§ 1 pm
§ Sir Ivan Lawrence (Burton)
This debate has almost become an annual event, thanks to the kindness of a succession of Speakers and Deputy Speakers. Although I have struck out—as our transatlantic cousins would say—on two previous annual Adjournment debates in which I raised the subject of the brewing industry in general and my brewing constituency of Burton in particular, I hope to score a sensational home run this time.
Much has been happening recently in the field of brewing, especially in Burton on Trent, where we have the finest breweries, in which Bass, Carlsberg-Tetley and Marston's manufacture their products and maintain the great Burton brewing tradition. Brewery workers, shareholders and, above all, the public are delighted that we have all-day opening and now Sunday afternoon opening as a result of the Government's sensible stripping away of overregulation.
The industry—whether manufacturing, retail, leisure or management—will now have the opportunity of attracting a new generation of young workers because we have lowered the age limit for working in bars, under proper supervision and with the obligation of further training. We welcome the lifting of restrictions and the reduction in tax on amusement machine prizes in pubs, which has resulted in the amusement machine industry in Burton being able to save itself and start to flourish once again.
Children certificates, although a good idea, have sadly attracted a low take-up of about only 3 per cent. That is largely due to regional inconsistencies between licensing boards. Some boards impose conditions—such as requiring nappy-changing facilities or low bar stools to avoid accidents—that are prohibitive and increase costs and so are not worth implementing, which is a shame.
Little beyond consultation has taken place in respect of the extra hour's opening on Friday or Saturday evenings, which might do more to defuse potential trouble from gangs of youths in town centres. The Bill on the stocks to limit under-age drinking in public places will be widely welcomed. Perhaps what we really need is a new, all-embracing licensing statute—the last one is now 32 years old and my commentary on it, which was written for Current Law in 1964, is that much out of date.
I turn now to the issue of the tied house—the partnership between brewer and publican whereby the publican can enter the brewing industry with only limited resources but can still flourish, in return for a commitment to sell a particular brewer's beers. Of course, that partnership, which could be exploitative, has been modified over the years to ensure that it is not, by giving the publican the rights to buy beer brands from other brewers, to choose his own supplier of wines, spirits and soft drinks, and to be protected by landlord and tenant legislation.
Some argue that the tie could restrict competition and keep beer prices high, as indeed it might; but the better view is that the abolition of the tie would be more likely to lead to the closure of many regional and smaller brewers, the increased domination of the market by fewer national brewers, higher prices and lower employment. Happily, the Government have adopted that view and my hon. Friend the Economic Secretary might want to reaffirm that today. Certainly, the industry welcomes the support from the Government in upholding the tie.
945 That support is especially welcome as the European Commission has shown an inclination to challenge the continuance of the exemption that we enjoy for the tie when it expires at the end of 1997. The Commission is challenging our arrangements for guest beers on the ground that our requirement that such beers should be cask conditioned discriminates against Euro-beers. That is, of course, complete nonsense because only 10 per cent. of British pubs have to have guest beers at all and we import properly £230 million-worth of Euro-beers a year, which is more than any other European country imports.
We have the most open beer market in Europe. If only it were possible to see British beers on sale in German pubs in the same way as German beers are sold in British pubs, we should all be thankful. The brewing industry welcomes the Government's robust defence in Europe of British brewing and British pubs. The British people have absolutely no wish to be pushed around by Brussels in the important matter of British beer.
The biggest problem affecting the industry today, as it has been whenever I have raised the issue over the past three or four years, is the level of beer duty. For that reason, I am delighted to see that my delightful hon. Friend the Economic Secretary will be answering the debate. The root of the problem is that we pay 30.7p per pint in duty on our beer, whereas the French pay 4.4p per pint—we pay over seven times as much. To a lesser extent, that gap exists in relation to all other European countries. Our beer duty is much greater than that of most other countries in Europe.
I concentrate on our trade with France because, France being nearer to us than other European countries, that is where most of the imports to this country come from. As a result of the differential in excise duty, imports from France have risen over the past three years from 400,000 pints to 1.1 million pints a day. That represents 4.5 per cent. of the United Kingdom beer market and £700 million a year in beer sales in British pubs, which is more than the sales of any UK regional brewer.
