The Exchequer Secretary to the Treasury (James Cartlidge) With
permission, Mr Deputy Speaker, I would like to make a statement on
the alcohol tax system. When in the autumn 2021 Budget the then
Chancellor—now Prime Minister—announced the biggest reforms to
alcohol duty in 140 years, he did so in order to change an outdated
and impractical system. Following our country’s departure from the
EU, our changes will overhaul the UK’s obsolete rules, which our
membership...Request free trial
The Exchequer Secretary to the Treasury ()
With permission, Mr Deputy Speaker, I would like to make a
statement on the alcohol tax system.
When in the autumn 2021 Budget the then Chancellor—now Prime
Minister—announced the biggest reforms to alcohol duty in 140
years, he did so in order to change an outdated and impractical
system. Following our country’s departure from the EU, our
changes will overhaul the UK’s obsolete rules, which our
membership of the EU precluded us from doing. With these new
freedoms, we will embark on radically simplifying the entire
system and slashing red tape.
The new alcohol tax system will adopt a common-sense approach
whereby the higher a drink’s strength, the higher the duty, while
new reliefs will be made available to help pubs and small
producers to thrive. In doing so, we have made a system that fits
with our national priorities, encourages growth and innovation,
aligns with public health goals and is fairer for hard-working
producers. The aim that lies at the root of this reform is to
make the system fairer, simpler to use and more supportive of
business.
Notwithstanding those ambitions, we fully understand that
businesses face difficulty and uncertainty in the face of rising
energy bills and inflation. I have listened to and value
stakeholders from across the sector, and I understand that they
want certainty and need reassurance in these challenging times.
That is why today I can confirm that the freeze on alcohol duty
rates has been extended by six months, to 1 August 2023.
Although new duty rates typically come in on 1 February each
year, I can confirm that the Chancellor will instead make his
decision on future duty rates at the spring Budget 2023, to give
businesses certainty and time to prepare. To further support the
industry, we are going further by confirming that if changes to
duty are announced then, they will not take effect until 1 August
2023. This is to align with the date that historic reforms of the
alcohol duty system come into force, and amounts to an effective
six-month extension to the current duty freeze. Most importantly,
to minimise the burden on business, it avoids the sector having
to deal with multiple changes to duty rather than one.
As I mentioned a moment ago, the alcohol duty reforms will help
create a simpler, fairer and healthier duty system. A higher rate
for sparkling wines will come to an end, meaning that they will
pay the same rate as still wine. Liqueurs will be put on the same
footing as fortified wine, meaning that a sherry will now pay the
same duty as a spirit liqueur, and the duty rate on
super-strength white cider will increase in order to address
public health concerns.
New draught relief will be worth £100 million a year, and to
ensure that smaller craft producers can benefit, the threshold
for qualifying containers will be 20 litres. The wine industry
will also be supported as it adapts to the new system. Duty on
all wine between 11.5% and 14.5% alcohol by volume will have its
duty calculated as if it were 12.5% ABV. This will last for 18
months from the implementation of the new system.
Pubs, cider makers, brewers, distilleries and wine makers have an
historic place at the heart of our communities. They provide not
only thousands of jobs, but hubs that enrich and often define the
social fabric of our villages, towns and cities. By saying to the
industry that it will face just one single industry-wide change
next summer, rather than two over the course of the year, we are
giving it maximum certainty. Hospitality is a major part of our
economy, and while these remain challenging times, we are doing
everything we can to support individual hospitality businesses of
every size so that they can have a prosperous new year. I commend
this statement to the House.
5.34pm
(Erith and Thamesmead)
(Lab)
I thank the Minister for advance sight of his statement. The
Government have confirmed that they are freezing alcohol duty
rates for six months. I know that the sector will welcome the
announcement, especially given the difficulties that businesses
are facing, whether they are producers, suppliers or hospitality
venues. I must say, however, that it is absolutely laughable that
the Government have announced the change in the name of
certainty. We should call it what it is: a U-turn. The previous
Chancellor announced a freeze, the current Chancellor scrapped
it, and now it is back on.
How did we get here? In October 2020 the Government announced a
call for evidence to seek views on how the alcohol duty system
could be reformed. At the time, they said that they would make
the system
“simpler, more economically rational and less administratively
burdensome on businesses and HMRC.”
