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House of Commons

Tuesday 13 January 2004

The House met at half-past Eleven o'clock


[Mr. Speaker in the Chair]

Oral Answers to Questions


The Secretary of State was asked—

Whisky Duty

1. Mr. Alistair Carmichael (Orkney and Shetland) (LD): What estimate he has made of the cost to the Scottish whisky industry of introducing a duty paid stamping scheme. [146391]

The Secretary of State for Scotland (Mr. Alistair Darling): The Government have made it clear that we will proceed with tax stamps for spirits if the industry is unable to put forward an alternative proposal that would be as effective in tackling spirits fraud.

Mr. Carmichael : I thank the Secretary of State for that answer; it may be an answer to something, but it was certainly not an answer to the question that I asked.

The estimate of the Scotch Whisky Association is that the Chancellor's proposal will constitute an extra cost to the Scotch whisky industry of about £280 million. In return for that, the industry will get a system that is so effective that the United States and Greece got rid of it. The system was also considered by Belgium, Germany and Norway and rejected. Will the Secretary of State make 2004 the year that his Department does something useful for Scotland and the Scotch Whisky Association, and will he ask his right hon. Friend the Chancellor to think again?

Mr. Darling: The hon. Gentleman will be aware that, in the last six Budgets, duty on Scotch whisky has been frozen, which has brought considerable benefit. That did not happen under previous Governments; it has happened because of the decisions taken by my right hon. Friend the Chancellor. The House knows that the problem is that spirits fraud has been rising year on year. It is estimated that about 16 per cent. of the spirits market has been subject to fraud, amounting to about £600 million. After many years of discussing those things with the industry, the Chancellor has said that we must do something about the problem. He believes that stamps offer the best way forward, but has made it clear

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that the door is open to the industry if it can propose something more effective. I understand that the industry has been speaking to Customs and Excise, but I am sure that most Members accept that no Government can put up with losing nearly £600 million a year because of fraud. That money could be usefully invested in services and other things. Something has to be done about the problem and if the hon. Gentleman has any good ideas, we should be happy to hear from him.

Mr. Brian H. Donohoe (Cunninghame, South) (Lab): The Secretary of State will know that I am the secretary of the all-party group on Scotch whisky and that, along with colleagues on both sides of the House, I have made strong representations to the Government and to the Chancellor to ask them to try to find alternatives to the stamp duty. What part will my right hon. Friend the Secretary of State take in any representations that are made, in relation both to industry management and to the trade unions?

Mr. Darling: I know of my hon. Friend's long-standing interest in whisky—I confess that I, too, take an interest in the subject from time to time.

The Chancellor and all Ministers are acutely aware of the importance of the Scotch whisky industry to the Scottish economy, but we are also acutely aware of the fact that fraud in the spirits market has been growing and that when we are losing nearly £600 million of revenue through fraud, something needs to be done. Discussions have been held over a number of years and the Chancellor has said that he will introduce the new stamping system unless the industry can come up with something better that is more effective. As I said, the door is open to the industry; if there is a better way of stopping that fraud, we will discuss it.

Angus Robertson (Moray) (SNP): Can the Secretary of State name even one leading figure in the Scotch whisky industry who is in favour of the proposal?

Mr. Darling: It is not surprising that people in the industry are reluctant to take responsibility for ensuring that tax is paid. The hon. Gentleman should recognise that the Government have two duties. First, we must do everything that we can to encourage industries, but, secondly, no Government can stand by and watch their revenue being systematically removed owing to fraud. I should have thought that the nationalists would accept that.

Mr. Michael Connarty (Falkirk, East) (Lab): The Secretary of State will know that the hon. Member for Moray (Angus Robertson) was not a Member when we persuaded the Treasury, in the last Parliament, not to bring in strip stamps. At that time, there was no doubt that the industry association and all those involved in the whisky and spirit industry accepted that there was massive fraud and that we had to do something about it. It is clear that we have to do something, but do we have to bring in this inefficient system that has already been used abroad and abandoned? I believe that the association will meet the Chancellor in February, so will the Secretary of State lobby at that time for a much

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broader survey of exactly how much fraud is going on? What is the source of the fraud and can we find a better way of dealing with it than strip stamping the bottles, which will cost small producers such as Whyte and MacKay in my constituency a disproportionate amount of money?

