House of Commons Hansard Debates for 1 Dec 1994

Mr. Deputy Speaker (Mr. Michael Morris): Order.

8.26 pm

Ms Angela Eagle (Wallasey): Much has been made by the Government and Conservative Members of Britain's improving economy. The Chancellor wallows in self-congratulation about that, but no credit whatever is due to the Government for our present situation. It came about because of the utter destruction on 16 September 1992 of the Government's centrepiece of economic policy. On that date, the pound was forced out of the ERM and there was an enforced and humiliating devaluation.

It is even more annoying that the Government persist in claiming credit for our economy when we realise that they spent approximately £15 billion of our contingency reserves in an afternoon to try to avoid the situation that preceded the recovery.

There are two Conservative parties in the House, and we are debating two Budgets. This is not the package of broadly neutral measures that has been reported in the newspapers, because the Budget contains the second tranche of tax increases, of which the increase in VAT on fuel from 8 to 17.5 per cent. is but one example. Those measures were put in place by the last Budget, and over the past two years taxation has increased by 7p in the pound. That increase has been made by a Government whose election pledge was to cut taxes. We shall keep reminding them of that.

The Secretary of State for Employment cuts an interesting figure at the Dispatch Box. I am sorry that he is not in his place. We all know that he has leadership ambitions. I recently looked at a book in which Oliver Cromwell described leadership. He wrote:

"None climbs so high as he who knows not whither he is going." That is bad news for the right hon. Gentleman, who has made it all too clear whither he thinks he should be going. He has probably planned it on the back of an envelope in the same way as his rival, the President of the Board of Trade.

We all know that the only job-creation scheme in which the right hon. Gentleman is interested is one that will put him into No. 10. He glories in being the darling of the Thatcherites. We are told that he is the heir apparent and that stalking horses are having to wait in the stables until next year when he has a little more experience. We look forward to seeing what happens when the time comes.

I was intrigued with the Cabinet reshuffle that landed the right hon. Gentleman with his current responsibilities. To put him in charge of a spending Department is rather like putting the wolf in charge of grandmother's

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community care programme. We know that it will devour the poor woman before Little Red Riding Hood even has the chance to rescue her. The expenditure plans outlined in the Red Book for the right hon. Gentleman's Department show us how true that is. He tells us that he can deliver better help for the unemployed and better training with reduced resources.

The right hon. Gentleman has enthusiastically taken an axe to his own Department because he does not believe in government. So anti- interventionist is he that, had he been present at the creation, he would have instructed God not to disturb the chaos. I expect that one day he will tell us that he was indeed present at the creation, and I look forward to that announcement.

We are left with a Secretary of State for Employment who is happy to hand over half of his Department's responsibilities to the Secretary of State for Social Security and to deny that the Government have any responsibility for the remainder. He will have to be careful or he will talk himself out of a job. I have to tell him that millions of his fellow citizens who are unemployed would enjoy that joke at his expense. They certainly do not expect any meaningful support from him.

We must look in detail at the measures in the Budget to help the unemployed. After all, that was one of the three priorities that the Chancellor set out. The proposals are pathetically inadequate. The package of work incentives will cost £680 million, but the incentive to employers to take on the long-term unemployed will cost only £45 million--and it does not start until April 1996.

Extended workstart pilots, the third tranche of pilots in this scheme, will cost a mere £8 million. Set against either the £25 billion annual cost of keeping the unemployed on the dole or the £10 billion extra gross domestic product growth that we have had this year, such minuscule resources show not priority, but the cruel neglect and indifference that has always characterised the Government's attitude to unemployment and those who become the victims of it. Why wait until 1996 to start those schemes? Why not extend them to those who have been unemployed for a year rather than two years? Why not have more generous subsidies?

On the one side there are to be cuts in capital spending that could lose up to 250,000 jobs from both the civil service and the public sector, but on the other there is a raft of supply side tinkering at the edges to compensate. It is not good enough to say that that characterises a Budget for jobs.

