HC Deb 13 July 1988 vol 137 cc469-77

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 1986, 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 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 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. Bowen Wells.]

Brought up, and read the First time.

11.15 pm
Mr. Bowen Wells (Hertford and Stortford)

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

I declare an interest as notified to the House in the Register of Members' Interests.

This new clause is not unfamiliar to my colleagues on the Treasury Bench and their officials. Duty deferment has caused serious concern to the industry for many years. En opposition, the Conservative party promised to make right the inequitable situation when it returned to office. and it did so in 1979. True to their word, the Conservative Government introduced the Bill that became the Customs and Excise Management Act 1979. It gave Customs and Excise commissioners powers to make provision for deferred payment of excise duty subject to such conditions or requirements as may be imposed by the regulations or, where the regulations so provide, by the commissioners.

With such powers, one might consider that the new clause is unnecessary. However, it is about five years since the powers were exercised by the Government and the commissioners, when they gave a concession of 28 days of duty deferment. That went some way to offset unfairness and inequity.

The House will know that, in effect, an excise duty is a sales tax. Under the current regulations, those who keep bonds and must pay excise duty—that is, the sales tax that is payable by the eventual customer—actually pay the tax or excise duty direct to the Revenue 28 days after removal of goods from a bond. Before the regulations were introduced, it was payable prior to their removal from bond. Therefore, the Government have accepted the principles about which I am speaking.

On average, excise duties are recouped by bond holders about 12 weeks from the time the goods are removed from bond. The 28-day period does not in any way represent the cost that is incurred by bond holders as a result of the way in which the excise duty is collected at present. Bond holders are not only tax collectors for the Government but Government financiers, because they have to pay the necessary financial charges on the amount of money that is borrowed to pay the excise duty. That is a considerable cost to the industry.

The principle is accepted. In equity, the Government accept that they must meet the case. We suggest that we should halve the difference. That is to say, we should increase the period of deferment from four weeks to eight weeks. That still does not meet the 12-week period that must be financed, but I should have thought that it was a sensible compromise between the two figures. Of course, the cost of that suggestion is zero. It means, though, that, because of the deferment period, in the year in question, using its annual accounting methods, the Treasury must forgo part of the revenue. However, it is collected soon after in the following year. Revenue is forgone in one year.

There is an additional, familiar reason. It is becoming much more important for the Government to reconsider their decision on the matter. I refer to 1992, the advent of the single European market and, therefore, the harmonisation or, at least, the approximation of excise duties and their treatment throughout Europe.

In Belgium, spirits have a four-month duty deferment period. In Luxembourg the period is two to six months, in Denmark it is 45 days, in France two months, in West Germany three months and, of course, in our own country only one month. Therefore, to move to two months, as the clause suggests, would simply put us on the same level as that of France, and in considerably worse condition compared with West Germany and other wine and spirit producers. I urge my hon. Friends to look at the matter again to see how they can meet this serious objection from those dealing with bonds and wines and spirits in this country.

Mr. Nicholas Brown

Along with my hon. Friends who served with me on the Committee, I am utterly sick of amendments and new clauses of this kind. We had a bellyful in Committee. [HON. MEMBERS: "A skinful."] We would have preferred a skinful, but it was a bellyful that we were given.

The hon. Member for Hertford and Stortford (Mr. Wells) has very properly declared his interest, and I am pleased that he did so. I assume that that interest is his position as parliamentary consultant to International Distillers and Vintners Export Ltd. He also declared a consultancy with Geest Industries Ltd., and with the Hawley Group—which I believe is Michael Ashcroft's group of companies. The hon. Gentleman will correct me if I am wrong. When he used the word "we" in moving the new clause, he presumably meant he and International Distillers and Vintners Export Ltd. He may have meant himself and his hon. Friends, but no other names feature on the amendment paper.

If this were an isolated instance, it would be wrong for me to make too much of it. But it is not an isolated instance; it is the latest of a series of such submissions that have been made both here and in Committee. I hope that I will be allowed to set out a little of the background, and explain why we are so annoyed. Before I do so, however, let me say that I shall be asking the Committee of Privileges, on behalf of the Opposition, to draw up new and tighter rules for the declaration of business interests for Finance Bill Committee members and others who wish to make amendments to the Bill. This is not a direct complaint to the hon. Member for Hertford and Stortford. It is perhaps his misfortune that this is the point at which I have chosen to make a much broader complaint on behalf of the Opposition.

