HC Deb 18 May 1960 vol 623 cc1281-303
Mr. John Cronin (Loughborough)

I beg to move, in page 1, line 23, at the end to insert: Provided that this subsection shall not apply to sherry. The purpose of the Amendment is simply to exclude sherry from the 12s. reduction of duty which the Chancellor has introduced for reinforced wines. It has been suggested to me that there may be some difficulty in defining sherry. I consulted my hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) and he told me that sherry is, perhaps, like an elephant; it is not easy to define, but everybody knows what it is. I should be content if sherry were regarded as a wine which was not a light wine, which was less than 42 degrees proof and which was imported from South Africa or from Spain.

The Chancellor said that the principal purpose of the Finance Bill was to introduce a moderate amount of restraint on consumption and it is, therefore, rather puzzling that he should introduce this considerable easement for the drinkers of reinforced wine. We understood from him that the cost of the provisions in Clause 1 would be about £4 million in a year. In a Budget meant to restrain consumption, it is anomalous to hand out £4 million which will be spent entirely in consumption. If the Chancellor has £4 million to dispose of, it could be disposed of more usefully. We have several new Clauses designed to assist widows, disabled persons, blind persons and others who are in difficulties and we feel that that £4 million could be dispersed much more usefully. There seems to be a case for easing the lot of the indigent rather than the bibulous.

It will be recognised that the consumption of alcohol is not of itself an activity which particularly requires encouragement. Alcohol obviously has considerable social evils, on which I shall not now dilate, although some of my hon. Friends would undoubtedly be happy to do so. We know that alcohol is increasingly becoming a suspicious factor in the ever-increasing toll on the roads. Alcohol is perhaps not the most desirable subject for a concession in the Finance Bill.

The curious thing is that in the last two Finance Bills there have already been substantial concessions for alcohol. In the last Finance Bill there was a concession to beer drinkers. The Chancellor then regarded beer as a matter of specific gravity. A year before, there was a substantial concession to drinkers of reinforced wines. Consumers of reinforced wines have been treated somewhat generously for two years running and it seems to some of us a matter of dubiety that they should again receive this favourable treatment.

It must be borne in mind that this is in the nature of a tariff reduction. Normally, tariff reductions are a matter of very close and even fierce negotiation between the countries concerned. We all recollect the prolonged negotiations which took place over the proposed European Free Trade Area. We all know that in normal circumstances whenever there is a tariff reduction, some sort of reciprocal concession is expected from the other country concerned. It is very uncommon in fiscal policy for a tariff concession to be made in favour of another country without any concession of any kind in return.

3.45 p.m.

I have spoken against the idea of further reducing the duty on reinforced wine, but in his Budget statement and subsequently on the Second Reading of the Finance Bill the Chancellor pointed out that Portugal was a somewhat exceptional case. He said that Portugal had joined with us in the European Free Trade Association and, therefore, joined with us in various tariff reductions and mutual concessions.

Under the terms of the Stockholm Treaty, wine is an agricultural product and, therefore, would not rank automatically for the same tariff concessions as other commodities. The Portuguese, therefore, have a reasonable case when they point out the rather high duties on our imports of port from their country, and port forms one of their principal exports to the United Kingdom.

There is already a favourable balance to ourselves in the trade between Portugal and the United Kingdom. In 1947, we imported £16 million worth of goods from Portugal and exported to her £22.3 million. The corresponding figures for 1958 were £14.3 million and £22.1 million and, for 1959, £14.8 million and £20.3 million. There is no doubt that we have a very favourable trade balance with Portugal and that the Portuguese have some reasonable ground for complaining if we decrease their exports of port by a comparatively high duty. Further, there is the fact that a substantial amount of British capital— about £12 million—is invested in Portugal.

Another aspect of the matter which may receive sympathetic attention is that port is a drink 90 per cent. of which is consumed in public houses, or obtained from off-licences, or wine merchants, by people of lower income groups and, therefore, people deserving some reduction in the duty concerned. I think that the Chancellor has made out a case for reducing the duty on port and on madeira, which comes from a Portuguese colony and to which exactly the same considerations apply

Other reinforced wines received a substantial reduction in 1958, but the same arguments do not apply to reducing the duty on wines like sherry, malaga and marsala. Sherry is easily the most dominant of those reinforced wines, other than port, and comes principally from Spain and from South Africa. A certain amount of sherry is imported from Australia, but the amount is small compared with the overwhelming dominance of South Africa and Spain in the sherry market.

