Finance Bill

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The Chairman: Order. I understand that hon. Members need to communicate with each other, but there is a limit to the number of private conversations that this Chairman is prepared to tolerate.

Before I ask the Financial Secretary to respond, it has been pointed out that some of the matters raised apply to clause 3. It is inevitable in such a debate that arguments will interrelate. It is up to the Financial Secretary whether he chooses to respond to some of the issues relating to alcopops now, or to reserve that response until the proper debate on the subject under clause 3. I am fairly relaxed on the subject.

12.15 pm

Mr. Boateng: I am grateful to you, Mr. Gale. I am looking forward enormously to the debate on alcopops, and I shall address the wider points on them then.

Hon. Members have asked me to give a rationale for the Government's approach to the taxation of alcoholic drinks. That is to be found in paragraph 5.88 of the Red Book, and is that we seek to take ''consistent steps to deliver'' what we describe as

''a fairer balance in the burden of taxation falling on different alcoholic drinks and different types of drink-producers.''

We are not motivated, in introducing the proposals, by the rosy recollection of our youthful drinking habits. We are not summoning up the happy memory of 14 pints a day, which the right hon. Member for Richmond, Yorks (Mr. Hague) shared with us. It might well be that the hon. Member for Epsom and Ewell (Chris Grayling) can beat that—I do not know. Perhaps there is a macho competition among Opposition Members to determine who can drink the other under the table. I know not, and I do not particularly care. It is not for us to base our policy on alcohol taxation on the fancies, foibles, fads and fixations of right hon. and hon. Members.

Chris Grayling: I have to say, representing a constituency in which antisocial behaviour is becoming an increasing problem and where my constituents are very concerned about increasing trouble caused by the over-consumption of alcohol, that they will listen to the Financial Secretary's comments with some dismay and think that he should take the subject more seriously. Does he accept that the much greater presence of strong alcohol in our society, which has increased during the past 20 years or so, is a significant contributor to the troubles in town centres across the country on Friday and Saturday nights?

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Mr. Boateng: The hon. Gentleman is going to spend many more weeks in close proximity to us all and I suggest, for his own happiness and that of the rest of us, that he lightens up a little. Be that as it may, of course we take seriously antisocial behaviour and binge drinking. What we are addressing here, on the basis of the rationale that I have outlined, is our specific decision about cider.

Why cut the duty on cider? Cider makers' production costs are higher than those of beer makers. Cider makers face the same problems in bringing their product to market as small brewers. A cut in duty will give them a much needed boost in a traditional industry that accounts for half of UK apple growing, forms an important part of the rural economy and has given a commitment to seek to increase the amount of UK apples that it uses to 67 per cent. The hon. Member for Christchurch made the legitimate point, as I should expect of him on the matter, that the industry could do more. It has given an undertaking that it will.

Mr. Jack: Could the Financial Secretary confirm that it has also given an undertaking that the full value at retail of the tax reduction will be passed on to the consumer?

Mr. Boateng: No, I cannot. As I said before, on a very interesting and widely followed debate on beer that we had on the Floor of the House, that is a matter for the industry. The right hon. Gentleman would be the last person on earth to expect the Financial Secretary to go around dictating to brewers or cider makers how much of any particular cut in duty they pass on to their customers. That would not be sensible. It is a matter for the markets and for decisions by individual brewers and cider makers.

Mr. John Burnett (Torridge and West Devon): I welcome you to the Chair, Mr. Gale.

Will the Financial Secretary circulate a copy of that undertaking? It would be interesting if members of the Committee could see it.

Mr. Boateng: I shall certainly drop the hon. Gentleman a line about the basis on which I can tell the Committee that the cider industry has pledged to increase the amount of UK-grown apples that it uses. If the matter is of interest to other members of the Committee, they should see the note too. I can see at least one Liberal Democrat Member—the hon. Member for Kingston and Surbiton—who, I should have thought, would normally have a discourse with the hon. Gentleman, but I am happy to send the hon. Gentleman a special copy to share with him.

It is welcome news and an assurance that the Committee is perfectly entitled to seek from the industry, because we want the rural economy to be supported in every way possible. One would want to see that without the cynical motive suggested by the hon. Member for Christchurch. I hope that, in light of that news, the clause will find favour with the Committee.

