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Mr. Newton : I do not wish to prolong the proceedings or be unduly tiresome, but I will make the point that while I happen to believe--as do my colleagues generally--in consultation wherever possible, although there is a requirement to consult here before introducing the proposal, there is no such requirement in respect of introducing primary legislation.

Mr. Bennett : I accept that there is no need for that requirement. I do not think that the proceedings of the House are particularly well reported, but almost always on Second Reading there is a reasonable debate in the House about the proposals, and from that point on people begin to become interested in the matter. I think that the consultation process is pretty effective ; certainly most of the organisations that would be formally consulted, as required by the legislation, would spot anything in primary legislation.

Mr. Spearing : Is my hon. Friend aware that, under consultation procedures, the Department of Transport sent out a letter on 11 February asking various official bodies what they thought about getting rid of three schedules of the London Transport Act 1982, taking away the burden of running a lost property service ? I do not think that many London Transport passengers know about that--and I did not until yesterday, despite having asked a question to which I received a misleading answer.

Mr. Bennett : I accept that it takes time. If the Government are anxious for the consultation process to be effective, they should look to primary legislation.

Primary legislation, moreover, gives the power to amend. Again, the markets provision, which was discussed last night, is a good illustration. The power to amend in detail allows the possibility of cross-party activity in the House and the defeat of the Government. Regulations, because of the way in which they are presented, give the Government much more power : there is a "take it or leave it" approach. I understand that some power to amend has been suggested, but that would be a result of the Committee's scrutiny rather than any opportunity to make amendments in the House.

Appointing 16 Committee members for the duration of a Parliament would be a disadvantage. Although they may follow the procedures, my experience in the House suggests that during such a long period at least some members of the party in government will be

promoted--perhaps not very far, but at least to parliamentary private secretary--and will leave the Committee. There may be a turnover of members for various other reasons.

I think it is easier to persuade people to volunteer for involvement in primary legislation--which will give them the interest to follow through the issues involved--than to hope for good attendance in a Committee that meets week after week, often dealing with matters in which individual members have very little interest. I can say from my experience of the Select Committee on Statutory

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Instruments that it is very difficult to maintain good attendance, although members are appointed for the duration of a Parliament. I believe that there are major defects in the new procedure. If the Government cannot secure agreement, it will start at a disadvantage : people will be aiming to wreck it, rather than to make it work. I suggest that, even at this late stage, the Leader of the House should scrap the Procedure Committee's report and think again about finding some consensus--perhaps through the usual channels--if the Government are determined to bring about deregulation of Acts of Parliament by regulation. It would be far better to scrap the whole Bill and start again, perhaps promising an annual deregulation measure.

9.37 pm

Mr. William Ross (Londonderry, East) : I shall be brief. I read paragraph 16 of the Committee's report with interest. It consists of only one sentence, stating that the Committee has sought to ensure "that no Act of Parliament is repealed or amended under this new power without examination at least as thorough as if the change had been made by a Bill passing through the House."

As I said earlier in an intervention on the speech of the hon. Member for Newham, South (Mr. Spearing), Northern Ireland has been governed by Order in Council for some 22 years. I was astonished and delighted this evening to hear so many Opposition Members condemn that procedure as applied to their constituents ; I hope that they will now understand how those of us who represent the Province have felt for the past 22 years, 20 of which I have spent in the House. Our experience is that the procedure suggested by the Government invariably results in legislation by civil servants rather than by Parliament. That is literally what happens with Northern Ireland legislation. I do not think that we should adopt such a procedure and I commend what was said by the hon. Member for Newham, South. A deregulation Bill each year might not be particularly satisfactory, but it would be a sight better than what the Government propose. 9.39 pm

Mr. Derek Fatchett (Leeds, Central) : We have had an important debate on the Select Committee's report.

I should like to preface my remarks by referring to the speech of my hon. Friend the Member for Cannock and Burntwood (Dr. Wright), who raised some important issues about the role of the House and ministerial accountability. It would do us all a great deal of good to explore that agenda because it is important for our democracy. It is extremely relevant to the debate that we have had this evening. My hon. Friend the Member for Cannock and Burntwood referred to the issue of the markets and the three clauses that were deleted last night from the Deregulation and Contracting Out Bill. I offer my hon. Friend one thought : if the procedures recommended in the report had been in place, I contend that the clauses dealing with markets would have been enacted speedily without the process of consultation and opposition that eventually occurred. The short-cut procedure would have led to bad legislation which would have been highly unpopular. It may be a warning to the Government that, if the procedures

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that they are now trying to implement had been in place, they would have pushed through some unpopular measures on markets. That is one of the lessons that we need to draw.

