HC Deb 02 July 1968 vol 767 cc1405-25


As from 19th March, 1968, section 8(2) of the Finance Act, 1964, shall have effect with the substitution for the reference to five groups of a reference to six groups and with the substitution for group (bb) of the following groups— (b) duties of customs or excise chargeable in respect of spirits (other than power methylated spirits); (bb) duties of customs or excise chargeable in respect of beer, wine and British wine.—[Mr. Patrick Jenkin.)

Brought up, and read the First time.

Motion made, and Question proposed, That the Clause be read a Second time.

Mr. Gordon Campbell (Moray and Nairn)

I hope that the Government will accept this harmless and attractive Clause. It would separate spirits from beer, wine and British wine for purposes of the regulator. The House will know that the regulator is a device for increasing or decreasing a number of indirect taxes between Budgets. It has been used twice since it was brought into existence in 1961.

The Government may Say that this is not very often, but during the last three years there have in any case been Budgets or mini-Budgets every three or four months. Since 1965 the regulator has been divided into five groups. By this Clause, we seek to make those six groups, with spirits as a separate group. This would introduce more flexibility, so that each group could be considered, when increases or decreases in taxation were contemplated, on its merits.

8.0 p.m.

The spirit with which I am especially concerned, as you will guess, Mr. Deputy Speaker, is Scotch whisky, on which there is at present what can only be described as punitive taxation. An important part of the distilling industry is in the North of Scotland, where it provides employment for men and industrial activity in development areas where such employment and activity are much needed. Governments have been spending considerable sums in recent years on grants and loans and on the building of advance factories to induce industries and firms to go to development areas, and in this situation it is folly to penalise an industry which is already in these areas and flourishing.

About 85 per cent. of the products of the Scotch whisky industry are exported. The Government cannot say, as they sometimes appear to suggest, that whisky sells itself, because it is the hard Work of the industry and its successful selling abroad which have resulted in 85 per cent. of the product going to exports. There is still great scope for increasing these exports—the markets are there—but if high taxation exists in the home country, Britain, and continues to increase, that naturally leads to the taxes against whisky abroad being increased as well.

The Government, regrettably, are raising the heavy tax on whisky in this Finance Bill by another 2s. 6d., and this will mean that the tax on a bottle of whisky will be 40s. The Chancellor is proposing that the empty bottle should cost £2 before any account is taken of its contents. I know that an Amendment which sought to prevent that increase was not selected, but my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) has ably made a strong case for that Amendment in Committee.

In this new Clause we are now trying to help the Chancellor so as to ensure that he will not be in a position, some time in the future, in which he has to raise the spirits duty, with other items in the regulator, when he may not wish to do so. The new Clause will not cost the Government any money, and in that way it is an unusual Finance Bill Amendment. It simply places spirits in a separate group for the purposes of the regulator.

It is significant that the tax on beer is not being raised in this Finance Bill. Thus, beer is now being treated separately from spirits in any event. Why should they not be treated separately for the purposes of the regulator? The duty on spirits could then be considered in the light of the factors at the time affecting the distilling industry and the sale of spirits, on the merits of the case.

There are two other substantial items covered by the regulator, namely, petrol and tobacco. But both come from abroad and do not involve a home manufacturing industry needing support through a firm and healthy home market. Tobacco raises considerations of health, but the Government have made it clear on previous occasions that they have no desire on medical or other grounds to restrict the home consumption of whisky, because, of course, taken in moderation it is an excellent beverage. Imports of tobacco are a heavy burden on our balance of payments—the very opposite of whisky, which is a leading dollar earner.

The increases in taxation since 1965 have had severe effects on the home consumption of whisky. In the 12 months after the 1965 Budget, that is, up to April, 1966, there was a slump of 9.4 per cent. in the home sales of whisky compared with the previous 12 months. That was the first time in the annual releases for home consumption that there had been a drop since the post-war period of shortage, and it was a very large drop. Later, on 20th July, 1966, there was a further 10 per cent. increase in the tax and during the 12 months following that, up to 20th July 1967, there was a further 5.7 per cent. drop in home consumption. That is why in the last two years a serious situation has arisen, because the gradually increasing consumption at home dropped severely as a result of these two increases in taxation.

One result has been that there has been little extra revenue for the Chancellor, because of these drops in consumption. The Minister of State will note that I have been comparing periods of 12 months with previous periods of 12 months, because that evens out any periods of Budget forestalling. The Treasury often tries to explain what is happening by saying that action has been taken in advance of a Budget. By comparing periods of 12 months, one evens out pre-Budget periods in each of the years in question.

Another result has been that the home market is expanding very slowly, with setbacks from time to time. The Government have been playing a kind of snakes and ladders with the industry, and the growth of consumption at home has been at the rate of a tortoise compared with the growth of exports. Other countries must be amazed by this crippling taxation on a unique industry with a popular product which is a winner in the export markets.

