Finance (No. 2) Bill

Alistair Carmichael Excerpts

Committee of the whole House
Wednesday 19th April 2023 Commons Chamber

[James Cartlidge]

We have had strong support from public health groups for the differential duty, because the evidence shows that is healthier to drink in a social environment than privately. That is another significant benefit.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

rose—

[James Cartlidge]

This is a popular area of the debate. I give way.

[Mr Carmichael]

I think the Minister has a sound case in relation to what the Government have done on beer duty. What is less clear, however, is why they have chosen to treat spirits so differently. Spirits are also an important part of the on trade. What will the impact be on the spirits trade from the differential that the Minister has now baked into the duty system?

[James Cartlidge]

There are spirits that will benefit from the differential—not spirits served from what I think are called optics, but spirits served on tap. There are mixers served on tap that will benefit from a more generous differential duty. On spirits, I am more than happy to set out further detail when I respond to the relevant amendments, because I think they are specifically focused on Scotch whisky, and I understand the concerns there.

I just want to finish my point on our Brexit pubs guarantee. Just to underline what we are doing, we are giving pubs a new permanent competitive advantage. We are levelling the playing field against supermarkets. Following the difficult times that pubs have had with the pandemic and higher energy costs, that hopefully gives them a new narrative for their communities with more positive times to look forward to ahead. That is what we want for our pubs. As my right hon. Friend the Member for Bexleyheath and Crayford (Sir David Evennett) said, they are so important for our communities and our economy. We continue to do everything possible to back the great British pub.

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[The Chairman of Ways and Means (Dame Eleanor Laing)]

I call Alistair Carmichael.

[Mr Carmichael]

Thank you, Dame Eleanor. It is perhaps not a novelty to see you back in the Chair, but it is still a great pleasure none the less. I am delighted to serve with you in control.

I rise to speak to amendment 7, which stands in my name and those of my hon. Friends. In doing so, I should indicate at this stage that it is my intention to divide the Committee and establish opinion on it. The effect of amendment 7 would be to freeze the level of duty on the production of spirits. The Minister kept saying these are Scotch whisky amendments. He maybe knows me too well, but I would readily concede that many other spirits will be affected by this, and they are just as important. I think the hon. Member for Aberdeen North (Kirsty Blackman) will speak to her amendments, which do relate specifically to Scotch whisky, but I have had discussions with her, and she tells me that SNP Members are in fact minded to support our amendment, instead of pursuing their own. She will doubtless speak for herself, as she always does, later in the debate.

When we consider that 70% of the gin produced in this country is, in fact, produced in Scotland—my constituency has no fewer than four gin distilleries, and we find that situation replicated across Scotland—the impact of rises in duty are not just going to be felt by areas that produce Scotch whisky. We have also seen a number of distilleries appearing in recent times—a much smaller number, but it is significant none the less—producing rum. So it is important that we have a coherent strategy for the excise duty on these products. The difficulty I have with what I hear from the Treasury Minister is that it is difficult to discern exactly what the Government are trying to achieve in this Budget.

Scotch whisky in particular is very important to the UK as part of our manufacturing base. Indeed, it is an enormously important part of our export portfolio. It is also critical for many of the most economically fragile communities that can be found around the highlands and islands of Scotland. I was born and brought up on Islay, and people will know the importance of the whisky industry, and in recent years the growth of whisky tourism to that economy. In my constituency we have Highland Park and Scapa. Occasionally other interests are declared, but we still have only two producing distilleries. They are very important to our local community, not just in relation to the jobs they provide directly, but because of the spin-offs—the visitor centre, the merchandising, and the visitors that those distilleries bring to the community. Whisky tourism is enormously important, and it is it enormously important that the whisky industry has confidence that the Government are on their side. I am afraid that the signals we have seen from this Government in recent months have been, if I am to be kind to them, mixed at best.

