Alun Cairns (Vale of Glamorgan) (Con) I beg to move, “That this
House has considered Alcohol Duty and tax on alcohol.” I am
grateful to the hon. Member for Gateshead (Ian Mearns) and the
Backbench Business Committee for selecting this important topic for
consideration, and to all Members across the House who supported
the case that it should be considered. This debate is hugely
important to a large number of businesses across the country—the
hospitality sector...Request free trial
(Vale of Glamorgan) (Con)
I beg to move,
“That this House has considered Alcohol Duty and tax on
alcohol.”
I am grateful to the hon. Member for Gateshead () and the Backbench Business Committee for selecting
this important topic for consideration, and to all Members across
the House who supported the case that it should be considered.
This debate is hugely important to a large number of businesses
across the country—the hospitality sector in general, brewers,
vineyards, distillers and retailers, employing hundreds of
thousands of people. A disproportionate amount of them will be
small businesses with younger employees, so getting this policy
right really matters.
I start by paying tribute to the Government for recognising this
Brexit opportunity. Taxation and alcohol duty has been needlessly
complicated for too long, yet the UK was tied to EU restrictions
preventing change. The Government set out their intentions to
review the structures in March 2020, followed by a consultation
on their proposals in October last year. The Government’s stated
aims are to make the system simpler, more economically rational
and less distortive, and to reduce the administrative burden. It
is fair to say that these positive intentions are included in the
thrust of the proposals. The consultation is welcome because it
creates the opportunity for hon. and right hon. Members, and the
industry, to respond and to further develop the plans. My
comments are aimed at encouraging the Minister to refine the
proposals further now that the industry, consumers and officials
have considered how they would work in practice.
On beer duty, there has rightly been a warm welcome for the lower
duty on draught beer. There has also been a recognition that the
proposed 5% reduction should also apply to kegs and casks of 20
litres rather than the 40 litres set out. There has been a strong
indication from the Treasury that this may happen, and I ask the
Minister to confirm her intentions. I would also press for a
greater reduction than 5% a pint in order to further support the
industry, and pubs in particular. New research published this
week highlighted that England and Wales have 7,000 fewer pubs
than just 10 years ago. We all recognise the important role pubs
play in our community and society at large, and also in providing
a watching influence on people who enjoy having a drink rather
than their being encouraged by the cost incentive to drink at
home.
The plan to widen the reduced rate from 2.8% to 3.4% ABV is also
a positive move, but a minor adjustment to 3.5% would resonate
much better, and enable the industry to innovate further. To help
to protect smaller brewers from the larger operators who may
simply adjust their recipes to take advantage, it is important
that the relief that they currently receive under the small
brewers relief fully applies at this level. It would also make
this element competitive with EU directives, and provide further
support to small businesses within the industry.
(Strangford) (DUP)
I commend the right hon. Member on bringing forward this debate
on an important issue. The past few years have impacted greatly
on local pubs, bars and restaurants—they are the ones who have
suffered. At the same time, Tesco and Asda, to take just two
examples, can sell exorbitant amounts of alcohol with low tax
while others are left suffering. Does he feel that with the
Government’s proposed steps, which he will speak about
later—lowering alcohol taxation and encouraging people to support
local—pubs can pick up the business they once had and have lost?
Does he agree that that is a positive way forward?
The hon. Member makes an extremely important point. As I said,
some people are encouraged to drink more at home by the
discounted prices offered by the large retailers. I would add
that in Scotland and Wales—I am not so familiar with the position
in Northern Ireland—the retailers receive the extra differential
with minimum alcohol pricing, in comparison with what is
available in England. That gives some room for the Treasury to
react positively to support the pubs and brewers, as he and I
seek to underline.
The small brewers relief has been proven to deliver major
benefits. It enables small brewers to compete with larger
operators and to innovate and generate new options for consumers.
It will be replaced by the small producers relief to offer
similar or common benefits to the wider sector and to prevent the
current cliff edge. Again, the Government’s objectives are
positive, but I am concerned that the proposed changes introduce
significant complexity to the process. Moving from 5,000
hectolitres at a 50% discount, to a maximum of 2,500 hectolitres
at a 50% discount, tapering up to a 100,000 hectolitre maximum at
up to 8.5% ABV, along with a cash limit and an average ABV
measure, is much more complex than it needs to be. It is hard
enough to say, let alone follow the process. It also makes it
much more unpredictable for the businesses we are seeking to
encourage to innovate, to invest and to create wealth at the
smaller end of the scale.
(Weston-super-Mare) (Con)
I congratulate my right hon. Friend on securing this debate on an
important issue, and he is making a powerful speech. I was
particularly interested in his point about broadening the duty
from brewers across to the wider sector. In particular, the cider
sector is important in the west country. Thatchers Cider, based
in my constituency, is complaining, both on its behalf and that
of many other small producers, about the massive increase in
complexity that this collective set of changes has introduced. It
may be easier to understand at a high level, but Martin Thatcher
has written to me saying that for individual firms the
“huge increase in red tape and bureaucracy brought in as a result
of these proposals will result in a need for increased staff to
manage monthly excise duty returns”,
and he goes on to talk about the increased costs of that burden.
I hope my right hon. Friend will address that and persuade the
Minister to respond.
I am grateful to my hon. Friend for his point. The significant
advantage that the cider industry receives—the differential in
taxation status— is testament to the campaigning that my hon. and
right hon. Friends have done for the industry. Some have called
for that to be addressed, but that is not proposed in the
Government’s plans, and I am not suggesting that should change.
He makes an extremely important point about the complexity. Even
when there are potential advantages for some sectors over others,
the complexity detracts from that. The simpler the process, the
better that would be.
I hope that the Minister agrees that the current proposal is too
complex, and a simplified approach would work much better. The
principles or broad approach of this incentive are important. Why
is there no similar support for UK vineyards as well, all of
which in the UK are small operators? These businesses invest for
many years before receiving a return on that investment. The
quality of wine competes on par with traditional winemaking
countries and wins.