It is not clear to my why Spain should have this special tariff concession. There is no question of Spain joining us in the European Free Trade Association and, so far as we know, there is no indica- tion that Spain intends to give us any reciprocal trade concessions. Our balance of trade with Spain is very unfavourable. In 1957, we imported £36.6 million worth of goods from Spain and exported only £26 million. In 1958, the corresponding figures were £366 million and £241 million and, in 1959, they were £36 million and £20.3 million.

It would seem that we have already a very unfavourable trade balance with Spain. I think that the Chancellor, if he is to introduce what is substantially a large tariff concession in favour of Spain, ought to be able to show us a definite concession in our favour to compensate for it.

Sir Leslie Plummer (Deptford)

Is my hon. Friend overlooking the fact that Spain, South Africa and Portugal at least have this one thing in common which may endear them to hon. Members opposite—that all of them are Fascist countries?

Mr. Cronin

I am obliged to my hon. Friend for reminding me of this important consideration. Spain is, of course, a country which even the most moderate person would describe as having a Fascist, or almost Fascist, Government. It certainly cannot be a country which is particularly deserving of the sympathy of this country to the extent that we should give Spain completely unrequited tariff concessions.

My hon. Friend will probably agree with me that we cannot be satisfied with the labour conditions under which sherry is manufactured in Spain. We know that trade unionism is severely suppressed in Spain. I agree that the same argument applies to Portugal, but I think that the Chancellor has made out a case, based on reciprocal treaty obligations in the European Free Trade Association, which to some extent clouds our minds to the political aspects of Portugal.

South Africa is already receiving the very substantial Commonwealth preference concessions. Again, I think that the Chancellor will probably tell us that no reciprocal concession has been negotiated with South Africa in return for these very substantial concessions. I think that all of us on both sides of the Committee feel considerable disapproval of the general racial policies pursued by the South African Government.

Mr. Ronald Bell (Buckinghamshire, South)

I notice that the hon. Gentleman has not referred the Committee to the trade balance between this country and South Africa.

Mr. Cronin

I am glad that the hon. Member raised that point, because it is only fair to admit that the trade balance between ourselves and South Africa is substantially in our favour and that, of course. Is an argument in favour of giving South Africa some concession. I think, however, that that argument is overbalanced by other considerations.

An important consideration is that we cannot feel approval of the South African Government, and what we are doing now is an extremely public act which will be noted all over the world. A substantial concession like this to the Government of South Africa must be regarded throughout the world as an act of approval of the Government of South Africa. I do not think that that is something which the Committee should be in a hurry to accept with equanimity.

Another very important aspect of this matter is the labour conditions under which sherry is manufactured in South Africa. Hon. Members may know that about 1¼ million Africans are convicted every year in South Africa for comparatively trivial offences and given prison sentences. About 500,000 are convicted of what would appear to us to be very trivial offences against the pass laws, for not having the documents which they are obliged to carry, or not having properly stamped documents, or being without documents.

I should like hon. Members to consider what happens to those convicted South Africans. They are for the most part sent to farms and to the establishments of the wine growers. They receive no pay, so for all practical purposes they are used as slave labour. It is a very serious matter if we are to hand out a very large tariff concession for a commodity which is manufactured to a substantial extent by slave labour. That is something which the Committee should consider very seriously.

I have run briefly over the arguments which, I believe, are in favour of withholding this concession from reinforced wines imported from South Africa and Spain. There are, of course, the opposite arguments of which, no doubt, we shall hear. We on this side of the Committee feel that a satisfactory case has not been made out for giving this special concession to Spain and South Africa, and that unless we have a really satisfactory explanation from the Chancellor we shall have to vote against the Clause.

Dr. Reginald Bennett (Gosport and Fareham)

As one who, some years ago, took up on the Adjournment and at other times the case of the import duty on port, I welcome very warmly the concession that my right hon. Friend the Chancellor of the Exchequer has granted on this occasion. Coupled with his former concession, it amounts to a real alleviation of the difficulties of the Portuguese wine community.

While I am not attempting to follow the hon. Gentleman the Member for Loughborough (Mr. Cronin) in his investigations of the varying degrees of boycott which he wishes to impose on forms of government of which he does not approve, I find it a little difficult to understand how he proposes to distinguish between what may style itself port and what may style itself sherry.

One of the curious chemical compositions which has perhaps brought this matter before the Committee is the importation of strong table wines which have been doctored by strong fortified wines to make a weak fortified wine, which is neither port nor sherry, but which is sold as sherry or port, and for which about half the duty is paid compared with that which used to be paid for the genuine article. I understand from my right hon. Friend that in time past the only criterion on which the Customs and Excise operated was the gravity or alcoholic content of the wine, and I have not heard from the hon. Member for Loughborough how he proposes to differentiate between the different Governments which he dislikes on the ground of chemical compositions.

