are some rigidities in EU rules, which mean that the hon. Lady’s approach will not work.

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party 6:45 pm, 13th May 2008

Has the Minister considered how countries like Germany managed to get over those legal hurdles, and introduced taxes on RTDs?

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

Yes, but slightly different rules apply here. I refer the hon. Lady to article 3 of Council directive 92/83 EEC, which states that beer must be taxed in direct proportion to the degree of alcoholic strength. That is the issue that I was talking about.

Another slightly more obscure provision of Council directive 92/12 EEC allows an additional excess tax to be imposed provided that it is hypothecated for a specific purpose. I suspect that the German example is based on that provision. I shall explain in a moment why that will not work for alcopops.

Photo of Peter Viggers Peter Viggers Conservative, Gosport

Before the Minister goes into further detail, will she address the general philosophical question of the Government’s attitude towards the taxation of alcohol? How do the Government feel about using taxation as a weapon to help solve the social problems that have been pointed out so well by the Opposition, and about having differential rates for different types of alcohol? Will she set out her strategic framework for taxing alcohol?

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

I am happy to do so. We have 10 minutes left today. I shall try to give the hon. Gentleman a quick view of our philosophical approach, but given the remarks that I have just made, I hope that he realises  that we are not completely free of EU regulations on applying different excise duty rates to different strengths of alcohol. We do not have a completely free rein. I think that we would all admit that excise duties can have an effect on the consumption of particular kinds of alcohol, but not necessarily on binge drinking or over-indulgence. There is a great deal of evidence that if one prejudices the use of a particular alcoholic beverage over another for those reasons, substitution occurs. One may achieve an initial decline in the kind of drinks that one wishes to see decline, but in fact, there is a substitution effect. The market is very dynamic and drinks are often reorganised: the trade has the chance to reduce or increase strengths to fit in with any excise duties that are created. It is a dynamic situation and we are subject to certain constraints and EU rules. That is why the hon. Lady’s suggestions do not hold together, especially for beer—they are simply illegal and cannot be done.

Moving on to ready-to-drinks or alcopops, under the current system, such products are taxed either as spirits, as came out in the debate, or as made-wine, depending on the ingredients used in their production. Since spirit-based alcopops are taxed in the same way as all spirits, they are already subject to a higher duty compared with other products of similar alcoholic strength. Under EU rules, we cannot introduce a new tax for one alcohol product to fund a tax cut for another product. Revenue from a separate tax on ready-to-drink products—the German example—would have to be hypothecated to a specific spend under the EU regulation. I am afraid that for the hon. Lady’s purposes, that specific spending does not include meeting other budgetary objectives. Her idea of recycling revenue from alcopops into reductions of excise duty in other bits of the forest, so to speak, on other lower strength beers, does not work and is illegal.

Photo of Mark Field Mark Field Conservative, Cities of London and Westminster

I accept what the Exchequer Secretary has to say, but surely it is not beyond the wit of man—or Treasury Ministers and officials—to ensure that hypothecation could, for example, go on health promotion? There must be a way of organising matters in that particular way. I, for one, fully appreciate that health promotion is not, and should not, be the only issue at stake, but surely that is one obvious way in which there could be a level of hypothecation, specifically for alcopops and directed at a very small part of the large alcohol market?

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

That may well be the case—and I will come on to the German example in a minute—but it renders unworkable the process set out in the amendments tabled by the hon. Member for Putney, which propose a higher tax on a particular form of alcohol and recycle the revenue into lower duty rates in other areas of the alcoholic beverage jungle.

Photo of Mark Field Mark Field Conservative, Cities of London and Westminster

I fear that I am taking the words out of the mouth of my hon. Friend the Member for Putney. We wanted to ensure that this was a revenue-neutral situation, not simply a matter of more and more stealth taxes on alcohol alone.

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

It is a pretty unworkable stealth tax if everybody has noticed that alcohol duties have gone up by 6 per cent. I have never been able to understand the  accusation that increases in excise duties are somehow a stealth tax. The letters that I have to sign, and the response from members of the industry that I have received since the Budget, have not exactly indicated that it was a sneaky thing. When I phoned them up on the day of the Budget to tell them what was in the Budget, I do not think that I did it by stealth and their reaction did not have anything very stealthy about it either.

Some hon. Members have argued that tax changes could be targeted at particular alcoholic drinks, but it has been our experience that increases in the price of a specific drink in isolation are not effective in reducing overall harmful alcohol consumption. Problem drinkers simply move on to other products. The German experience was cited by the hon. Member for Putney as a highly successful example of that of approach. Given that one would need a hypothecated fund that could not be spent on other budgetary measures, one would have to take the money from a tax on alcopops and put it into a specific place. In the German example, it was put it in a hypothecated fund for alcohol education for young people.

Justine Greening rose—

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

Does the Minster plan to put the tax increase into an auditable hypothecated fund for child poverty?