The Chancellor was right to say in December that there would be a freeze on duty. We welcomed that, as I am sure did others. Three months later, to then turn around and whack a duty increase on spirits in the region of something just north of 10%, makes us wonder what the Government are trying to achieve. When I was Secretary of State for Scotland, along with Danny Alexander, who was Chief Secretary to the Treasury, we argued successfully for a 2% duty cut. In 2015, the Red Book of the day said that that would bring with it a reduction in the amount of duty received and revenue brought in, but in point of fact we brought in more revenue with a lower level of duty than had been the case before it was cut.

If we are trying to do something that will bring in more money to the Treasury, surely a duty freeze, at the very least, should be on offer. Indeed, Treasury data illustrates the point well, because a recent history of cuts and duty freezes has actually had a beneficial effect on revenue brought in. For some reason, we now seem determined to introduce a duty increase that will have an inflationary impact, and for some of the most economically fragile communities in the country that will have the effect of stymying growth.

The position laid out by the Minister on sales of beer was exceptionally interesting. He will be aware that spirits account for one third of the serves of alcohol consumed in this country, but less than one fifth of the units consumed. On the other hand, beer has 60% of the units consumed but accounts for less than 50% of the serves. It is clear that the effect of this measure will be inflationary and have a detrimental effect on the economic growth that we are all supposed to be pursuing.

The Chief Medical Officer tells us that we should safely consume 14 units per week—I think I have read this correctly—per week. If we are to consume 14 units of cider, we pay £1.13 in tax. If we consume 14 units of wine, we pay £3.36 in tax. But if we consume 14 units of spirits, we pay £4.06 in tax. To put it another way, Scotch whisky, and spirits as a whole, are taxed 256% higher than cider, and 16% higher than wine.

It was presumably for that reason that the Secretary of State for Scotland is reported in The Scotsman as having argued against it. This was not some source quoted as saying that, but the Secretary of State himself. He said that he was disappointed the Chancellor acted in the way he did. I think we can all very much share the disappointment of the Secretary of State for Scotland. For the avoidance of doubt, I did let him know that I would be referring to him in the course of my speech. Our real disappointment, however, is that, having publicly disagreed with the Government on the matter, I have a strong suspicion that if it is put to a Division he will be in the other Lobby. It is all very well to wring your hands, but if, when the moment comes and the Division bells ring, you are not prepared to do what you know is right for such an important industry in Scotland in so many of our communities, then I feel we are, as politicians, failing in our duty to our constituents and those whom we seek to serve.

We heard a lot from the Minister about the harmonisation of duties, but the House has heard the truth of the matter. The position in relation to on-sales consumption of beer will widen the gap. It simply makes no sense. If the Minister can answer no other question when he comes to respond, can he answer this: what strategy are the Government seeking to deliver by bringing forward a duty increase in excess of 10%? I do not see it. It flies in the face of the Treasury’s own data and contradicts it. It is difficult to understand what the purpose of it is, other than simply an attitude that says, “Well, you’ve had it good for a few years now, so we’re going to treat you differently and it’s time for you to take some of the pain.” An industry as important as the production of spirits deserves rather better consideration from the Treasury.

[Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)]

I rise in support of my right hon. Friend the Member for Orkney and Shetland (Mr Carmichael), who speaks for my constituents as much as he does his own.

I want to make two simple points. First, the distilleries in my constituency—I could name them all, but I have done that before in this place—are part and parcel of each community in which they are based, and they are important to the people in those communities. They see them as their own. As my right hon. Friend said, the jobs they provide in some of the most sparsely populated and economically fragile parts of Scotland are absolutely crucial. Inver House, a company that owns two distilleries in my constituency, Balblair in Edderton and Old Pulteney in Wick, sponsors the Wick Gala each year. As something that epitomises the culture of Caithness, I would honestly recommend that all right hon. and hon. Members come to Wick and see the Wick Gala—it is something they will not forget. That company is a part of it and makes it happen, which is incredibly important. In my own home town of Tain, Glenmorangie, now owned by the French company Louis Vuitton, has for a number of years pretty well paid for the Tain highland games. Again, I say to Members: come see them and enjoy. So the distilleries are a part of the community and what they do is crucial for the community. It is about rural jobs in sparse areas.

