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4.37 pm
Mr. Edward Leigh (Gainsborough): Motion 5 is important, as it could have a significant effect on not only the public, but on Ways and Means motions generally and on the Government's finances. It is a thoroughly unpopular measure, which is being foisted on the British people against their will. However, the matter has now been settled and we cannot argue about it.
The Government pray in aid the fact that the measure will have a significant impact on Government revenue, as those who are affected by it will have to pay duty. Nevertheless, today, I think that we have to hear a bit more from the Minister about the precise revenue implications of a thoroughly unpopular and draconian tax increase being imposed on those who are simply trying to buy something on board a ship or aeroplane.
In this short debate, the Government might also make clear the precise implications of the measure for the various tax regimes as--now that we are getting rid of duty free--even the shortest journey by sea or air might pass through different tax regimes. It is not clear how the measure will be implemented in practice, or how the tax will be levied.
Therefore, not only will the public be losing a highly valued privilege--which they have enjoyed for a very long time--and the Government, by underhand means, be receiving revenue that they had not previously expected, but the public will be put to various inconveniences.
Mr. Fabricant:
My hon. Friend mentioned implementation of the measure and various tax regimes. Does he accept that there could be very real difficulty in collecting duty from travellers on a flight going to a European Union destination and then on to a non-European Union destination? How does he imagine that Customs and Excise will ensure that the correct duties are applied at the correct time?
Mr. Leigh:
My hon. Friend made that point in his excellent earlier comments. It certainly has not been made clear, to the House or the public, how that problem will be resolved. Clearly, different rates will apply according to whether a flight or sea journey originates from a European Union destination or from a non-European Union destination. However, a part of some air or sea journeys originating in a non-European destination will be made in the European Union. What tax will people pay on those journeys? The public could be very confused. The situation is not acceptable.
We should also consider the potential for the Exchequer to lose revenue because people in Dover and the Heathrow area will lose their jobs as a result of the loss of duty-free concessions. We now hear that such has been
the profit margin of many duty-free shops that they can apparently afford to ensure that the public buy their whisky or cigarettes for the same prices as before. That may be the case, but the Government cannot rely on it. They must come clean and explain the revenue implications.
Mr. Fabricant:
Does my hon. Friend share my concerns and those of my hon. Friend the Member for Spelthorne (Mr. Wilshire) about the confusion in the collection of duties between EU and non-EU areas, and the considerable doubt about the sums that will be collected, depending on whether the duties concerned are VAT duties or excise duties in the normal sense of the word? Does he agree that it will be interesting to hear whether the Paymaster General is able to answer my questions about the differentiation between the collection of excise and VAT duties?
Mr. Leigh:
The differentiation between excise and VAT duties is very interesting. My hon. Friend the Member for Rochford and Southend, East (Sir T. Taylor) also referred to it. I hope that the Paymaster General will be able to enlighten us. I have certainly received no enlightenment so far.
Mr. Letwin:
My hon. Friend's remarks bring to mind a further oddity. Does he agree that the clause to which this motion refers would reduce the revenue accruing to the Exchequer? Is it not odd to have such a Ways and Means motion?
Mr. Leigh:
I am not sure whether it is very usual. I do not understand why the Government are apparently reducing the revenue coming to the Exchequer. I cannot believe that that is their intention. I am sure that there is some misunderstanding.
What will be the effect of the revenue from duty free not being available for reinvestment in terminals and the transport network? That useful source of revenue will now be lost--
Mr. Deputy Speaker:
Order. I must counsel the hon. Gentleman that he is going far too far.
Mr. Leigh:
I apologise, Mr. Deputy Speaker. All those points have implications for the Ways and Means motion. If that revenue is no longer available, the Government must make up the shortfall somehow. The motion is incredibly important and we should have a proper debate on it. It should not just go through on the nod as yet another Ways and Means motion. The implications for the Exchequer are enormous. The public are being made to suffer. The Government are introducing an underhand tax rise which the public did not ask for. It is incumbent on the Minister to explain the implications for Ways and Means.
Mr. Fabricant:
My hon. Friend is right to say that the issue should not go through on the nod. Was it not the Speaker's decision that up to 45 minutes should be allowed for debate on each of the Ways and Means motions? Would it not be an insult to the House if we merely nodded them through?
Mr. Leigh:
We saw earlier that the Minister was trying to nod things through at the rate of an express train,
The Paymaster General (Dawn Primarolo):
The new provisions, which the motion provides the way for, would bring into United Kingdom legislation directive 92/12 EEC, which allowed only until 30 June 1999 the continuation of duty free for passengers to take away at the end of an intra-Community flight or sea crossing. I am sure that at the heart of all the points that have been made is a concern for passengers. I am delighted to be able to tell the House that shopping at Gatwick was easier than ever this morning. Gone are the complicated restrictions for Community travellers, who can now purchase as much as they like, duty paid. The tax-free shops have risen to the challenge and created a marketing opportunity, as we knew they would.
All travellers pay the same price for non-dutiable goods. Almost all prices have been held, emphasising what a good deal this is for the consumer. There is plenty of advice on hand, and travellers and retailers alike have adapted quickly to the new rules. BAA, for example, announced last week that it was holding at least 90 per cent. of all prices at exactly the same level.
Mr. Fabricant:
I am not sure whether the right hon. Lady's remarks are strictly on Ways and Means. However, will she clarify how those concerned at terminal 3 at Heathrow, or at the Gatwick terminals--where travellers go within and outside the EU--know what VAT or duties to charge or not to charge? How do they know the passenger's ultimate destination?
Dawn Primarolo:
It is up to the duty-free shop to ascertain whether the person is travelling within the EU or outside the EU. All travellers must produce their ticket to purchase at a duty-free shop, and the new technology in shops has been altered to cope with the arrangements.
Mr. Wilshire:
I want to ask the hon. Lady about the figures for Gatwick, which are clearly important, as the sales post-duty free will determine the amount of revenue that the Government get. What proportion of the sales was to people travelling from Gatwick to the EU, and what proportion was sold to those travelling from Gatwick to destinations outside the EU? That will tell us how much is duty paid and duty free, and will enable this House to determine what income the Government will receive. The other thing that we need to know--
Mr. Deputy Speaker:
Order. The hon. Gentleman can make a brief intervention, but not a second speech.
Mr. Wilshire:
I understand your point entirely, Mr. Deputy Speaker. What quantity of goods within those figures is being bought by individuals, so we know how much extra is being taken on aircraft?
Dawn Primarolo:
I intended to assure Opposition Members that airports and ports--I gave Gatwick as an example--were coping admirably with the new arrangements. Alas, I do not have responsibility for the commercial success or the figures of those shops, or for the flow of business through them. I was addressing whether things were running smoothly at our airports.
Conservative Members asked me about the expected increase in revenue, and VAT in particular, following the change in arrangements. Last week, we discussed a statutory instrument that also amended our legislation, and I made it clear to the hon. Member for Spelthorne (Mr. Wilshire) and others that it is difficult to give a precise estimate, as the increase will depend entirely on the decisions of shoppers and those who provide the facilities for them.
It is estimated--it is only an estimate--that there could be an increase of £120 million a year, but that depends entirely on how the companies providing the services seize on the new commercial opportunities that are now open to them. That is certainly outside the Government's control. I made it clear in Committee that we would monitor closely how the arrangements work and assess whether they continue to provide the best opportunities that we can secure after the abolition of duty free.
4.44 pm
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