Spirits, Beer, Wine, Made-Wine and Cider

Orders of the Day — Finance Bill – in the House of Commons at 3:45 pm on 6 May 1981.

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Photo of Jack Straw Jack Straw Shadow Spokesperson (Treasury) 3:45, 6 May 1981

I beg to move amendment No. 53, in page 1, line 21, leave out '"£18·00" and "£0·60"' and insert '"£15·00" and "£0·50".'.

The effect of the amendment would be to increase the excise duty on beer by 15 per cent., which is roughly the rise in the cost of living in the relevant period. It would add about 1½p to the price of beer compared with an increase of 4p announced by the Chancellor of the Exchequer in his Budget. As hon. Members are aware, the Chancellor announced an increase in the duty on spirits of 60p and in the duty on wine of about 12p per bottle. The increase of 4p on a pint of beer is staggering in terms of the percentage rise that it represents. The 60p per bottle on spirits represents an increase of just under 15 per cent., the 12p increase on wine about 17 per cent., but the 4p per pint on beer represents an increase of no less than 38 per cent.—twice the rate of increase on wine and spirits.

The amendment, which seeks to index the duty on beer as well as on wine and spirits, would achieve fairness as between those three categories of drink instead of being wholly discriminatory against beer. The Committee will know that beer is by far the most popular drink in this country. It is drunk by people of all social classes, but unquestionably it is the drink of working men and women— the same working men and women whom the Prime Minister and her colleagues so assiduously courted from 1974 to 1979. They were promised substantial cuts in direct taxation and no doubling of value added tax. Indeed, they were promised more jobs, as the hon. Member for Horncastle (Mr. Tapsell) reminded the Chancellor only last Thursday.

Yet, with the exception of the unemployed, it is those same working men and women who have been hit hardest of all by the activities of the Government. The Government have forced up indirect taxation. Yesterday we witnessed an extraordinary performance by the Financial Secretary, wriggling as usual and trying to pretend that the increase in VAT from 8 per cent. to 15 per cent. did not amount to nearly doubling VAT. In seeking to prove that proposition to my hon. Friend the Member for Edinburgh, Central (Mr. Cook), the Financial Secretary had the extravagance to include in his calculation not only those goods which before the Budget were taxed at 8 per cent. and at 12½ per cent., but even those which were not taxed at all. He said that if one included goods that were not taxed at all before, and those which were not taxed at all after, the May 1979 Budget, then with some arithmetical gymnastics, and presumably some "massaging" through the Treasury computer—I understand that that is the vogue word in the Treasury nowadays—the increase was not a doubling but only from 5 per cent. to 8 per cent.

The British people, particularly working people, know differently. They know that the increase was virtually a doubling. In addition, they have had to suffer an increase in direct taxation and substantial increases in the price of essentials. Their rents have increased by at least £3 in the past year and more the previous year. There have been increases in their mortgages, despite the recent welcome reduction in interest rates. There have been increases in the price of domestic fuel—in gas, electricity and heating oil—as well as in the price of petrol and in fares.

Living standards for all working people on average wages have been squeezed dramatically by the Government, and they will be squeezed even more. For the additional 1 million people who have lost their jobs during the past year, living standards have dropped catastrophically, not only because of the increased prices of essentials, which unemployed people still have to buy—Conservative Members seem all to often to forget that—but because of the cuts in the real level of benefits.

On top of all those increases in prices and in direct and indirect taxation which have hit working people and the unemployed, the Government seek to tax and tax again one of the few pleasures that are left to them under Conservative rule in 1981. The price of drink in the pub, a club or at home has been forced up and up. Last year, the Government imposed an increase of 2p a pint on beer, and this year they have increased it by 4p. We do not know whether that 4p increase is only the first instalment, because during the last week's debate on diesel fuel the Chancellor announced a concession which will cost £85 million. He said that the country would have to pay for it. Despite repeated efforts by many hon. Members to discover how the Chancellor intended to meet that £85 million shortfall, no information was forthcoming.

Will that shortfall of £85 million be met by another 1p on a pint of beer? We remain perplexed. When Conservative Members gave notice that they might rebel on the petrol and derv increases unless there was some concession, the Chancellor had from 16 March until last Thursday to work out the concession as well as how to pay for it. However, he offered no information on how the concession would be paid for.

Perhaps the Minister of State will now say whether the Government intend to add another 1p on a pint of beer, because conveniently that would bring in another £95 million which would pay for the concession which the Chancellor has made. Alternatively, do the Government propose to add another 17p on a bottle of wine? That would also bring in the £85 million which the Chancellor now says he needs.

As a result of the increase in the price of beer which has already been announced, and other cost increases which have fallen on brewers and other industrial companies, the price of a pint in a public bar has rocketed. In May 1979, in the halcyon days of the Labour Government—by God, they look like a golden age compared with the hell experienced under this Government—a working man could buy a pint for 36p. By last year, the Tory Government, who claim to work in the interests of the country as a whole, had forced up the price to 44p. By November, it had gone up to 51p, and now my friends who go into public houses tell me that a typical pint cannot be bought for less than 56p or 57p.