The second point I want to make to those on the Treasury Bench is about levelling up. Those are not the words I would have chosen, but it is a good concept to take parts of the UK that have lost out in the race and bring them up—giving them a leg up—to be equal to the richer parts of the UK. By definition, the areas where there are distilleries are very often some of the more hard-up parts of the Scottish highlands and of Scotland. If Government Members want to go about levelling up, they need to get into the parts of Britain that need help.

[Mr Carmichael]

As my hon. Friend says, these are often some of the more hard-up areas of the country, but the truth of the matter is that down the years they have contributed enormously to the GDP of this country and they have the potential to do more. We are not looking for any special treatment. We are not looking for any favours or handouts. All we are looking for is a fair crack of the whip.

[Jamie Stone]

That is an extremely valuable point. I would bolt on to it that we have new distilleries starting up. In John O’Groats, there is a brand new one called 8 Doors. These enterprising local Caithness people have done it off their own bat. To get tourists to go to John O’Groats, we have 8 Doors, which has done it along the coast of Caithness. We have Wolfstone—I think I have that right.

[Mr Carmichael]

Wolfburn.

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[Abena Oppong-Asare]

As I mentioned, we have consistently raised concerns about the Government’s U-turns on the issue. We have scrutinised them and put forward recommendations, which the hon. Member will hear us talk about in further detail in the Public Bill Committee.

It is important that today the Minister lays out what measures the Government will take to support the sectors most affected by the duty changes, as well as what consideration the Treasury has given to the potentially inflationary impact of the increases. The explanatory notes to the Bill state:

“The commencement of changes to approvals will be announced at a later date.”

Perhaps the Minister could give some certainty to businesses by fleshing out some further detail today.

Clause 50 and schedule 8 set out measures for a new draught relief that will provide a reduced rate of duty on qualifying draught products. Clause 51 sets out the requirement that qualifying draught products be under 8.5% ABV and be packaged in containers that hold at least 20 litres and are designed to connect to a dispensing system. Clause 52 sets out the rules on the repackaging of qualifying draught products. Decanting from 20-litre containers into smaller containers will be prohibited unless the products are to be consumed on the premises at which decanting takes place.

Labour supports these measures, which will support and protect the hospitality sector, but our analysis has found that more than 70,000 venues have had to reduce their opening hours because of energy bills. I have seen that in my constituency. These are businesses that enrich our communities and boost our high streets, but they are being let down by the Government and many of these changes will come far too late.

I note that the draught relief has been designed in a way that will exclude the wine sector. Can the Minister explain why? Will he let us know whether the Government will introduce any other measures to support British wine and spirit producers?

Clause 54 lays out measures to replace the small brewers relief with a small producer relief. Clause 55 specifies that eligible producers will be those whose products have an alcoholic strength of less than 8.5% ABV and who produce less than 4,500 hectolitres of alcohol per year. The remaining clauses and schedules lay out precise measures for calculating rates of relief.

Labour introduced the small brewers relief in 2002 and is proud of the effect that it has had by supporting small brewers and creating a vibrant UK beer scene. We therefore support the extension of relief to other producers, but I note that that may not occur under the new scheme, as British wine and spirit producers are largely excluded from these measures. Perhaps the Minister could lay out why the scheme has not been further extended.

In conclusion, Labour recognises the need to simplify the alcohol duty regime while striking a balance between supporting businesses and consumers, protecting public health and maintaining a source of revenue for the Exchequer.

[Mr Carmichael]

May I take up the point about small producers? Deerness distillery, in my constituency, is a family-owned business that is seeking to move into whisky production. Surely, as a small producer in a market dominated by big corporates, it should be given the same opportunity to grow as a brewer. Why, in principle, should there be any difference in their treatment?

[Abena Oppong-Asare]

We, too, are concerned about that, and I have met various stakeholders in the sector who have highlighted their concerns. I hope that the Minister will take the issue on board in his response.

