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Question accordingly negatived.

Clause added to the Bill.

New clause 2

Spirits, beer and cider: rates

`.--(1) In section 5 of the Alcoholic Liquor Duties Act 1979 (spirits) for "£19.81" there shall be substituted "£20.60". (2) In section 36(1) of that Act (beer) for "£10.45" there shall be substituted "£10.82".

(3) In section 62(1) of that Act (cider) for "£22.82" there shall be substituted "£23.78".

(4) This section shall be deemed to have come into force on 1st January 1995.'.-- [Mr. Heathcoat-Amory.]

Brought up, and read the First time.

Mr. Heathcoat-Amory: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this, it will be convenient to discuss also the following: Amendment (a) to the proposed new clause, in subsection (1), leave out `"£20.60"' and insert `"£17.83"'. Clause 2 stand part.

Government amendments Nos. 1 to 6.

Amendment No. 26, in schedule 1, page 156, line 25, leave out `£19.81' and insert `£17.83'.

Mr. Heathcoat-Amory: Clause 2, together with schedule 1, replaces the present five-band duty structure for low-strength wine and man-made wine with a two-band structure. It is a sensible, simplifying measure. The broad effect is fiscally neutral, but British producers will generally benefit from the change, as they produce proportionately more product at the higher end of the range. I am sure that the Committee will welcome that modest reform. The schedule also envisaged a duty standstill on wine, as on beer and spirits. That is now to be amended; I shall say why and how in a moment. The duty on fortified and sparkling wines was also reduced. In the case of fortified wine, that takes into account the third stage of the agreement with Spain, to reduce the differential between fortified wine and table wine, and to allow the name "British sherry" to be used until 1996.

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The reduction acts to correct an anomaly whereby sparkling wines are taxed more heavily than stronger fortified wines. More than half of all sparkling wine is not champagne, and there is also a successful British production of sparkling wine, which will modestly benefit from that change.

In his statement on 8 December 1994, my right hon. and learned Friend the Chancellor said that he had hoped to spare the alcohol industries any duty increase. However, the loss of revenue, as a result of the VAT on fuel decision, meant that he, regretfully, had to revisit those excise duties.

Amendments Nos. 1 to 6 give effect to an increase of about 4 per cent. in each wine category. Similarly, new clause 2 raises the duty on spirits, beer and cider by about 4 per cent. They were the subject of resolutions passed by the House on 13 December 1994.

Those increases are not as we originally wished. However, even with those increases, the duty on spirits, beer and wine has decreased in real terms since 1985 by 16.1 per cent., 7.7 per cent. and 2.2 per cent. respectively.

Ms Dawn Primarolo (Bristol, South): We will vote against new clause 2, which seeks to increase duty on beer, wine and spirits. A 4 per cent. increase in alcohol duties is contained in that new clause, imposed on the industry following the Chancellor's acknowledgment in his Budget speech of the problem confronted by the beer and pub industry in relation to the increase in legitimate cross-border shopping and illegal smuggling.

The Chancellor said:

"one of the most widely publicised other effects of the single market has been the increase in legitimate cross-border shopping in alcohol and tobacco, and in smuggling.

Both of these have inevitably meant some loss of duty to the Exchequer, pressures on the British drinks industry and some damage to British business. No Chancellor can remain unmoved in the face of this".--[ Official Report , 29 November 1994; Vol. 250, c. 1095-96.] We did not realise that he meant that no Chancellor could be moved for more than seven working days, faced with that problem. Despite the assurances that he gave the House in trying to persuade us that he understood the problems of the industry, he chose to increase alcohol duties about nine days later. Moreover, in the Budget itself, the Chancellor reduced duties on sparkling wine and champagne by 27p a bottle. Even with those changes, there is a reduction of 20p on champagne, making it cheaper than it was before the Budget in 1994. The Labour party believes that the Government should act urgently in several respects. In opposing the new clause, I shall describe how the Government could have reacted differently.

I note with some interest, reading Licensee and Pub Food Monthly , that the Paymaster General's uncle, Derek Heathcoat-Amory, was Chancellor in 1959, and he understood then the need to control duty on beer to prevent damage to the British industry. He reduced the duty on beer--a step that the hon. Gentleman did not feel able to take this year.

Beer smuggling is an enormous threat to the industry. It is a relatively new trade, if I may call it that, and we cannot estimate the extent to which the gradual build-up in the past 18 months has led to the undermining of the industry. The problems that are visible now are a fraction of the problems that will confront us in a few years' time if action is not taken.

