European Union: Abolition of Duty-free Allowances (Hansard, 3 June 1998)

§ Lord McIntosh of Haringey
My Lords, intra-EU duty free sales will end after 30th June 1999, unless there is a proposal from the Commission to retain them and the unanimous agreement of all 15 member states. The Government have always said that they would not oppose a study into the impact of abolition if there were consensus for such a study. My right honourable friend the Chancellor of the Exchequer, as chairman of ECOFIN, facilitated a discussion on 19th May from which it emerged that a clear majority of member states were against re-opening the decision and that there was no consensus for an impact study.

§ Lord Greenway
My Lords, I thank the Minister for that Answer. Following on from the ECOFIN meeting, 341 does it not seem somewhat ludicrous that we are looking at abolishing a profitable industry employing about 120,000 people in the EU by way of a rather fudged system of compensation which may well cost taxpayers something like £6 billion over the next five years? Further, in addition to the well-voiced concerns of the aviation and ferry industries, is the Minister aware that the cruise industry is also extremely concerned about the matter? Indeed, that industry is one of the fastest growing areas of the holiday business in Europe and the uncertainty, coupled with the possibility of having to deal with a number of different tax regimes within the EU before harmonisation, may well place a vastly increased workload on those companies which could result in the deflection of some of this lucrative business away from EU ports.

§ Lord McIntosh of Haringey
My Lords, the noble Lord referred to a confused situation. The extension to the 30th June 1999 was a six-and-a-half-year extension to enable those affected to make alternative plans. Some of the estimates which have been made of job losses and of damage to the travel industry have been based on the assumption that there would be no replacement for duty-free sales. I am sure that the noble Lord knows that Commission officials are looking at the possibilities of duty-paid sales both at the ports and, indeed, on vessels.

§ Baroness Trumpington
My Lords, apart from job losses, would the Minister care to comment on the possibility of an increase in fares arising due to the lack of money going to the airport authorities from duty-free sales?

§ Lord McIntosh of Haringey
My Lords, if there is any loss of revenue, it is up to the ferry companies and the airlines to decide what action they should take as to whether or not they increase fares. I repeat: the estimates of job losses and fare increases in studies carried out for the operators differ greatly from those of the authoritative study carried out for the Department of the Environment, Transport and the Regions.

§ Lord Stoddart of Swindon
My Lords, is my noble friend the Minister aware that many people are quite bewildered by the abandonment or the withdrawal of duty-free sales? Indeed, they have always been under the impression that taxation and the imposition of duty, or the non-imposition of duty, were matters for Parliament at Westminster. Therefore, does not my noble friend agree that they will be very annoyed—I feel sure they will be—because they are now having a privilege taken away from them by people outside this Parliament and outside the Government of this country?

§ Lord McIntosh of Haringey
My Lords, as my noble friend must surely know, the original decision was taken by unanimous vote in 1991 when Mr. Norman Lamont was the Chancellor of the Exchequer. Therefore, Parliament did have a say in the removal of this concession. It is not taxation policy by the Commission; it is the removal of a concession which, if it did not exist, I do not believe anyone would deliberately invent now.

§ Lord Rees
My Lords, can the Minister confirm that at the last ECOFIN meeting the Commission offered a paper on the implications of the abolition of duty-free sales? Further, if duty-free sales are indeed to be phased out in June of next year, can the noble Lord say when we are to have an indication of the new duty regime which is to be introduced?

§ Lord McIntosh of Haringey
My Lords, as I have already said, the Commission is working on the implications of duty-paid arrangements to replace those for duty-free sales. However, some of them could not be stopped; for example, duty-free sales in international waters. However, the issue is how to avoid the confusion which might arise if vessels were charging different rates during different parts of the voyage.