Mr. Newton : That was in the Bill because the Government judged that it was not a proper use for the regulation-making power. It is a good illustration of where we think that it is appropriate to have new primary legislation.

Mr. Fatchett : With respect, there is no definition in the Bill or in the Procedure Committee's report of what is to come in the future, what is defined as important and what Bills or proposals can be used via the mechanism. The right hon. Gentleman's argument falls on its face because that sort of measure can come in the future. The situation was well summed up by a telling intervention made by the Minister for Industry during the speech of my hon. Friend the Member for Glasgow, Hillhead (Mr. Galloway). The Minister said that many people want to get on with the deregulation initiative. That was an interesting perspective and it was embodied in all our debates in the Standing Committee. It was highly and wholly practical, with no reference to the underpinning constitutional issues. The Minister's primary concern was to deal with a deregulation initiative. That is an extremely dangerous approach to legislation and administration. The best approach takes account of our constitutional principles and tries to bring legislation within those principles.

We objected to the Bill on Second Reading, and we shall vote against it tomorrow on Third Reading, because it gives extensive powers to the Executive to repeal primary legislation. I shall quote a passage from the evidence of the Procedure Committee which has not been quoted by any of my hon. Friends. It sums up our key objection. The right hon. Member for Honiton (Sir P. Emery), the Chairman of the Procedure Committee

Mr. Bennett : Where is he ?

Mr. Fatchett : I have received a note from the right hon. Gentleman saying that he has to fulfil another appointment.

The right hon. Member for Honiton asked the Clerk of Committees the following question :

"do you know of any other instances where primary legislation has been altered, other than by a Statutory Instrument which arises from the primary legislation" ?

The Clerk said :

"No, I do not, Sir. I think this is recognised to be an innovation".

Is not the crucial point the fact that, under the Bill, the Government are taking the power to repeal and amend primary legislation ? That is the key constitutional point.

It is a sad reflection on the House that no Conservative Member has felt this to be an important enough principle to come to the debate and to speak on these issues. Once that principle is accepted, others may use it. As my hon. Friend the Member for Cannock and Burntwood said, Conservative Members believe that they will be the Government for ever and that they will implement the powers for ever. That is a foolish view in terms of their stewardship and of our political processes. It is also a dangerous and arrogant view which the House and the country should note.

Once the Government take that direction, one precedent will lead to many others. Do not Conservative Members

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recognise the danger that others with different motives and objectives may wish to use the same procedures ? They will not have the right to come back to the House and object. I should not want a Labour Government to use the executive powers proposed in the first four clauses of the Deregulation and Contracting Out Bill, or anything like them, but the Government have introduced them, to which we object in principle.

The Government argue that safeguards are included in the procedures, which is swallowed by the Procedure Committee report. It relies on two phrases-- "burden" and "necessary protection"--which arose time and again in Committee. The report and Ministers believe that those words have an objectivity that can be applied in each circumstance, which is nonsense. Those terms are highly political ; they are charged with political controversy. A burden on business or a cost to an employer may be a safeguard for an employee or a consumer.

The hon. Member for South Hams (Mr. Steen) is not in his place, but I would have said this even if he were. Time and again, he has gone on about fire regulations and environmental health inspectors. Many consumers prefer to eat in a restaurant or hotel that is subject to environmental health standards. They regard that as a necessary price to pay in a civilised society. For some, including the hon. Member for South Hams, however, that price is seen as a burden.

Those terms are not charged with objectivity. They are at the heart of the political controversy. Last night, the debate on health and safety regulations at work and fire protection regulations divided the House. It is no use the Select Committee's report or Conservative Members trying to pretend that those words will enable to us make objective judgments ; they will not.

The next argument of Ministers and in the Committee report is contradictory. We have been told by the right hon. Member for Honiton (Sir P. Emery) and by Ministers that the deregulation Bill is a modest Bill. That slightly contradicts the great fanfare of trumpets at the Conservative party conference that heralded this great deregulation initiative. Many great ideas at Conservative party conference suddenly become modest ideas ; deregulation may be one. Is there not a clear contradiction ? If these are modest measures, and the deregulation Bill is a modest measure, why, in the words of the Clerk of the House, must we invent a new constitutional procedure to deal with this modest Bill ? Is there not a better way of proceeding ?

