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Annabelle Ewing (Perth) (SNP) indicated dissent.

Mr. Henderson: The hon. Lady shakes her head, but the Government have effectively given a 36p rebate to the industry—[Hon. Members: "No!"] Yes, they have.

Mr. Laws rose—

Mr. Henderson: I will not give way.

I know that the trade unionists in the industry in Scotland will welcome that rebate, as it is an important factor in protecting their jobs. Having said that, I know that they will also want to see the maximum support being given to the industry to implement the proposals, and I hope that the Government will do that.

Mr. Peter Duncan: I welcome the opportunity to follow the hon. Member for Newcastle upon Tyne, North (Mr. Henderson), who did his best, in the circumstances, to defend what it is clearly the indefensible part of the Finance Bill.

It is important to reflect on exactly what is at stake in these proposals. In Scotland, one job in 50 depends on the success and development of the Scotch whisky industry, and that industry is among the UK's top five export earners. Those are not numbers that we can dismiss flippantly; they are significant. Indeed, with the Government proposing to become indebted to the tune of some £130 billion over the coming years, one would have thought that their first objective would have been to ensure the successful continuance of one of their key industries. One would have thought that they would have wanted to preserve such a successful industry.

Labour Back Benchers have every right to feel let down. My hon. Friend the Member for Hertford and Stortford (Mr. Prisk) reflected on the fact that they had been strangely silent in recent months in regard to backing this proposal as it has unfolded before our eyes. We are seeing a very destructive measure being forced through against the wishes of almost every informed commentator or impassioned observer. Every industry group is opposed to it. The Economic Secretary, for whom I have a lot of respect, did not do himself much justice when he failed to come up with a single industry group or observer who believed that the proposals were the right way to proceed. This is an embarrassing U-turn for the Government to have undertaken over the past three years, although embarrassing U-turns seem to have become the watchword of this phase for the Government.

Rural communities and urban work forces will be significantly and detrimentally affected by these proposals. The hon. Member for Paisley, North (Mrs. Adams) reflected on the work force in Springburn, and she was quite right to do so. Both rural and urban communities are being let down by a Labour Government who have failed to see the impact of what they are doing. That this proposal is to be forced through by a Scottish Chancellor of the Exchequer,
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aided and abetted by a Scottish Secretary of State, who has once again failed to stand up for our vital Scottish national interests, says much about how the Government now go about their business.

2.45 pm

My hon. Friend the Member for Hertford and Stortford reflected on the fact that 80 per cent. of the burden of implementing these proposals will fall on the top 9 per cent. of companies in the sector. It is important to understand exactly what that means for the smallest businesses in the sector. My constituency contains Scotland's southernmost distillery. In my opinion, it produces Scotland's finest whisky, but I probably would say that, wouldn't I? I suspect that we shall hear about some other contenders for that award later. Bladnoch distillery has recently restarted, after a period in mothballs, under the stewardship of Raymond Armstrong. It is in the very early days of re-formation, and it will bring vital diversity to the Scotch whisky industry. The Economic Secretary needs to reflect on the important fact that the Scotch whisky industry is not just about the major names. Its very essence is its diversity. It is about the Scotch whisky shops that we can all go into. The tourists love them, but so do the locals and some Members of Parliament. In those shops, we can see the huge diversity of this vital industry.

Mr. Armstrong informs me that the burden on his newly restarted enterprise in Bladnoch—a very small business indeed—will be in excess of £220,000. He expects to receive very little in contributions towards that, although he has not been able to ascertain much detail from the Government. That will represent a significant burden for his business to overcome. I am happy to accept that the number of jobs involved is not huge, but those jobs are highly significant in a very small community. The local town of Wigtown depends heavily on the tourism sector, and the Bladnoch distillery now plays a key part in that sector. The Government have so far failed to recognise that this measure will affect small, vulnerable rural communities, but they need to do so very quickly before they make a significant mistake.