Photo of Mr Donald Thompson Mr Donald Thompson , Sowerby

The hon. Gentleman will be lucky.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Treasury)

Well, perhaps in the hon. Gentleman's area beer costs even 60p a pint. I bow to his superior judgment. In two years, the price of a pint has risen by 20p, from 36p to 56p—an increase of at least 60 per cent. The beer drinker has consistently been hit twice as hard as the wine drinker or the spirits drinker. Beer drinkers have been discriminated against not only this year, but in previous years. Overall, the duty on beer has increased by 66 per cent. in two years, while the increase in wine and spirits has gone up by less than half that figure.

Let us compare the Conservative Government's record with the Labour Government's record. The Labour Government were concerned to protect domestic industry, such as the brewing and whisky distilling industries, and during their period of office the duty on wine rose significantly more than the duty on spirits and beer. If we take an index of 100, in 1974, spirits went up by 160, beer by 188 and wine by 237.

When Labour Members claim that the Conservative Party is a narrow, class party, Conservative Members hold up their hands in innocence and refuse to recognise the image that we offer of them. We accept that some Conservative Members still believe that the ghost of Disraeli is around the corridors of Conservative Party headquarters. However, a party must be judged on its deeds, not on its words, history or fantasies, and in every area of economic decision making we find that the Conservative Party has acted in its narrow, class interests and has taxed the poor to help the rich.

Photo of Mr Kenneth Lewis Mr Kenneth Lewis , Rutland and Stamford

I hope that the hon. Gentleman realises that many Conservative Members drink beer and that many Conservative supporters outside also drink beer.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Treasury)

Of course I realise that, but I am sure that the hon. Gentleman accepts that drinking habits tend to be a matter of social class. I can assure him that not much wine is drunk in the working men's clubs in my constituency. I dare say that not much wine is drunk in the working men's clubs of his constituency. If the hon. Gentleman is saying that drinking habits are homogeneously shared across social classes, that is an even greater argument for the equal and fair treatment of beer alongside spirits and wine. There can be no argument on fiscal or other grounds for discriminating against beer.

As I was saying, in every area of economic and fiscal decision making, the Conservative Party has favoured the rich and hurt the poor. It has given massive tax handouts to the rich at a time when in area after area it has taxed those who are least able to afford it.

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham

The hon. Gentleman has alleged that at all times the Labour Party cares for the poor and the Conservative Party cares only for the rich. In case he does not remember, I remind him that in 1975–76, the Labour Party refused to pay old-age pensioners their £10 Christmas bonus.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Treasury)

The hon. Gentleman should not swap tales about Labour's record on old-age pensions compared with the record of the Conservative Party. I distinctly remember the Labour Government refusing to pay the £10 bonus. I also remember that in July 1974 the Labour Government gave pensioners the largest increase in pensions they had ever received. I remember, too, that in 1975 it was written into the law that old-age pensioners should receive an increase in line with prices or earnings, whichever was the greater. I remember that the present Government shamefully removed the link between earnings and prices and the old-age pension.

In addition, they have extended 52-week years to 54-week years. On old-age pensions, above everything else, our record stands up to examination compared with the record of the Conservative Party.

I am not saying that the Conservative Party has never cared about working people. There was a time when it followed the advice of Disraeli and was concerned about one nation—for example, under Harold Macmillan. However, the Conservative Party has now become an extremist and doctrinaire party which has retreated into representing its narrow, class interests.

One consequence of the higher tax on beer has been a drop in consumption and less employment in the brewing industry. In March 1981, there was a drop in brewing of 17½ per cent. compared with the same month in 1980. That has meant a drop of one-fifth in the number of bulk barrels produced. If we take the quarterly figure this year and compare it with last year we find that there has been a drop in production of 6½ per cent., and that is before the full effects of the Budget increases are taken into account.

Almost weekly, we read of pubs closing, working men's clubs in difficulties and jobs being lost in the brewing industry. Brewing is an important industry, especially to many working people for whom it is their livelihood.

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In 1979, 68,000 people were employed in breweries. The big 10 national and regional breweries employed ¼ million people. However, employment in the brewing industry, as narrowly defined, has dropped by 10,000 since the general election. that is a drop of 13 per cent. in the number of those employed in the brewing industry and compares with a 4 per cent. drop during the five years of the last Labour Government.

Photo of Mr Chris Patten Mr Chris Patten , Bath

What about brewers?

Photo of Jack Straw Jack Straw Shadow Spokesperson (Treasury)

Of course, brewers are yet another group of industrialists who have discovered that their least successful investment was the one that they made in the Conservative Party. The hon. Member for Bath (Mr. Patten) should know about brewers because I believe that he worked at Conservative Central Office and the brewers paid his wages. No group of industrialists has been more generous or consistent in its donations to the Conservative Party. Indeed, of the top 10 regional and national breweries, only three failed last year to give anything to the Conservative Party. One brewery, Allied Breweries, gave £62,000 to the Conservative Party and to its various front organisations.

