HC Deb 07 April 1959 vol 603 cc55-8

These changes in Purchase Tax will make a small contribution towards reducing the cost of living. The total incidence of Purchase Tax on the cost of living, however, is not heavy—the whole £490 million yield of it amounting to not more than 1.5 points on the Retail Price Index. So I had to look elsewhere to find some relaxation which would help more with the cost of living. Few indirect taxes directly affect the cost of living significantly though most may do so indirectly in the long run. One tax which does have a marked effect is the Beer Duty. Because a very large number of people drink beer regularly in moderation, changes in its price have a marked effect on the cost of living.

There were other reasons too why a reduction in the duty on beer called for consideration. For a number of years after the war, consumption of beer showed a downward trend, and, although for a short time it seemed that a more stable situation had been reached, there was a further and appreciable fall in the year just ended. I depend on this duty for a large contribution towards the revenue and I must do what I can to safeguard the foundations of this contribution for the future.

The level of the duty is at present a high one. Apart from an adjustment in 1950 to provide for an improvement in the strength of beer, it has remained unchanged since the reduction made by Sir Stafford Cripps in his Budget of 1949. A reduction now would, therefore, be appropriate, not only on its merits, but because it helps to prevent a further decline in the Revenue—a fitting celebration perhaps of the achievements of an exhausting decade.

A change in the duty on beer also gives me the opportunity to introduce a reform in the system of liquor licence duties. The present system is complicated and costly to administer, and I propose to replace it by a simple system of fiat rates of duty which will give a very useful administrative saving. The licence duties will in future be treated as registration fees rather than as a source of revenue, and the proposed rates have been fixed at low levels with this in view. For example, the rate for the ordinary publican's "full" on-licence, and for the off-licence selling the full range of alcoholic drinks, will be £5 a year. There will be a comparable change in the club duty, and a consequential change in the basis for assessing compensation levy. I propose also to abolish the provisions requiring monopoly value to be charged when a new on-licence is taken out. Full details of these changes will be found in the White Paper.

Since the proposed rates of licence duty are very much lower than the existing rates, there will be a reduction in the yield of revenue which, together with the cost of abolishing monopoly value, I estimate at £5½ million in a full year. I intend that the benefit of this concession shall be wholly passed on to the consumer. On the basis of current consumption of beer, the £51 million of licence duty revenue which I shall be losing in a full year is equivalent to 4s. 5d. on a barrel of 36 gallons. I propose now to reduce the duty by 43s. 7d. a barrel which, together with the 4s. 5d. for the licence duty change, adds up to a total reduction of 48s. Od. a barrel.

This means a reduction in the retail price of 2d. a pint. I recognise that this will involve some problems of adjustment in the trade, but I am satisfied that the difficulties can be overcome and that the prices to the public will, in fact, be reduced by the full 2d. a pint. So the equivalent of the whole of the reduction in duty will be passed on in lower prices.

So, at a cost which I estimate at £36 million this year and £40 million in a full year, we shall obtain a reduction in the price of beer to the consumer by 2d. a pint and a considerable simplification of the present system and a useful administrative saving.

The reduction in the beer duty will operate from tomorrow. The changes in licence duties will apply in respect of excise licences issued or renewed after today. For licences already current the duly position will not be affected: the new rates will apply when the licences are renewed later this year. Club duty, which is paid annually in arrear at the beginning of the calendar year, will similarly remain unchanged for this year, and the new club licence duty which will replace it will come into force on 1stJanuary, 1960. Monopoly value will cease to he chargeable after today. I should emphasise that these changes in the Excise licence duties in no way affect the control over the sale of alcoholic drink exercised by the licensing justices.

As a minor adjustment, I also propose to reduce the duty on a rather special product known as "black beer ", which I understand may be of interest to some hon. Members from the North of England. I propose to reduce this duty also by 2d. a pint and to modernise its form. The cost of this change, which operates from tomorrow, is trifling, and has been taken into account in the estimate I have just given.

These reductions in the Purchase Tax and the Beer Duty will spread widely part of the benefits of the reduction in the burden of taxation which I am able to make in this Budget, and they will make a useful contribution in keeping down the cost of living. The combined effect of the two measures will, in fact, be to reduce the Retail Price Index by about four-fifths of a point. With the usual seasonal reduction in the price of milk which my right hon. Friend the Minister of Agriculture, Fisheries and Food has approved from the beginning of May, the result will be a reduction of the index by a full point.