Alcoholic liquor duties: rates

Finance Bill – in a Public Bill Committee at 2:30 pm on 7th July 2016.

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

Photo of Rebecca Long-Bailey Rebecca Long-Bailey Shadow Chief Secretary to the Treasury, Member, Labour Party National Executive Committee

The clause increases the rates of alcohol duty on wine and some ciders and perries in line with inflation. The changes took effect on 21 March. In discussing the clause, I want to touch on one type of alcohol duty that is notably not being increased in line with inflation.

The rates of duty on beer, spirits, wine and made-wine exceeding 22% alcohol by volume, and on still and sparkling cider and perry not exceeding 5.5%, will be frozen in 2016-17, as announced in the Budget. That freeze is expected to cost £85 million each year to 2020-21. We are not opposed to the freeze on beer duty, but I would like the Minister to address some minor concerns.

The Government have stated that their intention is to help pubs, which are important community assets that encourage responsible alcohol consumption. The industry, specifically the Campaign for Real Ale, the Society of Independent Brewers and the British Beer and Pub Association, has welcomed the freeze. Some trade bodies, however, have questioned why wine has been singled out for a duty rise. Will the Minister give some guidance on that? I am also interested to know that given my own more general interest in the price of a bottle of wine.

Furthermore, the Government acknowledged in their policy paper that the freeze is

“likely to lead to a minor increase in overall alcohol consumption in the UK.”

Will the Minister give exact details of how minor that expected increase will be? Those minor questions aside, we will not be opposing the clause.

Photo of Damian Hinds Damian Hinds The Exchequer Secretary 2:45 pm, 7th July 2016

Clause 143 sets out changes to alcohol duty rates from 21 March this year. It was announced in the Budget that the duty on beer, spirits and most ciders would be frozen this year and that the duty on most wines and higher-strength sparkling cider would rise with inflation. With those changes, we continue to support the pub industry, which plays such an important part in British cultural life. To respond to the hon. Lady’s point about what is most advantageous to the on-trade—to pubs—beer is considered to have a greater price sensitivity effect than wine, by a number of estimates.

The British Beer and Pub Association estimates that about 30 million adults visit a pub at least once a month. As I think all hon. Members would acknowledge, pubs are important community assets that promote responsible drinking in a generally friendly atmosphere. In the Budget, the Government therefore took further action to support the sector. Given that about two thirds of alcohol sold in pubs is beer, we froze duty on a typical pint of beer, following three consecutive beer duty cuts that were widely welcomed. The Government’s support for pubs means that a typical pint of beer is now 10p cheaper than it would have been if we had not ended the beer duty escalator in 2013. I am sure that is welcome news to many, many pub goers. In the BBPA’s assessment, the three beer duty cuts have created 19,000 jobs. The duty freeze will offer further support to pubs. The duty on high and low-strength beer will also be frozen, which offers the sector a continued incentive to expand the choice of those drinks to consumers.

The Government’s key priority for this Parliament is to restore the public finances to a sustainable position. We outlined in the Budget our commitment to fiscal sustainability, and the decisions taken on duty rates must, of course, reflect that.

The clause provides for duty on most wines to increase by RPI only. Under these changes, the duty on beer and wine will remain broadly similar, and the duty rate on wine above 22% ABV will continue to be the same as that for spirits. The hon. Lady may have a particular interest in this point: the price of a bottle of wine is now 7% lower than it would have been if we had not ended the wine duty escalator in 2014.

The clause also sets out that duty on high-strength sparkling cider is increased by RPI only, which means that it continues to be the same as for sparkling wine of equivalent strength. It was also announced in the Budget that the duty on all other ciders would be frozen. That means that a typical litre of cider is now 4p cheaper than it would have been if we had not ended the cider duty escalator in 2014. The freeze in cider duty supports the industry, which has high production costs and plays an important role in many local economies, particularly in some of our rural areas.

The Budget also froze duty on spirits. As Scottish National party Members and others will acknowledge, Scotch is one of the great British success stories. Its exports are estimated to be worth nearly £4 billion, and account for about 20% of total food and drink exports. The freeze in spirits duty will provide further support to the Scotch industry. It means that a 70 cl bottle of whisky is now 87p lower in price than it would have been if we had not ended the spirits duty escalator.

The freeze will help elsewhere, too, including by supporting the global thirst for British gin. According to the Wine and Spirit Trade Association, 140 million bottles were exported in 2014, which is an impressive 37% increase in five years. Government statistics also show that between 2010 and 2015 a total of 174 new spirit distilleries opened in the UK, with 56 new licences issued in the past year alone. The announcements made in this year’s Budget and in 2014 and 2015 have increased the confidence in the sector.

The changes to alcohol duty rates in the clause ensure that responsible drinkers are not penalised. It is right to point out the Government’s continuing care and concern for the wider health agenda on alcohol consumption, but it is important not to penalise responsible drinkers. We recognise that not everyone is a responsible drinker, and we have taken a targeted approach to tackling alcohol-related harm. For example, to encourage the consumption and production of lower-strength beer, the Government place higher duties on super-strength beer and cider. Licensing rules are also in place to help to tackle irresponsible alcohol consumption. For example, local authorities can now introduce early morning restriction orders more easily.

The clause reaffirms the Government’s commitment to supporting the pubs industry and responsible drinkers.

Question put and agreed to.

Clause 143 accordingly ordered to stand part of the Bill.

Clause 155