Particularly worrying is the aspect of the Budget that caps housing benefit and puts new restrictions on home owners who become unemployed. Both those cuts are extremely cruel and will lead to people in my constituency being made homeless, to increased indebtedness and to increased repossessions. We are storing up a position of difficulty, misery and insecurity in our economy that does not reflect the changes in the labour market, where we want to move to more flexible jobs and a more flexible attitude. How can we do that when we are threatening the unemployed with losing their homes as well as their jobs? It is draconian, inhuman and cruel, and the policy will have to be re-examined.

There has been much talk about the lack of the feel-good factor. The Maples memorandum contained some interesting titbits for us and some advice for the

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Government. Did the Chancellor follow that advice in his Budget? The memorandum punctured the virtual reality world that is inhabited by the Cabinet and most of the Tory party. It talked of

"a feeling of powerlessness and insecurity about jobs, housing and the NHS."

Did the Chancellor do anything about that? No, instead he increased job insecurity and the fear of people losing their homes if they lose their jobs.

The memorandum said:

"The reality is that the rich are getting richer on the backs of the rest who are getting poorer."

Again, that is true, but what did the Chancellor do about it? He did very little. There has been no taxation of executive share options to deal with the obscenely huge pay increases that the chairmen of public utilities are paying themselves. There has been no postponement of the second rise in VAT from 8 to 17.5 per cent. Both of those measures were suggested in the Maples memorandum but ignored by the Chancellor.

The memorandum also said:

"Few people think we are out of recession."

That is true, yet this Budget cuts living standards by £2.40 a week through tax increases. It said, "Privatisation is unpopular". The Government have speeded up the sale of Railtrack so that they can store up tax cuts.

The Budget is far more about jostling for the Tory party leadership and saving up money for pre-election bribes than about tackling the real and serious problems in our economy.

8.35 pm

Mr. Denis MacShane (Rotherham): This is a cynical Budget from a highly cynical Chancellor. Instead of robbing the Peter of public services to pay the Paul of future election tax cut bribes, it would have been better had he launched a national debate on public revenue and public expenditure. Our taxation system is very much out of kilter with modern economies. We have had the absurd sight of the Chancellor making three major speeches in as many days, and I expect that we will not see him again for another six or seven months--unless, of course, he succeeds in his ambition to move sideways from No. 11 Downing street.

Ideas need to be raised in a Budget debate beyond the individual proposals that will be debated strenuously in the Finance Bill Committee. With Gosplan dead, the Treasury remains the most centralised finance and planning Ministry in the world. Perhaps it was suited to running an empire in the days of a sterling area protected from any other trade, but it is not suited to running a modern European economy. That is especially true when the briefing that it gives the Chancellor is so wholly inaccurate.

The Chancellor was in remarkably Panglossian mode on Tuesday--all is well in the best of all possible worlds, he smugly implied. He boasted that our growth was the highest in the world, while at the same time announcing on page 17 of the Red Book that growth would actually decline next year. He is right to do so, because the mantras about British growth are about to turn into dirges. Gross domestic product growth figures for the latest three months show that it has been stronger in France, Germany, Italy, Sweden and Austria, just to name European Union countries.

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The Financial Times informed us today that Australia, now benefiting from its 12th year under a Labour Government, has an annual growth of 6.4 per cent., so Britain is the record breaker neither on growth nor on unemployment, which is lower in West Germany, the Netherlands, Sweden and Austria. It is higher in France and Italy, both of which are under right-wing Governments, and in Spain, where Mr. Gonzalez proudly proclaims himself a Thatcherist. In one area the United Kingdom does outstrip Europe--in wages and earnings, which have risen in the past 12 months at a higher rate than in all our competitor countries of a roughly equivalent size. The Chancellor has a policy for pay--to him that hath much shall be given; to him that hath less shall be taken away. Although the rate of pay rises outstrips our European competitors--leading to, as was suggested in the Red Book, a rising level of inflation next year and the interest rate rise the Chancellor will have to impose in consequence--the actual take-home pay of British workers remains among the lowest in advanced countries.

That was acknowledged by the Secretary of State for Social Security who, in a lecture some two weeks ago, said:

"probably the single most significant social change affecting the UK . . . is not the ageing of the population. Nor the breakdown of the family. Nor the increasing proportion of women at work. Rather, it is a phenomenon which is still largely unrecognised: the growing dispersion of earnings power."