This is what we have had to put up with. On clause 13, amendments Nos. 30, 60, 61, 50, 51, 53, 41 and 42 were tabled by the hon. Member for Bournemouth, West (Mr. Butterfill). The purpose of each was to extend the period in which small businesses must register for VAT: it was a way of easing VAT regulations. On clause 15, the hon. Gentleman tabled amendment No. 11. The purpose of the clause was to put civil penalties on VAT claims. The purpose of the amendment was to give Customs and Excise officers the right to mitigate the penalty—a concession to those who were supposed to make payment of such a penalty.

On clause 48, the hon. Member for Cannock and Burntwood (Mr. Howarth) aimed to extend the exemption of non-assessability for tax to the entertainment expenses of directors and higher-paid employees—a straightforward concession to what I think my hon. Friend the Member for Wrexham (Dr. Marek) would call the super-rich. On clause 51, the hon. Member for Dover (Mr. Shaw) sought through amendment No. 246 to change the timing of the relief on business expansion scheme moneys subscribed to approved investment funds, the aim being to ease the restrictions on BES funds.

On schedule 6, the hon. Member for Daventry (Mr. Boswell) tabled amendment No. 248, whose purpose was to extend the transitional relief on woodlands associated with farming—a concession sought, I understand, by the Country Landowners Association, which had lobbied forcefully for it. On clause 104, the hon. Member for Basingstoke (Mr. Hunter), through amendment No. 344, sought to extend rollover relief to all business assets used in trade. To give the Financial Secretary his due, he said that the amendment could lead to considerable avoidance, and he was certainly right about that. The amendment sought to allow any business asset to extended deferred capital gains tax liability. It would have given rise to considerable tax avoidance opportunities.

When the Committee came to consider schedule 8, amendment No. 353 was moved by the hon. Member for Basingstoke. The schedule was an anti-avoidance measure, which had some support from my right hon. and hon. Friends. The amendment was an attempt to frustrate the closure of a tax loophole. Its purpose was to create a more complex and more effective new tax loophole.

Mr. Michael Colvin (Romsey and Waterside)

Will the hon. Gentleman give way?

Mr. Brown

I shall accept interventions when I have completed this part of my speech.

When the Committee reached clause 109, amendment No. 227 was moved by the hon. Member for Bournemouth, West. The amendment sought to ease the regulations on investment trusts, which are vehicles used by the wealthy.

I move on to new clause 13, which was tabled by hon. Members who were not members of the Committee, the hon. Members for Shipley (Sir M. Fox) and for Croydon, South (Sir W. Clark). The purpose of the new clause was to remove the ceiling on tax relief for benefits in kind. The argument against the proposition was that it would be the thin end of the wedge for tax relief on private medical insurance, and that is exactly what was intended.

Mr. John Butterfill (Bournemouth, West)

Will the hon. Gentleman give way?

Mr. Brown

I shall do so at the end of my considerable list.

I move on to new clause 15—

Mr. Butterfill

Will the hon. Gentleman give way?

Mr. Brown

No.

New clause 15 was moved by the hon. Member for Bournemouth, West and supported by the hon. Member for Wyre Forest (Mr. Coombs). The clause would have extended the time for which a company may set off tax profits against tax losses from the preceding year. That is currently the procedure for the two preceding years. In another words, another tax concession was being sought.

New clause 35 was withdrawn at the insistence of the Opposition—

Mr.Butterfill

rose—

Mr. Brown

I shall not give way to Conservative Members while I read out the list. I shall give way to them once I have finished reading it. Surely that is fair.

New clause 35 was withdrawn under duress. It had been tabled by the hon. Members for Wanstead and Woodford, (Mr. Arbuthnot), for Daventry and for Basingstoke. It was a recipe for tax avoidance. It would have exempted gifts or bequests of woodlands from inheritance tax.

Subsection (7) to new clause 28 was moved by the hon. Members for Wyre Forest, for Fulham (Mr. Carrington) and for Maidstone (Miss Widdecombe). The purpose of the clause was to give tax relief to companies on moneys used to buy back their own shares to put in a trust to assist employees. The subsection was designed to offer a major tax loophole.

New clause 37 was withdrawn by the hon. Member for Croydon, South. Its purpose was to make easier tax avoidance for a share option scheme by allowing those who have such schemes to sell every year instead of every three years.

New clause 43, which was withdrawn, was moved by the hon. Members for Wanstead and Woodford and for Daventry. Its purpose was to assist those involved in any close company regime. It would have given substantial financial benefit to small family businesses. New clauses 38 and 39, moved by the hon. Member for Basingstoke, would have provided extra inheritance tax relief for holdings of unquoted shares in companies. That is the list.