What we have seen since then, however, is indecision, U-turns and
delays.
The Government finally published a response to the alcohol duty
consultation in September this year. Then in the shambolic
mini-Budget that crashed the British economy, the then Chancellor
announced a freeze on alcohol duty that was due to come into
force in February 2023. The new Chancellor scrapped the planned
freeze, however, in October’s autumn statement—just a couple of
months ago. We now have a screeching U-turn; the freeze is back
in place.
We see again that the Government have no long-term plan for the
British economy. They cannot provide the certainty that
businesses and their hard-working employees need to plan for the
tough winter ahead. They have left businesses and consumers out
in the cold. They may not want to hear it, but that is the
reality. They are unsure what regulatory systems will be in place
in as little as two months.
Today, Labour found that more than 70,000 venues have had to
reduce their opening hours due to the price of energy bills,
which means that almost a third of pubs, bars and hotels are
missing out on customers at the busiest and most profitable time
of the year. Those businesses and producers of wine, beer, cider
and spirits enrich our communities and boost our high streets. I
recently popped into the Standard, a pub in my Erith and
Thamesmead constituency, which is really struggling with soaring
energy bills and the lack of Government support. It needs the
Government to be on its side. The Government promised to tell the
House what the new energy bills support scheme would look like
before Christmas, but we have yet to hear anything from them.
Only Labour has set out a long-term plan to get our economy
growing again.
Looking to the future, we agree with the principles behind the
alcohol duty review and we want the alcohol duty system to be
made simpler and more consistent. We recognise that there is a
balance to be struck between supporting businesses and consumers
and protecting public health, and maintaining a source of revenue
for the Exchequer, but this statement leaves many questions
unanswered.
Can the Minister give an indication of his plans for duty reforms
in the coming spring? Can he confirm whether the alcohol duty
reform package will be implemented in full? If so, what impact
assessment has been carried out on the impact of the transition
to the new duty regime? I hope that he can provide some clarity.
The alcohol sector and the businesses and jobs that it supports
have suffered enough uncertainty and U-turns. These are major
changes that will affect businesses and consumers in all our
constituencies, so I hope that they will be properly thought
through and that we will not see last-minute policy announcements
and changes, as we have today.
I am grateful to the hon. Lady. To be clear, this is good news
for every single part of our alcohol industry and for those who
drink in our pubs. Crucially, it gives certainty to the industry.
The hospitality industry employed 2.1 million people at the
latest reckoning, so it is a huge part of our economy and we want
to do what we can to support it.
The hon. Lady mentioned a U-turn. To be clear, we said that we
would introduce a radical reform of alcohol duty, and we will
introduce that reform. It will come into effect next August. That
reform could not have happened if we had not left the European
Union. It will introduce, for the very first time, differential
duty rates on tap and in the supermarkets. The public want that,
because they value their pubs and understand the importance of
pubs to their communities. [Interruption.] The hon. Lady
intervenes, having sat down. She talked about her local pub.
Obviously, we want to assist her local pub, and all pubs up and
down the country; that is why we have put in place an energy bill
relief scheme worth £18.1 billion, which is a huge
intervention.
The energy bill relief scheme is very generous, but it is
expensive, and we need to ensure longer-term affordability and
value for money for the taxpayer. That is why we are carrying out
a review of the scheme, with the aim of reducing the public
finances’ exposure to volatile international energy prices from
April 2023. We will announce the outcome of the review in the new
year to ensure that businesses have sufficient certainty about
future support before the scheme ends in March 2023. We should
remember that this energy-related support comes on the back of
the enormous support that we put in place during the pandemic.
There were grants, bounce back loans, and of course furlough for
all staff working in the hospitality sector.
We are proceeding with this ambitious reform package next year.
We felt that it was appropriate to give the sector certainty as
soon as possible that it would face only one uprating. That is
the right thing to do, and it shows that the Government are
supporting the hospitality industry.
(Worthing West) (Con)
Like the hon. Member for Erith and Thamesmead (), who speaks for the
Opposition, I support what has been announced today. I declare an
interest: I drink most things, except super-strength draught
cider.