Llanerch Vineyard and Glyndwr Vineyard in my constituency are
excellent examples. They invest heavily, have long lead times,
are excellent employers and are great visitor attractions. In
reality, they are small operators, and extending either the
principle of the small producers relief to include vineyards or
simply increasing the current arrangement—albeit simplified from
the 8.5% ABV limit—would make a major difference and provide
significant advantage to wines made in England and Wales. Support
for such vineyards in the UK would not pose risks or undermine
the Treasury’s ambitions and can be met within the World Trade
Organisation rules.
(Mid Sussex) (Con)
This issue has been specifically raised with me by Bolney Wine
Estate, on which the duty particularly impacts, along with other
nearby producers, such as Ridgeview, which is on the edge of my
pitch in the constituency of my hon. Friend the Member for Lewes
(), and Kingscote in East
Grinstead. There is a collective ask across the English and Welsh
wine industry, and I hope that the Minister, my right hon. and
learned Friend the Member for South East Cambridgeshire () will be able to help these
businesses to grow. They are small producers and tourist
attractions, but above all they are businesses.
My hon. Friend makes an important point that underlines the
issues that we have highlighted.
(Warley) (Lab)
Will the right hon. Gentleman give way?
I have limited time, but I will give way briefly.
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?
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.
(Tewkesbury) (Con)
I entirely agree with my right hon. Friend, particularly on this
point. A company in my constituency, Direct Wines, has stressed
the dangers to its business if the changes go ahead. Does he
agree that they should be delayed until we have had more chance
to talk to people about how they will affect their business?
My hon. Friend makes an important point about the complexity of
the system, particularly in relation to wines and the variation
of ABV, which depends on circumstances. I am torn about delaying,
because if we can get this right—the industry needs only minor
changes—let us do it as quickly as possible. Clearly, however, we
would not want the proposals for wine to be introduced as they
stand, so if they have to remain, it would be better for them to
be delayed. It is a challenge, and perhaps the Minister can
indicate how long she expects it to take to see the changes.
These issues are technical and complex, but they are hugely
important to industries that employ and entertain millions of
people across the UK. Previous Chancellors have often made a name
for themselves by working closely with the drinks industry on
such technical issues and have delivered a huge boost to
employment, investment and society at large. It has also gone
down very well with the popular press when they got it right
because of the popularity of the alcohol sector, and rightly so.
This is an opportunity to do the same. The intentions are right
and the structure is logical, but changes along the lines I have
highlighted would ensure that this important industry can
continue to develop, grow and deliver for all our
constituents.
2.50pm
(St Albans) (LD)
I am incredibly pleased to be able to speak in this debate. I
would like to speak about beer, cider and fortified
wine—sometimes known in parts of Westminster as a work event.
The former Chancellor’s relief scheme for draught beer and cider
excludes far too many of the small brewers and cider producers
that need the most help. The ill-thought-out proposal to impose
the 40 litre minimum container size to qualify for help has
obviously been dreamt up by someone who has absolutely no
knowledge at all about how pubs up and down our country operate.
Almost all craft and small batch beers are kegged into a 30 litre
container, which is 6.6 gallons for anyone who still wants to
reintroduce imperial measurements. A small 4.5 gallon cask for
real ale—a pin—holds just 20 litres, and many ciders are
delivered to pubs to dispense in 20 litre bag-in-box
containers.
Some 34% of licensees stock products in containers smaller than
40 litres to improve beer quality and choice for customers, while
46% of venues said that some products are only available to them
in containers of less than 40 litres and one in 10 venues can
only stock containers of less than 40 litres as they do not have
the cellar space to sell the larger ones. I hope that the
Treasury can finally own up to the fact that it plucked this
figure out of the air, and instead give small brewers, cider
makers and our struggling hospitality industry the break they
need. Will the Minister confirm today that the industry will get
the much-needed assurance that the threshold will be lowered to
20 litres after all?
I also want to talk about fortified wines because the forthcoming
changes to the duty regime will have a significant and arguably
disproportionate effect on port producers in particular. In my
constituency, I have one of the UK’s leading distributors,
Fells—a major employer in my constituency and in Hertfordshire
more broadly—which is braced to see a dramatic decline in its
sales should this go ahead. Aside from the dramatic price
increase that will follow the changes, there are very real and
legitimate concerns about the implementation costs and the
increased red tape. The system changes, administrative burden and
ongoing compliance with such a system will have further negative
effects. The Government’s objectives for the alcohol duty reform
consultation were welcome. They want to simplify the regime and
reduce red tape, but the proposals simply do not do that. For
wine, the proposed model cannot be described as simpler.
Introducing taxation by degree will be complicated, costly and
impractical. Unlike other categories of alcoholic drink, there is
a far greater permitted tolerance for the alcohol content of wine
made from fresh grapes, meaning that without testing every wine
at the point excise duty becomes payable, it is not possible to
determine alcoholic strength accurately.
Introducing such a system will disproportionately hit
wine-dominant or wine-exclusive small and medium-sized
enterprises, importers and retailers, which are an important
element of the customer base for my constituency business, Fells.
It is requesting that the Government conduct a full and thorough
cost-benefit analysis of the impact on the wine sector and that
this analysis should be undertaken as a matter of urgency before
any such system is introduced. I would be grateful for assurances
from the Minister that they would indeed consider running such an
analysis.
Additionally, under the current proposals the suggested model
penalises warmer climates. There are limited tools available to
vineyard managers to keep ABV down to an acceptable degree, and
production rules forbid winemakers from removing more than 2% of
ABV. I understand that the Minister has met the Wine and Spirit
Trade Association; it is also seeking further meetings because it
is looking for an assurance that the Government will instead
consider a more workable way of taxing wine by applying a flat
rate based on 12% ABV for all wine and 18% ABV for all fortified
wine.
