Scotch Whisky: UK Rate of Duty (Hansard, 1 March 1993)

The Minister of State, Department of Transport (The Earl of Caithness)
My Lords, the rate of duty on spirits in the UK takes account of economic, health and social factors, which have always been reflected in successive Chancellors' Budget judgments. It would not be appropriate to comment further in advance of the Budget.

§ Lord John-Mackie
My Lords, does the noble Earl not appreciate the situation? Has he by any chance read the Scotch Whisky Association's brochure on the subject which points out the importance of Scotch whisky to Scotland? Does he know that one can buy whisky in Paris, Rome or Berlin for £3 a bottle less than in this country? I thought that we were dealing with a common market.

The Earl of Caithness
My Lords, I appreciate very much the value of whisky to Scotland. I also appreciate very much the value of whisky to lots of other people as well. With regard to the price of a bottle of whisky, I am sure the noble Lord would agree that it is the right of every country to set its own duty limits.

§ Lord Boyd-Carpenter
My Lords, is my noble friend aware—I do not think he can be—that last summer in a shop at the south end of Sardinia I bought in Italian lira a bottle of excellent Scotch whisky at half the price it would have cost me in London?

The Earl of Caithness
Yes, my Lords, I appreciate that whisky can be bought more cheaply in certain other parts of the world than in the United Kingdom. 416 But I am sure that my noble friend would agree that that is because there is a right for every country to set its own duty limits.

§ Lord Tordoff
My Lords, when the noble Earl replied to the first Question he suggested that health is a factor in setting the rate of duty. He is surely not suggesting to the noble Lord, Lord John-Mackie, that whisky is less healthy than wine.

The Earl of Caithness
My Lords, that is not what I said. It is a consideration to be taken into account.

§ Lord Campbell of Alloway
My Lords, on the health aspect, as whisky is in a sense medicinal, I was wondering whether my noble friend could consider zero rating for VAT?

The Earl of Caithness
My Lords, I hope that it is medicinal to my noble friend, but I hope not in excess. With regard to his second point, that is a question for my right honourable friend the Chancellor of the Exchequer.

§ Lord Stoddart of Swindon
My Lords, can the noble Earl say whether the Treasury has estimated how much taxation it will lose as a result of the single market and the removal of all the Customs duties from Scotch whisky and other liquors?

The Earl of Caithness
My Lords, it is not just a question of the duty, as the noble Lord will be aware. A lot of factors affect how much people drink of a particular product. It may be interesting for the noble Lord to know that the amount of duty and VAT as a proportion of the retail price has fallen by more than 11 percentage points since 1983.

§ Lord Macfarlane of Bearsden
My Lords, may I declare an interest in this matter as the chairman of United Distillers, the largest company in the Scotch whisky sector? Surely it is not a matter of debate but a matter of fact that Scotch whisky in the United Kingdom is discriminated against because the tax on a glass of wine at present is 12p whereas the tax on a single whisky with the same alcohol content is 23p. So is it any wonder that since 1979 the sales of imported wine in this country have increased by 60 per cent. while in the same period the sales of Scotch whisky have decreased by 30 per cent.? Perhaps equally disturbing is the signal to other governments that it is fair game to discriminate against Scotland's best known product and one of the United Kingdom's most successful products internationally.

The Earl of Caithness
My Lords, the tax burden is not the sole cause of price difference. My noble friend will be aware that whisky prices in the United Kingdom have risen faster than the taxes on whisky in recent years.

§ Lord Peston
My Lords, is not the Question on the Order Paper a good deal more straightforward than all that we have been talking about? Is it not the case that the Treasury puts as high a rate of excise duty on Scotch whisky as it can get away with in order to maximise the tax revenue it can get from Scotch 417 whisky? Is that not really what this is about? In many ways the Treasury would be foolhardy not to exploit the Scotch whisky drinker as much as it possibly can.

Noble Lords
Oh!

The Earl of Caithness
My Lords, it is a good deal more complicated than that, as I said in my original Answer.

§ Lord Peyton of Yeovil
My Lords, does my noble friend agree that it is carrying eccentricity a little too far to join an association of nations and then not take advantage of having more or less the same policies as them? As for the excuse that a Budget is forthcoming in the near future, is not that wearing a little threadbare now?

The Earl of Caithness
My Lords, I have listened to and answered debates in this House in which your Lordships have emphasised the need to retain fiscal sovereignty. That is something which the Government support and continue to take an active interest in. With regard to my noble friend's second point, if he casts his mind back to his days in another place I am sure that he would have been the first to have said that one must observe discretion before the Budget.

§ Lord John-Mackie
My Lords, the noble Earl will have noticed that every speaker on this Question has been very much against him. Will he please take note —I shall send him a copy of the Scotch Whisky Association's brochure—and go to see the Chancellor before the Budget?

The Earl of Caithness
My Lords, I am not sure whether the noble Lord's noble friend on the Front Bench was for or against me. I think that he was rather for me and rather against the noble Lord, Lord John-Mackie. I would say to the noble Lord that my right honourable friend the Chancellor of the Exchequer has seen the Scotch Whisky Association.

§ Lord Geddes
My Lords, is my noble friend aware of the letter in The Times some three weeks ago—if he has not seen it I can happily supply him with it—from a wine merchant and purveyor of whisky from Chelmsford describing the problem created for wine merchants by the increased flexibility of HM Customs and Excise regarding the bringing in of whisky and wines from the rest of continental Europe?

The Earl of Caithness
My Lords, one of the advantages of the single market is that one can buy duty paid goods, particularly wines and spirits, on the Continent and bring them back for one's own consumption. But as I understand it, Customs and Excise are handling the problem quite adequately.