Clause 14

Finance (No. 3) Bill – in a Public Bill Committee at 3:00 pm on 12th May 2011.

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Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury) 3:00 pm, 12th May 2011

I beg to move amendment 8, in clause 14, page 10, line 25, leave out ‘1 October 2011’ and insert ‘1 April 2011’.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

The clause deals with the introduction of the reduced rate for lower-strength beer. I want to ascertain from the Government the reasons for delaying its introduction until 1 October, especially when the alcohol duty provisions under clause 13 came into effect at the time of the Budget. It is also unclear why the measures under clause 15 and schedule 1 have been delayed.

Obviously, we support the general principle of using alcohol duty as a revenue raiser for the Treasury. It contributed about £9 billion to the Exchequer in 2009-10,  and had the matter been debated under clause 13, we would have supported the continuation of the duty escalator of 2% above inflation for alcohol duties. To what extent alcohol duty is used simply as a means of raising revenue or whether it is more about affecting behaviour, as the clause hints, is a tricky issue.

As with environmental taxation and excise duties on tobacco and gambling, there is a debate to be had about whether such taxes are used solely just to raise revenue or whether they can have an impact on binge drinking, alcoholism and other social bads. It has been argued that higher taxes on bads can change behaviour, by encouraging people to drink less or to switch to drinks that are subject to a lower rate of tax, as under the clause. Other people argue that taxation only has a limited power to change behaviour, but following the “polluter pays” principle, it is sometimes concluded that it is better to tax the bads, such as alcohol and environmentally unfriendly products, than to tax the goods on the grounds of efficiency or ethics.

We want to tease out from the Government whether they introduced the measure to encourage more responsible drinking. Evidence suggests a direct link between alcohol prices and consumption. For example, a major study carried out at the university of Florida in 2009 drew on the findings of more than 112 other academic studies and suggested that consumption did indeed increase when alcohol prices fell and that consumption fell when prices rose. Another study carried out by the university of Cardiff in 2006 went further and suggested that increased alcohol prices could lead to fewer injuries resulting from violent crime and thus a reduced demand for hospital trauma services.

Studies have also suggested that young drinkers, as well as heavy drinkers, are the most responsive to changing prices, because they tend to drink cheaper alcoholic drinks. There is certainly a debate to be had about whether pricing mechanisms alone could encourage people to switch to lower-strength beers. I should be interested in what the Minister has to say about that and in what analyses the Government have carried out of whether reducing the revenue on lower-strength beer would actually make a difference.

Photo of Tom Blenkinsop Tom Blenkinsop Labour, Middlesbrough South and East Cleveland

I am looking at the details, and the clause will create a new lower rate of beer duty to encourage consumption of beer below the strength of 2.8%. I am not the biggest drinker—

Photo of Ian Mearns Ian Mearns Labour, Gateshead

You’re not the biggest buyer.

Photo of Tom Blenkinsop Tom Blenkinsop Labour, Middlesbrough South and East Cleveland

But I go into pubs, and I do not see many beers below the strength of 2.8%.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

I wonder at this stage whether all the hon. Members who go to pubs ought to declare an interest when they intervene in a debate. I am possibly unique, in that I do not drink and, although I go to pubs, I tend to drink water. I am not an expert on the strength of beer, but it seems to be low. There is a quite a market now for alcohol-free beer, which is linked to the progress that has been made in tackling drink-driving. The message is, “Don’t drink at all if you’re going to drive.” I wonder whether an equivalent market in low-strength beer could be encouraged by having a lower price because of the lower duty rate.

Photo of Ian Mearns Ian Mearns Labour, Gateshead 3:15 pm, 12th May 2011

I hope that I can help my hon. Friend out on the issue of what is common in the beer trade and the gravity of the beer consumed in most pubs. I was at a beer festival in Gateshead last weekend. There were 100 real ales on show and for sale. Of those, about 60 or 70 were what are commonly known in the trade as session beers and were around 3.8% to 4%. About 10 or 15 of them were really quite strong and beyond my normal taste. There were no beers on display in Gateshead that were 2.8%, and such beers are unusual from my perspective. One wonders whether this is an opportunity for breweries, the micro breweries in particular, to get into that sort of trade.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

I thank my hon. Friend for educating me and adding to my very limited knowledge of the strengths of beer. As a Bristol MP, I know about the cider industry as cider is very popular in the south-west. I quite often look out from my flat at a barge called “The Apple”, where people go to drink cider. I have been there on only two occasions; usually I just stand there looking wistfully across the water at people enjoying themselves on a Friday or Saturday night. [ Interruption. ] I know; it is very sad.