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The Government, in deciding their panic measures--having lost the VAT vote--sought only to plug holes in the short term, rather than to consider changes in taxation to preserve the industry for the medium and long term. We are witnessing the emergence of a whole new sub-culture--a black market sub-culture, whereby smuggled drink, and indeed tobacco, is easily obtainable. It would be putting it politely to say that it is remiss of the Chancellor to take little notice of that danger--that undermining of the tax base and the industry. I am not speaking about legitimate cross-border shopping; I am speaking about the very expensive occupation of smuggling, and the damage that that does to the industry.

Mr. Nigel Forman (Carshalton and Wallington): Do I take it that the hon. Lady will base all her arguments on illegal cross-border imports of alcohol, or will she take account of the point of view that I think that I remember her expressing when she was shadow spokesman on health--that there are sound grounds for increasing the price of alcohol, in all its various categories, to discourage people from the problems associated with alcoholism?

Ms Primarolo: The hon. Gentleman is mistaken in his memory of what I may have said about reducing the consumption of alcohol, although I obviously agree that the balance of people's consumption of alcohol is an important health consideration. We are talking not about encouraging a greater consumption of alcohol but about arranging a tax system that does not create the opportunity for smuggling, which undermines the legitimate market. The difference between taxation here and taxation in France is so great that it provides that opportunity. The illegal entry of alcohol cannot be regulated by our health policies or controlled by our legitimate methods of dealing with alcohol consumption. That means that the Government's health policy on alcohol consumption is undermined by a tax policy that cannot deliver controls on that consumption.

6.30 pm

Mr. John Carlisle (Luton, North): The hon. Lady mentioned that she took basically the same attitude to the cross-border smuggling of alcohol as she did to the smuggling of tobacco. Does that mean that she will oppose new clause 4, which introduces an increase in taxation, using the same argument? I assume that the Opposition will vote against new clause 4, just as they will vote against new clause 2.

Ms Primarolo: I shall deal with that point when we discuss new clause 4. The point about the balance between taxation and the control of a product is important, as is the question of how the Government could not only prevent illegal imports which undermine our industries but provide for an increased consumption of, for example, cigarettes which clearly we do not want.

Mr. Michael Stern (Bristol, North-West): I take the hon. Lady back to what she was saying before the intervention by my hon. Friend the Member for Luton, North (Mr. Carlisle). She rightly drew attention to the substantial difference between duties in France and duties in this country. When the matter was discussed during the Finance Bill Committee last year, one Front-Bench Labour Member drew from that the conclusion that the British

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Government's policy should be substantially to reduce duty to levels much closer to the French levels. Is that now Labour party policy?

Ms Primarolo: On the question of duty levels and the ability to prevent smuggling, the Danish example gives us a good idea of how duties need to be balanced to secure income for the Treasury and to ensure that there is no loss through smuggling. The point is-- [Interruption.] Does the hon. Member for Bristol, North-West (Mr. Stern) want to hear the answer to his question or shall I move on to my next point?

The differences between excise duties in France and those in Britain are so great that to ignore them undermines the industry. The problem is how income to the Treasury would be replaced. The Government have not come forward with any suggestion or plan to deal with that gap. In fact, they have done the opposite. In their desperation to raise taxation, they have exacerbated the problem. When the Chancellor made his comments about freezing duty in his original Budget, he was acknowledging those problems and the need to correct them. If that policy was good enough on 29 November, it is certainly good enough now.

The importation and sale of undutied alcohol are criminal activities. At the lower end of the market, there are enormous opportunities for people to engage in that enterprise. On one trip, a large van carrying 25 cases can deliver profits of more than £700. Once a sales network has been established, smuggling can become a regular "business"--not a legitimate business. With a network of friends and friends of friends, the "business" is developed and the Government's whole strategy is undermined. The Government tell us that they are engaged in a thorough assessment of how to secure money for the Treasury. The truth is that they are saying that they can raise some taxes and lose some taxes and that, in the short term, they simply have to raise them.

