Prepared: 0:23 on 28th March 2012
Andrew Griffiths (Burton) (Con): This is the first time I have served under your chairmanship, Ms Dorries, and it is an absolute pleasure. I was not intending to speak in today’s debate, but I thought I would take the opportunity as there is a bit of time. I congratulate the hon. Member for North Antrim (Ian Paisley) who, as always, made a passionate speech. Everybody who has contributed to the debate wants the level of illegal tobacco and illegal alcohol to be reduced. We all recognise the damage that the problem does to British business, the cost to the Treasury and the cost to companies in all our constituencies. We are united in that view.
However, coming from a brewing constituency and being the chairman of the all-party group on beer, I have some major concerns about the Government’s proposals on duty stamping. Of course, such concerns come on the back of last week’s Budget, which continued the duty escalator on beer and resulted in a 5% increase in duty on a pint of beer.
We need to consider the impact that any measure we introduce on fraud will have on the industry. We already pay more duty on British beer than people in any other European country. The facts are that we pay 40% of all of Europe’s beer duty, yet we drink only 13% of Europe’s beer. Our British brewing industry is being penalised by the duty regime. In France, 7p in duty is paid on a pint; yet, in this country, we pay 49p in duty. Hon. Members can see the impact that the duty regime is having on our industry.
I urge the Minister to think carefully about the effect that such a policy will have on an industry that is already reeling as a result of the duty regime. We are talking about requiring British brewers to duty stamp 5.5 billion bottles and cans every year. We recognise that there is fraud and smuggling in relation to beer, cider and wine, but the Government are not proposing to introduce duty stamps for cider or wine. Why is it that yet again the British brewing industry is being penalised in this way?
Kelvin Hopkins: Would it not help the British brewing industry if there were serious constraints on imports of beer and, indeed, we returned to the era when we could tax imports of alcohol to the same level that domestic products are taxed?
Andrew Griffiths: I agree wholeheartedly that the duty regime is encouraging imports into this country. The fact that the British beer industry pays up to four times the duty of that paid by the British cider industry is encouraging companies such as Stella Artois to produce cider—or cidre, as it calls its brand—and import it into the UK. We are exporting jobs as a result of our duty regime.
Jesse Norman: On a point of information, I would like to make it perfectly clear to hon. Members that the cidre product has nothing to do with Herefordshire.
Andrew Griffiths: I would like to put it on the record that, as well as being a great supporter of the British brewing industry, my hon. Friend is a magnificent spokesman for the cider industry. We regularly do battle over whether beer or cider is best.
Let us consider the Government’s alcohol fraud strategy. In 2010, we introduced a new strategy, which has been successful. We have seen the number of illegal goods being impounded and seized increase dramatically: a 71% increase in beer, a 50% increase in wine and a 67% increase in cider. Those figures clearly demonstrate that the smuggling problem is just as prevalent with wine and cider, yet the Government do not propose to put a duty stamp on them. I struggle to understand why beer is being singled out in such a way.
Let us consider the estimated amount of illegal beer that the Government believe is coming into this country. They estimate that 28,000 articulated lorry loads of beer come into this country every year. That is the equivalent to 538 articulated lorry loads of beer every week, with an estimated profit to the smugglers of £18,000 per lorry. That is the equivalent of £9.6 million of profit to the smugglers per week. Of course, we want to stop that profit and that illegal trade. However, are we honestly suggesting that if our border controls have 28,000 articulated lorries going through them every year, the answer is to bring in duty stamps, rather than to tighten up our border controls?
Brandon Lewis: My hon. Friend and I have discussed this issue on a number of occasions. Is it not true that the industry feels that a lot of the trade that is, in theory, coming in on those trucks is not physically coming in, but is merely a paper movement? The product never actually leaves the UK in the first place. We need to overcome that problem as well.
Andrew Griffiths: I agree that that has been suggested. If we are saying that there is a problem with smuggling—importing bottles and cans of beer into the country—let us deal with that. If we are saying that there is a fraud going on in relation to some grand paper chase of virtual bottles of beer leaving the country and coming back in, let us tackle that. We need the industry and the wholesalers to work with us on that. The answer is not to implement a duty stamping of 5.5 billion bottles of beer at a massive cost to the brewing industry, because that may not solve the problem to which my hon. Friend refers. There is the phrase, “Just because you’re paranoid doesn’t mean they haven’t got it in for you”. From the brewers’ perspective, it seems as if the Government have a desire to ruin the British beer industry, and I ask the Government why.
