HC Deb 09 July 1985 vol 82 cc979-83

'The Alcoholic Liquor Duties Act 1979 shall be amended by inserting after section 74 the following section— 74A.—(1) Any duty chargeable on spirits or wines pursuant to section 5, or section 54 above shall be paid, in any year commencing with the year which begins 1st April 1985, fifty-six days after the commencement of the relevant period. (2) In subsection (1) above 'relevant period' means the period beginning with the date on which the spirits or wines in question are imported into the United Kingdom or removed from an excise warehouse (as the case may be) and ending on the date on which those spirits or wines are sold to a person otherwise than in the course of an excise licence trade carried on by him. (3) The powers of the Commissioners to make regulations under this Act or under any other enactment shall be read and construed subject to, and in accordance with, this section.".'.—[Mr. Hirst.]

Brought up, and read the First time.

9.30 pm
Mr. Michael Hirst (Strathkelvin and Bearsden)

I beg to move, That the clause be read a Second time.

The present 28-day period of duty deferment was introduced in April 1983 to give the wines and spirits trade a period of grace before excise duty had to be paid on goods brought out of bond or imported. That relief was given not least to help the hard-pressed Scotch whisky industry and to protect jobs in an industry which generates huge exports for the United Kingdom.

Since that deferment of duty was introduced, a number of measures have adversely affected the cash flow and profits of the wines and spirits trade, especially the Scotch whisky industry on which many jobs in my constituency depend. Two years ago, the concessions on tolerance losses on the bottling of spirits were withdrawn and as part of the revision of the corporate sector's fiscal regime in last year's Finance Act, stock relief was also withdrawn. I do not object to the fact that there was no exemption for the Scotch whisky industry when stock relief was withdrawn, as I realise that that would have been invidious. Nevertheless, no other industry depended so much on stock relief as the Scotch whisky industry which has a unique stock-sales ratio because whisky has to mature for a long period. The Finance Act 1984 also eliminated the postponed accounting system for VAT, to the detriment of the cash flow and profits of wine importers, many of whom also own Scotch whisky or other spirit distilling concerns.

Duty deferment was introduced as an acknowledgement of the adverse impact on cash flow of financing excise duty when the average period between import or clearance from bond and the receipt of the proceeds of sale from the ultimate customer was approximately 12 weeks. In answer to a parliamentary question from my hon. Friend the Member for Reigate (Mr. Gardiner) on 30 April 1985, my right hon. Friend the Minister of State said that the period of duty deferment in the United Kingdom was very modest compared with that in other EEC countries, where it could range up to six months.

My right hon. Friend will also be aware of the recommendations in the report of the Food and Drink Manufacturing Economic Development Committee on Scotch whisky in the 1980s. The new clause seeks to extend the duty deferment period from four weeks, or 28 days, to eight weeks, or 56 days, which is still considerably short of the 12-week average financing period between withdrawal from bond and the receipt of sales proceeds. It is a long way short of comparable duty deferment periods in EEC member countries.

I accept that the proposal that I have brought before the House in the new clause was costed in the answer that my right hon. Friend the Minister of State gave to my hon. Friend the Member for Reigate on 30 April. I accept that £185 million is a far from insignificant sum.

I could not end my speech without referring to the fact that the Scotch whisky industry is appreciative, as I am, of the lenient treatment that it received in the Budget on excise duty valorisation. The new clause should not be misinterpreted as representing a failure to acknowledge that. It is, rather, an effort to draw continued attention to the plight of the Scotch whisky industry, which can be represented by the number of distilleries that are not currently working, which have been shut down on a care and maintenance basis, or which are working at capacity of about 30 per cent. There is a real problem in the Scotch whisky industry, and that is what I am seeking to ventilate by moving the new clause.

Mr. Roger Sims (Chislehurst)

I declare an interest as an adviser to the Scotch Whisky Association. If hon. Members will excuse the pun, I support the spirit of new clause 5.

As my hon. Friend the Member for Strathkelvin and Bearsden (Mr. Hirst) said, there is often a period of 12 weeks between whisky being drawn out of bond and being sold. In the wholesale trade, it is usual to have a month or two's account to allow for such expense. The agreement reached a year or two ago was that there should be an average four-week deferment period so that there was some assistance to the industry in paying the duty to which my hon. Friend refers. The new clause suggests that the period should be extended to eight weeks. I shall not quibble about precisely what would be a reasonable period of deferment. Something between nothing at all and the 12-week average period is six weeks, and that is the period that the SWA would like. An average of six weeks means that there would be a minimum of four weeks and a maximum of eight weeks. That would assist the industry very much in cash flow, which, as my hon. Friend said, is a real problem, and has been exacerbated by several measures in the past few years, particularly the abolition of stock relief.