Mr. Cronin

I appreciate the highly scientific attitude adopted by the hon. Member about this. First, the wines to which he refers, and which are made here are sweets and are dealt with under a different subsection. The other thing is that I have suggested that the definition should be that of the country of origin, which is simply Spain and South Africa, so reinforced wines from Spain and South Africa are sherry for all practical purposes.

Dr. Bennett

Many other wines are imported from various parts of the world, and they are certainly not Iberian, to which this particular attack does not apply. In the absence of any constructive contribution from the hon. Gentleman about how to distinguish between these various wines, we should content ourselves with thanking my right hon. Friend for the concessions he has introduced and accept them with all gratitude.

4.0 p.m.

Mr. R. Gresham Cooke (Twickenham)

I did not like the deep political overtones of the speech made by the hon. Member for Loughborough (Mr. Cronin), which imported all sorts of alien subjects into a simple subject like sherry. If we are to arrange our Budgets and tariffs according to whether we like or dislike a country we shall have such a variegated pattern of tariffs that we shall not be able to carry on trade with any country of the world.

It seems to me that the Clause is right as it is. Since the war, sherry has got out of line with the ordinary foreign light wines, in terms of duty. Since the days before the war the duty on sherry has risen a great deal—until the last Budget it had risen by 375 per cent., whereas the duty on light wines has risen to a much smaller extent. Further, when one goes into a public house one cannot help feeling that sherry has lost its place as a drink among other drinks, and is being put into an unfair relationship with bubbly drinks, and so on.

Before the war a man would take his wife into a public house and offer her a glass of sherry, but he is not able to do so to the same extent today because it has become so expensive.

Mr. Gerald Nabarro (Kidderminster)

What about port and lemon?

Mr. Gresham Cooke

The same argument applies to port and lemon.

Mr. Cronin

The hon. Member for Twickenham (Mr. Gresham Cooke) will concede that, in spite of the duty upon it, the consumption of sherry has steadily increased since the war, and is now greater than it was in 1938 and 1939.

Mr. Gresham Cooke

Consumption has not risen all that much. I have been looking at the figures, and it is surprising how little it has risen since the war.

Last year's reduction of 2s. per bottle in the duty on sherry was not sufficient to make much difference to the price of a glass in a public house, but my right hon. Friend's concession this year will be a help in that direction.

We must also remember that many of the companies which import sherry are British companies, worthy of support. I therefore hope that my right hon. Friend will reject the Amendment, which I consider to be of a highly contentious and political nature, and stick to the wording of the Clause.

Mr. Ronald Bell

The hon. Member for Loughborough (Mr. Cronin) made it clear, both in his speech and his intervention, that what he meant by sherry was any strong wine which came from South Africa or Spain. It is quite enough to dispose of his Amendment simply to point out that it contains no definition by which we can distinguish sherry— which, as my hon. Friend the Member for Gosport and Fareham (Dr. Bennett) has pointed out, has become almost a brand name now—from other wines of high specific gravity, such as those defined as "sweets" in the Act that we are amending. I say that that is enough to dispose of the Amendment because, if we cannot define something which we want to take out, the Amendment becomes meaningless.

If the hon. Member is saying that port-type wines from South Africa should not enjoy the exemption from duty simply because they come from South Africa, he is merely relying upon rabid political prejudice. It astonishes me that some hon. Members opposite put forward this kind of argument when, at the same time, they continually try to advocate the extension of East-West trade. One wonders whether they approve of the internal policies of the countries behind the Iron Curtain, in whose trade they invite us to participate ever more freely.

I would ask the hon. Member whether his argument does not come to this: the defects of internal government do not matter to hon. Members opposite if the Government happens to be of the Left, but if it does not it is a great scandal, and trade and tariff discrimination ought to be urged against it in this House on every possible occasion.

I hope that my right hon. Friend will treat that argument with the contempt it deserves.

Sir L. Plummer

I hope that hon. Members on this side of the Committee will treat the arguments of the hon. Member for Buckinghamshire, South (Mr. Ronald Bell) with the contempt that they deserve. Hon. Members on this side have always argued that there should be as much free trade as possible throughout the world. [HON. MEMBERS: "Oh."] Yes—throughout the world. Many of my hon. Friends have been in the forefront in protesting against the kind of Governments that exist in various countries with whom we do not agree. We have protested over and over again. We have been much more critical of countries behind the Iron Curtain than hon. Members opposite have been of Fascist countries in Europe, or countries such as South Africa.

I do not believe that the issue here is that sherry is so expensive that the drinking of it has been stopped by people. We had to drink South African sherry during the war, but we gave it up gladly when Spanish sherry became available again. Now nobody in his senses would want to drink South African sherry, except to douse its taste with gin. It is not a drink that anybody likes; it was forced upon us because of the exigencies of war.