On a previous occasion, the Government gave an incredibly feeble excuse for rejecting the kind of suggestion which we are making tonight. They said that if we were to move from five to six groups for the regulator, there would be a demand for further splitting, possibly going to 26 or even 106 groups, and there would be no limit to the demand for splitting into further groups, and the Government would find the situation getting out of hand. That is completely wrong. So far as I know, there has not been any such demand and there is unlikely to be.

There is no case for tobacco and oil, which are already separately two of the five groups. There are no other items involving a large vital home industry, such as the spirits distilling industry. I ask the Minister of State to tear up any brief with which he may have been supplied if it simply makes the same feeble excuse.

The test of the Government's intentions towards this great and successful industry is whether they will accept this simple Clause. It would enable them, when indirect taxation is about to be put up by use of the regulator in future, to consider whether the special position of spirits and the distilling industry in general which might obtain at the time deserved such a rise of taxation. It would enable separate consideration of the merits of the case. If the Government will give the industry encouragement of this kind, I believe that the industry can go on to make an even larger contribution to out exports and our balance of payments.

Mr. George Younger (Ayr)

I want to add two points to what my hon. Friend the Member for Moray and Nairn (Mr. G. Campbell) has so correctly said about this simple new Clause, which we very much hope the Government will accept. My hon. Friend detailed most accurately the situation of the Scotch whisky industry. I hope that the Government are not deceived by the fact that there is a continuation of revenue from Scotch whisky, although only a little. There was a period, a year ago, when it looked as if it might not increase because the duty had been put up to such an extent. The Government should not imagine that the industry has not suffered through these astonishing increases in duty in recent years.

If the Minister wants evidence of this let him observe the cut-backs in production which have had to be made. Let him observe the parts of Scotland, many of them in the Highlands, with job shortages, where there have been closures of maltings and other ancillary plant in the whisky industry. I am not suggesting that the whole industry is in a terrible state of alarm and despondency, but the point has now been reached when the expansion of the industry is being visibly checked by these continual increases in duty.

This new Clause seeks to look ahead to what may happen if there is the pos- sibility of the regulator being used again. It is something at which the Government must look carefully. It is a precautionary measure, but I can see circumstances in which the alterations produced by the new Clause would be to the advantage of the Government and the Chancellor. Perhaps the Minister of State can visualise a situation in which he might be placed in the future, when for some economic reason, there is a suggestion that the regulator might be imposed. Let him imagine himself in his Department discussing which parts of the regulator would be most appropriate.

He might find, when considering the alternatives for putting the regulator on one group or another, that he reaches the point of considering the group including Scotch whisky. There would be the awful dilemma as to whether the regulator should be put on that group, which comprises many other items. Would it not be much more advantageous to have Scotch whisky in a separate group, with its separate problems and effects on the balance of payments and employment, particularly in the Highlands, separately assessed? Last year we discussed this and the then Financial Secretary said that this would be awkward because we would have to make the choice between different products. This is what governments and ministers are for. In imposing the regulator the choice has to be made betwen existing groups. There is nothing new in the principle of establishing a sixth group, and it might be helpful to the Chancellor in a difficult situation.

Mr. J. Bruce-Gardyne (South Angus)

Would my hon. Friend not agree that in any case there is no obligation upon the Government to make this invidious choice? If they want to, they can apply the regulator right across the board. This just gives greater freedom.

Mr. Younger

This is the point that comes next. If it is awkward to make a choice between the groups, which I do not accept, this new Clause makes it no more necessary than it is now. I ask the Government to take this point seriously this time. I do not think that the argument was taken seriously on the last occasion. This Clause has the rare distinction of being one which will not cost a penny to put into effect. It is something which the Government should accept and they might well see the day, before long, when they will be thankful that they did so.

8.15 p.m.

Mr. James Dempsey (Coatbridge and Airdrie)

I cannot help intervening after listening to the speeches of the hon. Member for Moray and Nairn (Mr. G. Campbell) and the hon. Member for Ayr (Mr. Younger). I know that the hon. Member for Ayr speaks with considerable authority on the subject. He is a Member for whom I have the greatest respect. However, this argument develops round a simple case, that whisky be treated separately for the purpose of the operation of the regulator. Out of this has developed an argument against the Government's decision to increase the tax on whisky. What we are debating is the amount of tax. The effect of the increased duty on sales remains to be seen, and neither hon. Gentleman has been able to produce any facts or figures to show that sales have fallen as a result of the increased duty.

Other factors are operating which have not been mentioned. Neither has given any consideration to the competition coming from the Lowlands. They have overlooked the important factor that the Americans are operating in Scotland on a large scale. In Airdrie they have a new distillery which has cost £5 million, operating in competition with distilleries in the Highlands.

Mr. G. Campbell

I think that the hon. Member is mistaken, because whether a distillery is operated by Americans or Scots, if it is making Scotch whisky, produced in Scotland, it comes within the amounts which I have mentioned. I have given definite proof, because in both recent cases where the tax has been put up, I pointed out that in the following 12 months there had been an immediate drop in consumption.

Mr. Dempsey

The hon. Gentleman went further than that and argued that it was causing unemployment.