11.30 pm

It was our concern that companies, and not constituencies, were being represented at this stage of the Finance Bill, and that property, not people, was motivating the hon. Members who moved the new clauses. I make no specific complaint about any individual hon. Member, but that is an extraordinarily long list of vested interests that could not possibly belong to the majority of any of the hon. Members' constituents. They were special interests. The dividing line between a legitimate interest and a less legitimate interest is very fine and we shall be seeking a review of such matters through the Committee of Privileges. In particular we shall be seeking firm guidelines and adherence to them to prevent abuses.

Mr. Butterfill

The hon. Gentleman referred to two of the amendments that I tabled. The first related to investment trusts. The hon. Gentleman suggested, quite erroneously, that I was seeking a tax change in their favour. The amendments were seeking an expansion of the areas in which they might be permitted to invest. Therefore, his assertion is totally wrong and I hope that he will withdraw it.

His second point related to losses. I was seeking to give the same treatment to losses as was available to competitor manufacturers in other western European countries. The hon. Gentleman might have had some sympathy with that. In so far as it related to our international competitiveness it certainly received a great deal of sympathy from many of my constituents.

In discussing the tax changes for which I was asking, the hon. Gentleman significantly failed to mention the changes which I was seeking for the elderly. I seem to remember that the hon. Gentleman and his hon. Friends voted with me.

Mr. Brown

I studiously avoided mentioning the clause, which was much trailed and got the hon. Gentleman six minutes on the Jimmy Young show, so it cannot have been of no significance. It also got him 35 minutes on the Finance Bill. The topic has aroused considerable interest around the country, and the hon. Gentleman had pursued it for a sustained period. Although some were willing to describe it as nothing but a ramp for Allied Dunbar, that was not the view of the parliamentary Opposition. However, some of the other matters the hon. Gentleman has raised would not fit so easily into that category.

I do not want to be drawn into arguing the merits of each of the clauses. Clearly that would be wrong. However, the parliamentary Opposition have had enough of Parliament and the Finance Bill being used as a vehicle for lobbyists rather than a vehicle for raising legitimate constituency interests.

Sir William Clark

rose—

Mr. Brown

I give way to the hon. Gentleman, but I am not nearly as sympathetic to him as I am to the hon. Member for Bournemouth, West.

Sir William Clark

I am most grateful to the hon. Gentleman for giving way. I am sure that he is not sympathetic to me, but he should get his facts right before he distorts them. He said that I tabled an amendment on share option schemes and then withdrew it. The amendment is still on the Order Paper. It was not selected. I have not withdrawn it, and I hope that the hon. Gentleman will withdraw the accusation that I have withdrawn the amendment that I tabled relating to share option schemes.

Mr. Brown

I apologise if I said that the amendment was withdrawn and it was not withdrawn. That is not the charge I was making. I was making the charge that it was tabled in the first place. I understand that I may have described new clauses as having been moved when they were proposed but not moved. From our point of view the difference is very fine. We oppose the use of the Finance Bill for raising interests that are not proper interests for Members of Parliament, but involve undue affection for commercial and business interests and not the interests of the constituents whom we were sent here to represent.

Sir William Clark

On a point of order, Madam Deputy Speaker. New clauses and amendments are tabled on the Order Paper and it is up to the Chair to make the selection of them. If the hon. Gentleman says that the fact that Conservative Members have tabled clauses which are not selected is a sort of lobby, is that not a reflection on the Chair's selection?

Madam Deputy Speaker

I do not regard that as a. reflection on the Chair's selection. It is a reflection not of the opinion of the Chair, but of the opinion of the hon. Members who table the amendments or new clauses.

Mr. Nicholas Brown

Further to that point of order, Madam Deputy Speaker. I wish to make it clear that I intend no reflection on the Chair, for which I have the greatest admiration.

Mr. Lilley

I do not intend to mix in that argument except to say that I have always assumed that hon. Members, speaking on behalf of whatever cause they choose, are speaking with honour and putting forward views because they believe them and wish to see them upheld. No doubt the hon. Member for Newcastle upon Tyne, East (Mr. Brown) had his reasons for putting forward his list. Those reasons may reflect his interest in the success of his party. That is up to him, but I am sure that he spoke with honour, as all my hon. Friends have done.

My hon. Friend the Member for Hertford and Stortford (Mr. Wells) could have justified his moving of the new clause by his generous desire to share his enthusiasm for the beverages with which it deals. I can vouch for that because I have partaken of his hospitality on occasion. He said that the clause is a familiar one, and so it is. It is so familiar that is still retains the date of 1986 from the last time it appeared. That means that were it to be accepted as it stands it would be retroactive, which I do not think is intended.

