The
Chairman: Before I call the next speaker, let me respond
to a point raised by the spokesperson for Her Majesty’s
Opposition. We are debating the two orders together because the
Committee decided to debate them together. I say to the hon. Lady that
we could have debated them separately. If that had been the case, there
could, of course, have been agreement across the Committee on one, and
a Division on the other. It was the Committee’s
decision—not mine and not the Government’s—for the
two orders to be debated together. We have about 50 minutes
left. I know that this issue raises much concern among Members worried
about their
communities. 5.10
pm
Mr.
Carmichael: I thank you, Sir Nicholas, and add my own new
year wishes. Over the years I have known many people who celebrate the
new year up until 13 January, and occasionally beyond, so it
is quite in
order. I
hold the Minister in some regard, but I am afraid that her performance
today was not her finest hour. In every sense, the order is a botched
job by the Government. In the first place, they got their figures
wrong. They had the good grace to admit that and introduce a second
order, for which we give them credit. However, even today the Minister
insists that the order forms part of a package of measures and that
duty is rising because VAT has fallen. When I asked her whether that
meant that duty will come down when VAT goes up, she said no.
The Minister
went on to say that the measure is part of the fiscal stimulus and will
be required once the economy has moved out of its current acute
downturn. It is pretty clear from that that the Government see the
brewing and distilling industries, and the licensed trade, to which
reference has been made, simply as a cash count. That is what the order
is about. One must regard it in its proper context: last
spring’s Budget saw a massive increase of 9 per cent. in duty on
spirits. Today’s order will result in a further 4 per cent.
increase. In the course of this financial year alone, therefore, we
have seen a 13 per cent. increase in duty payable on spirits.
Furthermore, the Chancellor is on the record as saying—it was
disappointing that the Minister would not confirm whether this remains
his intention—that come the next Budget the Government will
introduce a further 2 per cent. increase above inflation. As a result
of what the Government are doing today, the 2 per cent. rise will begin
from a rather higher base than would otherwise have been the
case. It
is by no means clear what the Government seek to achieve in doing that,
but I can tell the Minister what it will almost certainly end up
achieving: a further blow to one of the few remaining significant
manufacturing industries in this country. I speak of brewing and
distilling in general, but it will have a particular impact on the
Scotch Whisky Association, simply because of the way in which that
industry operates. I was born on Islay, where there are eight
distilleries and a ninth emerging with the opening of the Kilchoman
distillery. Production in the industry is very sensitive to economic
downturns. During a general economic downturn, it very often closes
down production, because it has such vast quantities sitting and
maturing in warehouses and can afford to do so. For example, Ardbeg on
Islay was closed for about 15 years before being reopened by
Glenfiddich in the late 1990s.
Anything that
impacts on sales and output at the retail end will have a
disproportionate effect on the manufacturing base. That industry
provides an enormous number of very good, high-quality jobs for people
in some of the most economically fragile communities in the
highlands and islands, Morayshire and Aberdeenshire—and all for
a frankly negligible raid on the overall spending mess that the
Government have brought us to! It is pretty clear why no impact
assessment was done for the duty changes: if any proper impact
assessment had been done, the changes simply would not be
made. If
the Minister were prepared to say today that the duty will come down
when VAT goes back up, or that the Government are prepared to regard
the higher duty as an early increase of the sort publicly planned for
the next Budget, I might be minded to say that there was some ground
for discussion or some common cause to be made. However, such sheer
intransigence with no particular purpose means, regrettably, that
should the Committee divide on the order, I will not be able to support
the Government.
Justine
Greening: Does the hon. Gentleman agree that what the
industry needs is certainty, and that what it wants to do is sit down
with Government and discuss an appropriate level of duty over a period
of years so that it can plan around it, whatever it
is?
Mr.
Carmichael: The hon. Lady is absolutely correct.
