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Mr. Richard Bacon (South Norfolk) (Con): I did not realise how much fun the clause was going to be. If it is any augury of what is to follow, I look forward to
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the collective chance to poke fun at the hon. Member for Yeovil, especially from a sedentary position. Before my hon. Friend the Member for Arundel and South Downs intervened, I was about to ask the Economic Secretary a similar question. If, as a consequence of the clause, people such as my hon. Friend have to pay through the nose for cigarettes, is not the issue mainly about getting the cash?
John Healey: The hon. Gentleman asked the same question as the hon. Member for Arundel and South Downs and I refer him to the answer that I gave. We are determined to drive down levels of tobacco consumption in this country. I look forward to the personal contribution that the hon. Member for Arundel and South Downs will make to that decline in due course.
10.15 am
My hon. Friend the Member for Poplar and Canning Town was not impressed by the hon. Gentleman's suggestion that the debate on this clause may somehow set a precedent and pattern for the remaining clauses. My hon. Friend would be concerned about our progress if it did. On that basis, I hope that the Committee will support clause 1.
Question put and agreed to.
Clause 1 ordered to stand part of the Bill.
The Chairman: Before we move to clause 2, I should point out that it has been drawn to my attention that the clock is not working. To avoid any doubt, we will go by the time on the House of Commons Annunciator rather than the House of Lords Annunciator—they are not always in synch. Clause 2
Rate of duty on beer
Question proposed, That the clause stand part of the Bill.
Mr. Prisk: We have had an excellent and surprisingly thorough debate on the issue of tobacco. We now turn to the question of beer. The comments that I shall make about beer are equally applicable to clause 3 on wine, and I do not intend to deter the Committee further. Deter? I mean ''detain''. It is obviously still early in the morning, and talking about beer at 10.15 am—or 10.16 am according to the House of Lords Annunciator—is questionable.
We note the rises that the Government propose in the clause; I have received no significant representations against those decisions. However, I have three brief questions. First, will the Minister confirm that following the freeze on beer duty in 2001–02, revenue received by the Government rose and the industry benefited from a rise in sales? Secondly, what estimates has the Treasury made of the total impact on Government revenue? As with cigarettes, there has been a change in consumer behaviour: there has been a switch from licensed trade sales to off-licences as the total tax burden has risen. The figure for the latter rose from roughly 23 per cent. of sales to 39 per cent. between 1993 and 2003—that is a big shift in the way that people buy beer. Given that off-licence VAT revenues are
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approximately half those of pubs, what studies, if any, has the Minister commissioned on the total impact on revenues of a further rise in the duty charge? Finally, will he tell us how the approach fits into the Government's overall strategy on alcohol?
John Healey: I hope that I can answer the hon. Gentleman's points during my brief remarks on the clause. Clause 2 increases the rate of excise duty charged on beer by 3.01 per cent. in line with general inflation. As the hon. Gentleman said, that has generally been accepted, and I, like him, have received no fierce representations against the rise. Excise duties on alcohol provide a crucial £7 billion a year for investment in public services and other Government spending. Beer accounts for more than 40 per cent. of alcohol duty receipts. The inflation-only increase, which together with VAT is equivalent to about a penny a pint, is necessary to maintain an important source of revenue. Since coming to office in 1997, the Government have made no real-terms increases in beer duty. This modest increase, which is a freeze in real terms, comes after freezes in beer duty in three of the previous five Budgets.
As with tobacco, it has been said that our levels of excise duty on alcohol are too high in comparison with those of continental European neighbours and that the inflation-only increases will somehow strengthen the motivation to buy beer and wine on the continent. Our commitment to the right of individual citizens to shop freely across borders in the EU for consumption for their own personal use is absolute. It is important not to view excise duty in isolation. A large proportion of cross-border shopping by the British is done in Belgium, the Netherlands and France, and it is true that those countries generally have lower rates of excise duty on alcohol. However, figures from the Organisation for Economic Co-operation and Development show that the UK is a relatively lightly taxed economy with one of the lowest total tax burdens in the EU, certainly far lower than the average.
The hon. Gentleman asked specifically about the level of revenue receipts following previous Budget decisions. If he cannot find the references in the Red Book—I cannot do so immediately—I will write to him with them. He points to a significant shift in the way in which people buy their beer, from on-trade to off-trade. I have discussed that with members of the all-party beer group in Parliament and the British Beer and Pub Association. It is a matter of concern to the pub and drinks industry and of interest to the Treasury. We are doing what we can to track and analyse the matter, and the industry has undertaken some useful analysis.