I went there straight after my re-election in 2010 and I was lured there the other week after we had done another typical Bristol thing and attended a gig by The Wurzels. South-west MPs have to go to a Wurzels concert at some point. I spent most of the concert begging to be allowed to leave, but it was not quite enough to force me to turn to drink. I am aware that some of the ciders are as high as 8% or 9% proof; sometimes when I am gazing out at this scene from my flat I can tell that it is 8% or 9% proof by the behaviour of the people who are leaving.

I shall return from my digression about my lack of a social life, or my exciting social life going to a concert by The Wurzels. If the Government intend to introduce this measure to encourage more responsible drinking, why is this new provision not coming into effect until October 2011 rather than at the beginning of the financial year like other measures in the Budget? The Government’s review of alcohol and taxation referred to their wish to tackle problem drinking without unfairly penalising responsible drinkers. There is a careful balance to be struck. There is a complex mix of evidence on the links between alcohol consumption and/or harm, and between price generally and/or taxation levels specifically.

The British Beer and Pub Association, whose representatives I am sure the Minister has met and been lobbied by frequently, disputes the link between taxation and harm, citing international comparisons on lower duty rates. It none the less welcomes the plan to introduce the reduced rate for beers under 2.8%. It believes that the change could provide an incentive for the industry to invest in lower-strength beers and encourage drinkers to consider them.

The Minister will also be aware that there is a campaign within the industry to tax alcohol according to the per-unit strength, so that rather than there being differential rates for wines, spirit and cider, taxation would simply be on the basis of the alcohol strength. What consideration has she given to that? We will come in a moment to the provision about higher-strength beers. It looks as though  the Treasury is going down the path of looking at alcohol strength in a bid to change behaviour, but it has not yet taken on board the wider representations that have been made by the industry.

Photo of Bill Esterson Bill Esterson Labour, Sefton Central

My hon. Friend is making a lot of progress on teasing out what the Government are trying to do. To help with her social life, perhaps next time she visits Sefton she can visit the Blue Anchor in Aintree village with me, where she can also see the race course on the other side of the canal. The beer is very good, I can assure her, and none of it is below 2.8% in strength.

Perhaps we can get the Minister to comment on the current research into the effectiveness of this measure, and the question of how much beer is below the 2.8% level. I think that in supermarkets quite a lot of beer is below that strength, so maybe it will have more of an impact in supermarkets than it will in pubs.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

I thank my hon. Friend for his offer. I believe that the Labour party conference is in Liverpool this year, and at party conferences some people indulge in alcohol consumption; my hon. Friend may be able to lure them to the Blue Anchor.

There is a concern about taking this measure one step further and looking at a per-alcohol-unit taxation across the board. When I spoke to the representatives of the spirit industry in particular—for a couple of months leading up to the Budget, it seemed as though I was stalking the Economic Secretary to the Treasury, because I had endless meetings with people from the Scotch Whisky Association, the Bingo Association and the British Beer and Pub Association, who had met her the day before or were due to meet her the day after, so I suspect we both received very similar representations—they were keen to stress that drinks that are not normally associated with binge drinking or problem drinking are often subject to much higher rates of duty on a per-unit basis.

Duty on spirits is 26p per unit, which is far higher than duty on beer at 16p to 17p. I would perhaps dispute the representatives’ assertion that spirits are not associated with binge drinking; I think that high levels of vodka, in particular—people drinking a lot of vodka before they go out, or smuggling it into pubs in their handbags and topping up their drinks—are significant in binge drinking for young women. The point remains that if we are looking at taxation as a way of changing behaviour, perhaps it should be looked at across the board.

My understanding is that the current share of the beer and cider market below 2.8% is less than 1%. Perhaps the Minister could provide further details of how many such beers are available in both the on-trade and the off-trade, and what proportion of beer sales they constitute. I would also be interested to know what discussions she has had with the industry about increasing the supply of lower-strength beers, given that the small breweries relief and the lower-strength duty rate cannot be applied together.