I am proud to say that one of the breweries that failed to give a penny to the Conservative Party was Matthew Brown, which is based in my constituency. It is also one of the few breweries not to have declared any redundancies. It is interesting to note the relationship between the amount of money invested in the Conservative Party by brewers and the increase the following year in their profits. Indeed, a new economic law can be pronounced, namely, the more money that a brewery puts into the Conservative Party, the less well the shareholders do. Greenall Whitley did not give any money to the Conservative Party and showed a 40 per cent. increase in its pre-tax profits. Matthew Brown showed a 17·1 per cent. increase in its pre-tax profits. However, Allied Breweries put massive sums into the Conservative Party and showed a measly increase of 0·6 per cent. in its pretax profits.

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham

Is not the hon. Gentleman clearly illustrating that the Conservative Party pays less regard to the money that it receives from brewers and acts more in the interests of the country? It would be a good thing if the Labour Party adopted the same attitude towards trade unions.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Treasury)

I had expected that reply from a Conservative Member. None of the brewery company directors who put money into the Conservative Party in 1979 and few industrialists anticipated that the economy would go this way. Indeed, on 12 June 1979 the CBI said that the Budget was one of opportunity that would lead to a regeneration of British industry. The directors were fools to put their money into the Conservative Party, just as they were fools in their judgment about the Government's likely performance.

Having established that the increase is highly discriminatory against beer drinkers it is important to examine the reasons for it. One argument in favour of increasing the price of alcohol by disproportionately raising the tax on it is to try to achieve a drop in consumption in the interests of health and of securing a reduction in alcoholism.

I am sure that all hon. Members are concerned about the rise in reported alcoholism over the past few years. They will also be concerned that new groups, which were not high in the league tables, appear to be coming into them. I refer particularly to young people and to women. That is a matter of genuine concern.

It is argued that the real price of alcohol should be increased or brought up to the level that existed some years ago. We accept that the real price of alcohol has dropped. It is argued that raising the price would deter heavy drinking. Indeed, there was a debate on that subject in last year's Finance Bill Committee. A notable contribution was made by the leader of the Scottish puritanical party, my hon. Friend the Member for Edinburgh, Central. He spoke powerfully about the need to check the growth in alcohol abuse by raising prices.

We understand that the Government are concerned about the relationship between the price of drink and alcoholism. In a leak to The Sunday Times of 14 November 1980 we were told: A consultative Green Paper will be issued early next year, aimed at arousing public concern and support for tougher action … To remedy this increased ease of purchase, much stiffer taxation policy is being urged. As Mrs. Thatcher is strongly opposed to direct tax rises in next year's budget"— we knew about that, but despite our opposition such rises have taken place— indirect taxes look increasingly certain to take the strain, with alcohol and tobacco in the forefront. It is said that pricing policy is considered crucial. The leak promised that there would be a Green Paper. Perhaps the Minister will tell us where it has got to. The Government have become so leaky that they now regard a chat with a Lobby correspondent as equivalent to a Green Paper. Some of us prefer to get our Green Papers from the Vote Office than from the cuttings service of the Library. I hope that the Minister will reply.

We know that the Government are concerned, just as we are, about this matter. There is some evidence to show that in other areas such as Scandinavia, efforts have been made to control the consumption of alcohol by price. However, it should be borne in mind that the Scandinavian experience is not unequivocal. Scandinavia has a serious drink problem, although there is a law that requires the price of alcohol to be raised in line with general prices.

Earlier today I had an opportunity to talk to a Swedish trade union leader. He said that the Swedes had been so worried about the drink problem that the measure was one of the few that had had all-party agreement for many years. Between 1922 and 1955 alcohol was rationed and each person was issued with a ration book entitling him to three litres of hard spirits a month. That amount seems unlikely to deter the heavy consumption of spirits. Even in the House of Commons with its slurred reputation for drink, there are few hon. Members who get through that amount. However, I exclude my Scottish friends from that statement.

Whatever view one may take about the relationship between price and alcohol consumption, and even if it is unquestioningly accepted that the price of alcohol should be increased to deter heavy consumption and ill health, there is no justification for this increase. It doubles the increase on beer compared with wine and spirits. If the price of alcohol is to be increased on order to deter consumption and alcoholism, it is only logical that the price of the harder forms of drink—wine and spirits—should be increased more severely than beer. However, perverse as usual, the Government are placing far more duty on beer than on wine and spirits.

Photo of Mr Ron Leighton Mr Ron Leighton , Newham North East

From my hon. Friend's reading of the reports of the proceedings on last year's Finance Bill did he notice that the Minister admitted that the Government were increasing the tax on beer to a greater extent than that on wine because of a decision of the EEC court? As a result of a complaint from the French, the court invited the British Government to even up the taxes. That is why the brewers have been treated in such an ungrateful manner.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Treasury)

That is one reason. However, there is another. Increasing the duty on beer raises much more revenue than increasing the duty on wine. The Government are avaricious and are ever ready to take hard-earned money out of people's pockets and to put it into the Exchequer. The hon. Member for Hertford and Stevenage (Mr. Wells) may laugh. He and other Conservative Members went round the country preaching Conservative propaganda about tax cuts. I have not had the benefit of reading his election address to the people of Stevenage, but I am sure that he said that if the Conservative Party was returned to office income tax would be cut and VAT would not be doubled.

