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Mr. McFall: I am delighted to be able to participate in this debate. The hon. Member for Moray (Angus Robertson) said that I was dismayed. I am dismayed, but there is one thing that dismays me even more: the obtuse tactics of Scottish National party Members. The opportunity to put right, and into context, their comments is extremely important.
I commend the Government for their actions on the Scotch whisky industry; the Labour Government have been a good friend of the industry. The freeze on duties, the longest since the 1950s, allied to duties for the next two years, adds up to a cumulative total of £1.33 off the duty on a bottle of whisky. With that £1.33 off, this Government have been good to the Scotch whisky industry over the years.
I also commend the report of the Scottish Affairs Committee. I have consistently told the Government that I am dismayed at the introduction of the tax stamps, and I commend the Committee report for several of its points, such as that in paragraph 9. However, we must all recognise that, at heart, the Government's proposals are aimed at tackling fraud in the spirits industry, and unless we have meaningful alternatives for tackling that fraud, this exercise is meaningless. It is important that the industry and the Government find ways of tackling fraud.
I commend the Committee report for its comments on the National Audit Office report, in paragraph 11. The Committee seems to be saying that the Government are making a decision that is illogical in terms of its implementation because of flawed figures. It is important that that issue is tied up.
Mr. Geoffrey Clifton-Brown (Cotswold) (Con): The hon. Gentleman refers to paragraphs 11 and 12 of the Select Committee report, which are on the NAO report. Paragraph 11, referring to the Customs and Excise estimate of £600 million in lost duty, says that the range
"should properly be expressed as . . . £330m to £1,080m",
and also refers to the Scotch Whisky Association's estimated range of "£10m to £260m".
Paragraph 12 goes on to say that
"it is difficult to accept that both methods are reliable when they result in such widely different estimates of consumption. It is therefore clear that further work needs to be done by the Office for National Statistics, with Customs and the Scotch Whisky Association".
Does not the hon. Gentleman think that the Government should at least postpone their proposals until the proper statistical evidence can be gathered, so that we know the real loss in revenue with greater accuracy?
Mr. McFall: Those points have already been made most eloquently by my hon. Friend the Member for Paisley, North (Mrs. Adams); if the hon. Member for Cotswold (Mr. Clifton-Brown) had been in his seat, he would have observed that we have severe reservations on that matter. We acknowledge that point.
Paragraph 20 of the Scottish Affairs Committee's report mentions flaws in the "physical nature" of the stamps. The Economic Secretary was good enough to accept an invitation from me to visit Scotland, and he visited the Allied Distillers plant at Dumbarton in my
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constituency. He saw for himself the thin, sticky labels becoming snagged in the machinery, being constantly ripped up and not adhering to the bottles properly. He then saw that they had to be manually recorded and stuck on to a list on a clipboard so that the distillery could claim the refund from them. That is a laborious process, and I ask the Economic Secretary to look at it again. It is important to put on record that whereas for the large firms in the industry—Diageo or Allied in my constituency—that strip-stamp process is a nuisance, for small companies it could mean existence or non-existence. The Economic Secretary must bear that in mind when he replies on this issue.
I agree that the industry has been slow. The Committee was right to refer to that and say that it would have been helpful if the industry had responded more quickly. The evidence in paragraph 28 on diversion, and the fact that nothing had been done about it, suggests that there must be some form of regulation.
I state again today that strip stamps are not the best way to tackle fraud. The hon. Member for Moray mentioned Gavin Hewitt, but I have news for the hon. Gentleman. I have here a letter from Gavin Hewitt dated 21 April, which does not read as a stirring declaration asking Members to vote against the proposal; the Scotch Whisky Association does not say that at all. It has realised from discussions with me that the all-party group comprises parliamentarians from all parties who do not take a political view on the matter, and Gavin Hewitt from the SWA reinforces that.
Mr. McFall: The hon. Gentleman has had his turn. I shall read out exactly what Gavin Hewitt has written to me:
"We and many independent observers remain convinced that tax stamps are a mistake".
I think that we can find an echo of support for that on both sides of the Committee. However, he goes on to say,
"but we recognise the reality of the Budget announcement. The industry will work with Customs to deliver a workable scheme, at the same time ensuring—in line with ministerial commitments—that costs to industry are mitigated."
In that letter, the Scotch Whisky Association—the trade body for Scotch whisky—is saying that it will work with us. I want my colleagues and I to work with the Treasury and the industry, on the industry's behalf, to ensure that we get a sound outcome, because the industry has accepted the reality of the situation.
3.30 pm
Angus Robertson: I agree that Members on both sides of the House should work with the Treasury in the interests of the industry. Will the hon. Gentleman confirm that the SWA still opposes strip stamps, and is he saying that its chief executive did not issue a press release yesterday in which he urged Members—from all parties—to reject tax stamps in today's debate?