If the other side of the equation is correct and these are not modest but extensive measures, as the Under-Secretary of State for Corporate Affairs told the Conservative party conference last year, and if we believe the rhetoric of that conference, is that not a greater warning to the House ? If the powers are extensive, should not we be saying that we shall not give the Government innovative powers to do things differently and undermine our constitution ? The more extensive the powers, the greater should be the vigilance and scrutiny by the House of Commons. It saddens me that these powers are being taken by the Executive without one voice being raised on the Tory Benches, despite the fact that the Government's arguments about the nature of the Bill do not add up.

We have also been told that the Bill is an on-going process. That makes me extremely cautious because, if we regard it as an on-going process, we must remember that what is on today's deregulation agenda may not be on

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tomorrow's. The present Ministers may disappear, and it is not impossible that the Conservative party could lurch even further to the right and be even more out of touch with public opinion. I could write the hypothesis of how that could happen. What would happen to these powers in such circumstances ?

We tried repeatedly in Committee to control the scrutiny powers and to put a time limit on them, but our attempts failed. The Minister for Industry said that deregulation was an on-going, rolling process. He forgot the point made by my hon. Friend the Member for Pendle (Mr. Prentice) that 71 per cent. of regulations have been introduced by this Government in the past 15 years. If deregulation is an on-going process, today's menu could change tomorrow and the new menu could be even more damaging for the interests that we should be protecting. On the day the Bill was published, I said that the new powers contained in it would allow the Health and Safety at Work, etc. Act 1974 to be repealed. I received a letter from the Minister of State, Department of Employment, saying that I was scaremongering, that there was no truth in what I said and that it was not the Government's intention to operate in that way. Let us consider what could happen ; I offer the House an hypothesis.

The Minister of State could tell the Deregulation Committee that the Health and Safety at Work, etc. Act 1974 is a burden on employers and that, if we are to compete against the Government's new model of industrial economies-- against Taiwan and South Korea, where he sees Britain's future--we have to get rid of that Act. He could say that, because we have good employers, we have the necessary protection, so the two categories--burden and necessary protection--are satisfied. The Scrutiny Committee, under the control of a Conservative majority, could agree that, as the two conditions of "necessary protection" and "burden" have been met, the Act should be repealed. What is there in the Committee's report or in the Bill to stop the 1974 Act being repealed in that way ? There is absolutely nothing. That is the real danger of this Bill.

The problem is not what is happening now but what will happen if new powers are given to the Government and the Government remain in office. My colleagues said many times in Committee and again tonight that the Bill and this initiative have been driven by people who have made substantial contributions to the Conservative party. The list of such people has been published and it is self-evident. The agenda can be pushed even further. There are no safeguards in the report or in the Bill to protect employee or consumer interests. That is why we asked for time scales and have disagreed strongly with these powers, but the Government persist in their strategy.

My hon. Friend the Member for Newham, South (Mr. Spearing) mentioned an alternative way of doing things. I am sure that he read the proceedings of the Standing Committee, and he will have seen that, for the first four clauses, we advanced the same argument. My hon. Friends and I said that there were other ways of dealing with the deregulation proposals.

I say the same thing again now. If the proposals are modest, small in number and limited in scope, why do the Government not take up the Opposition's suggestion ? It would in no sense stop the Government's deregulation initiative, but it would help them to say that each year a miscellaneous deregulation Bill would pass through the House. That would have the advantage of providing greater scrutiny, accountability and openness. Why do the

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Government not take up that proposal ? Why use the back door ? Why do things through a scrutiny Committee, which will not have the powers to operate as we think it should ?

I shall say a few final words about that Committee. In Standing Committee, I argued strongly that there should be a Chairman from among the Opposition parties. That is vital. But there is something else that we need to understand about this place. Flanked as I am by two Opposition Whips, I had better be careful what I say and how I phrase it, but I suspect that that crucial Committee defined in the report will consist of those whom the Whips know that they can manage--the ambitious, and those self-important enough to do the Whips' bidding. It will be a Government-controlled and

Government-sponsored Committee. That will not help the reputation of the House, or answer the points made by my hon. Friend the Member for Cannock and Burntwood about the way in which the general public regard the House. We need a Committee with more independence. There will be little faith in it if it is fixed by the Government Whips, like everything else these days.

