Post-duty point dilution of wine or made-wine

Part of Finance Bill – in a Public Bill Committee at 10:15 am on 16th June 2020.

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Photo of Wes Streeting Wes Streeting Shadow Exchequer Secretary (Treasury) 10:15 am, 16th June 2020

I shall begin by addressing the SNP’s amendment 10. It is important to look carefully at the relationship between alcohol taxation and public health. We have seen in other areas of taxation, notably the sugar tax, the huge impact that decisions taken by the Treasury can have on public health and public health outcomes. It is long past time for us to look seriously and sensibly at whether more can be done to reduce the impact of alcohol and alcoholism on people’s lives and communities.

Turning to clause 79, I have had the opportunity to do a much deeper dive into some of the issues, not least because of the determined efforts of my hon. Friend Mr Perkins. Anyone who has ever been lobbied by him will know that when it comes to standing up for his constituents and for businesses in his constituency, there is no more determined, stubborn and irrefutable representation than that which he provides. He has raised serious concerns about the impact of the clause on businesses in his constituency. I shall outline some of those concerns, in the hope that Ministers will consider their bearing on Government policy.

We understand perfectly what the Government are trying to achieve with clause 79. The clause amends the Alcoholic Liquor Duties Act 1979, to introduce sanctions for post duty point dilution of wine or made-wine, which, if carried out before the duty point, would have resulted in a higher amount of duty being payable. That change has, in effect, already come into force and we are legislating for it this morning. The change is perfectly understandable. It is designed to bring more revenue into the Treasury that would otherwise be, and is being, lost. I understand the Government’s position that post duty point dilution carries significant legal and revenue risk for the Exchequer.

The Wine and Spirit Trade Association is against the legislation, claiming it would put hundreds of jobs at risk and place more pressure on the industry. Recently, thanks to the initiative of my hon. Friend the Member for Chesterfield, I had the opportunity to speak to Global Brands, a business based in his constituency that makes VK and Hooch, among other products. We know that covid-19 is having a huge impact on the licensed trade industry and on alcohol sales in particular, affecting not only pubs but the producers of wines, spirits and other beverages. Global Brands is concerned that, because of the financial burden placed on its business by the clause, combined with the impact of covid-19, it expects to make 50% of its workforce redundant, putting 200 jobs at risk as a result of this change. If I can characterise our discussions in this way, it would be accurate to say that Global Brands accepts that this change is inevitable, and that the Treasury has a settled view on it, but it hopes that the Treasury might consider a 12-month delay in implementation—from April 2020 to April 2021—arguing that this would give it time to recover from the covid-19 shock, leaving it better able to absorb the change.

Global Brands makes other arguments that the Treasury may want to take into account. In particular, Global Brands sells what were commonly known as alcopops, a low alcohol by volume product—typically around 4% ABV. It is concerned that the impact of the change will be that, ironically, its low alcohol product would be taxed higher per unit of alcohol than much higher strength products, which flies in the face of the Government’s stated policy of discouraging high-strength alcohol and its impact on public health.

It is also worth highlighting that the Government have already announced their intention to conduct a wider review of alcohol taxation. I wonder whether it makes sense, from the point of view of business resilience and of giving companies such as Global Brands more time to cope with the covid-19 shock before absorbing this change, for the Treasury to consider this delay alongside the range of other issues that it will consider as part of its wider review of alcohol taxation. We might have been minded to table an amendment to probe the 12-month delay, but we were advised that such an amendment would not be in scope because the foundation resolution is clear about the date on which this change takes effect.

That is another reason why—I gently make this point again to Ministers—we feel strongly about the way in which the Treasury has restricted the scope of amendments and the debate by not introducing an amendment of the law resolution, as has been the case historically. As well as denying Opposition Members the opportunity to table broad, sweeping, political amendments to the Finance Bill, that also has practical implications. I impress on Ministers and the usual channels the need to reconsider that for future Finance Bills.

Finally, when my hon. Friend the Member for Chesterfield and I spoke to Global Brands just the other week, I was particularly impressed not just by the jobs and economic activity it provides in Chesterfield, but at the fact that its wider supply chain is virtually entirely British. Its ingredients, packaging and labelling are all derived from a British supply chain. I do wonder whether the Treasury has really thought through the timing of the change, the impact that it will have on businesses such as Global Brands, and where it might position such businesses in relation to their international competitors that are not providing jobs in this country and do not have a supply chain rooted here.

Given the unemployment statistics out today, we know that structural unemployment will become one of the biggest political issues and economic challenges in our country. Structural unemployment in Britain will become a feature of our life in a way that, frankly, it was not 10 years ago, in the wake of the financial crisis, and has not been for decades. The Government must do everything they can to protect jobs, which is why we have called today for them to come forward not just with fiscal measures in July, but a full-on, jobs-first Budget—because we are worried about the impact of covid-19 on unemployment.

The representations on clause 79 from Global Brands and from my hon. Friend the Member for Chesterfield remind us of the risk of the unintended consequences of Government policy. Given the impact on jobs and the supply chain and the fact that the Treasury is in any case preparing to undertake a review of alcohol taxation, I wonder whether the call for the Government to delay the measure by 12 months is not eminently reasonable—and whether they might come forward with their own change to the Bill on Report.