On wine, using an average rate of 12.5% is right; stepped rates
would not have worked, because growers do not know what strength
a wine will be—the strength fluctuates naturally. A
revenue-neutral level makes sense. I hope that this approach will
continue beyond the 18 months.
I hope that the Minister will consider whether farm-gate
concessions can be made for the growing number of vineyards in
this country. I hope that between now and the Budget the
Chancellor will calculate the price and tax elasticity, because
often, when duty rates are frozen, revenue goes up. There have
been times when the rate has gone up and the revenue has gone
down, which is perverse.
I am grateful to the Father of the House for his question—I do
not think that I will ever get another that mentions both
elasticity and high-strength cider; it was an interesting
combination of points. He made a very good point about wine. I
have enjoyed engaging with all the main alcohol sectors, mainly
in November, in the run-up to the making of this decision. As he
knows, we are requiring all wine between 11.5% and 14.5% ABV to
be treated as though it were 12.5% ABV for the purpose of
calculating the duty rate. That will apply for 18 months, so
there is a transition. We have to ask ourselves: if that were
made permanent, would it not undermine a regime that is
ultimately based on taxation by strength? I understand my hon.
Friend’s point and will continue to engage with the sector on
it.
(Dundee East) (SNP)
I welcome the statement. I have long supported an alcohol content
duty regime, and I hope that it delivers the fairness that the
sector needs. As a gentle aside, may I say that we did not need
Brexit to bring in this regime? The UK could have applied for a
derogation, but it chose, over decades, not to do that.
I have some technical questions. The previous Chancellor, the
right hon. Member for Spelthorne (), announced a one-year
freeze on alcohol duty in “The Growth Plan 2022”; that was due to
cost £545 million in 2023-24. The current Chancellor scrapped
that, but anticipates an additional yield of £1.3 billion in
2023-24; that was in the autumn statement 2022. First, how can a
one-year freeze cost £500 million, while its cancellation in the
same year suddenly generates £1.3 billion of additional yield?
Also, we have been told that the freeze is being reintroduced and
will last until August. How much will that cost the
Exchequer?
The proposals following the post-2021 Budget consultation have
been reported as having a modest cost of only £25 million next
year—that was in the autumn statement Green Book. But this
statement seems to suggest that the cost to the Exchequer of the
draught beer relief scheme alone will be £100 million a year.
Will the Minister explain what the net cost of this measure will
be either to the Exchequer, or to the industry? As things stand,
the numbers are not clear and in some cases do not add up.
I am glad that the right hon. Gentleman supports the principle of
the reform package that will come into place next August. I hope
Members across the House can do so. The cost obviously depends on
what decision is made in the Budget next year. That is a matter
for the Chancellor at the time. We know that that will be on 15
March, so there is not too long to wait.
The right hon. Gentleman made the point that it was not necessary
to leave the European Union to make these changes. To be clear,
EU law does not allow member states to differentiate beverages on
qualitative characteristics such as whether the product is on
draught. EU law actively discourages any attempt to support the
on-trade through the duty system. That is also true for a system
based on ABV; by and large, that would have been very difficult
as well. The fact is that this is a radical reform and it has
been made possible by Brexit.
(Vale of Glamorgan) (Con)
I declare an interest as the chairman of the all-party
parliamentary beer group, and someone who enjoys much of what we
have been discussing. May I at least warmly welcome my hon.
Friend’s statement? This will provide significant certainty to an
industry that has experienced significant challenges over recent
times, from the impact of weather on crops, to the impact on
energy prices on the back of the fallout from covid. So this is a
much needed platform on which the industry can build a strong
future. It is looking forward with enthusiasm to the differential
draught beer duty. That is an important principle. Come the
Budget in March, will the Minister consider going much further
that the 5% that has already been promised? The principle, and
the Brexit dividend, can bring significant benefits to our pubs
and beer industry across the country.
I am extremely grateful to my right hon. Friend for his comments.
He has become the chairman of the all-party beer group, but we
should remember the work of the former chairman, my hon. Friend
the Member for Dudley South (). He cannot speak as he is a
Whip, but he put in place all those sessions lobbying MPs and
Ministers and making the case for beer. Much as we enjoy that, it
is a major employer in this country. My right hon. Friend makes
an important point about differential duty. To put that in
context, the 5% cut to cider duty will be the biggest cut to
cider duty since 1923, so it is significant. Of course I cannot
from the Dispatch Box make decisions for the Budget next year,
but it is not too far away and I am sure there will be plenty of
chances for colleagues to engage up to then.
