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Mr. Edward Davey: Are those the total figures for alcohol and tobacco? The figures that I quoted related to beer, with which the clause deals.
Mr. Norman: The hon. Gentleman may correct me, but I understand that the total figure for alcohol and tobacco--£960 million--is greater. We are talking about rough estimates; it is not possible to estimate the true loss as a result of contraband sales, because the only reasonable way to do so is to estimate the amount of smuggling. I am advised by my friends in the brewing industry that the best way to do that, is to count the white Transit vans coming off the channel ferries, which would be an inexact science.
Dawn Primarolo: If that is the most effective way to assess the amount of smuggling, why did not the previous Government do that, and why did they not agree with the trade's figures?
4.30 pm
Mr. Norman: The Financial Secretary makes the important point that the profitability of smuggling has increased enormously in the past year. The actions of the Government in respect of macro-economic policy, the level of the pound and the increase of duty have greatly worsened the impact on the industry. She is a member of the Government, and it is up to her to explain to hon. Members how to count and measure the loss to the Revenue before assuming that it is not great.
Mr. Derek Twigg (Halton): Can the hon. Gentleman tell us how the previous Tory Government helped the situation by cutting severely the number of customs officers?
Mr. Norman: The hon. Gentleman knows that the previous Government intended to freeze duty on beer and reduced duty on spirits--there was an attempt to tackle the problem. No one is saying that it could be resolved
easily because it is complex, but it has gone beyond a sustainable level and a judgment must be made about what level is sustainable.
Various economic models, such as the Oxford one, have been mentioned. The Financial Secretary, if we might have her attention for a second, has explained that, in her judgment, that model does not prove that there would be material short-term loss of revenue as a result of the increase in duty, but this is not a short-term problem--it is a long-term problem that is growing rapidly.
As so often in Government dealings with business, the long-term effects are widely misunderstood. They are: decline in investment in the United Kingdom brewing industry, especially among small brewers; decline in the number of pubs and therefore in the capacity to sell British beer at full-paid duty; reduced availability of full-paid duty beer in this country; and changed drinking habits, because the switch in price and value means that it is cheaper to import foreign beer. A lot of contraband beer is foreign, which is tipping the scales against the British industry.
Mr. Cranston:
Can the hon. Gentleman explain why the previous Government increased the rate on beer in 1995 after they lost the VAT on fuel decision? Does the logic of his argument favour a uniform European Union duty on beer?
Mr. Norman:
The best response to the hon. Gentleman's latter point is to acknowledge that, as long ago as 1992, the members of the EU agreed that alcohol taxation across the EU should move towards the reference rate of 8p a pint. Labour Members keep referring to the previous Government, but the problem has been exacerbated greatly in the past 24 months by the increase in the value of the pound and by the increase in beer duty--it has gone beyond a sustainable level.
Mr. Christopher Leslie (Shipley):
To clarify that point, will the hon. Gentleman cite, with chapter and verse, the source of his information on developments over the past few months?
Mr. Norman:
My information comes from real life: I have talked to brewers and pub owners; I have listened to what the Government and the hon. Member for Dudley, North (Mr. Cranston) have said, and quoted it back to them. I have also looked at the Oxford economic model and other economic models--something that I strongly commend to the hon. Member for Shipley (Mr. Leslie), because, if he read them, he would become better informed on the subject.
The subject is easy enough to discuss in the ivory tower of the House of Commons, but in the pubs and off-licences and on the streets of Britain, it is affecting ordinary working people and their way of life. I recommend that Labour Members leave their economic models and get to grips with the people outside who are attempting to buy the ordinary British pint for an honest price. [Interruption.]
Mr. Andrew Robathan (Blaby):
Is it not strange that Labour Members laugh when they hear that my hon. Friend gets information from real life, instead of from the smoke-filled rooms of Labour party politics?
Mr. Norman:
It is not strange at all, because the facts of real life are often inconvenient to those in government, as the Labour party is now discovering.
The other salient fact to bear in mind is that ours is the only European Union country that suffers on such a substantial scale from the problem of smuggling and contraband. The reasons for that are: the disparity in duty is great; enforcement has been ineffective in the past; and the logistics of bringing product across the channel are far easier to handle than they would be in, say, Ireland, where the levels of duty are also extremely high.
Mr. Derek Twigg:
Can the hon. Gentleman quote figures on smuggling in other European nations, given that they are so different from UK figures?
Mr. Norman:
The hon. Gentleman will know that we discussed earlier the fact that reliable published statistics are not readily available; however, that there is a problem is well known. The hon. Gentleman may wish to discuss the issue with representatives from the Irish brewing industry.
Any brewer in the country will say that the industry is under attack because of the growing volume of imports resulting from the escalation in the value of the pound and the effect of increased smuggling and contraband. That is not a small effect, even though Labour Members think it trivial and the hon. Member for Kingston and Surbiton tries to explain that it does not cost the Treasury much. It is estimated that 15 per cent. of all the beer sold in the off-licence trade in Kent is contraband, and that that volume is growing at approximately 15 per cent. a year; compounded, that figure will double in five years.
When looking at economic models, what we have to worry about is not what happens today, but what will happen if the trend continues. In her response, the Financial Secretary might like to tell us not only whether the Government are prepared to reconsider the most recent increase in duty, but what their intentions are in respect of further increases in duty in years to come.
Mr. Barry Gardiner (Brent, North):
Given that, at 30 per cent., the percentage of the price of a pint of beer that is taken in tax is now lower than at any time in the past 30 years, does the hon. Gentleman agree that the explanation for the rise in smuggling--which is a major problem that we all recognise--must therefore be attributed to some other cause than the duty on beer?
Mr. Norman:
No, I do not agree with that. As a shopkeeper, I must advise the hon. Gentleman that he cannot bank percentages; what he can bank is pound notes. It does not matter what the percentage is: if the pound note profit is higher per Transit van-load of contraband, the exercise is more profitable. The costs have not risen greatly, but the benefits have increased considerably. As I said, it is estimated that the benefits are to the tune of £600 per white Transit van coming off a cross-channel ferry.
The profits have risen considerably over the past year, as they have done over the past five years. The problem is now out of hand and is having a long-term corrosive effect on a British industry that is worth protecting because it is part of the British way of life. In a sense, smuggling has also become part of the British way of life: it has become what is popularly called yellow-line crime and is widely participated in.
The number of people employed and engaged in crime as a result of the duty is great, and smuggling has become semi-legitimised in some communities and certain sections of British culture. It is contributing, on a widespread basis, to the growth in under-age drinking, because, inevitably, small retailers who knowingly sell these goods are also prepared to sell to those who are under age. Labour Members have confirmed that they are worried about that issue.
Contraband goods are now so widespread on the street--I assure the Committee that it is the case in any retail community, especially around Christmas--that small shopkeepers, to be price-competitive on beer sales, often feel that they must handle contraband. Many of those small businesses--in the north, in Scotland, in Liverpool, in the Manchester conurbation or in Yorkshire--are already under pressure to survive, and to keep themselves going and keep themselves price- competitive they must handle contraband. The level of duty is effectively pushing people into a form of yellow-line crime.
Mr. Cranston:
Is the hon. Gentleman making the accusation that many small shopkeepers in this country are handling contraband?
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