The Government’s proposals would have a particularly negative
impact on the fortified wine business. The total UK market for
fortified wine is £311 million. Port accounts for £82 million of
that, and Fells in my constituency is the leading UK importer and
distributor. The Government proposals would add £1.09 duty to a
bottle of port, resulting in an 11 % increase on the average
price per bottle. Fells estimates that in such a highly
price-sensitive market this increase could lead to an 11% decline
in sales, or approximately 1 million bottles per annum. Fortified
wines such as port and sherry are generally not consumed
irresponsibly; they are bought and consumed at festive occasions,
to mark exams and graduations, weddings and anniversaries, and at
Christmas—they are an occasional treat. But we are in a cost of
living emergency when treats are often the first things to go,
and therefore this regime could have a huge impact on this
market. So I ask the Government to think again, to consult more
and not rush this through, and to do that cost-benefit
analysis.
Overall, the alcohol duty reforms proposed by the Government just
tinker around the edges in dealing with the pressures facing
hospitality. We have a broken business rate system that penalises
pubs, restaurants and high street shops. We have spiralling
energy costs which remain uncapped for small businesses. We have
food inflation and labour shortages. I ask the Government to
seriously consider bringing forward a proper plan to protect
British brewers, distillers, winemakers and their
distributors.
2.57pm
(Meon Valley) (Con)
I congratulate my right hon. Friend the Member for Vale of
Glamorgan () on securing this important
debate.
It is a pleasure to speak in this debate on the taxation of
alcohol and the Government review, and I should first declare
that I am the chair of the all-party group on wine of Great
Britain. I am also fortunate to have some fantastic producers in
my Meon Valley constituency, who will have an interest in these
policies, including brewers of beer, cider makers and, most
importantly, vineyards. I have kept in close touch with them
throughout the process of the consultations and review, and the
points I make here are heavily influenced by their comments to me
over many months.
In Britain we are increasingly a maker and exporter of wine. Our
tastes as consumers, technological advances, and—we must face
it—climate change have driven change and growth in the industry.
I very much welcome the removal of the supertax on English
sparkling wine. We have some brilliant vineyards around the UK.
Hambledon Vineyard in my constituency is at the forefront with
its award-winning wines. This will help it develop the market at
home alongside its continuing success in the export market.
Vineyards face high start-up costs, and in the case of sparkling
winemakers up to a decade of careful work before they have a wine
they can market. I was pleased that the vineyards of Sussex
recently achieved protected designation of origin status and hope
that their counterparts in Hampshire and other counties will be
able to achieve a similar designation. I will do whatever I can
to help them get that recognition of their excellence.
In view of the challenges that winemakers and merchants face, we
must look again at the proposals on wine duty. I appreciate the
desire to simplify what has become a complex regime that dates
from a time when we neither consumed as wide a variety of wines
nor had so many made in Britain. However, the current proposals
would increase the price of around 70% of wines, which would
affect many small and medium-sized enterprises in the wine trade.
It would also create a regime of 27 different bands, as we have
heard, and the burden that that would impose on independent wine
importers and merchants is a mountain of red tape, which we are
generally trying to reduce.
The Wine and Spirit Trade Association has put a range of
proposals on wine and spirits to the Treasury, including bringing
small producers of wine and spirits into the small producers
scheme that is available to brewers and cider makers. I favour a
solution with duty based on 12% as the midpoint of the 8.5% to
15% range, which would cover three quarters of all wine.
Fortified wines have a midpoint of 18%, which would provide a
logical basis for another band. That would also tie in with the
global market, which regulates all wines between 8% and 15% as
just one product.
Turning to brewers, I ask the Treasury to look again at the Make
it 20 campaign, led by the Society of Independent Brewers. The
introduction of the draught duty rate has been welcomed across
the industry and by CAMRA. Supporting smaller brewers has been a
long-term aim of the Government but, in order to get the best out
of the draught duty rate, we need to reduce the container size to
which it applies to 20 litres. The 20-litre and 30-litre
containers are the mainstay of supply for small brewers and, with
the limit at 40 litres, there is a good chance that many would
miss out.
When we look at the health of the pub sector, consumers want to
see smaller brewers represented. YouGov recently surveyed pub
drinkers and found that more than three quarters of respondents
cited that as an important factor.
I will turn to cider, mentioned by my hon. Friend the Member for
Weston-super-Mare (), which is the area of
business that has benefited most from Government support in
recent years. I urge the Government to act at that same level for
our winemakers and brewers. Cider is a great British success
story. Having talked to cider makers such as Meon Valley Cider, I
look forward to them going from strength to strength.
Pubs faced a tough time during the pandemic. I argued strongly
for restrictions on them to be lifted as quickly as possible and
I wanted them to be able to continue off-sales while they were
closed for on-sales. The sector initially recovered strongly
during the pandemic, thanks to the Chancellor’s eat out to help
out scheme. However, even with the good weather that we are
having this summer, it is clear that pubs and restaurants are
still operating below pre-pandemic levels—a figure of minus 20%
is often mentioned—and that leaves a potential black hole in
their margins, which are tight at the best of times, with some
fairly rapacious major businesses in the supply chain. Macro
brewers and pubcos have not been good friends to the pub trade,
and that is why it is vital that we support our smaller
producers. The Treasury has generally been constructive
throughout the process, and I am confident that my colleagues
will continue to ensure that we get the right policies in place
to help our small brewers, cider makers and, in particular,
vineyards.
3.03pm
(Dudley South) (Con)
It is a real pleasure to speak in the debate. I congratulate my
right hon. Friend the Member for Vale of Glamorgan () on securing it at such a vital
time for so much in the sector. It is a particular pleasure to
speak as chair of the all-party parliamentary beer group, which
is the largest APPG in Parliament.
A lot of public focus is given to the very real harm that can be
caused by alcohol and overconsumption, but not enough attention
is given to the real contributions that British beer and our
community pubs make to almost every element of life. On balance,
they genuinely are forces for good. They are a force for good
economically, with beer and pubs nationally contributing about
£23 billion to GDP and, as I am sure the new Chancellor will
become very aware, about £13 billion to the Exchequer. They are
present in every single one of our constituencies in every part
of the country. We have about 1,800 brewers —possibly more—across
the UK, including about 150 in the west midlands. My own
constituency is home to at least five breweries.
They make huge contributions to our local economies. They are a
force for good for employment, with beer and pubs employing
around 900,000 people, with an almost identical gender balance.
