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"The introduction of tax stamps will have a revenue impact of £160 million in the first year of implementation."
How does the hon. Gentleman think the Government have been able to come up with such an accurate figure if they are unable to give even the roughest estimate of the risk of fraud following the introduction of strip stamps?
That is a very good point. We know that the £160 million must be based on the assumption of
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£600 million of fraud, but we know also that the National Audit Office has said that the assumption is questionable. The amount could reasonably be said to be between £330 million and £1.08 billion, but it certainly could not be said definitely to be £600 million, so the assumption of a £160 million saving is based on evidence that is yet to be proven.
The whisky and spirits industry is, as the Minister said, vital to the country's economy. The Conservative party strongly supports that industry, and of course we also support targeted, effective anti-fraud measures. That is why we urge the Government not to burden the industry with a scheme that clearly has a chequered history. The practicalities of implementing the scheme are becoming clearer to Customs, and not before time. What is clear to Conservative Members, however, is that the Government cannot tackle this fraud without a true partnership with industry, and that means co-operation.
In preparing for the debate I have consulted closely with the industry, including the Scotch Whisky Association, the Gin and Vodka Association and the Wine and Spirit Association. It is their opinion that the Government must think again. They wish to work with the Government, but they feel that the Treasury is becoming deaf to reason, and that is also the view of thousands of people whose livelihoods depend on this vital trade. I therefore say to Ministers, "Think again. It is not too late to delay this measure and give yourselves time to get it right." I say to Labour Members, "Help us to delay the clause because, if it proceeds, it will be bad for the industry but it could be even worse for the Government." This is an ill-considered, hasty measure, and it does not deserve the support of the House.
Mrs. Irene Adams (Paisley, North) (Lab): The Scottish Affairs Committee decided to look at this issue, not just in financial terms, some months ago when it became apparent that the Government might consider putting strip stamps on spirits. When the National Audit Office issued its report, we sent a letter to the Treasury asking it to be very cautious in proceeding with the idea. The figures provided by the industry and the Government were so diverse that we thought that it was not a good idea to proceed unless a more realistic figure became available.
During our investigations, however, the Government decided that strip stamps would be the solution to the problem. I say at the outset that the Committee, the industry and the Government all recognise that there is a very serious problem, and we all applaud attempts to do something about it. The Committee wanted to consider the impact of the proposal on the industry, so we visited a number of distilleries and bottling plants in Scotland and Northern Ireland. We are particularly concerned about the fragile communities that depend on the industry, on whisky in particular in Scotland and Northern Ireland. Those fragile communities are not necessarily those surrounding small island distilleries; they could be based around a bottling plant, such as that in Springburn in Glasgow, a very deprived area that would be seriously affected by this proposal. Morrisons of Bowmore, which owns that plant, does not know if it will be able to keep it going unless the Government get the measure right. The big danger is that firms will start
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to outsource. Many of the communities in Scotland that depend on the bottling plants would suffer greatly if that process was outsourced. For the purposes of the stamp, the product can be taken anywhere to be bottled. It has only to be produced in Scotland to make it Scotch whisky; it does not have to be bottled in Scotland. I hope the Government will take account of that danger.
Angus Robertson: I agree entirely with the hon. Lady and draw her attention to a letter I received from the general manager of a distillery in a community that she has just described. The general manager of that distillery writes:
"An important market for us is the UK which represents some 30 per cent. of cased goods turnover. However, we are considering turning our back on the UK market entirely and by 2006 secure other markets for our products, rather than suffer the new tax regime."
Mrs. Adams: That prospect would concern anyone. The last thing we want to do is lose jobs. I was struck by the hon. Member for Hertford and Stortford (Mr. Prisk) appealing to us for partnership and support. I did not hear that appeal when my constituency was losing 30,000 jobs over the years I have sat in the House. We can all agree that we are extremely concerned about job losses, and no doubt the Government will take the matter seriously.