If I am wrong the hon. Gentleman will correct me. That was written in the Conservative manifesto, but in reality the Government have increased income tax and direct taxes far more than previous Governments. Moreover, they have taxed the poor savagely, so that people now come into the income tax thresholds when they are receiving only 38 per cent. of average earnings. That is far below the figure achieved in any year of the Labour Government.

Photo of Mr Bowen Wells Mr Bowen Wells , Hertford and Stevenage

In my election address to the people of Hertford, Stevenage and Ware I did not refer to VAT. The hon. Gentleman will recall that that discussion was initiated by his party. An accusation was made, too.

The hon. Gentleman implied that we misled people at that election. In sharp contrast to the aim and objectives of the Labour Party, which is avaricious in its taxing policies, the aim of our party is to reduce taxation. However, we have increased taxation in the Budget. Does that not prove to the hon. Gentleman that, far from being dogmatic, the Government are pragmatic in dealing with the problems that they face? I invite him to agree with that even though it is against the objectives of the Government when they came to power.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Treasury)

I have heard many arguments for the Government's twisting and turning record for the past two years, but that takes the biscuit. If the hon. Gentleman is so proud of the pragmatic nature of the Government—I cannot say that I have noticed their becoming pragmatic—why did he not say in his election address "We might increase taxation or reduce it. We might double VAT or reduce it. We are not sure. It all depends"?

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham

On a point of order, Mr. Weatherill. The debate should be taking place on a comparatively narrow point. It is being extended far beyond the amendment.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

Order. I am grateful for the hon. Gentleman's help. The amendment refers to duties on beer. The hon. Member for Blackburn (Mr. Straw) was deflected by allowing an intervention. He should return to discussing the amendment.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Treasury)

Order is a matter for you, Mr. Weatherill, but it hardly lies in the mouth of the hon. Member for Gillingham (Sir F. Burden) to complain about our getting back to the point when he raised the issue of the Christmas bonus and pensions. If the Government accept our amendment—as we expect that they will—they may say that they want to raise income tax even more. The Government's election manifesto, on which the hon. Member for Hertford and Stevenage stood, said: We shall cut income tax at all levels to reward hard work, responsibility and success; tackle the poverty trap; encourage saving". They have tackled the poverty trap: they have made it deeper and wider.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

Order. That is what I was hoping would not happen. The hon. Member must return to the question of the duty on beer.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Treasury)

I shall, of course, get back to that matter, Mr. Weatherill.

My hon. Friend the Member for Newham, North-East (Mr. Leighton) made an intervention which was directly in order. There are two reasons why the Government have been forced to increase beer duty. One is that because of their economic policies they decided that they were strapped for revenue and increasing the duty on beer was one of the few ways in which they could raise money. There is no doubt that taxing beer is an easier way to raise revenue than many other methods.

I hope that the Minister will explain whether the estimates of yield given by the Chancellor in his Budget Statement on 10 March take into account the already substantial drop in beer consumption. What estimate does he make over the next 12 months about the elasticities involved? Also, will he explain a strange sentence in the Chancellor's speech when he said that the yield of the various increases in drink duties would yield £500 million in 1981–82 and £515 million in a full year? The Budget took place before the fiscal year 1981–82 began. I do not understand how the figure is £500 million for one full year and £515 million for the following year. What is the Government's estimate of the yield? In the light of the 6½ per cent. drop in consumption so far, is it likely to drop further, especially if there is a bad summer?

4.15 pm

In our view the rates should be increased only in line with inflation. The difference, which would be about £200 million, should not be made up elsewhere. We object to the deflationary nature of the Budget. Any decision of the Committee that moderates the deflationary nature of the Budget, together with the fact that £5,000 million will be taken out of the economy, is to be welcomed. However, if hon. Members decide that the extra £200 million should be found, there are other ways that would hurt the better-off rather than those who are poor and would be far better than taxing beer. It would be better to load the tax on wine rather than beer because, on the whole, wine is consumed by people in higher income groups and, moreover, is not made in this country.

The Government cannot, however, load duty on wine, despite the fact that that is the fairest and most sensible action to take for British drinkers and British industry, because of the Common Market's harmonisation rules and the Government's failure to stand up for British interests in the EEC institutions. In one sphere after another the Government claim stalwartly to defend British interests, but behind all the rhetoric the reality is concessions and humiliations all down the line. We see it in agriculture where the British Government have allowed other countries, especially France, to get away with near murder.

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham

On a point of order, Mr. Weatherill. The hon. Gentleman is wrong to talk about agriculture under a clause dealing with beer.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

I thank the hon. Gentleman for his help. I am listening carefully and the hon. Member for Blackburn is deploying an argument.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Treasury)

I accept that I may have strayed a little earlier, but my remarks are germane and central to our argument. The Government have accepted all sorts of humiliations on agriculture. The Minister of Agriculture has not told us how the French Government, in clear contradiction to article 93 of the EEC treaty, last December announced aid of 4,100 million francs to French Farmers over and above the assistance provided by the common agricultural policy. In clear breach of the EEC rules those aids were announced by President Giscard D'Estaing to gamer the votes of French agricultural workers. Those aids are still being paid.

