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Mr. Alan Reid:
I, too, wish to oppose clause 11. In my constituency, whisky distilling makes an important contribution to the local economy. It brings jobs to
remote communities where alternative employment can often be difficult to find. The increase in alcohol duties in the Budget puts those jobs at risk, and the Government should not increase alcohol duty yet again, after two increases over the rate of inflation in the last 12 months. It is high time that these inflation-plus duty increases were stopped.
Colin Challen (Morley and Rothwell) (Lab): I agree with the hon. Gentlemans general intent, but the increase in duty on beer imposed in the Budget is 1p. In my local, which I attend regularlyI do not know whether the hon. Gentleman attends histhe price of a pint has gone up by 10p. Who does the hon. Gentleman blame for the severe problems that drinkers face in their locals? They always increase prices at the time of the Budget, but they do not explain to customers why the price has gone up far more than the Chancellors imposition.
Mr. Reid: The hon. Gentleman asks about beer, but I was concentrating on whisky. He has made his point so I will continue my speech. Putting the duty up without a proper assessment of the impact on demand is risky. It could cost the Treasury money. Constant increases are unacceptable without any assessment of the impact on demand or on [ Interruption. ]
The Second Deputy Chairman: Order. There is a loud buzz of conversation in the Chamber that is making it difficult for me to hear what is being said. Perhaps those Members who do not want to take part in the proceedings might leave or, at the very least, keep quiet, so that those who do want to take part can hear what is going on.
Malcolm Bruce (Gordon) (LD): My hon. Friend is making an important point. In my area and other parts of north-east Scotland, new distilleries are proposed, but they may be prevented from going ahead by this increase. The issue is not only losses to the Exchequer, but a threat to jobs at a time when unemployment is reaching record levels. This is a serious issue and if the Government really cared about jobs and employment, they would not be destroying jobs in one of our most important industries.
Mr. Reid: I wholeheartedly agree with my right hon. Friend, who makes an important point. The constant increases in dutythe Government have promised another above-inflation increase in next years Budgetwill discourage people from investing in the industry and in new distilleries.
In my constituency, old distilleries have been reopened in recent yearswhen the present Prime Minister was Chancellor of the Exchequer and froze spirits duty. Under the policy of the present Chancellor, I do not expect to see any more new distilleries opening.
It is quite obvious that these constant increases in duty will deter investment in the industry, and that will clearly have an effect on employment. One illogical aspect of the present system is that spirits are
taxed far more heavily per unit of alcohol that beers or wines. If alcohol were taxed on health grounds, surely the only logical way to tax it would be based on the units. The present Prime Minister, when he was Chancellor, had the policy of freezing the duty on spirits and allowing that on beers and wines to catch up. I am disappointed that that policy has not continued.
Various studies over the years have shown that the sale of spirits is very sensitive to pricefar more so than is the case with wine. A policy of reducing the tax on spirits and increasing that on wine to a comparable level would probably bring in more money for the Treasury.
Scotch whisky is the worlds leading spirit drink. It can be produced only in Scotland, but it relies heavily on products produced throughout the whole of the UK. It is therefore bizarre that a product that is so important to the UK economy is taxed much more heavily than wines, most of which are imported. I doubt that any other country in the world discriminates against one of its own products in favour of imports in such a way. An unfortunate side effect of that is that it encourages other countries to impose unfair duties on Scotch whisky.
Mr. Geoffrey Clifton-Brown (Cotswold) (Con): On a day when manufacturing trade has reduced by 0.1 per cent., the largest reduction since records began in 1948, is it not folly to be increasing the duty on whisky to such an extent when it is one of our key export industries? We rely on it and other key exports to get us out of recession and to create jobs.
Mr. Reid: I agree entirely with the hon. Gentleman. He makes an important point. Whisky is an important export and, as I was saying, increasing the duty in this country encourages other countries also to discriminate against Scotch whisky. That means that when British trade negotiators protest about others countries harsh treatment of the Scotch whisky industry, those countries have an easy ripostethey just say, But your own country also discriminates against whisky.
The Scotch whisky industry is very important to the entire economy. It employs more than 10,000 people directly and supports an estimated 50,000 further jobs through its spending on input products. It also provides a significant boost to our balance of trade. It is also an important local employer in remote areas where alternative employment is hard to find. For example, the many excellent malts produced in my constituency on the islands of Islay, Jura and Mull provide local employment. It would be very hard to find alternative jobs on those islands.