Certainty, particularly from the Government in relation to duty, is
what the industry needs and wants. Of all the industries that deal
regularly with the Government, the Scotch whisky industry is assiduous
in its efforts to engage regularly with them and with Members of the
House. Every year, the industry speaks to the Treasury in the run-up to
the Budget and makes its case. In fairness to the Government, that has
often been listened to and acted on, but it is pretty clear that the
Government feel that that the reasons why they did not raise duty on
spirits for a long time no longer apply, although they have not offered
any explanation why.
The industry
needs certainty in order to conduct forward planning. The Government
must understand and accept the particularly sharp impact of a retail
decline on the manufacturing base in the industry. It is a matter of
supreme regret that the Treasury does not seem to be able to do
so. 5.17
pm
Colin
Challen: As the tenor of my earlier questions may have
suggested, I am rather unhappy with the measure. I hope that the
Minister will accept that there are genuine concerns about it on both
sides of the Committee, although I do not speak for Members of my
party. Why
does the Treasury say in paragraph 8 of the explanatory notes, which
relates to the measure’s impact, that nobody has found any
possible reason why the order might have an impact on business or the
private sector? My hon. Friend the Minister gave us a clue when she
said that the Government’s job is not to distinguish between
different parts of the sector such as supermarkets, pubs and clubs,
which are important in my constituency. It is as though there were no
real
difference and as though the measure were a neutral one that will have
no bearing on the different sectors in the licence trade. It is as
though my local Morrison’s or
Sainsbury’s—Sainsbury’s reported a large profit in
the last quarter, and I dare say the other supermarkets did
too—could shy away from the possibility of running loss leaders,
while pubs cannot. It is time
that the Treasury accepted that there is a difference, and that the
impact of fiscal measures such as the order ought to be understood in
their impact on different sectors. I have no brief for the
supermarkets. If they run loss leaders and can pay the extra duties
through slightly higher prices on food or other products, that is up to
them, but they also contribute to the dearth of pubs, to which I
referred earlier. Proud names are closing. The Albion, in my
constituency, has closed. Its Yorkshire slate roof was stolen after it
closed, making the whole community look more derelict. That is the
impact of closing pubs: communities look more derelict, just as they do
when post offices close. I am sure that if we were debating post office
closures and the impact of Government measures, it would be quite a
lively debate.
To
an extent, I compare what we are doing to the Conservatives’
approach to public transport in the 1980s and 1990s, whereby fewer
people had to pay for fewer services at higher prices. Eventually,
those services were extinguished. Now, we have fewer pubs and, often,
they are depressing places to visit. Frankly, we could ask why people
would want to go to them if they have to adjust to the new
circumstances. The things that have been laid on top of the problems
also have an impact, such as the smoking ban and the increase in
duties, which have been mentioned. For the Government to be unable to
distinguish between a supermarket and a pub is a grave
error. As
a result of today’s considerations, I hope that the Minister
goes back to the Treasury and asks why an impact assessment conceived
of no effect on the private sector or that she addresses that question
in the debate. I wonder whether there is a certain puritanism about
alcohol.
Angela
Eagle: I can assure my hon. Friend that I am no puritan,
and that I have met very few people in the Treasury who
are.
Colin
Challen: I am pleased that the Minister said that, because
I think that we ought to have views regarding puritanism on record
sometimes. Pubs and working men’s clubs—or, correctly,
working person’s clubs—are essential components of our
communities, just like post offices, good public transport and all the
rest of it. As we have discovered this afternoon, if the measure is
introduced, it will permanently increase taxes on alcohol—it is
not a temporary measure.
Why are
public houses and clubs are not given the same fiscal stimulus as every
other sector, especially the retail sector? That is actually a puritan
way of thinking. Why cannot people go and drown their sorrows? They can
get retail therapy at a 2.5 per cent. discount, but they
cannot—for heaven’s sake—go into their club and
enjoy such a discount, unless they go to JD Wetherspoon, which has
temporarily reduced the price of beer to 99p.
I am not
suggesting that the Government introduce a range of measures to
distinguish between supermarkets and pubs and clubs, but if they do not
do something
about the problem, the greatly increased number of pub closures in my
constituency will accelerate. I am dead against that, and I would like
the Minister to commit to a meeting with me and representatives of the
pub and club industries, such as the Working Men’s Club and
Institute Union, to discuss the issue in depth before it goes back to
the Floor of the House. Mr.