We voted against the Deregulation and Contracting Out Bill on Second Reading because of the extensive powers being given away. I ask my hon. Friends not to vote against the Select Committee's report now, but to join me in the Lobby tomorrow night to vote against Third Reading of the deregulation Bill. That will not be because, unlike the Government, we believe in red tape--after all, we did not introduce 71 per cent. of the current regulations--but because we believe in the House, in the accountability of Ministers and in a rolling scrutiny by Members of Parliament. That is why we shall vote against the Bill, and that is why we reject the report, which does not deal with the principal issues that the House should have tackled.

9.57 pm

Mr. Newton : I see that I have only three minutes in which to reply, so clearly I shall not be able to make any substantial comment on what has been said. I make no complaint about that, but I shall make one or two observations.

First, there has been some unfairness in attacks made on my right hon. Friend the Member for Honiton (Sir P. Emery) and the Procedure Committee for the alleged inadequacies of the report--I do not share that view of it- -by a party that declined to take a full part in its proceedings.

Secondly, there is something slightly peculiar in the implication of the hon. Members for Newham, South (Mr. Spearing), for Glasgow, Hillhead (Mr. Galloway) and for Pendle (Mr. Prentice) that proposals for orders that would allow the Patent Office to accept documents in forms other than paper --such as electronic filing--or exempt purchasers of small and statistically insignificant annual tonnages of corn from the requirement to make returns of information under the Corn Returns Act 1882 somehow constitute an astonishing attack on the whole of our parliamentary democracy

Mr. Fatchett rose

Mr. Newton : No, I shall not give way.

Thirdly, with due deference to the hon. Member for Cannock and Burntwood (Dr. Wright), who made an interesting speech, and to one or two others, I must say that the repeated emphasis on executive powers and the

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Government's power to legislate by order implies something verging on contempt of the House. We are speaking about orders that have to be passed by the House, whereas people persistently speak as if we are talking about government by fiat. To return to the argument that I made to the hon. Member for Newham, South, it is perhaps curious that I, standing here, have greater confidence in the House than many of the Members who have spoken.

Most of what the hon. Member for Cannock and Burntwood wanted was closer to what we have in the proposals from the Procedure Committee than to an existing study of legislation. Most of the things that we are speaking about would have been passed on the nod in some schedule in a primary Bill. Here we have a Committee that will have to consider them. The hon. Gentleman should consider whether we are moving in the direction that he wants. I sense that he recognised that in many of his remarks. I leave the matter there.

Mr. Timothy Wood (Lords Commissioner to the Treasury) : I beg to ask leave to withdraw the motion.

Motion, by leave, withdrawn.

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Section 11 Funding

10 pm

Mr. Keith Vaz (Leicester, East) : I should like to present to the House on behalf of 2,000 of my constituents a petition which was presented to me recently by teachers and parents concerning the proposal of the Government to cut section 11 funding. Such funding, as the House knows, has provided a great deal of support for teachers, especially in our inner-city areas. The petition has been signed by teachers, parents and other people who are affected by the cuts. The petitioners request the Government to change their mind and to restore the section 11 funding, which is to be severely cut. To lie upon the Table.

Goodwood House

Mr. Vaz : I also wish to present to the House a petition that is signed by 1,725 of my constituents, living predominantly in the areas of Evington, Thurncourt road and West Humberstone. The petition calls on the Secretary of State for Social Security to intervene in the proposals of Leicestershire county council to close Goodwood house, which is a home that provides services and residence for a number of elderly people in my constituency. The proposals are opposed by a large number of people, and the petitioners request that the Secretary of State intervenes so that provision may be allowed to continue and the residents of Goodwood house who have lived there for so many years may be allowed to continue to live there.

To lie upon the Table.

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Alcohol Sales (European Single Market)

Motion made, and Question proposed, That this House do now adjourn.-- [Mr. Wood.]