The all-party parliamentary beer group—I urge those in the Chamber who are not members to join as a matter of urgency—held a hearing recently, in which, I think, Andy Leggett gave evidence to us. He said, at that stage, that duty stamps were not the number one option for the Treasury and Customs in relation to smuggling and fraud. We are therefore concerned to see that proposal in the Budget.
Does the Minister have any idea what cost this will add to the beleaguered British beer industry? Why single out beer? Why not cider? Why not wine? Does she have any estimate of the cumulative effect of the extra burden and red tape on the brewing industry, when adding in the beer duty escalator and this unnecessary extra cost? I ask the Minister to think about British beer. Some 80% of all beer drunk in this country is brewed in this country. The beer industry employs tens of thousands of people in all our constituencies. It is a great British product of which we should be proud. Let us not ruin it with an over-bureaucratic system that is costly and damages the future of British beer.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op): It is a pleasure to have you as Chair this morning, Ms Dorries. I congratulate the hon. Member for Hereford and South Herefordshire (Jesse Norman) on securing the debate, and on giving a very good outline to some of the issues.
We have heard a wide-ranging debate covering the amount of money lost to the Treasury through illegal sales of alcohol and cigarettes, and also issues relating to health, smoking, alcohol and so on. I will not stray too much into that territory. However, I was a member of the Scottish Government when Scotland was the first part of the UK to introduce a ban on smoking in public places. That ban was not universally popular at the outset, but I think it has been proved to have been the right thing to do. The idea that some policies on health are unpopular but ultimately turn out to be the right thing to do has run through the debate, and I may return to it.
The hon. Member for Hereford and South Herefordshire made the point that this is the tip of the iceberg. People try to avoid paying their fair share of tax in a whole range of areas. Illegal alcohol and tobacco sales are an important part of that, but not the only part. I think the hon. Member for North Antrim (Ian Paisley) mentioned that people try to avoid the appropriate duty on fuel, as well as on tobacco and alcohol. The hon. Member for Hereford and South Herefordshire talked about shops selling under the counter and the amount of goods seized, and how those shops and premises are back in operation a few weeks later. That not only results in a loss to the taxpayer, but has very little deterrent effect. It almost sends a message to people that they can pretty much do what they like—they can take it as a business loss and simply get back up and running again, rather than changing behaviour. I think that the hon. Gentleman felt that there needs to be a change in legislation.
I was surprised that the issue was seen as one for the Treasury Minister only. Tie-ups happen between Her Majesty’s Revenue and Customs, UK Border Agency, police and local authorities in terms of licensing and trading standards, which indicates that this is a wider issue than just money lost to the Treasury. Many hon. Members have talked about a cross-cutting approach, and that is worth considering.
The hon. Member for North Antrim gave a very powerful description of this serious multi-million pound organised crime industry, if I can call it that. Of course, we will always see situations where some people will try to make a few extra pounds for themselves at a local level by bringing back a quantity of cigarettes or alcohol products if they have been in another country. However, it is absolutely right to focus on those who are seriously involved.
As the hon. Member for North Antrim will be aware, when businesses are shut down as a result of effective action, product substitution occurs: they move on to another product to make money to fund whatever other activities they wish to fund from the illicit gains. Therefore, these issues sit across Departments. I hope that the Minister will say how she will ensure that the Government are able to deal with issues that relate not just to the Treasury—of course, such issues are very important—but that they will begin to consider the deterrent effect of appropriate sentencing for those who persist in breaking the law.
Closure orders were considered in Scotland, particularly in relation to alcohol. For premises that persistently sold to underage drinkers or persistently broke the licensing laws, legislation was introduced to provide the opportunity to shut them down—a message to the retailer and to the local community.
Jesse Norman: To be clear, that would close down retailers who have breached the law by selling to underage drinkers, but are otherwise legal in their operations. I also have it in mind to target retail outlets that are not doing any legal trading—they have been set up simply for the purposes of the illegal sale of alcohol and cigarettes.