As a result of the price differential, a third of French beer is carried across the channel in hired vans and much is sold illegally at car-boot sales on council housing estates or door to door. The van trade in smuggled beer costs every pub in the country over £3,000 a year in lost beer sales and the Exchequer loses £250 million which, of course, the taxpayer has to make up. The number of vans crossing the channel by ferry, never mind those coming under the channel—such crossings have, sadly, temporarily stopped, but we did not know how many vans were involved anyway—is more than 64,000 a year, which is 175 a day. Each van of smuggled beer contains 1,500 pints, which is more than the weekly trade of a small community pub.
Surveillance by the Brewers and Licensed Retailers Association—which I still prefer to call "the brewers' society"—has identified vans from Dundee, Aberdeen, Truro, Bangor and Northern Ireland, so it is not only a London and south-east England trade.
Another aspect that should worry my right hon. and learned Friend the Chancellor and my hon. Friend the Economic Secretary, as well as the Chancellor's Euro-partners, is the fact that in 1994, Customs and Excise recorded UK beer exports to France of 57 million pints, but French customs recorded only 26 million pints entering France from the UK. Thirty-one million pints 946 appear to have got lost. How? The likely explanation is that those exports existed only on paper. Why? To allow UK beer duty to be reclaimed as pretend sales to France. Those pretend exports are diverted to the UK market, and sold at full retail price as though UK duty and VAT has been paid on them. In that way, fraudsters make about £30 million a year. If the duty differential did not exist, those fraudsters would have to seek another way to cheat the Revenue.
What is the practical effect of that tax differential? My answer is that, as about 60 per cent. of cross-channel beer purchases replace what would otherwise be sold in British pubs and off-licences, about 10,000 pubs are likely to close in the next five years, and as a result 90,000 jobs will be lost in the UK in pubs, breweries and suppliers.
The Government must want to do something about that. What should they do? The industry's answer is to reduce excise duty to a level that removes the incentive for cross-border shopping and bootlegging. The reduction could be phased over five years, to reduce the rate to about 6.5p per pint by the year 2000. That would be a really good way to celebrate the millennium.
My right hon. and learned Friend the Chancellor could start with a cut of 4p in next week's Budget, so this debate is timely. That is why I am grateful to you, Mr. Deputy Speaker, and to the Speaker's Office for allowing me to initiate it, so that I can affect the intentions of the Chancellor in the Budget in a few days' time.
The Treasury will argue, as it always does, that cutting beer duty would reduce tax revenues, which would mean that £2 billion had to be found elsewhere, or that the public sector borrowing requirement had to be raised at a time when it needed to be reduced to make way for tax cuts. But I wonder what assessment the Treasury has actually made of the benefits of reducing tax.
Would not such a reduction inevitably lead to lower retail prices, therefore to more beer sales, and therefore to more tax revenue to offset part of the loss? Would it not inevitably boost jobs in pubs, breweries and related industries and generate higher profits and tax returns? Would it not inevitably lower the retail prices index and therefore pay settlements? Would not those factors prolong the fall of inflation, which the Government have achieved to their great credit, increase competitiveness, another of their achievements, increase economic growth, yet another of their successes, and produce a higher tax yield?
If my hon. Friend the Economic Secretary is unsure about that, I must report that Oxford Economic Forecasting, using the Treasury's economic model, can demonstrate that 6p off the duty on a pint of beer would have just those effects and would reduce inflation by 0.2 per cent. That organisation says that official estimates substantially overstate the true first-year cost of cutting beer duty, which would actually reduce the public sector borrowing requirement in its second year.
I have heard it said that such a reduction would only lead brewers to maintain the high beer price, but prices in UK pubs are already considerably cheaper than those in the bars of Europe. The wholesale price of beer in Britain has fallen by 10 per cent. in real terms in the past three years and 75 brewing and pub company members of the Brewers and Licensed Retailers Association have promised to pass on fully any reduction in beer duty in the coming Budget.
947 Our brewing industry is one of the oldest and best of British industries. Directly and indirectly, it employs 750,000 people, even now. Our pubs are the finest in the world, although their number is steadily decreasing. Beer is the most popular alcoholic drink in Britain today, and we consume a fifth of the European Union total, spending more than £13 billion a year and raising more than £4.5 billion for the Treasury—a substantial proportion of which is raised in Burton upon Trent. That is the equivalent of 3p off income tax.
