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Mr. Cousins: The hon. Gentleman's argument is somewhat tortured. Is he suggesting that, if the Government were to negotiate a position with the other members of the European Union so that the eurobond market in the City was outside the scope of any of the taxes that he is imagining--so no veto had to be exercised--he would regard that as a satisfactory outcome? Or is he saying that because he lived under the lash of the handbag and was subjected to that pain for so many years that he wants the Government to exercise the veto as a proper display of power? That is a ridiculous position.
Sir Michael Spicer: I am saying that one has to establish one's position firmly in any negotiations if one
wants them to go the right way. I do not have any confidence from recent public pronouncements that the Government will do what they initially said that they would do--to defend this country's interests. The Government have begun to show mixed signals. We no longer need a crystal ball, because we can read the book--in so far as it has been printed--of the meeting that took place last Saturday, and it seems that the Government shied away from taking a firm stance. The hon. Gentleman may not care too much about that because it may not be part of his philosophy to defend the City, but--in so far as the Government's policy was to defend the City and its interests, and its contribution to GDP--the emerging picture is a shabby one. If that is the case, the Government's position will be traded off, and that will be serious for this country and for the Government because of the commitments that have been made by some Ministers.
Mr. Tyrie: If such an exclusion were negotiated for the UK, is it my hon. Friend's view that we would be hurt anyway because financial services are increasingly seen in a European or global context and our exclusion would not be sufficient fully to protect us? Is not the whole history of the European Union one in which, if countries have exclusions, the Commission makes proposals some years later to bring them back into the ambit of the tax or controls?
Sir Michael Spicer: I agree with my hon. Friend. The attacks on the City are coming from different directions, with most of them originating from Brussels. The most significant was mentioned by my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory), who said that one of the most worrying aspects of what the Government were doing to the City, and to the economy generally, was the introduction of massive new regulatory regimes. The FSA, and the Bill that will introduce it, are a source of enormous concern. The FSA started as a smallish operation to try to help a few consumers who the Government claimed had had a bad deal, but it has turned into a monster. The Bill will give the FSA huge powers; and it will be able to determine its own size and powers. That is causing grave concern among those who have the interests of the financial sector at heart. The withholding tax is just part of a much wider picture of a Government who are not interested in what really makes a market such as the City of London flourish.
Mr. Tyrie: The Government have not grasped it.
Sir Michael Spicer: That is another way of looking at it. The Government do not have much more time to grasp it--only another year or so.
The Government are a tax and spend Government. They try to disguise that, but their whole philosophy is based on tax and spend and the distribution of the taxes they collect. The Government have created their strange and rather absurd golden rule, which allows expenditure to take place without proper funding and rules about taxation. Therefore, it is doubly surprising that they should try to pretend that the Budget is not part of a tax-raising strategy. It manifestly is, as has been determined by outside commentators and by the Select Committee on the Treasury.
7.16 pm
Mr. Eric Illsley (Barnsley, Central):
I do not intend to follow the hon. Member for West Worcestershire(Sir M. Spicer) in analysing the Treasury Committee's report, because I wish to make a few brief points, especially about excise duties--on cigarettes, alcohol and the fuel duty escalator--and their effect on my constituency.
I welcome the Finance Bill and the Budget. The measures they contain will have a marked effect on my constituency, which is an area of high unemployment. We are trying to regenerate the local economy and many of the measures in the Bill will do much to help that--in particular, the lower rates of income tax, the measures to help families, the increases in child benefit, the children's tax credit and the investment in schools and hospitals. The measures to encourage work will also be of great benefit.
In the past few years, I have welcomed successive Governments' commitments to reducing smoking. My constituency suffers from a high incidence of smoking-related diseases and we would welcome any initiative that reduced levels of smoking. Sadly, increasing numbers of young women are taking up smoking, which is very worrying. Successive Governments have used the Budget and the Finance Bill to increase tax on tobacco products to try to reduce smoking, but for young women the effect of those measures has slowed down or they are simply not working. One of the reasons for that--although it is not the only reason--is the difference in duty between cigarettes legally purchased in this country and the duty in France and the other countries of Europe on cigarettes and tobacco products which are smuggled into this country and illegally resold through various outlets or by individuals. It is easy to obtain cheap tobacco products, which defeats the worthwhile objectives of successive Governments in increasing tobacco taxes to reduce smoking.
An interesting article recently described an analysis of discarded cigarette packets at a football ground. Three out of every four packets collected were imported and had not been sold legally in the UK. That gives some idea of the amount of smuggling, which is, to some extent, defeating the Government's objective and removing revenue from the Treasury.
Smuggling also affects retailers. A constituent of mine, a former miner, invested some redundancy money in cigarette machines, but has begun to regret it because he cannot compete with the prices of cigarettes smuggled into the United Kingdom and then resold.
Mr. Rowe:
The other end of that chain lies in my constituency, which is full of sinister criminal families who have moved to Kent because there is more profit to be derived from smuggling tobacco than from almost any other substance. Kent police are particularly anxious about that movement.
