HC Deb 08 May 2002 vol 385 cc158-62

Question proposed, That the clause stand part of the Bill.

3.47 pm
Mr. Edward Davey (Kingston and Surbiton)

I should like to make a brief contribution on the clause before we consider the detailed amendments, as I think that we need to debate the principle of the Government's proposal to introduce progressive beer duty. We will deal with some of the problems through Conservative amendments that will have Liberal Democrat support. In introducing a new tax relief, we should debate the underlying principle before we deal with the detail that is the subject of the clause.

The Financial Secretary will be aware that the issue of progressive beer duty has had a long gestation before coming to the House. There has been a long campaign, and the introduction of such a duty has had many supporters in the House and outside, whether among brewers, beer drinkers or members of the Campaign for Real Ale. Hon. Members who have spoken to CAMRA members in their constituencies will know of the passion that is felt by many people about the new relief. It is not surprising, therefore, that the Government have been considering the issue. My hon. Friend the Member for Cheltenham (Mr. Jones), who is very active in the all—party group on beer, has been a champion for such a move in my party.

The question, however, is whether the proposed move is right. The key argument used in its favour has been that we need a level playing field for the brewers who will benefit from the measure. The idea is that there is currently no level playing field between the microbreweries and small brewers—the traditional brewers—and the very large breweries. The rationale for the lack of a level playing field is that the larger breweries can obtain many economies of scale. They can use fairly aggressive discounting methods. Sometimes, the question is asked whether those are against competition. Therefore, people have argued that reform is needed in the brewing industry to create a level playing field. Another important argument relates to competition: many proponents of progressive beer duty have argued that it will achieve greater proliferation of real ales and greater choice.

The previous Conservative Government and, indeed, this Government have considered reforms of various aspects of the beer industry to try to create a level playing field and to increase choice. We have seen the beer orders and Office of Fair Trading inquiries. Different measures and ideas have been put forward to try to create extra competition. The Government's analysis for reform is based, I hope, on that notion. Many past reforms have not worked. Therefore, in deciding whether it wants to go down this road, the Committee must ask a few pertinent questions and put the policy to a few stringent tests.

The first obvious question is whether the duty reform will maintain and indeed increase the choice of real ales and the quality of beer available to consumers. Will the rebate enable that? What financial analysis has Her Majesty's Treasury done to show that the relief is needed to meet those objectives? Will the relief improve the position of the brewing industry and improve choice for consumers?

I assume that the Treasury has undertaken such research. Clearly, before one spends taxpayers' money, one will want to be certain that the policy is going to produce the benefits that it is alleged it will produce. I hope that the Minister can reassure the Committee that the research has been done. Moreover, I hope that he will promise to publish that research, so that it is in the public domain and so that, before we get to Report, we will all have a chance to examine what the boffins in the Treasury have been working on to justify the policy.

I hope that the Minister will go further and reassure the Committee that the relief will be examined to check that it is meeting its objectives. We all wish it well. We all hope that it will work, but the Government need to ensure that when reliefs are created they are meeting their objective.

The evidence that we have seen from sources in the industry, from consumers and from CAMRA is fairly compelling. We have looked at that research and been fairly impressed by it, but the Government have a different job if they are to represent the interests of the taxpayer. They must ensure that the research from the industry and from CAMRA is valid. They must do independent research to convince hon. Members on both sides of the Committee that the relief would be a good use of taxpayers' money. I hope that the Minister can assure us that the research has been done, and that this was not a last minute, tabloid—pleasing, rabbit out of the hat policy decided at the last minute, with the World cup taking place this summer.

Mr. Mark Field (Cities of London and Westminster)

The hon. Gentleman suggests that the argument for the proposal is compelling. What proportion of British beer would be covered by clause 4?

Mr. Davey

I am grateful for that intervention. I believe from research that I have seen that less than 2 per cent. of beer brewed in the United Kingdom will benefit, but that will not necessarily go against the thrust of what the Government are doing, if their research shows that the proposal will improve competition and choice. It will have a big effect on more than 350 breweries, so it may be welcome, but we need to see the evidence to be reassured.

