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4.15 pm
The Government do have other powers open to them, should they wish to use them. I urge them to examine the licensing regime, to give local representatives and local magistrates working with the local police more powers to intervene, and to ensure that those powers cannot be overridden by a faraway, unaccountable Government inspector, who does not know the local position and cannot react quickly to it.
Smuggling is the other issue that the Government have to balance in deciding what the duty should be. We have heard much about that, and I am sure that we will hear more from right hon. and hon. Members who are yet to speak, but the question that we have to debate is whether the current duty level has caused the alleged increase in smuggling, whether there are other causes and, most important, whether a significant reduction in alcohol and tobacco excise duties would lead to an increase in revenue.
That has been the contention of some hon. Members, particularly those who spoke on Second Reading. They would need to show two factors before they could defend their case: first, that there was mass evasion, to the effect that revenues were seriously undermined, and therefore that a reduction in duties would make good those revenues; and, secondly, that attempts to persuade European Union partners to level up duties had been completely exhausted. Indeed, there is a third factor: they would need to show that there were no alternative measures that Her Majesty's Treasury could implement to tackle smuggling, such as reorganisation of Customs and Excise.
For this debate, I have considered the evidence produced in parliamentary answers from the Financial Secretary and in other papers available to hon. Members. It is clear that the estimate of the amount of revenue that has been evaded by cross-border shopping and lost because of smuggling is very small. Indeed, the estimate seems to be much smaller than that of the losses from evasion of other taxes. Government estimates for 1997 show that, in total, £165 million was evaded and that £120 million was lost. Those figures were reached by using new estimating procedures, which are run jointly with the industries in Great Britain, so the figures are not disputed by them.
Mrs. Jacqui Lait (Beckenham):
I am interested in those figures, which are the lowest that have been produced for a long time. Where did the Treasury get them?
Mr. Davey:
The House of Commons Library took them directly from estimates published by Customs and Excise,
Beer duties represent about 3 per cent. of the total revenues from excise duties, which is a very low figure. Those who want to slash the duties must provide more convincing figures, which I do not believe are available.
For the benefit of France and other European Union member states, the Government should try to persuade them to level up their duties. That would also have an effect.
Mr. Heathcoat-Amory:
Dream on.
Mr. Davey:
The right hon. Gentleman may be sceptical, but I still think that that avenue is worth pursuing. Perhaps, with the much warmer relations that the Government claim to have with our European partners, they will have more success than their predecessors.
Mr. Nicholas Soames (Mid-Sussex):
Where does the hon. Gentleman propose raising the revenue shortfall that would accrue from the transaction?
Mr. Davey:
I do not believe that there would be a revenue shortfall from what I am proposing. My proposal was that France should raise the duties on beer.
Mr. Davey:
The hon. Gentleman may say that it will not, but it is for this Government to see whether they can be more successful than the Conservative Government. We have yet to find out.
I read with interest the Alcohol Concern report "Who Creates the Bootleggers' Profits?". Before the industry can lobby effectively for significant reductions in alcohol duties, it will have to answer some of the points that are well set out in that research paper. Alcohol Concern research conducted this March comparing the different prices charged in supermarkets and off-licences in Dover and Calais showed that there was a 21p price difference on a unit of alcohol for beer, of which 9p could be put down to differences in duty, but of which 12p apparently related to differences between the industries in France and in Britain.
The difference is partly explained by the way in which beer is sold in Calais, where there is a "pile it high, sell it cheap to the day trippers" mentality. It would be possible for enterprising people in this country to pile it high and sell it cheap in a warehouse in Dover. They would not have the 9p price incentive to add to the 12p differential that is caused by our industry's inefficiencies, but there is still a margin that they could arbitrage away. The industry still has a case to prove.
That does not mean that the Liberal Democrats do not take smuggling seriously. It is illegal and has bad effects, because unscrupulous individuals who break one law are likely to break others by selling alcohol to minors and engaging in other dangerous activities.
Rather than merely cutting duty, which is a simplistic approach and may not be effective, the Government should consider changes in Customs and Excise. In a press release in September last year, the Economic Secretary talked about some of the extra resources that she had allocated to Customs in Dover. That was welcome, as there are clearly problems in Dover, including a lack of space to expand the facilities, which is a logistical problem which I hope Customs and Excise management can address. I hope that, when the results of the comprehensive spending review come out, we can go much further.
I am not an expert in the managerial structure and operational routines of Customs and Excise, but from first principles, one imagines that Customs and Excise has a tradition in history of operating purely out of the ports--coastal ports and airports--and that its organisational structure has been biased towards tackling smuggling at the ports. That is probably a different culture from that which exists on the continent. Our partners on the continent have long land borders and they are much more used to exercising anti-smuggling measures inland. I suggest to the Financial Secretary that there may well be some benefit in seeing whether Customs and Excise can redirect some of its efforts to tackling smuggling inland. I hope that it does that in any case, but the extra marginal investment in its services may be best directed to internal controls.
For all the reasons outlined, I feel that what is before us in clause 1 is a modest increase. The problems that need to be tackled in setting alcohol duties--health and social problems, and smuggling--can be tackled in other ways. Therefore, Liberal Members will support the Government if the Committee divides.
Mr. Archie Norman (Tunbridge Wells):
I, too, want to talk about beer duty but, before doing so, I remind members of the Committee that I have an interest in the matter as chairman of a supermarket group responsible for a large proportion of the legitimate beer sales in this country. The issue at hand is not the interests of large supermarkets or, for that matter, large brewers. It is very much a question of the little guy, the small independent retailer, the small pub and the small brewer. It is a question of the British pint--part of the British way of life--and the price of that pint to ordinary working people.
We are looking not only at an excessive tax on the daily fare of ordinary working people but at a broken promise. My right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) quoted the Prime Minister. I have another quote from the Prime Minister. In May 1997, he wrote:
The fact is that it is a bad tax. The motivation for the tax is entirely driven by revenue income. That, in and of itself, is not a sufficient reason for taxing a specific good or product. The tax is exploitative, selective and there for the wrong reasons.
"Labour accepts that there is a problem and that the Government should act urgently to strengthen Customs and Excise, tackle the illicit sale of contraband, stand up for UK consumers, jobs and businesses when rates of duty are considered by the European Council and initiate an urgent independent and comprehensive study".
As my right hon. Friend said, the study may have been initiated, but we have not seen much by way of the outcome. I hope that the Financial Secretary will tell us exactly when she expects the study to be published. Perhaps she would be kind enough to give us some insight into its content. There is widespread suspicion in the industry that the content is unhelpful to the Government's case, and that that is why it has not been disclosed.
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