Does the Minister have any information on what proportion of beer under 2.8% is produced by small breweries? Have the Minister or her officials at the Treasury done any calculations, on a sliding scale of lower-strength beers, about the level at which consumption  would be expected to rise and the extent to which that would be matched with the correlation in the decline of the drinking of ordinary-strength and higher-strength beers, which we will come on to?

There is obviously concern in the pub industry about the low cost of alcohol in supermarkets. The Labour Government banned irresponsible drinks promotions under their Policing and Crime Act 2009. There is a real issue about loss-leading in supermarkets by pricing alcohol under cost price. The debate relates not only to alcohol duties and taxation, but to public health measures and whether there should be a minimum alcohol price. Pubs and bars cannot compete with the prices offered by supermarkets and they have lobbied me—and, I am sure, the Minister—claiming that the lower off-trade cost contributes to the trend of pre-loading before a night out.

The pub industry accordingly argues that off-trade sales are the more significant factor in problem drinking, but either way, it does not seem that alcohol duty alone will significantly change the existing balance. I return to my point about drink-driving; people may well turn to lower-strength beers if they want to drive home at the end of the evening, so they are carefully watching their alcohol intake. If they are buying alcohol from a supermarket, however, it is far more likely to be for home consumption. The strength of the alcohol may not, therefore, be such a deciding factor. The price differential may not be sufficient to persuade them to go for a lower-strength beer instead of buying something of ordinary strength.

Photo of Bill Esterson Bill Esterson Labour, Sefton Central

My hon. Friend pulls together a number of alcohol issues, such as the health aspects, drink-driving and pricing. Will the Minister say how the Government will bring those aspects together to make the most of the provision? Without doing so, there is a danger that supermarkets will be able to carry on with the sort of loss-leading behaviour that my hon. Friend has referred to. Recently, I was looking at high-alcohol lagers that are only about 50p a bottle.

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Substitute Member)

Order. I am terribly sorry to interrupt the hon. Gentleman, but I remind him that this is an intervention on the hon. Member for Bristol East, not a question to the Minister. He can put whatever questions he likes to members of his own party at this stage. If he chooses to catch my eye later and make an intervention, he can say whatever he likes, so long as it is in order, but he cannot question the Minister now.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

My hon. Friend raises an important issue. Again, we go back to how effective taxation and price differentials are in modifying behaviour. In particular, are we simply trying to reduce alcohol consumption across the board, which would have an impact not only on binge drinking but on people who drink responsibly, or are we mostly concerned with tackling binge drinking?

I question whether lower-strength beer appeals to people who are more prone to excessive or binge drinking. The measure might therefore benefit people who drink responsibly, but it will not tackle the underlying public health issue, which also affects the public purse because  people are admitted to A and E. Binge drinking has an impact on domestic violence, family life and policing. The cost of policing binge drinking in city or town centres at the weekend, in many areas across the country, is astronomical. Although I welcome the measure, it does not in itself address those problems.

Significantly, attitudes towards drink-driving, and behaviour patterns, changed not as a result of any financial measures, but because of public information campaigns and subsequent peer pressure. The position on drink-driving shifted. It used to be very much accepted—it was something that people did. There would be debates about whether people could get away with being over the limit and it was accepted that people at pubs or dinner parties would drink a fair bit and then drive home. That has significantly changed and drink-driving is now very much frowned upon, but taxation did not play a major role in that change.

The National Institute for Health and Clinical Excellence has commented on evidence linking advertising to drinking and the Advertising Standards Authority has very strict regulations on alcohol advertising, including a prohibition on any health claims. Can the Minister tell us whether the Government will work with industry to improve awareness of, and potentially the demand for, lower-strength beer? Also, will the Government propose targeting such beer at a particular section of drinkers? For example, could the current strict rules on advertising alcohol be relaxed so that lower-strength beer could be promoted in a more positive way, to try to create more of a market for that type of beer than for higher-strength beers?

I have received some interesting evidence from the National Association of Cider Makers on consumption trends, which could well inform this debate. The NACM reports that there has been a significant change in the distribution of cider sales according to alcohol by volume band, with a reduction in the average ABV from 5.6% in 2000 to 5% in 2010. The NACM attributes that to the marked rise in the popularity of premium but lower-strength ciders such as Magners, Bulmers and Gaymers.

