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7.35 am
Mr. Howard Flight (Arundel and South Downs): I think that we have all taken stock of the Bill, and realise that it is about very much more than resource accounting.
I want to stress three points. First, as has been clearly demonstrated, the Bill is about Parliament's holding the Executive to account in regard to public expenditure. Conservative Members feel that the Government may not have best served their interests by not taking more notice of the PAC's proposals, and that it is a pity that they did not do so. They were, I think, beaten in argument on nearly all the key points--and, as others have pointed out, this is not a party political matter.
I echo the tribute paid by the hon. Member for Newbury (Mr. Rendel) to the Labour Members on the PAC, who have valiantly supported proposals to uphold the rights of Parliament. This is a battle between the Executive and Parliament, and, after only two and three quarter years in power, the Government seem to us to have fallen into the hands of the mandarins.
Secondly, the debate has confirmed the need for an independent body to prescribe accounting principles. That is particularly necessary, given the introduction of resource accounting. Indeed, it is questionable whether the move to resource accounting will be correct or sustainable without its inclusion.
Thirdly--many will have forgotten this; we dealt with it so long ago--the Bill includes provisions for the establishment of Partnerships UK. We feel that there is still an important need--again, this is very much in the
Government's interests--to clarify the territory and role of Partnerships UK. Will it merely continue the useful role played by the Treasury team to date, or will it develop a major role as an equity investor with significant potential conflicts of interest?
The change to resource accounting is welcomed in principle by virtually the whole House. As we are all aware, it has been planned for some five or six years, but there is a long way to go. There are a large number of assets not included in the register of assets, and major areas of expenditure not included and not to be scrutinised. We hope that the negotiations between the Government and the PAC will improve the machinery for proper accountability to Parliament, and that the Government will take on board the need for the CAG to have proper access and to be empowered to audit in appropriate circumstances.
Miss Melanie Johnson:
At 7.40 in the morning, I will be extremely brief, not least because, as my right hon. Friend the Chief Secretary to the Treasury has pointed out, the Opposition have kept us from our beds for 16 hours during a long debate of dubious quality. Much of it has been of dubious quality, although there were exceptions. [Interruption.] Some Opposition Members who are making noises have not been here all night. Indeed, they have not been here at all, so they had better be quiet. My right hon. Friend has pointed out to me that my remarks are all that stand between Members going home to their beds or to their business for the day, so I will be brief.
It is a privilege to bring to a close the House's deliberations on the Bill. I pay tribute, as my right hon. Friend has already generously done, to all those who have contributed to the Bill. I join him in his thanks. I would be the first to acknowledge that the scrutiny of the Bill has improved it, although tonight is not a good example. However, in general, the scrutiny has improved it. It was improved in the Standing Committee in particular.
The Bill's purpose is important. It is to put on a footing the way in which we use our capital, so that we can see how it is used and can account for it properly, as the private sector has done for probably hundreds of years--certainly for more than 100 years. It is important that we have made the change.
It is important to bring Partnerships UK into being, which will enable us to modernise our key public services and to ensure that, in the long term, the type of deal-making skills that are available temporarily only in the Treasury task force will be available to the public sector.
As several hon. Members have mentioned this evening and on earlier occasions--I mention in particular the right hon. Member for Haltemprice and Howden (Mr. Davis) and the hon. Member for Kingston and Surbiton (Mr. Davey)--the Bill is historic and heralds a revolution in many ways. They have both welcomed it in their own way and supported it.
It is important to note that the right hon. Gentleman, who is Chairman of the PAC, emphasised that he would vote for the Bill, were it to be put to a vote. He believes that it has merit and heralds a revolution. He has said that he is minded to join the committee that the Chief Secretary is setting up to review the audit and accountability issues on a wider basis.
What is probably most important about the Bill is that it will cause us to look properly again at the way we use public money in relation to public services, and at efficient and effective provision of those public services. It will cause us to look harder at the performance indicators that we use, at the way in which we assess whether we are making good use of that money, and at the way in which we decide what is important in achieving the outcomes that we set ourselves and in building policy making on evidence.
All those considerations are important. They have merited much of the discussion that we have given them. I am grateful to all Members who have contributed positively to those conclusions.
I will not detain anyone any further. I have to be elsewhere in a very short time. I commend the Bill to the House.
Question put and agreed to.
