MPs flay Government over beer intervention: Report recommends excise cuts to help industry Lord Young criticised over 'no clear rationale'

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The Independent Online
A DAMNING report on the Government's radical changes to the brewing industry is published today by an all- party select committee of MPs. The report recommends strong measures to help the industry, including a cut in excise duty rates and liberalisation of licensing laws.

The Commons Agriculture Committee, chaired by Sir Jerry Wiggin, a Conservative, accused the Government of failing to establish a 'clear strategic path' for the industry when it decided in 1989 to force the big brewers to dispose of 11,000 pubs over three years.

Government intervention in the industry was based on a Monopolies and Mergers Commission investigation between 1986 and 1989 into the supply of beer.

The committee report says the Government's actions, legislatively imposed under the Beer Orders, caused unnecessary 'expense and turbulence' for brewing companies.

'We feel that there is sufficient evidence to show that the MMC and the Government failed to understand the mechanics of competition in the supply of beer, and that as a consequence several problems persist within the market and others have arisen.

'We therefore question whether it was necessary for the Government to intervene so forcefully in the brewing industry in the first place. In particular, we consider that reform of the licensing laws could have gone much of the way to introducing greater competition into the industry with far less traumatic results that the direct regulatory action adopted.'

The Committee points to the closure of pubs, the decline of beers available nationwide, rises in beer retail prices above the rate of inflation, and the continuned presence of local monopolies as indications that the Beer Orders have failed in their primary objectives.

Lord Young, who was responsible for invoking the Beer Orders as the then Secretary of State for Trade and Industry, has also been singled out for criticism.

His statements to the House of Lords in July 1989 on the MMC report provided, the report says, 'no clear rationale for the policy choices made by the Government, or for the reasons for accepting or rejecting particular MMC recommendations'.

It adds: 'Much of the subsequent confusion within the industry could have been avoided if a clear strategic path had been established from the outset.'

Big brewers welcomed the findings. Whitbread said: 'We are very pleased that the Committee has seen the MMC report was flawed, which is something the industry has always believed.' The company said it would also endorse lower duty rates, but not for spirits which it believed should be taxed more heavily for health reasons.

Lower duty rates, the committee says, would defuse the threat posed to the industry by the removal of customs barriers in the European Community.

Average excise duty of 33p per pint in the UK is substantially higher than in all other EC member states apart from Ireland.

The Scotch Whisky Association strongly rejects the arguments for taxing spirits on health grounds, basing its case for lower duty on the loss of revenue to the Treasury brought about by re-importing cheaper drinks.

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