Ministers have not told the House how the French and Belgians are still going ahead with massive schemes of aid to their textile industries—again, in apparent breach of EEC rules. However, the Minister of State told us how the Government will comply abjectly with the initiative on harmonisation on wine. That was debated in the House on 3 December.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

Order. The hon. Gentleman should deploy these arguments on clause stand part. They will be more appropriate when we deal with wine and other items.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Treasury)

My comments are central to the argument because the harmonisation initiative requires that the ratio of the rates of duty on wine and beer should be reduced from 5:1, as it was before the Budget, to 3:1. That means that the Government had to reduce the rate of duty on wine or increase the rate on beer. The Government increased the rate on beer in order to comply with the harmonisation rules.

In the debate on 3 December the Minister of State made it clear that the Government were moving towards compliance with the ratio which is based on an assessment of the alcoholic content of wine and spirits. The EEC claims, under its ridiculous rules, that because the alcoholic content of beer and wine is in a ratio of 3:1, the duties should therefore be in the same ratio.

My right hon.Friend the Member for Llanelli (Mr. Davies) questioned the Minister of State about the effects of accepting that ratio. The Opposition said that the clear effect would be to add 4p to the price of a pint of beer. The Minister of State replied: The right hon. Member for Llanelli misunderstands the position. It could happen on certain broad limits on the beer-wine ratio … there are about three or four possible permutations."—[Official Report, 3 December 1980; Vol. 995, c. 606.] An article in The Economist at about the same time said that, according to the Minister of State, the ratio could be put into effect in one of three ways—by raising the duty on beer by 4p a pint, which would yield an extra £440 million to the Treasury, by cutting wine duty by 19p a bottle, which would cost £50 million in lost revenue, or by raising beer duty by ½p a pint and cutting wine duty by 17p a bottle, which would be financially neutral to the Exchequer. The article concluded: But there should be no panic buying of beer, or popping of champagne corks in celebration. Whichever solution is adopted, it will be phased in over seven years. The Government tell the House and the British press that they will stoutly defend British interests. Indeed, as late as 17 April we read in the excellent Agence Europe reports from Brussels that the Government had asked for a further delay in the consideration by the European Court of Justice of the cases involving the high tax charged on wine in the United Kingdom compared with that charged on beer, so that the Government could present reports. The Government have been making noises in Brussels and telling British newspapers that they will stand up for British interests and have offered soothing words to the brewers, saying that the increases will be phased over seven years, but during that time they have been preparing, and are now implementing, the full increase, not in seven years and not even in seven months.

The Government said that it would take many years to implement the harmonisation initiative, but they have implemented it with a vengeance and in a way which causes the maximum harm to British drinkers and British industry and the maximum benefit to the drink industries of Italy, Germany and France. That might just be bearable, even to those of us who object to our membership of the Common Market, if other members of the EEC had played the game. But in February 1980 the European Court issued a decision against France, Italy, Ireland and Denmark, saying that their excise duty regimes discriminated heavily against whisky.

The court may pronounce, but only domestic Governments can act. As far as I have been able to ascertain, the decision of the court, taken well over a year ago, has still to be implemented. It is said that Italy has changed the State prices of strong spirits, but France has adopted measures, including only a partial change this year, that will take two years to come into effect. The changes proposed by Denmark are still the subject of discussions with the Commission.

Another aspect that is often overlooked is that, despite the requirement of the EEC directive that there should be a clear ratio between the duty on beer and that on wine, I understand that there is no requirement on countries to have a duty on wine. It is only if they impose such a duty that there has to be a ratio between that and the beer duty.

At the end of last year, Germany and Italy were insisting that we should raise our duty on domestically produced beer, but they had no duty on their domestically produced wines. Is that still the case? Does the Minister of State agree that it is a scandal and an outrage that Germany and Italy should insist that we increase the price of beer to our consumers, causing great damage to our drinkers and our domestic industry, while those countries are allowed to get off scot-free, because there is no requirement on them to tax their wines?

Photo of Mr Arthur Lewis Mr Arthur Lewis , Newham North West

My hon. Friend is right to ask the Minister of State for that information, but should he not also ask the absent Liberal Party and the one SDP Member who is in the Chamber to point out that, as they are 110 per cent. pro-Common Market, they are 110 cer cent. in favour of the rooking of the British public? My hon. Friend should blame not only the Government, but the SDP and the absent Liberal Party.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Treasury)

The Liberals are well represented by their surrogate, the hon. Member for Gateshead, West, (Mr. Horam) who will no doubt speak for them. It will not lie in the hon. Gentleman's mouth to complain too much about a further iniquity of the Common Market, since he was one of those who forced us into it.