I give two examples. One individual was making three trips a week and clearing a profit of more than £2,000 a week, which was not taxed. Another gang was doing seven to 10 runs a week. About 15 people were involved and they had been carrying out that work for 11 months or more; they were making £10,000 a week of untaxed profit. In the beginning, opportunists were involved. Organised professionals are beginning to enter the "business". Yet again, the Government's free market ideology provides an opportunity for criminal activity. The Government originally told us that they would take the cheap option in dealing with the problem of excise duties. They said that they would go for controls on trade as the likeliest means of getting a grip on this illegal activity. Against the background of there being only 200 excise verification officers, the results achieved are good. The Government, however, have now announced that they will cut the number of Customs and Excise officers, the front-line officers who investigate those illegal activities. The Government need to explain why they are doing that--why they are going back on promises made to the House.

How can only 200 excise verification officers deal with the problems of bootlegging? In the Leeds collection area, only 10 staff cover York, Leeds, Bradford, Halifax and Hull. In the south-west of England--I draw the attention of the hon. Member for Bristol, North-West to this-- eight staff cover the area from Bristol to Land's End,

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which is a lot of coastline. In the Birmingham collection area, 12 staff cover the entire west midlands. The Government intend to reduce those figures through further cuts in Customs and Excise. The cuts in the number of Customs and Excise staff break a promise, given in the House on 2 February 1993 by the then Paymaster General, the right hon. Member for Northavon (Sir J. Cope), to my hon. Friend the Member for Oxford, East (Mr. Smith), that there would be no reduction in the number of Customs and Excise officers. The Paymaster General went on to say:

"I can readily undertake to keep matters under close review, particularly in the early stages of the single market--indeed, we are already doing so. As I have told the House before, we are determined to ensure that smuggling, bootlegging and the resale of goods brought back without UK duty having been paid are pursued with the utmost vigour of the law by all the customs officers that it requires." After being challenged by my hon. Friend, the Paymaster General said:

"Yes. The customs and the Government must determine how we define necessary . . . and see what we determine to be necessary in order to police such matters firmly."--[ Official Report , 2 February 1993; Vol. 218, c. 287- 88.]

He said that the Government would keep the position under review and that there would be no cuts in the number of Customs and Excise officers. In the same Budget in which the Government have increased the excise duty on alcohol and declared a "prevention" strategy--with the option of increasing the number of customs officers to tackle smuggling--they have announced a 16 per cent. cut in the number of customs officers. Those cuts have immense implications for preventing the illegal importation of alcohol. Furthermore, the brewing industry has said that the future growth of the market in illegal alcohol products will lead to job losses in pubs, off- licences, supermarkets and cash-and-carry stores.

The Government explained that they were cutting the number of customs officers in order to increase surveillance and ensure greater flexibility by deploying officers in vans. Officers will no longer need to perform routine inspections and front-line work; yet it is those routine inspections and spot checks of off-licences and cash-and-carrys that ensure that illegally imported alcohol does not find a retail outlet.

The Government must implement a clear policy which respects the rights of individuals to engage in legal cross-channel shopping but which uses Customs and Excise to control the ports and ensure that alcohol does not enter the country illegally. The Government must also develop a clear strategy to deal with the problems caused by our European partners' differing levels of alcohol duty.

The Government must strengthen Customs and Excise; tackle the illicit sale of contraband, including drugs and tobacco as well as alcohol; ensure that the negotiations in Europe bring about a reasonable and acceptable package of solutions to protect our industry; and urgently undertake a comprehensive review and present to the House ways in which taxation and Customs and Excise can work together to reduce smuggling and ensure the protection of British industry.

A taxation system must work in the short, medium and long term. It must deliver revenue to the Government without creating unemployment or undermining their position in certain areas by allowing smuggling to continue.

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The Government have picked on duty on beer and spirits as a soft target which will provide a "quick fix". They are undermining our industry. We are opposed to all the increases in duty-- unlike the Scottish National party, which is opposed only to the increase in duty on whisky. We will vote against the increases in duty on whisky, beer and cider.

Sir Ivan Lawrence (Burton): As the representative of the brewing centre of England and the universe, I am angry on my constituents' behalf at the proposed increase in the duty on beer. It shows that the Government have paid scant attention to my last two speeches which called for a reduction in excise duty on beer because of the inevitable consequences for the brewing industry and my constituency. Nobody is convinced that the taxation measures might not ultimately prove far worse for the industry, for the reasons given by the hon. Member for Bristol, South (Ms Primarolo). The Government will suffer if bootlegging and smuggling continue to leach revenue from the tax take, and I am not convinced that they have taken that factor accurately into account when doing their sums.

