Scotch Whisky: Tax Level (Hansard, 4 November 1993)

§ Lord John-Mackie
My Lords, before I ask my Question I should like to make a statement. Because I tabled two Questions on whisky there is a rumour that I have a financial interest in the whisky industry, which is not the case. It is obvious that the rumour arose because my first cousin, whose name is also John Mackie, is deep in the whisky trade. My only interest in whisky is in the nice bottle of malt on my sideboard, which my family are inclined to say I renew rather too often.
I beg leave to ask the Question standing in my name on the Order Paper.

The Minister of State, Department of Transport (The Earl of Caithness)
My Lords, we take into consideration a wide range of social, economic and health factors as well as revenue considerations when setting the level of taxation on spirits.

§ Lord John-Mackie
My Lords, the noble Earl says that the Government take those matters into consideration. Do they realise that because of the export of whisky, free of tax, to France, Italy and Germany, they have lost £80 million in taxes? The noble Earl mentioned the social question of whisky the last time I asked this Question. Do the Government realise that around 40 per cent. of the men in the trade have lost their jobs? That is in an area, as he well knows, where there is not a lot of work. Many other factors are also contributing to a difficult situation in the whisky industry. If the Government do not improve their management of those matters—it is indeed bad management when one looks at what is happening—they will be in trouble.

The Earl of Caithness
My Lords, how nice it is to answer another Question on whisky from the noble Lord, Lord John-Mackie. It is one of a number that he asks at this time of year. He knows that I cannot discuss the rates because of the coming Budget. However, as I have said previously, it is up to each country to set its duty and taxation limits. That is right. I know that the noble Lord will be pleased to hear that, far from the so-called halcyon days of Labour when 80 per cent. of the cost of whisky was attributable to taxation, that is now down to 64.3 per cent.

§ Lord Boyd-Carpenter
My Lords, has not the position been radically altered by the adoption of the European rule that anyone can bring liquor into each country duty free? It is therefore easy to buy commodities like whisky or wine at the infinitely lower rate of duty prevailing on the Continent thus providing unfair competition to the British producer.

The Earl of Caithness
My Lords, it is true that as a result of the single market one can bring in duty-paid goods for one's own consumption. The initial estimate for the full year revenue loss on all goods was estimated at around £250 million. That does not seem to be too far off the mark.

Lord Campbell of Croy
My Lords, my noble friend mentioned health considerations. Is he aware that over the years the medical profession has offered advice to me that whisky is an excellent beverage for human health, provided it is taken in moderation? That is because my home and former constituency are in the heart of the distilling area of northern Scotland.

The Earl of Caithness
My Lords, I welcome what my noble friend says. However, it did not take the medical profession to tell me that it was good for my health, in moderation.

§ Lord Macfarlane of Bearsden
My Lords, 1 declare an interest as the chairman of the United Distillers, the largest company in the Scotch whisky industry. It is surely not a matter of debate but a matter of fact that Scotch whisky is discriminated against in this country. The mathematics are irrefutable. The duty on a single whisky is more than double the duty on a glass of wine of the same alcoholic content. Is it not surprising therefore that over the past 10 years wine sales have flourished and Scotch whisky sales have decreased? Why do the Government continue to disadvantage to such an outrageous extent the product for which Scotland is best known and which is also one of the UK's top export earners?

The Earl of Caithness
My Lords, I note what my noble friend says. However, a wide range of issues are taken into account when setting the levels of taxation.

§ Lord Eatwell
My Lords, can the Minister tell the House what are the Government's estimates of the consequences of a reduction in the whisky duty for overall sales and consequently for government revenue? For example, were the duty on whisky to be reduced by 10 per cent., would the sales increase by more than 10 per cent. and revenue consequently increase? What is the Government's current estimate?

The Earl of Caithness
My Lords, with respect, the noble Lord would not expect me to be able to answer that question without notice.

§ Lord Merrivale
My Lords, does my noble friend accept that the outrageous tax on whisky in this country is highly discriminatory? If one takes into account that one can buy for £6.50 in Gibraltar a litre bottle of 1155 Famous Grouse whisky which in this country costs £16, one must see that that is discriminating against the whisky industry.

The Earl of Caithness
My Lords, I am sure that my noble friend agrees that each country should have the freedom to set its own duty rate. That is why we find a variable price from country to country.

§ Lord Mackie of Benshie
My Lords, does the Minister accept that an export industry as valuable as the Scotch whisky industry needs a prosperous home market? With the industry already struggling against the existing rates of tax, it is no help if, as the noble Lord, Lord Boyd-Carpenter, says, whisky drinkers travelling abroad are constantly bringing back supplies. The home market is essential for the export trade.

The Earl of Caithness
My Lords, I note with care what the noble Lord says.

§ Lord Desai
My Lords, does the Minister agree that now we have a single European market we must think about a policy which leads to wide tax differences on tobacco and alcohol? Does the Treasury have any thoughts on how it is going to re-think that policy fundamentally? If not, the losses will continue to grow.

The Earl of Caithness
My Lords, I can assure the noble Lord, Lord Desai, that we thought of that long before the single market existed and gave consideration to it. However, I am sure the noble Lord will agree that it is for each country to set its own duty rates.

§ Lord Gisborough
My Lords, to build on the question of the noble Lord, Lord Eatwell, was there a greater take when total duty was 80 per cent. compared with 60 per cent.?

The Earl of Caithness
My Lords, the figure that I quoted to the noble Lord, Lord John-Mackie, was tax and duty as a percentage of the price. That has gone down. With regard to the duty yield, I cannot go back as far as that. But in cash terms, it looks much the same as in 1985–86.

§ Lord John-Mackie
My Lords, the noble Earl did not give a very good reply to his noble friend Lord Boyd-Carpenter on the subject of the amount of whisky being brought back into this country on which the Government lose all the tax. It is an enormous figure. Should that point not be considered very carefully?

The Earl of Caithness
My Lords, I took up the question of my noble friend Lord Boyd-Carpenter and gave a very full reply that included not only whisky but all imported spirits and beers.