Alcohol Taxation

I beg to move,

“That this House has considered Alcohol Duty and tax on alcohol.”

I am grateful to the hon. Member for Gateshead (Ian Mearns) and the Backbench Business Committee for selecting this important topic for consideration, and to all Members across the House who supported the case that it should be considered. This debate is hugely important to a large number of businesses across the country—the hospitality sector in general, brewers, vineyards, distillers and retailers, employing hundreds of thousands of people. A disproportionate amount of them will be small businesses with younger employees, so getting this policy right really matters.

I start by paying tribute to the Government for recognising this Brexit opportunity. Taxation and alcohol duty has been needlessly complicated for too long, yet the UK was tied to EU restrictions preventing change. The Government set out their intentions to review the structures in March 2020, followed by a consultation on their proposals in October last year. The Government’s stated aims are to make the system simpler, more economically rational and less distortive, and to reduce the administrative burden. It is fair to say that these positive intentions are included in the thrust of the proposals. The consultation is welcome because it creates the opportunity for hon. and right hon. Members, and the industry, to respond and to further develop the plans. My comments are aimed at encouraging the Minister to refine the proposals further now that the industry, consumers and officials have considered how they would work in practice.

On beer duty, there has rightly been a warm welcome for the lower duty on draught beer. There has also been a recognition that the proposed 5% reduction should also apply to kegs and casks of 20 litres rather than the 40 litres set out. There has been a strong indication from the Treasury that this may happen, and I ask the Minister to confirm her intentions. I would also press for a greater reduction than 5% a pint in order to further support the industry, and pubs in particular. New research published this week highlighted that England and Wales have 7,000 fewer pubs than just 10 years ago. We all recognise the important role pubs play in our community and society at large, and also in providing a watching influence on people who enjoy having a drink rather than their being encouraged by the cost incentive to drink at home.

The plan to widen the reduced rate from 2.8% to 3.4% ABV is also a positive move, but a minor adjustment to 3.5% would resonate much better, and enable the industry to innovate further. To help to protect smaller brewers from the larger operators who may simply adjust their recipes to take advantage, it is important that the relief that they currently receive under the small brewers relief fully applies at this level. It would also make this element competitive with EU directives, and provide further support to small businesses within the industry.

I commend the right hon. Member on bringing forward this debate on an important issue. The past few years have impacted greatly on local pubs, bars and restaurants—they are the ones who have suffered. At the same time, Tesco and Asda, to take just two examples, can sell exorbitant amounts of alcohol with low tax while others are left suffering. Does he feel that with the Government’s proposed steps, which he will speak about later—lowering alcohol taxation and encouraging people to support local—pubs can pick up the business they once had and have lost? Does he agree that that is a positive way forward?

The hon. Member makes an extremely important point. As I said, some people are encouraged to drink more at home by the discounted prices offered by the large retailers. I would add that in Scotland and Wales—I am not so familiar with the position in Northern Ireland—the retailers receive the extra differential with minimum alcohol pricing, in comparison with what is available in England. That gives some room for the Treasury to react positively to support the pubs and brewers, as he and I seek to underline.

The small brewers relief has been proven to deliver major benefits. It enables small brewers to compete with larger operators and to innovate and generate new options for consumers. It will be replaced by the small producers relief to offer similar or common benefits to the wider sector and to prevent the current cliff edge. Again, the Government’s objectives are positive, but I am concerned that the proposed changes introduce significant complexity to the process. Moving from 5,000 hectolitres at a 50% discount, to a maximum of 2,500 hectolitres at a 50% discount, tapering up to a 100,000 hectolitre maximum at up to 8.5% ABV, along with a cash limit and an average ABV measure, is much more complex than it needs to be. It is hard enough to say, let alone follow the process. It also makes it much more unpredictable for the businesses we are seeking to encourage to innovate, to invest and to create wealth at the smaller end of the scale.

I congratulate my right hon. Friend on securing this debate on an important issue, and he is making a powerful speech. I was particularly interested in his point about broadening the duty from brewers across to the wider sector. In particular, the cider sector is important in the west country. Thatchers Cider, based in my constituency, is complaining, both on its behalf and that of many other small producers, about the massive increase in complexity that this collective set of changes has introduced. It may be easier to understand at a high level, but Martin Thatcher has written to me saying that for individual firms the

“huge increase in red tape and bureaucracy brought in as a result of these proposals will result in a need for increased staff to manage monthly excise duty returns”,

and he goes on to talk about the increased costs of that burden. I hope my right hon. Friend will address that and persuade the Minister to respond.