I understand, of course, that there are very important reasons for increasing the duty on alcohol: it is the only way in which the deficiency in the value added tax take can be remedied. I am angered by the attitude of Labour Members. They are responsible for the increase in the cost of beer, and we must ensure that the finger is pointed at them. If, as the hon. Lady said, the increase in the excise duty on beer is a "quick fix", it is the Opposition who have forced the Government to come up with that remedy. They have forced the Government to extract VAT in this way. I do not think we need listen to any lectures on the subject from Labour Members, who have certainly not offered any alternatives.

6.45 pm

Dr. Marek: Will the hon. and learned Gentleman give way?

Sir Ivan Lawrence: I shall give way in a moment. We must look to the future and to reducing the excise duty yield from the brewing industry, so that it can flourish without that heavy taxation burden imposed by this or any other Government. However, it is difficult to see how we can achieve that aim. My right hon. and learned Friend the Chancellor has talked about getting our European partners to come into line with us. If it were a matter of a few pence difference in excise duty, it would be easy to see how that might be achieved. But the gap is enormous--the excise duty on a pint of beer is about 4p in France and 32p in Britain. It is difficult to see how my right hon. and learned Friend can be optimistic about getting our European partners to come into line with us, and he has not explained how that can be done.

Do we not make achieving that aim still more difficult by setting the appalling example of increasing the duty on beer to boost the VAT take? With this measure, it is even more difficult for my right hon. and learned Friend the Chancellor to advance his argument with our European partners.

The persistent hon. Member for Wrexham (Dr. Marek) has something to contribute to the debate.

Dr. Marek: I am grateful to the hon. and learned Gentleman for giving way. In the last debate I said that,

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if the rise in value added tax were forgone, the Government would be faced with raising an extra £500 million; but that sum could have been recouped by not withdrawing the duty on share transactions. The Government could have easily gained £1 billion from that measure. The hon. and learned Gentleman would not suggest that because it does not affect his friends; he is seeking to make political capital from this issue. Will he persuade the Minister to accept that the Government should aim for long-term harmonisation of duties? If the Minister accepts that, we can make some progress.

Sir Ivan Lawrence: My right hon. and learned Friend has already suggested that harmonisation is his aim--it must be, if we are to stay part of the European Community. If the share transfer tax that the hon. Gentleman mentioned were as easy to impose as he suggests, I am sure that it would have been adopted. The fact remains that it has not and cannot be done. The imposition of duty on alcohol is the simplest way, but it has dealt another blow to jobs and to the success of a great industry that is at the root of so much of our social life, never mind our industrial, economic or any other kind of life. We know as a party how the industry feels when we open the newspapers and learn how much of the industry's former support is ebbing away, which I deplore.

My right hon. and learned Friend the Chancellor and my hon. Friend the Paymaster General should seriously address constructive ways of reducing this appalling duty burden. I look forward to hearing what my hon. Friend the Paymaster General will say to reassure not just the Committee but the people who send us here--a high proportion of whom drink in our pubs, clubs and restaurants, and many of whom are employed in the brewing industry. My hon. Friend the Paymaster General should make no mistake about it. I shall, of course, support him in the Lobby tonight, because the blame for all this lies on the other side of the Chamber, but that does not mean that I am any the less angry or will not continue my fight against the Government to bring down this inequitable, iniquitous and harsh measure against the industry that is the heart of the constituency that I represent.

Mrs. Ewing: Amendments (a) and (b) would reduce by 10 per cent. the duty levied on all British spirits, but I wish to speak particularly of the Scottish whisky industry. I remind the Committee that this is the Burns season, when a fair amount of uisqe beatha will be consumed not only in Scotland but throughout the world. Last night, I attended a Burns supper in my constituency hosted by a major distillery organisation and attended by representatives of independent distilleries and other interests. When I replied on behalf of the lasses, I received the biggest cheer when I said that I was introducing these amendments, because those present appreciated the industry's significance to not only my constituency but the whole economy.

The present boundaries of Moray contain more than 40 distilleries. They do not provide a huge number of jobs in direct employment but provide employment in farms, maltsters, warehouses, cooperages, transportation companies and tourism. Anyone who knows my constituency will be aware that it is a great pleasure to follow the whisky trail. All right hon. and hon. Members would receive a warm welcome in my constituency and learn a great

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deal about the industry. That is true even of the Chancellor, although I would not advise him to show his face too soon in the light of his December statement.

