§ The Economic Secretary to the Treasury (Mr. Jock Bruce-Gardyne)
I beg to move,That the Customs Duty (Personal Reliefs) (No. 1) Order 1968 (Amendment) Order 1982 (S.I., 1982, No. 1591), a copy of which was laid before this House on 16th November, be approved.
The order has essentially two purposes. One is to call a halt to the practice that has developed of substantial imports of beer and lighters under duty-free concessions in circumstances which give rise to the strong suspicion that they are being imported for commercial rather than for personal use. The second is to make a modest amendment in the rules governing the duty on particular types of spirit. I shall deal with the two aspects in succession.
First, the imports of beer and lighters. Under the Customs Duty (Personal Relief) (No. 1) Order 1968, beer and mechanical lighters come within the allowances which are granted for goods other than tobacco, spirits, wines, perfumes and toilet water for which tight limits are prescribed. For goods other than those that I have specified, there is an allowance for up to £120 worth of goods that United Kingdom residents returning with purchases made in another member State of the European Community may import. A great deal of beer and many mechanical lighters can be bought for £120. At present £120 will buy about 300 litres of beer.
In recent months enterprising groups of three or four people have been sharing a van to bring back several hundred pounds worth of beer at a time. The frequency of such importations leaves no doubt that significant quantities of beer are being imported for resale. That also applies to lighters. The amount of beer imported through Dover and neighbouring Channel ports grew from 32,000 litres in May to over 430,000 litres in October. To stop the abuse article 2(3) restricts the permissible import of duty-free beer to 50 litres and duty-free mechanical lighters to 25 in number.
§ Mr. D. N. Campbell-Savours (Workington)
Is it merely speculation, or does the Minister have clear evidence about the use of imported commodities?
§ Mr. Bruce-Gardyne
It is difficult to collect specific evidence. Customs and Excise could only establish beyond peradventure that commodities were being used for commercial purposes if it followed them through to their eventual destination and consumption. That is not practicable for the quantities involved. An increase from 32,000 litres to 430,000 litres in five months suggests something more than personal consumption.
The limits restrict traffic to a generous level for personal use.
The order also covers the quantity of spirit that may be imported duty and tax-free. The quantity differs according to alcoholic strength. Under the 1968 order, three litres of spirit not exceeding "38.8 degrees of proof' or one and a half litres of spirit exceeding that strength may be imported. The amending order provides for the dividing line to be expressed as "22% by volume". The change comes into effect from the beginning of next year. It was provided for by section 7 of the Finance Act 1977, which was thereafter implemented by the 1979 order introduced by the Labour Government. 679 An order made under section 13 of the Customs and Excise Duties (General Reliefs) Act 1979 requires an affirmative resolution if it restricts the amount of relief given by a previous order. That is why this provision requires approval by the affirmative resolution procedure. The 22 per cent. is not an absolutely strict conversion of 38.8 degrees proof. The strict conversion would be 22.2 per cent. by volume, but the House might accept that 22 per cent. is a more convenient figure. I emphasise that, so far as we know, there is no spirit in normal commercial traffic that will be caught between the old limit equivalent of 22.2 per cent. and the new 22 per cent. limit.
The practical effect in terms of trade and imports is zero. Because there is a small downward correction, it is necessary for the order to receive the approval of the House under the affimative resolution procedure.
The major issue relates to the traffic in beer and lighters. I hope that the House will agree that the commissioners of Customs and Excise could not allow the exploitation of allowances for beer and mechanical lighters to continue on the scale that it has reached. The limits are not ungenerous. They cater adequately for the reasonable needs of travellers.
The House will be aware that the Select Committee on Statutory Instruments, in its fourth report, has queried the compatibility of the order with the relevant Community directive. I am advised that the order is intra vires, because the need to ensure that duty-free imports are intended for the personal use of the importer is deemed to be overriding.
On that basis, I ask the House to approve the order.
§ 10.36 p.m.
§ Mr. Robert Sheldon (Ashton-under-Lyne)
The history of duty-free concessions shows that there has been greater clarity and accuracy since they became statutory. This is a much more sensible way of operating.
The order limits the amount of duty-free beer to 50 litres and the number of duty-free mechanical lighters to 25. It may be thought that this is comparable because there must be abuse in respect of both items. The Minister has not dealt with lighters. He gave the relevant figures for imported beer. That was useful, and showed how such importation had undergone a startling increase, but he did not give comparable figures for lighters. I am as worried about lighters as I am about beer.