I would not have thought that the drinking habits of our people were altering. What may happen is that a moderate reduction in the price of wines and sherry will accelerate its consumption—but only temporarily. The brewers believe that this is a temporary thing, because one of our biggest firms has decided to spend £125,000 on an advertising campaign in favour of lager, simply because it believes that our people will revert to beer drinking again, as opposed to wine drinking, especially in our public houses.

Therefore, I do not believe that the reduction in duty will make an enormous difference. Nevertheless, it is right for those of us who believe that an injustice has been created in another country to attack that country, and to make the sort of speech that my hon. Friend the Member for Loughborough (Mr. Cronin) made.

Mr. Robert Cooke (Bristol, West)

As the Member for Bristol whose constituency is undermined by cellars filled with sherry of one kind or another, I feel that I must say something.

Mr. H. Wilson

Would it not be right to put it on the record that the hon. Member is a Member for Bristol and not the Member for Bristol?

Mr. Cooke

I am the only Member in Bristol whose constituency is undermined by cellars full of sherry.

I feel flattered that it should be this subject which is being discussed at the beginning of the Committee stage of the Finance Bill. I intervene only because certain hon. Members opposite have made some extremely offensive remarks about my constituency. It so happens that most of the great firms from Bristol are located solely in that city, although, in deference to my hon. Friend the Member for Kidderminster (Mr. Nabarro), I should point out that one of the most distinguished of those firms also has a branch in Kidderminster. I hope, therefore, that my hon. Friend will fly to my support.

Mr. Nabarro

My hon. Friend does not need it at present.

Mr. Cooke

My constituents, upon whose good will I depend in so many ways, greatly welcome my right hon. Friend's concession. I cannot see why hon. Members opposite should be so complaining about the fact that sherry has been given the same concession as port. I can assure my right hon. Friend that we in Bristol, who depend so much on this trade for our well-being and for the employment of so many of our citizens, would never allow any political considerations to stop us indulging in this trade, in which we have been engaged for about 200 years. I therefore hope that my right hon. Friend will resist the Amendment with all the force at his command.

Sir Godfrey Nicholson (Farnham)

I hope that the Committee will listen for a few moment to someone who happens to be a wine merchant. As I see it, this action of the Chancellor has no political significance; it is a purely fiscal and trading measure. We cannot distinguish between different types of fortified wine —and here I would point out that the proper term is "fortified", and not "reinforced"; it is wine, not concrete.

One cannot distinguish between different types of fortified wines. What we are debating today, or should be debating, is whether it would be fair to discriminate against any one branch of the wine trade when those two branches of the wine trade, port and sherry, have always been treated the same.

I do not know whether my right hon. Friend was right to reduce the duty on port. Perhaps he had good international reasons for doing so, but, having reached that conclusion, it follows as night follows day that all fortified wines must receive the same concessions. [HON. MEMBERS: "Why?"] Because it would be most unfair to the trade suddenly to put the trade into three categories and prejudice one type of trade for political and commercial reasons.

I am not a great sherry drinker, but the strictures which the hon. Member for Deptford (Sir L. Plummer) made on South African sherry are unfair. I prefer Spanish sherry, but South African sherry can be very good. I hope that my right hon. Friend will justify the Clause on the right grounds, and not on political grounds.

The Economic Secretary to the Treasury (Mr. Anthony Barber)

The Amendment deals with the very narrow point whether, within the ambit of the reduction of the duty on heavy wines, sherry should be excluded. I hope that the Committee will forgive me if I follow my hon. Friend the Member for Twickenham (Mr. Gresham Cooke) and avoid talking in what he called political overtones, because, whatever may be the merits of the case, I hope that I shall be able to convince the hon. Member for Loughborough (Mr. Cronin) that it would be impracticable to accept the Amendment.

I recognise that it is a matter of opinion whether all heavy wines should be included within this duty reduction, but if one is considering the question of desirability alone I think that there is much force in what was said by my hon. Friend the Member for Bristol, West (Mr. Robert Cooke). Practicability is another matter, and I hope I shall be able to convince the Committee that it would be impossible to accede to the request of the hon. Member for Loughborough.

I said that it would be undesirable to have a different rate of duty for sherry compared with other heavy wines, and the reason is that to do that would bring the wine duties out of alignment. If it ware necessary I would deploy this argument further on the Question, "That the Clause stand part of the Bill", but one of the reasons which has prompted my right hon. Friend to deal with this matter is that it is recognised—I think by the trade in general and by people outside the trade who have studied this matter —that it is highly desirable that the structure of the wine duties should be reformed, although my right hon. Friend made it clear in his Budget speech that, so far as timing was concerned, he would not have chosen to put this proposal forward this year if it had not been for our relations with the European Free Trade Association.

