Duty-free Goods (Airports) (Hansard, 15 July 1981)

§ Mr. Anthony Grant (Harrow, Central)

At this late hour I am extremely grateful to my hon. and learned Friend the Minister of State, Treasury for being here to answer this debate after the long days and nights that he has spent on the Finance Bill.

This is an important subject, because most of us have experienced the tedious burden of humping duty-free goods on and off aircraft and the discomfort that the load causes during our journey. This crazy ritual, which has become a standard feature of air travel nowadays, has worse effects than mere inconvenience to passengers.

At a time of high energy costs and severe financial difficulty for airlines throughout the world, this absurd practice adds hugely to overheads and hence to fares or subsidies to airlines. British Airways have undertaken a careful analysis of the effects upon them. They estimate that the average quantity of duty-free liquor carried by passengers imposes an additional fuel cost of over £1 million per annum. Other airlines, large or small, sustain equivalent added costs throughout the world. As energy costs rise, so will this quite unnecessary bill.

What is more, the carriage of duty-free alcohol is an added safety hazard. My hon. Friend the Member for Newbury (Mr. McNair-Wilson) drew attention to this in a thoughtful speech on 22 May this year. Further, the British Air Line Pilots Association, in a recent report, pointed out this factor most forcefully. In 1973, in the Varig fatal accident, 117 lives were lost following an uncontrollable fire that was found to have been exacerbated by duty-free spirits igniting in the luggage racks.

During one month in 1980 there were seven recorded cases in the United States where bottles were used by hijackers. The hijacked VC 10 at Amsterdam was burnt out as a result of a deliberate fire started with duty-free bottles. On a lesser scale, there have been instances of injury to passengers as a result of falling bottles, and falling bottles have also proved an added hazard when emergency exits have had to be made from aeroplanes. Of course, the safety aspect should not be exaggerated, but anything that minimises risk should be carefully considered.

What can be done? One solution would be to abolish the whole silly charade of duty-free goods. There seems to be no justification for giving air travellers a duty-free allowance in addition to what they need to drink in transit. But, of course, our airports earn about £20 million to £30 million a year from their duty-free shops, and that admirable company Sealink also benefits from them. Certain other interests no doubt benefit and would be in jeopardy if there were complete abolition.

Therefore, I propose a simple solution, and that is to enable duty-free goods to be purchased at the point of arrival rather than the point of departure. Purists in Her Majesty's Customs, I know, look upon this suggestion with the same horror a maiden aunt looks upon the notion of a blue film show. There is really no more or less morality and no more or less justice in buying duty-free 1366 goods when one arrives rather than when one leaves. It is vastly more economic for airlines and air travellers generally. It is also safer.

What could be more absurd than the quite common practice of buying at the shop in Heathrow and lugging bottles to Europe or elsewhere in the world—and I confess that I have sometimes done this myself—and then bringing them back again, all because one feared that a suitable shop might not be available abroad? I understand that there would be no legal difficulties in following this proposal because section 13 of the Customs and Excise Duties (General Reliefs) Act 1979 provides: The Commissioners may by order make provisions for conferring on persons entering the United Kingdom reliefs from duty and value added tax". There may be international obligations to be overcome, and if there are I am sure that my hon. and learned Friend will tell me. These should not be insuperable. All nations that have airlines have an interest in economy and safety of operation. Many places already provide duty-free shops for those arriving. This is the case at Rio de Janeiro, Cairo, Khartoum, Colombo, Singapore, Caracas and Iceland, and I understand that Australia is considering adopting such a facility.

There would have to be some physical reorganisation at airports, but anyone who uses Heathrow will know that reorganisation is almost a feature of everyday life there. Transferring sales to the point of arrival would make little if any difference to sales. Airlines would gain by carrying either less fuel or more passengers, instead of whisky and gin. Passengers' rights would be unchanged, and their benefits would be greater safety and convenience and, quite possibly, cheaper fares.

The Customs would not lose their precious revenue. Her Majesty's Customs is still thinking back to the age when travel was by sea and it was sometimes necessary to take victuals for sustenance on long voyages, and, if one had some left over, there was a concession to bring it in. However, in the interests of economy, air travel and safety, Customs should be brought into the jet age. I look to the Minister of State, who is one of the most reasonable and sympathetic Treasury Ministers I have known, to do so.

§ The Minister of State, Treasury (Mr. Peter Rees.)

I am grateful to my hon. Friend the Member for Harrow, Central (Mr. Grant) for his kind words. May I in turn congratulate him on the zest with which he has raised a subject of such topical importance after what has seemed like 36 hours of almost continuous fiscal debate? At any rate, he has not flagged.

