Beer Duty

Jane Ellison Excerpts

Tuesday 7th March 2017 Westminster Hall

[The Financial Secretary to the Treasury (Jane Ellison)]

I thank colleagues from all parties in the House for what has been a typically vivid and enthusiastic debate. It has been wonderful to hear so many fantastic pubs and breweries—both large and small—getting a name- check today in the House, which they deserve. I will not repeat them all, because there were so many mentions of people’s local star businesses, but I pay tribute to all of them. Debates such as this one are so valuable, because they allow Members to bring real colour to a debate about duty by demonstrating the impact that duty has had or could have on businesses in their own area.

I particularly thank my hon. Friend the Member for St Austell and Newquay (Steve Double) for opening this debate on behalf of our hon. Friend the Member for Gower (Byron Davies). I know that my hon. Friend the Member for St Austell and Newquay and others here are advocates for the important role that pubs can play; we have heard today about pubs’ community role, as well as their wider economic role.

I congratulate both the all-party group on beer and the all-party group on save the pub for the work they do. Of course, the all-party group on beer is led by my hon. Friend the Member for Weaver Vale (Graham Evans), who took us through his own extensive history of pubs. However, bearing in mind that he was born in 1963, I hope that his experience of Boddingtons in the 1970s came very much at the end of that decade and not at the beginning.

I noted that my hon. Friend the Member for St Austell and Newquay said that it was important that this sector was not overlooked. I can reassure the pub and brewing industries that their interests are never overlooked in Parliament; they have fantastic advocates in Parliament, who are passionate and articulate champions, and they come from up and down the country and from all parties. As a result, industry concerns are regularly brought to the attention of Ministers. I myself have taken part in debates such as this one as a Back Bencher; I responded to similar debates as the Minister with responsibility for public health; and now I am responding to this debate today as the Minister with responsibility for tax.

I will try to respond to as many of the issues raised this morning as I can without repeating some of the points that others have made. As I am sure Members will realise, I cannot pre-empt anything that my right hon. Friend the Chancellor will announce tomorrow. [Interruption.] I will resist all blandishments on that front.

Turning to beer duty rises, the Government of course recognise the importance of the UK pubs sector and its contribution to promoting responsible drinking. I mentioned my previous role as Public Health Minister. In that role I made the case for pubs as advocates of responsible drinking. That was not always the most straightforward thing to do, because there is always a balance in reconciling the undoubted problem our country has with alcohol in some regards against the fact that we love our pub and brewing industry. Actually, pubs are very much the answer in that regard. They bring together those two ambitions: they encourage people to drink responsibly while at the same time doing all the other good things they do, such as providing employment and contributing to community life.

As we have heard, the sector’s footprint covers every constituency across the country. If I am allowed one namecheck, it is for the fantastic Sambrook’s Brewery in my constituency. Along with other Members, I managed to get one of my local ales into the Strangers Bar. I know that many of us have taken that opportunity over recent years. We appreciate the contribution that all breweries—large and small—make to local economies and the wider beer market. The rise in the number of small breweries has increased diversity and choice in the beer market and promoted consumer interest in a much larger range of beers, which has benefited all brewers and the industry as a whole.

We have heard about the action taken on the beer duty escalator since 2013. My right hon. Friend the Member for Tatton (Mr Osborne) deserves the praise he has been given for that. A pint of beer is 10p cheaper than it would have been had the beer duty escalator not been ended in 2013. That has disproportionately benefited pubs, given that two thirds of the alcohol sold in pubs is beer. The British Beer and Pub Association—it stays closely in touch with Members and briefs them—feels that the action taken since 2013 has increased confidence. I heard that in person from the head of a well known brewery who came in as part of the delegation led by my hon. Friend the Member for Weaver Vale last week. As my hon. Friend the Member for Devizes (Claire Perry) said, when we talk to people involved in the industry, we can hear the impact that confidence has. Sometimes it is hard to put an exact figure on its impact on a particular part of our economy, but I have heard that from people.

The BBPA estimates that more than £1 billion is being invested by brewers and pub owners each year, and that impacts on employment decisions across the supply chain. I draw the House’s attention to the ways in which the Government have supported the innovative domestic brewery industry other than by duty cuts and freezes. The shadow Minister noted them in his contribution, and they include supporting the employment of younger people through some of the changes made there, boosting research and development for small and medium-sized enterprises and reducing corporation tax on company profits from 28% in 2010 to 19% from April. In 2020, it is moving to 17%. Cutting the tax on profits encourages reinvestment and innovation.

[Toby Perkins]

Does the Minister recognise that there is a real debate about the value of a reduction in corporation tax on the profits that businesses make as compared with the fact that we have the largest corporate property tax in all of Europe? We are expecting businesses that often are not making a profit to see their business rates tax bill go up and up.

[Jane Ellison]

The hon. Gentleman brings me to the next section of my speech, which is about business rates. I am not surprised that colleagues across the House have raised that issue. We recognise that business rates can represent a high fixed cost for some businesses. I will not rehearse all the facts about the 2017 revaluation. I think we all acknowledge that there was a long gap between revaluations, but I emphasise that for those who face an increase in business rates as a result, there is a £3.6 billion transitional relief scheme. It will support them by capping and phasing in rises in bills. The Chancellor has already said that he is working with the Secretary of State for Communities and Local Government to provide additional support for the hardest hit businesses.