Bill accordingly read the Third time, and passed.
Motion made, and Question proposed, That this House do now adjourn.--[Mrs. McGuire.]
Mr. Desmond Browne (Kilmarnock and Loudoun):
I am grateful--I think that hon. Members will understand how grateful I am now--for the opportunity to initiate this debate. As I stand here, I am reminded of the often told after-dinner joke about the hon. Member who dreamt that he was delivering a speech to the House and woke up to discover that he was.
I should declare my interest in the subject, as the treasurer of the all-party Scotch whisky group; I have a still greater interest in the debate as the Member of Parliament for Kilmarnock and Loudoun. In 1820, John Walker opened a shop in Kilmarnock, starting a wine and spirits business that laid the foundations for the highly successful brand that bears his name: Johnnie Walker--the best selling blended whisky in the world. The business grew throughout the 19th century, until, in 1909, Tom Browne drew the striding man. Although recently, for marketing reasons, he has changed direction, the Johnnie Walker striding man has bestrode the world since then as the symbol of a truly great global industry.
By 1920, Johnnie Walker was sold in more than 120 countries. In these days of globalisation, what commodity other than Scotch whisky can claim to be in every bar or cafe and in almost every hotel world wide? All of that has been has been achieved by people from a small country perched on the north-west shoulder of Europe, with a population of about 5 million people.
In 1998, the Fraser of Allander Institute estimated that a total of £3.5 billion of Scottish output was generated annually by the Scotch whisky industry. Based on 1997 data, the Scotch whisky industry directly employs 12,000 people in Scotland and supports another 28,500 in the wider community. The fact is that 10.4 per cent. of Scottish agricultural jobs and 4 per cent. of all manufacturing jobs depend on Scotch whisky, and that 5 per cent. of the total Scottish work force--or one job in every 54 in Scotland--depends on the whisky industry. Across the United Kingdom, a total of 60,000 people are dependent on the whisky industry. Moreover, the whisky industry is a Government-friendly one, as about £1 billion in taxes is contributed each year by it to the Exchequer.
In my own constituency of Kilmarnock and Loudoun, the United Distillers and Vintners packaging plant, in Hill Street, Kilmarnock, and the distribution centre, at Hurlford, provide employment to more than 620 people. When I visited the Kilmarnock plant yesterday--with my colleague Margaret Jamieson, who is the Member of the Scottish Parliament representing Kilmarnock and Loudoun--we saw premium Scotch whisky being bottled in bottles of every shape and size, for every corner of the globe. The Kilmarnock plant--those 620 people--will produce 7 million cases of premium Scotch whisky this year alone.
All that has been achieved and sustained despite severe economic pressure and major recent adverse circumstances, such as the abolition of duty free sales for internal European Union traveland the large reduction in exports to Asia, in 1998, following the Asian slump. Although there has been some recovery--in 1999--
in Asia, there has been a corresponding sharp decrease in export volume to Latin America. Other adverse circumstances include structural discrimination in the tax system and the application of trade barriers in many global markets, including across the European Union.
One of the few compensations that the industry enjoys is European Union export refunds for cereals, but that is now clearly under threat. The export rebate or refund schemes operated by the EU are payable on basic agricultural products such as eggs, rice, milk, sugar and cereals when they are contained in processed products such as whisky and beer, chemicals and pharmaceuticals, and chocolates and biscuits.
The purpose of the refunds is to provide compensation on non-EU sales for the higher cost of using EU-sourced raw materials that is a consequence of the price support mechanism under the common agricultural policy. Although total exports of Scotch whisky represent about £2 billion per annum, 60 per cent. of that total is exported beyond the European Union and attracts the potential of that refund. For the Scotch whisky industry, refunds are essential to assist companies to maintain competitiveness in their critical non-European Union markets, where they compete against directly comparable products such as American whiskey and pale Japanese imitations.
The importance of the assistance was acknowledged at the time of the UK and Irish accession to the EEC in 1972, when it was recognised that it was necessary to ensure supplies of European Community raw materials to the spirits industry at a fair and reasonable price.