That is extraordinary language from a Minister who has loyally backed measure after measure to increase the earnings gap. Again today, as in Employment questions on Tuesday, the Secretary of State for Employment said that the UK has the highest take-home pay in Europe--higher than France, Italy and Denmark. I gather that parliamentary convention does not allow one to refer to lies, whoppers or "Portillo porkies" so, to remain within the rules, I shall describe that as a statistical inexactitude. Who does the Secretary of State think that he is kidding? It is certainly not other Government agencies which place adverts around Europe offering Britain as a low-wage country. The time has come to nail this untruth--not a killer fact, but a killer fib.

Here are the facts from that well-known repository of socialist information, the Union Bank of Switzerland. Its 1994 survey of prices and earnings around the globe shows net hourly wages in London to be £4.70, in Copenhagen, £7.80, in Paris, £5.60, in Milan, £4.80 and in Taipei, £8.20.

It is necessary to nail the lie that Britain is on its way to becoming a high-pay nation. I am grateful to the Under-Secretary of State for Employment for the tables that he placed in the Library this week in response to a question of mine. In particular, they show how badly my constituents in Rotherham and in South Yorkshire generally suffer.

According to those tables, one third of all men in full-time work in Yorkshire and Humberside earn no more than £208 a week, which is below the European level of a decent living wage. Unbelievably, nearly 10 per cent. earn only £150 a week--not enough to pay for a case of champagne at the Alexandra palace gathering of Europhobes, right-wing nutters and Sunday Telegraph leader writers called to celebrate the 10 years in

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Parliament of the right hon. Member for Enfield, Southgate (Mr. Portillo), the Secretary of State for unemployment. Those are gross, not take-home, earnings.

The situation is even worse for part-time workers. The tables placed in the Library this week show that four out of five part-time employees in South Yorkshire earn £5.50 an hour or less. More than one third earn £3.50 or less an hour, giving them take-home pay of about one tenth the going rate for a Tory parliamentary question. This is the low-wage, poverty Britain that has been created as a matter of deliberate policy by the new two-nation Conservative party. More than 100 years ago, Benjamin Disraeli legislated for the 56-hour week. Two or three weeks ago in the last Session I heard the Minister for Energy and Industry boasting about visiting a factory where people worked 60 hours a week. One of the reasons for that is the massive cut in training and skills investment, not one bit of which has been put right in the Budget. Training has been cut in real terms by 35 per cent. in the past four years, leading, within what is a mini-boom, to inevitable skills shortages and skills bottlenecks. In January 1994, the CBI reported that the lack of skilled labour affected only 5 per cent. of its firms. By October this year, nearly three times as many firms were reporting skills shortages. The firms reporting the biggest concerns about the shortage of skilled labour were those employing up to 500 employees--the crucial family firms which have been ignored in the Government's hostility to effective regional and industrial policy that could support such companies. That lack of regional policy means that since 1985 less than 7 per cent. of inward investment in Britain has gone to Yorkshire compared with 30 per cent. that has gone to the south-east and the west midlands, home of Tory Members of Parliament and the marginals that they must win.

The Budget lacks any real help for industry and rejects most of the proposals put forward by the CBI, which is why Howard Davies, the director general, is unhappy about it. It rejects everything put forward by the TUC. Again, it is a Budget for the rich drawn up at the Ritz. It does not address the need to overcome the two-nation Britain in which we live in order to forge again a one-nation country with effective regions with a share of resources and with the ability to grow together.

8.45 pm

Ms Margaret Hodge (Barking): The Chancellor of the Exchequer introduced his Budget by stating that he intended to pursue three priorities. He wished to promote sustainable growth, strengthen the economy in the long term and prevent the emergence of a deprived underclass. One of the many indictments of the Chancellor's proposals is that much of his Budget runs completely counter to his stated objectives.

When historians reflect on the Chancellor's record, they will see that he has simply followed in the footsteps of his predecessors. Once again, we see political expediency put before the public interest. A Budget that should have been about nurturing the fortunes of the British economy was in fact about reviving the fortunes of the Conservative party.