We do not oppose the clauses and schedules, but we want answers to the questions that have been raised, and, most important, we want certainty for the businesses and consumers who have suffered over the past few months and years as a result of the constant chopping and changing that the country has seen from various Conservative Governments.

[James Cartlidge]

Before I turn to the very good speeches that we have heard during the current debate, let me clarify a point relating to our earlier debate on the electricity generator levy. I mistakenly said that “private wire” was included in the levy, when of course I meant to say that it was excluded.

Let me begin by saying that I welcome the support expressed by the hon. Member for Erith and Thamesmead (Abena Oppong-Asare) for the clause relating to devolved welfare payments. As for alcohol duty, the right hon. Member for Orkney and Shetland (Mr Carmichael) may not recall the debate that he initiated in Westminster Hall in October 2017, when I was a mere Back Bencher, but I was the first Member to intervene on his speech. All the others were Scottish. I intervened because a leading company in my constituency produces the bottle tops for the whisky trade. That, along with the East Anglian grain that is sent up to Scotland from time to time to help support the sector, underlines the fact that this is a UK industry, and a UK export. We are all proud of Scotch whisky and the role that it plays in our economy. However, I must say this to the right hon. Gentleman, and also to the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone), who spoke with his usual eloquence and conjured up wonderful images. I understand the importance of the Scotch whisky sector, and we have supported it—in nine of the last 10 Budgets, we have either frozen or cut the tax—but the key point is that not introducing the RPI-linked increase would have a significant cost.

[Mr Carmichael]

The Minister is making our case himself, so presumably he will be joining us in the Lobby—as, indeed, the Secretary of State for Scotland should be doing—or else accepting my amendment.

[James Cartlidge]

I had never thought of the right hon. Gentleman as a cheeky chappie, but for that brief moment, he almost was. Let me now address his amendment 7. The Scottish National party Members have, very nobly, effectively withdrawn their amendments to ride on the back of it, which is perfectly fair: they seek, ultimately, to arrive at roughly the same point, which could be described as the protection of spirits, and Scotch whisky in particular, from the RPI-linked increase.

The proposal in amendment 7 would cost an amount between £1.7 billion and £2 billion. An overall RPI freeze would cost £5 billion across the scorecard. We have, of course, supported freezes in the past, and it was I who announced the freeze back in December. Members may recall the reason for that freeze: in view of the August reform, we did not want the sector to go through two separate alcohol tax increases. We supported the industry, but it is expensive, and with the public finances as they are, we feel that the responsible option is to introduce the RPI-linked increase—which, after all, is not a real-terms increase—but, nevertheless, to bring in the differential duty to support our pubs.

[Mr Carmichael]

rose—

[James Cartlidge]

I will give way to the right hon. Gentleman, for the last time.

[Mr Carmichael]

The Minister needs to look at the actual data relating to the revenue brought in over these years of cuts and freezes, because the story that it tells is very different from the forecasts on which he relies. He should remember that in 2015 the forecast was for a 2% reduction, but in fact there was a 4% increase. When will the Government become a bit more realistic about the effect of their own policies in this area?

[James Cartlidge]

I have to disagree with the right hon. Gentleman’s use of the word “realistic”. I have met representatives of the Scotch Whisky Association, whom I greatly respect, and they have said to me that if we freeze the tax we get the revenue. Unfortunately, however, the Government have what I believe is the very important and successful policy of using an independent body, the Office for Budget Responsibility, which makes forecasts independently for Governments on the effects of fiscal measures. [Interruption.] I hear voices behind me saying that they are wrong. The point is that the OBR is not a collection of soothsayers employed to predict, entirely accurately, exactly what will happen in the future. With the greatest respect to everyone, if that was the case, I suspect they would spend rather more of their time looking at accountancy of the turf-related kind rather than trying to forecast the national accounts. The point is that this enables us to ground fiscal events in a forecast of where we are at that time and the fiscal costs at the time, therefore adding credibility to the decisions we make and avoiding the easy situation where we do not have to make the difficult trade-offs that households and businesses know that, in reality, we have to face. If we want to cut one tax, we have to find the money from somewhere else. It is a good discipline.