Right hon. and hon. Members often regard speeches about the whisky industry as frivolous, but in the areas in question, it is as significant as mining or shipbuilding to other parts of the country, and equally symbolic. If there is a depression in the whisky industry, there is a depression in our communities. That has nothing to do with consumption but has to do with the local as well as the national economy.

The industry is a huge earner, particularly in exports, raising more than £2 billion last year. Ministers may argue that the 26p per bottle increase in duty will not be imposed abroad--but at a time when the industry is arguing to break down international tariff barriers and arguing for a level playing field in the European Union with other alcoholic drinks such as wines and beers, the Government have sent a signal that they do not care. Why should the industry try to persuade the Japanese to treat it with more respect and to get rid of the internal discrimination that exists in many far eastern countries?

Mr. John McFall (Dumbarton): Does the hon. Lady agree that the most pressing aspect is tax harmonisation in Europe? The Chancellor's action, in a moment of petulance, of imposing 26p on a bottle of whisky means that harmonisation is further away than ever. Seventy thousand jobs in Scotland depend on the whisky industry, and many will be jeopardised as a result of the Chancellor's decision. The need for harmonisation in Europe is, more than anything, the message that should be put across to the Government.

Mrs. Ewing: I much agree with the hon. Gentleman. I know that he has a substantial interest in the subject because Allied Distillers has its headquarters in his area and provides a great deal of employment. He appreciates, as I do, the importance of harmonisation, for which we have argued for some time. We thought that the Government had begun to listen and to accept the need for cuts in the duty levied on whisky.

On 20 November 1994, The Sunday Times in Scotland published a substantial article on the arguments made by the Scotch Whisky Association and the all- party group for a 10 per cent. reduction in duty. It stated:

"Ministerial colleagues are convinced that Kenneth Clarke, the chancellor, is set to deliver a long-awaited boost to the scotch whisky industry."

It was said that he had closely scrutinised the issues and was "particularly impressed" by the argument

"in favour of countering the anomaly that the UK taxes home product scotch at almost twice the rate of imported wine . . . Ministerial sources said that the full 10% cut is `expecting too much at one stroke' but they also pointed to a treasury briefing document published at the last budget which said: `The UK duty on spirits . . . is already relatively high and seriously out of line with the rates of duty elsewhere in the single market'."

That showed that the Treasury was listening. The Chancellor's action in quickly attacking the industry could only have been a fit of pique resulting from the vote on an increase in VAT on domestic fuel. The duty on alcohol already brings substantial amounts into the Treasury's coffers every year. The last time UK duty on whisky was increased, there was a net reduction in Treasury income, so the Treasury cut off its nose to spite its face, rather

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than boost an industry that generates so much money for the Government and provides thousands of jobs in Scotland and many other parts of the United Kingdom.

The Treasury should have shown more respect and devised something simpler-- such as the tax suggested by the hon. Member for Wrexham (Dr. Marek). If it had examined the public sector borrowing requirement, it would have realised that an increase in VAT on domestic fuel was unnecessary in the first place.

I cannot emphasise enough how angry is the Scotch whisky industry at what has become known as the mini-bar Budget. The industry is furious because it is working hard to promote its products. I know people who fly from my constituency every week to far-off parts of the world to promote Scotch whisky. That is sometimes difficult, but the industry was making progress. Now it sees that the Government do not care about its wonderful product.

Mr. Forman: In what sense does an increase in duty on a bottle of scotch damage the industry's export prospects?

Mrs. Ewing: The domestic market is damaged--sales have fallen--but it is the message sent out that really matters. It shows our attitude to a unique industry, the quality of whose product is unrivalled in the world. The industry brings in money to the Treasury directly and it attracts as many international tourists a year as a great many other attractions put together.

Recently, Macallan whisky chairman Allan Shiach met Clint Eastwood's production company

"on the day Kenneth Clarke did his Dirty Harry act on the Scotch industry. It did not make his day. `If the government shoots itself in the foot, I am not sure why everybody else has to limp'". The Government have wounded the Scotch whisky industry and the whole UK spirit industry. I trust that hon. Members will seriously consider supporting our amendments; we shall certainly vote with the official Opposition on the new clause.