Brewing is a national institution, and my constituency is at its heart. For, as the great poet A. E. Housman wrote:
We in Burton, we in the brewing industry in the country, ask for relief from unfair taxation. Is it really too much to ask?
- "Say for what were hop-yards meant,
- Or why was Burton built on Trent'?
- Oh many a peer of England brews
- Livelier liquor than the Muse,
- And malt does more than Milton can
- To justify God's ways to man."
§ The Economic Secretary to the Treasury (Mrs. Angela Knight)
I congratulate my hon. and learned Friend the Member for Burton (Sir I. Lawrence) on being granted this debate—his annual Adjournment debate on a subject dear to his heart and to the heart of many Members of Parliament and many people in the country.
I have a sad confession to make. I am a cider drinker, not a beer drinker. I hope that that at least puts me in the category of the alcohol consumer, even if I do not consume the product that is brewed in my hon. and learned Friend's constituency.
§ Sir Ivan Lawrence
May I invite my hon. Friend to come to Burton-on-Trent soon and frequently, so that I may introduce her to the joys of Burton beer?
§ Mrs. Knight
My hon. and learned Friend has already tried to introduce me to the charms of Burton beer, not altogether successfully, but I will visit his constituency with pleasure. I believe it is well known that, when one is at least a quarter of an hour out of Burton on the A38, it is possible to smell the hops through the car windows, and that smell is a very tempting prospect.
The Government acknowledge the importance of the brewing industry. The industry contributes significantly to Government revenues, is a wealth creator in the economy generally and plays a socially cohesive role in pubs throughout the country. It is a considerable employer, directly and indirectly. As my hon. and learned Friend's contribution developed, I understood why the debate was timely.
No right hon. or hon. Member would expect me to divulge the Chancellor's Budget intentions—there are a few more days to wait—but I can say that the worries that my hon. and learned Friend expressed about the impact on brewers of cross-border shopping and smuggling are a 948 very significant factor, which the Chancellor will take into account in reaching his decisions. He has done so for the past few years, and I know that he will do so again.
§ Mr. William Ross (East Londonderry)
May we be assured that the effects of the smuggling of tobacco will also be taken into account?
§ Mrs. Knight
I can give the hon. Gentleman that assurance. My right hon. and learned Friend will take into account all matters relating to cross-border smuggling when he reaches his decisions.
My hon. and learned Friend clearly set out some of the general aspects relating to the brewing industry in his opening remarks. In so doing he recognised the many recent changes to that industry. Community pubs are popular, but there have unfortunately been closures in some areas—for a number of reasons. The off-licence trade has, over the years, taken business away from the pubs, and in the off-sales sector supermarkets have increased trade at the expense of off-licence shops. Social trends and changes in drinking patterns have also played their part.
Over the past 30 years or so the main drink of practically every country in Europe has declined as a proportion of the whole: beer is down in beer-drinking countries and wine is down in wine-drinking countries. The industry has responded to these changes in consumption. At retail level, it has reassessed the pub structure to help it compete more successfully. We now have a variety of types of pub catering for particular groups—targeting a high-spending young clientele with theme bars, Irish bars and so on. Then there are community or country pubs, which have generally been made more attractive to customers by renovation and improved facilities—including the idea of the family pub catering for children.
I hear what my hon. and learned Friend says about the concerns regarding regional inconsistencies as between children's licences; we shall take a careful look at that.
I think that the family pub is an excellent idea. It means that I can take my children into the pub with me and they do not have to go through what I went through. My father used to leave me in the car in the car park with a fizzy orange drink which I did not like and, occasionally, a packet of crisps, while he stayed in the pub for what seemed like hours. I am sure that it was not really that long, but certainly, being able to take one's children into pubs leads to a more family-like atmosphere and is a great benefit. I note that my hon. Friend the Member for East Surrey (Mr. Ainsworth), the Government Whip, is nodding in agreement. He too has children who can benefit from these changes.
More people now drink at home because of drink-driving laws and because of home entertainments, but also because of significantly cheaper drinks being available in supermarkets. It is important to recognise and to cater for these long-term trends.
