§ 11. Mr. Sheldonasked the Chancellor of the Exchequer if he will consider replacing the present excise duty on spirits and tobacco with ad valorem charges.
§ Mr. MacDermotNo, Sir.
§ Mr. SheldonWould my hon. and learned Friend agree that the lack of price competition in the spirits and tobacco industry is largely due to the high level of duty compared with the small effects of price changes? Would he not further agree that ad valorem charges, by relating duty to the cost, would be likely to re- 1090 flect a reduction in prices in the shops at no charge to the Exchequer?
§ Mr. MacDermotI doubt whether it would have that effect. Owing to the high rate of the duty, slight differences in price would be enormously magnified by the duty if the ad valorem system were adopted. This would produce serious fluctuations in the revenue and considerable friction in the trade. Also, from an administrative viewpoint it would be necessary to examine the prices with great care to see whether they were acceptable as a basis for charging the duty.