The Budget does little to encourage sustained growth. It seeks instead to encourage a pre-election consumer boom with 5p off income tax in a year's time--pure,

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traditional, orthodox Tory boom and bust economics; boom in the hope that they can con the voters and then bust for the rest of us when the election is over. But this time it is one con too far and it is doomed to fail.

The British people will not forget the dismal record of broken promises and broken confidences that are now the hallmark of the Conservative party. The Budget will be remembered not just for the broken promises but for its failure to grasp the opportunities available to us--an opportunity lost to build sustained growth and strengthen the economy.

As we finally come out of the long years of recession, employers are already complaining about skill shortages. Britain lies 18th out of 23 in the world skills league. The Government's response is to slash still further the training budget. Of course we are interested in output, but we cannot achieve output without any input. That is short-sighted nonsense. How on earth can the Chancellor claim that this is a Budget for the long term when he is cutting the essential investment in skills and training for our future? We need increased investment in training the work force. The Chancellor is following the example set by his predecessors--total neglect of our training needs.

The Chancellor's rhetoric suggests that he has learnt from past errors. However, his actions tell a different story. Until the words and deeds match, the verdict of the British people will remain the same.

Government have a responsibility to create an environment in which enterprise can flourish. Yet one area facing massive cuts is the capital investment budget. Current levels of capital spending are already too low to keep pace with the need to maintain and renew our existing assets. I invite right hon. and hon. Members to look at the crumbling and decaying state of social housing, schools and transport in their own constituencies. Where is the investment just to conserve that which exists, let alone to build for the future?

I am told that a little extra money for capital spending on schools is hidden in the education budget, but even £100 million will make hardly a dent in the problem after 15 years of neglect. At current spending of about £1 billion on capital and education, it will take 60 years just to renew, maintain and repair those assets. The sum of £100 million is a drop in the ocean.

Capital investment would provide not only a modern, strong infrastructure but ensure jobs for the thousands of construction workers abandoned by the Government, who know that their plans for capital investment are grossly inadequate. That is why they set such store by reviving the private finance initiative. Although we require the resources of the whole community-- public, private and voluntary--to deal with the problems and we want to encourage private investment for public good, experience of the PFI so far has not been good. Only £500 million has been raised, and even successful initiatives have been slow and costly.

The private sector is not the alternative state. The Government should not and cannot pass the buck for its responsibilities to the private sector. The public sector must lead the partnership and facilitate private investment. The Government are driven by dogma--for them, all that is public is bad, and all that is private is good. That dogma prevents the development of effective partnerships which could deliver essential capital investment in the

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infrastructure. If the Government were less dogmatic and more pragmatic, they would examine afresh definitions of the nature of capital investment, which should be counted against the PSBR. A positive approach is needed to ensure more capital investment in state schools.

Britain has the smallest social housing programme since the second world war, with £5 billion locked up in housing capital receipts. That money could be used to build more homes, repair existing properties and get thousands of building workers back to work. Those resources were unlocked last year, but not this year. The failure to act demonstrates the triumph of political dogma over common sense. The victims of that dogma are the homeless and the unemployed. Cutting housing benefit is one of the Budget's most insidious aspects. The exploding cost of that benefit is the inevitable result of Government action in deregulating the private sector and forcing up council and housing association rents--a 79 per cent. increase in the past five years. The Chancellor intends to regulate by the back door, by capping housing benefit--a dishonest, inefficient and unfair mechanism. The homeless will again be made the scapegoats of Government failure.

Has the Chancellor met his stated priority of preventing the emergence of a deprived underclass? The Government's deliberate actions and policies led to the emergence of that underclass. Of course we welcome proposals to bring some long-term unemployed back to work, and we are delighted that the Chancellor has adopted ideas developed by Opposition Members--but that is too little, too late, to undo the effects of 16 years of deliberate Government policy. Taking housing costs, taxes, benefits and wages together, the poorest 30 per cent. of the population have suffered a cut in real income of 2.5 per cent. since 1979, while the richest 10 per cent. have seen a rise in real income of 62 per cent. According to the Institute for Fiscal Studies, under Government tax plans of the last decade, the richest 10 per cent. of the population are £30 a week better off, while the poorest 10 per cent. are £3 a week worse off. That is why there is an underclass.