That recognition was reflected in protocol 19 of the UK and Irish accession treaties, which requires the Council to decide the necessary measurements to facilitate
Over many years, the European Community has attempted to remove or reduce distillers' rights to obtain refunds. The current attack on the distillers' rights has its roots in the settlement of the Uruguay round of the world trade talks in 1995. There, the EU agreed to expenditure ceilings for export refunds. That agreement, coupled with decisions on the EU budget taken at the Berlin summit in March, generated pressures on the budgeted provision for processed products export refunds late in 1999. The European Commission estimated that demand for refunds was likely to outstrip the agreed budget. For the months of November and December 1999, the Commission proposed flat-rate cuts of 4.5 per cent. to the non-annexe 1 refund rates for dairy products, cereals and sugar.
The UK and other member states criticised that decision. However, despite the lack of support from a single member state, the Commission promulgated and applied the regulations that imposed the flat-rate cut across the non-annexe 1 refund regime.
A flat-rate cut was only a short-term strategy. In November, the Commission issued a communication to the Council of Agriculture Ministers on the longer-term
strategy. It controversially recommended abolishing or reducing refunds for some products, such as Scotch whisky, without any change in the refunds available to other sectors. The Commission has once again specifically targeted spirits for reduction.
The Agriculture Council is due to consider the proposals in March. That is why the debate is timeous. If the paper is agreed, the detailed rate of reduction in the rebates will probably be set thereafter by working groups. Each member state has a representative in each working group, but decisions are taken on the basis of the qualified majority. If the paper is agreed, it may become impossible to prevent the loss of cereal refunds.
It is important that, in March, the Government do not nod through a general, undetailed proposal without knowing the potential detailed impact on distillers. While the flat-rate 4.5 per cent. across-the-board reduction will probably be removed if the working group follows the proposal set out in the Commission's November communication, cereal refunds for whisky may be singled out for cuts that do not apply to other sectors. That is why the proposals must be challenged at the March Agriculture Council. Any reductions now could be the thin end of the wedge for the industry.
Cereal costs are a significant element of the cost of production of Scotch whisky. The industry estimates that for new make grain whisky, cereal raw material costs, after the export refund is paid, are about 60 to 70 per cent. of primary production costs: for malt whisky, they are about 50 to 55 per cent.
The impact of any reduction in refunds is illustrated by the differences between EU and world maize prices. In April 1999, EU prices were 47 per cent. above world prices, and the premium in November 1999 was 58 per cent. World prices fell by 10 per cent. over the period. However, the net EU price for Scottish distillers, even with their export refunds, rose by 7.2 per cent. A broadly similar picture applies to wheat and barley.
Scotch whisky will suffer an increasing competitive disadvantage if, as the Commission proposes, spirit refunds are reduced further or eliminated altogether, unless efforts are renewed to reform the CAP and reduce EU cereal prices to world levels; or there is a full and unfettered access to world supplies; or an alternative form of compensation is devised for the gap between EU and world raw material prices.
It is unfair and anti-economic to expect the industry to carry the can for the failure of the Community to agree adequate reforms to the CAP in Agenda 2000, which would have reduced the need for export refunds by aligning Community prices more closely with world market prices.
The industry also questions the robustness of the Commission's economic analysis, the choice of product sectors for refund reduction or elimination and the principle of targeting itself.
Reportedly, there is a compensatory measure. The package of measures proposed by the Commission includes a proposal for more flexible increased access to inward processing relief, a relief that enables manufacturers to import basic commodities tariff free for incorporation and re-export in processed form. Distillers with longer memories recall that IPR and applications made under it were disagreeably complicated and bureaucratic.
The view of the industry is that IPR does not even begin to represent a solution if the process is not made smooth and easy for processors, and frankly, that is highly unlikely.
IPR as an alternative compensatory mechanism has, however, the significant disadvantage that it will drive manufacturers outside the Community where they can obtain their raw materials at world market prices with obvious consequences for jobs and for the market in agricultural commodities within the EU. That cannot be a long-term solution. The only real solution is to dismantle EU intervention pricing and to allow free market pricing in raw materials such as cereals within the EU, but that can be done only when there is reform of the CAP price structure.
7.44 am
the use of community cereals in the manufacture of spirituous beverages obtained from cereals, and in particular of whisky, exported to third countries.
That protocol, which also serves the interests of our farmers, is still relevant today and provides for this country and for the Irish a unique basis for the full maintenance of export refunds for the spirits industry. Importantly, it provides a unique basis for refunds on any of the EU cereals used in whisky production, which includes maize and wheat as well as barley.
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