EC Duty-Free Sales: Future (Hansard, 27 March 1991)

§ The Parliamentary Under-Secretary of State, Department of Social Security (Lord Henley)
My Lords, the European Commission has made clear its view that, as a consequence of the completion of the single market, duty-free shopping for travellers within the Community should cease. The Government understand the Commission's view but equally are aware of the significance of the duty-free trade for UK producers, vendors and the transport industry in general. Ministers have met representatives of the trade on a number of occasions and are examining the issue very carefully before coming to a final view.

§ Lord Parry
My Lords, I thank the noble Lord for that helpful and constructive Answer. Will he agree with me that as there will be differing regimes—12 in fact—within the EC for a considerable period after 1992, it may be wiser for the Government to tie the duty-free question to fiscal areas rather than to the simple line of the customs union? In that case, will the Government assure us that they will not do away prematurely with what is a very valuable industry to this country?

§ Lord Henley
My Lords, we shall not come to any premature decision. We accept, as the noble Lord said, that the industry is very valuable to this country. As I said in my original Answer, we are examining the issue very carefully. It is rather early for me to say whether or not I agree with the noble Lord's suggestion.

§ Lord Boyd-Carpenter
My Lords, will my noble friend and his colleagues bear in mind that the duty-free arrangements are often of decisive importance to the smaller airlines in as much as they make the difference between a profit and a loss? Will he take care that the zeal of the European Community does not destroy British airlines?

§ Lord Henley
My Lords, we accept that the trade can be important to some operators. There can be a degree of cross-subsidy by smokers and drinkers subsidising non-smokers and non-drinkers. Therefore, we accept that the matter is important. We shall take into consideration the points raised by my noble friend.

Lord Winstanley
My Lords, does the noble Lord agree that in many cases, although not all, duty-free sales do little more than persuade our wives to buy goods at prices far in excess of those at which they can 1064 be bought in the local supermarket? Does he accept also that to label a point of sale "duty-free" when the remitted duty is used to increase the profits of the seller rather than the price to the purchaser could constitute a breach of the Trade Descriptions Act?

§ Lord Henley
My Lords, I accept that duty-free sales are possibly not as much of a bargain as they often appear to be. However, that is a matter for the operators and not for the Government. As regards the noble Lord's first point, I heard cries from parts of the Chamber that the arguments which he was putting forward were somewhat sexist. Perhaps he will take up that matter with the deputy leader of his party.

§ Lord Rees
My Lords, while I understand that my noble friend is unable to give a direct answer to the Question at this stage, will he accept that even the theoretical case for the abolition of duty-free goods must depend on a much closer approximation of indirect tax rates inside the EC than exists at present? Will lie ensure that before the Council of Ministers is asked to consider the question, the European Community provides a full and thorough study of the implications of the abolition of duty-free allowance as required by the overwhelming majority of Members of the European Parliament?

§ Lord Henley
My Lords, I am aware of the decision of the European Parliament. I hope that the Commission and, later on, the Council of Ministers will take particular note of those anxieties.

§ Baroness Carnegy of Lour
My Lords, in their continuing thoughts on this matter, will the Government bear in mind the damage which the end of duty-free trading will do to the Scotch whisky industry? Is the Minister aware that the industry believes that £40 million worth of sales of Scotch whisky products will be lost every year because of the abolition of duty-free trading? That loss could not be replaced by sales on the home market.

§ Lord Henley
My Lords, I accept that there may be loss of sales, particularly as regards luxury brands. I believe that most of those could be offset by increases in tax-paid sales.

§ Lord Peston
My Lords, does the Minister find the interventions of his noble friends a trifle puzzling? Is it not government policy that British industry, notably the private sector, should stand on its own two feet and should not require subsidy in any form? Is there any economic case of which he knows for continuing duty-free sales?

§ Lord Henley
My Lords, I obviously failed to make clear that there are arguments on both sides and the fact that the Government are considering those arguments.

§ Lord Peston
My Lords, as the noble Lord knows, the subject of economics interests me. Can he give me any of the arguments on the other side? What is the case for subsidising private industry in this way?

§ Lord Henley
My Lords, I thought that I had made that quite clear. Certain industries might suffer if 1065 duty-free sales disappeared. At the same time I accept that there are arguments for getting rid of duty-free sales.

§ Baroness Robson of Kiddington
My Lords, as long as the so-called duty-free shops exist at airports, will the Minister consider changing the rules so that passengers are allowed to buy goods on arrival instead of when leaving an airport?

§ Lord Henley
My Lords, I suspect that those selling duty-free goods might prefer to sell them on departure rather than on arrival for the very sensible reason that they might be able to sell more.

§ Lord Parry
My Lords, given the interest aroused in the House and the rather negative help that I have received from my Front Bench, perhaps the House will indulge me. Does the Minister agree that one of the economic arguments is the fact that one-quarter of all European sales of duty-free goods are British goods? Have the Government considered the vendor-control system which seems to work very well in the Nordic countries and Australia?

§ Lord Henley
My Lords, I take the point that the noble Lord makes. Four of the top six duty-free outlets are in this country.

§ Lord Peston
My Lords, I was not seeking to undermine my noble friend: I was simply trying to discover what has happened to the Government's economic policy. For several years I have sat here and been told that industry must stand on its own two feet. Can the Minister say whether it is now the Government's view that that is no longer the case? Can industry now begin to ask for all kinds of hand-outs?

§ Lord Henley
My Lords, that is another question. I accept that the noble Lord was not necessarily intending to undermine his noble friend's Question, but he certainly seemed to be trying his best.

§ The Earl of Perth
My Lords, did I understand the noble Lord to say that he considered Scotch whisky to be a luxury? For many of us it is a necessity of life.

§ Lord Henley
My Lords, I am the first to agree with the noble Earl. However, there are some brands of Scotch whisky which are considered to be luxury products as opposed to the more usual brands.