Before I come to the solutions that he propounds, I hope that the House will forgive me if I briefly outline the historical background to the establishment of duty-free shops and the relationship with the personal allowances granted to passengers on arrival in the United Kingdom.

Duty-free shops were originally provided to encourage visitors to this country to purchase British goods before they returned home. That was considered to be a useful way to advertise domestic products, and, in the past certainly, the foreign currency earned in that way was regarded as a valuable, if small, contribution to our balance of payments. The facility was later extended to United Kingdom residents going abroad, partly for similar reasons but mainly because access to duty-free shopping 1367 had come to be regarded throughout the world as a normal convenience for outward-bound passengers. The basis of the relief in law is, of course, that exported goods are relieved from indirect taxes.

The personal allowances which permit incoming passengers to import small quantities of goods free of revenue charges have their roots—as my hon. Friend perceptively observed—in the distant past, when vessels were victualled for long voyages, and both passengers and crew usually had something in hand on their return. Even in those distant days, Customs recognised the need for compassion and desisted from levying duties on nominal amounts of food, drink and tobacco imported in that way.

Nowadays, of course, the purpose of the allowances granted to incoming passengers is to speed up Customs clearance by avoiding the need to collect small sums of duty and tax on items that are typically bought by returning tourists. It is an administrative measure that conveniently embraces a hallowed tradition of the past. It is not, as it were, a reward for having been abroad to which passengers should be entitled even if they did not actually bring the goods with them.

My hon. Friend touched on the question of air safety, and naturally I share his concern. However, I remind him and the House that the subject of liquor carried on aircraft was aired in the House on a previous occasion on 4 February last year, when my hon. Friend the Minister of State, Department of Industry, who was at the time Under-Secretary of State for Trade, and who, of course, has personal experience of flying in many roles, said that he did not believe that there was an unacceptable safety hazard if liquor was stowed properly—and I agree that that is a qualification to his remarks.

However, quite large amounts of liquor are, in any event, carried aboard aircraft for sale and consumption in flight. I doubt whether passengers would relish flying dry, even in the interests of greater safety or for the more convenient administration of Customs and Excise at either end.

I noted carefully what my hon. Friend said about fuel saving. I think, however, that it is not unreasonable to say that the quantities involved are so variable and so small, in the light of the weight of fuel, passengers and baggage carried and, indeed, of the aircraft itself, as not to be susceptible to precise worldwide calculation. It is certainly doubtful whether the quantity of spirits carried by passengers is any greater than that held in aircraft stores.

My hon. Friend, with his background, rightly touched on some of the legal constraints which might have to be considered. I should perhaps, therefore, turn briefly to some of the constraints which apply to the introduction of 1368 inward duty-free shops, which I think was his preferred solution to what admittedly is a problem that we should consider.

On the international front, this country, together with most other major countries engaged in air transport, has subscribed to recommendations made in 1960 by the Customs Co-operation Council that sales in duty-free shops should be confined to travellers leaving for abroad by sea or air. I must advise the House that we could not depart unilaterally from our obligations under that convention, and there is little sign that other countries concerned would welcome a move in that direction.

My hon. Friend listed a number of places which have such facilities, but the airports concerned are located in developing countries seeking to take advantage of a marked preponderance of inward tourists rather than their own nationals going abroad. I must observe that only one of the countries that he mentioned—it would perhaps be invidious to single it out—is a signatory to the convention to which I have drawn attention.

I do not believe that inward facilities would be generally welcomed by airport operators. I understand that it would be difficult to locate them at our principal airports without major alterations which would be extremely expensive. Their use would also tend to create congestion and delay at the very point where every attempt is made by all concerned to streamline and speed the clearance of passengers. Inevitably there would be a proliferation of such facilities.

I can assure my hon. Friend that the Customs and Excise, far from being lodged in the eighteenth or nineteenth century, is acutely aware of the problem. It maintains a very close relationship with its counterparts in the air industry and makes every effort to keep abreast of developments in this rapidly developing field. It has considered very carefully the idea of introducing inward duty-free shops, but has concluded—rightly, I believe, at the present time—that such a change in favour of air passengers could not be justified and would not be practicable in the absence of widespread agreement within the industry as a whole and with major countries concerned in air transport.

My hon. Friend has done a service to the House in ventilating the problem. I hope that I have demonstrated that thought has been given to developments in this area. Although it may be necessary in future to attempt to renegotiate the convention, depending on developments in this area, I must say—without, I hope, myself being regarded as stuck in the eighteenth or nineteenth century—that I do not feel that the moment has yet arrived for the imaginative development proposed by my hon. Friend.