My hon. and learned Friend mentioned his concern about the guest beer provision. Even though I am not a beer drinker, I am well aware of the concerns that many have expressed on this matter. Indeed, the organisation CAMRA has brought it to many people's attention. The European Commission alleges that cask-conditioned beer is not produced in any significant quantity in other 949 member states, so the provision infringes article 30 of the treaty of Rome by discriminating against beer producers in other member states. The Government dispute that view.
To resolve the issue, on 11 October officials of the Department of Trade and Industry and of the Ministry of Agriculture, Fisheries and Food met Commission officials responsible for the free movement of goods in the single market, and representatives of the CBMC—the European brewers federation. They met to clarify the facts behind the dispute. It has been agreed that the CBMC will provide information on the extent of cask-conditioned beer production in other member states. I can assure my hon. and learned Friend that the United Kingdom is committed to resolving the issue. We do not believe that the guest beer provision breaches article 30 of the treaty.
Cross-border shopping affects not just the brewers; all involved in the production, distribution and retailing of alcoholic drinks are affected. On the other hand, the single market has brought a great number of benefits to UK business generally, to the extent that I notice that some brewers are reporting healthy sales on the continent.
Tax-induced cross-border shopping has clearly had an effect on the brewing industry, but since 1993 UK beer production has continued to increase, and most major and regional brewers report increased profits.
The drinks industry is working closely with Customs and Excise. It has been doing so for some time, first to agree the amount of personal imports of alcoholic drinks, and secondly to look at cross-border issues. The calculation that has been agreed is that in 1994 between 3 and 5 per cent. of the UK market was affected by the importation of alcoholic drinks. There is also general agreement on the overall amount of legitimate importation and smuggling. Agreement is still to be reached on how much of what is purchased cheaply abroad is in substitution for what would be bought here, and how much is additional consumption.
I can assure the House that we are not complacent. It is, however, important to keep the cross-border issue in proportion. Customs' own estimates of revenue lost—in duty and VAT—for legitimate cross-border shopping last year put the figure at £210 million for all alcoholic drinks. The share attributable to beer was £40 million. That assumes that half the trade is additional; but even if none of it was additional, the figures would not square with some of the scenarios about which we have read.
Customs conducted its own survey earlier this year to arrive at an estimate of revenue evaded by smuggling. That estimate provides a similar figure of £210 million for all alcoholic drinks, but with a much larger share attributable to beer, at £110 million. The actual loss of 950 revenue will be less, since some of the smuggling is likely to represent additional consumption. Taking legitimate cross-border shopping and smuggling together, this represents less than 5 per cent. of the UK's beer consumption. The total tax collected on beer was over £4.7 billion last year.
That is not to say that we are doing nothing about the problem, or that Customs is not paying attention to this vital area. The top priority is to catch the smugglers.
§ Mr. Alan Meale (Mansfield)
Customs and Excise forecasts that by the year 2000 illegally imported alcoholic drinks will have doubled in quantity—a frightening statistic that will mean hundreds of millions of pounds in lost revenue. With Customs and Excise already stretched to the limit, does the Minister agree that action is needed now?
§ Mrs. Knight
I was just coming to that. What are we doing about the smuggling problem? Smuggling, dealing in smuggled goods and buying smuggled goods are all crimes. Customs has 300 staff employed on single market work, most of them directly involved in the anti-smuggling effort. Many, if not most, of them work at the ports, but some work inland providing intelligence. For instance, they are watching more closely the frequent crosser—but my hon. and learned Friend will excuse me if I do not go into the detail of what we are doing to stop smugglers. We do not want to give them notice of our intentions.
My hon. and learned Friend used the argument about harmonisation—that harmonising duties across the European Union would spell the end of smuggling as a problem. Some heavy costs are associated with that. A reduction of 10 per cent. in the duties on alcohol would result in a loss of £500 million to the Exchequer. To reduce our duties to French levels would cost roughly £3.5 billion. That is the sort of sum in question. We take every opportunity to press our case in the Commission. We want other countries to adopt a more practical attitude to alcohol duties.
It is true, as my hon. and learned Friend said, that the Treasury model has been used by some observers, but that model does not cater for the narrow, specific area of one industry, such as the brewing industry. We are discussing with those involved the reasons why their estimates are incorrect.
I conclude by reiterating that we take the matter extremely seriously. All the issues raised by my hon. and learned Friend will inform the decisions of my right hon. and learned Friend the Chancellor with regard to the Budget that he will present to the House next week.