James Wild
Main Page: James Wild (Conservative - North West Norfolk)Department Debates - View all James Wild's debates with the HM Treasury
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James Wild (North West Norfolk) (Con)
It is a pleasure to serve with you in the Chair once again, Mr Turner. I congratulate my hon. Friend the Member for Farnham and Bordon (Gregory Stafford) on securing this important debate. In Blur’s immortal words, he knows his claret from his Beaujolais, but I will not have anyone say he is a charmless man.
It is a pleasure to speak in support of an industry that is doing well in this country, although it is facing some challenges. Wine is a home-grown success story, with more than 1,000 vineyards and nearly 5,000 hectares under vines across the country. In my North West Norfolk constituency, I am fortunate to have wineries including the award-winning Burn Valley and Cobble Hill, which are contributing to the local economy, supporting tourism and creating jobs. Overall, the wine and spirits industry contributed £76 billion in economic activity last year, with nearly half of that coming from the wine sector. Despite this success, the Government are putting more burdens on the sector.
This has been a good debate, and I think my hon. Friend the Member for Weald of Kent (Katie Lam) wins the prize for the number of wineries in her constituency. The hon. Member for Edinburgh South West (Dr Arthur) made some important points about public health. Unfortunately, the hon. Member for Witney (Charlie Maynard) could not resist mentioning Brexit—he seems slightly obsessed.
The domestic sector is largely made up of small producers, with two thirds producing fewer than 10,000 bottles a year. Generally, these are family businesses, local employers and passionate entrepreneurs. Employment in the sector has grown significantly over the past few years, and since 2010 bottle sales have increased to over 9 million.
The UK is a global hub for the trade, being the second largest importer of wine by volume and value. This is a sector that we should be nurturing, not penalising. When we were in government, that is what we did. We introduced the simplified duty system, based on taxing alcohol by strength, with an 18-month easement to help the sector. We encouraged businesses to diversify and move into wine production.
Importantly in the context of this debate, we froze alcohol duty rates in the 2023 autumn statement, and we continued that in the spring Budget of 2024. That is a record of support, but sadly this Government have taken a different path. At last year’s Budget, they raised the headline rate of alcohol duty by inflation. As we have heard, around 60% of the cost of a bottle of wine is now tax, and Wine GB warns that the increases are driving down demand and, in turn, cutting revenue to the Treasury. One in four drinkers say they will buy less alcohol as a result of the price increases.
Let us be clear that producing wine in Britain is not easy. Yields are 30% to 50% lower than in France or Spain, labour costs are higher, the weather is obviously unpredictable, and input prices keep rising. But instead of backing the sector, the Government keep piling on costs. Alcohol duty—up. Business rates—up. National insurance—up. As we have heard, the Wine and Spirit Trade Association has said that revenues from alcohol duty are down £300 million in the first six months of this financial year. If that continues, the Treasury will be bringing in £1 billion less than was forecast by the Office for Budget Responsibility at the spring statement.
The Government are putting the country on the wrong side of the Laffer curve, not just on alcohol taxes but across the board. The Minister is relatively new in post, but has he commissioned advice on the duty’s impact on the sector? Has he taken a fresh look at the data or at the assumptions used by the OBR? If not, will he do so, and do so rapidly? The Opposition are firmly on the side of Britain’s wine producers. It is a vibrant, innovative and home-grown sector that deserves support, not more taxation.
Of course, it is not possible to have this debate without talking about the hospitality sector, as a number of colleagues have. Wine is more than a drink; it is about socialising and shared experiences. The sector clearly depends heavily on pubs, restaurants and hotels to introduce consumers to this great British product.
However, under this Government, hospitality, like so many sectors, is struggling. Nearly 90,000 jobs have been lost since the disastrous Budget a year ago, and today we have seen the unemployment rate hit 5%—it has gone up every month under this Government. That is the result of the Chancellor’s terrible judgment in making it more expensive to employ people. With rising employment costs, the jobs tax, the extended producer responsibility and higher business rates, we see layer upon layer of additional cost, so it is no wonder that UKHospitality has described the Government’s approach as a “hammer blow”.
The wine sector has put forward some suggestions for the Chancellor and Ministers ahead of the Budget. First and foremost, it asks that they reconsider some of the decisions to increase business taxes, and it asks them to consider a freeze on excise duty or a wine tourism relief. As was highlighted by my hon. Friend the Member for Bridgwater (Sir Ashley Fox), and echoed by others, it also asks for the alignment of small producer relief with the realities of the wine industry. Those are all practical ideas that are worthy of consideration, so will the Minister commit to looking seriously and carefully at all of them?
Rather than taxing success, we should be nurturing it. The wine sector is a model of sustainable, rural growth, and it deserves our support. Its ask of the Minister is simple: will the Government work with the sector and listen to it, and will they look at the evidence and commit to easing the burden on our wine producers?
The Exchequer Secretary to the Treasury (Dan Tomlinson)
I am glad to be serving under your chairmanship, Mr Turner. I am grateful to the hon. Member for Farnham and Bordon (Gregory Stafford) for securing this important debate, and for speaking so eloquently in support of the UK wine sector. It is fantastic to hear him speak about the sector’s growth, as well as its continuing progress on exports, which is a really good thing. The irony is not lost on me, though, that he said that Treasury Wine Estates has some reservations about the Treasury’s tax policy—I will look into that.
