Schedule 4. — (British Wine (Rates of Excise Duties).)

FINANCE (No. 2) BILL – in the House of Commons at 12:00 am on 1st June 1967.

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Question proposed, That this Schedule be the Fourth Schedule to the Bill.

Photo of Mr Robin Maxwell-Hyslop Mr Robin Maxwell-Hyslop , Tiverton

I want to draw the attention of the Committee to a major point of substance. In the Chancellor's Budget speech. he said something which, taken in conjunction with Schedule 4, grossly misled the House and, had it not been for that statement, I should certainly have divided the House on one of the Budget Resolutions.

In the course of his Budget speech, the right hon. Gentleman referred to the economic regulator, and said: I therefore propose broadly to consolidate the surcharges at the existing rates with effect from tonight and, at the same time, to bring the current surcharges themselves to an end. Here are the important words: The final result will be roughly the same, and there is nothing in the changes that I am making which would justify any increase in the price level."—[OFFICIAL REPORT, 11th April, 1967; Vol. 744, c. 1003.] That is quite specific, I think. What the Chancellor has done is to slap on a tax increase of 1s. 0½d. per gallon on home-produced heavy wine, which represents more than 2d. a bottle, contrary to the statement which he made in his Budget speech.

I know of one firm producing heavy British wines and, for that firm, this represents over £100,000 a year. It cannot possibly carry that extra load. If it puts up its price by 2d. a bottle, when the Chancellor has told the country that he has done nothing to the duties which would justify a price increase, naturally the public will think that the firm concerned is breaking the price freeze and profiteering.

It is grossly wrong for the Chancellor to put an individual firm in that position. In addition, it must be remembered that hon. Members never have time to study the figures in the Budget Resolutions before they are put to the Committee. It means that hon. Members have been mis- led into thinking that, inside that mass of figures, there is no significant increase, when the Chancellor has made an increase quite deliberately. Not only has he made a significant increase, he has picked out the British producers for the largest single increase of any of the ones in the Third and Fourth Schedules.

The Chancellor owes the Committee an explanation why he misled the House so grossly, and he owes the House the opportunity of honouring the words which he used in column 1003 by agreeing to the withdrawal of the Fourth Schedule and then coming back to the House at a later stage with a new Schedule adjusted to make it compatible with the undertaking which he gave. This is the only respectable thing that he can do, and if he does not do it he has no right to expect either the courtesy or the co-operation of this Committee.

10.45 p.m.

Photo of Mr John Peyton Mr John Peyton , Yeovil

I want to remind the Committee of some immortal words which the Chancellor of the Exchequer spoke in June, 1964, when he said: That really began from 1961 and the pay pause and although I know that the Government are acting purely in the knowledge that there is nobody left who wants to drink their health, they are now making it more expensive for us to drown our sorrows."—[OFFICIAL REPORT, 2nd June. 1964; Vol. 695, c. 945.] I think that nothing could be more satisfactory from our point of view than to hand those words back to the Chancellor tonight on a plate and say that we only wish they were worth a drink to him, but they really are not. It shows how dangerous it is for Ministers who believe and think as the right hon. Gentleman does to get up and say the sort of things he did then.

I am sorry that the Chancellor now finds himself in a position in which he cannot give way at all, either to the pleas of those who, like my hon. and gallant Friend the Member for Knutsford (Sir W. Bromley-Davenport) have spoken on behalf of imported wines, or my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) who has spoken on behalf of British wines and rightly pointed out the vicious swipe which the Chancellor and his colleagues are taking at British beverages.

It really is sad to think that we can extract nothing from the Government, and that no assurances they can ever give will carry any weight until we have some indication from the Front Bench opposite that they will engage in policies which will make a reduction in taxation profitable and welcome to themselves. We are coming increasingly to regard their opposition to tax reductions as stemming from two things: first, their obstinate adherence to policies which cannot work because they are too expensive, and secondly from a dreary, dull conviction that all enjoyment is wrong, a conviction with which we had to live in the almost endless twilight of war, and which arose from the close companionship which they mentally keep with austerity and dullness.