The figures in the ready reckoner produced in the Autumn forecast show that duty relief is about 14.3 per cent. per pint on beer. That excludes the extra charge of VAT. Fifty litres would yield a duty rebate of 50 times the 14.3 per cent, and then the pints must be converted into litres. I calculate that, exclusive of VAT, bringing in 50 litres of beer would save 12.63.
In section 3(2) of the Finance Act, the duty on lighters was increased from 20p to 50p under protest from the Opposition. If someone brought in 25 cigarette lighters bearing a duty of 50p each, the duty saving, exclusive of VAT, would be £12.50. The two concessions amount to £12.63 for beer and £12.50 for mechanical lighters. The hon. Gentleman has not given the figures—I should like him to do so now—to show how the importation of mechanical lighters has become the problem that he says it now is. The main consideration—which the Minister completely left out—appears to be rough equality in duty 680 advantage. Should that be the consideration in bringing about these changes, or is it really because the goods are being imported in quantities for a commercial purpose? The Minister must give the figures for mechanical lighters to show that they are being imported for a commercial purpose.
The 50 litres of beer could be brought in for other than a commercial purpose. Several people could well bring in that amount for one or two parties, particularly during Christmas time, and they could consume that beer within a week or so. It is not an unusual quantity, However, if someone were to bring in 25 lighters, it is difficult to imagine anything other than a commercial purpose. There is a marked difference between the use that can be made of 50 litres of beer and the use that can be made of 25 lighters.
Last year, we sharply increased the duty on lighters. It is up to the Minister to show that the increase in duty on lighters has led to the possibility of abuse. There may well be some slipshod thinking here, because the two amounts of duty relief are so close that people may mistakenly think that these two items are comparable.
What other articles are being considered for limitation? If there is abuse in respect of cigarette lighters and beer, there may well be so in other areas. What other articles have been considered for limitation, and are the Government thinking in terms of future regulations on this point? Matches could be one possibility, because thanks to the Finance Act 1982, there has been a considerable increase in the duty on matches. That struck us at the time, and still does, as ludicrous. Nevertheless, it could have certain consequences about which the Minister should inform the House.
The second proposal is that there should be a change from proof to percentage volume. Is this the last flicker of the Sikes proof system, or does it exist elsewhere in our legislation? I recall that 100 proof measured the alcoholic content which when mixed with a quantity of gunpowder sustained a flame. There was a certain romance about that and it lasted for a considerable time, but, although that system was efficacious, it needed to give way to a more precise measurement.
Under the old Sikes system, any weaker or stronger liquid could be compared with the 100 proof. That system lasted through many years of increasing accuracy in measurement, and all who have a nostalgic interest in the subject will feel that the percentage of alcohol does not convey the same kind of awe as degrees proof.
The Minister said that 38.8 proof was not precisely equal to 22 per cent. by volume. The Economic Secretary said that there was nothing on the borderline. I do not know the extent of his consultations, but if he were to be shown that there is a borderline figure he may wish to reconsider the matter. The new system will come into force in one month's time. How much notice was given to the trade for the purpose of changing labels to adjust to the new regime?
Those are my main points, but, depending on the Economic Secretary's replies, I may need to raise the matter again with the Leader of the House.
§ Mr. Hugh Dykes (Harrow, East)
I share the anxiety of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) about lighters. I shall air the matter briefly and try to provide further reasons why the House should 681 reconsider the matter carefully, notwithstanding the fact that it was considered in the Statutory Instruments Select Committee. I hope that my hon. Friend the Economic Secretary to the Treasury will consider this aspect of the matter in his reply.
Whatever protests were made in 1981, when the Finance Act brought in a swingeing increase in duty, the present duty on lighters is irrational. The matter must be reconsidered because of the European Community aspect. The Government have the opportunity, even if this order is passed, to reconsider the plight of the distributors of lighters and the consumers who wish to purchase cheap lighters but who find it increasingly difficult to do so.