The NACM report did not comment on the reasons for the increasing popularity of those brands, but it is notable that they have all been very heavily marketed. I am not proposing that the Government start an advertising campaign for lower-strength beer brands; I am merely asking whether duty alone can have a significant impact on drinking habits or whether it comes down to marketing, changing social attitudes, peer pressure and so on. Will the Minister tell us, therefore, what is the projected impact of the lower beer duty rate on alcohol consumption? Also, what is the projected impact of the lower beer duty rate on the Treasury’s revenue streams from alcohol?

Previously, the Economic Secretary has told the House that it is not possible under EU directive 92/83 to apply the reduced duty rate for beers on beers that are above 2.8% in strength, but she intimated that the Government would like to increase that threshold at some point in the future. Can the Minister update us on the Government’s discussions with the EU on this issue? I would particularly like to know what threshold the Treasury would ideally set if it was able to go above the 2.8% threshold dictated by the EU. Also, what proportion of the beer market would be affected by such a change? What impact would there be on the Treasury’s revenue? And does the  Minister believe that a higher threshold would have any benefits in terms of reducing alcohol-related harm?

Finally, I turn to the amendment itself. Although the precise causes and effects may be disputed, the Government clearly believe that a reduced duty rate for lower-strength beers will have significant benefits for the Treasury, drinkers and society more generally. Even if it were to apply to relatively few beers that are currently being produced, it seems preferable to allow those benefits to be reaped sooner rather than later and to promote the idea of lower-strength beer within the industry and among drinkers as soon as possible. So I hope the Minister will be able to clarify why the date of 1 October was chosen.

Photo of Karen Bradley Karen Bradley Conservative, Staffordshire Moorlands 3:30 pm, 12th May 2011

I wonder whether the shadow Minister can clarify something for me. I understand that this clause will be retrospective, so how does she propose the Government should deal with the period from 1 April until now?

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

This is a probing amendment to find out why the Government are acting in the way that they are. It is not an amendment that we will push to the vote and we do not have any expectation that we would win a vote on it. Nevertheless, as I have said already there were many other measures in the Budget that came into effect on 1 April and I am just seeking clarification from the Minister as to why that was not the case with this measure.

The hon. Lady stopped me about three words from the end of my final contribution. [Laughter.] I was just about to say that I hope that the Minister will now clarify why the date of 1 October was chosen. Obviously, the measure cannot be brought forward now to apply from 1 April because there would be difficulties with retrospective implementation, but perhaps it could be brought forward from 1 October.

Photo of Stella Creasy Stella Creasy Labour, Walthamstow

I want to speak about the amendment and indeed the clause itself, because it is a really interesting clause. It has wider ramifications for how this Government act. It seems to be one of the most explicit examples of “nudge”. I know that many people have talked about “nudge” and the principles behind it, arguing that Government policies can effect behavioural change in the population. I must say that all I have seen in the last year is a large “shove” for many people in my community of Walthamstow, as we have seen massive cuts to public services and to the benefits and support that they all rely on.

However, this policy is explicit about changing people’s behaviour by introducing a higher rate of duty on super-strength lager. It also speaks to a concern, with which many of us are sympathetic, about the difficulties of dealing with problem drinking and the impact that it has on all our communities. It is therefore worth asking the Government to clarify what they mean by problem drinking and what type of drinking they are attempting to tackle. Does that have a knock-on effect—I do not want to use the word “nudge” twice—on other public policies and on other concerns, which are dear to many members of the Committee, about the future of pubs in our local communities? I know well the concerns of  Opposition Members about the regular distribution of pubs, and I am sure that they are shared by Government Members. What does the policy mean for the public purse?

There are dangers in the use of nudge in public policy. I would be happy to give Government Members a treatise, if they so desire at 4 o’clock on a Thursday afternoon, on why we should not read Thaler’s work; why we should be critical of the rather unimaginative philosophical and psychological principles behind it. I am sure that they would welcome that opportunity. It creates complications for public policy. If we seek to effect change in one area through measures in another, those measures interact.

