Clause 82 - Approval requirement: producers

Part of Finance (No. 2) Bill – in a Public Bill Committee at 3:45 pm on 16 May 2023.

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Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Cabinet Office) 3:45, 16 May 2023

As I said both in the Committee of the whole House and earlier today, I have a number of questions about clause 87, which relates to the post-duty point dilution of alcoholic products. The Minister mentioned that all the exemptions, some of the technical language, and some of the definitions mentioned in this part and in the previous part are carried over from the Alcoholic Liquor Duties Act 1979 and the Finance Act 1995. I understand that, but the post-duty point dilution changes are relatively recent; they have not been in place particularly long. The clause replicates section 55ZA of the 1979 Act, which I think was added to it in the last few years in relation to concerns that were raised about the post-duty point dilution.

The clause relates to products such as Bacardi Breezers and WKD blue. Hooch was a drink that existed when I was first able to drink alcohol. Basically, it is things that are mixers, in bottles. It was a significant issue because they were effectively being taxed at the wrong rate because they were being charged duty in advance of the dilution. They would have been liable for more tax had they been taxed after the dilution rather than before it. They were being taxed on the basis not of the sold product but of the created product, which was very different. I understand the Government’s intention in introducing the measure, but because it is a relatively new one that is simply being replicated in the new regime, I wonder how much information the Minister has about how well the change has worked. Has it actually done what was intended?

I am slightly unclear about the Government’s intention in relation to the clause. From reading the Bill, it looks like the intention is that no mixing can take place: no other liquids can be added to spirits. If a company adds orange juice to vodka and sells it, the tax rate will not be lower. Have we seen in practice that companies are not mixing? Are they paying the duty at a different point in the journey rather than not creating these products anymore? What effects have the Government’s previous changes had?

My other question is about the terminology changes. The Minister said that the changes to the language of the Alcohol and Liquor Duties Act 1979 relate to terminology, but clause 82 changes its application, not just its terminology. Section 55ZA of the Act specifically relates only to wine and made-wine. It does not talk about any other types of alcohol that things can be mixed into. Why has the Minister chosen to widen that section out to all alcohol? I do not necessarily disagree with the change; I am just interested in the logic behind it. Have the previous changes had the effect the Government hoped they would? If they did not, is there any point in replicating them? Do we need to tighten up the law or change it even further?

I appreciate that clause 89 gives HMRC powers to take action against people who transgress and break the rule. I appreciate that that happens and that action is taken against people when necessary, but hopefully we have seen a behavioural change. It would be great to have some clarity from the Minister about whether there has been a behavioural change among companies and whether they are now paying their tax or have stopped making these products. I would also like clarity about why the proposal no longer applies just to wine and made-wine but has been broadened out to all spirits.

I am aware that not everybody is quite as geeky about this issue as me—I had a constituent come to me and spend many hours explaining it in huge detail, so I have a specific interest in it—so if the Minister does not have answers today, I am happy to receive them later.