It is interesting that four countries in the Community levy customs duties as well as VAT on both matches and mechanical lighters. The two have always been linked in the past. Those four countries are Denmark, Ireland, Italy and the United Kingdom. The British excise duty is heavier than that of any other country. The tax on matches is now £1.15 per short standard—or 7,200 matches—and 50p on each lighter, as opposed to 20p before the Finance Act 1981. On disposable lighters, which normally retail at about £1 to £1.25, the tax is now an onerous proportion of the total retail price, excluding VAT.
In April 1981 there was a 150 per cent. increase in duty, but it must be extremely frustrating to the Treasury that the revenue from that tax is negligible. Despite some reluctance in the Treasury, I managed to extract from it last week the fact that the yield for 1981–82 was £16.4 million and in 1980–81 it was £9.6 million. However, most of that revenue comes from matches and only £3 million comes from mechanical lighters.
The European Commission has always taken the view—quite legitimately—as do many people in Britain, that the main aim of an excise duty is to raise revenue and that the duty is valid only if the yield is sufficiently great, bearing in mind the expenses incurred in obtaining it. For beer and other main consumption items, that is probably unarguable, but it does not apply to mechanical lighters, which have a small market that is growing smaller as a result of the imposition of this onerous duty.
A colleague of mine who is a European Member of Parliament recently asked in the European Parliament whether the Commission was still in pursuit of the objective of harmonising duties on tobacco, alcohol, wines, beer and oil and abolishing duties that produce negligible or tiny revenues. The answer was an emphatic "Yes". That is indeed the aim, and it should surely also be the aim of the domestic Exchequer.
The duty on lighters remains a significant irritant for consumers, importers and manufacturers alike. People in the business in Britain rightly point out that the Commission's proposals for harmonising consumer taxes other than VAT provide that member States should bear it in mind that excise duty should not affect products which may be regarded as essential or ordinary everyday products for normal living. Although beer might come into that category, the yield makes it impossible for the domestic Exchequer to consider abolition. Matches and lighters, however, should surely fall into that category.
There is now overwhelming evidence that the heavy duty imposed has almost entirely destroyed the market in Britain. Alas, there are now no significant domestic manufacturers of cheaper lighters. Indeed, one of the reasons for the order is that the extremely heavy duty encourages smuggling. In every way, therefore, the duty 682 seems illogical and irrational and no more than a bureaucratic continuation to please the Treasury of a duty that is indefensible in all inherent terms. That is the whole purpose of the special order.
The Government still have the opportunity to reconsider the duty on lighters whenever they like. It is entirely unsatisfactory for all concerned. Consumers wishing to buy a cheap product have to pay far more because of a duty that yields less to the Treasury than it costs to raise. Manufacturers and importers are selling far fewer lighters. Even well-known companies in this country have either already gone out of business or are on the verge of doing so, so the Exchequer is left to collect a diminishing amount of money. If one or more United Kingdom companies manufactured a cheap lighter to help consumers, the situation might be different in that there might be a case at the margin for protecting a domestic industry, particularly a re-emergent industry. That is not the case, however, as I believe that the only lighters now manufactured in the United Kingdom are high price luxery lighters.
The Economic Secretary is a wise and sensible person. Therefore, even if he cannot make any changes on the other imported products covered by the order and the abuse that I freely concede goes with them, I hope that he will seriously reconsider the plight of the cheap lighter sector.
§ Mr. Bob Cryer (Keightey)
I wish to comment on the fourth report of the Select Committee on Statutory Instruments, of which I am Chairman. The Committee drew special attention to the order becausethere appears to be a doubt whether it is intra.The Minister, not unexpectedly, took the view that it was indeed intra vires.
Paragraph 4 of the report states:Council Directive 69/169/EEC provides that goods in travellers' personal luggage shall be exempt from VAT and excise duty if they have no commercial character and their total value does not exceed a specified monetary limit.Here, however, in addition to the specified monetary limit a limit of 50 litres of beer and 25 lighters is being imposed.
Article 3.2 of the directive states:Importation shall have no commercial character if theyThat is a general guideline. It is perhaps unsatisfactory, but it is all that the Treasury has.
- (a) take place occasionally and
- (b) consist exclusively of goods for the personal or family use of travellers, or of goods intended as presents; the nature or quantity of such goods must not be such as might indicate that they are beig imported for commercial reasons".
