Finance Bill (Third sitting)

Debate between James Wild and Angus MacDonald

Committee stage
Thursday 30th January 2025 Public Bill Committees

[James Wild (North West Norfolk) (Con)]

I apologise for the confusion on our side, Ms Vaz. The Committee will be pleased to know that I have lots to say on this clause, so we can all settle in for a while.

Clause 63 increases the headline rate of alcohol duty in line with the retail price index, provides a reduction to the rates for draught alcoholic products and cuts to the rates paid by eligible small producers. The Government have also chosen not to extend the temporary easement for certain wine products. I say at the outset that His Majesty’s Opposition is a strong supporter of the broader alcohol sector, and we have some concerns about the impact that some of the provisions will have on important sectors. As well as speaking to clauses 63 and 64, I will speak to new clause 4, which stands in my name and that of my hon. Friend the Member for Grantham and Bourne.

In 2023, the previous Government introduced a progressive strength-based duty system following the alcohol duty review, which was the biggest review of alcohol duties for more than 140 years. The new and simplified alcohol duty rates system was based on the common-sense principle of taxing alcohol by strength, with the aim of modernising the existing duties, supporting businesses and meeting our public health objectives. That was the first time that public health objectives had been inserted into the alcohol duty system. The reforms also introduced two new reliefs: the draught relief to reduce the duty burden on draught products sold at on-trade venues, and small producer relief.

At the autumn statement 2023, the previous Government froze alcohol duty rates until August 2024, and that was extended until February 2025 at the following Budget. According to the OBR, alcohol duty receipts are expected to raise £12.4 billion this year, falling by 0.6% compared with last year as the rates remain frozen, but receipts are then forecast to increase by 5% a year on average, to reach £15.9 billion by the end of the Parliament.

Pubs make a huge contribution to our culture, economy and communities. When the Conservatives were in government, we recognised that and introduced a raft of supportive measures, including draught relief, small producer relief and the Brexit pubs guarantee, which I am sure all hon. Members remember and welcome. I therefore welcome the increased draught relief from February, from 9.2% to 13.9%, and the fact that the relative value of small producer relief will be maintained. Although we welcome the inclusion of both reliefs, the increase to draught relief will mean that beer duty on a 5% pint of beer is reduced from 54p to 53p—a 1p saving. I fear that drinkers will not be toasting the Exchequer Secretary over that.

Turning to whisky—although it is a little early in the day for me—as the hon. Member for Inverness, Skye and West Ross-shire set out, Scotch whisky is one of our most iconic and successful industries. Some 43 bottles of scotch whisky are exported per second and the industry supports more than 66,000 jobs across the UK, many of which are in rural areas. The decision to uprate duty rates by RPI has been met with deep concern by the industry—indeed, the Scotch Whisky Association said that it represents a broken commitment, after the Prime Minister claimed last year that his Government’s trade strategy would

“back Scotch producers to the hilt.”

That sounds rather like the promise that he gave to farmers, which Labour’s family farm tax has broken. The managing director of Diageo said:

“This betrayal will leave a bitter taste for drinkers and pubs, while jeopardising jobs and investment across Scotland.”

I would be interested to hear the Minister’s response to those comments. Have the Government calculated the risk to jobs in the sector more widely?

A similar picture is painted by the cider industry, which supports more than 11,500 jobs and attracts more than 1 million tourists each year. The National Association of Cider Makers has raised fears that raising the headline rate, alongside the national insurance increases and the family farm tax, could put elements of the UK cider industry at risk. Has the Minister calculated the cumulative impact that these tax rises will have on the sector?

At this point, we should consider the wider context in which we are discussing these increases. Time and again we hear about the Budget placing a range of cost pressures on the hospitality industry, which is a key contributor to the UK economy. According to UKHospitality:

“In the past six years, hospitality has increased its annual economic contribution by £20 billion to £93 billion.”

The tax rises in the Budget, including the £25 billion a year jobs tax, will make it much harder for the industry to succeed. Just look at the impact of recent measures. Colliers, a professional property services company, reported that cutting the hospitality business rate relief from 75% to 40% means that restaurants will face a bill of, on average, over £13,000 a year, up from £5,500.

[Mr MacDonald]

Will the Minister comment on whether, when the Government fix all these additional taxes, they take into account what happens in Scotland, where many in the hospitality industry do not get business rate relief? We are getting it twice on exactly the same issue.

[James Wild]

The hon. Gentleman makes an important point that I am sure the Minister will want to cover when he responds.

The average bill for pubs will go from £4,000 to £9,642 a year. Any hon. Member who talks to hospitality businesses in their constituency will know the real-world challenges they are facing. As it happens, my favourite pub in my constituency closed its doors on Sunday, in part due to the increased costs and taxes the sector is facing. Have the Government considered the impact of the combination of these tax rises on pubs and the wider sector?

