Cross-Channel Alcohol Smuggling (Hansard, 14 April 1999)

§ Lord McIntosh of Haringey
My Lords, following the thorough alcohol and tobacco fraud review, the recommendations resulted in the Comprehensive Spending Review in July 1998 allocating Customs £35 million to tackle evasion of alcohol and tobacco duties. This has enabled it to employ more than 100 extra front-line staff, who have been operationally effective since 1st April.

§ Lord Islwyn
My Lords, does the Minister appreciate that whereas these measures may be worth while, nevertheless they tend to deal with the symptoms and not the cause of the problem? The real issue is the duty differential. For example, beer in France has 5p a pint excise duty compared to 33p a pint in Britain. Meanwhile, the Treasury is losing out because 15 per cent. of French beer sales is drunk in Britain. Organised crime is muscling in on this illicit trade and Kent police are having a job to cope with the situation. Surely fresh thought is needed on this important problem.

§ Lord McIntosh of Haringey
My Lords, we should get the figures into perspective. Yes, of course it is true that it is a serious problem; I do not wish to underestimate it. The loss through cross-Channel smuggling of alcohol is put at £220 million, which is 2 per cent. of UK alcohol receipts. On the other hand, if we were to bring our alcohol duty levels down to those of France and our tobacco duties down to those of Belgium, we would be losing £9.5 billion in revenue. That is the balance which should be considered.

§ Lord Skelmersdale
My Lords, the Minister spoke about the new Customs and Excise officers being "operationally effective". Does he mean that they are working or does he mean that they have caught smugglers?

§ Lord McIntosh of Haringey
Both, my Lords. They have been recruited and in training since July of last year when the money was allocated. They are now all on duty—some were on duty well before 1st April—and they are all contributing to the work of Customs and Excise in combating smuggling.

§ Lord Berkeley
My Lords, would the Minister care to comment on how much smuggling there might be of 762 tobacco and drink between France and Belgium? Perhaps I may suggest to him that if there were some harmonisation between rates of duty and taxes within the Community—up as well as down, bearing in mind what the Minister has just said—that might eliminate the problem.

§ Lord McIntosh of Haringey
My Lords, my noble friend knows that the land frontier between France and Belgium is pretty well 100 per cent. open. I have no idea what degree of smuggling there is. I do not think anybody could possibly know such a figure.

§ The Earl of Northesk
My Lords, can the Minister confirm the recent announcement that 1.000 Customs and Excise jobs are to be cut in the south of England?

§ Lord McIntosh of Haringey
No, I cannot, my Lords. I will investigate and write to the noble Earl.

§ Lord Stoddart of Swindon
My Lords, does my noble friend not agree that the higher the disparity between the taxes on alcohol and tobacco in this country and other countries, the more incentive there is for criminality? Does that not in itself worry the Government, because they are having to employ more officials to prevent this criminality from taking place and growing? Would it not be far better to have more reasonable taxes on these two items than continually to increase them above the cost of living and make things even more difficult as time goes on?

§ Lord McIntosh of Haringey
My Lords, I am not surprised at the question. My noble friend is of course right; great disparities in excise duty rates result in smuggling. I have already given the difference between the cost to the Revenue of smuggling and the cost to the Revenue if we were to harmonise the rates fully. However, I am surprised that the question should come from him and that my noble friend Lord Stoddart of Swindon, of all people, should be arguing for tax harmonisation within the European Union.

§ Lord Stoddart of Swindon
My Lords, my noble friend is quite wrong. I was not arguing for tax harmonisation; I was arguing for the Treasury and Parliament in this country to reduce the taxes on those particular items. That is not harmonisation.

§ Lord Islwyn
My Lords, will the Minister recognise that young people can obtain supplies of alcohol more easily from illicit dealers, whereas with off-licences at least there is a measure of control? Will he also recognise that the licensing trade employs many thousands of people throughout the country and that eventually these smuggling activities will have a knock-on effect on jobs?

§ Lord McIntosh of Haringey
My Lords, I do not know that I can confirm that this is likely to increase sales of alcohol to children. Unfortunately, a great deal of smuggled alcohol and tobacco goes through legitimate or semi-legitimate retail outlets. As to job 763 losses, it should be borne in mind that a large proportion of the alcohol smuggled into this country is manufactured in this country, sent out to hypermarkets in Calais and Boulogne and then brought back again. So there are job losses in the retail trade but not in the brewing industry.

§ Baroness Trumpington
My Lords, in view of what the Minister has just said, would he care to comment on the losses suffered by Kentish pubs and breweries?

§ Lord McIntosh of Haringey
My Lords, I hoped that I had answered that question. Yes, of course the loss to Kentish pubs is very serious. That is why we are putting the extra effort into anti-smuggling activity. But the loss to breweries is probably not that great as it is British beer that is being brought back into the country.

§ Lord Ironside
My Lords, does the noble Lord agree that there is another differential to consider; namely, the difference between the strength of export spirits and that of spirits obtained on the home market? Is not the lure to smuggle the ability to be able to buy export strength spirits, for example gin and whisky, at 47 per cent. by volume, as opposed to spirits sold in the domestic markets at 40 per cent. by volume? Does the noble Lord therefore consider that there is good reason to harmonise the rates of alcohol content in order to avoid and reduce smuggling?

§ Lord McIntosh of Haringey
My Lords, harmonising rates of alcohol strength would be a step that would take us far in the direction of a "united states of Europe" in which this Government do not wish to go. I do not know that extra high-strength spirits form a significant proportion of the goods brought back into this country. A significant proportion of the beer that is brought back into this country is high-strength. It has no market in other European countries; it is manufactured in this country, sent over to Calais and Boulogne and then returned here.