Beer Duty Rates

Debate between Jesse Norman and Andrew Griffiths

Tuesday 25th June 2019 Westminster Hall

[Jesse Norman]

That will certainly be of great interest to my constituents, both as consumers and producers. As my hon. Friend knows, there has been a tremendous reinvigoration of the brewing industry over the last nine years. The number of brewers has this year risen dramatically to more than 2,200. The rise of craft beer has seen breweries grow and flourish in every part of this country, including microbreweries, and exports have reached more than £500 million a year.

Again, it would be wrong of me not to mention a personal interest in this context. Certainly, my county of Herefordshire is as amply endowed with fabulous breweries and pubs as any part of the country. It would be wrong not to mention Wye Valley Brewery, Golden Valley Brewery and Hereford Brewery—I have pulled a pint of its Hereford Best in the Strangers Bar. Notable pubs in Hereford are the Barrels, where I held an informal surgery last Friday afternoon for a considerable period; the Volunteer Inn, known as the Volly; the Lichfield Vaults, known as the Lich; the Grapes; and the Britannia. However, I also pay attention to the specialists that have come into the market in my constituency over the last few years, which picks out this wider process of economic and social change, including Beer in Hand and the Hereford Beer House—part of a panoply of pubs across the entire county, including the King’s Head Hotel, the Man of Ross, the Mill Race in Ross and many other fine houses.

It would also be wrong of me not to touch on the excellent work in the community of the local Campaign for Real Ale team, with my support, in saving, for the second time, the Broadleys pub in south Hereford from being turned into a Co-op. It sheds a very bad light on the Co-op, which is in many ways a fine institution that I otherwise rather admire, even if I did have the crystal Methodist in front of me at one point when I was on the Treasury Committee, if hon. Members remember him. It should not sponsor the closure of pubs in order to open new Co-ops merely a few hundred yards away from ones that already exist. I single it out personally, not as a matter of Government policy, for its misbehaviour in that regard.

[Andrew Griffiths]

I agree with my hon. Friend, because I have seen that in action. Does he agree that one great way to support the great British pub is by doing something on beer duty? Seven out of 10 alcoholic drinks purchased in a pub are beer, so if we want to help pubs, doing something specifically on beer is the way to do it.

[Jesse Norman]

I will come on to a point my hon. Friend raised, and with great eloquence, on the vigorous role that the Government have taken in cutting beer duty and supporting the industry. However, I point out that this great change over the last few years has not been the result merely of enlightened tax policy but of an outbreak of entrepreneurialism and energy in the sector as a whole. It is important to realise that the Government cannot reverse the laws of economic gravity or changing tastes and habits, but they can help at the margin, and have tried to.

As my hon. Friend will know, in 2013 the Government took the decision to end the beer duty escalator. Since then, they have cut or frozen beer duty several times, including at the last Budget, with the effect that a typical pint of beer is 14p cheaper than it would otherwise be. The Government will of course continue to look for ways to support the brewing industry, and I absolutely look forward to further engagement with my hon. Friends and Members from across the House.

However, it is important to try to strike a responsible and sustainable balance with wider public spending commitments. It is worth noting that the Exchequer has forgone more than £5.2 billion in revenue due to cuts and freezes to all alcohol duties since 2013. That is £5 billion that has to be made up by taxpayers by other means if we are to be able to spend as we would wish on our public services. [Interruption.] Hon. Members who have recently arrived for the next debate will not be aware that we have a few more minutes, because of the kind courtesy of the Chair, and can run the debate until 4.45 pm.

My hon. Friend the Member for Clacton is absolutely right to emphasise the social importance of pubs, which are central places in the community. They are mixing places and meeting places for people from every walk of life. My hon. Friend the Member for Burton also made the point that pubs are a place of supervised, safe drinking, where publicans—male or female—know their customers, pulling pints and pulling people together in a social environment. That of course raises the stakes from a Government standpoint.

When considering whether to introduce differential beer duty, we and Governments before us have had to acknowledge that the UK is currently bound by EU laws that harmonise excise duties applicable to alcohol products. We can only introduce reliefs or different rates of duty for beer that are compatible with the EU directive on alcohol excise duty structures. My hon. Friend the Member for Burton made the point that, once the UK has left the EU, the Government and Parliament will no longer be bound by this directive, so there should be much greater opportunity to explore creative proposals to redress that balance. But until then, there are limits laid down in statute as to what can be introduced. However, even within that context—this point has been touched on—we have been able to make progress and exploit some existing differentials, which have benefited pubs and breweries. Those include the small brewers relief, which allows the smallest breweries to receive up to 50% off their duty bill in the start-up and growth phase. As hon. Members will know, the Treasury announced a review of that relief in the Budget. My officials are now working to take the results of the survey further to address the issues raised, and the Government hope to make further announcements in due course.