10.2 pm

Mr. Nigel Evans (Ribble Valley) : I am grateful for the opportunity to mention an issue that is of great interest to many people involved in the drinks business throughout the country. It is the single market and the effect that it is having on our domestic drinks business, whether that be brewing, on-sales or off-sales. The industry employs about 1 million people, and even in the north-west it employs up to 150,000 people. I am an executive member of the all-party beer group and I take my duties extremely seriously. There are three breweries in and around my constituency. The first is a small brewery in Moorhouses, Burnley. It employs 11 people on the brewing side and 30 people in its six pubs. It also supplies 150 other pubs in the area, employing about 750 people. Thwaites is a larger brewery, but still in family hands, based in Blackburn. It was established in 1807. It employs 332 people on the brewing side and provides employment for 2,000 other people in its public houses. Finally, there is Whitbreads in Samlesbury, which employs more than 500 people on the brewing side and a considerable number of other people in pubs and clubs that sell its beer. It was established in 1742. I have been to all three breweries and I am proud of their contribution to the local economy.

In addition to the breweries, some of the finest public houses in the country are in my constituency. The British pub is an institution that is not properly replicated anywhere in the world, but it is the envy of the world. Seventy per cent. of visitors to Britain prefer British pubs to their bars at home. The one aspect in which we could learn something from the continentals is our licensing hours, and I hope that we can tackle those at a future date.

Although we have some of the best pubs in the world, and certainly some of the best beers in the world, that is now seriously under threat.

I applaud the single market. It is a trading bloc without frontiers of 350 million people. We have 12 countries in the European Community. Soon the number will expand to 16, which means 16 different taxes and 16 different Governments--long may that remain the case.

We have a policy in this country of switching taxation away from direct to indirect taxes and I applaud that policy. That has led to the top rate of direct tax being reduced from 83 per cent. to 40 per cent. and the bottom rate of tax being reduced from 33 per cent. to 20 per cent. at its lowest rate and 25 per cent. otherwise. We also have the lowest rate of corporation tax in the European Community. Where we are almost top of the European Community league table is in the taxation that is imposed on alcohol, and I shall refer specifically to beer this evening.

Beer drinkers in this country account for 21 per cent. of the European Community's total beer consumption, but we pay 55 per cent. of the total Community beer duty, whereas our German neighbours account for 40 per cent. of total beer consumption in the Community but pay only 14 per cent. of the duty yield. The excise duty on a typical pint of British beer is 24.5p and the VAT is 20p, whereas in France drinkers pay, on average, less than 5p in excise duty per pint. That means that beer sellers in France start off with an advantage of 25p a pint over their British

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counterparts when other factors are taken into account. Nor should we forget that French beer is stronger than British beer. The last thing we should be doing is encouraging people to drink more beer with a higher alcoholic content.

As we celebrate the coming down of the international barriers to trade, the chances are that we shall be toasting the frontierless trade with a glass of beer that originated abroad. Last year 330 million such pints of beer were drunk in this country. That is almost as much as is brewed in Norway.

I do not blame people for getting into their cars and vans and making the trek across the channel. It is a bit of fun, and, with the difference in the rates of tax on beer, there is a great incentive to do so. Nor is the ferry industry slow to encourage as many people as possible to use its services. Special offers appear in some national newspapers. The average customer will see a very quick return on his fare outlay.

The single market means that one can now bring back as much as one likes as long as it is for personal consumption. I fear for the health of the nation and I marvel at the physical capacity of some of my fellow countrymen to put away so much liquid. It cannot be doing them any good. I refer to those people who come back with their cars heavily laden with beer and tell Customs officials that it is all for their own consumption. What are the officials supposed to do with such evidence ?

The trade is getting so big that British-owned store chains such as Sainsbury and Tesco are opening up across the channel, and others will soon follow. I am sure that Mr. Sainsbury will be relieved to learn that in my retail store in Swansea I do not intend to follow suit.

There are worrying signs on the horizon. I shall mention just one or two of them. On the question of smuggling, I refer the House to early-day motion 165, which has been signed by 125 hon. Members. Organised crime and the Arthur Daleys of this world have a nice little earner in the sale of massive quantities of their contraband. So prolific is the practice that it has reached the heights of Reg Holdsworth's minimarket in "Coronation Street".

The Minister will be alarmed, as I was, to learn that Britain's favourite landlady, Bet Lynch of the Rover's Return, could see her livelihood hit thanks to her boy friend's frequent illegal imports of cheap lager, which he brings back in his empty lorry on the return leg of his visits abroad. He sells the lager to Reg, who then sells it to his customers. Reg is a decent sort of bloke and probably thinks that he is not doing any wrong. Bet Lynch would probably think otherwise, as would Newton and Ridley, the brewery landlords of the Rover's Return.

