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Alcohol Duty Bands

Volume 826: debated on Thursday 12 January 2023


Asked by

To ask His Majesty’s Government whether they have any plans to increase the top rate of the new alcohol duty bands, forecasted to take effect from August 2023.

We aim to keep alcohol duty rates under review during the yearly budget process and to balance the impact on businesses with public health objectives. In December we announced that the freeze to UK alcohol duty rates had been extended for six months, to 1 August 2023, providing businesses with certainty and aligning with the implementation date for our historic alcohol duty reforms. The Chancellor will reserve his decision on future duty rates for the Spring Budget 2023.

My Lords, I am grateful to the Minister for her reply but she seems to have missed the Question; the Question is about the top band, and she made no mention at all of that. The reality is that a new system is coming in, which I generally welcome, that will actually yield less tax to the Government—which is a surprise, given that we cannot pay nurses enough but are not taking the taxes that we should be. We should be increasing taxes there, not reducing them, which is the case with the top band; in relative terms, it is going down. Would the Government please review this, and change it and increase it, so that alcohol such as vodka is taxed at a higher level than is presently proposed?

My Lords, the Answer that the Chancellor will reserve his decision on future duty rates applies to all bands. I take the noble Lord’s point, but the reforms that we announced in the alcohol duty bands are broadly cost-neutral, and they make an important move to taxing all alcohol by strength rather than the fragmented system that we had before. That is an approach that has public health at its heart, and I hope it will be welcomed.

My Lords, given that alcohol deaths have risen by over 27% in 2021 compared with 2019, and that in the under-50s alcohol is a leading risk factor for ill health and death, have the Government costed what these changes being delayed are incurring as costs to the nation in lost work, lost productivity and cost to the health service? Will all those costs be considered in the review that she has already spoken about in answer to the noble Lord, Lord Brooke of Alverthorpe?

My Lords, as I have said, in keeping alcohol duty rates under review we aim to balance the impact on businesses with public health objectives. The reforms we have made to alcohol duty rates are the biggest reforms that we have had in 140 years. It is right that businesses have the time that they need to adjust to those changes.

Is my noble friend able to tell the House today what position the Government have taken on the public health aspect of reducing alcohol consumption between higher and variable rates of alcohol, depending on the strength of the alcohol, as opposed to minimum-unit pricing?

My noble friend is right that the Government’s preferred approach has been to reform alcohol duties and align them all based on the strength of alcohol. As I have said to other noble Lords, that is an approach that has public health at its heart.

My Lords, alcohol has become 72% more affordable than it was 35 years ago. Increasing alcohol duties in line with inflation, as was planned last October but cancelled last December, would bring in approximately £1.4 billion annually. Would this not help to pay for the costs to the NHS of alcohol-related harm, and for people such as the nurses who have to treat people with alcohol-related issues, including the many victims of alcohol-related crime?

My Lords, one of the big changes that we are making to alcohol duties is to ensure that higher-strength alcohol is taxed at a higher rate. This puts the points that the noble Lord makes at the heart of our approach. The normal process is to review alcohol duties on a yearly basis and take a decision in the round, and that will continue.

My Lords, what discussions have the Treasury and the UK Government had with the Scottish Government, who clearly have an interest in this in relation to two aspects—one being minimum-unit pricing, which has not had the desired effect that the Scottish Government expected, and the other being their consideration of implementing a tax on whisky producers in Scotland to raise money to cover some of the expenditure of the Scottish Government?

My Lords, the Government have regular dialogue with the Scottish Government—indeed, the Prime Minister is there today. I agree with the noble Lord that the minimum-unit pricing approach has not always had the desired effect. The UK Government’s position is to address this through the level of duties, and relating that to the strength of alcohol. That is the better approach, and one that we can take now that we have left the EU.

Can my noble friend the Minister tell us whether the Treasury, or indeed any other government department, has done any modelling on the effect of the new rates and whether they would lead or incentivise drinkers to drink lower-alcohol drinks and reduce their overall consumption of alcohol?

My Lords, I am sure we have taken that into account in looking at this work, and that we work closely with the Department of Health and Social Care on it. Another aspect of the reforms we are bringing forward is to provide draught relief to allow pubs and other venues to be more competitive with off-licences and supermarkets selling alcohol.

My Lords, I am sympathetic to the Minister answering this Question: she is the victim of a bizarre system of government. Surely this is at least 50% a health issue. The decision-making should certainly rest within the Department of Health, and the Chancellor of the Exchequer should not be deciding what sin and health are about—he should be worried just about the Exchequer.

I reassure the noble Lord that if he looks at the consultation we did on the new duty rates, he will see that public health is at the heart of our approach. However, we need to balance public health objectives with, for example, the impact on businesses. For instance, Scotch whisky is an incredibly important industry in Scotland, and there are new breweries all across the country which are big economic success stories. We need to have a balance between those two approaches.

My Lords, I am pleased that the Minister talked about business. Leaving aside the level of taxation—I have sympathy with my noble friend—this system is quite complicated. It is a sophisticated solution but it also makes it complicated for businesses to respond. So I ask that the Treasury, as well as looking at the level of taxation, looks at the number of different levels of taxation, because the more there are, the harder it is for small and medium-sized businesses to administer.

I appreciate the noble Lord’s point, but the reforms we have introduced simplify, for example, the number of different bands of duties that businesses pay. We have taken significant steps in that direction, and this Government always seek to simplify things for businesses where possible.

Low-alcohol beers and spirits obviously have a lower duty, but the price to consumers is often comparative or even higher than that of other alcohols. What can the Government do to incentivise lower prices for alcohol-free products, which can have significant health benefits?

The noble Lord is right to point to the fact that, under these reforms, lower-alcohol products—regardless of the type of alcohol product they are—will have a lower duty. That is a significant incentive to people. I am not sure about the other drivers of the higher prices that he referred to; that would have to be looked at more carefully.

My Lords, alcohol misuse is one of the prime causes of domestic violence of men against women. Surely increasing the duty should be part of the overall package of trying to reduce that kind of action; making alcohol more expensive might contribute to that reduction.

Through making higher-strength drinks subject to higher duty, we are making alcohol more expensive in that way.

My Lords, surely it is about the proportion of the cost. I am not clear that the noble Baroness has answered the Question. She has repeatedly said that this is to allow businesses time to adjust. I remember the days when the most eagerly awaited bit of any Budget Statement was the announcement of duties on alcohol. As I understand it, it was always then rushed through the House of Commons that day so that the increases could come in overnight. What is this period for businesses to adjust all about?

My Lords, in addition to the annual level of the duties paid by businesses, we are introducing the biggest reform to alcohol duties in 140 years—for example, as I have said, by reducing the number of bands operating by linking very clearly the level of duty to the level of alcohol in a product. That is a significant reform, and one that businesses need time to adjust to. That is why we have aligned the introduction of the new duty rates with the new system.