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

No, but we have made clear where some of the revenue raised from the increases in alcohol excise duties have gone. I am anxious to make the point about the German example, of which the hon. Lady made a great deal in her speech. In that case, the specific tax on alcopops did not stop young people drinking; they simply drank something else instead. One year after the introduction of the German tax, alcopop sales reduced—the hon. Lady was right to point that out—but sales of other drinks, such as wine-mixed beverages and beer-mixed beverages, went up by 250 per cent. and 19 per cent. respectively.

The proposed changes to alcopop taxation require the Treasury to make regulations that define ready-to-drinks, and, as the alcohol industry is dynamic and competitive under any definition, it is likely that it will simply respond by reformulating products to ensure favourable tax treatment. The regulations would need to be constantly reviewed.

I do not know whether the hon. Lady has looked at alcopop sales recently, but they have halved since 2002, when they were at 105,194 hectolitres of pure alcohol, to 51,797 hectolitres of pure alcohol in 2007. The decline started in 2002, when the Government removed a concession introduced in 1998 by the Conservative Government, which basically began the growth in alcopop beverages. Removing that concession in 2002 put up the price of alcopops and the market for them, in hectolitres of pure alcohol, halved. Since 2007, it has halved again. Alcopops are possibly in terminal decline as a beverage, and people have moved on to other issues. That demonstrates that targeting particular drinks in a dynamic industry, which can be very innovative when it wishes, simply does not work. The  hon. Member for Taunton made that point, and I agree with him. It causes substitution in one area and causes those issues. We cannot have an excise duty on that basis, and I hope that the hon. Lady recognises that.

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

The Minster seems to be slightly ignoring the rest if the proposal, which would increase the duty on high-strength and super-strength cider and beers.

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

In that case, I wait to hear what she has to say with interest.

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

Following the Budget increases in alcohol duty, still cider between 1.2 per cent. and 7.5 per cent. is taxed at £28.90 per hectolitre, and still cider between 7.5 per cent. and 8.5 per cent. is taxed at £43.37 per hectolitre, so strong cider is already subject to a higher rate of duty. There has been a lot of interest expressed in strong white ciders. They were certainly discussed a great deal when representatives of Alcohol Concern came to see me before the Budget. The product represents only a small proportion of the overall cider market, which itself accounts for only 4 per cent. of total alcohol sales.

Photo of Stewart Hosie Stewart Hosie Shadow Chief Whip (Commons), Shadow Spokesperson (Treasury) 7:00 pm, 13th May 2008

I know that the Minister was accurate when she spoke about strong cider being taxed at a higher level, but the basic rate per hectolitre on still cider still goes up to 7.5 per cent. AVP. That is extraordinarily strong to be paying only £28.90 of duty.

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

The hon. Gentleman admirably cantered around the issues with Scotch whisky. His approach is that alcohol should always and everywhere be taxed in proportion to its alcoholic strength—its alcohol by volume. We do not yet have a structure that is so certain. I am looking at you, Mr. Cook. I am nowhere near the end of my remarks, and I do not know whether we are okay for time.

Photo of Frank Cook Frank Cook Labour, Stockton North

There is no time for termination. The next stoppage will be when the Secretary of State for Children, Schools and Families pulls the plug on new clause 14 of the Education and Skills Bill, so please continue.

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

I am happy to do so.

In summary, the European Union restrictions make revenue-neutral changes, as proposed in the amendment, unworkable. Furthermore, increases in duty on specific products will not reduce overall problem drinking because consumers will shift their consumption to other products, so the Government cannot agree to the structure of the amendment.

Amendment No. 59 would require the Government to provide an assessment of the impact of alcohol duty increases on consumption. As with all tax policy decisions, we monitor the impact of alcohol duty on a range of factors. When the hon. Member for Putney started this debate, she asked some questions about the HMRC model. We always examine input and assess whether our models need to be updated. The model to which she referred uses the latest market information on prices and consumption of alcohol, and is based on the elasticity set out in the published Government  economic service working paper No. 140, about which the industry has no doubt been writing to her.

The model is also based on HMRC’s clearance data consumption forecast and the latest industry prices and strength of alcoholic beverages, which can change rapidly, as I am sure that the hon. Lady appreciates. Behavioural effects and elasticities are applied to arrive at an additional tax revenue generated from duty changes. We assume 100 per cent. pass through of duty, and inflation is accounted for. That model comes to the Revenue forecasts that she sees in the Red Book. We keep it under review, and I hope that she finds my explanation reasonable.

The Government do not agree with amendment No. 59. I am sure that all hon. Members acknowledge that a number of factors have an impact on alcohol consumption, and it would be difficult to identify the specific impact of alcohol duty rises against other factors, including changing consumer patterns, changing and reformulated drinks, and fashions, as the hon. Member for Taunton rightly said.

We have been clear about the purpose of the decision to raise alcohol rates in the Budget. The principal aim is not the reduction of problem drinking, but primarily to provide revenue so that we can continue to assist pensioners and tackle child poverty.

Photo of Patrick Hall Patrick Hall Labour, Bedford

Could my hon. Friend come to the point before we conclude—you said that we could go on for a little while, Mr. Cook—about the accelerator and why it is 2 per cent. above inflation and why it is for four years?