7 pm

Mr. James Couchman (Gillingham): It may be for the convenience of the House to know that although I ran public houses until the beginning of last November, and had been doing so in London for 25 years, I have now disposed of those interests, although I briefly remain a non-executive director of the company in question. I have listened carefully to the speeches so far, in which several hon. Members have mentioned the fact that bootlegging has been on the increase since the barriers went down on 1 January 1993. I should be interested to hear from the Minister whether expectations of the duty to be collected have been met or, if they have not been met, what the shortfall in the year to April 1994 was. What was the shortfall, if any, for the first three quarters of this year? I believe that the House needs that information, because the mini-Budget has proved to be profoundly unhelpful to an industry that has suffered greatly in the past three years.

The public house in London is under threat, not just from bootleggers-- although they are undoubtedly a factor--but from the fact that people's drinking habits are dramatically changing. Bootlegging is one thing; people's consciousness of health is another. In London and the

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south-east there has been a dramatic decline in trade over the past three years, and the industry shows no sign of recovering from the recession.

It would have been far better if my right hon. and learned Friend had listened to the case put to him by the Brewers and Licensed Retailers Association in the middle of last year, when it suggested that progressive harmonisation with rates of duty on the continent would lead to increased employment in this important industry--in production, and in wholesale and retail. That should have been done instead of putting a relatively small additional burden on top of the duty already charged.

There were expectations that the first Budget might have taken a modest step in the right direction by reducing duty. That was not to be, and the trade was duly disappointed. But it was horrified by the mini-Budget, which put a 4 per cent. increase on duties and which sent out the wrong messages. So trade will continue to be depressed and many jobs will be lost, as will many drink outlets in the retail, wholesale and off-licence sectors.

I look forward to the day when my right hon. and learned Friend will be able to tell us that we are about to move towards the duty levels that prevail on the continent.

Mr. Alan Meale (Mansfield): I, too, oppose the increased levies on beer. I declare an interest, as chairman of the all-party parliamentary beer club--an unpaid post, I might add.

It was not just pique but cheek on the part of the Government to introduce such an increase. They are trying to keep wage increases down to 1 or 2 per cent. at the same time as inflicting the increase on the beer trade, which is so important to the Treasury. I understand that the industry, directly and indirectly, supplies the Treasury with about £12 billion a year. An increase of 4 per cent. will inevitably be passed on to the customer. Furthermore, jobs linked directly and indirectly to the industry will be lost. The beer trade has already lost about 70,000 jobs--including jobs in other sectors related to the industry--in the past six years. That important industry generates about 750,000 jobs in Britain. My constituency is the location for both the Mansfield brewery and the Tom Cobleigh retail outlet. The constituency has suffered 6,000 job losses because of mine closures; if we now lose the brewery and Tom Cobleigh, the situation will be serious indeed.

Dividing up the 750,000 jobs in the industry among the 650 seats in the House gives a figure that shows that the industry is just as important to most other hon. Members. A 4 per cent. increase in duty would lead to another 10,000 jobs, direct and indirect, being lost to the industry. The Opposition Front-Bench spokesperson described the scale of the problem facing the beer industry in Britain due to a lack of action. Cross-border imports are flooding in from Europe at a rate of about a million pints a day because of the huge duty differential, which the Government have done nothing to remedy it. That represents 3.5 per cent. of all United Kingdom beer sales and 15 per cent. of all UK take-home sales. It also amounts to the same as the sales from every single pub in Kent, the west midlands and west Yorkshire, and the output of 18 regional brewers.

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Many hon. Members have been on official day trips by bus to the continent-- [Interruption.] They are not jollies; I do not know anyone who wants to go to Calais for a day just for a jolly. Be that as it may, heavy advertising by cross-channel ferry companies has led to people going across with their vans--to such an extent that our beer club discovered, in November 1993, that there were no vans for hire in Kent until the following February. They had all been booked by people who hired them to make two or three trips a day to the continent, to make thousands of pounds a week.

The lack of Government action to close the differential has rendered the situation extremely serious. In France I can buy a small bottle of beer for 11p, a price that includes the tax and duty. In Britain, we would pay 15p or 16p in duty and excise alone for the same bottle. We cannot compete on those terms.

The Government increase taxes and duties on beer while cutting the number of staff at Customs and Excise, whose unions have been told by the Government that they intend to cut 4,000 jobs in the Department. That represents 16 per cent. of the entire Customs and Excise operation. How can that be reconciled with helping the beer industry to make progress or with retaining those 750,000 jobs? We cannot stand up in Europe for our beer industry unless we start to tackle some of those problems.