Mr. G. Campbell


Mr. Dempsey

The hon. Member said that there was unemployment in some of the distilleries.

Mr. G. Campbell

The hon. Member is wrong again, because I did not say that unemployment was being caused. I said that these distilleries in the Highlands were providing much-needed employment, and it was an industry doing an excellent job, deserving of support.

Mr. Dempsey

If the hon. Member looks at HANSARD he will also see that he said that people were losing their jobs. He will find that a number of these people are in Airdrie, working for the American-owned distillery. This firm could not have got going without the Scottish workers from the Highlands. The local council offered them houses to induce them to come to the development area in North Lanarkshire. That factor is often overlooked.

Another factor is the Road Traffic Act and the introduction of the breathalyser. If the hon. Gentleman will visit any hotel or licensed restaurant on Saturday or Sunday evening, he will be surprised to learn the effects the breathalyser is having on the consumption of whisky.

Mr. G. Campbell

I am grateful to the hon. Gentleman for giving way again. I can help him here. Curiously enough, since the breathalyser came in, home consumption of whisky has slightly increased. The reductions I spoke about were earlier on, following increases in taxation.

Mr. Dempsey

Consumption may have increased in the Highlands, but it has not increased in the southern uplands, especially in the Lanarkshire area. I live and travel there and have very good friends among licensees of premises which sell excisable liquor. The effect of the breathalyser on their sales has been, they assure me, emphatic. This is to be welcomed.

No one can dispute that, in the industrial areas, there has been a decided drop in the sales of whisky because of the breathalyser. That indisputable evidence can be obtained from local police authorities or local hoteliers' associations or licensed trade organisations. It is for this reason that some of us have been asked time and again to try to amend the Road Traffic Act. The hon. Gentleman, therefore, cannot dispute that it has had an adverse effect on the sale of whisky in other parts of the country, if not in the Highlands.

The hon. Gentleman should consider yet another aspect. He said that we were giving aid to industry under the Local Employment Acts. I am all for giving aid to publicans and, indeed, we are giving it to the licensed trade. We are giving grants to hoteliers and to those building hotels in the development areas. We are also giving it to publicans building licensed premises there. As far as I am aware, the whole of Scotland is a development area, excluding Edinburgh. So Scotland as a whole, its hoteliers and publicans are doing very well from the financial assistance by the Government through the Local Employment Acts. The hon. Gentleman should give the Government some credit for that.

I am not arguing whether it is a good or bad thing that whisky should be separated for the purpose of the regulator. I am willing to admit that, once duty is increased on a particular product, it can have the effect of reduced sales to the consumer. When the Conservatives were in power, I argued year after year against the anomalies which were so silly and unjustifiable. But duties are increased deliberately in Budgets to take heat out of the economy. All Governments do it. It is a method of reducing certain types of purchasing power in order to develop the export trade and it is not new.

Mr. Deputy Speaker (Mr. Sydney Irving)

Order. The purpose of the new Clause is to redefine classifications and the hon. Gentleman is not relating his remarks sufficiently to it.

Mr. Dempsey

I am relating my remarks to the fact that, if whisky duty is increased, which means increasing the selling price, there is every possibility that sales will go down. I am pointing out that this happens with any commodity and I have quoted examples.

Mr. Deputy Speaker

Order. I am not disputing the correctness of what the hon. Gentleman is saying. I am merely pointing out that it is not related to the new Clause.

Mr. Dempsey

What is related to the new Clause; is the fact that, from a rather simple, naive-looking new Clause, there has resulted a debate on whether the increase in duty on whisky has resulted in a falling off of sales. That is what the argument is about. If that is out of order, we have all been out of order. I argue that there are other factors to be considered before hon. Members opposite arrive at such an arbitrary decision.

Mr. Alick Buchanan-Smith (North Angus and Mearns)

I have listened with interest to the hon. Member for Coat-bridge and Airdrie (Mr. Dempsey), as always. But his argument is rather devious. I find it difficult to follow its import. First, he said that the whisky industry is setting up in Coatbridge. It would, therefore, be in his interests to support the new Clause. We are not arguing the interests of the Highlands against the Lowlands. We are arguing the case for the Scotch whisky industry as a whole. I hope that, in appreciation, he will vote with us. He should do so in the interests of his constituents.

Secondly, I found it strange to hear the hon. Gentleman's reference to what my hon. Friend the Member for Moray and Nairn (Mr. G. Campbell) had said about the relationship between the time of application of the regulator and the fall in whisky sales, because the remarks of my hon. Friend referred to the period before introduction of the breathalyser. If the hon. Gentleman will read HANSARD tomorrow, as he exhorted us to do, he will see that the breathalyser had nothing to do with my hon. Friend's argument.

It is the case that total sales have shown a marginal increase, despite the breathalyser, but the hon. Gentleman is mistaken in thinking that all whisky is necessarily sold through hotels and public houses to people who drive cars. There are many other outlets and there has been a marginal increase. We cannot say that the breathalyser has anything to do with the argument put forward by my hon. Friend.