Some of the other fragile communities that I hope the Government will consider are in places such as Islay and a very small distillery that we visited, which has reopened in the past few years, at Bruichladdich. Only a handful of people are employed there, but one must understand the nature of the community to realise the impact of the reopened distillery on it. A small bottling line has been set up, employing 12 people. That may not mean much in a huge constituency, but in a place such as Islay, it means everything. The firm has used the new deal for disability to employ four seriously disabled people on the bottling line. Those people could never have hoped to get a job anywhere else, yet there they were, in full-time employment with the assistance of the Government. If not for the Government's policies and the new deal, that could never have happened. There is great concern that if the measure goes ahead, the bottling line will have to be closed down. Again, I hope the Government will take particular account of such fragile communities.
In Northern Ireland at Bushmills, where there is a village of 1,000 people, 10 per cent. of them work directly in the local distillerynot outside it, but in the distillery. The whole village is entirely dependent on producing whiskey and, more importantly, on bottling whiskey. The big jobs are in bottling, not in production. Three or four people can produce a malt whiskey, but it takes many more than that to bottle it.
The company has three bottling plants and is a sister company of Jamieson in Dublin. The bottling plants are in Dublin, Bushmills and Cork. The company is considering closing the one in Cork. However, the Dublin distillery and bottling plant has the facility to
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put strip stamps on bottles, and Bushmills bottling plant does not, so the danger is that the company will move all bottling to Dublin where there is the facility and the capacity. That would shut down not just the Bushmills distillery, but the Bushmills village. When the Government consider the matter, I urge them to look not at the big boysthey will take care of themselvesbut at the very small distilleries and, more important, bottling facilities.
The Select Committee recognised that there would be problems with counterfeiting. One of my hon. Friends will have a lot to say about that. A further issue was the theft of strip stamps£50,000 worth of strip stamps is the size of a paperback novel. One can put that amount of stamps in one's pocket; one does not have to steal £50,000 worth of bottles of whisky to get the value of that. One can walk out the door with a paperback novel-size package of strip stamps in one's pocket, and one has £50,000. It is even smaller to carry than the equivalent amount of cash. Security will be a great problem for the bottling plants when they hold such huge sums. The stamps do not have to be counterfeitthe genuine product will be a great attraction to thieves. To carry that off will be a much easier task than carrying off £50,000 worth of bottles of whisky.
I strongly urge the Government to keep talking to the industry. The industry is not entirely innocent. Three years ago when the Government said they would not continue with strip stamps, the industry sat back and heaved a huge sigh of relief. Instead of looking for the solutions that were needed to combat the fraud, the industry came up with a few voluntary solutions that would never be an adequate answer. It did not at any time seek regulation, and I believe it should have done so, because the voluntary codes were clearly not working.
There was a case in which Customs warned a producer that one of its distributors was not a bona fide company and was diverting some of the product. The answer from the producer was, "Well, as far as we're concerned, they are bona fide and we'll keep using them." That is not good enough for the industry. The problem must be sorted out and there must be regulation. The industry has to be prepared to accept regulation. It must meet the Government half way in overcoming the problems.
We urge that the Government keep talking to the industry. Ultimately, both are victims of the fraud and are not the people who should be injured by the solutions. It is the perpetrators of the fraud whom we all seek to injure by the solutions. I appeal to the Government not to make the solution worse than the problem, to keep talking to the industry, and not to be absolutely sure that the solution is a stamp across the bottle. The industry is happy for the stamp to go round the bottle or on the label, or to have a hologram elsewhere. The difficulty in putting a stamp across the top of the bottle is a grave problem indeed. Owing to the way some of the bottling lines operatethe bottles go directly into boxes, and the boxes are closed and casedit will mean reopening all the cases to apply the stamp. On such a line, the output is 600 bottles a minute, so it is not a question of adding just a few minutes to the operation. It would mean starting again.
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There is a host of issues that the Government must work with the industry to resolve. If the Government are determined that a stamp is the only answer, will they please be sure that they get the stamp absolutely right and that they do not make the solution worse than the problem?
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