Of course, as I have said, we also recognise the importance of responsible drinking. That is why there are already differential rates of duty on lower-strength and alcohol-free beers. On beers of less than 1.2% ABV, no duty is paid at all, and on beers between 1.2% and 2.8%, the reduced rate is less than half the standard beer duty rate. My hon. Friend the Member for Burton is absolutely right. It is hard to produce a beer of, I would say, less than 2.3% that maintains its taste, but at between 2.3% and 2.8%, one can have a delicious pint and benefit from the duty differential. Conversely, higher-strength beers over 7.5% ABV pay a higher duty rate of roughly 30% more, in part to send a fiscal signal about the importance of responsible drinking.

[Andrew Griffiths]

The Minister is absolutely right in what he says about lower-strength beers and the potential that that has, but may I share with him what brewers across the country have said to me? If they got the opportunity, through the duty regime, to promote beers at 3% or up to 3.5%, they would do that wholeheartedly. That would not only create a new category, but help to take alcohol units out and therefore help responsible drinking at the same time.

[Jesse Norman]

I am grateful for that intervention. There may be scope to contemplate an uplift in relation to the higher level of lower-strength beer. It would be interesting to discuss that further.

Let me turn to some of the points that my hon. Friend the Member for Clacton raised. I intervened only to provide the point of information to him, because of course I did not see the correspondence that he had received and therefore could not respond to it in those terms. I apologise if he was disappointed by the response that was given. It is always the Treasury’s policy to try to give informative and full as well as, of course, accurate responses.

Let me pick up a couple of the points that were raised in my hon. Friend’s speech and that reiterate some of the wider issues. Of course, there are public health outcomes that need to be met. The closure of pubs potentially affects some of those, particularly in a world that has seen, in this country at least, something of an epidemic of loneliness, so my hon. Friend was absolutely right to pick up on that. He is also right to say that there is evidence that responsible drinking and better public health outcomes can be due to differential rates of duty. I understand that point. It is important, though, to remind ourselves of the practical difficulties that need to be overcome. It is not merely the EU law issue. It is also important that whatever the regimen may be, it is not subject to legal challenge for breaching state aid or competition rules. And we may wish to remain aligned with the EU even post Brexit, from a competition or state aid perspective, in part to prevent mercantilism from breaking out between EU businesses and our own.

Of course, there is an issue about enforcement. Her Majesty’s Revenue and Customs taxes beer at the point at which it moves into general distribution, rather than monitoring the wider beer supply chain. The concern is obviously about the potential to repackage beer that had the lower rate of duty paid on it and then to sell it and trouser the difference.

[Andrew Griffiths]

I absolutely understand the point that the Minister makes about the grey market and the potential for fraud; the all-party parliamentary beer group did an investigation into that. I therefore point him back to my previous remarks on draught beer. It is very easy to understand draught beer. It cannot be repackaged; it cannot be put in a different container; it is draught beer. We could have a differential on draught beer that I think would solve my hon. Friend’s problem.

[Jesse Norman]

I am delighted to have taken that final point of information. It may be the case that when we come to reconsider it, the draught beer distinction that my hon. Friend draws gives us a workable legal and practical basis on which to proceed. My point is a much simpler one: it is important to bear in mind the potential grey market impacts, as well as the competition, state aid and legal points that I raised earlier. Having said that, I am enormously grateful to my hon. Friend the Member for Clacton for initiating the debate and for making a case of great passion and urgency with his usual oratorical flourish. Even if I cannot join him in his own Kings Head where he was a publican, I very much hope to be able to join him in the future at some point.

Question put and agreed to.

Resolved,

That this House has considered differential rates of beer duty.

Beer Duty Escalator

Debate between Jesse Norman and Andrew Griffiths

Thursday 1st November 2012 Commons Chamber

[Andrew Griffiths]

If I could finish my point, I will then give way. The reality is that since the introduction of the beer duty escalator in 2008, beer duty has increased by a crippling 42%.

[Jesse Norman (Hereford and South Herefordshire) (Con)]

I congratulate my hon. Friend on securing this debate. Herefordshire has wonderful pubs, which are hard-pressed, breweries and some of the finest hops in the country. Does my hon. Friend agree that part of the review’s solution must be to include a rebalancing of duty away from pubs and towards retailers?