The matter does not lend itself easily to fiscal decisions that might follow because it is not easy to see how it might be possible to distinguish between on-trade and off-trade sales in determining fiscal policy. My conclusion is that there is a significant shift in consumption patterns which we need to understand, but we have limited scope in fiscal policy terms to influence that or to respond directly.
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Mr. Prisk: I understand that the Minister may not be able to pursue policy further, but I am not clear whether the Government have assessed the overall problem. Clearly, if one set of taxes is raised, there will be a knock-on effect on other taxes, and I assume—the Minister may contradict this—that the Government have looked at the total revenue. If a change made to one fiscal measure has a detrimental effect elsewhere, the Government could end up in deficit in tax terms. What studies have been commissioned?
John Healey: As I said, we have discussed the matter with the industry in recent months and we have looked at the industry's analysis of shifting consumption patterns. I would not describe it as a problem, as the hon. Gentleman does, but it is clearly an emerging feature. We are studying, analysing and assessing it as it becomes clear.
I am aware that there is, in part, a shift that is contributing to the pressures on the beer and pub industry, which plays an important part in the economy, our heritage and, for those of us who like a pint or two, our leisure time. This is a modest, inflation-only increase, which recognises the industry's concerns but maintains an important stream of revenue that is necessary to maintain our commitment to improving public services. I hope that the Committee will support the measure.
Question put and agreed to.
Clause 2 ordered to stand part of the Bill.
Clause 3 ordered to stand part of the Bill.
Clause 6
Road fuel gas
Question proposed, That the clause stand part of the Bill.
Mr. Andrew Tyrie (Chichester) (Con): We have a battery of clauses on hydrocarbons coming up, and I shall not make many general comments about them, except to say that it seems to me that the underlying purpose of virtually all of them is to raise revenue. We had a reminder yesterday that the Transport Minister wants to tax people out of their cars.
I have taken a close look at the clauses and my impression is that, when one scratches the surface, one finds that many of the environmental arguments are slightly less rigorous than they initially appear. We have already had a good canter around clause 5 on the Floor of the House. I should at this point alert the Committee to my interests, which are listed in the Register of Members' Interests. As far as I am aware, none could possibly be said to conflict with the clause or any other clause that will be considered in Committee. I worked for BP some 20 years ago, so I have a vague idea about these hydrocarbon clauses and I have reacquainted myself with some of the terms over the past few days.
The Chairman: Order. Some 30 years ago I looked after the lines going into the Grangemouth refinery. I do not think that that gives me an interest either.
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Mr. Tyrie: I am sure that we will find out more about your deep knowledge of this subject, Mr. McWilliam, as we examine these eight clauses.
As the Minister will no doubt explain, the clause deals with liquefied petroleum gas. Its main effect is to increase the LPG duty by almost 45 per cent., from 5.4p per litre to 7.82p per litre. My biggest worry is the effect that that will have on the LPG market. The case against the Government's action has been emphatically summed up by the chief executive of the Retail Motor Industry Federation, Matthew Carrington, who said:
''The duty increase on LPG could be the beginning of the end for the fuel in the UK. This anti-green measure is a backward step environmentally. It could be a death-blow for the fledgling LPG market, and could destroy public confidence in the viability of all alternative fuels.''
He went on to say:
''At a time when we are all being encouraged to think beyond conventional fuels, it seems paradoxical that the government would take away any incentive to try alternatives, especially since it was the government that encouraged us in the first place.''
That leads to a number of questions, which I should be grateful if the Minister could answer. What is the Government's long-term intention for LPG? Do they have a long-term policy? Where can we find it in a form that looks credible if the Minister does not present it to us today? Why have the Government reversed the freeze that they introduced in 2001? There has been a complete reversal of policy in four years. I will give the Minister time to think about those.
No doubt a brief has already been prepared for him on the question about 2001; I have been trying to think of some explanations for the change myself. First, the Government might intend to encourage people out of LPG and into biofuels because another effect is to narrow the differential between the two. Another possibility is that the Government believe that the industry has now invested enough to make it self-sustaining to switch to LPG, so they can afford to raise rates. If that is the explanation, it is not the majority view of those who were recently consulted. Finally, I ask the Minister to comment on the fact that the majority of respondents in that consultation wanted to see no change in these key differentials.
10.30 am
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