Cider Industry: Duty Changes

Opened the debate

I am concerned about the discrepancies in duty rates for flavoured ciders, which are taxed at two and a half times the rate of apple cider. This hampers innovation and growth in the sector. The consultation has not included flavoured ciders despite their historical significance and growing market demand. Traditional small-scale cider makers in North Herefordshire face a 40% increase in duty if they venture into fruit versions, stifling diversification.

Government Response

It is a pleasure to serve under your chairmanship, Mr Davies. I raise a metaphorical glass to congratulate my hon. Friend the Member for North Herefordshire on securing this debate, and I thank him for his constructive tone and his welcome for many of the announcements on alcohol duty in the Budget. It is clear that my hon. Friend is indeed a true friend of the many cider producers in his constituency. In fact, as far back as 1724, Daniel Defoe wrote of the county's people that 'they have the finest wool, and the best hops and richest cider in all Britain.' As a Kent MP, I know that other parts of the country might dispute that claim, at least when it comes to hops. Today, as my hon. Friend pointed out, Herefordshire is home to many cider makers, small and large, producing drinks that are enjoyed both in this country and around the world. Although Herefordshire is a centre for the industry, the economic benefits of cider production are felt nationwide. My hon. Friend is quite right to highlight cider producers' contribution to the national economy and the many jobs that the industry supports. I am sure hon. Members can understand why the Government want this fantastic industry, which has been with us since at least Roman times, to go on to even bigger and better things. Before I address the detailed points raised by my hon. Friend, I will briefly run through some of the changes we are making, which we believe will help the industry to go on to achieve further success. First, I will discuss alcohol duty reform. Quite frankly, reform of our alcohol tax laws is long overdue. They have barely changed since the 1990s. As my hon. Friend said, that is largely because of incoherent and prohibitive European Union rules that have hindered much-needed change. However, now we have left the EU, we have an unmissable opportunity to create alcohol laws that are simpler, fairer and indeed healthier, and by doing so we can help cider producers—along with British brewers, wine producers and spirit makers—to innovate and grow. That is why in the Budget we announced a series of major reforms to our alcohol duty laws, including the biggest reduction in cider duty for 98 years. Our new draft relief will cut duty on draft cider by 5%, encouraging people to choose to purchase cider in our great British pubs. We look forward to working with the industry to understand how keg size and distribution methods can best support small producers and cider makers. We are also cutting duty on craft sparkling cider by up to half, so that anyone buying a 75 cl bottle of such cider that is 6.5% alcohol by volume will pay £1.25 less duty. This boost is a clear benefit of the Government's decision to introduce a common-sense approach to alcohol duty and to remove the arbitrary and unfair premium rates on sparkling ciders and wines in the current system. The new lower duty rates for ciders below 3.5% alcohol by volume will incentivise cider producers to innovate and develop healthier alternatives for consumers. As the Chancellor said at the Budget, sales of fruit cider have increased from one in 1,000 ciders sold in 2005 to one in four sold today. As has been mentioned, we are also cutting duty on such drinks by 13p a pint in the pub. My hon. Friend the Member for North Herefordshire was right to highlight the health risks of white ciders. Although we are reducing the cost of lower-strength ciders, we are increasing duty on high-strength drinks, including harmful white ciders. Under our reforms, people buying superstrength ciders will pay 7p per 500 ml can. We believe that, together, such measures will not only boost British craft cider producers, but give consumers more choice, with healthier, lower-alcohol alternatives. They will boost community pubs by incentivising people to drink at their local instead of at home. Beyond the duty changes, we are supporting the traditional cider industry in other ways. Although we are listening closely to the industry as part of our consultation on changing minimum duty requirements, we are keeping the definition of 'cider' as a drink made wholly from apples and pears. My hon. Friend pointed out that we need to champion the little guy, and I agree. That is why all the measures will be underpinned by a new small producer relief for businesses making cider that is less than 8.5% alcohol by volume. That will build on the duty exemption that the smallest cider makers currently enjoy and help smaller, innovative craft cider makers and other producers, such as those found in Herefordshire and Somerset, to expand and grow their businesses without facing substantial tax increases. On consultation, I want to stress that the reforms announced at the Budget were part of our review on alcohol duty last year. That involved a call for evidence and received over 100 responses from the industry and other groups. We spent almost a year carefully considering the feedback from cider makers and other producers. We have been closely discussing our proposals with the industry throughout the policy development process. The consultation will be published in October and remains open until January, and I welcome the industry's views on the questions raised in the consultation documents and on the points covered by my hon. Friend during the debate. I recognise that the changes outlined at the Budget are significant, and we will continue to listen to the sector. I have heard the arguments that my hon. Friend has made, and I look forward to working with him and other colleagues on this matter. In conclusion, once-in-a-generation duty cuts, new incentives to grow and innovate, and a boost for pubs—our reforms spell exciting times for cider in this country. These steps will not only put more money in people's pockets, but encourage people to try new healthier and, may I say, delicious drinking choices. I am confident that together these measures will support our wonderful, traditional cider industry for many more years to come.