Photo of Mr Niall MacDermot Mr Niall MacDermot , Derby North

The hon. Member for Tiverton (Mr. Maxwell-Hyslop) quoted a passage from the Chancellor's Budget speech and suggested that my right hon. Gentleman had misled the House and the trade in what he said. I hope to satisfy the Committee that that is not the case, and to explain the reason for the distinction which there is between the steps taken in this Consolidation Measure in the Fourth Schedule in relation to British wines, and those in the Third Schedule which we have just been discussing.

Shortly after the passage which the hon. Gentleman quoted my right hon. Friend said: As regards alcoholic drink, I propose to incorporate the surcharge into the substantive rates of duty with the least possible alteration, taking account of international commitments."—[OFFICIAL REPORT, 11th April, 1967; Vol. 744, c. 1003.] There are a number of international obligations affecting the duties on wines and British wines which were disturbed by the imposition of the 10 per cent. surcharge last July. The revised rates which are contained in these two Schedules are designed to restore the differential between the full, Commonwealth and British rates without causing any substantial loss in the total amount of revenue. That is in accordance with the policy stated by the Chancellor in the passage which the hon. Member quoted.

This has been effected by rounding the surcharge-inclusive Commonwealth rate to the nearest 3d. and applying the differential margins to determine the other rates. This results in a reduction in the surcharge-inclusive full rates and an increase in the British wine rates. The new rates involve increases amounting to 1s. 0·6d. per gallon on heavy wine. The reason is the combination of the need to comply with these international commitments and the need to avoid a substantial loss of revenue.

Some representations have been received, including one, I believe, from the company to which the hon. Member was referring, saying that the effect would be a consequential increase in cost of 2d. a bottle for certain of its wines. In reply the Chancellor reiterated that he saw no reason for any overall increase in the price of wines as a result of these measures in the regulator, and that if the company feels that it can and wishes to make out a case for a specific increase during the period of severe restraint that is a matter for it to take up with the Minister of Agriculture, Fisheries and Food.

But these measures do, as I hope the Committee will now accept, follow the statements of policy made by my right hon. Friend the Chancellor in his Budget speech. The increase in the duty on British wines is an unfortunate and unavoidable consequence of the consolidation measure.

Photo of Mr Robin Maxwell-Hyslop Mr Robin Maxwell-Hyslop , Tiverton

If what the Financial Secretary says was accurate there might be some merit in it, but it has not even the merit of accuracy. He says that we wanted to restore the ratios to what they were before the 10 per cent. regulator was put on.

Photo of Mr Niall MacDermot Mr Niall MacDermot , Derby North

I said we wanted to restore the differential.

Photo of Mr Robin Maxwell-Hyslop Mr Robin Maxwell-Hyslop , Tiverton

To restore the differential, certainly. If we take the basic rate of 17s. for home-produced wines before the regulator was put on as 100, the index for wines of Commonwealth origin would be 156 and the index for foreign would be 214. If we take the rates in Schedules 3 and 4 on British heavy wines as 100, the rate for Commonwealth wines has been reduced from 156 to 148 and the rate for foreign from 214 to 199. That is not restoring the differential.

Photo of Mr Niall MacDermot Mr Niall MacDermot , Derby North

It is the difference between the ratio and the differential. The hon. Member is still thinking and speaking in terms of ratios, but the differential which exists by agreement with Australia is that the difference between the Commonwealth and British rates may not exceed 9s. 6d. a gallon. It is a flat sum, and it is in order to restore that differential that the difficulty arises.

Photo of Mr Robin Maxwell-Hyslop Mr Robin Maxwell-Hyslop , Tiverton

If so the Financial Secretary needs to explain why it was possible to distort the differential by the use of the regulator and not possible to maintain the distortion subsequently. The Committee is entitled to an explanation why it is right to do it in July and wrong to do it in April.