Mr. William Molloy (Ealing, North)

This is an intriguing debate. The hon. Member for Moray and Nairn (Mr. G. Campbell) argued at one time that he should be supported because sales of whisky were dropping. Then, intervening in the speech of my hon. Friend the Member for Coatbridge and Airdrie (Mr. Dempsey), he said that, despite the breathalyser, sales were going up. I would like one point elucidated. When talking about sales of whisky dropping, do hon. Members mean output or that sales are dropping in this country but increasing in the export market?

Mr. Buchanan-Smith

I am grateful for that intervention, for it helps to clarify the argument. On every occasion that duty has been increased, there has been a fall-off in the rate of increase in consumption and, therefore, a fall-off in the rate of expansion of the industry, which is a major industry in Scotland. That is on home consumption. But when we raise the duty in this country, other Governments follow suit—that is an established fact—by raising their duties. This has had the effect of reducing the rate of increase of sales in other countries.

Up to the end of last year, there had been a tremendous fall-off in the rate of increase. In March, the Financial Times reported a statement by Mr. W. G. Farquharson, Chairman of Arthur Bell and Sons, the independent company in Perth, which said: The high duty at home was also reflected in the amount of duty imposed on Scotch overseas. 'Again and again we have seen increases of duty in the U.K. followed by increases in foreign markets. This inevitably affects the growth of our exports'". The point is that it affects the growth of an export industry with a tremendous financial potential.

8.30 p.m.

Mr. Deputy Speaker

I must remind the hon. Member also that the new Clause deals with redefining the classification. He has not got round to mentioning it yet. I hope that he will do so.

Mr. Buchanan-Smith

If I may finish the point, Mr. Deputy Speaker, it is important to explain why whisky should be separated from other forms of spirit. I hope that I may clarify the point raised by the hon. Member for Ealing, North (Mr. Molloy) by completing the quotation: To emphasise this point, Mr. Farquharson noted that in 1966 the rise in whisky exports was only about one-third that of previous years and that last year the increase was limited to 3.7 per cent. That demonstrates what happens when the regulator is applied across the board, giving the Government no freedom to act if it is felt necessary to do so in the interests of an important export industry.

Mr. G. Campbell

My hon. Friend has confirmed what I was saying. I referred to the snakes and ladders game. There has been a gradual increase in home consumption which has had setbacks every time that extra taxation has been applied. Secondly, for reasons of brevity, I did not make the point, which I have made on previous occasions, of informing the House—and the news is usually greeted on all sides—that there are plentiful supplies of Scotch whisky maturing in Scotland, both for export and for home consumption. There is no question of any conflict between home consumption and export.

Mr. Buchanan-Smith

I am grateful to my hon. Friend for his intervention, which helps to clarify the position beyond peradventure for hon. Members opposite. In the Amendment, we are trying to remove any hindrance from one of our best export industries.

The separate grouping of whisky is important for the employment potential in the Scotch whisky industry. On the one hand, the Government have their commitment to raise revenue and they use the regulator in one way and another. On the other hand, we have the problems of regional development and what the Government are doing to try to increase industrial activity in certain areas. That is why I would like Scotch whisky to be separated from other exercisable spirits in the use of the regulator, so that the Government would be given freedom to act if they cared to use it. As my hon. Friend the Member for Ayr (Mr. Younger) said, the decision would still be left with the Government to decide whether to use the regulator in the way we suggest by separating Scotch whisky or applying it across all the different groups over which they have power to apply it.

If it should be against the interest of regional development to increase the regulator and thereby increase the duty of Scotch whisky and threaten regional development and employment in certain limited areas, particularly in the Highlands, by the new Clause the Government would have freedom to exclude whisky from the regulator.

The point is of even greater importance today than when we debated the matter a year ago. My constituency includes the town of Montrose, which has two distilleries, one of which has been going through a difficult period for. these reasons. Sometimes it is working and sometimes it is not. Sometimes it is taking on men and sometimes it is paying off. That is in an area in which Government policy has not so far succeeded in introducing much new industry and employment. We still depend a great deal on employment in the whisky industry. If we could introduce a greater degree of stability, it would help those in the industry.

Another important reason is that we we are talking of an industry which is already becoming labour intensive. In the type of town of which I am speaking, we have, therefore, already seen a contraction because of greater efficiency in the industry through, for example, the use of more labour-saving methods in maltings and in other ways. We are talking of an industry in which, for economic reasons, there is in any event a contraction of employment.

Therefore, if through the use of the regulator the Government are reducing the consumption of Scotch whisky and thereby affecting production and employment in the industry, they are making a difficult situation even worse. There may not be much at stake in terms of the numbers of jobs, but where those jobs exist their importance is that they occupy a high proportion of the male population in the villages and small towns. That is why I plead with the Minister that although we are not talking of vast numbers of jobs in terms of the motor car or other mass industries of the South, in my part of the world and that of my hon. Friend the Member for Moray and Nairn this is a desperately important matter. We must keep and even expand any jobs that we can get.