I am grateful to my hon. Friend for his point. The significant advantage that the cider industry receives—the differential in taxation status— is testament to the campaigning that my hon. and right hon. Friends have done for the industry. Some have called for that to be addressed, but that is not proposed in the Government’s plans, and I am not suggesting that should change. He makes an extremely important point about the complexity. Even when there are potential advantages for some sectors over others, the complexity detracts from that. The simpler the process, the better that would be.

I hope that the Minister agrees that the current proposal is too complex, and a simplified approach would work much better. The principles or broad approach of this incentive are important. Why is there no similar support for UK vineyards as well, all of which in the UK are small operators? These businesses invest for many years before receiving a return on that investment. The quality of wine competes on par with traditional winemaking countries and wins.

Llanerch Vineyard and Glyndwr Vineyard in my constituency are excellent examples. They invest heavily, have long lead times, are excellent employers and are great visitor attractions. In reality, they are small operators, and extending either the principle of the small producers relief to include vineyards or simply increasing the current arrangement—albeit simplified from the 8.5% ABV limit—would make a major difference and provide significant advantage to wines made in England and Wales. Support for such vineyards in the UK would not pose risks or undermine the Treasury’s ambitions and can be met within the World Trade Organisation rules.

This issue has been specifically raised with me by Bolney Wine Estate, on which the duty particularly impacts, along with other nearby producers, such as Ridgeview, which is on the edge of my pitch in the constituency of my hon. Friend the Member for Lewes (Maria Caulfield), and Kingscote in East Grinstead. There is a collective ask across the English and Welsh wine industry, and I hope that the Minister, my right hon. and learned Friend the Member for South East Cambridgeshire (Lucy Frazer) will be able to help these businesses to grow. They are small producers and tourist attractions, but above all they are businesses.

My hon. Friend makes an important point that underlines the issues that we have highlighted.

Will the right hon. Gentleman give way?

I have limited time, but I will give way briefly.

I thank the right hon. Gentleman for giving way. As a member of the Campaign for Real Ale, I welcome his comments about the brewing industry. If we get the reduction to 22%, it will be welcome. On wine, he rightly references British vineyards, which are a great success story. Is he concerned about our trading relationships with many of our strongest allies, particularly when the Government are undertaking a trade deal with Australia? Australian winemakers are seeking to diversify from their market in China and are concerned about the new complexities being introduced. Does he think that the Government ought to engage with the Governments of Australia and other similar countries where our trade and security relationships are important?

The right hon. Gentleman makes an extremely important point. That is important for businesses, as he recognises, and because of the international influence that such policies have. His wider experience, geographically and on security issues, is recognised on both sides of the House.

I warmly welcome the proposed abolition of the additional tax on sparkling wine, which is particularly helpful to producers in England and Wales. Some 70% of wines from the UK are sparkling and the current EU system works against them, particularly as smaller operators, so that is another Brexit dividend.

The wider proposals for duty changes on wine also have positive intentions, but in practical terms, as they stand, they will leave more complexity in the system. The three current rates per bottle will be replaced by a total of 27 separate amounts per bottle, assuming that it applies to the labelled ABV. We must recognise that winemakers cannot dictate the specific level of ABV. It depends on seasonal factors, and the structure of taxation should take that into account.

The administrative burden will fall particularly hard on UK retailers, particularly specialist merchants that tend to carry small supplies of a wider range of products. For example, a small retailer could have a range of 2,000 to 3,000 different products. The variation between different vintages means that they would become swamped in red tape—a policy that runs against the positive intentions of the Minister and the Treasury. There would also be a need to take into account permitted tolerances.

The good news is that minor adjustments could achieve the Government’s objectives and simplify the structure for the industry. All wines fall within a spread of 8.5% to 15% ABV. Establishing such a spread and applying a common rate would simplify the process and give the Treasury the clarity it needs. For example, the industry believes that a rate of 12%—a 4% increase on current rate—would be a win for the Treasury and for it because of the reduced red tape. That demonstrates the earlier point about the cost of red tape.

I entirely agree with my right hon. Friend, particularly on this point. A company in my constituency, Direct Wines, has stressed the dangers to its business if the changes go ahead. Does he agree that they should be delayed until we have had more chance to talk to people about how they will affect their business?

My hon. Friend makes an important point about the complexity of the system, particularly in relation to wines and the variation of ABV, which depends on circumstances. I am torn about delaying, because if we can get this right—the industry needs only minor changes—let us do it as quickly as possible. Clearly, however, we would not want the proposals for wine to be introduced as they stand, so if they have to remain, it would be better for them to be delayed. It is a challenge, and perhaps the Minister can indicate how long she expects it to take to see the changes.