Secondly, the Financial Secretary has not yet fought his way out of the definite commitment given by the Chancellor: The final result will be roughly the same, and there is nothing in the changes that I am making which would justify any increase in the price level,"—[OFFICIAL REPORT, 11th April, 1967; Vol. 744, c. 1033.] unless he is putting forward the proposition that an increase in Excise duty does not justify an increase in price to the consumer. If he is putting that argument forward it is an entirely novel doctrine, which has not been put forward in the Committee before. When petrol duty, cigarette duty and beer and whisky duty go up under the regulator, that justifies an increase in price. Thus, when the right hon. Gentleman puts 1s. ½d. a gallon on home-produced heavy wines, he wants us to believe that they are in some strange category in which, for imperceptible reasons, no increase is justified. He may make such a bizarre case if he wishes, but he should not ask the Committee to take it on trust—

Photo of Mr Niall MacDermot Mr Niall MacDermot , Derby North

The hon. Gentleman still does not understand. In the passage he quoted, my right hon. Friend was referring not just to the surcharge on alcoholic drinks but to the whole range of surcharges and he was saying that the consolidation measures would bring the total revenue to the same position as it was before consolidation, and that, therefore, these measures would not justify an increase in the price level, which is, of course, an average of many different prices—[Interruption.]—of course it is. He said later that there was a particular difficulty in relation to alcoholic drinks.

I do not want to say anything which might be thought to prejudge the matter, but I have explained that if, because of this measure—I have explained why it had to be taken in relation to British wines—a company felt that an increase in the price of some of its products was justified, it should take that matter up with the Minister of Agriculture. But this would be no justification for an overall increase in prices, which would affect the price level.

On the hon. Gentleman's first point, whereas other countries, in a temporary matter like the introduction of the Regulator, will accept a slight and temporary breach of the agreement, when we are consolidating them into a permanent measure, of course they will not.

Photo of Mr Robin Maxwell-Hyslop Mr Robin Maxwell-Hyslop , Tiverton

The hon. and learned Gentleman, therefore, is stating an obvious proposition, that an increase in tax on one item does not justify an increase in the price of another. I concur utterly, although I should not have thought that it needed saying. His other proposition was that the statement that there is nothing in the changes meant that there is something in them. This also is a somewhat unusual construction. And the phrase about justifying any increase in the price level means, he told us, that one may increase prices but that this does not mean that one has increased the price level. This is a naive interpretation.

I do not see the point of making this general proposition if all it meant was that, when duties have been put up, we expect prices to go up and vice versa, and that, as the overall sum is neither plus nor minus, the overall effect will be neither. But hon. Members who heard the Budget speech certainly did not think that the right hon. Gentleman intended to put 1s. 0½d. a gallon on British heavy wines; nor did the public take that statement to mean that duty would be increased substantially.

None of us realised this until we heard from the manufacturers who had listened to the Budget on the radio that the Commissioners of Customs and Excise had notified them that 1s. 0½d. was to go on at midnight. Although his junior Minister tried to talk his way out of it, it is because the Chancellor presented this increase in such a way that it was concealed from the Committee that anyone who values accurate presentation, if nothing else, would do well to vote against Schedule 4.

Question put, That this Schedule be the Fourth Schedule to the Bill:—

The Committee divided: Ayes, 174; Noes, 106.