Cathy Jamieson: I hear what the hon. Gentleman says, which is very important because there are two separate issues. If an operation is set up simply for the purposes of selling illegal products or trading illegally, that should be taken very seriously with the full force of the law, not only with an appropriate sentence when it is brought to court, but with the ability to act quickly to stop these activities. That needs to be considered.
The hon. Member for North Antrim talked about the report published by the Northern Ireland Affairs Committee. I will certainly read that with interest, as I am sure other hon. Members will. His contribution, and the contributions of my hon. Friend the Member for Stockton North (Alex Cunningham) and the hon. Member for Bristol West (Stephen Williams), highlighted the consideration of smoking policies more generally as they relate to health, as well as to business and trade.
There was a fairly lively debate on the issue of plain packaging. I am not a smoker. I have never been a smoker, and in my former careers I took a fairly dim view of smoking generally. Therefore, I think that the Government should take an interest in anything that can be done to deal with health issues, but it must be done in a way that makes sense and is enforceable. I take the point that many people who work in the industry are worried about their jobs. We have to have some cognisance of that in our discussions.
My hon. Friend the Member for Stockton North mentioned some of the work that was done by the Labour Government. I had no wish to make this a party political debate—that is not a criticism of my hon. Friend—because I think all hon. Members share common ground in trying to deal with these important issues.
My hon. Friend also raised one of the more serious issues: the so-called tab houses, which have been the subject of responses to parliamentary questions and on which work has been done previously, with a particular focus on the introduction of children to smoking. We are also concerned about whether children and young people are being introduced not just to smoking, but to crime, drug misuse and other activities in which they should not be involved.
In debating these issues, it is important that we do not focus simply on packaging. There will be different views about how much packaging and branding impacts on consumer behaviour—I am sure that there are plenty of PhD theses about that, even if they are not in this room—and that debate will continue. One important point, which my hon. Friend mentioned, is how we deal with the problems of criminality relating to these issues. Again, I do not wish to make this a party political point, but the appropriate number of people must be involved in intelligence-led policing and the joined-up approach between policing, trading standards, licensing authorities and the UK Border Agency. There would be concern that elements of that approach rely on many people who are sometimes described as the backroom staff in police forces. None the less, they are the ones who gather the intelligence, analyse the data and information and do the forensic work to track down some of those involved in serious and organised crime. That will be important as we consider a way forward.
As well as discussions on smoking and the impact on health, we also heard from the hon. Members for Great Yarmouth (Brandon Lewis) and for Burton (Andrew Griffiths), the chair of the all-party parliamentary beer group, particularly about duty stamping. Again, that is controversial and both hon. Gentlemen are putting forward viewpoints on how this would work in practice and what the impact on the industry would be. Will the Minister reply to the hon. Gentlemen’s questions, which I should also like to pose?
We heard about some technical issues in respect of duty stamping and whether it would be the correct option. Have the Minister and her colleagues considered forming a working group, bringing together different industry interests to look at what is technically the best way to work on avoidance of duty and whether the duty stamping is the correct way to take this forward? If other options are being considered, perhaps the Minister could lay those out for us today, because we will have to consider this matter in more detail as we debate it, following on from the Budget.
Overall, we have had a useful debate. It is clear that there are different interests and views across the political parties, and within them, particularly on plain packaging on cigarettes. I should like briefly to highlight another issue relating to tobacco. Work done by HMRC on avoidance considered what it called the tax gap. In 2009-10, the spirits duty gap was 3.4%, the beer duty gap was 14%, the gap in cigarette duty was 10% and in respect of hand-rolling tobacco the duty gap was estimated at 46% and had reached a high point of 50% in 2008-09. We have not looked at that in detail this morning. None the less, there could be greater focus on that area as we move forward.
In conclusion, we have had a good debate. We have covered smoking and issues to do with the duty stamp, about which, I hope, we will get more information. We have heard about enforcement issues and about how we have to take health policy into account. We have heard how important this matter is for the Revenue and for business. But the important message that must be taken away by the Government is that we have to find solutions to all the problems that have been identified. I reiterate the point that has been made: having a lead Minister or someone identified to work on the cross-cutting agenda and take this forward would assist the process. I hope that the Minister addresses that point as well as the other questions that have been raised this morning.