Photo of John Horam John Horam , Gateshead West

As a matter of historic record, I voted against entry into the Common Market.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Treasury)

I am pleased to hear that the SDP is as catholic as the Labour Party, but I wonder why the hon. Gentleman joined the SDP. I shall look forward with interest to finding out whether his party follows his advice rather than that of the right hon. Member for Plymouth, Devonport (Dr. Owen).

The 40 per cent. increase in beer duty is wholly unjustified. It hits at one of the few pleasures left under this Government and puts up the cost of living. It has been forced on the Government partly because they prefer to tax working people to pay for tax cuts for the rich and partly by their slavish adherence to the Common Market and their refusal to stand up for British interests. We shall oppose the increase and we invite other hon. Members to do so.

Photo of Mr Eric Heffer Mr Eric Heffer , Liverpool, Walton

The intervention of the hon. Member for Hertford arid Stevenage (Mr. Wells) intrigued me, because I was born in Hertford and I had relatives in Ware in the hon. Gentleman's constituency. I remember that when I was a lad the great thing about Hertford was the number of pubs in the town. In Maidenhead Street there was a pub next to a shop next to a pub next to a shop next to a pub. It was that sort of street and most of Hertford was like that.

I doubt whether the people of Maidenhead Street and Fore Street in Hertford will be loudly singing the praises of the Government's decision to put up the price of beer by 4p a pint. Like other workers, they like their pint after a hard day's work, and that is the important point which my hon. Friend the Member for Blackburn (Mr Straw) was making.

Beer is the drink of most ordinary working men on building sites, in coal mines, in shipyards, on the roads and in the fields.

When they come back from a hard day's work they like to wet their whistle and they go into the pub on the corner for a pint or two. There is nothing wrong with that but it is a bit grim when they are faced with an increase of 4p per pint, because that is what it means.

4.30 pm

It has been said that Conservatives also drink beer. Of course they do. I do not think those Conservatives are enthusiastic about it either. I am sure they will be just as angry and fed up as beer drinkers who vote Labour.

The whole thing is a conspiracy against the Labour Party. [Interruption.] Some hon. Members say, "Ah". The brewers have been great contributors to Tory Party funds. Rather like the builders, they must be a bit fed up and wonder what they are getting for their contributions. There are Labour clubs throughout the length and breadth of the country. Although we get a political levy from trade unions, much of the finance for the Labour Party at local level comes from contributions from Labour clubs. If the price of beer is increased, less is drunk and smaller contributions are made to Labour Party funds which makes it much more difficult for us to fight the Conservatives. That is what is behind this increase in duty.

In all seriousness the increase in duty will affect Labour clubs. The people who go there are not buying as much beer because they cannot afford it. We must consider the 2½ million unemployed. Those who come from areas of high unemployment are finding it difficult anyway to buy their pint; with the increase of 4p it becomes even more difficult for them.

I am not going to join in the debate about the Common Market. I do not like talking about it and I wish we were not in it. It would be much better if we did not get involved in such discussions. What I am concerned about is the effect of the increase in beer duty on the lives of ordinary working men and on those who have retired. There has been a reference to the effect on pensioners who watch television and then go off to the local pub or Labour or Tory club to have their pint. As each pint costs 4p more, the pensioner has not two, but only one.

That is the sort of answer which the Government have to economic problems. They wish to place the burden on the shoulders of ordinary working men and women. I am not a great beer drinker; I have never taken much to beer. I do not mind paying a few pence more for what I drink. If I am going to have a glass of wine I am happy to pay the extra. But this is an added burden for the working chap who is suffering because of the policies of the Government. I hope that every Member, including all the Conservatives who drink beer, will stand up for the working class and support the amendment.

Photo of Mr Kenneth Lewis Mr Kenneth Lewis , Rutland and Stamford

I thought the hon. Member for Blackburn (Mr. Straw) sparked off an interesting debate leading to interventions. Rutland is famous for its independence and because it used to be a county. What is not so generally known is that it is also famous for its beer. We have a very good small brewery, Ruddles. Its beer can be bought in London and it is infiltrating all over the South of England. It has not yet found its way into the House of Commons. I put in a claim for it but I am told that there are so many different beers in the House of Commons put there at the request of Members that there is hardly any room for more kegs.

Photo of Mr Eric Heffer Mr Eric Heffer , Liverpool, Walton

Is it better than McMullans, which is made in Hertford? That is a very good beer.

Photo of Mr Arthur Lewis Mr Arthur Lewis , Newham North West

I have never had McMullans. Ruddles is better than some of the lagers which are frequently advertised on television. We do not need television advertising; we can sell it without any difficulty. It is available even in supermarkets.

I lean towards the beer drinker. I like a beer myself. I intervened earlier because I thought the hon. Member for Blackburn was being grossly unfair when he said that hon. Members on this side of the House do not drink beer. Plenty of them drink beer. Millions of Conservatives will be going to the polls tomorrow to vote Tory; they will be having a beer before they go or after they have voted. Whether they will be having a few beers on Friday to cheer themselves up or to drown their sorrows we are not sure; we will wait and see. I would rather my right hon. and learned Friend had been able to manage his Budget without putting 4p on beer.