Apart from practicability, there is one other aspect which the Committee must recognise. If the Amendment were accepted, it would mean introducing into the wine duties sub-divisions based on the types of wine, and I should have thought that if we did that it would lead to requests for special rates for other wines.

The hon. Member for Loughborough said that he thought that the Chancellor had made out a good case for some relief in respect of port, but he wished to exclude sherry, and he referred in particular to South African and Spanish sherry. The fact is that, as my hon. Friend the Member for Farnham (Sir G. Nicholson) said, if we were to provide relief for port it follows that we must provide relief for all fortified wines, or, as they are called, all heavy wines. The reason is simple. There is no definition of "sherry" which is known to the law. That being the case, naturally one considers whether, to try to help the hon. Gentleman it would be possible to define sherry.

4.15 p.m.

It is impossible to evolve a satisfactory definition. Obviously, one could not simply refer to the name "sherry", because the name could quite easily be changed, and I have no doubt that if sherry were to pay a higher duty than other heavy wines some of those who produce sherry would in future produce it under a different name.

Mr. G. R. Mitchison (Kettering)

Is not sherry rather like an elephant—easy to recognise and difficult to define? Is the hon. Gentleman saying that all the goods enumerated in the Customs and Excise Blue Book are capable of definition otherwise than by their names?

Mr. Barber

I am sure that the hon. and learned Gentleman realises that in fiscal matters one must be extremely careful to avoid, wherever possible, imposing a duty by reference to a definition which, if he will pardon the expression, may not hold water. While the hon. and learned Gentleman may feel that he would be able to recognise sherry in all circumstances, it would be impossible to define it satisfactorily for the purposes of the law. After all, if one ignores the question of taste, which I have no doubt the hon. and learned Gentleman has in mind, and considers some of the physical characteristics, the first one that comes to mind is colour, but I am informed that port can be white, and we all know that certain sherries are reddish brown.

I think that the hon. Member for Loughborough appreciated the difficulties, because he asked why we could not deal with it in some way by reference to the country of origin. My hon. Friend the Member for Buckinghamshire, South (Mr. Ronald Bell) pointed out that the Amendment does not purport to do that, and I should like to deal with that point, because, if that were possible, the hon. Gentleman could put down another Amendment to deal with the matter in that way. However if we were to proceed by reference to the country of origin —for example to exclude from this reduction heavy wines from Spain or South Africa—that would be contrary to the most favoured nation provisions of G.A.T.T., so we cannot do that.

I hope, therefore, that, even if I have not convinced the hon. Member for Loughborough on the question of desirability, he will take the view that it is impracticable to do as he desires, and will seek leave to withdraw the Amendment.

Mr. Roy Jenkins (Birmingham, Stechford)

The Finance Bill often tends to be a rather narrow, technical Bill. Per- haps this year it is rather more narrow and more technical than most. Therefore, it is not bad that we should open on an Amendment which is not characterised either by narrowness or by being of a technical nature.

We have provoked a series of fine speeches from the benches opposite. The hon. Member for Bristol, West (Mr. Robert Cooke) began in very self-confident form by proclaiming himself the Member for Bristol, and then, rather less self-confidently, tried to strike up an alliance with one of the hon. Members for Kidderminster.

Mr. Nabarro

No. I hasten to tell the hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) that the horn. Member for Kidderminster is, and always has been, absolutely unique in this House.

Mr. Jenkins

I am sure that the hon. Member for Kidderminster (Mr. Nabarro) is an absolutely unique representative in this House, and we are very glad of that.

Let me hasten to assure the hon. Member for Bristol, West that in supporting the Amendment I feel no ill-will towards those distinguished wine merchants in his constituency, the more distinguished but perhaps the lesser known of whom I have had happy relations with for many years.

The hon. Member for Farnham (Sir G. Nicholson) intervened as a wine merchant. He did not give me complete confidence in his position as a wine merchant, because he said that it was impossible to distinguish between sherry, port or champagne.

Sir G. Nicholson

I think that the hon. Gentleman is rather too full of his subject. He is getting a little muddled. I never mentioned champagne. I said, purely from the fiscal point of view, that it was difficult to distinguish between any fortified wines. I was not saying it was impossible to distinguish between port and sherry—even the hon. Member could do that.

Mr. Jenkins

The hon. Member may think that he did not say that it was impossible to distinguish between them, but the fact remains that he found it impossible and I am bound to say that it gave me the feeling that I should prefer to patronise the constituency of the hon. Member for Bristol, West. We were not discussing whether it is difficult to define them. I should have thought it perfectly easy to distinguish between them.