As the hon. Member for City of Chester (Christian Matheson) and others have said, pubs are valued for business rates around the idea of a fair maintainable turnover. An approved guide on the valuation of public houses for business rates has been agreed between the Valuation Office Agency and all five bodies representing pubs, including the British Beer and Pub Association and the Association of Licensed Multiple Retailers. That formula has been agreed, and that is a welcome step that provides more certainty for pub operators over their business rates bill.

It is also worth noting that in the Budget 2016, the Government announced a £6.7 billion business rates reduction package to benefit all ratepayers. I draw the House’s attention to the switch of the annual indexation of business rates from the retail prices index to the main measure of inflation, the consumer prices index, from April 2020. That will represent a cut every year from 2020. In 2020-21, that benefit will be worth £370 million, and it will grow significantly thereafter.

I will turn to a number of the issues raised by Members. A number of people have made the case—I am familiar with it and recently had the chance to hear it in person from industry representatives—that duty cuts boost Exchequer revenues. It is fair to say that even if we allow for other additional tax revenues, the industry analysis we have seen shows that duty cuts still have a net cost to the Exchequer. For example, because the public finances assume an increase by RPI each year, the duty changes from Budget 2013 onwards are estimated to have reduced total alcohol duty receipts by £800 million for 2016-17. That implies that to make up for that, Government would have to raise taxes in other areas of the economy, cut spending elsewhere or increase the deficit. I put it on record that cuts and freezes have a real impact on how the public finances account for things.

A number of Members have raised the issue of lower duty rates on low-strength beer. I recognise some of the challenges around the point at which that line is drawn and around brewing to that level. High-strength beer is taxed more than the equivalent low-strength product, but the 2.8% threshold is set by European Union law and is being reviewed by the Commission at the moment. In the industry meeting, we explored the impact and discussed where the threshold should be.

Members have rightly discussed the challenge around the on-trade and the off-trade and discussed how pubs can encourage responsible drinking. Current rules do not permit the Government to apply a different tax treatment to the same product. We cannot tax alcohol sold in shops at a different rate to alcohol sold in pubs, but we recognise the role that pubs play in promoting responsible drinking. In 2014, we took action on very cheap alcohol by banning sales below duty plus VAT in England and Wales.

[Liz McInnes]

I appreciate the point that the Minister is making about different rates of tax, but is it not true that minimum pricing for alcohol would apply only to alcohol sold in supermarkets and retail outlets, and not to alcoholic drinks sold in pubs? Is that not correct?

[Jane Ellison]

I suspect that is a debate for another time. It is certainly a debate in which I took part in my previous role. If the hon. Lady will forgive me, I will stick to the topic of the debate, lest we get drawn into minimum unit pricing, as it is a complex issue.

My hon. Friend the Member for Faversham and Mid Kent (Helen Whately) spoke about the long history of the brewing industry in her constituency. She is another strong advocate for the brewing industry, and she rightly mentioned beer exports, which were worth £531 million in 2015, up 10% on the previous year. I reassure her that no duty is payable on exported alcohol, so the link between duty cuts and exports is not a direct one, although I take her point about general confidence within the industry.

The issue of high-strength alcohol has been challenged. I think the House is unanimous in wanting to tackle excessive alcohol consumption and the related health harms associated with the strongest products. The question is how we do that, but the point has been well made and the Government are of course reflecting on that.

I hope I have covered most of the points raised. I have not been able to respond to the whole thrust of the debate, although more will be said tomorrow in the Budget. The debate has been a valuable opportunity to discuss the issues, and it has been interesting to see so much common ground.

[Jim Shannon]

In my contribution I talked about alcopops—I know that might be a separate issue—and the advantage that high-street supermarkets have over the pubs. Do the Government intend to address that imbalance, the unfair advantage that high streets have over pubs, and the control of the alcohol that is sold?

[Jane Ellison]

Again, that is perhaps for a wider debate, but, as I recollect from my time as Public Health Minister, the industry was rightly praised for the extent to which it stepped up to address issues with certain products. A lot of alcopop products have been phased out by some producers who decided to change their portfolio. One or two speakers referred to the bigger chains and the fact that they have tried to shift their portfolios as they recognise the challenges that certain products pose, especially for younger drinkers. It is worth putting on the record a recognition of the industry’s actions in that regard, although there is always the challenge to do more.

I hope that I have been able to reassure Members on some issues. In opening the debate, my hon. Friend the Member for St Austell and Newquay said that the industry wanted to make sure it was not overlooked, and I can reassure him that it is not. Its voice is rightly heard loud and clear across the House and within Government. We have regular meetings and dealings with the industry and we listen very carefully to all the points made.

[Peter Dowd]

Will the Minister give way?

[Jane Ellison]

Very briefly.

[Peter Dowd]

I take the point that the Minister makes about the industry not being overlooked, but it is important to put this in context. For example, according to the industry, the business rates rise will put a 15% increase on pubs’ costs and 23% on restaurants’ costs. That is an additional £300 million to £500 million a year. The Minister should perhaps give more consideration to that.

[Jane Ellison]

If the shadow Minister thinks that the Government have not given consideration to business rates in recent weeks, he has not been looking at the newspapers. Of course it is an important issue and we have given consideration to it. Many establishments in different parts of the country will gain from the business rates revaluation. More businesses will see their rates cut or frozen than will see an increase. For those that see an increase, transitional relief is available, so it is important for people to look at that. No doubt people will look at the impact of that fiscally neutral revaluation in their own areas.

To return to my previous point, the industry’s voice is rightly heard loud and clear in Government. It has powerful advocates in all parties in this House. The debate has been constructive and has brought out important issues. I have heard all hon. Members’ contributions today and will take them as representations ahead of tomorrow’s Budget.