As the Select Committee report makes clear, the provisions of that directivehave direct effect in accordance with the principles laid down by the European Court, and … give rise to rights enforceable in the courts of the United Kingdom in accordance with sections 2(1) and (3) of the European Communities Act 1972.
The Committee does not make a judgment about the merits of the order; it is concerned simply with whether the order is within the framework of the legislation on which the Minister has to operate.
The Commissioners of Customs and Excise gave a curious explanation in the supplementary memorandum, which is printed in the report to the House and which has been mentioned by the Minister. The directive states thatimportations shall have no commercial character".A number of qualifications are then given. The Commissioners of Customs and Excise say that 683imported goods are subject to the rule that their nature or quantity must not be such as might indicate that they are being imported for commercial reasons. This constitutes an overriding qualification which is not capable of being displaced by evidence that the goods in question were in fact imported for non-commercial reasons.That is an extraordinary explanation.
A person may arrive with 60 litres of beer for a party which a dozen people will attend. They would be capable of absorbing such a quantity of beer. As he has never done this before, it will be occasional use. But, even if he provides the customs officer with an invitation to the party and with the names and addresses of all those likely to be present, such evidence is not capable of displacing the authority that the Treasury has produced to limit the importation to 50 litres. Therefore, the Committee reported to the House that there did not appear to be any sound basis for the application of the limit either on beer or on lighters beyond the qualifications laid down in article 3.2 of the directive. The Minister may say that that is unsatisfactory.
Many of us—this was not the common view of the Committee—regard directives from the Common Market with no great affection. None the less, the Committee has a duty to examine the authority of such orders and to report. The Minister has had his advice and we have had our advice. Our advice, from the Speaker's Counsel, is that there is a doubt about the vires of the order. The Committee had to take that matter seriously. I hope the Minister will take the report seriously as the Committee was established to ensure that Ministers excercise their powers accurately and do not produce instruments that go beyond the defined powers.
The Committee has drawn the attention of the House to this matter. I do not propose to divide the House. I hope that, at the conclusion of our short debate, the Minister will go back to his advisers to see whether an amending instrument is required to conform to the directive and the recommendations of the Committee.
§ Mr. Bruce-Gardyne
We have had a useful short debate on the order in which a number of questions have been raised and comments made. I should like to deal with them in a somewhat reverse order by beginning with the comments of the hon. Member for Keighley (Mr. Cryer).
I freely confess to him that when one is among lawyers one is on dangerous ground. It has to be conceded that establishing beyond a peradventure when items are imported for a commercial purpose rather than a personal use presents considerable problems.
The hon. Gentleman has fairly quoted from the directive which lays upon us the obligation to ensure that duty-free importations should not have a commercial character. The problem we are up against is that once one is dealing for example, with substantial quantities of beer, it is extremely difficult for the Customs and Excise to judge in the period available, without severely delaying traffic, precisely how much is being brought in. The limit of 50 litres has been chosen with a view to establishing a fairly generous point that would be amply adequate for any conceivable personal use.
The hon. Gentleman suggested that someone coming in with 60 litres of beer—that is quite a large amount—might invite the officer of Customs and Excise to attend the party 684 to see that the beer was consumed on the premises. Unfortunately, the Customs and Excise has neither the time nor the manpower to respond enthusiastically to invitations of that kind. I recognise the authority with which the hon. Gentleman speaks as chairman of the Select Committee. I shall study his remarks. The best legal advice I am given is that the order is intra vires and that it is necessary in the light of recent developments to fulfil our obligations under the directive, especially the obligation to ensure that importation is not for commercial purposes.
It was for the reasons set out by my hon. Friend the Member for Harrow, East (Mr. Dykes) that I looked sceptically at an import duty on lighters. Although my hon. Friend is correct in saying that lighters manufactured in this country are essentially those at the top of the range, it has to be recognised that the manufacturers would not take enthusiastically to the abolition of the duty. My hon. Friend was suggesting, I believe, that the yield from the duty was less than the cost of collection. I assure him that that is not the case, certainly following the increase in duty in the 1981 Budget.
This is one aspect of our duty structure that needs to be kept under review for the reasons that my hon. Friend has explained. I cannot give any undertakings, but I accept the argument advanced by my hon. Friend for considering whether the yield and the cost of collection and the risk of smuggling justify the continued imposition of the duty. We must also bear in mind the position of the domestic manufacturers of lighters, who, as I said, would not be keen to see the duty go.