Mr. Illsley:
I am aware of the hon. Gentleman's concern and shall refer later to a slightly amusing incident that he will appreciate in which smugglers from my area went to his.
Smuggling is affecting Government policy and revenues. It also hits retailers in my constituency. I fully support initiatives to reduce smoking taken by this Government and their predecessor, and I support plans to
ban tobacco advertising. I do not advocate reducing duty on cigarettes, but more resources should be given to Customs and Excise--and perhaps to Kent police--to try to stop tobacco being smuggled into the UK.
We must try to remove the reasons for wanting to smuggle tobacco. As the hon. Member for Faversham and Mid-Kent (Mr. Rowe) said, it is one of the easiest ways to make a lot of money these days. The Government could consider moving our duty rates closer to those of our continental counterparts more quickly than is envisaged. They could, in short, try to make smuggling less economic.
I welcome the freezing of duty on alcohol, except for cider. The difference between our levels of duty and those in Europe is substantial. Ours are much higher. The duty on a pint of beer, for example, is around 33p, but in France it is about 5p. Some of our European partners have cut their duties towards a target of 8p a pint, and it is easy to see how far we are from that rate. Even if we freeze alcohol duties for a few years, it will take some considerable time before European duties approximate to ours.
About one and a half million pints of beer enter the UK each year on which duty has been paid in France. That has a huge effect on domestic beer sales, just as tobacco smuggling affects tobacco retailing. Breweries have closed over the past few years and consumption of beer in pubs has decreased. The Treasury is losing an estimated £800 million a year as a consequence of alcohol smuggling.
There is a knock-on effect for my constituency, which is one of western Europe's largest producers of glass, by volume. We produce glasses and beer bottles, among other things, and the industry is feeling the pinch.
The hon. Member for Faversham and Mid-Kent mentioned families descending on Kent with the sole intention of smuggling illegal quantities of beer and tobacco. More than 12 months ago, Channel 4's "Dispatches" programme focused on several people from my constituency who had been convicted of smuggling. They had travelled from South Yorkshire to Kent, lived there and gone across the channel with vans to come back with as much alcohol and tobacco as they could carry. They were unemployed, some of them ex-miners. They had no income, and they spotted a way to earn some easy money.
Those people were caught and convicted, but they were detected not by Customs and Excise but by the good people of Kent, who became fed up with lads from Barnsley having a good time and spending money that they had not previously had. The lads stood out a bit in the hostelries of Kent, speaking in good old-fashioned Barnsley accents and spending lots of money, as generous Barnsley people do. The people of Dover reported that an unusual group was camped in that part of Kent; it was not customs who caught them. The Budget announced extra funds for tackling smuggling, but we must try to reduce the differences in duty between ourselves and mainland Europe to remove the reason behind smuggling.
It is often suggested that many smugglers emanate from Sheffield. However, Sheffield is a vehicle registration area. A lot of vans and trucks that are clocked crossing
the channel from ferry ports happen to be registered in Sheffield, but they are not always driven by people from Sheffield or South Yorkshire.
The more topical issues of the fuel duty escalator and the perceived effect on the haulage industry of vehicle excise duty on commercial vehicles have already been raised tonight. Like other Members, I have been heavily lobbied by the haulage industry and by local hauliers. In January, Truck, Headlight and other trade magazines ran similar articles calling on hauliers to lobby MPs and drawing attention to VED and the fuel duty escalator. They all carried stories about the possibility of Eddie Stobart moving abroad to take advantage of cheaper VED and cheaper diesel.
The Government are aware of that lobby and have acted to try to reduce the burden on small companies. The 1 per cent. reduction in corporation tax, the 1 per cent. reduction in small companies tax, the quarterly payments of advance corporation tax and the extension of capital allowances have all been cited as Government action that will ease the burden on hauliers. However, as the hon. Member for Gordon (Mr. Bruce) said, companies must be making profits if they are to take advantage of reductions in corporation tax and so on, and must not have costs imposed on them.
A small company with few staff will not receive the advantages of the national insurance initiative that the Government have rightly taken. The smaller the profit, the less benefit there will be from reduced taxes. Our fuel is the most expensive in Europe, and vehicle excise duties for 30-tonne or 32-tonne lorries are, at about £3,200, the most expensive in Europe, too.
We have been through the environmental arguments for imposition of the fuel duty escalator. However, having an 1100 cc engine does not necessarily make a car cleaner than a 3.5 litre, superbly tuned, brand new car with catalytic converter. The smaller motor could easily be twice as dirty as the car with the larger engine. To take advantage of the £1,000 reduction in vehicle excise duty for cleaner engines would mean a hell of an investment to hauliers with few lorries.
The Government should consider the state of research. My research showed that the most recent work on European Union comparisons in respect of the costs of the road haulage industry is quite old. Both the Road Haulage Association and the Freight Transport Association estimate that 8,000 jobs will be lost over the next 12 months. One takes that with a pinch of salt, because they will try to make the best case that they can in respect of the escalator. There has been considerable press coverage and direct action by the hauliers. I condemn such action, which does the industry no good.
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