However, I fear that in this practice Reg is not alone. A local brewery told me that the landlords of three of its pubs have been approached by people offering to sell them vanloads of imported beer. Someone even offered to supply the brewery's managing director with beer in this way.

I know that Customs and Excise has a dedicated task force visiting stores, pubs and car boot sales. Its members use the intelligence that they have built up from various sources, but it is not enough. Nor are there enough of these people. There must be more stops and searches. If they are successful in finding illegal supplies, these must be confiscated and prosecutions must take place. Perhaps my right hon. Friend the Minister will be able to tell the House how many prosecutions there have been to date and how many goods have been confiscated.

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Potentially more worrying than smuggling is a practice called distance selling and buying. The practice may start and it has not been tested in the courts. It would involve someone using a middle man or agent to place an order and to receive imports of beer from France into the United Kingdom without accompanying the goods. If we think that smuggling has proved to be damaging to the trade as it stands, distance selling will lead to the decimation of the brewing industry.

When the single market was first introduced, swift action was taken by the Danish Government because they could see that there would be a problem. As a result, beer duty decreased by 47 per cent. That approach has worked. The Danes were fearful of the cross-border trading that would take place.

The specific problem to which I am drawing attention has been recognised by my right hon. and learned Friend the Chancellor of the Exchequer and he mentioned it in his November Budget. Only 40 per cent. of travellers take the opportunity to buy beer on their trips abroad, so there is scope for an even greater increase in the practice. That will be especially so when the channel tunnel comes into full operation and doubles the capacity for cross -channel travel from 28 million to 56 million passengers a year.

We are exporting our taxes and our jobs. The problem will be eradicated only by decreasing the differential between taxation systems. I would not dream of telling the French what to do with their domestic taxes, and I would be especially offended if the French told me what we should be doing with our taxes. We must recognise, however, that a problem exists and that there is a stark difference between our taxes on beer and their taxes.

I cheered with everybody else when Her Majesty the Queen travelled through the channel tunnel for the first time. I look forward to travelling through the tunnel myself. A new market will be created and many more people will be able to make the journey. As Her Majesty looks forward to the marriage of her youngest son to Sophie Rhys-Jones, I trust that she will not be toasting their future happiness with a glass of smuggled champagne, but all too many will. The need is pressing for the Government to introduce tighter controls and tougher penalties on smugglers who abuse the single market. It is time to look again at the present tax regime in the United Kingdom, which is preventing the drinks industry from taking full advantage of the potential benefits. Having reassessed the tax regime, we would be able to preserve the drinks industry, which has grown up over centuries. It has contributed to our benefit and now is the time for us to support it.

10.12 pm

Mr. Graham Riddick (Colne Valley) : First, I congratulate my hon. Friend the Member for Ribble Valley (Mr. Evans) on his luck in securing the Adjournment debate this evening. I thank him for allowing me to take a minute or so of the debate.

Secondly, I declare my interest. I am the parliamentary adviser to the Brewers and Licensed Retailers Association. In that role I meet many brewers, and I know that they are extremely concerned about the situation that my hon. Friend has outlined. It is not only the brewers in the south- east of England who are concerned about the effect

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of the importation of beer. The concern is shared by brewers throughout the country. We are finding imported beer on which no duty has been paid in Yorkshire and the north-east of England generally. It is a serious problem.

It is not only the brewers who are worried. CAMRA--the Campaign for Real Ale--which is certainly not in bed with the brewers, shares their concern. I shall quote what it states in a brief that it sent to hon. Members in July 1993. The brief reads :

"The massive differential between Britain and the Continent will lead in the long term to a smaller UK brewing industry, pub closures and revenue loss as beer is increasingly brewed and bought abroad." I do not believe that CAMRA is being alarmist when it says that. There is a serious risk of the brewing industry being harmed as a result of the situation as outlined by my hon. Friend. He was quite right to talk of the threat to jobs. The problem, of course, is that UK beer duty is more than six times that in France. The result is that the UK tax regime perpetuates unfair competition in the European single market.

