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Column 426in half, there would still be an incentive to cross-border shopping. It would no doubt be reduced, but it would certainly not be eliminated.
The cost in duty and VAT from halving our alcohol rates would be about £2.3 billion in a full year--five times the highest estimate by the brewers of the present duty and VAT losses. A big cut in duty, if passed on to consumers, would clearly increase sales, but not by nearly enough to recover the duty lost. Looking at the duty alone, to recover a cut of half the duty would involve doubling the total sales of alcohol in this country. The secondary effects on income and corporation tax would not bridge more than a very small fraction of that gap.
The Chancellor and the House must decide what other taxes to raise if it is desired to finance a major cut in alcohol duty rates. We must also reflect on the other consequences of a big cut in alcohol prices if one assumes that that would lead to a substantial increase in consumption. I accept entirely that there is a major dilemma. The single market will not go away and consumers are entitled to benefit from it. We, the British Parliament, however, are also entitled to decide British taxes. I do not believe that our constituents would thank us for cutting alcohol duty and raising VAT or income tax to pay for it.
The cross-border effects are one of the factors that the Chancellor, in every future Budget, will need to consider when framing the Budget judgments. That has been the case in respect of the Budgets in which I have been involved and it was so before that. It may perhaps be an increasingly influential factor, but the arithmetic is inescapable and necessarily difficult for us all.
My hon. Friend the Member for Ribble Valley referred to his concern--it is one that I share--about distance sales. Apparently, a Commission official suggested not long ago that distance sales of excise products would attract duty at the rate applicable in the country of the seller, not the country of the purchaser. In other words, if a purchaser in the United Kingdom buys alcohol from a seller in France through an agent or over the telephone, French duty would be payable and not British duty.
I am reliably informed that that is legally wrong. Goods must be accompanied across the border by the purchaser and be for his or her personal use if the duty in the country of origin only is to be payable. It was not the intention of the European Community agreement to permit such a loophole and it is not the obvious meaning of the relevant text. The European Commissioner responsible, Mrs. Scrivener, confirmed this opinion immediately after the story first appeared. I assure my hon. Friend that we take very seriously the suggestion that the agreement might be distorted in that way. If any lawyers try to say that, regardless of the intention of the agreement, the words can be interpreted in that way, we shall resist it strongly in the courts. If necessary, we shall seek a modification of the agreement so as to make the intention clear. We have the support of other member states in this view because they know what was agreed, and in any case they do not want their various revenues from excise goods affected by such actions either.
I do not doubt that I have the support of everyone in the trade, as well as that of my hon. Friend and the House, in that matter. I also have no doubt that we have the same support in tackling smuggling. Whatever the exact extent may be, the smuggling of excise goods for resale is illegal, and selling excise goods here which have evaded UK duty
Column 427is also illegal. Such acts are punishable by fines, confiscation of the goods concerned and any vehicle involved, and by imprisonment in serious cases.
Customs and Excise has the Government's full backing in bringing smugglers to justice. So far, the new breed of excise verification officers that we have created have detected 1,600 cases of smuggling alcoholic drinks and tobacco, involving more than £2.3 million in duty. In most cases-- particularly first offences--Customs has dealt with the offenders by seizing the goods. In 247 cases, it has also seized the vehicles. I need not tell you, Mr. Deputy Speaker, that that is a powerful deterrent in itself, but it also has the added bonus of not tying up the precious time of the courts.
Prosecutions have taken place in the more serious cases and, so far, 85 individuals have been prosecuted. The penalties imposed by the courts have included imprisonment, a number of suspended sentences, community service orders and the like, but mainly fines. There are more cases before the courts and the wheels of justice are grinding towards them. It may be a while before the full fruits of the Customs and Excise effort are fully visible.
I assure my hon. Friend that our actions against smugglers are increasing. Since 1 April--the beginning of the financial year--101 detections have been made in the Dover area alone. These have been made mainly in the port. About 10 per cent. of these cases involved people from the north west. A high proportion of them involved the use of vans, but one must not assume, as some do, that all vans automatically carry illegal alcohol. There is a lot of regular traffic in newspapers and magazines and so on using the same kind of vans, which is perfectly legal.
Those caught smuggling face fines often of thousands of pounds. So far, the biggest fine imposed was £8,000 and the longest sentence of 15 months was given at the Maidstone crown court recently. However, that case involved cigarettes.
The Customs effort is not confined to the ports. It is a crime to deal in goods which have evaded payment of UK duty, and a lot of effort is devoted to catching criminals in that area. Any licensee who buys or sells alcohol without paying United Kingdom duty risks his licence and his job or tenancy, so the legitimate trade is rightly very wary of becoming involved with that illegal activity. They and
Column 428others are keen in many cases to help Customs with intelligence. We have recently set up a hotline--0800 901901-- and I am glad to say that a considerable number of calls came in during the first few days of its operation with valuable intelligence, every bit of which is being followed up.
The excise verification officers have the specialist task and are dedicated to it, but in a way every Customs officer is involved. For example, VAT officers have been trained to look out for indications of sales of illicit alcohol and tobacco, and they visit a large number of traders. All customs and excise intelligence is co-ordinated because information which at first seems to be about one criminal activity may actually be about another.
Mr. Riddick : My hon. Friend the Member for Ribble Valley (Mr. Evans) and I welcome my right hon. Friend's robust approach on distance selling and also on smuggling, although I do not altogether welcome what he has said on the possible reduction in beer duty. Is he looking at other approaches to tackling the growing problem of the importation of beer into this country ?
Sir John Cope : I am prepared to look at every approach, but the primary approach must be to catch the smugglers. The excise verification officers are the front line, but everyone is involved. I assure the House and my hon. Friend that the Customs and Excise is working hard on this and has my full backing. It has been doing that work for literally hundreds of years, but it obviously has new relevance and has been given a new impetus at present.
My hon. Friends will not expect me to anticipate the decisions of the Chancellor about future Budgets and future rates of beer taxation, and I certainly have no intention of doing so. It is the lot of excise Ministers to be attacked by brewers, of course, and I know enough about their campaign from my hon. Friends and also from newspapers. It may be popular for the latter to campaign for a cut in the beer duty, but I do not think that it would be similarly popular to campaign for a rise in income tax or in VAT to finance it. Even when we can afford to reduce the duty, the Chancellor of the day will need to balance the priorities. In those circumstances, it seems important
The motion having been made after Ten o'clock and the debate having continued for half an hour, Mr. Deputy Speaker-- adjourned the House without Question put, pursuant to the Standing Order. Adjourned at twenty- eight minutes to Eleven o'clock.
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