(Stockport) (Lab)
Stockport has several wonderful producers, including Robinsons
Brewery and Stockport Gin, and they have been through a lot over
the past few years. When will the Government finally end the
U-turns and delays, and agree a long-term solution and support
package for the alcohol sector?
I am grateful to the hon. Gentleman for mentioning the producers
in his constituency: Robinsons Brewery and Stockport Gin. I am
grateful to them for all they are doing in these challenging
times to provide employment in his constituency and support
consumers with the products they offer. That is what this is all
about—supporting those companies and vital sectors in our
constituencies. The hon. Gentleman asks about a long-term
commitment. This is the biggest reform to alcohol duty for 140
years. It is a significant reform, getting the balance between
competitive rates of duty and consideration of public health,
which is incredibly important. It is an opportunity we should all
seize and welcome.
(Ludlow) (Con)
I warmly welcome the proposals announced by the Minister today in
one of his most impressive performances at the Dispatch Box, and
in particular the differential duty rates to allow pubs and
restaurants to charge their customers a lower rate of duty than
the off-trade, for which many of us have called for a long time.
I also congratulate him on the point made by the Father of the
House—differential rates on wines will be consolidated to a
single rate for the vast majority of wines—because that reaches
the principle of simplicity, which was an essential part of the
consultation. What is the 18-month period dependent on? If we
were to move then to differential bands per percentage of ABV,
that would not really help the trade to prepare. The trade needs
to know where it is going.
I am grateful to my right hon. Friend for his kind words. My
first ever Parliamentary Private Secretary job was as a PPS to
him, as a brilliant Health Minister. He mentioned simplicity: he
is absolutely right that that is a key part of the reform
package. In terms of the wine easement, as we call it, the 18
months is there precisely to enable the sector to adapt to the
changes that are coming. He was also right to emphasise the on
and off-trade differences. There is a key point on those
differences. It is again about public health. The evidence shows
that, while all drinking should be done responsibly, where people
are socialising and going to the pub, they are less likely to
encounter the more severe end of problem drinking; that is more
likely to happen in private. That is one of the reasons why we
have the differential.
(North East Fife)
(LD)
The Scotch Whisky Association said on behalf of producers that it
was furious about the Government’s decision to increase rates of
duty in the autumn statement. The freeze is therefore welcome,
but distilling is an energy-intensive business. The Minister said
that the energy bills report will come in the new year, but the
Chancellor assured me at the Dispatch Box during the autumn
statement that it would come before Christmas. I would be
grateful if he could explain the delay.
The hon. Lady makes an important point. We are aware of the
importance of energy costs. I was absolutely clear just now that
we will report in the new year. It has taken slightly longer than
expected. These are complex matters. It is complex enough to put
in place household support. Non-domestic support is particularly
complicated because of the huge range of businesses involved.
However, let us be clear what is happening: six months of support
since October, worth £18.1 billion for businesses, including
pubs, distillers and breweries, with their energy bills. That is
huge. Of course, I know that people want to know what happens
next and in the new year we will come forward with the results of
our review.
(Moray) (Con)
It is encouraging to hear support from across the House for these
duty reforms, which were originally announced as a manifesto
commitment at Roseisle distillery in my constituency. Of course,
Moray is home to more Scotch whisky distilleries than any other
constituency in the House. [Interruption.] As my hon. Friend the
Member for Milton Keynes South () says, many are very good
ones. I have been pressing both the Chancellor and the Prime
Minister to maintain the freeze on duty for Scotch whisky for as
long as possible, which is important for the entire industry and
the jobs that rely on it. Will the Exchequer Secretary take on
board what the Father of the House said? When it comes to the
Budget in March, will the Government listen to the industry,
which has time after time proven wrong Treasury officials who
predicted that an increase in duty would increase revenue to the
Treasury? In fact, a freeze in duty increases revenue to the
Treasury and it would be welcome to see that continuing.