I hope that the Minister of State will accept the Amendment. It would simply give him more flexibility and more freedom to act in the future. It could be used in the interests of regional development and of areas such as the North-East and the Highlands of Scotland.

The Minister of State, Treasury (Mr. Dick Taverne)

The hon. Member for Moray and Nairn (Mr. G. Campbell) and his hon. Friends the Members for Ayr (Mr. Younger) and North Angus and Mearns (Mr. Buchanan-Smith) have put the argument in favour of the new Clause very attractively. They have based it on, and they have attacked the problem of the regulator from, the special plight of the whisky industry in Scotland. It was fully debated in Committee, when the case was eloquently advanced by the hon. Member for South Angus (Mr. Bruce-Gardyne) and was answered by my hon. Friend the Financial Secretary.

Obviously, I would be out of order to deal with the particular points which are raised in connection with that industry to the extent that they do not affect the regulator. When, however, it comes to the general prospect for the whisky industry in Scotland, not all those concerned in the industry after the Budget was announced took quite as gloomy a view as hon. Members opposite. For example, on 22nd March, in the Investors' Chronicle, a spokesman for one of the largest distilling companies said: It will be another blow for the United Kingdom trade, but, as you know, most of our business is overseas and we have the benefits of devaluation on exports. That is a considerable factor to be borne in mind.

The real question, however, is whether it would be feasible and reasonable to alter the use of the regulator by creating this sixth group of spirits for special treatment. The hon. Member for Moray and Nairn said that in answering the debate I was not on any account to use any of the arguments which had previously been used against similar Amendments. It is always an attractive idea that one's argument should be entirely novel, but it is not something which it is always possible to achieve when the same ground is being gone over in successive Finance Bills.

The first question is whether one can restrict the argument logically to another class, and to one only, that of spirits. The hon. Member for Moray and Nairn said that there have been, and there will be, no other candidates for special treatment. In the first part he is incorrect, because precisely the same sort of representations have been made in favour of splitting up the hydrocarbon oil group. It was suggested that heavy oil should be separately treated. I see no reason why, if spirits are to be separately treated, beer should not be separately treated from wines. If one enters into this argument there is no reason why the different bands of Purchase Tax should not be separately treated. Why should not one take some of the higher bands and treat these separately from the lower bands?

I do not feel that the optimism of the hon. Member for Moray and Nairn can be shared about whisky being the only candidate for separate group treatment. There is little doubt that one would get a proliferation of groups and the regulator would become something entirely different from what it was designed for. The regulator was never designed to usurp the functions of the Budget, which is brought before the House and considered carefully in great detail in terms of the revenue produced and possibly the danger of diminishing returns, which was the kind of argument considered in Committee, and to determine the relative levels of taxation between individual products. Yet this undoubtedly is what the regulator would become if this new Clause were carried. The regulator was designed as a somewhat blunt instrument for the purpose of the broad questions of supply and demand in the economy. It was designed to be an interim weapon only to deal with the broad questions of supply and demand on a temporary basis until they could be more adequately adjusted as between different products by means of the Budgetary instrument.

If we did what we were invited to do here and said, "Right, it is a decision for the Minister. The Minister should be able to choose and say we will use the regulator for one product and not for others", as the hon. Member for Ayr suggested, what about the general debate? The House is jealous of its privileges and rights in dealing with taxation. One would, by a Statutory Instrument, be dealing with matters which eminently were matters for the Finance Bill as a whole.

Mr. G. Campbell

But, first, this would not isolate whisky. It would be spirits as a whole. Secondly, my argument was that the whisky industry was the only serious candidate since it was a very important home industry with 85 per cent. of its production going to exports. That does not apply to other items in other groups.

Mr. Taverne

One could probably say that whisky dominates spirits and that it has this high percentage of exports. To some extent, that means that the effect on the industry as whole is less when one uses the regulator than it would be if the entire domestic production of other particular candidates were affected by the use of the regulator. The special position of whisky would not make the effect of the use of the regulator as deleterious on whisky as it might be in other spheres.

The real question is whether one should take particular products in a generally competing group and say that the regulator should apply to some and not to others. In the past the regulator has been made more flexible by the creation of the groups. It is now suggested that it should become a very refined instrument distinguishing between separate items within the groups. Here one has different items competing against each other—alcoholic beverages generally, beer, wines and whisky—and, further, one is attempting to do by means of the regulator what should be done by the Budget.

Mr. G. Campbell

In the Finance Bill the Government are not putting up the duty on beer, but they are putting up the duty on whisky. Therefore, they are doing this separation in the Finance Bill.

Mr. Taverne

I am afraid that the hon. Gentleman did not follow my argument. My argument is that this is the sort of operation that one should do in a Budget, because it can then be considered in detail. But it cannot be considered in detail when one debates a Statutory Instrument, which is what the regulator must be used for. In seeking to differentiate in the treatment of different items of indirect taxation, hon. Gentlemen opposite are to some extent inconsistent with the general tendency of Opposition thought which was to treat indirect taxes all together and very much the same. They are concerned with the same rate, but nevertheless part of the argument is that one should not, in considering indirect taxation, distinguish between individual and particular objects. For these reasons I ask the House not to accept this new Clause.