The one thing the hon. Member for Blackburn did not tell us was where the money was going to come from if the amendment was passed. I think the cost would be £200-odd million. When the Chancellor gave the concession to those of us, including myself who tabled an amendment in relation to duty on derv, he announced that in due course there would be a replacement tax. We do not yet know what it is going to be. The hon. Gentleman said that it might be 1p more on beer. I hope not. He also said that it might be 1p on one-armed bandits which would affect Labour clubs, Conservative clubs and other clubs. In so far as people would be spending more on one-armed bandits, they would have less to spend on beer, so either way it would hit them.

When there is a large public sector borrowing requirement, if the Government want to avoid increasing income tax or putting up national health insurance too much they have to get revenue somewhere. We fought the election on the principle that people should have more money in their pocket in take-home pay and should have to pay more in tax on what they spend rather than the other way round. I stick to that policy, although it has slipped a bit. The Government are moving in the right direction.

The Government have been in office for only two years although it may seem longer. As long as my right hon. and learned Friend the Chancellor can promise me that in the next three years we are going to have further reductions in income tax so that people have more in take-home pay, we will not object to an increase in the duty on beer.

The official Opposition would have done almost the same if they had been in Government. They might have had to put twice as much on the price of beer, because the extra expenditure that they present to the Government week by week would require such a large increase in revenue that the tax on beer would have to be increased rather than reduced.

I am as unhappy about increased taxes, including the increase on beer, as anyone else, but if there has to be an increase in taxes, it is better for it to be on optional expenditure than on necessities.

Photo of John Horam John Horam , Gateshead West

I must remonstrate with my former colleagues on the Opposition Front Bench, particularly with the hon. Member for Blackburn (Mr. Straw) who moved the amendment. It is disappointing to go through all these conventional hoops all over again. What have the Opposition done during this series of debates on the Finance Bill?

The right hon.Member for Stepney and Poplar (Mr. Shore) in his speech on the Budget put forward a whole raft of public expenditure proposals—with some of which I agree—which would involve higher public expenditure. In the debate on the Finance Bill the Labour Opposition have promoted a series of measures to decrease taxation. First, they wanted to bring down the petrol and derv duty to 8p in the pound. Then they wanted to index the tax threshholds fully and to reinstate the lower rate band. That was a controversial measure in the previous Labour Government; there was considerable disagreement between the Chancellor of the Exchequer and the Prime Minister at that time. Now they come on to beer. Where is the arithmetic? When shall we know the arithmetic behind this massive increase in public expenditure on the one hand and this series of attempts to decrease taxation on the other hand?

Nothing so far has been said about whether the arithmetic adds up or does not add up. The hon. Member for Blackburn will recall the speech made by his right hon. Friend the Member for Stepney and Poplar on the Budget. That was followed by a speech made by the right hon. Member for Down, South (Mr. Powell) who commented on the way the bill was added up. He invited the right hon. Member for Stepney and Poplar to intervene and tell him what was the arithmetic. He speculated that the proposals put forward by the right hon. Gentleman on that occasion would add £15 billion to the public sector borrowing requirement, and he asked the right hon. Gentleman to say whether he disagreed. But the right hon. Member for Stepney and Poplar did not comment.

Photo of Robin Cook Robin Cook , Edinburgh Central

It was a specious speech.

Photo of John Horam John Horam , Gateshead West

It was not. The hon. Member for Down, South made a very telling point. No attempt was made by the Labour Party to give any details of the arithmetic. All the Opposition say is that there must be vastly increased public expenditure and greatly decreased taxation. They never say what the final sum will be. When challenged to do so by the right hon. Member for Down, South in a negative but brilliant speech, the right hon. Member for Stepney and Poplar sat mum. He may be acting under instructions. I remember, when I was sitting on the Opposition Front Bench during a debate initiated by the Liberal Party, the Shadow Cabinet could not make up their minds about an incomes policy, so I was not allowed to speak in the debate. I was roundly condemned for being like a Trappist monk. The right hon. Member for Stepney and Poplar may be in that position; he may not be allowed to say what the figures are.

It is time that the Labour Opposition made some comment on this aspect. I am making this point not in favour of the Conservative Party but on behalf of ordinary people who want to know how this adds up.

Photo of Mr Eric Heffer Mr Eric Heffer , Liverpool, Walton

Am I to assume, on the basis of the argument of the hon. Member for Gateshead, West (Mr. Horam), that Professor David Marquand, who used to be a member of the House of Commons, is right in saying that the hon. Gentleman's views are not similar to Mrs. Williams' views, because she argues the case that is being put forward by the Prime Minister?

Photo of John Horam John Horam , Gateshead West

That is a poor intervention by the hon. Member for Liverpool, Walton (Mr. Heffer)—

Photo of John Horam John Horam , Gateshead West

I am not arguing—

Photo of Mr Eric Heffer Mr Eric Heffer , Liverpool, Walton

The hon. Gentleman is arguing—

Photo of John Horam John Horam , Gateshead West 4:45, 6 May 1981

I am seeking to reply to the hon. Gentleman. I am not arguing in favour of the Government's policies. I have spoken against them in this series of debates, as have other hon. Members from the Liberal Party and the Labour Party. All I say is that it is about time we got away from the conventional game we always have in debating the Finance Bill of asking for cake and wanting to eat it at the same time.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Treasury)

Does the hon. Gentleman still agree with the view he expressed last year in Committee on the Finance Bill when he said that he was certain it was a badly chosen time to increase Excise duties as the Government had done. I know that the hon. Gentleman wore a different hat last year, but he was the same person. Does he still take that view?.