Question put and agreed to.

Clause 2 ordered to stand part of the Bill.

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Clause 3

Duty on beverages made with spirits

to be at spirits rate

Mr. Chope: I beg to move amendment No. 1, in page 2, line 18, leave out subsection (1) and insert—

'(1) The Treasury shall lay before Parliament on or before 31st December 2002 a report on the operation of duties on alcoholic beverages that shall include—

(a) information about the market in lower-strength alcoholic beverages;

(b) an estimate of the impact on consumption of the rates of duty on beer, cider, wine and spirits in comparison with the rates of duty on those beverages falling within the provisions of section 1(9) of the Alcoholic Liquor Duties Act 1979;

(c) a summary of any representations received by the Treasury after the day on which this Act is passed relating to section 1(9) of the Alcoholic Liquor Duties Act 1979.'.

The Chairman: With this we may take amendment No. 2, in page 10, line 27, leave out column 5.

Mr. Chope: The purpose of the amendment is to draw out the Treasury and the Minister further on this issue. Unlike on most occasions when there is a dramatic change in a duty regime, there was no consultation with the industry, as I understand it, before the Budget, and the Chancellor's Budget statement came out of the blue. Let us remind ourselves of what the Chancellor said. He said:

''From 28 April, premium package coolers which contain spirits not wine will be taxed not as low-alcohol wines, but as they should always have been, at the same rate as spirits.''—[Official Report, 17 April 2002; Vol. 383, c. 584.]

If the Chancellor believed that premium package coolers should always have been charged at the same rate as spirits, why did he not divulge that view a little earlier? After all, he has been Chancellor for five years and he had time before he came to office to pledge that his Government would do that as a revenue-raising measure; but not a bit of it.

It is also significant that in the Budget statement the Chancellor devoted all of three and a half lines in Hansard to the extra tax on coolers, which will generate £170 million of extra revenue for the Exchequer this year. That was half the lineage that he was prepared to devote to small beer, which will cost the Exchequer a mere £10 million this year. That is another example of the way in which the Chancellor, in his Budget statement, tends to place an enormous amount of emphasis on areas where he is reducing taxes in a gimmicky way, but pays the minimum amount of attention to areas where he is imposing a sharp increase in tax. Indeed, this is a very sharp increase in tax—£175 million a year. Later, we shall discuss whether it can be justified.

I want to draw the Committee's attention to the background to the issue. It is more correct to refer to these spirit coolers as flavoured alcoholic beverages. I understand that that is the modern terminology. I know that the Financial Secretary always likes to be as modern as possible. If he wants to be as modern as possible, I suggest that he begins to refer to these drinks as FABs—flavoured alcoholic beverages. The origin of the tax was the concession on the UK production and importation of coolers, which was introduced in October 1988. It was intended to

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encourage the development of the market for lower strength alcoholic drinks. The concession achieves its objectives, and on that basis one company, Bacardi-Martini, has made a sustained investment of £10 million, which has created 200 new jobs.

I know Bacardi-Martini because it used to be in my constituency when I represented Southampton, Itchen, which is now represented by the Minister for Police, Courts and Drugs. Last year, just before the general election, he opened the £10 million investment in the production line at Bacardi-Martini. At the time, the local press did not report the Chancellor's view that duty should always have been charged on those products at the same rate as spirits, and the Minister for Police, Courts and Drugs was full of enthusiasm for the new production line and the new investment in innovative products.

Bacardi-Martini has launched a number of new products designed to compete directly with bottled beers, lagers and ciders. Clause 3 would distort the market and remove the coolers industry's ability to compete, which it has done since 1995. It has been very successful, and I did not realise that it was part of the Government's policy to penalise entrepreneurial success, which is what they seem to be doing in clause 3. The concession is being removed without any consultation with the industry, which has continued to invest on the assumption that the market would be stable but now finds that it has been totally mislead.

The implications of what has happened go wider than that particular industry, important as it is. Investment in innovative drinks is something that we should encourage in this country. If industry finds that it invests and suddenly, without any advance warning, the Government come along and cut the ground away from under it, it is right to be concerned.

 

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Prepared 14 May 2002