8.45 p.m.

Mr. Patrick Jenkin

The hon. and learned Gentleman's reply can only be described as disappointing and unforth-coming. I can only imagine that he has found himself somewhat unsympathetic to the arguments put forward by my hon. Friends by the fact that his drinking arm appears to be out of action, for which we express our sympathy.

I think that the House is indebted to those of my hon. Friends who advanced arguments in favour of the Clause, and I believe that the distilling industry in Scotland, too, will feel indebted to them for the case they have put forward. At this stage I think that it is right for me to declare a personal interest, which I declared in Committee, namely, that I am an employee, but have no stake in the ownership, of a large distilling company.

The case in favour of the Clause and for splitting the regulator can be argued under a number of separate heads, but it seems to me that two stand out. First, by lumping together all wines, beers and spirits, one is dealing with three categories of alcoholic beverage which have widely different characteristics in terms of economics. Let us examine the consumption figures. On doing so for these three categories, one comes up against some surprising results. In the five years 1963–67, home-produced spirits declined from 14.2 million proof gallons to 13.7 million proof gallons. Beer, on the other hand, increased from 28.3 million bulk barrels to 31.3 million bulk barrels. Imported wines increased still further, from 22 million bulk gallons to 28.4 million bulk gallons. By grouping them all together one is dealing with different products with different histories, and a duty change which may be appropriate for one is not appropriate to the other.

Linked with that argument—and this applies particularly to imported wines— there is the fact that one is a product which is wholly home-produced, while the other is a product which is virtually entirely imported. The point was made clearly in a letter to the Financial Times from Mr. P. J. Woodhouse, Secretary of the Scotch Whisky Association, who said: … This Association has drawn the attention of successive Chancellors … to the situation created by the imposition of a much higher duty on home-produced spirits than that applicable to imported wines. As an illustration of the position, the current duty on fortified wines imported at a strength of say 35° is equivalent to 129s. 3d. per proof gallon, whereas that applicable to home-produced spirits is 342s. 9d. per proof gallon … As the Association said to the Chancellor recently, it is difficult to understand a policy which encourages imports at the expense of home production. Consequently, one can hardly let his comment pass without suggesting that he might consider practising what he preaches. The argument there is that it cannot be right that the blunt instrument, and such it is—the Minister of State so described it—of the regulator should apply equally to products which are wholly imported and those which are entirely home-produced. That is one argument.

The other—and it is one to which I referred during the Budget debate—is that, as my hon. Frien the Member for Moray and Nairn (Mr. G. Campbell) rightly said, in this Budget the Chancellor has increased the duty on wines and spirits, but has not increased it on beer. He has, therefore, put himself in the position of being unable to reverse by the regulator what he has done in the Budget unless the Clause is accepted if the situation requires the use of the regulator.

Mr. Taverne

With respect, if the Clause were accepted and my right hon. Friend wanted to reverse the position between wines and beer it would be necessary to have a separate group for each.

Mr. Jenkin

The real competitor of whisky is beer. There are advertisements which show a glass of beer and say A double Scotch at half the price. The point is that he could not put it back. Still more, if the situation requires the use of the regulator in an upward direction—which heaven forfend— the Chancellor would have no alternative but to increase the duty on whisky yet again in order to get the benefit of the increased duty on beer. Does the Chancellor want to be in that position? Is that the sort of weapon he wants to have in the event of his requiring to use the regulator?

The Minister of State argued the case for the five groups. He argued on the footing that the regulator should always be operated in respect of all the groups. We have five groups. How can the Treasury contend that five is the right figure, and that six, or even seven would be undesirable?

When the Measure was first introduced, an argument was put forward that the power which Parliament would be giving to the Government to exercise by order should not extend to the full range of powers of taxation which could be exercised only by Parliament. I agree. But we have come to realise that this is

a valuable flexible weapon in the Chancellor's armoury and all we are seeking to do is to make it marginally more flexible. The Minister of State has, on the contrary, shown himself to be remarkably inflexible, and in the circumstances it is right that the Clause should be pressed to a Division. I therefore ask my hon. and right hon. Friends to support it in the Lobby.

Question put, That the Clause be read a Second time: —

The House divided: Ayes 124, Noes 206.