The solution should be that the Government follow a strategy of progressive reduction in UK beer duty to bring about fair competition. I am grateful to my right hon. and learned Friend the Chancellor for freezing beer duty as he did in the Budget. I do not believe that he did it simply because he is fond of the odd pint, but because he recognised the difficulties facing the brewing industry. The Danes, as my hon. Friend pointed out, had a similar problem, which they faced by reducing beer duty and it solved the problem. There may be other solutions, and if my right hon. Friend the Paymaster General has something else in mind, perhaps he can spell it out tonight. However, it seems that doing nothing is not an option. 10.15 pm

The Paymaster General (Sir John Cope) : I am glad of the opportunity provided by my hon. Friend the Member for Ribble Valley (Mr. Evans) to give the House an update on how we see the position of cross-border shopping and the smuggling of alcohol. I want to talk briefly on three aspects : first, the scale and the effects of it all ; secondly, the possibility, which my hon. Friend mentioned, of distance selling and unaccompanied goods ; thirdly, the progress of customs in dealing with smuggling.

There have been a series of attempts to estimate the scale of cross-border shopping and the smuggling of excisable goods since the single market opened in the past year. Clearly, cross-border shopping is inherently easier to estimate, because people will tell us what they are doing, whereas smugglers, of course, conceal it when they can. Obviously, cross- border shopping for personal consumption is a legal activity ; indeed, it is one of the benefits to consumers of the coming of the single market. Smuggling goods for resale is illegal, however, as is selling alcohol or tobacco here, which has evaded United Kingdom duty.

Often the estimates of the scale of such practices are expressed by me and by others in terms of duty lost. That is a convenient way in which to measure the volume of alcohol involved, but nobody supposes that the duty lost is the only fiscal effect of these phenomena. Clearly, there will be directly measurable effects on value added tax and indirect effects on corporation tax and income tax, although those are more difficult to estimate.

We consider all the available evidence for cross-border shopping and smuggling. Surveys have been done by the

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brewers--understandably campaigning against such behaviour--and also by Customs and Excise. They have come to different results, partly because they have been expressing slightly different things. There was a certain amount of cross-border shopping and smuggling before the single market opened ; our primary interest is in the increase of those activities since.

Surveys are not the only way in which to try to establish the facts. One of the things that I look at carefully every month is the returns of duty received. In 1993, after a year of the single market, our receipts from duty were up in every category. Duty receipts from spirits produced in 1993 rose from £1,698 million to £1,739 million. The volume of production was up by about 1.9 per cent. Receipts from beer produced rose from £2,394 million to £2,407 million. There was a volume fall of about 3 per cent., continuing the trend of recent years.

Wine receipts rose strongly from £974 million to £1,078 million-- a volume increase of about 5.5 per cent. and the first year, incidentally, of more than £1 million of wine duty receipts. The pattern, so far as we can see, is repeating itself this year. The latest figures show that alcohol duties in the first four months of this year rose by 4 per cent. compared with the first four months of 1993, despite pre-Budget forestalling in that year.

When looking at the figures, one must assess how the duty receipts might have moved if the single market had not opened. I do not suggest that the market would have been static. Clearly the economic recovery would be reflected, and is no doubt reflected to some extent, in the figures. There has obviously been an increase in cross-border shopping and smuggling and we are losing some revenue. However, it is clear that there is no acute haemorrhaging of revenue threatening the basic yields of duty.

That is relevant to the decisions that the Chancellor of the Exchequer and the House had to consider in the Budget and in the Finance Bill in recent months, and which we shall have to consider again in the Budget in November. I repeat a point that I made clearly earlier : the extent of cross-border shopping and smuggling is a factor that we have to take into account in arriving at the Budget judgments to recommend to the House. As my hon. Friend the Member for Ribble Valley (Mr. Evans) said, we did that last year and we shall have to do it in every future Budget.

There is a beguiling argument which I only wish were true, but which does not stand up to examination. That is the idea that lower duty rates on alcoholic drinks would lead to higher duty and tax yields and would thus compensate for the loss of revenue. That depends on the level of cross- border shopping and smuggling that one believes is taking place now. It also depends on the additional sales to be expected as a result of cuts in duty being passed on in cheaper prices.

Even if we take the largest estimates that anyone has advanced for the present scale of cross-border activity, and generous assumptions about extra sales, the inescapable fact is that large cuts in duty--sufficient to make a material difference to cross-border prices--would cost a great deal more revenue than would be recovered from increased or repatriated sales. Nothing that I say today should be taken as a hint about future Budgets, but we cannot expect to recover the yield by increased or repatriated sales. For the sake of illustration, if we were to cut the alcohol duty rates

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