Duty on Liquor

HL Deb 26 January 1994 vol 551 cc955-7

Lord Boyd-Carpenter asked Her Majesty's Government:

Whether they are aware that higher rates of duty on liquor, including beer, in the United Kingdom compared with those operating on the European Continent now place British producers at an increased disadvantage since the importation of European liquor for personal use has become duty-free regardless of quantity.

The Parliamentary Under-Secretary of State, Department of Employment (Lord Henley)

My Lords, Customs and Excise has been examining trade reports and conducting its own survey into the scale of cross-border shopping for personal use. Current official estimates place the revenue loss well within the 1992 forecast figure and not at a level which suggests significant disadvantage to United Kingdom producers. The Government will continue to keep the matter under close review.

Lord Boyd-Carpenter

My Lords, I thank my noble friend for that reply. However, is there not a double loss? First, there is a loss to the Revenue and, secondly, there is a considerable loss to British firms and a reduction therefore in their taxable profits. In view of the fact that the Government are pressing hard to increase taxation because of the need for revenue, is it not a pity to let this matter slide?

Lord Henley

My Lords, I do not believe that we are letting it slide. We are taking considerable steps to stop illegal importation of excessive quantities of liquor. We accept that there is a degree of loss. We reckon that it is of the order—these figures are speculative—of £175 million, of which about £75 million probably relates to liquor, the other £100 million relating to cigarettes. At the same time we have seen a rise in excise duties which suggests that the loss is not as serious as all that. We shall continue to pursue those who import more than is necessary for personal consumption and take appropriate measures.

Lord Eatwell

My Lords, can the Minister say whether in his view the industry would be better or worse off if excise rates were harmonised?

Lord Henley

My Lords, we do not see a need to harmonise excise duties. I take it that the noble Lord means harmonisation with our European partners. We believe it is right that the rates should continue to be set by individual countries and the Chancellor of the Exchequer will continue to set them according to economic, health and social factors.

Lord Harmar-Nicholls

My Lords, is my noble friend aware that the phrase, not as serious as all that", is not a view shared by the people in the retail business in the South of England? Their Christmas trade showed clearly that the position made a serious inroad into their ability to continue with a profitable business.

Lord Henley

My Lords, I accept that some retailers may be affected. I do not believe that it necessarily affects the producers. I was trying to say that the losses are within the range we expected, and probably lower. At the same time, we have seen an increase in total take from excise duties which suggests that the problem is not as serious as all that.

One should perhaps direct my noble friend to the Irish experience. They have been suffering a degree of cross-border shopping since the early 1980s. They tried reducing the duty on spirits to match United Kingdom duties and froze other rates. There was then an increase in consumption in Ireland but it was insufficient to make up for the fall in revenue. I understand that they are producing their Budget this afternoon and may address the issue.

Lord Mason of Barnsley

My Lords, the Minister is taking a laid-back attitude. But is he not aware that a massive bootlegging operation is being carried on? There are organised gangs going to the Continent, buying large quantities of beer and cigarettes and then illegally reselling them in this country. What steps are the Government taking to stop that?

Lord Henley

My Lords, I was trying to make clear that we are certainly not complacent. In the first 11 months of 1993 there were over 1,000 detections of illicit importation involving over £1.5 million in revenue. Many goods have been seized; there have been a number of prosecutions and confiscations. It is difficult to estimate the extent of the illegal activity. However, the overall increase in excise duties seems to suggest that the problem is not as serious as all that.

Lord Rees

My Lords, will my noble friend confirm that overall legitimate duty free trade contributes substantially to the economy of this country?

Lord Henley

My Lords., my noble friend is correct. It also contributes substantially to the Exchequer. That is one of the reasons why we levy excise duties on liquor.

Lord Barnett

My Lords, I believe the Minister said earlier that the Government were not in favour of harmonisation. Does that mean that they are not in favour of the single market either?

Lord Henley

No, my Lords. There is no contradiction between what I said and what my noble friend Lady Chalker said yesterday. I did not say that we did not favour harmonisation; I said that harmonisation would be difficult. We felt it was appropriate in the duty set on liquor and tobacco that that should continue to be a matter for my right honourable friend the Chancellor of the Exchequer; and he will continue to set the rates according to economic, social and health factors.

Lord Geddes

My Lords, with regard to the last line of the Question on the Order Paper, does my noble friend agree that the importation of European liquor for personal use has become duty-free regardless of quantity? Is that so?

Lord Henley

My Lords, I can correct the last line of the Question. It is not duty-free regardless of quantity. It is duty-paid in the country where it was purchased. People pay the duty in the appropriate country. The duty-free regulations as applied in the old days still apply to the importation of goods from outside the EC. One can still import a certain amount duty-free from within the EC. Over and above that one pays duty at the local rate.

Lord Cocks of Hartcliffe

My Lords, before the entire House dissolves into tears over the plight of the brewers, will the Minister comfort his noble friend Lord Boyd-Carpenter by pointing out that they will get a very substantial bonus if the deregulation and contracting out Bill goes through in its present form? In future everyone buying beer or cider will have to pay full price for the froth or head on the top.

Lord Henley

My Lords, that is another matter. There has been some decline in the consumption of beer over the years. Whether that is to do with duties charged or the price I would not care to speculate. It might just be due to changing taste that some people have shifted from beer to other drinks or spirits.

Lord Boyd-Carpenter

My Lords, in view of the Minister's criticism of the last line of the Question, is he aware of the fact that the goods brought in by individuals are imported free of import duty?

Lord Henley

My Lords, what I was trying to make clear is that they pay duty at the rate appropriate in the country in which the goods were bought. In other words, people will pay the appropriate French taxes. Therefore, they are not strictly speaking duty-free.