With that in mind, it is worth looking at what we mean by problem drinking, because the clause relates to a specific type of alcohol, and asking whether that will affect the people about whom we are talking. Many members of the Committee are concerned, as I am, about the increase in binge drinking among young people. Having worked with young people for many years, I know that it is a new phenomenon. Indeed, some of us may remember. In the inter-war years, the 18 to 24-year-old age group were the lightest drinkers but, by this century, they have become the heaviest drinkers in our communities. There is trend towards drinking to intoxication. It is not just that people are drinking a lot; they are drinking to get very drunk. Many of us will have seen the impact of that on the streets of our town centres on a Friday and Saturday—and indeed, on midweek nights.

As a former youth worker, I am concerned about the evidence of that trend spreading to younger children. It is very worrying that, of 15 and 16-year-olds, nearly 20% of boys and 25% of girls have been drunk three times or more during the last 30 days. When we think about the impact of that on their ability to learn at school, on the relationships that they form with their peers and on their personal safety, that is a real problem. Much of that drinking starts not in pubs but at home. Kids start trying alcohol with their parents and then, for reasons of peer pressure, use alcohol not only to have a good time but because their friends are drinking and it is seen as the thing to do.

We must think about how the measure will affect people with such a form of problem drinking. I am sure that Ministers would accept that the clause probably does not make much difference to young drinkers, because the evidence shows that they do not drink the type of alcohol to which the clause refers. The measure will, however, have an impact on our pubs, which are really struggling. Many hon. Members are worried about what is happening to pubs, not necessarily because of drinking problems, but because of the wider social and economic ramifications for our local communities. At present, there are 52,000 pubs in Britain and, through the income that they generate, each adds about £80,000 to their local community. In London, five pubs are closing each week. I can see some members of the Committee starting to panic about that already.

Beer sales are falling, and I am sure that hon. Members throughout the House have been lobbied by the pub and beer industries about the impact of changing duty on beer and what that might do to those trends. That seems to be a different question. The problems to be dealt with are binge drinking, especially among young  people because, if people start drinking early, they continue that pattern into their later life and we all know the health and social consequences of that. However, actions to deal with problem drinking might have unintended consequences on other parts of our economy, be it the pub industry, which employs nearly 600,000 people in this country, or on our ability to engage with young people.

My hon. Friend the shadow Minister has set out admirably some of the challenges involved in getting the policy right. No one wants to make partisan points, because it is a difficult policy area, but we need to recognise the complex factors that are in play. Problem drinking among young people calls for a different set of measures from problem drinking among older people, who can go into pubs and buy alcohol at discounted rates from supermarkets. In that sense, it is worth thinking about the context in which we operate, because if we are discussing that second category of people, who are legally eligible to drink, we are looking at some different challenges.

We know that the UK has one of the highest rates in western Europe of people who consume alcohol and of people who consume to excess, but we are not actually the worst. About 26% of men in the UK drink five units or more a day, which is in contrast to 49% of men in Ireland and 42% of men in the Netherlands. We know that the trend of binge drinking and drinking to intoxication on a regular basis increases with age. Beyond the 18 to 24-year-old age group, 30% to 40% of the population in their late 20s, early 30s and, indeed, 40s, continue to drink in such a way.

Looking at those facts together, we see that we have a culture of drinking in the UK that we must tackle if we want to deal with its social and health consequences. Our approach must transcend the rather narrow one of duty alone. I am not suggesting that the pricing of alcohol has no role to play, but we have to look at all the factors. We have to be clear about what we mean by problem drinking and the consequences for one group over the other. The shadow Minister was discussing the different types of alcohol that people are consuming, and, again, I return to the point about who the problem drinkers are. One trend that I have noticed among some of the young people with whom I have been working is that they have started drinking gin. I must say that I did not associate gin with the younger age group, but it has become a trendy spirit. I can see the shock and horror among hon. Members faces.

Photo of Stella Creasy Stella Creasy Labour, Walthamstow

I am very interested to hear what the hon. Gentleman has to say about his consumption of gin.

Photo of Alec Shelbrooke Alec Shelbrooke Conservative, Elmet and Rothwell

Does the hon. Lady’s constituency include West Ham United? That might explain the increase in the drinking of gin.

Photo of Stella Creasy Stella Creasy Labour, Walthamstow

While we do have a number of Hammers fans in Walthamstow, West Ham United is not even within the borough boundary. We do, however, have  Leyton Orient, and that may well account for some of the challenges that people face with their alcohol consumption. I am sure that the hon. Gentleman did not intend to be flippant, but he made an interesting intervention. If we are going to start looking at the way in which economic policy can effect behavioural change—I have big reservations about whether that really works—trying to understand what behaviour and by whom and in what context is really critical when we consider whether any of the measures will actually make an impact.

