Finance (No. 2) Bill

Debate between James Cartlidge and Bob Stewart

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

[James Cartlidge]

We have had pensions and energy, and we conclude with alcohol, and of course one other minor matter is covered. We are specifically debating clauses 27, 47, 48 and 50 to 60, and schedules 7 to 9, which cover powers to clarify the tax treatment of devolved social security benefits—that is the measure not relating to alcohol—as well as the change to alcohol duty and the introduction of two new reliefs for alcohol duty.

Clause 27 introduces a new power to enable the tax treatment of new payments or new top-up welfare payments introduced by the devolved Administrations to be confirmed as social security income by statutory instrument. The changes made by clause 27 will allow the UK Government to confirm the tax treatment of new payments or new top-up payments introduced by the devolved Administrations within the tax year, rather than their being subject to the UK parliamentary timetable.

I will now turn to the main issue of alcohol duty, and specifically clauses 47 and 48, which set out the charging of alcohol duty, and schedule 7. In line with our plan to manage the UK economy responsibly, we are reverting to the standard approach of uprating the previously published reformed rates and structures by the retail price index, while increasing the value of draught relief to ensure that the duty on an average pint of beer or lower-strength cider served on tap in a pub does not increase. Most importantly, these clauses introduce the Government’s historic alcohol duty reforms: the biggest overhaul of the alcohol duty system in over 140 years, made possible by our departure from the European Union.

The current alcohol duty system is complex and outdated. The Institute for Fiscal Studies has said that our system of alcohol taxation is “a mess”; the Institute of Economic Affairs has said that it “defies common sense”; and the World Health Organisation has said that countries such as the UK that follow the EU alcohol rules are

“unable to implement tax systems that are optimal from the perspective of public health.”

As such, at Budget 2020, the Government announced that they would take forward a review of alcohol duty. This legislation is the culmination of that review, and makes changes to the overall duty structure for alcohol. It moves us from individual, product-specific duties and bands to a single duty on all alcoholic products and a standardised series of tax bands based on alcoholic strength.

The clauses we are debating today repeal and replace, with variations, the Alcoholic Liquor Duties Act 1979 and sections 4 and 5 of the Finance Act 1995. Specifically, clause 47 provides for alcohol duty to be charged on alcoholic products, clause 48 explains where the rates of alcohol duty can be found—that is, in schedule 7—and schedule 7 itself provides the standard or full rates of alcohol duty to be applied to alcoholic products. This radical simplification of the alcohol duty system reduces the number of duty bands from 15 to six, and has only been made possible since leaving the EU. Now, thanks to the Windsor framework, I can confirm that these reforms can now also be implemented in Northern Ireland. The new alcohol duty structures, rates and reliefs will take effect from 1 August this year, which brings me to the new reliefs.

[Bob Stewart (Beckenham) (Con)]

As a member of the Campaign for Real Ale, may I ask the Minister whether that means beer that is not very strong will come down in price?

[James Cartlidge]

That is an excellent question from my right hon. Friend. As he will appreciate, there is obviously a difference between the duty and the price—we control the duty. As I am about to explain, we are doing everything possible, and I hope he will be interested, because I know that members of CAMRA have great fondness and support for our brilliant pubs up and down the country.

The first of the two new reliefs, which is our new draught relief, applies to alcoholic products under 8.5% alcohol by volume intended to be sold on draught. This draught relief is historic, because as Members will remember, in the EU, we had a thing called the EU structures directive. Under that directive, as a country, we could of course vary our alcohol duty—we could increase it, decrease it or whatever—but what we could not do was charge differential duty between the on trade, meaning pubs, and the off trade, meaning supermarkets, retail and so on. For the first time, we will have that differential draught relief, and I am pleased to confirm that in the Budget, we brought forward two very important measures in relation to that relief. It had been anticipated that we would set the draught relief at 5%, but the Chancellor confirmed in the Budget that it would be increased to 9.2%. I can therefore confirm to my right hon. Friend the Member for Beckenham (Bob Stewart) that as a result of that increase in the draught relief, when the new system comes in this August, the duty on the average pint of beer or lower-strength cider that people buy in pubs will still be frozen.

More importantly, we have issued our Brexit pubs guarantee. As I say, this change would not have been possible in the EU, and we are using this opportunity to send a very powerful message to our pubs: to guarantee that from August onwards, the duty on a pint in a pub will always be lower than the duty on the equivalent in a supermarket.

--- Later in debate ---

[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.

[Bob Stewart]

It seems that we will finish early tonight, in which case I am going straight to the Jolly Woodman in my constituency. I hope I will be able to tell it that the price of its beer will come down. Is there any possibility that there can be a differentiation to encourage real ale, speaking as a member of the Campaign for Real Ale?

[James Cartlidge]

I hope my right hon. Friend is welcomed with open arms in the Jolly Woodman, having given it fulsome promotion. I might make do with Strangers Bar downstairs. Real ales will benefit from the differential duty, particularly those served on tap. There are lower rates for those with lower alcohol by volume, which will hopefully encourage innovation. I hope that will support our craft brewers, not least with the second relief, which replaces and extends small brewers relief with a small producer relief applying to alcoholic products under 8.5% ABV produced by those making less than 4,500 hectolitres of alcohol per year. That will be precisely those sorts of craft brewers.

Clauses 50 to 53 introduce the new draught relief and clauses 54 to 60 provide for the new small producer relief. Taking each clause in turn quickly—I will canter through them—clause 50 explains that alcohol duty is charged on qualifying draught products at the reduced rates shown in schedule 8. Clause 51 sets out the eligibility criteria for draught relief. Clause 52 defines repackaging for the purposes of draught relief and introduces a penalty for repackaging that is not authorised. Clause 53 provides assessment and penalty consequences for a person repackaging qualifying draught products in a way not allowed under clause 52. Clause 54 provides for discounted rates to be charged on all small producer alcoholic products and explains how the discounted rate is calculated. Clause 55 defines small producer alcoholic products.

Clause 56 introduces the criteria for determining whether premises used to produce alcoholic products are small production premises. Clause 57 explains the alcohol production amount used for the purposes of determining eligibility for the duty discount and calculating the duty discount for small producer alcoholic products. Clause 58 sets out the circumstances, other than not meeting the eligibility conditions, in which alcoholic products are not small producer alcoholic products. I hope hon. Members are all following. Clause 59 and schedule 9 set out how to calculate the duty discount used to determine the discounted rate for small producer alcoholic products, and clause 60 allows the commissioners to assess alcohol duty that is due in circumstances where the small producer rate has not been applied correctly. The remaining clauses concerning alcohol duty will be debated in the Public Bill Committee.