Alcohol Duty

John Glen Excerpts

Thursday 25th February 2021 Commons Chamber

[The Economic Secretary to the Treasury (John Glen) [V]]

May I start my response by congratulating my hon. Friend the Member for Moray (Douglas Ross) on securing this debate, particularly since his constituency of Moray lays claim to hosting the largest number of distilleries in any United Kingdom constituency? He has indeed been a tireless advocate for the interests of Scotland. From lobbying for the removal of US tariffs to ensuring officials press on with the alcohol duty review, he has continually supported the Scottish alcohol industry, and he is absolutely right to do so. Distillers such as those in Moray are not just a source of refreshment; they are part of our heritage, they are significant tourism attractions in their own right, and they are important employers up and down the country. In 2019, the number of visitors to the Speyside whisky trail surpassed 2 million. That is a reflection of the sector’s remarkable growth, which my hon. Friend mentioned, and the innovation that it has seen in recent years. I am confident that, post pandemic, the sector will continue to flourish, attracting millions more visitors each year. Distillers, like so many other businesses, have had a very challenging year, and as hon. Members will know, the Government have acted decisively to help them, just as we have acted decisively to help thousands of other businesses across other sectors.

Today, though, we are debating the future of the UK’s alcohol duty system—a system that in fact has a long and fascinating history. Dating back to 1643, it was first introduced by Parliament as a way of financing its fight in the English civil war. Over time, the UK alcohol duty system evolved to become an important provider of Government revenue, and that is very much still the case. As my hon. Friend noted, the sector has experienced an impressive period of growth, helping to generate billions of pounds for the UK Exchequer. Each year the UK’s alcohol duty system raises over £12 billion, helping to fund public services such as the NHS. In that way it helps to address the harm caused to society and public health by excessive or irresponsible drinking.

Those benefits, though, are balanced by the Government’s pragmatic, reasonable approach to the level of duty applied. The Government have cut or frozen duty at seven of the last eight Budgets. In fact, the price of a typical bottle of Scotch whisky is £1.79 lower than it would have been, since we ended the spirits duty escalator seven years ago, in 2014.

As hon. Members may be aware, the current UK duty system is comprised of four distinct categories—beer duty, cider duty, spirits duty and wine duty. That means that the tax applied to each unit of alcohol varies according to whether the alcohol used to produce it came from malt, grapes or apples. That inconsistency was, in part, a consequence of EU directives. Now that the United Kingdom has left the European Union, the Government have the opportunity to take a fresh look at the alcohol duty system to see whether we can create a system that is simpler, more consistent, less administratively burdensome to producers, and does a better job of protecting public health. I know that many of our constituents agree that there is need for reform.

My hon. Friend has once again eloquently voiced his concerns, urging the Government to create a system that works in the best interests of business, his constituents and the industry as a whole. As he noted, at Budget 2020 the Chancellor announced that the Government would review the alcohol duty system. That, of course, was a commitment made in our manifesto, which, as my hon. Friend said, was announced when the Prime Minister visited the distillery in his constituency at Roseisle during, I think, the election campaign, and this review came about only because of the campaigning efforts of my hon. Friend and other Scottish Conservatives to raise the need for reform. The review has come about in part because the Treasury recognises that the alcohol drinks industry is innovative and entrepreneurial, and that traditional assumptions may no longer hold. I was heartened to hear from his speech that Scotland is turning its distilling expertise to gin, with explosive growth in the number of Scottish gin brands.

Since that announcement at the 2020 budget, my officials and my hon. Friend the Exchequer Secretary have engaged with stakeholders across the industry, as well as with public health officials and tax experts. Our goal has been to assess how well the alcohol duty system works now and how it could work better in future. A call for evidence launched in October 2020 asked a series of key questions such as: overall, how well do the different duties work when combined together as a system? Is there a case to move to a standard method of taxation? Would a more consistent systemic approach to indexing alcohol duties be of benefit? Could we reduce burdens by standardising the way businesses declare and pay their duty?

I am pleased to say that we received more than 100 submissions expressing, as one might expect, a wide range of views, which we—my officials and my hon. Friend the Exchequer Secretary—are now analysing. We will provide further updates from the review in due course, as quickly as we can. I would like to assure my hon. Friend that my right hon. Friend the Chancellor and my hon. Friend the Exchequer Secretary are taking a very close interest in this issue and the detailed analysis and work that has been undertaken and are keen to make the most swift progress possible.

Since my hon. Friend the Member for Moray has also raised the issue of small brewers’ relief, I should add that the Government are running a separate technical consultation specifically on this issue. That closes on 4 April. I encourage any craft breweries based in his constituency or in Scotland to make their views heard by responding to this consultation. The Chancellor will set out plans for the coming year at the Budget next Wednesday, and hon. Members will understand that it would be inappropriate for me to comment in any more detail at this stage. I note that my hon. Friend has also rightly raised concerns about the 25% US tariffs on Scotch whisky, and I agree entirely with his assessment that the continued application of these tariffs is particularly disappointing and unfair, given that they have nothing to do with the Scotch whisky industry. To be clear, the UK has negotiated intensively with the US and the EU on these disputes and remains committed to reaching a fair and balanced settlement. I share my hon. Friend’s desire to help struggling producers and reach a settlement that works for the UK as a whole.

To sum up, Mr Deputy Speaker, the UK’s alcohol duty system makes an important contribution to funding vital public services and addressing alcohol-related harms. However, as my hon. Friend has compellingly explained, once again the current system is in need of reform. Leaving the EU provides an invaluable historic opportunity to undertake that reform, and our guiding intention is to do what we can to support this country’s historic and vibrant drinks industry for the long term. By challenging and tackling existing anomalies and reducing inconsistencies that distort the market, our hope is to support innovation and growth within the industry and thereby give the sector the future that it deserves.

I thank my hon. Friend for his contribution today. I know that he will be a little bit frustrated that I cannot set out a clearer timetable, but he certainly can know that the Government are fully committed to addressing the issue and will urgently respond to the challenge that he has set us.

[Mr Deputy Speaker (Mr Nigel Evans)]

At the end of this week I thank everybody at the broadcasting unit, the technicians and their teams for working supremely well to ensure that the vast majority of Members were able to make their contributions remotely, thereby making this Parliament much safer for those who have to work here.

Question put and agreed to.