The Chancellor admitted in his Budget speech that no Chancellor could remain unmoved in the face of the evidence that had been presented. If we are not willing to recognise what he said and do not start to take on board the seriousness of the problem, the British pub will be lost for ever.

Mrs. Jacqui Lait (Hastings and Rye): I am sure that the hon. Gentleman will want to correct the wrong impression that he is certainly giving me, which is that every person who goes abroad and returns with cheap drink is evading duty. Most of that activity is completely legal trade and part of being in the European Union, which I understand his party supports.

Mr. Meale: The hon. Lady is right. Much of the activity that we are talking about is legal trade. In a way, that is the problem. Unfortunately, there is an ever-growing trade in smuggling. If she has any doubts, she might like to talk to those of her hon. Friends who have visited France and seen queues of vehicles stretching for half a mile. I am talking of not only vans but half-empty or empty lorries, which are being loaded with pallets of beer. Those vehicles will return to the United Kingdom across the channel. Perhaps she will choose to talk to those of her hon. Friends who have visited pubs and clubs, or to those who have talked to brewers in Scotland, the north-east, the north-west, the midlands, the east and west and London. Over the past 18 months, 12,000 pubs have been lost, mainly in the south and south-east. The direct cause has been the beer and spirits that have come into the country from across the channel.

Mrs. Lait: I have made three speeches making precisely those points. It is clear that the hon. Gentleman has not been following proceedings during debates on the Budget and the Second Reading of the Finance Bill.

Mr. Meale: I feel sorry that I allowed the hon. Lady to intervene. She made an irrelevant point.

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If the hon. Lady believes in what she said when discussing the Finance Bill on Second Reading and if she believes in the arguments that are being advanced to explain why an increase in duty is wrong for the beer industry--I have in mind those who depend upon the industry for their employment and an industry that is paying such a great deal of money to the Chancellor year after year--she will vote in the Opposition Lobby.

If we do not change the price differentials between buying beer in this country and abroad, we shall lose the British pub. That will have serious consequences for all communities.

Mrs. Lait: I am grateful to have the opportunity to take up the remarks of the hon. Member for Mansfield (Mr. Meale) and to repeat some of the arguments that I have advanced in other debates. I apologise to my right hon. and hon. Friends on the Government Front Bench because this is the fourth time that I have spoken on this subject since the Budget statement. I find no comfort in hearing Opposition Members make precisely the points that I have already made. I suppose that I can comfort myself by thinking that at least they are learning something.

The increase in excise duty that we are facing on alcohol and tobacco will result in job losses. It will have an effect on the nation's health and will quite significantly undermine the rule of law. There are various options. My hon. Friend the Paymaster General has assured me on many occasions that the Government are planning to approximate our rates of duty with those of our European partners. My hon. and learned Friend the Member for Burton (Sir I. Lawrence) drew attention to the huge differentials between the United Kingdom and our European partners.

I understand that my hon. Friend the Paymaster General is pressing for changes, and I would like to know what progress he expects to make. I would like also to know that he is encouraging other members of the Government, such as my right hon. Friend the Secretary of State for Health, to press her opposite numbers in the EU so that they, too, are putting pressure on their Chancellors to increase duties because of the damage to health that is happening in countries such as France, Germany, Italy, Spain, Portugal and Greece. I re-emphasise that while I make no criticism of our excise officers, who do a good job, it must be recognised that prevention is not paying. We are already spending more on preventing the smuggling of beer, wine and tobacco than on the products that are being recovered. History re- emphasises that argument. I wish very much that the Treasury would do its sums and work out the excessive cost of prevention over the cure, which is approximation of duties. The Treasury should stop regarding excise as the milch cow of first resort--when in trouble, first increase excise duties.

Mr. Salmond: While the hon. Lady is waiting for other European countries to change their policies to get the Government off the hook, and given that this is the fourth time that she has made her points to the Government Front Bench-- those on the Government Front Bench seem not to be taking much notice of her-- is she proposing any stronger action such as voting against the actions of which she disapproves?

Mrs. Lait: I see no point in voting against an increase in duties that has had to be put in place because of the irresponsible behaviour of Opposition Members.

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I hope that my hon. Friend the Paymaster General will give me an assurance that the Treasury will think more strategically about the use of excise duty and stop regarding it as the milch cow that will solve any problem when we need to raise revenue quickly. I hope that that is the direction in which the Treasury is planning to move. 7.15 pm

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