Alcohol Taxation

Lord Spellar Excerpts

Thursday 7th July 2022 Commons Chamber

[Alun Cairns]

My hon. Friend makes an important point that underlines the issues that we have highlighted.

[John Spellar (Warley) (Lab)]

Will the right hon. Gentleman give way?

[Alun Cairns]

I have limited time, but I will give way briefly.

[John Spellar]

I thank the right hon. Gentleman for giving way. As a member of the Campaign for Real Ale, I welcome his comments about the brewing industry. If we get the reduction to 22%, it will be welcome. On wine, he rightly references British vineyards, which are a great success story. Is he concerned about our trading relationships with many of our strongest allies, particularly when the Government are undertaking a trade deal with Australia? Australian winemakers are seeking to diversify from their market in China and are concerned about the new complexities being introduced. Does he think that the Government ought to engage with the Governments of Australia and other similar countries where our trade and security relationships are important?

[Alun Cairns]

The right hon. Gentleman makes an extremely important point. That is important for businesses, as he recognises, and because of the international influence that such policies have. His wider experience, geographically and on security issues, is recognised on both sides of the House.

I warmly welcome the proposed abolition of the additional tax on sparkling wine, which is particularly helpful to producers in England and Wales. Some 70% of wines from the UK are sparkling and the current EU system works against them, particularly as smaller operators, so that is another Brexit dividend.

The wider proposals for duty changes on wine also have positive intentions, but in practical terms, as they stand, they will leave more complexity in the system. The three current rates per bottle will be replaced by a total of 27 separate amounts per bottle, assuming that it applies to the labelled ABV. We must recognise that winemakers cannot dictate the specific level of ABV. It depends on seasonal factors, and the structure of taxation should take that into account.

The administrative burden will fall particularly hard on UK retailers, particularly specialist merchants that tend to carry small supplies of a wider range of products. For example, a small retailer could have a range of 2,000 to 3,000 different products. The variation between different vintages means that they would become swamped in red tape—a policy that runs against the positive intentions of the Minister and the Treasury. There would also be a need to take into account permitted tolerances.

The good news is that minor adjustments could achieve the Government’s objectives and simplify the structure for the industry. All wines fall within a spread of 8.5% to 15% ABV. Establishing such a spread and applying a common rate would simplify the process and give the Treasury the clarity it needs. For example, the industry believes that a rate of 12%—a 4% increase on current rate—would be a win for the Treasury and for it because of the reduced red tape. That demonstrates the earlier point about the cost of red tape.

It might sound logical to compromise—for example, to have just two splits instead of the high number of splits in the range of 8.5% to 15% ABV—but that would not work either. The complexity would remain and it would leave similar tolerance challenges. Taxing at one rate would help the Treasury to achieve its objective of providing clarity, as well as significantly supporting the industry.