Division No. 341.]AYES[11.00 p.m.
Alldritt, WalterGalpern, Sir MyerMorris, John (Aberavon)
Anderson, DonaldGourlay, HarryMoyle, Roland
Archer, PeterGray, Dr. Hugh (Yarmouth)Murray, Albert
Armstrong, ErnestGregory, ArnoldNorwood, Christopher
Atkinson, Norman (Tottenham)Grey, Charles (Durham)Oakes, Gordon
Barnett, JoelGriffiths, David (Rother Valley)Ogden, Eric
Beaney, AlanHamilton, James (Bothwell)O'Malley, Brian
Bence, CyrilHannan, WilliamOram, Albert E.
Bidwell, SydneyHarper, JosephOrme, Stanley
Bishop, E. S.Haseldine, NormanOswald, Thomas
Blackburn, F.Henig, StanleyPage, Derek (King's Lynn)
Booth, AlbertHerbison, Rt. Hn. MargaretPalmer, Arthur
Boston, TerenceHilton, W. S.Pannell, Rt. Hn. Charles
Boyden, JamesHoughton, Rt. Hn. DouglasPark, Trevor
Bradley, TomHowarth, Harry (Wellingborough)Parkyn, Brian (Bedford)
Bray, Dr. JeremyHowarth, Robert (Bolton, E.)Pearson, Arthur (Pontypridd)
Broughton, Dr. A. D. D.Hoy, JamesPentland, Norman
Brown, Rt. Hn. George (Belper)Huckfield, L.Prentice, Rt. Hn. R. E.
Brown, Hugh D. (G'gow, Provan)Hughes, Roy (Newport)Price, Thomas (Westhoughton)
Brown, R. W. (Shoreditch & F'bury)Hunter, AdamProbert, Arthur
Buchan, NormanHynd, JohnPursey, Cmdr. Harry
Callaghan, Rt. Hn. JamesJackson, Colin (B'h'se & Spenb'gh)Reynolds, G. W.
Cant, R. B.Jackson, Peter M. (High Peak)Roberts, Albert (Normanton)
Coleman, DonaldJeger,Mrs.Lena(H'b'n&St.P'cras,S.)Roberts, Gwilym (Bedfordshire, S.)
Concannon, J. D.Johnson, Carol (Lewisham, S.)Robinson, W. O. J. (Walth'stow, E.)
Conlan, BernardJones, T. Alec (Rhondda, West)Roebuck, Roy
Craddock, George (Bradford, S.)Judd, FrankRogers, George (Kensington, N.)
Crawshaw, RichardKerr, Mrs. Anne (R'ter & Chatham)Ross, Rt. Hn. William
Crosland, Rt. Hn. AnthonyLeadbitter, TedRowlands, E. (Cardiff, N.)
Crossman, Rt. Hn. RichardLedger, RonRyan, John
Cullen, Mrs. AliceLee, Rt. Hn. Frederick (Newton)Shaw, Arnold (Ilford, S.)
Dalyell, TamLee, John (Reading)Sheldon, Robert
Davidson, Arthur (Accrington)Lestor, Miss JoanShort, Mrs. Renée(W'hampton,N.E.)
Davies, Dr. Ernest (Stretford)Lever, Harold (Cheetham)Silkin, Rt. Hn. John (Deptford)
Davies, G. Elfed (Rhondda, E.)Lewis, Ron (Carlisle)Silkin, Hn. S. C. (Dulwich)
Davies, Ednyfed Hudson (Conway)Loughlin, CharlesSilverman, Julius (Aston)
Davies, Harold (Leek)Luard, EvanSlater, Joseph
de Freitas, Rt. Hn. Sir GeoffreyLyons, Edward (Bradford, E.)Stewart, Rt. Hn. Michael
Dell, EdmundMcBride, NeilTaverne, Dick
Dempsey, JamesMacColl, JamesTinn, James
Diamond, Rt. Hn. JohnMacDermot, NiallUrwin, T. W.
Dickens, JamesMacdonald, A. H.Wainwright, Edwin (Dearne Valley)
Doig, PeterMcGuire, MichaelWalker, Harold (Doncaster)
Donnelly, DesmondMackenzie, Gregor (Rutherglen)Wallace, George
Dunnett, JackMackintosh, John P.Watkins, David (Consett)
Dunwoody, Mrs. Gwyneth (Exeter)MacMillan, Malcolm (Western Isles)Wellbeloved, James
Dunwoody, Dr. John (F'th & C'b'e)McMillan, Tom (Glasgow, C.)Wells, William (Walsall, N.)
Eadie, AlexMcNamara, J. KevinWhitlock, William