Around half the people employed across the sectors are aged under
25 and there is a fantastic variety of career progression across
the industry. They are good for tourism. British pubs are named
consistently as one of the top three things that visitors to the
UK want to do here. They are good for exports. They are the
third-highest food and drink export sector, worth about £550
million for the UK economy. Before the pandemic, the sector was
growing more quickly than almost any other export sector. They
are good for our society and culture. At a time when loneliness
and isolation are often the biggest challenges facing some of the
most vulnerable people in our communities, in many areas the
community pub really is the last of the services in towns and
villages.
I thank my hon. Friend for raising the long-term and managerial
career opportunities in the sector, and for raising the
charitable good will and fundraising that happens in many of our
pubs. I recently went to a “Brave the Shave” in the Burrell Arms
in Haywards Heath, which raised masses of money for Macmillan
Cancer. That sort of thing goes on up and down the land, bringing
people together and bringing good causes and good will
together—as well as a good time.
My hon. Friend is absolutely right. PubAid estimates that pubs up
and down the country contribute more than £100 million every year
to charitable activities and community causes, and a further £40
million for grassroots sports in our constituencies, so they
really are forces for good in our communities.
As my hon. Friends have said, our pubs, brewers and many other
parts of the sector have long been over-taxed. UK pubs and
brewers are taxed around 20 times more than US tech companies, as
compared by their turnover. They are taxed around five times more
than UK gambling. The UK has one of the highest levels of beer
duty in Europe—behind, I think, only Finland and Ireland—which is
10 times that of Germany. Taken together, our pubs and brewers
contributed over £10 billion in tax last year, even in reduced
market conditions—£1 in every £3 spent in a UK pub goes straight
to the Treasury. I am sure the Minister is very grateful for
that, but I am also sure that Members recognise the disadvantage
and burden that places on responsible places for people to drink
responsibly and in moderation, compared with the opportunities
that supermarkets in particular and other off-trade retailers
have to sell their products far more cheaply, with far fewer
employment costs and far fewer responsibilities to regulate who
they are selling to.
Does the hon. Gentleman agree that it is an absolute travesty
that about 10,000 pubs and restaurants could be lost if there are
not more fundamental reforms to the tax system that affects UK
hospitality? Many say that the pressures they face now are even
worse than those they faced during the pandemic. Does he agree
that we need to go much further than just having the alcohol duty
reforms?
There has been a long-term trend away from drinking in pubs and
on-trade, and towards supermarket sales making up a greater share
of the market. Some of that will be due to natural changes in
consumer preferences and people’s lifestyles, but we should not
allow the tax system to aggravate such trends, which have real
social and economic consequences. Where we can tweak the tax
system to make sure that our pubs, brewers and other producers
get a fairer deal and where we can reduce some of the
disincentives to people consuming drinks in well-regulated public
houses, we should do so.
I welcome the alcohol duty review, which is a massive step
forward. The level of duty, which is much higher than in most
comparable countries, is compounded not only by VAT, but by
extremely high business rates. I hope that we can look at how our
system of local business taxation can be further modified. The
Treasury has clearly been piloting attempts to charge digital and
online companies. That is an important starting point, but we
need to make sure that our taxes on clicks are comparable with
our taxes on bricks, to help sectors that have to operate in the
real world. Nobody has yet established a viable virtual pub. A
few people tried during the pandemic, but I do not think that any
of those experiences quite worked out. It is noticeable that in
April and May last year, most people were quick to get back to
the real thing rather than using the online equivalent.
On the duty review, the proposed reforms are hugely welcome,
particularly the banding that recognises the progression through
alcohol strengths, so that higher-strength drinks have, if not
quite exponentially more, progressively higher levels of duty
compared with low-strength drinks. The changes to the low-alcohol
band for beer for 2.8% to 3.4% will make a big difference to the
availability of good-quality, lower-alcohol beer. Brewers find it
relatively simple to change recipes to bring a 3.6% or 3.7% real
ale down to 3.4%. It is much easier than getting a recipe down to
under a 2.8% threshold without changing the character of such
drinks, although I agree with my right hon. Friend the Member for
Vale of Glamorgan that 3.5% would clearly be preferable, if we
are looking at those details.
Similarly, the proposals for small brewers relief are hugely
preferable both to the system that we have and to the Treasury’s
initial proposals, which would have caused a lot of difficulties
for relatively small breweries. I accept that the changes will
take a while to get our heads around—that is probably putting it
lightly—but the current system has a distorting effect, with
sharp edges that act as a very strong disincentive for growth and
that impose an unnatural plateau at about 5,000 hectolitres. That
means that unless businesses are confident that they will grow
significantly beyond 5,000 hectolitres, they have very little
incentive to invest in the extra staff and the extra capital to
do so. The system that has been proposed is far better. It is
very noticeable that what for a long time was probably the most
contentious issue in the beer sector has now brought people
together: although there are some details that each person might
like to change, the overwhelming majority in the sector now feel
that they can live with it.
I suggest that the Treasury look at whether it might be possible
to extend some form of small producers relief beyond beer and
cider, to include small wine producers. That would have
particular benefits for English wine producers, and of course for
Welsh wine producers; I must say to the SNP Front Bencher, the
hon. Member for Gordon (), that I do not know the
scale on which Scottish wine producers are operating at the
moment, but I imagine that they mostly fall within the smaller
category.
The differential draught beer duty rate that the then Chancellor,
my right hon. Friend the Member for Richmond (Yorks) (), announced in his Budget last
autumn is a fantastic proposal. It has the potential to make a
big difference to supporting responsible beer drinking in our
pubs, cafés and bars, instead of our supermarkets and—let us be
honest—our park benches, town centres and street corners.
The difference will depend on the scale of the differential. The
5p differential is a good start in establishing the principle,
but getting a new system up and running is likely to mean that
almost all of it will be retained by pubs and breweries. That
will typically mean an additional investment of about £2,000
being available to pubs, but if we want our consumers and beer
drinkers to benefit from the draught beer duty rate, the
differential will need to be widened. Only once it gets to 10p or
15p will we start to see a real difference in what customers pay
for a pint at the bar, which will also make a difference by
encouraging people to drink on regulated premises instead of
buying from the off-trade.