This year's Budget proposes cuts in housing and incapacity benefits, a job seeker's allowance, less good quality housing, a two-tier health service, and a lack of training and education services. It also reflects growing crime and fear of crime. Action is needed in the Budget to restore social cohesion and to undo the social divisions that the Government have created.

In 1972, the former Prime Minister promised a nursery place for every three and four-year-old. A generation later, the current Prime Minister pledged at this year's Tory party conference that there will be education for all four-year-olds--but there was no mention of that pledge in the Budget. It is not a question of more money, but of choices and of how money should be used. The Government are spending £780 million on consultants to privatise British Rail. That money could meet the cost of the proposals that the Prime Minister put to the Conservative party conference. It could have been spent on our children, which would have strengthened the economy in the long term and prevented the emergence of an underclass.

The Chancellor has failed his own test. He has failed to meet the priorities that he set himself, and he will fail also with his real priority--that of saving this wretched, divided Government. The British people's first

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opportunity to give their verdict on the Budget will come in Dudley, West in a fortnight, and I have every confidence that Labour will win.

8.55 pm

Mr. Thomas McAvoy (Glasgow, Rutherglen): I compliment my hon. Friend the Member for Rotherham (Mr. MacShane) on his excellent speech. We share the honour of having been born in the same town of Rutherglen. I admit to disagreeing with one of his comments about the Secretary of State for Employment. I happen to like Sunday Telegraph editorials. They do an excellent demolition job on the Government--the more so because they both come from the same camp. The landfill tax is a small step by the Government to making sure that industry and local authorities face up to the fact that landfill is not the only answer to waste disposal. There is another side to that coin. Glasgow district council is proposing to implement a large landfill site just beyond my constituency, across the East Kilbride boundary. Part of the pressure on the council stems from cuts in Government support grants to local authorities in Scotland. Although I welcome the landfill tax as a disincentive for local authorities to continue using landfill ad infinitum, they are pressured by lack of grants. I hope that Glasgow district council realises that with the landfill tax it will cost the public more in the long run to go ahead with such sites. In the light of the Budget, I shall be calling on Glasgow district council to withdraw its proposal for a landfill site at South Cathkin.

I resent the continual attack on the motorist and the attempts by the Conservative party to portray the Labour party as the enemy of the car and the car user. That is certainly not the case. I recall many of the points made by the hon. Member for Wellingborough (Mr. Fry). It is not enough to have the continual increases on petrol, fuel, DERV and the road tax in isolation from other measures to make road traffic flow more smoothly and to prevent traffic jams and without alternative policies. It is clearly a tax-raising move by the Government.

The same applies to the arbitrary cutting off of the amount of money for road-building schemes. I am not particularly in favour of roads all over the place, but there is a reasonable case for considering them where they are necessary. In my constituency, again, a motorway has been planned and most of it has been built except the last section--the proposed M24 extension. If that section is not completed, Cambuslang and Rutherglen main streets will continue to suffer traffic jams, with all the safety and health risks inherent in them. If there is a sensible road plan, it is common sense to go ahead with it. I have no dogma one way or the other for or against roads, but common sense must come into it.

The same applies to the Government's attitude to rail travel. Although they are maintaining the level of support for the railways in the next financial year at £975 million, they intend to reduce it to £740 million. That will start a downward curve in support for the railways, not only for Scotland but for the whole west coast main line, which needs investment and Government support to ensure that railways operate as an incentive and alternative to road travel. I regret that the Chancellor failed to address one of the most serious problems facing small businesses--the late payment of debt. Small businesses have lobbied long and