The danger is that the Government will introduce the wrong measure and seek to affect one sort of behaviour in one group of people in one particular context. Young people who are learning about alcohol and who live in a culture where alcohol is, frankly, widely celebrated are different from those people who may well drink exactly the same amount of alcohol over a similar period of time when watching football on a Saturday afternoon, and they will be diversely affected by the proposal. We know that the biggest drinkers of high-strength beer are men over 35, not the 15, 16, 17 or 18-year old kids—the biggest youth drinkers—who are finally getting into pubs.

It is a shame that we cannot have some of the Health Ministers here to try and tease out a little bit more of the thinking behind this particular policy.

Photo of Stella Creasy Stella Creasy Labour, Walthamstow

I hesitate to answer, but I am trying to make a general point that the issue is cross-cutting. When we get to policies such as this one, it would be helpful, so that the Opposition can understand the motivation, to have a broader conversation, so that we understand if the Government say, “In the first instance, we want to act on the duty on high-strength beer; we may leave spirits alone.” If the Government are going to use economic and fiscal policy to affect behavioural change in such a specific manner, do we need to review the entire application of taxes to alcohol? That is not to dismiss the value that I am sure the Minister will bring to the debate when she replies, but these are cross-cutting, complex issues.

Behaviour is not something that you can poke with a stick from Whitehall and expect to change on the streets with such simplicity. That is precisely why I have grave concerns about nudge. For the Government to embrace nudge as a philosophy perhaps reflects some of the philosophical vacuum that overcomes them, because it does not reflect the complex, messy reality of the groups of people whom they are trying to deal with.

I hope, therefore, that when the Minister comes to respond to some of the points that hon. Members on this side have raised about this particular proposal, and whether duty can be used to effect behavioural change, she will set out that broader context for us to better understand where she sees that fitting. What is it a harbinger for, in terms of how the Government will approach alcohol taxation, and might we see a whole-scale review not just of alcohol taxation but of alcohol policy in the round? I think that all of us recognise that measures needs to be taken not just by the Treasury or even the Department of Health, but perhaps could also  involve schools and local councils, which have to deal with some of the consequences of not getting alcohol policy right.

Photo of Pamela Nash Pamela Nash Labour, Airdrie and Shotts 3:45 pm, 12th May 2011

It will not surprise anyone that I find this debate fascinating, being from the west of Scotland. I am in full support of the measures to increase the rates on higher strength beers. I am extremely concerned, however, by the assertion, in the coalition agreement of last year, that the proposed changes in alcohol duty pricing will tackle binge drinking. Alcohol pricing is clearly a tool in the arsenal of the Government against alcohol-related problems. It should be noted that a much wider package of measures is required, and that pricing does not always have an effect.

For example, I was pleased to learn recently that, according to NHS Scotland’s report, “Health Behaviours in School-Aged Children”, the number of our young people who are drinking is now a third less than it was 20 years ago. That flies in the face of the stereotype of teenagers binge drinking and behaving badly. I have to say that I did not really help to dispel that myth myself in Scotland not so long ago, but I am glad that it does seem to have been reduced now. That reduction has come in spite of the fact that alcohol prices in Scotland are now cheaper than they have ever been. I can only put that drop in young people drinking down to the excellent public health campaigns we have had in the past 15 years in Scotland by NHS Scotland and education work in schools.

The problem we have in Scotland is the consumption of higher strength beers and also alcohol products with high levels of caffeine content, such as Buckfast, which is widely consumed in my constituency. Therefore, I strongly support the proposed higher rate of beer duty. High-strength lagers have often been consumed by the most vulnerable in our society and I believe that the proposal will make an impact on those problems. However, I have seen no specific mention of caffeinated alcohol products from the Government in the past year, which is a shame because they are such a scourge on many communities, and certainly my own.

I recently had a meeting with my local police officers in the lead up to the last old firm game.

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Substitute Member)

Order. I am sorry to interrupt the hon. Lady. She is right at the far end of the room. It is quite difficult to hear from here, and that affects both the Chair and the Hansard reporter. I would be grateful if private conversations could be kept to an absolute minimum.