Edwards, William (Merioneth)MacPherson, MalcolmWilliams, Alan (Swansea, W.)
Ennals, DavidMahon, Peter (Preston, S.)Williams, Alan Lee (Hornchurch)
Ensor, DavidMahon, Simon (Bootle)Williams, Clifford (Abertillery)
Evans, Ioan L. (Birm'h'm, Yardley)Marquand, DavidWilliams, Mrs. Shirley (Hitchin)
Finch, HaroldMikardo, IanWilson, William (Coventry, S.)
Fitt, Gerard (Belfast, W.)Millan, BruceWinnick, David
Fletcher, Ted (Darlington)Miller, Dr. M. S.Yates, Victor
Foot, Michael (Ebbw Vale)Mitchell, R. C. (S'th'pton, Test)
Forrester, JohnMorgan, Elystan (Cardiganshire)TELLERS FOR THE AYES:
Fowler, GerryMorris, Alfred (Wythenshawe)Mr. Walter Harrison and
Fraser, Rt. Hn. Tom (Hamilton)Morris, Charles R. (Openshaw)Mr. Alan Fitch.
Freeson, Reginald
NOES
Alison, Michael (Barkston Ash)Boyd-Carpenter, Rt. Hn. JohnDalkeith, Earl of
Awdry, DanielBrinton, Sir TattonDean, Paul (Somerset, N.)
Bell, RonaldBromley-Davenport, Lt.-Col. Sir WalterDodds-Parker, Douglas
Bennett, Sir Frederic (Torquay)Brown, Sir Edward (Bath)Drayson, G. B.
Berry, Hn. AnthonyBrace-Gardyne, J.Eden, Sir John
Bessell, PeterCampbell, GordonElliott,R.W.(N'c'tle-upon-Tyne,N.)
Biffen, JohnCarlisle, MarkEyre, Reginald
Birch, Rt. Hn. NigelChichester.Clark, R.Fletcher-Cooke, Charles
Black, Sir CyrilClegg, WalterFortescue, Tim
Blaker, PeterCostain, A. P.Gilmour, Ian (Norfolk, C.)
Body, RichardCunningham, Sir KnoxGlover, Sir Douglas
Goodhart, PhilipLewis, Kenneth (Rutland)Rossi, Hugh (Hornsey)
Goodhew, VictorLloyd, Ian (P'tsm'th, Langstone)Royle, Anthony
Grant, AnthonyMacArthur, IanScott, Nicholas
Grieve, PercyMackenzie, Alasdair(Ross&Crom'ty)Sharples, Richard
Griffiths, Eldon (Bury St. Edmunds)Macleod, Rt. Hn. IainShaw, Michael (Sc'b'gh & Whitby)
Gurden, HaroldMarten, NeilSinclair, Sir George
Hall-Davis, A. G. F.Maxwell-Hyslop, R. J.Smith, John
Hawkins, PaulMaydon, Lt.-Cmdr. S. L. C.Stainton, Keith
Heald, Rt. Hn. Sir LionelMills, Stratton (Belfast, N.)Steel, David (Roxburgh)
Heseltine, MichaelMiscampbell, NormanStoddart-Scott, Col. Sir M. (Ripon)
Higgins, Terence L.Monro, HectorTaylor,Edward M.(G'gow,Cathcart)
Hiley, JosephMore, JasperThatcher, Mrs. Margaret
Hill, J. E. B.Morrison, Charles (Devizes)Tilney, John
Hogg, Rt. Hn. QuintinMurton, OscarWainwright, Richard (Colne Valley)
Holland, PhilipNabarro, Sir GeraldWard, Dame Irene
Hornby, RichardNoble, Rt. Hn. MichaelWhitelaw, Rt. Hn. William
Howell, David (Guildford)Onslow, CranleyWills, Sir Gerald (Bridgwater)
Hunt, JohnOrr-Ewing, Sir IanWilson, Geoffrey (Truro)
Hutchison, Michael ClarkPage, Graham (Crosby)Winstanley, Dr. M. P.
Jenkin, Patrick (Woodford)Peel, JohnWorsley, Marcus
Johnston, Russell (Inverness)Percival, IanWylie, N. R.
Jopling, MichaelPeyton, John
Kershaw, AnthonyPowell, Rt. Hn. J. EnochTELLERS FOR THE NOES:
Kirk, PeterPym, FrancisMr. David Mitchell and
Langford-Holt, Sir JohnRamsden, Rt. Hn. JamesMr. Bernard Weatherill.
Legge-Bourke, Sir HarryRenton, Rt. Hn. Sir David

Schedule 5 agreed to.

Clause 2 ordered to stand part of the Bill.