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

We had discussions earlier about how much more affordable alcohol had become over the years, and the 2 per cent. increase is an attempt to change that balance over the next four years coherently and with advance advertising.

European union rules on the structure of alcohol duty rates make a duty regime under which all the products of a given alcohol strength are subject to the same duty rate unworkable. Under those rules, wine and cider are taxed in bands, but we are required to tax spirits and beer directly in proportion to their alcoholic strength. That makes it impossible to provide exactly the same treatment for all products of equivalent alcoholic strength. I hope that that has, to some extent, dealt with the comments of the hon. Member for Dundee, East. His plan cannot be brought into being because of EU rules. He is dancing around and I am happy to let him in.

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

I am not sure that I was dancing around. I understand why the changes that might follow from the assessment that I mentioned might not be able to be made now, or quickly. However, that would not prevent the assessment from being made and the information published so that all of us—the industry, and those concerned about health, crime and politics—could see what the rates should be were it possible to do it on an equitable basis. If we then thought, “My goodness, that’s a jolly good idea. It might help”, we could perhaps take the necessary steps thereafter to find a way of implementing it.

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

Changing how excise duty rules operate at European level is not quite as simple as the hon. Gentleman perhaps assumes. I understand his  point and why he makes it, because it is about the Scotch whisky industry. That industry—as was pointed out when he got to his feet—has benefited from nine years of zero increases in duty. It is not happy about the across-the-board increase in this year’s Budget. One cannot expect it to be happy, but most of the rest of the alcohol industry would be very happy to have had nine years of no excise duty increases. I merely ask him to take that into account as he surveys the scene.

The increase is across the board; it does not target specific alcohol products. The Budget maintains a differential in duty rates between Scotch whisky and other alcohol products, although it does not narrow it as Scotch whisky would have wished. I understand its feelings about that, but I also note that 90 per cent. of Scotch whisky is exported, and it is doing extremely well in exports. I hope that Opposition members will not press the amendments. They are ineffective and certainly illegal, and for that reason unworkable. If they do press the amendments, I will ask my hon. Friends to vote against them.

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

Apart from being illegal and ineffective, is there anything that she does not like about them? As the hon. Lady can imagine, we got legal advice which was that, provided that the duties were calculated by reference to a product’s weight, quantity or alcohol content, what we proposed was fine. The argument that she made about hypothecation did not stack up. I am absolutely sure that it would be possible to structure the duty system so that, through using hypothecation and tax reductions or otherwise, one could achieve the sort of structure that we propose. Therefore I want to press amendment No. 67 to a vote, because we believe that it is wrong that the pub industry and ordinary, responsible drinkers are being hit, when we could have had a much more thoughtful policy that would have given not only the industry, but ordinary drinkers a break, and would also have taken at least some steps towards tackling the big issues that we have with problem drinkers. I will press amendment No. 67 to a vote.

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

I heard what the Exchequer Secretary said in relation to the European directives, particularly 92/83 which requires member states to tax all spirits equally. I understand that articles 19 to 23 of another relevant directive may allow exceptions. I will not press amendment No. 60 today, but I may bring back a version at a later stage.

Amendment, by leave, withdrawn.

Amendment proposed: No. 67, in clause 9, page 4, line 41, at end insert—

‘(7) The Treasury must, not later than the date of the Budget 2009, lay before the House revenue-neutral proposals for—

(a) decreased rates of duty on beer of a strength not exceeding 2.5 per cent. and cider of strength not exceeding 3.0 per cent.;

(b) increased rates of duty on beer of a strength exceeding 5.9 per cent. and cider of a strength exceeding 5.5 per cent.; and

(c) a new category of duty on “ready-to-drinks”, at a rate higher than the duty on spirits.

(8) For the purposes of subsection (7), not later than the date of the Budget 2009, the Treasury must make regulations setting out the definition of “ready-to-drinks”.

(9) Regulations under this section are to be made by statutory instrument.

(10) A statutory instrument containing the first regulations under this section may not be made unless a draft of the regulations has been laid before, and approved by a resolution of, the House of Commons.’.—[Justine Greening.]

Question put, That the amendment be made:—

The Committee divided: Ayes 4, Noes 12.

Division number 4 Nimrod Review — Statement — Clause 9

Aye: 4 MPs

No: 12 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.

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

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

Briefly, we will oppose the clause stand part for the same reason as I have already mentioned: it is the wrong time to hit the industry and responsible drinkers.

Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 13, Noes 6.

Division number 5 Nimrod Review — Statement — Clause 9

Aye: 13 MPs

No: 6 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly agreed to.

Photo of Bob Blizzard Bob Blizzard Assistant Whip

I can hear the sound of the jazz from below, so I beg to move that further consideration of the Bill be now adjourned.

Photo of Frank Cook Frank Cook Labour, Stockton North

I could have sworn that it was a measure of fatigue that had moved throughout the Committee.

Further consideration adjourned:—[Mr. Blizzard.]

Adjourned accordingly at fourteen minutes past Seven o’clock till Thursday 15 May at Nine o’clock.