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hard. That problem is particularly hard for them to bear, yet the Government continue to ignore their pleas for help. I received a communication from the Minister for Consumer Affairs and Small Firms, Earl Ferrers, indicating that it would be too complicated to introduce a scheme to deal solely with small businesses and the problems that they face of late payment of debt. I take the point of view that, if there is a will, there is a way. If one were to contrast the sort of "giving up before you start" attitude to the Government's complicated measures to "encourage" people who are unemployed to seek work, one would see that the same ingenuity applied to the late payment of debt could achieve a solution. I come now to the Secretary of State's comments about the lack of a social chapter in Britain being an incentive for companies to come into the United Kingdom. The Hoover company has a factory in Cambuslang in my constituency. An investment programme resulted in the transfer of work from a factory in France to the Cambuslang factory. I specifically asked for, and was given, public assurances from the company that the lack of a social chapter in Britain played absolutely no part in its decision to bring those extra jobs to Cambuslang. It was purely and simply because of the good industrial relations, the good investment record of the factory and the investment prospects in the west of Scotland--and, to be fair, the support from the Scottish Office. That shows that the lack of a social chapter did not encourage Hoover to bring those jobs to Cambuslang.

Although the Secretary of State for Employment is not here--I am sure that he will be told about or read about this--I will remind him of what he says about the Tory urge to cut taxes. I remember being on the Committee which considered the council tax, where the Secretary of State was piloting the Bill. One of his ideas, if I recall correctly, was about evaluators surveying properties to ensure that they had got the assessments right. He floated--that is the correct word--the idea of hot air balloons, which would float over the back gardens of the terraced houses so that the evaluators could see whether any improvements had been made. So the Secretary of State's credibility has quite a long way to go.

I make no apology for dealing now with VAT, because Labour Members have rightly mentioned it. Some hon. Members on the Conservative Benches have mentioned it, too. The Paymaster General said that we are the only country in Europe without some kind of similar tax. I think that he quoted Norway. To make such a comparison without taking into account the whole taxation and social security system in that country is invalid.

My constituency, which includes Cambuslang, Rutherglen and Toryglen, has a large elderly population. One council ward in particular, Bankhead, has a high proportion of elderly people, and also many mothers with young children, who will use electricity and gas more than the average. Those people will suffer as a result of the Government's insistence on imposing the full rate of VAT in April. That, in my view, completely destroys the Government's pretence to be the party of low taxation. Over the past few years their record has been a disgrace, and they know it. They are shaking in their boots, and come the general election--indeed, come the by-election at Dudley, West--they will pay the price.

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9.4 pm

Mr. Doug Henderson (Newcastle upon Tyne, North): I wish to discuss the cross-channel movement of alcohol. Let me declare an interest, as a sponsored member of the GMB union: I believe that many of its members' jobs are threatened by that trade, in breweries, clubs, pubs and other parts of the industry.

When the single market was introduced on 1 January 1993, it was acknowledged that various countries in the European Union could set their own levels of duty. It was also acknowledged by those who were involved in discussions at the time that it would consequently be possible to transfer certain commodities from one country to another when it was advantageous to do so. There is, indeed, a regular trade among the mainland European Union countries in a number of items: the Danish Government, for instance, were at one point concerned about some of the movement between Germany and Denmark, and took steps to bring their taxation regime more into line with Germany's. In Britain, it has been recognised that there are dramatic differences between the duty paid on alcohol and cigarettes here and that paid in many other European Union countries. At the time of the discussions to which I referred, it was acknowledged that some seepage was inevitable and that people would take advantage of the lower duty levels in, for example, France. They would be able to shop in France and, when it was possible to transport the products that they bought, they would bring them back to the United Kingdom. Cross-channel movement of alcohol now presents a serious problem, however. Now we are dealing not merely with Mr. and Mrs. Smith from Melton Mowbray, who go on a day bus trip to Calais and bring back a few cans of beer and a bottle of wine--although that possibly constitutes up to half the cross-channel traffic in alcohol on which duty is paid in France. That picture will no longer be typical; there has now been a move into organised smuggling, which will seriously threaten many business men whose livelihoods depend on their business.

In 1993, the Brewers and Licensed Retailers Association appointed independent consultants--including private detectives, who followed the movement of some of the items. As a result, it made an estimate. I do not think that the Treasury and Civil Service Select Committee, which examined the issue, disagreed with that estimate; I do not think that the Minister of State and his colleagues did, either. The estimate was that, in 1993, at least £1 billion-worth of alcohol was purchased in France and brought back to the United Kingdom. That means that our Treasury has lost £470 million in revenue--£315 million in loss of duty and £154 million in lost VAT.