The hon. Member for Twickenham (Mr. Gresham Cooke) complained bitterly that my hon. Friend .the Member for Loughborough (Mr. Cronin) had introduced deep political overtones into this debate. The fact is that the Chancellor introduced this concession to the Committee in his Budget speech in explicitly political terms. The right hon. Gentleman made no attempt at all to say that this year he thought there was a fiscal case for reducing the duty on heavy wines, whether port or sherry or champagne.

Sir G. Nicholson

Champagne is not a heavy wine.

Mr. Jenkins

Champagne is included in Clause 1. I agree that it is not a heavy wine, but the reduction applies to champagne and chateau bottled clarets or burgundies bottled on the estate.

The Chancellor did not attempt to advance his case purely on fiscal grounds. He put it forward explicitly—and this was underlined by the Economic Secretary—on the ground that, had it not been for the particular consideration of helping Portugal, he would not have done it this year. The right hon. Gentleman was quite explicit about that and, therefore, this is a political concession. It is a concession specifically introduced to solidify the not very solid structure of the European Free Trade Association.

While we may be prepared to accept the need for such a concession, it is rather difficult to accept a rather expensive concession which is not justified on fiscal grounds and with no particular social argument in its favour. During the Second Reading debate, my hon. and learned Friend the Member for Kettering (Mr. Mitchison) argued powerfully against this being a social priority this year. There is no fiscal and no social argument in favour of this concession it is made only for the benefit of Portugal. It will cost a good deal of money to bring a relatively little benefit. It is an imprecise weapon. There is no doubt that a substantial part of the concession will go to sherry and therefore, in broad terms, go, first, to Spain and, secondly, to South Africa.

In this Committee we may have varying views about what we think should be our attitude to South Africa and still more varying views about our attitude to the Spanish régime. But I doubt whether any hon. Member would say that at present South Africa ought to be singled out and be given a trade concession in the way that the Chancellor has singled out Portugal. A similarly strong argument—although the case for putting it is not so overwhelming— could be advanced regarding Spain. That is the objection we feel to this very broadly drawn concession.

It is true that the duty on heavy wines generally is still rather higher, in relation to light table wines, than was the case before the war, but it is not as much as a few years ago. Sherry received a substantial concession in the 1959 Budget, when the duty came down from 50s. to 38s. Since that time the consumption of sherry has been rising rapidly, and it is probable that it has been rising more rapidly since the 1958 Budget than the consumption of light wines, though the contrary was the case before 1958. I do not think we need worry unduly about the point made by the hon. Member for Twickenham, about whether we are breaking national habits and that not enough sherry is being consumed.

Mr. Gresham Cooke

In the public houses.

Mr. Jenkins

I should have thought that, on the whole, far more sherry is being consumed, and a great deal of it at the expense of the Chancellor.

Mr. Nabarro

Not in the public houses.

Mr. Jenkins

In any case the Chancellor has not put his case forward on the ground of the ill-treatment of people in public houses, but on the ground of the need to bolster up Portugal as a member of the Free Trade Association, so do not let us hear too much about the public houses.

If it be that the sherry trade is faltering because the price charged in public houses is such that people cannot afford to buy it, there are certain other actions, independent of the Chancellor, which would appear to be open to the trade. I do not know how many hon. Members read the article in yesterday's Financial Times, which was of interest to me in view of the debate this afternoon. It referred to the structure of the sherry trade. Among a number of other interesting facts, the article drew attention to the extraordinarily high rate of retailers' profit in the sherry trade.

Of the price paid by the consumer— I think that this would be the price paid when buying a bottle, and that the margin would be greater still if the customer were buying by the glass over the bar counter—

Mr. Nabarro

It would depend on how good is the barmaid.

Mr. Jenkins

On a bottle of sherry the retailer's margin is, as the retailers or the trade choose to state it, 28 per cent. But to state it in that way is false, because that is 28 per cent. of the cost to the consumer, which includes duty, and it is 28 per cent. of the end-price. In the retail trade, it is more usual to cite the mark-up price independent of duty or Purchase Tax, or whatever it might be, and to cite it at a percentage of the price at which the retailer received the goods and not the end price. Clearly, from that point of view it would be right that the mark-up in the sherry trade is not 28 per cent., but as much as 56 per cent.

Without any ill-will towards the constituents of the hon. Member for Bristol, West, or the constituents of any other hon. Member for that matter, it seems to me that if the sherry trade is faltering, or, as was suggested at Question Time yesterday, this concession which the Chancellor has made is not being passed on wholly to the consumer, there is the substantial remedy open to the retailers to reduce this very high profit margin of 56 per cent. I hope that this will be taken into account.