Turning to wine, as part of our reforms we introduced a wine easement for 18 months until February 2025. The Minister will be aware of the concerns of some in the sector that because that easement is coming to an end, duty will increase by 98p in just over 18 months. While we support the transition to the new regime and the end of the easement, I would be grateful if the Minister clarified what engagement he has had to understand how prepared the industry is for the new system.

We have many incredible wineries here in the UK. In 2023, sales rose 10% to reach nearly 9 million bottles. Supporting domestic wine producers should be a priority. In my constituency, I am fortunate to have Burn Valley winery, Cobble Hill winery and others. They are producing great products, proving very popular and helping to improve the rural economy and employment. However, growers have higher production and establishment costs, which will be made more challenging by the tax rises in these clauses and the wider Budget.

To support the industry, WineGB has proposed the introduction of a cellar door duty relief scheme modelled on the Australian scheme, to promote wine tourism, which a VisitBritain survey demonstrated could attract 16 million visitors. The Government have an ambitious target to increase annual visits to the UK to 50 million by 2030—up from 38 million last year. In the spirit of trying to help the Government lift their foot off the growth brake lever, perhaps the Minister will have a look at that idea and consider whether introducing it has any merit.

It is because of the challenges facing producers and the hospitality sector that we have tabled new clause 4, which would require the Chancellor, within six months of the Bill being passed, to make a statement to Parliament about the impact on various sectors of the increases in alcohol duties. As we have heard, increases to duty rates place significant additional costs on hospitality, pubs, whisky, spirits, wine, cider and other sectors, and we are concerned that this could inhibit growth and business investment. The previous Government recognised the significant contribution made by those sectors and saw an increase in business investment in the hospitality sector. Given the headwinds facing alcohol producers and hospitality businesses, which support so many jobs, it is only right that the Government report back to Parliament on the impact of their choices.

Clause 64 abolishes the duty stamps scheme for spirit drinks from 1 May 2025, fulfilling a commitment made by the Conservative Government in the spring Budget. We welcome this. The scheme was important when it was introduced, but it became an increasingly diminishing part of HMRC’s compliance response. Unnecessary regulation should of course be removed where possible, and I welcome this Government’s apparent commitment to deregulation, as set out in the Chancellor’s speech, though it would have more credibility if the Government were not also bringing forward the unemployment Bill that will add £4.5 billion to business costs.

As I set out, we support this change to reduce administrative burdens. I look forward to the Minister’s response to the concerns I have raised on behalf of the sector and producers in relation to these clauses.

Finance Bill (Fourth sitting)

Debate between James Wild and Angus MacDonald

Committee stage
Thursday 30th January 2025 Public Bill Committees

[James Wild]

Would that we had the happy chance to be sitting in the Treasury making the policy decisions. It is the Chancellor who will bring forward another fiscal event, and who may have to take some action to deal with the impact of her Budget. This is about what the Government will do and the review that they conduct and bring forward.

Business confidence is essential for investment, but it has been damaged by this Government, when they first came in, talking down the economy. We now hear a much more positive tone talking about our strengths, and the strong fundamentals of our economy, which were all points that the Opposition made throughout our period in office. We encouraged the Government to do the same when they came in, but they wanted to talk about a fantasy black hole and the worst economic inheritance, which has done a lot of damage to our economy.

The latest Confederation of British Industry growth indicator shows that private sector firms expect a significant fall in activity over the next three months. The latest purchasing managers’ index flash shows that one in four businesses have cut jobs due to employment costs. The Office for National Statistics showed that retail sales in December fell by 43%. This is a worrying state of affairs and any Members who speak to businesses will have heard the deep concerns over the hiking costs of employing people, the cut in business rate support for retail, leisure and hospitality businesses, and other measures.

The Budget put up taxes on entrepreneurs and wealth creators, and it is driving people who create wealth away from our country. The energy profits levy puts at risk 35,000 jobs in Scotland and the North sea. The family business tax, which was launched without any warning, has had a highly damaging impact on family farms and other family firms. That is why a review of business taxation is so necessary, with the objective of not only encouraging an increase in investment but providing certainty for firms. The Minister has spoken repeatedly about certainty, so I hope he will feel able to support the new clause.

[Mr MacDonald]

I support what the shadow Minister said, almost word for word. My career has been in business, and in my two days sitting in the Committee, I have been appalled by what seems to be tax increase upon tax increase. Small and medium-sized businesses across the UK are on their knees and we have done a catastrophic job since the Budget in ruining things for businesses.