[Andrew Griffiths]

My hon. Friend makes an important point. The gap between prices charged at the pub and those charged at the supermarkets has widened. The supermarkets have driven the price down, as they did with milk, which affected our dairy farmers, and every time there is a duty increase it is the brewers who are forced to stand it.

Illegal Alcohol and Tobacco Sales

Debate between Jesse Norman and Andrew Griffiths

Tuesday 27th March 2012 Westminster Hall

[Jesse Norman (Hereford and South Herefordshire) (Con)]

It is a pleasure, as always, Ms Dorries, to serve under your chairladyship today.

I am grateful to colleagues from across the House for their support in this debate, and to the Economic Secretary and shadow Economic Secretary, the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson), for attending. Many issues will be raised in this debate—including, I am sure, the issue of duty and minimum alcohol pricing. I will restrict myself to describing and discussing the core issue of the illegal smuggling of tobacco and alcohol.

Such smuggling is becoming a serious issue in Herefordshire, particularly in Hereford city itself. My investigations have made clear to me what will already be apparent to many Members—namely, that such smuggling is only the tip of an iceberg and only the beginning of a much bigger problem nationwide. In that context, I especially want to pay tribute to PC John Yarwood, who is the Hereford city beat manager; to Councillor Mark Hubbard, who first brought this issue to my attention; and to the trading standards team at Herefordshire council, who have been fighting to keep the smuggling under control.

The problem is easily stated. A number of shops in my constituency persistently sell illegal tobacco and alcohol under the counter. A regular pattern is emerging: the shops are raided by the police and HM Revenue and Customs, goods are seized and fines are imposed. But weeks later, exactly the same thing happens again—the shops are raided, goods are seized and fines are imposed. And so it goes on. In the past 18 months, some 360,000 cigarettes have been seized in Herefordshire alone.

That pattern does not happen by accident. There is a simple explanation—the profits to be made from illicit sales far exceed the losses from fines and seizures. A single lorry-load of cigarettes can be worth £1.5 million in profits to the smugglers. Costing just 9p, a pack of 20 cigarettes has something like a 4,000% mark-up when it is sold on the street.

It has been reported that HM Revenue and Customs seizes some 1.7 billion illegal cigarettes every year. As a whole, tobacco trafficking is estimated to cost the taxpayer £2 billion a year and alcohol trafficking £1.2 billion a year so this is very big business. In effect, the fines and seizures have become just another cost of doing business—literally, a licence to smuggle. It appears that they have little or no deterrent effect. Many of these shops have had their alcohol licences revoked, but that has proven to be little or no deterrent against illegal sales.

These actions make a mockery of the law and our law enforcement agencies, and they need to be stopped. They cause a huge loss of tobacco and alcohol duty to the taxpayer, they undermine the sales of law-abiding businesses on the high street and of distributors, and there is nothing to prevent under-age sales and illegal working in these shops; one man arrested in a raid in Hereford last year had been awaiting deportation since 2008. They also create serious additional hazards to health.

Someone smoking a smuggled cigarette could be smoking anything, just as someone drinking a smuggled bottle of spirits could be drinking anything. These products are not subject to the same rigorous controls as the legal products. Generally, they are made in backstreet premises in countries far distant from the UK, and they are specifically made to be smuggled. Moreover, there is evidence that illegal tobacco and alcohol outlets are often used to fund organised crime on a far wider scale.

However, the problem goes much deeper than that. There appears to be no way in law to prevent these shops from reopening and no clear line of accountability within Government. The issue sits unhappily poised between HM Revenue and Customs, which reports to the Treasury; the UK Border Agency and the police, which report to the Home Office; and licensing policy and trading standards officers, which report to local councils. I am extraordinarily grateful to the Economic Secretary for coming today, but she cannot be expected to answer questions about policing or border controls. Those topics are for the Home Office, not the Treasury.

I am aware that the Government have taken important steps to address the issue in recent years—providing extra resources during the next four years to increase investigations, intelligence and enforcement; expanding the work of HMRC overseas to tackle importation into the UK at source; and developing new technology and resources to strengthen our borders. I am also aware that, at least in theory, HMRC has a range of penalties at its disposal, including the seizure of goods, civil penalties, fines of up to £5,000, criminal prosecution and the recovery of criminal assets. However, those penalties are not anything like enough. I repeat that a single lorry-load of cigarettes can be worth £1.5 million in profits to the criminal rings behind it.