John Greenway (Ryedale) (Con): The hon. Gentleman is
talking a lot of good sense. In the likelihood that he gets such a
meeting, will he add sports clubs to his list of organisations that
would be adversely affected by the measure? The Government’s
agenda is to encourage sport—one reason why Australia is so good
at sport is that it has such a good network of clubs—and many of
the sports clubs in Yorkshire have bars that support putting kids on
football and cricket
pitches.
Colin
Challen: The hon. Gentleman has made a good point, which
is correct as far as it goes. The Government have actually made
significant, beneficial changes to support for sports clubs, which
should be
acknowledged. From
my observations in my constituency, the pub trade is finely balanced.
There are many vacant signs on pubs in my constituency that say,
“Take over this pub and see whether you can transform
it.” Those signs advertise the demise of an industry that I
believe is crucial to the long-term success, not only of local
communities, but tourism and other things.
The way in
which the impact assessment has been presented to us—it says,
“There is nothing happening that we should be worried
about”—reveals the lack of depth in the Treasury’s
thinking on the issue. I hope that we can have a meeting to explore the
issue, so that people can be satisfied that the Government are not
simply breezing through the agenda as if there were no consequences
whatever, saying, “It’s all revenue neutral, so who
cares?”
5.25
pm Angus
Robertson (Moray) (SNP): May I echo the new year’s
message with which you started our proceedings, Sir Nicholas, and which
has been echoed by many other hon. and right hon. Members? Many of us
toasted in the new year with a good dram, and long may that continue.
In such a debate I have to declare an interest: I am proud to be able
to represent more than 50 per cent. of the entire Scotch malt whisky
industry, as more than 40 distilleries are located in Speyside, the
biggest producing region in my constituency.
As
vice-chairman of the all-party group on Scotch whisky and spirits, I
take a close working interest in the industry, together with colleagues
from all parties. I will concentrate my comments on the Alcoholic
Liquor (Surcharge on Spirits Duty) Order 2008 because of its obvious
importance to the industry. For anyone who doubts its importance, it is
worth explaining for the record the scale and importance of the
industry. It contributes around £800 million to the Scottish
economy, supports 41,000 jobs and adds £2 billion to the balance
of trade, making it one the UK’s top five manufacturing export
earners.
The whisky
industry also generates a substantial income for the Government, with
around £1.6 billion raised in duty each year. I find it strange
that on a matter of such importance to one of Scotland’s key
industries there is not a single Member on the Government side
representing a Scottish constituency who might echo the concerns that
the hon. Member for Orkney and Shetland and I have raised with regard
to the
industry. The
context of the order follows from the 2008 Budget, in which the
Chancellor ignored the pleas for a continued tax freeze and instead
introduced a 59p hike in the tax on a bottle of whisky. That means that
75 per cent.—three quarters—of the cost of every bottle
of whisky purchased in the United Kingdom goes directly to the UK
Treasury. That tax is set to increase by a further 2 per cent. over the
rate of inflation every year until 2013. Gavin Hewitt, the chief
executive of the Scotch Whisky Association at that time
stated: “A
tax rise is a blow to international competitiveness when the industry
has been investing significantly to meet growing global demand for
Scotch whisky.”
It is utterly
extraordinary that, being fully aware of the importance of the industry
in both broad economic terms and as a cash cow for the Treasury, the
Government deem it unnecessary to conduct an impact assessment into the
industry on business.
I say in
passing that the Government concluded that there would be no impact on
the public sector, but if the industry is forced to downsize in any
way, that will have a huge impact in one form or another on
constituencies such as Moray, Orkney and Shetland, Argyll and Bute and
many others across Scotland, because the impact would not only be on
distilling, but on farming. If that is the case, that will certainly
have an impact on the public sector. I am sure that many of us who
understand whisky producing areas are well aware that the impact is on
not only the industry itself, but on the wider community and the public
sector. The
8 per cent. increase in excise duty on spirits set out in the
pre-Budget report at the end of last year translated to a 47p increase
in the duty on a bottle of whisky, bringing the total to £6.45.