My concern results from representations made to me by members of my union and others. About two weeks ago, I went to Calais to see for myself. That was quite enlightening. I wanted to know what effect was being produced in the north-east of England, the area that I represent. I had been told that a number of organised gangs in my area were involved in smuggling alcohol, and I went to Calais to see whether I could identify any of those gangs.

One of the colleagues who accompanied me asked how I would identify the gangs from the north-east. I said, "If I put on a Sunderland scarf, I shall quickly find out which are from Newcastle, and if I put on a Newcastle scarf, I

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shall quickly find out which are from Sunderland." In fact, that was not necessary: I could have put on a Manchester City scarf and found the gangs from Manchester, put on a Sheffield United scarf and found the ones from Sheffield or put on a Celtic or Rangers scarf and found the ones from Glasgow. The gangs come from all over the country. However, I found that there was a preponderance from London, the south-east and the north-east of England where a large amount of trafficking was taking place. It is a serious threat.

During the week before I went to Calais, in just one day private detectives identified 300 transit vans from the United Kingdom going on and off the boat. I was there for one morning a week last Monday and I saw dozens of vans queuing up at all the outlets.

Mr. and Mrs. Smith from Melton Mowbray go to a legitimate superstore in Calais and buy small amounts for their own consumption. The smuggling trade takes place in the back yards and peripheral industrial estates in Calais. There is usually a typical warehouse with the hamburger stall, the muddy forecourt, a fork-lift truck and all the pallets of beer. Most transit vans can take two pallets of beer. There are 96 cases in one pallet and 24 bottles in a case. So, the lads with one transit van have over 2,000 pints of beer in the back. If one approaches them to ask whether it is for their personal consumption, they say, "Why aye, man. It's for us."

No doubt some of my good friends in the city of Newcastle could consume 2,000 pints of beer in a fairly short time. Some hon. Members may even be able to help them without too much difficulty. However, the average people involved in smuggling are not bringing back what is effectively contraband for their own use; they are bringing it back to sell it. In doing so, they are threatening the jobs of many people involved in the manufacturing and distribution of beer, and they must be threatening six northern breweries. A further threat that has not been identified so far is that from mail order roll-on/roll-off smuggling of alcohol.

I wish to draw the House's attention to the details of a legal arrangement involving the importation of cigarettes from Belgium. In Belgium, the duty on cigarettes is much lower than in most other European countries, and it is substantially lower than in Britain. A new company trying to break into the cigarette market is called the Enlightened Tobacco Company. The House will be pleased to know that its product is not called Anchor, Senior Service or Weights, but is called Death.

The Enlightened Tobacco Company has tried to break into the United Kingdom cigarette market, but the distributors have said that, if that product is put on the shelves, all the other tobacco companies will take theirs off. So the corner shop is effectively prevented from buying from the normal distributors. The Enlightened Tobacco Company has said, "We can get round this. We can get the cigarettes for your corner shop in Belgium."

Article 6 of the single market agreement says that duty becomes chargeable at

"the time of release for consumption".

The corner shop retailer appoints the agent of the Enlightened Tobacco Company to purchase the tobacco and the duty becomes payable when the tobacco is released for consumption--that is, when it is given to the agent. So duty is paid under Belgian law, not British law.

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Also, the retailer does not have to go to Belgium to collect the tobacco, because the agent delivers it anywhere in the United Kingdom.

Imagine if that were to be extended to alcohol. If it is legal for cigarettes, it is legal for alcohol and there may be court cases about that in the future. In Calais I spoke to a number of lads driving vans who had already cottoned on to that. They would not even have to risk hiring the van or buying the petrol. They would simply act as a distributor in whatever part of the United Kingdom they came from. They would appoint someone else to be their agent in France, who would buy the alcohol and pay the low French duty--one seventh of the level in the United Kingdom. They would then sell it to the corner shop.

It would not end at the corner shop. It would be a bit like dial-a-pint. One would not even have to go to the corner shop. One would be able to find a distributor's telephone number from the telephone directory or on the newsagent's window. A few cases of beer, with French duty placed on it, would then arrive at the doorstep. One would not have to go to an off-sales outlet to buy takeaway beer.