We would like to see the differential not only increased but
introduced at the first available opportunity. I know that the
Treasury was looking at introducing something in probably the
spring of next year, but given the difficulties that we all know
the hospitality sector has had over the past two years or so, if
a suitable fiscal event or financial instrument could be found
that would allow the measure to come into force before this
year’s Christmas season, that would make a massive difference. It
would help the pubs that the hon. Member for St Albans () referred to, which may be
struggling, on the edge of going under or just about managing to
stay afloat through the winter. Bringing the differential in
early would make a big difference.
There has clearly been a very lively debate about container size;
20 litres is very obviously the correct answer. Having had
discussions with the last Chancellor and the last Economic
Secretary, my hon. Friend the Member for Salisbury (), I think they recognised that 20
litres was where we needed to end up. I very much hope that
incoming Ministers will reach the same conclusion. I think that
the last Chancellor broadly accepted the argument that 40 litres
was probably not the right container size for the threshold: he
was pictured with the Prime Minister holding 30-litre containers
to launch the policy. The 20-litre level will make a big
difference to the range and types of beer that can be made
available, particularly for our smaller brewers. However, I also
think we should look at the provisions on distribution
mechanisms, and ensure that containers do not necessarily have to
be connectable to either a gravity-pulled or an electrically
pulled draught system. When it comes to the pins of the kind
typically seen at beer festivals in all our constituencies, where
there is just a tap in the side of a barrel, I think that
applying the discount to a container of over 20 litres makes a
good deal of sense. Brewers I have talked to estimate that less
than 0.1% of their beer is sold through those taps. We are not
risking a massive distortion in the market from people buying
huge numbers of these containers for parties at lower rates of
duty, and applying this to all containers of over 20 litres would
constitute a minimal cost to the Treasury.
The system introduced a few years ago in Australia does have a
requirement involving connectors, partly because the Australian
market is very different and partly because there is a much lower
threshold—from memory, I think it is as low as 8 litres—but I
think that a provision for 20 litres would capture virtually all
the beer that almost all the small brewers that we are trying to
support supply through our pubs and our licensed premises, and
that they would benefit. I therefore hope that the Treasury will
settle on that, as the obvious figure, in its final decision.
Once again, I thank my right hon. Friend the Member for Vale of
Glamorgan for securing the debate. I also thank the Treasury for
all the discussions that we have had over the past couple of
years, particularly since the publication of the duty review. We
look forward to the speedy introduction of these measures so that
our brewers, our publicans and UK hospitality as a whole can
benefit, succeed and thrive.
Mr Deputy Speaker ( )
We now come to the Front Bench winding-up speeches. First, I call
.
3.21pm
(Gordon) (SNP)
Let me first say what a pleasure it is to speak in the debate,
and congratulate the right hon. Member for Vale of Glamorgan
() on securing it. Let me also
declare my membership of the Scotch whisky all-party
parliamentary group, and say how pleased I am to see that, after
a day of turmoil, the Minister is still in her place. I am going
to have to get to grips with two other Ministers whom I shadow,
so it is nice to see some continuity in at least one area of my
responsibilities on the APPG.
Alcohol duty has been ripe for review for a considerable time, on
the grounds of complexity and economic impacts, but also on the
grounds of the social and health impacts that it may have in
influencing behaviour. I think—indeed, I know—that this could
have been done at any time. Contrasting levels of duty are
applied across the European Union, and the UK was towards the
higher end of that, but many other countries had considerably
lower rates, so it is certainly not a Brexit benefit that the UK
Government are now able to turn their attention to this
matter.
The former Chancellor clearly had an agenda to simplify the duty
regime. It is perhaps understandable that the current Chancellor
has not had a chance to share his thoughts with us. Of course, he
may not even be Chancellor past the autumn; it will depend on how
the cards fall. In any event, I think that this is the right
moment for us to have this debate and reopen some of these
issues.
Ideally, to my mind, what any Government ought to be looking for
is a regime that supports domestic innovation—product innovation
and technological innovation, of which there is a great deal in
the alcohol-producing sector—along with investment and
production, while also keeping the social and health impacts of
alcohol consumption in mind. On that measure, in terms of the
review of the parameters that have been set out so far, I have
always taken a dim view of the apparent bias against stronger
alcohols such as whisky, vodka and gin, and I will go on to
explain why.
As I have said, I am a member of the all-party parliamentary
group on Scotch whisky, and in my constituency in the north-east
of Scotland there are three significant distilleries. The
Glendronach distillery is near the village of Forgue, and the
Ardmore distillery is near the railway at Kennethmont. The third
is Glen Garioch and, unusually for a Scottish distillery, it sits
not in the middle of an iconic natural landscape but slap bang in
the middle of the town of Oldmeldrum. If you drive through
Oldmeldrum, you drive through the different buildings of the
distillery, depending on the route you take, and it really is
quite remarkable. If you are in the north-east of Scotland, I
would encourage you to visit it. Give me a shout and I’ll come
along with you—it would be great to be able to show off such a
distillery.
As well as producing excellent products, those distilleries are
right at the heart of our visitor economy. Together with the rest
of the whisky sector, they make an enormous contribution to
Treasury revenues and to the UK balance of payments. It is not
just the whisky that is important; many distillery sites in
Scotland also produce the spirits needed to make vodka or gin. In
Aberdeenshire there is a burgeoning sector of craft gin
manufacturers and those who produce the botanicals to go along
with that. There is real innovation there, and while I would not
wish to overstate this, it seems iniquitous that we are taxing
that domestic product at such a high rate and as a consequence
perhaps influencing consumer behaviour to prefer other forms of
drink that are not produced domestically.
Those levels of duty are disproportionate, and that is harmful on
a number of levels. For one thing—I know from my discussions with
the industry how significant this is—it becomes very hard when
trying to strike trade deals, which the Government are obviously
trying their best to do at the moment, to encourage other
jurisdictions to bring down the sometimes punitive rates of duty
that they apply to these products. There is also the inhibition
that that, as well as some tariffs, puts on the bourbon sector.