I apologise to the House for dealing with these points in reverse order, but it is easier to do so. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) mentioned consultations and the possibility that certain spirits might fall within the gulch between 22.2 per cent. and 20 per cent. or, to put it the other way round, between 38.8 per cent. and 22 per cent., which is the amended order in this range.
The alcoholic strength of whisky, brandy, rum, gin and vodka is at least 36 per cent. by volume, so they are miles over the top and could not possibly be affected. Most liqueurs also have a strength well in excess of 22 per cent. by volume, with the two exceptions of advocaat and anisette. I must admit that they are not my normal bedtime drinking, but some people have acquired a taste for them. The percentage of alcohol in advocaat is 20.5 per cent., which, again, is well short of the margin between the old and the new dividing line, and in anisette it is 26.3 per cent., which, again, is substantially above the dividing line.
I am assured that there is no known instance of the 22 per cent. dividing line in practice detracting from the existing duty-free entitlements under the legislation which this order will replace. It was not felt necessary to conduct consultations because the order did not seem to have any impact on the trade.
§ Mr. Robert Sheldon
A variety of new cream liqueurs have come on the market this year. I should have thought that it would be essential to have consultations about those innovations which were designed for sale in the Christmas trade this year.
§ Mr. Bruce-Gardyne
I shall certainly see if there are any exceptions, but I am assured that there are no spirits 685 or liqueurs at or about this dividing line, and, therefore, no known instance where the trade would be affected. However if the right hon. Member for Ashton-under-Lyne, or any other hon. Member, has evidence to the contrary I shall be happy to examine it.
The right hon. Gentleman asked whether degrees proof still survived in any shape or form and asked about the Sikes system. I must admit that he caught me wholly off-guard on that. However, I am advised that the Sikes system has now been removed from general revenue law and that Customs and Excise has sold off its Sikes hydrometers as souvenirs. If the right hon. Gentleman would like one, I am sure that we could find him one. I cannot, off the cuff, say whether proof exists in any other non-Revenue legislation, but, if it does, I am not aware of it.
The right hon. Gentleman's main point was that mechanical lighters had been dragged in on the coat tails of the new regulation to control imports of duty-free beer. I understand that recently there have been several instances in which travellers have been found with substantial quantities of manufactured lighters. I have not got any up-to-date figure for the rate of growth in such traffic, but there was a prosecution after a traveller came into the country with 600 lighters. By any stretch of the imagination, that was hardly likely to be for personal use.
The right hon. Member for Ashton-under-Lyne suggested that 25 might be too handsome a limit to have for lighters and that nobody would want to bring in 25 lighters for personal use. I must admit that in bygone days, when the differential between the cost of lighters in France and the United Kingdom was much greater than it is today, I brought in perhaps half a dozen lighters for my own personal use. I found it well worth doing, because the 686 lighters did not last long and were easily lost. Therefore, a certain number of lighters can reasonably be expected to be imported for personal use. However, I accept that 25 is a pretty handsome limit.
§ Mr. Robert Sheldon
My argument was not so much that 25 was a handsome limit but that, while it was hard to imagine bringing in 25 lighters for anything other than commercial use, it was easy to see that, in practice, 50 litres of beer could be brought in for personal use. Indeed, my hon. Friend the Member for Keighley (Mr. Cryer) went into the details. The amount of duty saved is such a coincidence that it almost seems as if equality of duty saved was the motive.
§ Mr. Bruce-Gardyne
There is no particularly sacrosanct figure for either commodity. After all, 50 litres of beer is a pretty handsome allowance for anybody. If I met the right hon. Gentleman on the quayside at Dover and he was bringing in 50 litres of beer, I would be mildly surprised. [Interruption.] I would not dispute that 25 lighters is perhaps on the generous side, but the line has to be drawn somewhere. The line should be drawn at the point at which people would have considerable difficulty in proving that they were really bringing in a greater quantity for personal use. In the circumstances, the limit of 25 lighters and 50 litres is not unreasonable.
On that basis, I hope that the House will give the order a fair wind.
§ Question put and agreed to.
That the Customs Duty (Personal Reliefs) (No. 1) Order 1968 (Amendment) Order 1982 (S.I., 1982, No. 1591), a copy of which was laid before this House on 16th November, be approved.