Scotch Whisky: Tax Treatment (Hansard, 18 January 1989)

§ The Secretary of State for Trade and Industry (Lord Young of Graffham)
My Lords, the Government attach great importance to the well-being of the Scotch whisky industry in view of its contribution to exports and to the Scottish economy generally. They have taken positive steps to assist the industry in the area of taxation by maintaining a standstill in the rate of excise duty on spirits since March 1985. Indeed, overall, the differential between the levels of duty on spirits and on other alcoholic drinks has narrowed since 1979. As for future duty levels, this is a matter for the Chancellor's Budget judgment and I cannot say more now.

§ Baroness Carnegy of Lour
My Lords, I thank my noble friend for that reply. I accept of course that the Government have taken a number of steps in the right direction in recent Budgets and that they have done well by the Scotch whisky industry in their negotiations with the European Community and Japan. But, in view of the fact that 40 per cent. more wine is now drunk in the United Kingdom than 10 years ago, and rather more than 18 per cent. less whisky, is it not unfair to the people who work in the industry to continue the uniquely discriminatory corporation tax arrangements, or any differential at all, between the excise duty on whisky and wine? Is that what the Chancellor calls fiscal neutrality?

§ Lord Young of Graffham
My Lords, it is only fair to point out that the duty on whisky has fallen in real terms by almost 30 per cent. since 1979. In all these matters we have to achieve a balance at a time when alcoholism may be a matter of concern in some areas. We should be careful how we adjust the rates and levels of taxation.

§ Lord Mackie of Benshie
My Lords, is the Minister aware that, while the level of taxation may have fallen relatively, the differential is still enormous? Is there any possible social reason for continuing the differential between beer and wine and whisky? Is there any differential left between the taxation of whisky and brandy in France?

§ Lord Young of Graffham
My Lords, these matters arc all more properly for my right honourable friend the Chancellor of the Exchequer. The relief from corporation tax was on stock. It was introduced 15 years ago and removed in 1984. Since then, the Government have reduced corporation tax to the lowest rate in Europe and almost the lowest rate in the Western world. The other matters are for my right honourable friend the Chancellor of the Exchequer. I am sure that he will take them into account at the appropriate time.

Lord Bruce of Donington
My Lords, is the Secretary of State aware that uniquely among spirituous liquors those distinguished distillations from north of the border have received medical approval when consumed in moderation? Is he aware that specialists prescribe them after certain serious heart operations? Will he see that the matter is drawn to the attention of his right honourable friend the Chancellor of the Exchequer with a view to encouraging medicinal use, in moderation, of this unique product of Scotland?

§ Lord Young of Graffham
My Lords, I wish to assure the noble Lord, Lord Bruce of Donington, that I find Scotch whisky to he quite suitable at times when I am fairly healthy. I am sure that, while not wishing to put words into the mouth of my right honourable friend the Chancellor of the Exchequer, he would say that his taxation policy on Scotch whisky has been conducted in moderation. Tax duties have fallen by almost 30 per cent. in real terms over the last 10 years.

§ Lord Stodart of Leaston
My Lords, will my noble friend fund it possible to confirm that the energy for which he is renowned is perhaps stimulated by the occasional wee dram of 10 year-old malt whisky before he retires at night? Is he aware that the maturing of that miraculous beverage is responsible for it carrying the highest rate of corporation tax of any industry?

§ Lord Young of Graffham
My Lords, I suspect that if I were to indulge in the habits which my noble friend has suggested I should find my boxes going through much more easily. However, I am not sure that the quality of my judgment would be exactly improved.

§ Lady Saltoun of Abernethy
My Lords, would it not be fairer to the Scottish whisky industry if all alcoholic drinks were taxed at the same rate per centilitre of alcohol contained in them?

§ Lord Young of Graffham
My Lords, again Scotch whisky is taxed. The current duty rate is some £15.77 233 per litre of pure alcohol. That is about £4.73 a standard bottle. But all these matters are the responsibility of my right honourable friend the Chancellor of the Exchequer and I shall draw his attention to them.

§ Lord Grimond
My Lords, now that the two companies are amalgamated, may we look forward to advertisements saying, "Guinness and whisky are good for you"? Will the noble Lord, who has shown some sympathy with the point that the whisky trade is discriminated against, impress upon his right honourable friend the Chancellor of the Exchequer that there is no reason for this discrimination? Indeed, there is no defence put up for it except some historical accident.

§ Lord Young of Graffham
My Lords, the sympathy I might exhibit today is that of a consumer. For the rest of my time I must accept that the points I shall put to the Chancellor of the Exchequer and which no doubt he will take into account are that a wide range of economic and social factors all come into play when looking at this quite difficult area.

§ Lord John-Mackie
My Lords, it would help the whisky trade more than anything else if it were made illegal to serve anything less than a quarter of a gill. The business of wetting the bottom of the glass in this part of the world is quite ridiculous.

§ Baroness Carnegy of Lour
My Lords, there is one further question which is very much a matter for my noble friend. As 1992 approaches and the European Community begins to think more about tax harmonisation, will it not weaken very much the Government's negotiating position if we go into those negotiations still ourselves discriminating against Scotch whisky?

§ Lord Young of Graffham
My Lords, I am grateful for the point which my noble friend makes. Of course we have to take into account a wide range of matters. We have said time and time again that we do not see any real need for tax harmonisation in order to go through the 1992 process. We see ways in which the market will deal with this in its own fashion. Certainly we wish to take the social consequences of taxation in the form of duties, excise duties or corporation taxes on alcohol very much into account before making any policy decisions.