The House will recall that that relief was a corporation tax concession to alleviate the stock value problems caused by high inflation. It was withdrawn precipitately in March 1984. It was not a gradual withdrawal — it was withdrawn at one fell swoop. It had a particularly serious effect on the Scotch whisky industry because its stocks have to be kept for so many years. It is curious that it is a capital-intensive industry, but the capital is tied up not in plant and machinery but in its stocks.

I shall not repeat all the arguments about stock relief. My hon. Friend will be familiar with them. In any event, I am conscious that they are not the subject of the new clause and I would not wish to incur your displeasure, Mr. Speaker. I say only that the abolition of stock relief has caused a real cash flow problem to the Scotch whisky industry, which estimates that its additional tax liability for the most recent financial year, simply through the withdrawal of stock relief, is some £30 million.

The extension of the period of deferment would, to some extent, alleviate the problem and would, as my hon. Friend said, bring United Kingdom practice into line with practice elsewhere. It would not be an unduly expensive measure, because it is a one-off step. There would be a cost to the Treasury this year, but it would not recur. I hope that my right hon. Friend will consider the new clause sympathetically.

Dr. Marek

The hon. Member for Strathkelvin and Bearsden (Mr. Hirst) said that some distilleries have been shut or closed temporarily on a care and maintenance basis. If that is the case, the House should be worried, because the whisky industry is a successful one that contributes to our balance of payments and has a good record of exports. It would be a great pity if the industry went into decline. I blame the Government across the board for decimating manufacturing industry and exports during the past five or six years, and it would be sad if yet another industry were to bite the dust simply because it did not receive the right help at the right time. The Government could provide such help, although it may be only temporary.

I may have got it wrong, and the industry may be healthy. Perhaps it wants this tax concession simply to make more profits. I do not know. It could be one or the other, or it may be a mixture of both. I hope that when the Minister replies he will use some of the time—I suspect that he will resist the new clause—to reassure me and the House that the whisky industry is in a good state, that it will continue to make exports for the benefit of Britain, and that we shall continue to have the present large range of malt whiskies.

Sir Hector Monro (Dumfries)

I firmly support the plea of my hon. Friends the Members for Strathkelvin and Bearsden (Mr. Hirst) and for Chiselhurst (Mr. Sims) for the Government to accept the new clause. Sadly, unlike most Scottish Members, I have no constituency interest. Therefore, I speak only on behalf of a great Scottish industry that deserves as much support as it can get at a time of high unemployment, distilleries closing or going on short time, and boxing and blending plants being in a similar plight. Those of us who live in Scotland realise that that is a fact, and that we cannot turn a blind eye to one of Britain's great industries, which has provided much valuable export revenue for many years, but which is running into difficulties for reasons that are well known to Ministers. We should now think seriously about providing additional assistance.

My right hon. Friend the Minister will know that, this year, many distilleries will have to pay substantially increased rates on their plants, which are not covered by commercial or domestic relief. That has created substantial worries about their cash flows later in the year.

At the beginning of this year, my right hon. Friend the Minister was kind enough to meet a deputation of Scottish Conservative Members, who put to him the serious plight of the whisky industry. I appreciated his sympathetic hearing of our case. We welcome the favourable treatment in the Budget in relation to excise duty on whisky as compared with other spirits, and there is no question but that the whisky industry appreciated that concession. We must go further if we are to promote the industry to the top of the tree in terms of home and export production.

9.45 pm

My hon. Friend the Member for Strathkelvin and Bearsden has explained the technical aspects of the new clause relative to stock relief, which seem to the industry to be the most effective way to obtain assistance in the immediate future. The concession on stock relief which might put the Scottish industry in a similar position to that of some of our competitors in Europe would be an enormous help. In the past, Ministers have listened sympathetically to representations on the industry's plight. I know that, if they had the time to go to the whisky-producing areas in Scotland, they would see that what we have said is the truth—many distilleries have closed and many operate on short time. There is great concern in the Highlands about the future of the most important industry in the area.

I hope that Ministers have listened sympathetically to what hon. Members have said and that they will accept the new clause as a measure that will assist an industry that could do so much for our economy.

