Tolley Anne: Alcohol Advisory Council Amendment Bill — Second Reading 
Tolley Anne: Alcohol Advisory Council Amendment Bill — Second Reading 
[Volume:652;Page:1576] 
Hon ANNE TOLLEY (Minister of Education) 
 on behalf of the  
Minister of Health 
: I move  
That the Alcohol Advisory Council Amendment Bill be now read a second time 
. This bill is a technical amendment to the Alcohol Advisory Council Act 1976 to address problems with the current levy-setting mechanisms by introducing an updated and simple calculation system that reflects the current alcohol market and future-proofs the levy against new types of alcohol products. The amendment bill also provides for regulations to be made by Order in Council to fix the rate of levy payable. This Government has chosen to progress this bill because it proposes a pragmatic improvement to the system that is long overdue. I will outline the rationale for the bill discuss the select committee’s recommendations and note a further very minor change to the bill that will be introduced by a Supplementary Order Paper. 
The Alcohol Advisory Council (ALAC) was established under the Alcohol Advisory Council Act in 1976. ALAC’s primary objective is to encourage and promote moderation in the use of liquor to discourage and reduce the misuse of liquor and to minimise the personal social and economic harm resulting from the misuse of liquor. ALAC’s functions include research dissemination of information educational programmes and innovative treatment programmes designed to achieve its objectives. It is important to acknowledge that ALAC has a significant role in reducing the significant burden of alcohol-related harm in New Zealand and that this bill is not intended to contribute to reducing alcohol-related harm. This Government is very concerned about alcohol-related harm but plans to address the harms through other mechanisms. A technical amendment to simplify the funding of a Crown entity is not the place to debate ways to reduce alcohol-related harm. 
ALAC is funded by a levy on all alcoholic beverages manufactured in and imported into New Zealand. The way the ALAC levy is calculated and apportioned is outlined in the Alcohol Advisory Council Act 1976. The total levy amount for ALAC during the 2007-08 financial year was $12.4 million. This is small in comparison with alcohol excise payable on alcohol manufactured in New Zealand and excise-equivalent duty payable on alcohol imported into New Zealand which was $795 million in the year ended June 2008. 
In 2004 the Ministry of Health reviewed the current levy-setting mechanisms of the Alcohol Advisory Council Act 1976. The review found four major problems with the way the ALAC levy is calculated and apportioned. First the levy-setting mechanism is outdated as it is based on only four classes of liquor. The alcohol market has changed considerably since 1976 and the levy-setting provisions no longer reflect the diversity of alcohol consumed in New Zealand. For instance the emergence of ready-to-drink—RTD—products of around 5 percent alcohol and an increasing number of standard spirits of less than 42 percent alcohol by volume are not readily accommodated by the way that the levy is currently struck. This highlights the need to future-proof the classification system by enabling the easier classification of emerging types of beverage. Second the spirits category requires the calculation of proof letters—a concept that is no longer in use. Since 1986 New Zealand’s Customs Service has measured spirit volumes as litres of alcohol and proof litres are no longer recorded. Third the current levy-setting mechanism is unnecessarily complex when viewed alongside the way excise and excise-equivalent duties are set on the basis of alcohol content. Alcohol importers and producers have often noted that this procedure could be simplified. Fourth section 27 of the Alcohol Advisory Council Act 1976 allows the levy to be set by the Minister of Health by  
Gazette 
 notice. There is no process for Cabinet to be involved in the levy-setting procedure which is inconsistent with more robust approaches to setting levies such as the procedure for the problem-gambling levy. 
This bill seeks to introduce a system of alcohol classification bands—an approach that aligns with the system the New Zealand Customs Service uses to collect alcohol excise duty and excise-equivalent duty. Under this system a dollar amount per litre of beverage for the ALAC levy could be set for each alcoholic beverage according to its deemed alcohol content or average alcohol content. This means that alcoholic beverages with a higher volume of alcohol would contribute a higher proportion to the levy. Two other options were considered: incorporating the levy into excise and replacing the levy with funding through Vote Health. The Government and most stakeholders prefer the chosen option of retaining the levy but aligning it to excise because it will be simpler than the status quo and more transparent and cheaper than the alternatives. 
The new system will not affect the total sum collected for the levy and the effect on price to consumers through shifts in the levy payable between beverage types will not be significant—approximately 2c less for a 750 ml bottle of spirits and a difference of less than 1c for a bottle of wine a six-pack of beer or a four-pack of ready-to-drink beverages. Estimates from the 2006-07 levy round suggest that the beer industry will be affected most by the proposed change to the calculation of the levy due to the high volume of imported and manufactured beer products in New Zealand. The spirit and wine sectors would both contribute a lower proportion of the levy under the proposed system. The change will have minimal impact on those who pay the levy and industry groups are generally supportive of the bill. 
After looking at the bill and considering submissions from six submitters the Health Committee recommended that the bill proceed with two minor amendments. At the time every committee member supported the changes. The first minor amendment is to insert a definition of “rate” to make it clear that it means the percentage figure given in the schedule of the bill. The second minor amendment is a replacement of the table set out in the schedule. The revised table includes a list of the applicable tariff items for each class of beverage. The purpose of this amended schedule is to address the concerns raised by New Zealand Winegrowers by making it clear what rates will be applicable to particular products. This will ensure that the bill continues to be in line with the excise and excise-equivalent regime. 
The Ministry of Health engaged with industry groups prior to making the recommendation to the Health Committee in order to ensure that the recommended approach was easy to understand and accurate from the perspective of industry groups. The Minister of Health intends to propose a Supplementary Order Paper to correct a typographical error in the revised schedule of the bill that was discovered after the Health Committee had reported back to the House. One tariff item was drafted as 22.90.08 rather than the correct format of 2208.90.08. The error relates to the list of class F tariff items under the heading “Legal definition of class”. I recommend that the House supports the passage of this bill to the next stage.