I heartily echo the hon. Gentleman’s praise for the UK wine industry’s significant contribution to our economy, culture and tourism. As he mentioned, the statistics speak for themselves: we are the world’s second largest wine importer, bringing in 1.7 billion bottles in 2024. Sales of both imported and home-grown wine support hundreds of thousands of jobs, particularly in hospitality and retail. In recent years, as many Members have mentioned, more and more people have taken up work in the UK’s domestic wine sector, which is much like a dessert wine—small, but strong.
Industry figures suggest that more than 1,000 vineyards and 200 wineries contribute to our rural economy, with land under vine growing fivefold since 2005. The hon. Member for Weald of Kent (Katie Lam) listed many of the wineries in her patch; one of the challenges of being a Parliamentary Private Secretary, like my hon. Friend the Member for Hastings and Rye (Helena Dollimore), is that they do not always get to speak in these debates. However, I have been reliably informed by note that the two Members have the same number of vineyards in their constituencies—there may have to be a little Kent-based competition.
It is great to see that the number of home-grown products is increasing, with production exceeding 10 million bottles last year, and with sales rising too. This Government are committed to fostering an environment in which the wine industry, like its vines, can thrive and grow.
The hon. Member for Farnham and Bordon, as well as other Opposition Members, made important points about the UK’s alcohol duty system. Before I turn to those points, I will first acknowledge the Government’s wider work to support the wine industry through agricultural grants and export promotion. The Government have committed at least £200 million to the farming innovation programme through to 2030, and we champion domestically produced wines on the international stage. For example, we showcased English sparkling wine at the Osaka expo earlier this year.
As I have mentioned English sparkling wine, it is important that I also mention the contribution of my hon. Friend the Member for Edinburgh South West (Dr Arthur), who talked about Scotland’s growing wine industry and the impact it is having on high streets. He also said that, in designing a sensible tax system, it is important that it takes account of the impact on the health of the population, which I think is reflected in the current system.
Members have spoken about the previous Government’s reform of the alcohol duty system. I am a Labour MP, so it is not lost on me that I am defending an alcohol duty system implemented by Conservative MPs, and that Conservative MPs are opposed to a system implemented by their own Government. We learned in opposition that it is not always wise to oppose the decisions made by our party when it was previously in government. Indeed, I think that one of the reasons we won the last election is because we were able to talk proudly and confidently of the achievements of previous Labour Governments. Anyway, it is up to Opposition Members to choose which aspects of previous Government policy they wish to support, or not.
As others have mentioned, the alcohol duty system is now based on the principle of taxing alcohol by strength, which means that alcohol duty increases with a product’s ABV. Although it is true that some higher-strength wines have faced increases in duty, that has been balanced by reductions in duty for lower-ABV wines, including some British wines. Prior to the reforms, wines with 11% ABV and wines with 14% ABV both paid the same duty per bottle. Now, there is a difference: wines with 11% ABV pay £2.43 in duty and wines with 14% ABV pay £3.10.
I am interested in the point made by the hon. Member for Weald of Kent about the extent to which British wine companies are producing wine with an ABV below 8.5%. I will consider that point. Indeed, I was thinking the same thing when I was reading up on this topic earlier today. However, I know the changes were introduced alongside conversations with industry representatives, and those conversations will continue as the changes bed in.
In recognition of the big changes that were implemented, it is right to assess their impacts after they have had time to take effect. We have said that will take place at least three years after their introduction in 2023. I will take that work forward next year with officials from HMRC, and I would welcome evidence from Members in this Chamber, including representations from the businesses and communities they represent, and of course I will engage with the wine industry.
The hon. Member for Farnham and Bordon said he had three points, but I think he had four in the end, including on the cumulative impact—I will try to address all four. On his third point, yes, we will consider in the round all aspects of the system’s current design. I do not want this review to be one that does not properly interrogate the design of the system, and I also do not want to pre-empt where it will get to, but in my role overseeing that review, I want us to look carefully at the design of the system as a whole. I think the system is sensible and fair, but I also know there are challenges that have been raised by Members today.
On the hon. Member’s big point about cuts or freezes to alcohol duty, it is worth realising that any such cuts or freezes would come at a cost to the Exchequer. The Office for Budget Responsibility produces the costings for any changes to taxation policy.
Dan Tomlinson
The hon. Gentleman might think that some of the OBR’s assumptions are wrong. I encourage Members, if they have evidence, facts or figures that they want to put to the OBR on the elasticities—as I believe it is called when a tax rate is changed and has an impact on consumption—to send them in. The Government are confident in the OBR’s independence, but I will always want to ensure that we are putting forward accurate costings. In this instance, I believe that the OBR is in the right place when it comes to the elasticities, but Members should feel free to send in their own representations.
It is worth noting that freezing alcohol duty this year, if inflation was around 4%, would be equivalent to a 3.85% duty cut. Using HMRC’s published ready reckoner, this would cost the Exchequer roughly £440 million a year. It is right, therefore, that any decision on alcohol duty weighs the impact on overall revenues carefully. That is what I am confident that the Chancellor will do when she makes a decision in the Budget in just a few weeks.
I will try to run through some of the points made by Members in this debate. The hon. Members for Bridgwater, for Weald of Kent and for Farnham and Bordon, and the Opposition spokesperson, the hon. Member for North West Norfolk (James Wild), raised the issue of small producer relief for wine. That question was considered in detail as part of the previous Government’s review into alcohol duty, and as I have said, we will look to review it three years after the implementation that took place on 1 August 2023. We want to gather data and really look at the impact of the reforms. If Members want to come forward with proposals for change, then they should do so.