I recognise that there is a long-standing concern about the matter among those in the wine and spirits business. I recognise too that the whisky industry plays a valuable part in the life of the country, particularly of Scotland, for the employment it provides and for the conviviality it provides here and abroad. It is rather sad that in standing up for the interests of the industry—that is how my hon. Friend the Member for Hertford and Stortford sees the new clause—which brings employment to many of the constituencies of Opposition Members, they did not thank him rather than criticise him.

I cannot accept my hon. Friend's case because he tries to say simultaneously that the deferment procedures we have at present are costly to the industry and that if we were to grant a longer deferment it would not be costly to the Government. The industry's gain in those circumstances would be the taxpayers' loss. The loss of cash flow in the first instance would be about £,245 million in a year, and if we were forced to extend the measure to beer and cider, as might be the case, it would involve a loss of £400 million of cash flow. The interest on that money would be an ongoing loss to the Treasury and should be taken into account.

The importance and contribution of the spirits industry in particular was recognised in the last three Budgets of my right hon. Friend the Chancellor when duties were not raised. In two of the three Budgets, duties were not raised for the wine section of the industry.

My hon. Friend the Member for Hertford and Stortford mentioned the approach of 1992 and the possibility of harmonisation of duties and commensurate arrangements proposed by the European Commission. As I have said, those proposals are no more than proposals. We are not alone in having great difficulty with them and I think it extremely unlikely that that package of measures or anything like it will come into force by 1992. There will therefore be no requirement for us to harmonise the related aspects of duty collection as my hon. Friend suggests.

In making comparisons with other countries, it is important to recognise that it is not just duty structures that differ; procedures and commercial practice differ so that in other countries, too, industries may be bearing the cost of tax collection for the same period, or for a longer or shorter period than ours. I hope that my hon. Friend will recognise that we understand the industry's worries about this matter, which my hon. Friend the Chancellor naturally considered fully before his Budget. If my hon. Friend and those in this important industry for whom he speaks, wish to discuss the matter before the next Budget, we shall look forward to the customary representations.

Mr. Wells

It saddens me to hear the hon. Member for Newcastle upon Tyne, East (Mr. Brown) suggest that my motivation in tabling the new clause was in any way related to self-interest. It would be quite easy for me to avoid the implications of the list that the hon. Gentleman read to the House: one could cite a large number of hon. Members whose constituents are severely affected by the provisions. Many Opposition Members, especially those who represent Scotland, would agree that we need the equalisation of taxation across Europe to move so that the whisky industry—Scotland's primary industry and the biggest exporter from Scotland—is not at a disadvantage compared with producers and exporters of other spirits in Europe.

This is a very serious issue for the whole industry, of which Britain is a leader—and not only domestically. It owns large parts of the liquor and alcohol industries in the United States and parts of Europe. The new clause deals with a serious issue of equity and equalisation, which has serious constituency implications, for many hon. Members. A large number of those who work in the industry in Harlow, which is in the neigbouring constituency, none the less live in my constituency, so if I wanted to I could claim a constituency interest in the matter. The hon. Member for Newcastle upon Tyne, East gave a legitimacy to such an interest, and suggested that that was the only way in which we could raise matters of concern.

The hon. Gentleman can report it to the Privileges Committee if he wishes, but I am certain that my hon. Friends and I will be exonerated from the implications and the smears that he tried to put on us for taking a legitimate interest in a very serious matter affecting the employment of thousands, if not millions of people in this country, which has a very serious effect on our balance of trade and our exports.

Mr. Nicholas Brown

I am sorry that the hon. Gentleman should regard it as a smear when I read out his entry in the Register of Members' Interests.

Mr. Wells

I did not say that that was a smear. I referred to the implication of the hon. Gentleman's remarks. The outrage with which he read the list suggested that there was something dishonourable in taking up these matters even if one has a declared interest and has brought it to the attention of the House. If his dictum were accepted, none of us would be able to raise legitimate issues. Opposition Members would be in no position to raise in the House matters to do with trade unions or their interests. The House would be a great deal poorer if hon. Members could not bring their deep knowledge of particular interests to its attention.

I am sure that the House does not wish to be delayed further on this matter. I did not intend to prolong the debate. I thank my hon. Friend the Minister for answering my propositions sympathetically. The argument that we do not have to harmonise excise duties because of 1992 does not abort the argument that the spirits and wine industry should be able to trade on the same basis as that of its competitors overseas, particularly those within the EEC. Therefore, my argument has some serious validity and I am grateful to him for saying that he will consider with deep seriousness the inequity involved. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

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