Mr. McFall:
Is the hon. Gentleman saying that the chief executive of the SWA told Members of this House to vote against the Budget today? If so, I shall take the
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matter up with the chief executive, because I have a letter from him declaring that he will work with us. The hon. Gentleman might have done better to have a personal chat with the SWA, instead of reading from a press release. In fact, I shall follow the example of my hon. Friend the Member for Newcastle upon Tyne, North (Mr. Henderson) and place this letter in the House of Commons Library, so that everyone can read it.
Let my colleagues be in no doubt that the Scotch whisky industry is saying that the Budget announcement is a reality, and that it will work with it. I am taking my line from the SWA.
Mr. Prisk: As Chairman of the Treasury Committee, the hon. Gentleman is very thorough in his approach to this issue. My discussions with the SWA made it clear that a year's delay was considered to be the most practical solution, and we tabled an amendment to that effect. Does the hon. Gentleman agree with that view?
Mr. McFall: The issue is meaningful negotiation. I shall deal with that issue later, and in doing so I shall take on board what the hon. Gentleman says. I agree that these are crucial and important matters, but the question is: can they be resolved through discussion?
In its letter to me, the SWA said:
"The industry held a most disappointing meeting with officials on 20 April. While the clock is ticking very fast, there appears to be little developed thought on many of the fundamental issues. We are pleased that the industry is being consulted on the terms of the scheme and the associated secondary legislation, but it is of major concern to us that so many central issues have not been addressed . . . If the industry is to engage in meaningful discussion, this situation must change quickly. Tax stamps are set for introduction in April 2006, but companies will need to test their equipment and systems, build up stocks and organise changes in their supply lines from January 2006 at the latest."
I ask the Economic Secretary to provide the industry with greater clarity on a number of issues, including offsets. The SWA states that
"Ministers have consistently and publicly said that the government will mitigate costs through offsets. This is stressed"—
as the Economic Secretary himself said—
"throughout the Regulatory Impact Assessment; but at our recent meeting"
"had nothing concrete to offer on offsets; all the emphasis was on getting the money as early as possible".
Will the Economic Secretary comment on that? The SWA further states that officials
"were unable to comment on industry suggestions, for example, for an extension of the duty deferment period; and . . . appeared, in contradiction to all previous pronouncements, to suggest that they were not convinced that there would be significant costs to the industry to offset."
The industry is also concerned about guarantees. The SWA states:
"No other tax (VAT, corporation tax etc) requires companies to provide guarantees for payment of tax up front. Those companies with duty deferment accounts already have guarantees in place. We therefore see no justification for introducing further additional guarantees to cover tax stamps."
On capital assistance, which has already been mentioned, the SWA says that
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"the government has promised to make available £3m towards the industry's first year capital costs of £23m. This is required to be directed at 'smaller firms'."
We would all agree with that. The SWA continues, however, by stating that
"it is not fair to put on industry the burden of deciding how to carve up this capital assistance among the companies concerned—as many as 160. Clear guidelines are needed. Without this, planning cannot take place."
"Perhaps even more surprising is the lack of clarity on which products will require stamps and which will not."
My hon. Friend the Member for Paisley, North asked a question, to which the Economic Secretary responded, about where on whisky bottles the stamp will be placed. That is a very important issue. The SWA states that
"it has been suggested that stamps should apply only to those categories where fraud is a problem; but this raises serious competition issues and possible distortion of the market. For example, why should liqueurs be exempt if special bottles of rare malt whisky are included?"
The Minister will see that there is a great opportunity for detailed discussions between the industry and the Government.
Flexibility is another issue. The letter states:
"The companies, the market and product range are hugely diverse. One scheme for all may not be the right answer. Companies with an unblemished record on compliance and payment should not be treated the same as a newcomer to the market without a track record. As far as possible, we should be aiming for a level playing field for large and small companies to avoid competition distortion."
The industry has told me very clearly that it wants to play a
"constructive and collaborative role",
"depressing that the policy of tax stamps has got this far, when officials are only now grappling with the complexity of the practicalities."
I should like the Economic Secretary to give the industry some reassurance on its concerns. The industry will work with Customs and Excise, but needs
"the certainty of Ministerial guidance to officials to ensure that their undertakings to the industry are turned into action and reality."
In view of Gavin Hewitt's letter to me and his clear statement that the Budget is a done deal, where do we go from here? How can Members adopt a constructive and positive agenda working alongside the industry? Do we stand aside and be negative, providing no answers to the problem? Do we turn a blind eye to £600 million-worth of fraud, when we are here to work for the best interests of the taxpayer? The industry recognises that, and I suggest that we work, as the industry says, with the Government to secure a good solution to the problem.
If I were saying that all on my own, I might be subject to charges of cynicism, but the chief executive of the Scotch Whisky Association is telling me that. Let me make it absolutely clear to the Committee that the chief executive would never say in any discussions that Members of Parliament should vote against the Budget.
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He would tell me that the Scotch Whisky Association is a non-political body, which is best served by all parties collectively working here for its advantage.
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