Division No. 259.] AYES [8.52 p.m.
Alison, Michael (Barkston Ash) Hall, John (Wycombe) Peel,, John
Baker, Kenneth (Acton) Hall-Davis, A. G. F. Percival, Ian
Balniel, Lord Harrison, Brian (Maiden) Pike, Miss Mervyn
Bell, Ronald Harrison, Col. Sir Harwood (Eye) Pink, R. Bonner
Biffen, John Harvey, Sir Arthur Vere Pounder, Rafton
Black, Sir Cyril Harvie Anderson, Miss Powell, Rt. Hn. J. Enoch
Boardman, Tom (Leicester, S.W.) Hawkins, Paul Pym, Francis
Brewis, John Heald, Rt. Hn. Sir Lionet Ramsden, Rt. Hn. James
Brinton, Sir Tatton Higgins, Terence L. Rawlinson, Rt. Hn. Sir Peter
Bromley-Davenport.Lt.-Col.Sirwalter Hirst, Geoffrey Rhys Williams, Sir Brandon
Buchanan-Smith,Alick(Angus,N&M) Holland, Philip Ridley, Hn. Nicholas
Bullus, Sir Eric Hornby, Richard Ridsdale, Julian
Burden, F. A. Hunt, John Rodgers, Sir John (Sevenoaks)
Campbell, B. (Oldham, West) Jenkin, Patrick (Woodford) Rossi, Hugh (Hornsey)
Campbell, Gordon (Moray & Nairn) Kimball, Marcus Royle, Anthony
Carlisle, Mark King, Evelyn (Dorset, S.) Scott-Hopkins, James
Cary, Sir Robert Kirk, Peter Sharples, Richard
Chichester-Clark, R. Knight, Mrs. Jill Shaw, Michael (Sc'b'gh & Whitby)
Clegg, Walter Langford-Holt, Sir John Silvester, Frederick
Cooke, Robert Longden, Gilbert Sinclair, Sir George
Cooper-Key, Sir Neill McAdden, Sir Stephen Smith, Dudley (W'wick A L'mington)
Corfield, F. V. Maclean, Sir Fitzroy Smith, John (London & W'minster)
Crowder, F. P. Macleod, Rt. Hn. Ian Stainton, Keith
Dance, James McMaster, Stanley Stoddart-Scott, Col. Sir M. (Ripon)
Dean, Paul (Somerset, N.) Maddan, Martin Summers, Sir Spencer
Deedes, Rt. Hn. W. F. (Ashford) Maginnis, John E. Taylor, Sir Charles (Eastbourne)
Eden, Sir John Marten, Neil Temple, John M.
Elliot, Capt. Walter (Carshalton) Maude, Angus Thatcher, Mrs. Margaret
Elliott,R.W.(N'c'tle-upon-Tyne,N.) Mawby, Ray van Straubenzee, W. R.
Emery, Peter Maxwell-Hyslop, R. J. Waddington, D.
Errington, Sir Eric Maydon, Lt.-Cmdr. S. L. C. Walker-Smith, Rt. Hn. Sir Derek
Farr, John Mills, Peter (Torrington) Wall, Patrick
Fortescue, Tim More, Jasper Walters, Dennis
Fraser,Rt.Hn.Hugh(St'ford & Stone) Morgan, Geraint (Denbigh) Ward, Dame Irene
Galbraith, Hn. T. G. Munro-Lucas-Tooth, Sir Hugh Williams, Donald (Dudley)
Glover, Sir Douglas Murton, Oscar Wilson, Geoffrey (Truro)
Goodhart, Philip Naharro, Sir Gerald Wolrige-Gordon, Patrick
Goodhew, Victor Nicholls, Sir Harmar Younger, Hn. George
Gower, Raymond Noble, Rt. Hn. Michael
Grant, Anthony Onslow, Crarriey TELLERS FOR THE AYES:
Grieve, Percy Osborne, Sir Cyril (Louth) Mr. Reginald Eyre and
Griffiths, Eldon (Bury St. Edmunds) Page, Graham (Crosby) Mr. Bernard Weatherill.
Gurden, Harold Pearson, Sir Frank (Clitheroe)
Abse, Leo Blackburn, F. Carmichael, Neil
Albu, Austen Boardman, H. (Leigh) Carter-Jones, Lewis
Allaun, Frank (Salford, E.) Booth, Albert Coe, Denis
Alldritt, Walter Boston, Terence Coleman, Donald
Anderson, Donald Braddock, Mrs. E. M. Concannon, J. D.
Archer, Peter Bray, Dr. Jeremy Corbet, Mrs. Freda
Atkins, Ronald (Preston, N.) Brooks, Edwin Crawshaw, Richard
Atkinson, Norman (Tottenham) Brown, Hugh D. (G'gow, Provan) Cronin, John
Bacon, Rt. Hn. Alice Brown,Bob(N'c'tle-upon-Tyne,W.) Cullen, Mrs. Alice
Barnett, Joel Brown, R. W. (Shoreditch & F'bury) Dalyell, Tam
Baxter, William Buchanan, Richard (G'gow, SP'burn) Davidson,James(Aberdeenshire,w.)
Bence, Cyril Butler, Herbert (Hackney, C.) Davies, Harold (Leek)
Bidwell, Sydney Callaghan, Rt. Hn. James Davies, Ifor (Gower)
Bishop, E. S. Cant, R. B. Dempsey, James
Diamond, Rt. Hn. John Jones, Dan (Burnley) Paget, R. T.