Mr. Terry Davis

I have listened with interest to what Conservative Members have said in advocating the new clause and have carefully read the papers that were kindly sent to me by the hon. Member for Strathkelvin and Bearsden (Mr. Hirst). I recognise that there is a problem. Nevertheless, I take a relaxed view of this issue because I confidently predict that the hon. Member for Strathkelvin and Bearsden will not press his new clause to a Division, whatever the Government say.

The Minister of State, Treasury (Mr. Barney Hayhoe)

This short debate has concentrated on the whisky industry, although the purpose of the new clause goes rather wider than that important industry, which I think draws support from both sides of the House. We all recognise the special place of that industry in exports and its substantial contribution to trade over the years.

I am advised that the drafting of the new clause is not entirely clear. From what my hon. Friend the Member for Strathkelvin and Bearsden (Mr. Hirst) said, it is clear that he wishes to extend the deferment from four weeks to eight weeks and thereby improve the cash position of the Scotch whisky industry on which he concentrated. The measure would also affect other industries and other parts of the spirits and wine interests at home and abroad.

My hon. Friend the Member for Strathkelvin and Bearsden explained that the wine and spirits trade has been pressing for an extension of duty deferment to help its financial position and to offset the effects of various measures which have eroded the benefit of duty deferment since it was introduced in February 1983. My hon. Friend referred to the withdrawal of postponed accounting for VAT in the last Budget, the withdrawal of stock relief, the changes relating to the duty on strengths and quantities declared on bottle labels, tolerances and matters of that kind. I assure my hon. Friend that representations made direct to Treasury Ministers by the Scotch Whisky Association and others were taken into account by my right hon. Friend the Chancellor in the context of his Budget judgment and decisions this year. He decided to deal favourably with the Scotch whisky industry, and I am glad that hon. Members have referred to that decision. It is of significant value to the industry.

If one were minded to accept the spirit of the new clause and to allow increased duty deferment for wines and spirits, there would quickly be strong pressure from the beer industry and cider makers saying that they, too, should be treated similarly. The cost of the extension of deferment proposed in the clause would be a once-and-for-all loss in the financial year of about £185 million. If the cider and beer interests got in on the act—the pressures would be great — the costs would nearly double and there would be a once-and-for-all cost of £350 million. These sums show how impossible it would be in the context of the Budget to make the concession for which my hon. Friends ask.

The Government have shown sympathetic concern for the Scotch whisky industry on a number of occasions during their lifetime. Favourable treatment has been meted out to it and I can assure my hon. Friends that sympathetic consideration will be given to their representations in future. I hasten to add that I am making no commitment to further favourable treatment. However, I am sure that my right hon. Friend the Chancellor of the Exchequer will give sympathetic consideration to the industry. I understand that all his predecessors have done so and I am sure that all his successors will. It is an industry that attracts a great deal of support on both sides of the House.

I am sorry that I am unable to accede to the requests of my hon. Friend the Member for Strethkelvin and Bearsden in his moderate, balanced and reasonable speech. I hope that the forecast of the hon. Member for Birmingham, Hodge Hill (Mr. Davis) will prove correct and that my hon. Friend will seek leave to withdraw the motion.

Mr. Hirst

I welcome the support that has been forthcoming from my right hon. Friend the Member for Chislehurst (Mr. Sims), who speaks authoritatively on behalf of the Scotch Whisky Association. It is true that I am seeking an extension of the deferment that will involve a once-and-for-all cost. I shall take the opportunity of taking to task the hon. Member for Wrexham (Dr. Marek), who is prepared always to attribute the woes of any industry to Government action. However, it is a fact that drinking habits have changed and that the Scotch whisky industry faces a threat from the increased popularity of white spirits. The industry is facing marketing difficulties.

It is always helpful and enormously consoling to have the support of my hon. Friend the Member for Dumfries (Sir H. Monro). My hon. Friend has no whisky interests and we must admire his modesty in declining to articulate his interest as a consumer of the product.

Mr. Maxton

Will the hon. Gentleman ask the leave of the House to withdraw the motion?

Mr. Hirst

The hon. Gentleman will have to wait to learn my intentions. The hon. Member for Birmingham, Hodge Hill (Mr. Davis) might have done better to listen to my opening remarks. I made it clear that the purpose of the clause was to draw attention to the importance of the whisky industry, to the difficulties that it has faced in recent years and to my desire that the sympathetic consideration that my right hon. Friend has expressed this evening will find its way into legislative effect next year. On that basis, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

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