Photo of Pamela Nash Pamela Nash Labour, Airdrie and Shotts

I recently had a meeting with my local community policing team in the run-up to the last old firm game. Related problems around that period were much reported on here as well as in Scotland, and included a vast increase in domestic violence and assaults. That is directly related not just to alcohol consumption, but to high-strength beers and alcohol products with a high caffeine content. I hope that that toxic mix is something that can be addressed by the Government, both by Treasury and Public Health Ministers in the  near future. I hope that these proposed measures become a part of a large package from different Departments in Government.

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

It is a pleasure to see you in the Chair this afternoon, Mr Gale. We have had a debate that has focused on high-strength beer, which is actually tackled in the following clause. Clause 14 relates to lower strength beers. Perhaps I can address some of the broad issues around problem drinking. The two clauses are clearly related. If we have the debate now, it will still be relevant to clause 15.

The provisions are part of a series of measures that the Government have introduced and are introducing to tackle problem drinking. The Treasury recognises that duty has a role to play, but it is clearly part of the bigger package of measures that is needed if we are to challenge the relatively deep-seated drinking culture in our country, and, as some hon. Members said, the changing nature of problem drinking over time. I assure hon. Members that the Treasury has worked with the Department of Health and the Home Office, which clearly has a role to play. The hon. Member for Airdrie and Shotts mentioned that.

The hon. Member for Walthamstow referred to a segmentation strategy for problem drinking, and the need to recognise that there are different sorts of problem drinkers. I agree. There are perhaps four-plus segments: alcoholics; young, under-age drinkers; binge drinkers, and home drinkers—an increasing proportion of middle-income people drink too much at home. In the workshops that we held last summer, we talked to not only the industry but to other stakeholder groups about their views on problem drinking, and another category of problem drinking emerged from those discussions. It comprises perfectly normal people, who, when out celebrating a particular occasion, drink too much. Setting aside those particular instances, they may drink responsibly for the rest of the year.

Clearly, the matter is complex, and we are right to consider a mix of solutions, depending on which group of problem drinkers we particularly want to influence. The solutions include duty, the Home Office, local authorities and the police, and the Department of Health, which can play a role in education, changing the culture, and perhaps working with the Department for Education in tackling younger drinkers, their perceptions of drinking and the peer pressure that is sometimes applied to them to drink.

I assure the Committee that the provision is part of a much wider piece of work. From my perspective as a Minister, clauses 14 and 15 are a start. We are one of the first countries to introduce a low-strength duty. At the moment, it is very much couched in terms of what we can do in Europe, but we are interested in how the market—demand and supply—responds to the duty provision that we are discussing.

Photo of Ian Murray Ian Murray Labour, Edinburgh South

I refer the Committee to my entry in the Register of Members’ Financial Interests. Before we move on to the technicalities of the policy, will the Economic Secretary give us some views on the Government’s approach to over-the-counter off-sales in licensed premises? All the evidence shows that if we tackle the cheaper, supermarket alcohol and off-sales  generally—it is not just the supermarkets; I do not mean to pick on them—and benefit the on-trade, which is one of the most highly regulated industries in the world, it could regulate the matter for the Government. The policies that we are considering will do nothing to regulate the off-trade. We should make a distinction, and if the Government increased duties on the off-trade and benefited the on-trade, that would go a long way towards resolving some of the problems that the Economic Secretary has started to highlight.

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

The hon. Gentleman makes a point that many people in the industry, particularly the pub industry, raised. The Government have introduced measures to ban below-cost sales to start to tackle that. However, I think that he asked how we could link the two clauses with tackling the off-trade issue. We will define “below-cost” as duty plus VAT. We are therefore clearly linking the two approaches in a helpful way, which means that our decisions about levels of duty and VAT will feed directly into that below-cost definition. So there is a way to link them together.

I will now take the Committee through some of the technicalities of the clause, so that I may put on record how it will work. Clause 14 introduces a new reduced rate of duty for beers at or below 2.8% ABV. That will help to encourage development of lower-strength beers and give responsible drinkers a wider choice of products.

The reduced rate is being introduced following the review of alcohol taxation, which I briefly mentioned, and was announced in my statement to the House on 30 November last year. The measure corresponds to the new high-strength beer duty that we will address in the next clause. As well as introducing a new duty to encourage people not to drink super-strength lagers, it is right that we provide encouragement to those who wish to consume lower-alcohol beers.