I am extremely grateful to my hon. Friend, who speaks with great
knowledge on these matters. He has been a consistent champion for
the Scotch whisky industry, standing up for it in this place,
whether on tariffs or duties. I know that he was lobbying the
Chancellor and the Prime Minster to continue the freeze, so I
hope that he is pleased with the result. On what happens going
forward, I will engage with the Scotch whisky industry and indeed
all the other alcohol sectors. The clear point is that the
extension of the freeze is good news for every single sector and
I hope that colleagues welcome that.
(Easington) (Lab)
I am not sure whether I should declare an interest, but I do
enjoy a tipple—a glass of beer—on occasions. I thank the Minister
for his statement. May I seek clarification in relation to his
comments on differential rates of duty? He mentioned the need for
certainty and the need to encourage diversity in choice in the
small brewery sector. He referred to the new draught relief,
worth £100 million a year, to ensure that smaller craft brewers
can benefit, and he mentioned that the threshold for qualifying
containers will be 20 litres. Can he go further and say something
about the duty taper? Are the Government going to address the
cliff edge above 5,000 hectolitres for small producers?
The hon. Gentleman makes a good point. To clarify, the draught
relief is the new differential duty between the rate applied to
alcohol purchased on draught—in other words, in the pub—as
opposed to, for example, in the supermarket. This is about
creating a level playing field. Small brewers relief is becoming
small producers relief, so it extends to cider makers, for
example.
As a general point, I have a chart here—you will be pleased to
know, Mr Deputy Speaker, that I will not get it out—showing the
old rates and the new rates that will come in under the reform,
and it is striking how much leaner the new system is. I am more
than happy to write to the hon. Gentleman with details of the
taper and the technical points. I think he will observe that this
is a much simpler system.
(Harrogate and Knaresborough)
(Con)
I welcome the extension of the duty freeze and am particularly
pleased to see the draught relief to support the important
on-trade. Can my hon. Friend comment or write to me about the
proposals for mergers and acquisitions to absorb production over
three years rather than one? Basically, allowing that to happen
would facilitate a smoother business transition and smoother
ownership in the sector.
Of course, my hon. Friend was an Exchequer Secretary to the
Treasury, and I should put on record that he did much of the work
that led to us being able to deliver these reforms in the first
place. On his question about mergers and acquisitions, I am more
than happy to meet him and share with him further detail from
officials about the matter.
(Bury South) (Lab)
I speak as the chairman of the all-party parliamentary group on
alcohol harm. I thank the Minister for recently meeting me and
alcohol harm charities. I welcome the introduction of duty in
regard to the strength of drinks, but my view is that it still
does not go quite far enough, although I appreciate the
differential duty. What assurances can he give me, alcohol harm
charities and all those concerned about alcohol harm that he will
continue to work cross-party and cross-Department to ensure that
public health is fundamental in any alcohol duty changes?
I enjoyed meeting the hon. Gentleman, other parliamentarians and
alcohol harm stakeholders on, I think, 24 November in the
Treasury. It was a good meeting, where I think there was
acceptance that we are trying with the reform package to strike
that balance. We want to have competitive duty rates and to look
at levelling the playing field that exists between pubs and
supermarkets, but, equally, alcohol harm and consideration of
public health must be at the heart of this. That is why the
reform package in August has one underlying principle: taxation
on the basis of ABV. We think that that is the right way forward,
balancing both those approaches.
(Strangford) (DUP)
I very much welcome the statement. It is good news not simply
because the hospitality industry is on its knees, but because the
steep increases in prices have led to more people having not a
social drink with friends but a sustained drinking at home
mentality, which can be detrimental to families. Has the Minister
considered taxation aimed at multibuys in supermarkets, in
co-ordination with the welcome freeze for pubs and
hospitality?
I am grateful to the hon. Gentleman for his comments. As I said
last time he asked me a question, the occupant of the Chair
always seems to save the best till last. The hon. Gentleman hit
the nail on the head. Let us be clear. He is talking about
friends who cannot go for a drink because of economic pressures.
With the enormous surge in energy costs and the rise in
inflation, the biggest impact economically is on consumption and
therefore discretionary spend such as in pubs, hitting
hospitality. When we talk about the support that matters, it is
not just help for businesses with their energy bills but the help
that we are giving to consumers, so that they can still find that
expenditure to support our pubs this winter. Of course, we are
helping them by freezing duty for six more months. It is a
win-win for consumers and for the sector.
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