Mr. Darling: As I said, the Chancellor has made it clear that he is happy to discuss with the industry other ways to combat fraud. The problem is that those discussions have been going on for some years now and the amount of fraud has been growing year on year. We have reached a stage where, whether the fraud is £600 million or £100 million either side of that figure, an increasing amount of money is going missing from the Exchequer. Of course, there may be other ways to deal with the matter—that is what the Chancellor said—but, unless the industry can come up with another means that is just as effective and workable, he sees no alternative but to introduce the tax stamps. To do nothing and pretend that the problem will somehow go away seems foolish because all the evidence shows that fraud is increasing year by year. Let no one forget that we have frozen the duty on whisky for six successive Budgets. The Chancellor has said that he intends to continue that for the rest of this Parliament, but he can do so only if we do something about the fraud that is being perpetrated in the industry.

Mr. Peter Duncan (Galloway and Upper Nithsdale) (Con): Given the Government's borrowing requirement of £120 billion for the years to 2006, one might have thought that they would want to encourage one of Scotland's most successful trade and revenue-generating industries to fund their burgeoning deficit. Did the Chancellor consult the Secretary of State before the pre-Budget report and the announcement paving the way for this damaging whisky tax stamp proposal? If so, why did he not veto it?

Mr. Darling: I am surprised that the hon. Gentleman has not expressed any concern about the fraud that is being practised on the spirits industry. As for Budget deficits, he was not a Member at the time, but those of us who have been Members for some years will remember that Government borrowing rose to astronomical levels when the Conservative party was in office. The borrowing that we have today is not only manageable, but a small proportion of the amount borrowing compared with our competitor countries, never mind what happened in the past.

In relation to this proposal, I have said that the industry is crucial to Scotland, which is why we have frozen the duty for six successive Budgets—something that did not happen under the Tory Government—and I should have thought that the hon. Gentleman accepted that, if there is fraud on this scale, we have to do something about it. To ignore it would be grossly irresponsible.

Housing Finance

2. Mr. Mark Lazarowicz (Edinburgh, North and Leith) (Lab/Co-op): What assessment he has made of the implications for Scotland of the Miles report on housing finance. [146392]

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The Parliamentary Under-Secretary of State for Scotland (Mrs. Anne McGuire): The interim report by David Miles on the UK mortgage market was published on 9 December 2003. The Government will consider it carefully and look forward to the final report, which is due by the 2004 Budget. It would therefore be premature to make any assessment specifically for Scotland.

Mr. Lazarowicz : When the Government come to consider the final Miles report, and also the Barker report, will she make it clear to the Treasury that the problems associated with volatility and shortage of supply in the housing market affect not just the south-east of England, but places such as Edinburgh as well? Will she use her good offices with the Treasury to ensure that, if any pilot scheme emerges from the reports, my constituents in Edinburgh, who often have difficulty affording housing in the city, will benefit from those reports?

Mrs. McGuire: Many of us share my hon. Friend's understanding of the hot spots in the housing market in Edinburgh, and even my own constituency of Stirling faces significant difficulties. I reassure him that the Scottish Executive are fully engaged with the Miles report. In fact, I hope that his comments about including Scotland in any pilot areas that my right hon. Friend the Chancellor may embark on will be fully taken into account.

John Thurso (Caithness, Sutherland and Easter Ross) (LD): In his interim report, Professor Miles states that there is

among mortgage borrowers. Does the Minister accept that it is often the most vulnerable in society who have both the largest amount of debt and possibly the least appreciation of the associated risks, and that that problem is shown by the report to be worse in Scotland than in the UK as a whole? What research will the Government undertake to consider that aspect of the question?

Mrs. McGuire: The hon. Gentleman makes a valid point. One of the difficulties, particularly with those on fixed or lower incomes, is perhaps that they do not appreciate the full risk that they are taking on, partly because of poor advice when they take on that debt. The Miles report is only an interim one and has made no recommendations, and David Miles has said that he wants to discuss issues related to some of the points that the hon. Gentleman makes with the Financial Services Authority and the Office of Fair Trading.

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