These issues are technical and complex, but they are hugely important to industries that employ and entertain millions of people across the UK. Previous Chancellors have often made a name for themselves by working closely with the drinks industry on such technical issues and have delivered a huge boost to employment, investment and society at large. It has also gone down very well with the popular press when they got it right because of the popularity of the alcohol sector, and rightly so. This is an opportunity to do the same. The intentions are right and the structure is logical, but changes along the lines I have highlighted would ensure that this important industry can continue to develop, grow and deliver for all our constituents.

I am incredibly pleased to be able to speak in this debate. I would like to speak about beer, cider and fortified wine—sometimes known in parts of Westminster as a work event.

The former Chancellor’s relief scheme for draught beer and cider excludes far too many of the small brewers and cider producers that need the most help. The ill-thought-out proposal to impose the 40 litre minimum container size to qualify for help has obviously been dreamt up by someone who has absolutely no knowledge at all about how pubs up and down our country operate. Almost all craft and small batch beers are kegged into a 30 litre container, which is 6.6 gallons for anyone who still wants to reintroduce imperial measurements. A small 4.5 gallon cask for real ale—a pin—holds just 20 litres, and many ciders are delivered to pubs to dispense in 20 litre bag-in-box containers.

Some 34% of licensees stock products in containers smaller than 40 litres to improve beer quality and choice for customers, while 46% of venues said that some products are only available to them in containers of less than 40 litres and one in 10 venues can only stock containers of less than 40 litres as they do not have the cellar space to sell the larger ones. I hope that the Treasury can finally own up to the fact that it plucked this figure out of the air, and instead give small brewers, cider makers and our struggling hospitality industry the break they need. Will the Minister confirm today that the industry will get the much-needed assurance that the threshold will be lowered to 20 litres after all?

I also want to talk about fortified wines because the forthcoming changes to the duty regime will have a significant and arguably disproportionate effect on port producers in particular. In my constituency, I have one of the UK’s leading distributors, Fells—a major employer in my constituency and in Hertfordshire more broadly—which is braced to see a dramatic decline in its sales should this go ahead. Aside from the dramatic price increase that will follow the changes, there are very real and legitimate concerns about the implementation costs and the increased red tape. The system changes, administrative burden and ongoing compliance with such a system will have further negative effects. The Government’s objectives for the alcohol duty reform consultation were welcome. They want to simplify the regime and reduce red tape, but the proposals simply do not do that. For wine, the proposed model cannot be described as simpler. Introducing taxation by degree will be complicated, costly and impractical. Unlike other categories of alcoholic drink, there is a far greater permitted tolerance for the alcohol content of wine made from fresh grapes, meaning that without testing every wine at the point excise duty becomes payable, it is not possible to determine alcoholic strength accurately.

I congratulate my right hon. Friend the Member for Vale of Glamorgan (Alun Cairns) on securing this important debate.

It is a pleasure to speak in this debate on the taxation of alcohol and the Government review, and I should first declare that I am the chair of the all-party group on wine of Great Britain. I am also fortunate to have some fantastic producers in my Meon Valley constituency, who will have an interest in these policies, including brewers of beer, cider makers and, most importantly, vineyards. I have kept in close touch with them throughout the process of the consultations and review, and the points I make here are heavily influenced by their comments to me over many months.

In Britain we are increasingly a maker and exporter of wine. Our tastes as consumers, technological advances, and—we must face it—climate change have driven change and growth in the industry. I very much welcome the removal of the supertax on English sparkling wine. We have some brilliant vineyards around the UK. Hambledon Vineyard in my constituency is at the forefront with its award-winning wines. This will help it develop the market at home alongside its continuing success in the export market.

Vineyards face high start-up costs, and in the case of sparkling winemakers up to a decade of careful work before they have a wine they can market. I was pleased that the vineyards of Sussex recently achieved protected designation of origin status and hope that their counterparts in Hampshire and other counties will be able to achieve a similar designation. I will do whatever I can to help them get that recognition of their excellence.

In view of the challenges that winemakers and merchants face, we must look again at the proposals on wine duty. I appreciate the desire to simplify what has become a complex regime that dates from a time when we neither consumed as wide a variety of wines nor had so many made in Britain. However, the current proposals would increase the price of around 70% of wines, which would affect many small and medium-sized enterprises in the wine trade. It would also create a regime of 27 different bands, as we have heard, and the burden that that would impose on independent wine importers and merchants is a mountain of red tape, which we are generally trying to reduce.