Critically, Mr. Armstrong made his decision to invest in the restarting of Bladnoch distillery some two or three years ago, at a time when the Government were happily assuring him that they were not willing to contemplate strip stamps. At that time, they were not seen as an effective use of resources to counteract fraud. Now that he is half-way down the road towards restarting and developing an effective and successful business, he is faced with a substantial burden on his cash flow. I am particularly concerned about the increased barrier to entry for new businesses entering the Scotch whisky industry. This measure is another element that will make it more difficult for new businesses to enter an industry that depends on diversity and on small businesses continually coming into the sector.

Mr. Armstrong has also reflected on the security implications of tax stamps. His distillery is in a rural community in the middle of a very disparately populated area. What are the security consequences of having to store a significant number of tax stamps on the premises? The Chairman of the Select Committee rightly said that a pack of stamps the size of a paperback
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book was worth £50,000. The security implications for that business are not trivial, and should not be dismissed lightly.

In an intervention on the Economic Secretary, I mentioned the Customs and Excise operation in London, which we have discussed on previous occasions. In that operation, some 300 premises were surveyed and visited by Customs and Excise staff, who reported that more than 140 were selling illicit spirits. That is a troubling figure. No one on either side of the House, and no one in the Select Committee who heard that evidence, has not been troubled by it.

But where is the action resulting from that statistic? Is each of those 140-odd retailers now facing an automatic discharge of their liquor licence? Are Customs and Excise lawyers queueing up to take immediate and effective action against people who are obviously knowingly dealing in illicit alcohol? No, there is a complete absence of enforcement action. The strip stamps proposal would have more credibility if it had been embarked on after a period of strong and effective enforcement of the existing system. There is no evidence, however, that that strong and effective action has either been resourced—resources may well be an issue within Customs and Excise—or has taken place. The fact is that fraud is happening—I shall refer later to the debate about its size—downstream from the distilleries. The distilleries, however, must pay the price, and as a result, Mr. Armstrong faces a huge bill to his new business.

The hon. Member for Moray (Angus Robertson), in an intervention a short while ago, said clearly that each bottle of whisky has a lot number on it. As a member of the Scottish Affairs Committee, I have still never been given a satisfactory answer as to why, in the 21st century, when bar codes are commonplace, computer technology is routine and men are sent to the moon regularly, we cannot track a bottle of whisky and its lot number from the place where it is retailed back to a distillery. I accept that it is difficult, and that there may be some complicated transactions, but I do not understand why it is not possible.

Sir Robert Smith: Given the Home Secretary's desire to track every member of this country through a centralised computer system with our biometric details, could not the Treasury at least embrace the idea of trying to track the whisky that is in the bottles?

Mr. Duncan: The hon. Gentleman makes an important point. If he is advocating biometric testing for whisky, I look forward to seeing his proposals in due course.

The issue of counterfeiting has come up on several occasions during the debate, and it is worth spending a couple of minutes on it. There are two aspects: first, counterfeiting of the tax stamps; and secondly, the counterfeiting of whisky as a product. Counterfeiting of stamps has been wildly underestimated by the Treasury. I found the Economic Secretary's opening remarks, in which he admitted that no assessment had been completed of the likely level of counterfeiting in relation to his proposal, unbelievable. If that is the case—I would welcome clarification in his winding-up speech—it is a serious omission and undermines significantly the Treasury's case.
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The incentives for counterfeiting are massive. Part of the reason that we have a problem is that we have a high-tax product, and a higher-tax product than many other markets. The risks are small, and the reality is that in Taiwan and across the far east printers will be waiting for the nod from the Economic Secretary, at which they will start work on a very sophisticated product. If the Economic Secretary thinks that he can be one step ahead of the counterfeiters, I can assure him that they will be half a step behind him. They will devise counterfeit tax stamps that will undermine the system. The losers will be the distilleries, which will have paid the price for the tax stamp, but will still suffer from fraud.

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