Furthermore, recent history has not been encouraging. Far from raising their game during the past 10 years, I understand that HMRC and the UK Border Agency have been doing worse over that time: they seized fewer cigarettes and less rolling tobacco in 2008-09 than in 2000-01; they have seized fewer vehicles; and fewer people have been sentenced for tobacco smuggling.

What can we do? I suggest three things. First, we need more information. Is it true that HMRC has been less effective and not more effective during the past few years? How many prosecutions have there been? We need regular and detailed data on prosecutions and seizures. Secondly, it is not enough for the police and HMRC just to be able to seize goods and impose these relatively modest fines. They need to be able to close down premises for significant periods when there have been repeated violations of the law. That may require new law-making.

Finally, there is a clear case for having a Minister who is specifically charged with dealing with the issue and able to work across Departments to be as effective as possible. I note that the Minister with responsibility for broadband, my hon. Friend the Member for Wantage (Mr Vaizey), works across both the Department for Business, Innovation and Skills and the Department for Culture, Media and Sport. Perhaps there is scope for similar joint-reporting lines across HMRC, the Treasury and the Home Office in this area.

[Andrew Griffiths (Burton) (Con)]

I thank my hon. Friend for securing this debate. As the chair of the all-party group on beer, I recognise his commitment to the brewing industry; he has been a great supporter of it since he has been in this place. Does he share my concern about the Government’s recent estimate of alcohol smuggling into this country? They estimated that the equivalent of 28,000 lorry-loads of alcohol come into this country every year, which is about 538 illicit movements per week. If so, does he also share my view that if such a massive amount of alcohol is being smuggled into this country, the problem lies with the customs authorities, which are not policing our borders efficiently and effectively?

[Jesse Norman]

I thank my hon. Friend and colleague for his intervention and questions. He puts his finger on the scale of the problem and he must also be right that the UK Border Agency is not being as effective as it should be in preventing this illegal importation of goods. That is a further element to be addressed by a Minister with the kind of joint-reporting lines that I described earlier.

Let me sum up my argument. Better information, new powers and better co-ordination between Government agencies are all required. Those three steps could make a crucial contribution to tackling the scourge of alcohol and tobacco trafficking, and I am sure that I speak for all Members in Westminster Hall today when I urge the Government to consider those steps carefully as they develop their thinking in this area.

--- Later in debate ---

[Andrew Griffiths]

I agree wholeheartedly that the duty regime is encouraging imports into this country. The fact that the British beer industry pays up to four times the duty paid by the British cider industry is encouraging companies such as Stella Artois to produce cider—or cidre, as it calls its brand—and import it into the UK. We are exporting jobs as a result of our duty regime.

[Jesse Norman]

On a point of information, I would like to make it perfectly clear to hon. Members that the cidre product has nothing to do with Herefordshire.

[Andrew Griffiths]

I would like to put it on the record that, as well as being a great supporter of the British brewing industry, my hon. Friend is a magnificent spokesman for the cider industry. We regularly do battle over whether beer or cider is best.

Let us consider the Government’s alcohol fraud strategy. In 2010, we introduced a new strategy, which has been successful. We have seen the number of illegal goods being impounded and seized increase dramatically: a 71% increase in beer, a 50% increase in wine and a 67% increase in cider. Those figures clearly demonstrate that the smuggling problem is just as prevalent with wine and cider, yet the Government do not propose to put a duty stamp on them. I struggle to understand why beer is being singled out in such a way.

Let us consider the estimated amount of illegal beer that the Government believe is coming into this country. They estimate that 28,000 articulated lorry loads of beer come into this country every year. That is the equivalent of 538 articulated lorry loads of beer every week, with an estimated profit to the smugglers of £18,000 per lorry. That is the equivalent of £9.6 million of profit to the smugglers per week. Of course, we want to stop that profit and that illegal trade. However, are we honestly suggesting that if our border controls have 28,000 articulated lorries going through them every year, the answer is to bring in duty stamps, rather than to tighten up our border controls?

House of Lords Reform

Debate between Jesse Norman and Andrew Griffiths

Monday 27th June 2011 Commons Chamber

[Andrew Griffiths]

As my hon. Friend is, like me, a member of the Select Committee on Political and Constitutional Reform, he will know how passionate we both are about political and constitutional reform. We want to see a better Chamber and a better politics come out of this place, but all too often we are navel gazing by talking about the things which turn us on as political anoraks, but which have no impact whatever on the general public and voters at large.

[Jesse Norman]

Does my hon. Friend share my view that the process of scrutinising the Bill is likely to take days, if not weeks, of parliamentary time? Does he also share my view that it will be impossible to account to the electorate for how that time was spent when there is a fire in the economic engine-room?