We are dissatisfied that, without any fiscal or social argument in its favour, it was found necessary to extend the concession given to port—on arguments which are not overwhelmingly compelling, but which we are compelled to accept from the Chancellor—to the rather priggish drink of sherry.

The Economic Secretary said that it was difficult to define what was sherry with complete satisfaction, but he did not reply entirely to my hon. and learned Friend the Member for Kettering. I think that we should have to scrap a good deal of the contents of the Customs and Excise schedules if we were only to put in categories which could be defined with absolutely complete and logical clarity.

I recognise the point that he made about G.A.T.T., if we were to deal with this question on a basis of countries of origin, but I do not think that he applied himself as closely as he might have done to seeing whether it is not possible to produce a working definition of what sherry is in common parlance. Therefore, we do not regard this situation as entirely satisfactory. We hope that we shall get better replies from the Government as the Committee stage proceeds. None the less, in view of the technical difficulties, which we appreciate, although they are not so overwhelming as the Economic Secretary suggested, I do not ask my hon. Friends to divide the Committee on this first Amendment.

4.30 p.m.

Sir G. Nicholson

The hon. Member made an attack, not based on malice, but on ignorance, upon the wine trade and allied trades. I should point out that it is a keenly competitive trade and margins of profit, at all stages, are no more than are justified. I assure him. quite sincerely, that people are not exploited. I assure him, also, that wine merchants have lost heavily on the reduction of duty, because they had to write down the value of duty-paid stocks. I ask the Committee to believe that in a trade where competition is very keen merchants do not make extraordinary rates of profit.

Mr. Roy Jenkins

I should have been happy to leave the matter there, but, as the hon. Member is apparently anxious not to do so, may I say that my attack, as he was kind enough to say, was not founded on malice. I do not set myself up as having a great degree of expert knowledge, but I based it quite specifically on a particular analysis of profit margins in this trade published in a highly reputable financial newspaper yesterday.

If the hon. Member is challenging what I said, I am not in a position to say that everything that the Financial Times says is accurate. If he likes to tell me that a 56 per cent. mark-up, which I suggested came out from that article, is quite untrue, of course the Committee will accept that. I should like to know his detailed refutation of the detailed arguments placed before the Committee.

Sir G. Nicholson

I should be happy to show the hon. Member a typical wine merchant's accounts, from which he would see what the position is.

Mr. Robert Cooke

I should not like to follow my hon. Friend the Member for Farnham (Sir G. Nicholson) in the suggestion that malice was shown against the wine trade—

Sir G. Nicholson

I said that the hon. Member was not basing his argument on malice.

Mr. Robert Cooke

I am sorry; I did not understand.

Although I am not an economist, and cannot speak of percentages or grand totals, I understand that the concession made by the Chancellor in 1958 amounted to 2s. a bottle, and it should be the same under this Budget. So far as I know, the whole concession was passed on to the consumer.

Mr. Cronin

My hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) has dealt admirably with the arguments advanced by the Economic Secretary, so I do not propose to go into the matter further except to say that I feel considerable disquiet as to what is likely to happen if this is a sample of the kind of negotiations in such a delicate matter as the European Free Trade Association negotiations. If we have to hand out concessions to other countries whenever we do so to one country, we are in a very parlous state.

Although I am not satisfied with the arguments of the Economic Secretary, or of hon. Members opposite, who seem to take an entirely political view of the situation, I think that my hon. Friends on this side of the Committee will agree that we are most anxious to make progress with consideration of the Bill. I therefore beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Motion made, and Question proposed, That the Clause stand part of the Bill.

Mr. E. C. Redhead (Walthamstow, West)

The objections raised to this Clause, and the Amendment which has just been withdrawn, have been limited to the simple aspect of the question of country of origin. If certain political aspects have been drawn into the argument, I am bound to say I think the Chancellor drew them on himself by the rather limited way in which he produced the reasons for this particular reduction in the duties on light wines imported in bottle and on heavy wines.

What he neglected to do was to point out that, quite apart from the argument which had been adduced on the more political aspects of the matter, there is a case for doing this. If we are to be frank, we have to acknowledge that it is a case which has been pressed on the Chancellor for several years in succession by hon. Members on both sides of the Committee. What the Chancellor is doing—and I think that to this extent he can make an arguable case—is to restore the relationship which existed prewar as between the duties on heavy wines and light wines, when, traditionally, it was the practice to maintain the duty on heavy wines at a level twice that an light wines.