As a result of the Governments punitive actions, the product produced on those islands brings in large sums for the Treasury but only a small fraction of that money is returned to the islands to be spent on public services. If any hon. Members want to spend their holiday on Mull, they will certainly see the disgraceful state of the roads, although they will also see beautiful scenery. Those islands produced great revenue for the Treasury, but they do not see the return in public services.
How does the price of whisky, with which I must admit I have a certain affinity, compare with the RPI? Sometimes, the question of duty is not accurately portrayed in terms of the general increase in
prices. Sometimes, the prices of certain things do not keep pace with the RPI, even after the duty increases. Is whisky
The Second Deputy Chairman: Order. I am loth to interrupt the hon. Gentleman, but we covered much of that ground earlier in the debate, when I do not think he was in the Chamber. He has probably given the hon. Member for Argyll and Bute (Mr. Reid) enough to work on for the time being.
Mr. Reid: The price of whisky is going up, mainly because the Government keep on putting the duty up higher than the rate of inflation. We saw it in last years Budget and back in December, and we are now seeing it again. A successful industry such as the Scotch whisky industry should be encouraged, not penalised by constant rises in duty.
The Government put forward two arguments for the duty increaseshealth and the tax yield. However, if health were the reason, the tax per unit of alcohol would be the same for all beverages, with the result that the tax on whisky would come down and that on beers and wines would go up. As for the tax yield argument, there is a severe danger that increasing the duty will lead to a lower yield because of consumer resistance to buying at the higher price.
Mr. Redwood: In the preceding debate, it was very disappointing that the Minister was unable to explain how clause 11 would work in terms of the duty rates, or what consequences she thought the changes would have for jobs and enterprise in the important businesses and sectors involved. She was also unable to give a forecast of how much more damage would be done. She was not even able to say what she thought was the cause of the big escalation in the number of pub closures in recent months, and she does not seem to have much idea of the impact that the measure will have on business in general.
I am delighted that my Front-Bench team are inviting Conservative Members to vote against the duty measures tonight. If the Government had not spent so much on the banks, or if they were able to control their public spending better, they might not need to raise so much revenue in this rather clumsy way. This change is not the way to get businesses through or out of a recession, but it is deeply damaging to enterprise and prospects.
Some Labour Members have failed to speak up for their constituents at all, while others have treated it as a subject of some frivolity because it involves drinking. All of them should understand that many people in the business are hurting very badly, and that they are looking to the Government for help and a lead. However, we are seeing again tonight that absolutely no help is forthcoming.
Mr. Browne: I shall be brief, and my contribution will be along the lines of that made by the right hon. Member for Wokingham. Like all hon. Members, I have received a great many representations on this matter from individuals, pub landlords and brewers in my constituency. They have all made it very clear that they consider that increase in duty over and above the rate of inflation proposed in this clause will be detrimental to their businesses.
That is not a hypothetical assertion, as one need only look at the number of pubs closing every day to see that the change is having a very immediate effect. What is more, it is having a considerable social impact on communities in towns, cities and villages right across the country.
The Second Deputy Chairman: Order. Again, I am not anxious to curtail debate, but I must explain that we are not now going over the amendments that we have had before. With great respect to the hon. Gentleman, he is in danger of doing that.
Mr. Browne: Thank you, Sir Michael. The new clause is widely drawn and there is scope for overlap, but I was seeking to bring my remarks to a close. The essential point is that the clause will raise revenue on producers, manufacturers and brewers of alcohol. That will damage both them and communities in all our constituencies. I hope that hon. Members of all parties will represent the interests of their constituents by voting against the Government on this matter.
Mr. Clifton-Brown: I declare an interest as chairman of the all-party wine group. Our group carried out a study of the effect of the Governments proposed duty increases and the escalator. Our conclusion was that jobs and investment would be lost and that revenues would reduce over time, not meet the Governments revenue targets.
Whether we are talking about the increase in duty on wine, whisky or beer, we have to recognise that we live in an increasingly international world. Hong Kong, by reducing its duty to zero, is taking from London the market in wineselling and cellaringthat has been here for centuries. The Government are doing themselves huge damage with the duty increases. They are reducing investment in the industries affected, reducing the number of jobs and reducing the tax take they receive because they are reducing consumption of wine and whisky. On every count, the measures are counter-productive.
Mr. Redwood: Does my hon. Friend think that Labour Members are ashamed of what they are doing? None of them has risen to speak in defence of the clause, and the Government curtailed debate on the amendments.
Mr. Clifton-Brown: My right hon. Friend makes a good point. What the Government are doing makes no sense. If it increases unemployment, reduces investment, reduces consumption and therefore the tax take, what on earth is the point of increasing duties well above the rate of inflation? I shall oppose the clause.
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