Dickens, James Jones, J. Idwal (Wrexham) Palmer, Arthur
Doig, Peter Kerr, Mrs. Anne (R'ter & Chatham) Pardoe, John
Driberg, Tom Kerr, Dr. David (W'worth, Central) Parkyn, Brian (Bedford)
Dunn, James A. Kerr, Russell (Feltham) Pearson, Arthur (Pontypridd)
Dunwoody, Mrs. Gwyneth (Exeter) Lawson, George Pentland, Norman
Dunwoody, Dr. John (F'th & C'b'e) Leadbitter, Ted Price, Christopher (Perry Barr)
Edelman, Maurice Ledger, Ron Price, Thomas (Westhoughton)
Edwards, Robert (Bilston) Lee, Rt. Hn. Frederick (Newton) Price, William (Rugby)
Edwards, William (Merioneth) Lee, John (Reading) Rankin, John
Ellis, John Lestor, Miss Joan Reynolds, Rt. Hn. G. W.
English, Michael Lever, Harold (Cheetham) Roberts, Albert (Normanton)
Evans, Albert (Islington, S.W.) Lewis, Arthur (W. Ham, N.) Robertson, John (Paisley)
Evans, loan L. (Birm'h'm, Yardley) Lewis, Ron (Carlisle) Robinson, Rt. Hn. Kenneth (St.P'c'as)
Faulds, Andrew Lomas, Kenneth Robinson, W. O. J. (Walth'stow, E)
Fernyhough, E. Loughlin, Charles Rose, Paul
Fitch, Alan (Wigan) Luard, Evan Rowlands, E. (Cardiff, N.)
Fletcher, Raymond (Ilkeston) Lubbock, Eric Ryan, John
Fletcher, Ted (Darlington) Lyon, Alexander W. (York) Sheldon, Robert
Foley, Maurice Lyons, Edward (Bradford, E.) Shore, Rt. Hn. Peter (Stepney)
Foot, Michael (Ebbw Vale) McBride, Neil Short, Rt. Hn. Edward (N'c'tle-u-Tyne)
Forrester, John McCann, John Short, Mrs. Renée (W'hampton, N. E.)
Fowler, Gerry MacColl, James Silkin, Hn. S. C. (Dulwich)
Freeson, Reginald MacDermot, Niall Silverman, Julius (Aston)
Galpern, Sir Myer McGuire, Michael Slater, Joseph
Gardner, Tony McKay, Mrs. Margaret Small, William
Gray, Dr. Hugh (Yarmouth) Mackenzie, Alasdair (Ross&Crom'ty) Spriggs, Leslie
Gregory, Arnold Mackintosh, John P. Steel, David (Roxburgh)
Crey, Charles (Durham) Maclennan, Robert Steele, Thomas (Dunbartonshire, W.)
Griffiths, Eddie (Brightside) McMillan, Tom (Glasgow, C.) Symonds, J. B.
Griffiths, Will (Exchange) Mahon, Peter (Preston, S.) Taverne, Dick
Grimond, fit. Hn. J. Mahon, Simon (Bootle) Thornton, Ernest
Hamilton, James (Bothwell) Mallalieu, J. P. W. (Huddersfied, E.) Tinn, James
Hamilton, William (Fife, W.) Manuel, Archie Tuck, Raphael
Hamling, William Marquand, David Urwin, T. W.
Hannan, William Mason, Rt. Hn. Roy Varley, Eric G.
Harrison, Walter (Wakefield) Mellish, Rt. Hn. Robert Wainwright, Richard (Colne Valley)
Haseldine, Norman Mendelson, J.J. Walker, Harold (Doncaster)
Hazell, Bert Millan, Bruce Watkins, David (Consett)
Heffer, Eric S. Miller, Dr. M. S. Watkins, Tudor (Brecon & Radnor)
Henig, Stanley Milne, Edward (Blyth) Weitzman, David
Herbison, Rt. Hn. Margaret Mitchell, R. O. (S'th'pton, Test) Wellbeloved, James
Hooley, Frank Molloy, William White, Mrs. Eirene
Hooson, Emlyn Morgan, Elystan (Cardiganshire) Wilkins, W. A.
Howell, Denis (Small Heath) Morris, Alfred (Wythenshawe) Willey, Rt. Hn. Frederick
Howie, W. Morris, Charles R. (Openshaw) Williams, Alan (Swansea, W.)
Hoy, James Moyle, Roland Williams, Alan Lee (Hornchurch)
Huckfield, Leslie Murray, Albert Willis, Rt. Hn. George
Hughes, Roy (Newport) Neal, Harold Wilson, William (Coventry, S.)
Hunter, Adam Oakes, Gordon Winnick, David
Hynd, John O'Malley, Brian Winstanloy, Dr. M. P.
Jackson, Colin (B'h'se & Spenb'gh) Oram, Albert E. Yates, Victor
Jackson, Peter M. (High Peak) Orme, Stanley
Jeger, Mrs. Lena (H'b'n&St.P'cras, S.) Oswald, Thomas TELLERS FOR THE NOES:
Johnson, Carol (Lewisham, S.) Owen, Dr. David (Plymouth, S'tn) Mr. Ernest Armstrong and
Johnson, James (K'ston-on-Hull W.) Page, Derek (King's Lynn) Mr. Joseph Harper.
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