The clause introduces a new reduced rate at 50% of general beer duty for beers at or below 2.8% ABV. We will continue not to charge duty on beers at or below 1.2% ABV. That will reduce the price of a pint of lower-strength beer by between 12p and 18p. It will provide an incentive for brewers to develop and retail new lower-strength products. As we have heard, the measure has been welcomed by the industry and beer groups.

Some Members wanted to know how big the market currently is. As we have heard, it is relatively small at the moment. There are a few limited brands that brewers are putting on the market. As important as price is, taste is important, too. Many companies are now working to produce low-strength beers that have the taste that consumers want.

I am sure hon. Members will be pleased to know that a number of producers are already experimenting with new lower-alcohol brews, and they are making good progress. We expect the reduced rate of duty to allow pubs and other retailers to offer lower-strength beers at a lower price. A price differential will hopefully encourage consumers to try, and enjoy, a wider range of products. We hope that the new lower rate of duty will encourage growth in that part of the beer market.

In terms of where we set the definition of lower-strength beer, it is not possible at present for us to apply a reduced rate of duty for beers with an ABV above 2.8%, because the 2.8% ABV threshold is set directly by the EU directive on alcohol structures. As Members may be aware, that directive is currently under review. We are working with our European partners to try to increase the threshold, which would give us more flexibility nationally to raise the definition of lower-strength beers should a Government wish to do that in the future.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

Has the Minister been given any indication of how long it would take to get EU agreement to change the 2.8% limit? At some point next week we will go on to talk about fuel duties. There has been an issue with the derogation of VAT on fuel, which the Minister has said will be a complicated and lengthy process to implement. Are we talking about a similar time scale for this, or could it be achieved much more quickly?

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

The difference between the two measures is that this directive is already under review. Because of the introduction of the new lower rate of duty, we are now able to participate meaningfully in the European debate. We are one of the countries that is using the ability to set a lower rate of duty.

At the moment, of course, there is no review of the VAT directive looking at whether any product should go from a zero rate of VAT to a reduced rate of VAT or a full rate of VAT. That is the difference. This is under review, and, as a country, we want to make our view known. We expect the measure will have a relatively small cost to the Exchequer, but that will be offset by the revenues from the new high-strength beer duty.

I was asked about the impact on small breweries, and the clause includes provisions that ensure that all small breweries receive the full 50% duty reduction for lower-strength beers. That will help to limit the complexity of having to apply reduced rates to reduced rates.

Amendment 8 seeks to advance the date for the introduction of the reduced rate of duty. The measures are to encourage the production and consumption of lower strength beers, but a retrospective introduction of the reduced rate would not achieve that, instead giving a duty rebate to lower strength beers that have already been produced. Also, as one of my hon. Friends pointed out, producers paying the higher rate of duty until now would then have to claim a rebate, which would be an added complexity.

The date of 1 October 2011 was chosen for three main reasons. First, HMRC needs to make changes to its systems, so as to collect the new duty and to apply the reduced rates. Without the changes, collection of the duty would have been burdensome for businesses and for HMRC, imposing unnecessary costs. The system changes needed time, and would not have been achieved by 1 April.

Secondly, the level of the reduced rate was only announced in the 2011 Budget and, consistent with our aim of better tax policy making, we decided that eight days was simply not sufficient time for businesses to adapt their accounting systems to a structural change in the duty regime.

Thirdly, the longer lead-in time will allow all brewers to develop a product that will benefit from the favourable rate of duty—we hope to see that take place. Earlier introduction of the measure would have been unlikely to help bring new lower strength beers to the market more quickly.

Accepting the amendment would also have had revenue implications for the Government. Without the parallel amendment to the timing for the introduction of the new high strength beer duty, we would have had a reduction in revenue because of the lower strength beer duty. Without the corresponding higher strength beer duty to pay for reduction, a loss to the Exchequer would have resulted.

For those reasons, with the reassurance to the Committee that this is a sensible package of measures and because we will debate clause 15 shortly, I ask that the amendment be withdrawn.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

I thank the Minister for that comprehensive response, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 14 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Mr Goodwill.)

Adjourned till Tuesday 17 May at half-past Ten o’clock.