That relationship was very seriously disturbed in 1949. Although the duties on both light and heavy wines increased steadily during the war years, in 1949, for quite special reasons and to encourage the consumption and sale of light wines, the duty on light wines not in bottle was reduced to 13s. a gallon, whereas that on heavy wines was maintained at 50s. a gallon. It is that great disparity, so different from the situation which existed before, which has given rise to the very natural and understandable disquiet in the trade which has been affected. Manifestly, it will be seen in the fact that it had the result of showing an increase since 1938–39 in respect of heavy wines of 375 per cent. but in respect of light wines of only 225 per cent., compared with spirits of 184 per cent., humble beer remaining at 258 per cent.

The effect has been quite seriously to limit the sale and consumption of port and sherry and to bring about a degree of apparent discrimination between the heavy and light wines. In 1958, the Chancellor, quite deliberately, tried—in part, at any rate—to redress the balance, although he did not completely do so, when he reduced the duty on heavy wines from 50s. to 38s. Now, I take it, he is restoring completely the old relationship.

Although some of my hon. Friends, quite understandably and naturally, feel that this reduction is a little incongruous and to some extent untimely in a Bill which, elsewhere, steps up very materially the duty on tobacco, which fails to make provision for certain needy sections of the community in very desirable social directions—-which fails, for example, to make any provision in respect of the restoration of housing subsidies and the like—nevertheless, recognising the technical purpose of this Clause and the fact that on the ground of equity as between two types of wine there is a case to be made for it, we shall not resist the passage of the Clause.

This particular case, within the limited field of wine, on the ground of equity, ought to have loomed larger in the answers adduced by the Government spokesman for this reduction rather than the point he made that this was at the request of the Portuguese in negotiations connected with the European Free Trade Association.

There is another factor which, I think, can be fairly adduced in favour of the proposition. It is that it should put an end to that very undesirable practice which has been encouraged by the two great disparity of rates between duties on light and heavy wines. I refer to the practice which has grown up of blending low-strength foreign wines with high-strength imported wines and producing a wine as strong as sherry, for example, but, nevertheless, one on which duty is paid at only 25s. on the foreign or 20s. on the Commonwealth product, as compared with 38s. on genuine sherry. I do not think that that can be justified. It is not even good from the consumer's point of view to have these combinations thrust upon him.

Nevertheless, I do not think that the Chancellor should be credited with undue generosity in this respect because he is not likely to reduce the revenue although he estimates a reduction of £2½ million as a result of the change made in this connection. The experience in light wines has been that the 1949 reduction of duty made consumption shoot up from 1.3 million gallons in 1949 to 7 million gallons in 1959 and the revenue received increased from £1.7 million to £5 million. Even the modest reduction that was made in the case of heavy wine duties in 1958 has accounted for an increase of consumption of 10 to 15 per cent.

If, therefore, we do not resist the Clause, we have our hesitations about it on the ground of the untimely choice of this subject for a reduction in duty when, elsewhere, the Chancellor of the Exchequer has not felt it possible to be more generous in directions which would be more socially desirable. Within the limited reasons which I have adduced, however, we shall not resist the Clause.

Mr. G. R. Howard (St. Ives)

The hon. Member for Walthamstow, West (Mr. Redhead) will forgive me if I do not follow him in all his arguments, but there is one respect in which I agree with him. Experience will, perhaps, show that this lowering of duty may well lead to an increased consumption of the wine. It is the feeling of the wine trade that it will do its best, by way of saying "Thank you" to my right hon. Friend the Chancellor of the Exchequer for this concession, to see that he does not lose out in the end.

I could not let the Clause pass without saying a sincere "Thank you" to my right hon. Friend for the concessions which he has made, not only in 1958, but on this occasion, too.

Dr. Bennett

We have covered the subject of the fortified wines well enough and I am glad that the hon. Member for Walthamstow, West (Mr. Redhead) has endorsed the feeling that we are likely to put an end to the undesirable blending of some curious mixtures under the guise of a particularly duty-evading fortified wine.

I should like to add a word of thanks to my right hon. Friend the Chancellor of the Exchequer for having seen fit to remove an anomaly which, I believe, dates from the latter years of the last century—the double standard of duty on an identical product, the light table wine —by removing the extra surcharge on wine which has been put in bottle overseas.

I forget the precise delicious quotations to which we have been treated on earlier occasions about this matter. I believe that it was held forth as a chance for the bachelor to contribute, as he no doubt wished to do, towards the well-being of the State. No doubt, the descendants of those bachelors are duly grateful. I am most relieved to see that the rates of duty are now to be charged on the product on an easily identifiable scale and will not bring in perjudice, matrimony, or anything else. I am sure that the whole country will be grateful to my right hon. Friend.

Question put and agreed to.

Clause ordered to stand part of the Bill.