That duty hike, if combined with the increase from the 2008 Budget,
will make the rise a total of 80p, which is the biggest annual hike
since 1975. The justification of the increase was of course that it
would be offset by the temporary 2.5 per cent. reduction in VAT, but
even if the VAT reduction is included, the increase is still an extra
29p on the average 70 cl bottle.
Not only was
the rise invidious, but its timing was particularly invidious, because
sales in the UK in the run-up to Christmas are crucial to the Scotch
whisky industry. Forty per cent. of all malt sales and 30 per cent. of
all blended whisky sales happen in the weeks leading up to Christmas.
The Chancellor was prepared to announce, in essence, the biggest tax
rise on the whisky industry in 40 years, a few short weeks before
Christmas when the Treasury knew, despite not being prepared to provide
an impact assessment, that whisky is particularly
price-sensitive. I
know that because every year I and the other office bearers from the
all-party group go to the Treasury. We have not had the honour of
speaking to the current Minister, but we talked at great length to her
predecessors. I got the impression, from both the Ministers and
officials, that they were very well aware of the sensitivity
of whisky sales to price. Ninety per cent. of whisky is exported, so it
is not only important for the UK market. The percussive effect of tax
rises in the UK is that they are used as an excuse in other countries
to maintain unfair trade barriers and discriminate against whisky
entering important markets elsewhere. It is not simply about
discussions relating to UK tax rises, because it impacts on the
industry in other ways as well. I
would like to ask the Minister some specific questions. Questions have
been raised about the lack of an impact assessment, but I am interested
in how the Government came to the decision in the first place. As I and
the hon. Member for Orkney and Shetland have said, the Government have
met all kinds of interest groups about this matter in the past. I am
particularly interested in the role of the Scotland Office. Scottish
taxpayer contributions are top-sliced, so instead of spending money on
public services in Scotland, such as health, education and so on, some
of that money pays for an office with a burgeoning staff complement on
Whitehall—the Scotland Office. We are told that it has a
full-time, energetic Secretary of State and is there to stand up for
the interests of Scotland. I am interested in what the Secretary of
State did in the run-up to this
decision. I
will be grateful if the Minister answers three very specific and simple
questions. Did the Treasury hold discussions with any other UK
Government Departments in advance of the PBR statement? Did it hold
discussions specifically with the Scotland Office? Did Cabinet approve
the PBR statement and its contents before the statement to
Parliament? The
proposal——the biggest tax rise in 40
years——was hare-brained and a big mistake, and the
Government recognised that afterwards. Either the Secretary of State
for Scotland approved the decision in Cabinet and in advance of
discussions with the Treasury, or he was not involved in the
discussions and was not standing up for the interests of the industry.
Either way, the Scotland Office dropped the ball. Sadly, the Secretary
of State for Scotland prefers to issue regular press releases on every
subject under the sun, in particular attacking the Scottish Government,
rather than delivering the appropriate policies for Scotland. This is a
classic example of failing to deliver when it is his
responsibility. I
hope that in future the Secretary of State for Scotland will stand up
for Scotland in the Cabinet, rather than being the Cabinet’s man
in Scotland. Those working in the Scotch whisky industry and those who
depend on it deserve an answer today about what the Government did, how
they reached their decision and what role the Scotland Office played in
it.
5.34
pm Mr.
David Chaytor (Bury, North) (Lab): I did not intend to
speak, but after listening to the debate, I want to make two or three
points. First, I want to endorse the remarks of my hon. Friend the
Member for Morley and Rothwell about the problems caused by the closure
of pubs up and down the country, although I do not accept that
increases in taxation necessarily have a direct relationship to
increases in prices. For example, the previous Conservative Government
doubled the rate of VAT from 8.5 to 17.5 per cent. and the consequence
for consumer prices in the following two decades was that almost every
category of consumer goods fell in price. In reality, there is no
direct relationship between
taxation levels and price levels. The other point that I want to make
about the impact on pubs is that there are many other social
factors.
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