That would constitute a major threat to the British brewing industry. The transport of £1 billion of alcohol from France to Britain is equivalent to 15 per cent. of the legal takeaway trade in Britain. It is already making a dent in the business of many breweries that supply off- sales outlets throughout the United Kingdom. If that scam is allowed, it will lead to the destruction of a number of breweries, and provincial breweries in north-east England will be particularly vulnerable to the threat.

Action must to be taken now. The problem will not go away. In his speech, the Chancellor of the Exchequer was right to acknowledge that there is a problem. He has not, however, taken action that will be effective. Freezing duties on alcohol is, to some extent, a concession to brewers and to the workers who make the beer, but it will not protect their business or their jobs. It makes only a marginal difference to the gap between alcohol duties in France and those in the UK.

We must face up to the problem. Step one should be to set up an official inquiry so that it is not only hon. Members who explain their experiences or the Treasury and Civil Service Select Committee, which I believe did not visit Calais--it certainly did not make an official visit--that makes statements. The brewers and trade unions that represent brewery workers say that there is a problem. I think--in fact, I know--that there is a problem. I hope that the Government will recognise that and set up an inquiry.

The problem will not be easily resolved. It was not clever this week to reduce the number of customs officers involved in attempting to track down illegal trade, when the Chancellor of the Exchequer acknowledged to the House that a major problem existed. We must tighten our customs procedures. I want far more undercover activity by customs officers chasing the vans. Illegal trade involves not only small transit vans, but large articulated lorries. One can get a lot more than two pallets of beer on a large artic.

In the northern economic region of England, there have been only two prosecutions since January 1993, and only one of them has been successful. That is not satisfactory. The prosecution level should be higher. I do not claim

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that that will be easy. It is difficult to find the people who are reselling the alcohol. Under current law, it is not illegal if one does not find them reselling the alcohol.

Some of the comments that I am about to make might not be popular with certain Labour Members.

Mr. Andrew Mitchell (Lords Commissioner to the Treasury): Ah.

Mr. Henderson: My comments will certainly not be popular with Conservative Members.

As the European economies become more convergent, we should not ignore the fact that duties are substantially different from one European country to another. We must start to think about how to close the gap to take away the incentive for smuggling.

We should not be talking about reducing tobacco duties, but insisting that other European countries increase their tobacco duties so that they are more in line with ours. Britain needs to take unilateral action on beer duties as an example to other European countries and to protect our industry. Over a period, we need to consider how we can properly introduce moves towards greater harmonisation of some of our taxes, including VAT and duty. There is a major problem, which will not go away. In the past 10 years, it has got worse because, while other European countries have frozen indirect taxes in real terms, Britain has increased them. The problem is much worse than it would have been if the single market had been introduced in 1981 instead of 1993. But there is a problem, and we have to face it. I hope that the Minister of State will at least acknowledge the fact that there is a case for a proper formal inquiry, with representation from the different parts of the industry and others, which could provide a basis for firm action in next year's Budget. I do not believe that the action taken this year is sufficiently strong to tackle the issue.

9.19 pm

Ms Dawn Primarolo (Bristol, South): The House is grateful to my hon. Friend the Member for Newcastle upon Tyne, North (Mr. Henderson) for his eloquent and detailed illustration of the problems being experienced with the substantial traffic of alcohol into Britain, and the threat that that poses to the brewing industry. The issue is complex, and I hope that the Minister will agree that we need to investigate the situation and to establish a consensus--dare I use that word?--on how to proceed.

This has been an interesting and excellent debate. We have heard substantial disagreement among Conservative Members, and at one stage I thought that some of them were practising making speeches from the Opposition Benches--something that I hope that they will be able to do very soon.

Output has risen and unemployment is lower, but that is the end of the good news. The economy is still weak--2.5 million people are out of work, investment is low, the public services are under stress. The Chancellor set himself three priorities for the Budget--sustainable growth, job creation and strengthening the economy in the long term. Those are welcome priorities, and represent a marked change from the monetarist rhetoric of the 1980s. However, the Budget fails to measure up to the Chancellor's aims, especially on jobs. The measures to create jobs and to give long-term strength to the economy fall far short of what is needed.

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