Coleman Jonathan: Alcohol Advisory Council Amendment Bill — First Reading 
Coleman Jonathan: Alcohol Advisory Council Amendment Bill — First Reading 
[Volume:645;Page:14555] 
Dr JONATHAN COLEMAN (National—Northcote) 
: 
 After that extremely wide-ranging Government motion No. 2 we now come back to something that is somewhat more prosaic: the Alcohol Advisory Council Amendment Bill. On the last day of the last sitting week I spoke for 1 minute on it and I made the point that National will be supporting this first reading. Now I have the opportunity to expand on that a little further. 
The purpose of this bill is to amend the Alcohol Advisory Council Act 1976 with a view to simplifying and modernising the levy-setting mechanisms of the Alcohol Advisory Council (ALAC). The bill changes the method of calculation of the ALAC levy charged on each alcoholic beverage. ALAC is currently funded by a proportionate levy on four categories of alcohol—beer wine fortified wine and spirits—according to their volumes consumed during the previous year. The total levy collected for ALAC in 2005-06 was $13 million. The new method that this bill introduces is a levy per litre of alcohol content which is similar to the classification system used by the Customs Service to calculate excise duty. The result is that drinks with higher alcohol percentages will contribute a higher proportion of the levy so spirits will attract a higher levy than wine which will in turn attract a higher levy than beers. The levy change will advantage those beverages with high volumes but a low alcoholic content—such as beer and especially light beer—and low-strength spirits such as alcopops. 
A key factor in the Ministry of Health’s choosing the preferred option was its similarity to the current method that the Customs Service uses to collect excise tax. Industry feedback provided during consultation favoured rolling the levy into the excise tax. The Customs Service and the Ministry of Economic Development also favoured this option in order to reduce compliance costs. Only Treasury and the Ministry of Health favoured the proposed option. The ministry favoured it because it shows a direct link between the industry and ALAC’s work and Treasury favoured it because it makes ALAC’s costs transparent. 
One can see the logic that the Ministry of Health is following. Obsessive consumption of alcohol is harmful and ipso facto the higher the concentration of alcohol the greater the negative effects in terms of health and social impacts. However there are strong arguments that much of the negative impact of alcohol in New Zealand society may be attributed to beverages that are lower in alcohol but tend to be consumed to excess by at-risk groups. It is a fair bet that young people who get into trouble in whatever form through the abuse of alcohol are more likely to be drinking beer and alcopops than Pinot noir and I believe we will be hearing a lot more on that subject during the select committee process. There is no doubt that we have problems with alcohol in New Zealand society—problems that stem from our ingrained attitudes to drink. This issue is discussed regularly in different forms in this Parliament and it is pretty clear that alcohol abuse impacts on the lives of hundreds of thousands of New Zealanders and their loved ones. 
ALAC fulfils an important role in encouraging the responsible consumption of alcohol and in minimising its harmful effects. It was set up in 1976 when a royal commission recommended its establishment following an inquiry into the Sale of Liquor Act. Its budget for 2008 is $12.5 million. Other sources for ALAC’s funding were considered including having a higher excise tax or funding it through Vote Health but these were dismissed by the Ministry of Health. ALAC is an organisation that deserves Government and industry support. Its education campaigns and research studies have helped to shape and change many New Zealanders’ views towards alcohol. None the less by no means is ALAC’s job finished which is why the alcohol levy is so important and why this legislation is needed. 
A recent Ministry of Health review of the levy-setting provisions found them to be outdated and not future-proofed against new types of beverage. They were found to be overly complex and it was noted that they are presently set by the Minister through a  
Gazette 
 notice which is inconsistent with the setting of the gambling levy. This review consulted the beverage industry widely and found support for adjusting the levy-setting mechanisms. Three options were given to industry stakeholders and relevant Government departments to consider. The first would have brought ALAC’s levy under excise and excise-equivalent duty and the second would have seen all funding for ALAC taken out of Vote Health. The third was the option we are now discussing: using classification bands to determine the levy. This option was seen by Treasury and the ministry as the best one because it lawfully addresses the problems uncovered by the Ministry of Health review. However the majority of industry stakeholders although not opposing this option as such preferred rolling the levy into the excise tax. 
The Beer Wine and Spirits Council and especially the New Zealand Winegrowers association favour the excise option because they believe the classification method will unfairly impact on their products which are by nature higher in alcohol content than many other alcohol products. To the Ministry of Health and Treasury the third option is preferable for a number of reasons. It updates the levy-setting mechanism by bringing it into line with current Customs Service excise-collecting systems it future-proofs against new kinds of alcoholic products it more easily takes into account any new types and it simplifies the system as the new levy-setting mechanisms are far simpler to calculate than the current ones. 
In addition the bill sets out new provisions to allow Cabinet a role in the process thereby bringing it into line with the same process as the setting of the gambling levy. An up-to-date simplified levy-setting mechanism is necessary for ALAC and the beverage industry for obvious reasons and it is the main reason why the National Party will be supporting this bill going to a select committee. 
I would just like to mention briefly three main provisions of this bill. Firstly there is a new definition of “wine”. This bill repeals all previous definitions of “wine” and replaces them with the following: “ ‘wine’ means the product of the complete or partial fermentation of any fruit … vegetable or honey and—(a) includes—(i) cider perry and mead; and (ii) fortified wines such as sherry port and fruit or vegetable-based liquors; …”. This classification simplifies the definition in the current Act which defines different kinds of wine rather than the concept of wine itself. 
The second important provision relates to the definition of “class of liquor” which is a new definition in the bill. This definition classes liquor into groups for the purposes of identifying the amounts of levy that will be taken out of any particular leverage—for example more than 1.5 percent but not more than 2.5 percent alcohol content and so on. 
The third main provision is in regards to the setting of the levy. This sets out the calculation that the Minister must use to find the correct figure for each class of liquor. Some of these rates may be variable in which circumstances the bill notes that the Minister must determine what these rates are. In addition as mentioned earlier the Governor-General may also fix the levy if directed to by the Minister. 
Although National essentially supports this bill at the first reading we take issue with it for a couple of reasons. Firstly the bill obviously advantages those beverages with low alcoholic content but high volume such as beer especially light beer and low-strength spirits—those sometimes referred to as alcopops. Whether this will see an increase in production of these alcopop products remains to be seen but it is an issue that may need to be addressed at a later stage and one that will no doubt be discussed at the bill’s hearing in the select committee. 
Secondly National is concerned that a number of the industry stakeholders as well as the Ministry of Economic Development and the Customs Service favoured rolling the levy into an excise tax rather than the option under debate here. We need to make sure that their concerns about the chosen levy-setting mechanism are heard and appropriately considered. Thirdly National strongly believes that an extra clause should be added to this bill requiring the Minister to consult with the sector if a levy increase in excess of the consumer price index is planned in any year. This will give the sector confidence in the administration of the levy and allow stakeholders to feel more involved in the levy process as a whole. 
So to sum up National will support this bill at its first reading and looks forward to the discussion of the bill at the Health Committee. We are sure this bill will attract a wide range of submissions and I think there will be some quite interesting debate in the committee.