People might think that bourbon is a competitor product, but in
many ways it is a complementary product due to the nature of the
ownership of the distilling industry. Quite often the
multinational companies trying to sell bourbon in these markets
are also investing heavily in new production and new practices in
the Scotch whisky industry, so it is all interlinked. The high
level of taxation that we put on that product on the shelf is not
very helpful.
Finally, let me say something about minimum unit pricing. This
policy was introduced in Scotland, and I think it is fair to say
that it was quite controversial at the time. It was attacked for
a number of reasons, some good and some not so good. We have now
experienced the policy in action for some time, and I can happily
report that there have not been the predicted traffic jams at the
border on the A1 at Berwick or on the M74 at Carlisle due to
people doing booze runs. That did not happen. The most valid
criticism of that policy approach was not so much about the
increase in price as about the fact that the benefit of the
increase did not go to the Government to invest in health
measures but instead rested with the retailer. That was a fair
criticism. I think it is fair to say that if any Scottish
Government had had control over the range of duties applied to
various drinks, they might have had a minimum price in mind, but
they would have used duty as a mechanism rather than imposing
that on the retailers.
(Caerphilly) (Lab)
Minimum unit pricing has also been introduced in Wales, and the
feedback there has also been very positive.
I thank the hon. Member for that intervention. It has indeed been
introduced in Wales, and the evidence is that it has been a very
positive thing in both jurisdictions.
We also need to look at promotions. Minimum pricing and other
associated policies ended the practice of supermarkets using
cheap, below-cost-price alcohol as a loss leader to draw people
through the doors. Today’s evaluation of minimum unit pricing in
Scotland—I am sure there will be similar evaluations in
Wales—shows that, in the 12 months following its introduction
before the pandemic, there was a 2% reduction in off-trade
alcohol sales and, more significantly, a 10% decline in
alcohol-specific deaths in 2019. With more alcohol being drunk at
home and with the changes in behaviour we saw throughout the
pandemic, it is still reasonable to conclude that minimum unit
pricing is contributing to a lower level of harm and adverse
health, crime and social outcomes than might otherwise be the
case.
All of this has been part of an initial suite of measures to try
to change the relationship we sadly have with alcohol in
Scotland. We can have an incredibly positive relationship with
alcohol, but we cannot be blind to the impacts it can have. I am
pleased that the Scottish Government are reviewing the
effectiveness of the current system of alcohol brief
interventions where people have exhibited problem behaviours, and
are reviewing how the product is marketed and presented to
consumers, as part of delivering those improved public health
outcomes. I believe a review of where we are on duties is a ripe
opportunity to do that, and I would be failing in my duty as an
SNP spokesperson if I did not say that this would all be better
if it were devolved.
On a point of order, Mr Deputy Speaker. I should have drawn the
House’s attention to my entry in the Register of Members’
Financial Interests relating to the hospitality I have received
from, appropriately, the hospitality sector. Can you advise on
how I may put that on the record?
Mr Deputy Speaker ( )
Thank you for giving me notice of your point of order. You have
just done that, and I thank you for correcting the record at the
earliest opportunity.
3.31pm
(Erith and Thamesmead)
(Lab)
I congratulate the right hon. Member for Vale of Glamorgan
() on securing this Backbench
Business debate. He covered all the points very well.
Despite the strange situation in which we find ourselves, I
welcome this opportunity to debate the principles behind the
taxation of alcohol and the details of the Government’s alcohol
duty review. I am glad the Government have managed to find a
Minister to respond to this debate, and I welcome her to her
place. We will see whether the review survives the change of
Government.
Over recent months, I have engaged with representatives across
the alcohol sector on these significant changes. The alcohol duty
review represents the biggest change to alcohol duty in decades,
so it is welcome that the House has had the opportunity to
consider the changes in advance of legislation, for which I thank
the right hon. Member for Vale of Glamorgan.
I also thank all the other hon. Members who have contributed.
Many of them spoke on behalf of alcohol producers and retailers
in their constituency. It is clear that our great many breweries,
cider makers, distilleries, wine shops and other alcohol-related
businesses play an important role in supporting local jobs and
economies, and we all know the importance of pubs to our local
communities. It is good that hon. Members have been able to
champion these businesses today.
Before addressing the specific issues, I will set out the
principles that Labour believes should guide the changes. We
agree that the alcohol duty system should be simplified and
should be more consistent. For this reason, we welcome the
principles behind the alcohol duty review, but we believe careful
consideration should be given to individual changes. We recognise
that there is a balance to be struck between supporting
businesses and consumers, protecting public health and
maintaining an important source of revenue for the Exchequer.
Importantly, the Treasury must make sure there are no unintended
consequences as it seeks to make these changes—we have heard
about some of those unintended consequences in this debate. We
also believe that special attention should be given to ensuring
that small domestic producers are able to compete with global
players across the industry.
I will now turn to some of the specific proposals for each
category of product. The Government are proposing significant
changes to wine duty. Currently, wine is taxed by volume, rather
than by strength, and the Treasury states that there are a number
of anomalies and distortions in the current system. The alcohol
duty review therefore proposes that all wine products will be
taxed in reference to their ABV. It also proposes abolishing the
different rates for still and sparkling wine, which will benefit
English sparkling wine producers. Some hon. Members have raised
some of the issues of complexity in relation to wine duty, and I
have also heard these concerns directly from the industry. The
Wine and Spirit Trade Association says that the proposed system
will replace one band with 27 bands, resulting in a significant
increase in red tape for businesses throughout the supply chain.
That is likely to cause particular problems for small and
medium-sized enterprises, including SME importers and retailers.
I hope the Minister is aware of these concerns, and I am sure all
hon. Members would be interested to hear from her about any
changes the Treasury is considering to mitigate the impact on the
wine industry. We believe that the Government should set out a
comprehensive assessment of the impact that these proposals will
have on the regulatory burden faced by businesses in the wine
sector and the steps the Government intend to take to mitigate
them.
