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Finance Bill

I certainly agree with my hon. Friend, but I fear that if I comment on that, I shall stray away from the purpose of the amendment. Alcohol duties are only one part of the picture, but they are an important part. On the Government's approach and specific points arising from the Budget and the duty changes, so poorly thought through has been the Government's response to the industry's difficulties that, for the first time, the five UK alcoholic drinks trade associations made a joint submission on this year's Budget on duty levels. Their letter talked about""spiralling redundancies and short-time working across the alcohol sector and the unprecedented number of pub closures."" Their letter combined two main requests: first, to freeze alcohol duties and, secondly, to withdraw the proposal for the alcohol duty escalator. I would like the Exchequer Secretary, when she responds, to reflect on whether alcohol duties are close to reaching, or even outstripping, the revenue maximisation point. Given the decline in alcohol consumption in this country since 2004, there is some evidence, albeit perhaps not conclusive, that that point has been reached. The hon. Lady may well say that she is not in a position to give answers to theoretical questions, but I remind her that in the debate on last year's Finance Bill she stated a quite definitive view that tobacco duties had reached the tax maximisation point, saying:""duty rates are close to revenue maximisation, which is why there has been no greater increase than revalorisation in the Budget."––[Official Report, Finance Public Bill Committee, 15 May 2008; c. 221.]" Will she tonight offer a view on whether alcohol duties have reached that point? I am told that the Treasury model appears to show that the tax maximisation point has been reached or is close to being reached, but I am also informed that many in the industry, at least, doubt the robustness of the Treasury modelling. As their joint submission showed, producers have felt for some time that the Government are refusing to listen to their concerns and failing to recognise the issues they face. That was most apparent in the pre-Budget report. Now, of course, Ministers claim that the increases in duty were offset by the cut in VAT. I will examine that claim in a moment, although hon. Members who remember the backtracking on whisky will already be sceptical. The Government's claim overlooks a key distinction: producers pay duty, whereas the retailers pay VAT. I have met wine producers and importers who, safe—or so they thought—in the knowledge that the Government had introduced a duty escalator to enable long-term decision making, had entered into contracts to supply wine to supermarkets and others at a set price. Producers' and importers' margins are so tight that every bottle they produced after the PBR was produced at a loss until the contracts expired months later, as they had not factored in the additional rise in duty in the PBR. As they were the ones who paid duty, they suffered. Meanwhile, they watched the retailers whom they were supplying charge less VAT, but not always a lower price. The Minister will understand that the claim that the duty increase for producers was offset is held in utter contempt in the industry. We have seen time and again that the Government's failure to consult, and their rush to implement duty changes, produced problems they did not foresee. To promise the industry a three-year horizon of stability, and then provide less than a week's notice of a major change only six months later, perhaps marks a new low in the Government's miserable record. The VAT cut offset was hardly that, anyway. The PBR suggested that the changes would leave the total VAT and duty on products "broadly unchanged". I suppose that that depends on how broadly one defines the word "broadly", but the whisky increases proved too broad for even Labour's tradition of semantic hair-splitting to spin away. The proposed rise of 8 per cent. in duty on spirits in the PBR had to be cut to 4 per cent. when the Government were forced to admit that they had got their sums wrong. The Scotch Whisky Association, in particular, showed that the rise would have added 47p to a £20 bottle of whisky. The muddle on wine duties that occurred at the same time was never resolved. The increase in duty was supposed to offset the decline in VAT. For wine, that was true only of bottles priced at £6.07 or more, and 92 per cent. of bottles sold in the retail trade are priced at less than £6. That meant that under the PBR, four out of five shoppers ended up paying more for their wine as a result of the duty changes and VAT changes combined. The position was not at all neutral for wine buyers. The Government claimed that when they introduced the alcohol duty escalator, it would bring certainty about future duty rises. After the PBR blunder, this year's Budget has actually added to that uncertainty. Traditionally, the indexation element of any duty rise was linked to the retail prices index that prevailed in the September before the Budget. This year's increase applies the RPI forecast for the September following the Budget. Clearly, that dampens the rise in duty in this instance, but it would be helpful to know whether the Government see that as a permanent change in their methodology; if it is not, the promised certainty on those duties has been eroded yet further. The uncertainty reached in the industry in the past year beggars belief; there have been hefty duty increases in two Budgets and in the intervening PBR, as well as the introduction of an escalator and a change in the RPI date used for its calculation. That totally throws out the whole certainty argument, which was introduced a year ago along with the escalator. The uncertainty wreaks havoc with pricing, contracts and overhead costs, not to mention the administrative costs of implementing the price changes such as those due on new year's eve. If duty is not put back down when VAT returns to 17.5 per cent., the industry will take another hit. If the escalator is 2 per cent. per annum, why is the industry in practice facing a total rise of 4.5 per cent. in this financial year? That is a critical question that Ministers must answer tonight. At the moment, Labour's escalator appears to contain no certainty whatsoever. We need to look at what the purpose of alcohol tax is in the first place. After the pre-Budget report, the Exchequer Secretary said in a debate in Committee in January, when these duties were last raised, that taxation was a very blunt instrument with which to deal with a minority of drinkers and that in her view tax did not have a major role to play. She meant to attack Conservative policy, but we believe that the blanket duty increases have far less impact on health than targeted measures directed at problem drinks and problem drinkers. Her comments were also rather at odds with those of her colleagues in the Department of Health on duty. The Minister of State, Department of Health, the right hon. Member for Bristol, South (Dawn Primarolo) told the public health conference held by the British Medical Association last year that""our estimates suggest that higher taxes, if they do feed through to price, will mainly affect the 7 per cent. of the population who drink one third of all alcohol consumed in Great Britain. In England alone, the total number of lives saved up to end of March 2013 will be 3,250 by the Department's own calculations."" My hon. Friend the Member for Henley (John Howell) wanted to know if there were any Government studies. There was a recent study—the community pub inquiry, by the all-party parliamentary beer group—and the Government's response to it was quite fascinating:""It is important that any Government interventions reduce harm without impacting unduly on the majority of responsible drinkers"." However, that is exactly what they have done. Their duty rises have clobbered the majority of responsible drinkers. Across-the-board rises hit responsible drinkers, but fail specifically to target problem drinkers or drinking with antisocial consequences. What other solutions have been proposed? A major controversy is the ability of the supermarkets and the off-trade more generally to absorb the rises in duty compared with the on-trade. France has looked at a scheme to reduce VAT on served food, versus that paid in supermarkets, and has suggested doing the same for the duty paid on served drinks. I would be grateful for a word from the Exchequer Secretary as to whether the UK has been looking at such schemes.