Beer Duty Escalator

Sajid Javid Excerpts

Thursday 1st November 2012 Commons Chamber

[The Economic Secretary to the Treasury (Sajid Javid)]

I congratulate my hon. Friends the Members for Burton (Andrew Griffiths) and for Leeds North West (Greg Mulholland) on securing what has been an excellent debate, and on the excellent work that they do through chairing the all-party beer group and the all-party save the pub group respectively. I also thank all Members who have contributed to the debate—I, too, counted 20 Back-Bench colleagues—as well as the 104,000 people who have signed the e-petition and all Members who are in the Chamber today.

[Richard Graham (Gloucester) (Con)]

Does my hon. Friend agree that the British brewing sector, British pubs and the British people have paid a heavy price for the previous Government’s beer duty escalator? May I urge him to hold a review and then do what Treasury Ministers have done to the previous Government’s fuel duty escalator, which is to stop it? In that way, he will deserve a celebratory pint from all my constituents in Gloucester, a pint of beer from the—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. The Minister will not have time to drink the pint if we have such long interventions.

[Sajid Javid]

I thank my hon. Friend, and I will come on to that point.

The Government really do recognise the importance to the British economy of pubs and brewers. I fully support the industry, and I know that Members of all parties would like to see it prosper. We have heard a lot from hon. Members about beer duty, but let us be clear that the previous Government introduced the escalator. They increased beer duty by 60% while they were in office, and in fact for the poorest households it went up by 80%. That was the inheritance that we had to deal with. At the same time, as we all know, we were burdened with a huge budget deficit of £159 billion, or 11% of gross domestic product, which was greater than that of any other developed country. That inevitably meant that the incoming Government had to take some difficult decisions that the Labour party dodged. We had to deal with that legacy.

We set out a clear plan to deal with the deficit, part of which was the planned increase in beer duty rises until 2014-15, about which we have heard so much today. We have announced no changes to that policy. Cancelling the planned 2% duty rise represented by the escalator portion of beer duty would cost £35 million next year and £70 million the following year. If that tax were cancelled, the revenue would have to be recouped one way or another, either through further public spending cuts over and above what is already necessary or by finding increases in other taxes or duties.

[Richard Drax]

The whole point is to reduce taxation and thereby encourage growth and employment. That will create wealth, which will inevitably end up in the Treasury’s pockets. Is that not the Conservative way forward for the long term?

[Sajid Javid]

My hon. Friend makes a good point, but I think he will accept that the Government need to raise taxes to pay for public services in one way or another. However, we continue to keep all taxes and duties under review, including the ones that have been discussed today, and we regularly monitor alcohol duties to ensure that we are on top of their impact on the industry and consumers.

[Cathy Jamieson]

I hear what the Minister says about keeping matters under review, but in my experience that sometimes means keeping something on a shelf. Is it not time to dust down some of that information and hold a review that reaches a conclusion?

[Sajid Javid]

I assure the hon. Lady that, as an incoming Minister who is new to this portfolio, I plan to keep nothing on the shelf. I will be looking at everything, which includes all duties and taxes for which I have responsibility. That would be a sensible thing for any Minister to do.

Let me say a word about the importance that the Government attach to pubs and brewers in the wider economy. The sad truth is that pubs have been closing for many years, and that decline has been influenced by many factors, not just alcohol duty. Lifestyles and consumer tastes are changing and individuals have increased choice in their leisure activities. Those things have an impact, and those factors—not just alcohol duty— determine the size of the pub sector. The number of pubs continued to decline in the early 2000s, despite relatively flat alcohol duties in real terms. The Government are rightly doing a lot to support pubs and brewers, and those businesses will benefit from many decisions taken in the tax system and elsewhere.

Let me give a couple of examples. Changes to business rates mean that small pubs can benefit from small business rates relief, or rural rates relief. The Government have extended the small business rates relief holiday until March 2012. We have also legislated to allow local authorities to give grant discounts to businesses, including pubs and brewers, as appropriate.

Other wider actions will also benefit the pubs and brewing industry, and the cut in corporation tax from 26% to 22% by April 2014 will help brewers. Small businesses such as pubs benefit from the small profits rate, which has fallen from 21% to 20%. The change in machine gaming taxation will affect the majority of pubs. From February 2013, machine games duty will replace the current system of taxation on gaming machines, and more than 70% of pubs will benefit from that move to MGD through reduced tax liabilities.

My hon. Friends the Members for St Austell and Newquay (Stephen Gilbert) and for Mid Derbyshire (Pauline Latham) mentioned small breweries’ relief, which helps small brewers up and down the country, and that is vital to our economy. The right hon. Member for Southampton, Itchen (Mr Denham) mentioned entrepreneurship. The Government have supported entrepreneurship by lowering beer duty for small producers, and helping small brewers invest and grow. There were 394 small breweries in 2002 when that relief was introduced, and today there are more than 730. My hon. Friend the Member for Bristol North West (Charlotte Leslie) mentioned the Live Music Act 2012, which came into force on 1 October and is already making it easier for pubs to play live music. The Government have launched a £90 million support programme to help eligible community organisations take on the community ownership and management of assets that are important to them, including pubs.

A number of hon. Members, including the hon. Member for Midlothian (Mr Hamilton) and my hon. Friend the Member for Harrow East (Bob Blackman), mentioned the Government alcohol strategy. Alcohol drunk in moderation can have a positive effect on the well-being of adults, but excessive consumption has negative consequences on both individuals and wider society. The Government published their alcohol strategy earlier this year, which includes plans for minimum unit pricing. Setting a floor price for alcohol will prevent heavily discounted alcohol from being sold in supermarkets and off licences. Raising the price of cheap alcohol will help tackle excessive alcohol consumption, and I hope that pubs will benefit from minimum unit pricing once the demand for cheap alcohol in the off-trade has been tackled.

The Government recognise the importance of pubs and brewers to their local communities and the wider economy. We have done much to try and support that industry—I have given a few examples, which I hope was helpful—and it makes sense for us to keep looking at other ways to continue that support.

May I thank again those who sponsored the debate and all hon. Members who took part, as well as all those who signed the public petition? In conclusion, I will respond to a comment that was made by the mover of the motion, my hon. Friend the Member for Burton at the start of the debate. If I remember his words correctly, he challenged me to become known as “the Minister who saved the great British pub.” I am very tempted, although I would have to compete for that honour with the Under-Secretary of State for Communities and Local Government (Brandon Lewis), who has responsibility for pubs. I am sure, however, that we can work well together and perhaps jointly take that title.

I assure all hon. Members who have contributed to the debate that I have been in listening mode. This debate has been valuable and showed just how important debates tabled by the Backbench Business Committee can be. I will take on board a lot of messages from the debate, and ensure that the Government do even more to help the pubs and the brewing industry.