Let us be clear. If Parliament passes the clause and the schedule that is linked to it, it will agree to expenditure of £15 million. which is an awful lot of money. It is also being asked to agree to put on the statute book nine new pages of tax law to back up the £15 million tax concession. We should also bear it in mind that private sector companies and Customs and Excise officials will have to spend hours ensuring that the money works properly and is not abused. In due course, as the wily minds of the private sector find ways around the nine pages before us, we will doubtless be asked to pass anti—avoidance legislation.

Although I am trying to provoke a debate on the principle behind clause 4, I do so in a spirit of acceptance of the policy. I hope that it will bring about the claimed advantages, and that the Minister can reassure us that it is well researched. Who in this House would oppose cheaper beer and greater choice in the pub? It is a popular notion that we would want to support in general terms, but we need reassurance on the detail.

I have one final point for the Minister. According to some sources, the Chancellor's presentation of the policy on Budget day was rather misleading. He implied that it would result in a 14p reduction in the price of a pint of beer, but those hon. Members who have examined the policy in detail will know that the cut in duty is unlikely to be passed on to the consumer. Many brewers have told me that they are concerned about the way in which the policy is portrayed. They believe that most breweries will try to invest the money, given that they—particularly small independent microbreweries—operate on very tight margins. That would be a laudable use of the money, and with that in mind I hope that the Minister will present the policy in a slightly different way to that deployed by the Chancellor on 17 April.

If the policy will not in fact result in a 14p reduction in the price of a pint of beer, those beer drinkers who, hopefully, will be watching us massacre Sweden in the World cup will want to know why they cannot buy beer at that price. If the answer is that breweries will invest the money in providing a greater choice of beers, in premises through which to sell beer, and in independent outlets, that might well be a good thing, but we want to know whether that was the Government's intention. We do not want to hear the spin that we heard on Budget day; we want to know the reality behind the proposal. I hope that the Minister can give serious answers to those serious questions.

Mr. Christopher Chope (Christchurch)

I am delighted to hear that the hon. Member for Kingston and Surbiton (Mr. Davey) supports our amendments, and we, too, support clause 4. He was in fact being rather kind to the Government in arguing that the Chancellor has said one thing but that the reality is rather different. I wonder whether he is aware of today's statement by the Independent Family Brewers of Britain, which consists of 33 family—owned and family—run brewers and pub retailers: The way the Chancellor announced the reductions was a complete con. We estimate that approximately 0.5 per cent. of pubs will be able to take advantage of the change in beer duty—any England fan looking for cheaper beer at the time of the World Cup will have a very long (and thirsty!) search. The public has been misled into believing that village pubs will offer cheaper beer and that is only the case in a tiny, tiny minority. In identifying the fact that, as so often in the past, the Chancellor's Budget is all clever words designed for a wider audience, the hon. Gentleman has made a good point. As we always say, we must look at the small print. The Chancellor said in his Budget statement: I have decided that the duty paid on their own beer will be halved. This is a cut equal to 14p off each pint, to be implemented for village pubs and small breweries by this summer—in time for the World cup."—[Official Report, 17 April 2002; Vol. 382, c. 584.] However, that is far from the truth.

Mr. Howard Flight (Arundel and South Downs)

As usual.

Mr. Chope

As my hon. Friend says, that is usual. I hope that we will hear an explanation of why the Chancellor spoke at such length to give the impression to people listening to his Budget that they would be able to get cheap beer after 1 June, when the reality is very different.

I shall not say any more about clause 4, because it is important to get on to the amendments. If we accept the principle, we need to ensure that we come up with a workable system. At the moment, it is not workable.

4 pm

The Financial Secretary to the Treasury (Mr. Paul Boateng)

The Opposition were characteristically carping, cavilling and mealy—mouthed. After many years of campaigning for this change by many sectors of the industry and the pub—going public—backed by some Liberal Democrat and Conservative Members—when the day finally arrives, we hear nothing but whining and attempts to undermine a real achievement for the industry. It will bring new hope to nine out of 10 UK breweries, which will make savings of up to £120,000 as a result of this measure. That includes all microbreweries and local breweries.