The Government’s overall proposals for beer duty are relatively
minor, as the current system is already based on the ABV of the
product. The reduced rate for products below 2.8% is being
widened and will now include products of up to 3.5%. I note this
has been welcomed by the Campaign for Real Ale, which says that
it will incentivise the production of lower-strength beers.
However, the Society of Independent Brewers has raised concerns
that this change may allow large brewers to undercut small
brewers, so will the Minister look into this? The alcohol duty
review also announced the Government’s intention to introduce a
new draught duty discount of 5% for draught products sold in
large containers. Labour welcomes that proposal as an important
way to support pubs as they recover from several very difficult
years during the pandemic. However, there are concerns that the
proposal to set 40 litres as the minimum container size risks
excluding small brewers and small community pubs, which often use
20-litre or 30-litre containers. We believe the Government should
set out how many small brewers would benefit at different minimum
sizes of containers. Will the Minister address that in her
wind-up?
The alcohol duty review states that cider duty is not a
well-structured tax, as high-strength ciders currently pay
proportionately less duty than those at lower ABV. The review
also directly links that to high rates of problem drinking
associated with very strong white ciders. However, the review
continues to treat cider favourably, with a rate less than half
that of beer. We do recognise cider making’s importance to many
rural communities, but is the Minister concerned that the
proposed changes will not go far enough in tackling the problem
drinking associated with very strong ciders? Will she set out
what assessment the Treasury has made of the public health impact
of different rates of duty on high-alcohol cider, given it makes
up a disproportionate amount of alcohol-related harm?
Spirit distillers, particularly the Scotch whisky industry, make
a very important contribution to the UK economy and are an
important export for the UK. I urge the Government to work with
this industry to ensure it remains competitive. The Government
are not making significant changes to the structure of spirits
duty, but we welcome their reducing the duty on spirits below 22%
to encourage the development of lower-strength spirit-based
drinks.
Finally, I wish to say a few words about the proposal for a new
small producers relief. Labour introduced a small brewers relief
in 2002 and is proud of the effect that it has in supporting
small brewers and creating the vibrant UK beer scene that we know
exists. We therefore support proposals to extend the scheme to
other producers, but believe that the Treasury should work
closely with representatives of small brewers and cider makers to
ensure that it continues to work effectively, because, as Members
will know, the devil is always in the detail.
I have also had concerns from the wine and spirits industry that
the proposed small producers relief will not apply to products
above 8.5% ABV. The Government need to explain why they are
excluding small distillers and small English and Welsh wine
makers from this relief and what assessment they have made of the
merits of including them.
To end my remarks, I look forward to hearing from the Minister on
all the important points that I have raised. These are major
changes that will affect businesses and consumers, and they
deserve careful consideration. We will be scrutinising the
forthcoming legislation closely, and I look forward to debating
the issues again in the future.
3.40pm
The Financial Secretary to the Treasury ()
It is a pleasure to respond to this debate and I congratulate my
right hon. Friend the Member for Vale of Glamorgan () on securing it. It has been
good to hear from hon. Members across the House and from the
chairs and members of very important all-party groups on this
subject.
It is very clear that my right hon. Friend is an ardent advocate
for producers and traders in his constituency. Indeed, Wales has
an historic association with alcohol production going back 4,000
years and today produces many ciders, beers and wine. My hon.
Friend the Member for Meon Valley (Mrs Drummond) also talked
about the producers in her constituency.
As many Members have mentioned today, we are making changes to
outdated, arbitrary and inconsistent alcohol tax laws. These
reforms will make the system fairer, simpler and more aligned to
public health goals than the system that we inherited from the
EU. As the hon. Member for Erith and Thamesmead () said, these are
significant reforms that we are making.
Before addressing the excellent points that have been raised
today, I want to remind Members of the major changes that we are
making to improve the duty system. Reform of our alcohol tax laws
is long overdue. These laws have barely changed since the 1990s.
That is largely because incoherent and prohibitive EU rules have,
in the past, hindered much-needed change. In the current system,
a high-strength white cider will pay less duty per unit than a
low-strength beer. Sparkling wine—a product of which the UK has
world- leading examples—pays much more duty than still wine, even
when it is substantially less strong. Fortified wines are made
with the addition of spirits, and yet they pay less duty than a
liqueur made with spirits, even if they are the same strength. We
have inherited 15 rates from the EU across five different
products, and with three different methods of taxation.
The current system is complex and archaic. The Institute of
Economic Affairs said that it “defies common sense”. Producers,
importers and exporters in this country have called it
“distorted”,
“perversely incentivised to produce stronger drinks”
and welcomed “the opportunity for reform”. We agree. Now that we
have left the EU, we have an opportunity to create alcohol laws
that are more rational and that support the many and varied
producers and traders in this country that we have heard about
today.
I wish to take this opportunity to remind everyone of the
significant benefits that have been introduced with our reforms:
a radically simplified system, slashing the number of bands from
15 to six and taxing all products in proportion to their alcohol
content; taxing all products in the same rational way, a policy
banned by EU law; and ending the premium rates on sparkling wine
and equalising them with still wine, and substantially reducing
duty on rosé. We have introduced new rates for low-strength
drinks below 3.5%, encouraging innovation and reflecting consumer
preferences for the low or no-alcohol market, and we are cutting
duty on 3.4% beer by 25p a pint. We have modernised the taxation
of cider, targeting unhealthy and problematic white ciders while
cutting the duty for lower ABV craft and sparkling ciders. We
have introduced small producers’ relief to support the many
small, artisan alcohol producers who continue to create
world-leading products in this country. Those are benefits that
would not have been available to us before we left the EU.
Can the Minister clarify which specific EU regulation was
preventing us from enacting duty reform?
There are many laws in the EU, as the hon. Lady will know, that
have dictated our laws for many years. Those are the regulations
and directives that we are changing, not only in this area, but
in many others.