What we should have heard from the Opposition was some acknowledgement that they supported the change. Successive Governments have sought to support the diversity of the British beer market, notably by use of regulations allowing independent brewers access to tied estates. As the number of tied estates has fallen and pub companies have come to the fore, it has become increasingly difficult to promote diversity and market access through regulation. When we are asked for the rationale behind the scheme, it is an attempt to meet that concern and recognise the particular difficulties that small breweries face when seeking to grow their business and compete for access in today's beer market.

We estimate that the savings will help small breweries to remain profitable when selling beer to pub companies at discount rates and, for many, will allow them to invest in their own pubs, which will offer them a more secure and stable outlet for their products. Of course, the choice is theirs; it is not for the Government to dictate how small breweries should make use of the savings now available. Some may choose to cut their prices, but others will seek to re—invest the savings to enable them to compete against medium and large breweries. That is why we, too, found convincing the arguments put to us by the Small Independent Brewers Association.

The scheme has been under active consideration by successive Governments since at least 1989, when it was recommended by the Monopolies and Mergers Commission. Indeed, we have been in close consultation with the brewing industry since announcing that we were considering the scheme in the 2001 Budget. That consultation demonstrated exactly what we have announced and the veracity of the rationale that lies behind the measure. The suggestion by the hon. Member for Kingston and Surbiton (Mr. Davey) that this was a Budget wheeze thought up a few days before to grab some headlines does not do him justice. He gives these matters greater consideration than that cheap jibe would suggest. I hope that he does not intend to continue in that vein for the rest of the consideration of this Finance Bill.

Mr. John Bercow (Buckingham)

I hope that he does.

Mr. Boateng

The shadow Chief Secretary says from a sedentary position, "I hope that he does." I wonder how often the hon. Gentleman will turn up in Committee. He will not have to endure the hon. Member for Kingston and Surbiton—

Mr. Bercow

I will be there.

Mr. Boateng

Good. We look forward very much to the continued attendance of the shadow Chief Secretary, as we want to put him to the test. He has not had any testing yet, and it is time that he had some.

Mr. Edward Davey

rose—

Mr. Bercow

rose

Mr. Boateng

I see the shadow Chief Secretary is itching to respond, but he will have plenty of time to do so in the Committee's deliberations. He must restrain himself just a little longer, while I give way to the hon. Member for Kingston and Surbiton.

Mr. Edward Davey

I am grateful to the Financial Secretary for giving way, although I am sorry to stop him in his rather tedious tracks. So far, he has failed to say whether he will publish the analysis performed by the Treasury before the policy was decided. The right hon. Gentleman has said that there has been consultation. Have the results been published? If so, where are they available? If not, when will they be published?

Mr. Boateng

I am not going to fall for that one. I would not want to be tedious and bore the Committee this afternoon in the way that the hon. Gentleman suggests. I am only too happy to write to him to outline the general nature of the consultation, but I do not intend to publish the details. The hon. Gentleman can do what he will with the letter that I shall write to him on the subject, but he needs to understand why the small breweries so welcome the measure.

The measure will help to level the playing field. Small brewers will be able to compete more effectively with the big regional and national breweries. They will be able to use the savings that they make to invest in their own pubs, or to offer increased discounts when selling their beer.

The proposed relief will provide support for small brewers throughout their growth—from the first barrel that they produce until they reach the £2.5 million turnover of regional brewers. The relief is focused and will meet the needs of those who require it most. It will retain for the UK the rich diversity of its brewing industry, and protect consumer choice in an age when multi—million pound pub companies dominate the retail market.

We want a beer industry in which 500 brewers have access to the market, and not just the largest 50. That is why the small brewing industry has welcomed the measure with such warmth. The proposal is right in principle, which is why it will be capable of withstanding the detailed scrutiny of the Committee.

I commend the principle and its outcome to the Committee.

Question put and agreed to.

Clause 4 ordered to stand part of the Bill.

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