Coming back to the system we are producing, we ran a consultation
from after the autumn Budget until January this year and Treasury
officials have met many stakeholders from across industries and
public health groups. The hon. Lady said that we need to consult
more, but I can assure her that Treasury Ministers, largely the
former Exchequer Secretary to the Treasury, my hon. Friend the
Member for Faversham and Mid Kent (), who was responsible for
this area, have met colleagues from across the parties. We have
spoken to and visited businesses, from the smallest to the
largest, welcomed representations from many of the most important
trade bodies and sat down with the Australian high commissioner,
all to ensure that at the Treasury we have heard all points of
view on the reforms. I can assure the hon. Lady and others that
we are listening.
I will come on to the points that hon. Members have made. We have
heard from industries, businesses and colleagues about their
concerns, and we will continue to listen to the feedback. The
comments made in this debate will form part of that listening. We
are actively thinking about how we can reduce burdens on
businesses while still preserving the many benefits of the
system, not least the clear and obvious public health benefits of
taxing products by their alcohol strength.
Many hon. Members have talked about issues with keg size,
including my right hon. Friend the Member for Vale of Glamorgan,
my hon. Friends the Members for Meon Valley and for Dudley South
(), and the hon. Member for St
Albans (). I want to assure them that,
while I cannot make any announcements today, we are listening to
that point. My right hon. Friend the Member for Vale of
Glamorgan, my hon. Friend the Member for Dudley South and others
talked about how small producers’ relief is too complicated. I
reassure them that we are determined to get rid of the cliff edge
to support the growth of small brewers.
Other hon. Members talked about the duty charges on wine. I have
spoken to the former Exchequer Secretary, who told me how she has
been engaging with the sector on this very issue. The hon. Member
for St Albans mentioned that she had visited the Wine Society and
heard its views, and I know the Treasury is looking at ways to
reduce the administrative burdens.
The hon. Lady also talked about fortified wines; she will know
that we are reforming the duty on fortified wines to ensure that
those products pay a consistent rate of duty per unit with still
and sparkling wines and high-strength beers. We are increasing
the duty on fortified wines to equal the duty on spirit-based
liqueurs such as Baileys, because both drinks are made using
spirits and we think it is right in those circumstances that they
pay the same rates.
My hon. Friends the Members for Weston-super-Mare () and for Meon Valley talked
about cider, as did others, and I hear what they are saying. They
will know that ciders will benefit from new reduced rates for
lower ABV ciders below 3.5% ABV, and as part of our new draught
relief we will cut duty rates on draught fruit ciders by 20% to
equalise them with beer, cutting 13p off a pint. Nobody has
mentioned this today, but I would like to reiterate that we
announced in the 2021 autumn Budget that we were freezing cider
duty for the fourth consecutive year.
The hon. Member for Gordon () talked about Scotch and
other spirits. I remind him that at the Budget the Government
froze spirits duty, saving 52p off a bottle of Scotch compared
with what it would have been if duty had risen with inflation.
Because of the decisions that we have made, spirits duty rates
are at their lowest level since at least 1918. It is a really
important industry for us and we have an exceptionally
competitive environment for Scotch to succeed. Domestic whisky
volumes have expanded year on year, including throughout the
pandemic, to reach their highest levels since 2013, growing by
11% over the past two years.
I am looking at a graphic that shows that when duty on a shot of
whisky in the UK was 46p, duty on the same measure of whisky in
Spain would have been the equivalent of only 12p. I wonder what
Brexit benefit it might be that has resulted in that differential
staying there even with whisky duties being frozen.
The hon. Member will know that the benefit of Brexit is that we
can now make these decisions ourselves, reflecting our own
industries and what we want to do as a Government going
forward.
We have heard many positive responses to the changes we have
made, welcoming the substantial benefits that they will bring to
businesses. Respondents to the consultation said that they
“wholeheartedly welcome the direction of the proposals.”
Many hon. Members have mentioned positive features of the
proposals, which have been called a “genuinely significant
achievement”. Crucially to a country that puts its people first,
a public health group described the reforms as
“the largest and most positive shift from the perspective of
public health in contemporary alcohol policy.”
I thank all colleagues who have contributed to this important and
insightful debate. We will soon confirm details of the reforms
and publish the draft legislation for consultation, alongside the
Government’s response. We have before us a once-in-a-generation
opportunity to reform and improve an outdated system, with new
incentives for producers to diversify and innovate, while
introducing a direct boost for pubs. The reforms are more
rational, they are fair, and they are better aligned to public
health goals and consumer preferences. They support the great
British pub and small producers producing fantastic,
world-leading products. Our reforms spell exciting times for
alcohol businesses in this country and will protect our brilliant
heritage in alcohol production and trade.
3.52pm
It has been a privilege to hold this debate and I am grateful to
all Members who have contributed. I think it is obvious that
right across the House there is strong support for the need for
change and for the direction of travel that the Government have
introduced, but also a recognition of the need for further
change.
The hon. Member for St Albans () highlighted the challenges to
fortified wines, among other things. My hon. Friend the Member
for Meon Valley (Mrs Drummond) talked about a range of issues,
including the importance of the wine sector, particularly to her
constituency, and the need to consider, as a key issue, one broad
range of 8.5% to 15% ABV. The Minister said that 15 rates across
five products would come down to just six rates. That is a
positive step, but it does not recognise the 27 measures per
bottle that would need to be on wine alone, the different rates
that would apply, and the difficulty of predicting them.
My hon. Friend the Member for Dudley South (), who is clearly a champion of
the beer industry, drew attention to the importance of the
sector, as well as welcome nature of the changes and some
adjustments that are needed in order to secure them. The hon.
Member for Gordon () rightly highlighted the
importance of duty on Scotch whisky and the impact that that has.
He also, I would suggest, recognises the Brexit opportunity given
to the Scotch whisky industry.
The fact that the hon. Member for Erith and Thamesmead () highlighted some of
the same issues as many Conservative Members draws attention to
the consensus that exists across the House for change in this
area. That needs to be along the lines that the Government are
pursuing, but also in a way that really supports the industry,
supports the Treasury in raising the revenue it needs, reduces
red tape, and allows for innovation to take place. I am grateful
to all hon. and right hon. Members for their contributions.
Question put and agreed to.
Resolved,
That this House has considered Alcohol Duty and tax on alcohol.
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