I assure the hon. Gentleman that the Opposition are under no instructions to remain silent about our alternative policies. There is no reason why the hon. Gentleman should study the press releases which I put out, but with my colleagues in Opposition I have issued several statements about alternative policies and they have been tasted and worked through the Treasury's economic model. Whenever we seriously attempt to work out the costings we are derided by Government supporters. Serious efforts are being made by the Opposition and inside the Labour Party to cost the proposals

There was no reason why my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) should reply to the right hon. Member for Down, South (Mr. Powell). What the right hon. Member for Down, South said was so self-evidently preposterous that it needed no answer. The right hon. Member for Down, South will admit, if it is put to him, that he was taking the cost of an expansionary Budget over four or five years and suggesting that that would be the cost in one year. That is how he reached his figure of £20 billion.

Photo of Mr Michael Brown Mr Michael Brown , Brigg and Scunthorpe

On a point of order, Mr. Weatherill. I am listening to the debate to see what is the difference between the Social Democratic Party's view of beer and the Labour Party's view of beer. I am worried that no one else seems to be able to join in this private discussion.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

That is perhaps a long enough intervention.

Photo of John Horam John Horam , Gateshead West

I feel that I have been generous in allowing such a long intervention.

If the hon. Member for Blackburn has these figures, why does he not bring them out in the debate? I have seen no costings, although I have looked back through all the debates. I have been present at most of the debates since the Budget. The arithmetic of the Opposition's amendments, combined with their expansionary proposals, has not been presented to the House of Commons in a thoroughgoing manner. I see nothing in Hansard to contradict that.

I will give the hon. Member for Blackburn credit for being an improvement on his Leader. He said that he would wish to increase the impost on wine to make up for the revenue that would be lost on beer if the amendment were carried. He must know that that is a preposterous proposition, because wine is a much smaller source of revenue than beer. The amount raised from beer could not be raised from wine. It is not a practical proposal. He also has to consider buoyancy.

The hon. Gentleman referred to that matter but the Committee has heard nothing profound from him. Has the hon. Gentleman done any calculations? Is he simply not telling the House about them because they do not sound very good? The proposal that he put forward does not bear examination. The Labour Party is refusing to make choices.

I supported strongly the case made yesterday about the Government's failure to index the tax threshold. That is the most serious consequence of the Bill. It will have devastating effects on low-paid workers. I thought that the Opposition combined well to make a forceful case against the Government. Ministers have not replied to the real charge about the increase in the tax burden that results from this and previous Budgets. The Government have failed lamentably to answer the real challenge on the extent of the tax burden and the degree to which it has fallen on the shoulders of those least able to bear it.

However, the revenue for the expansionary measures supported by the Opposition—I agree with some of them—has to be raised somehow. A choice has to be made of the measures to be taken to raise the revenue to pay for the expenditure. Hon. Members have not heard from the Opposition where their choices lie. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) was challenged directly yesterday by the Financial Secretary to the Treasury. The right hon. Gentleman refused to reply when he was asked whether the Opposition would have foregone the attempt to raise the threshold on income tax if their amendment on the petrol increase, which I supported, had been passed. The Opposition were not making choices.

If we are to have honest debates which fill the Chamber more than this debate, and more than yesterday's debate did when the main Opposition party had to whip in people to speak, and which command the attention of people both inside and outside the House, we should discuss matters more frankly The Opposition are simply going through the motions. I know that the Opposition have a new team. I was a member of the old team last year. I had hoped that the new team would be more original than simply to go through the hoops of putting forward amendment after amendment which do not add up to a convincing policy.

Photo of Robin Cook Robin Cook , Edinburgh Central

I should like gently to draw the hon. Gentleman back to the subject of beer. He has mentioned that he was a member of the old team. I presume that I was a member of the old Back Bench team. Last year, we debated a similar issue. I made a speech in which I chided the Minister for not putting up Excise duties by more than the amount he proposed, particularly in relation to spirits. If the opportunity arises, I may make some remarks about wine later this evening.

In last year's debate the hon. Gentleman said that it was an extraordinarily badly chosen time to increase Excise duties. If the hon. Gentleman is to make a speech attacking the official Opposition, he has an obligation to explain what great revelation has occurred to him between last year and this year that transforms what, last year, was an extraordinarily badly chosen moment into what he now says is the correct time to increase Excise duties.

Photo of John Horam John Horam , Gateshead West

The hon. Gentleman must be aware of the answer. We argue that there should be increases in public expenditure to deal with the present economic problems. We want to be less deflationary than the Government. We believe, like the Labour party, that there should be an increase in public sector projects. Those projects have to be paid for. I have stated in the House that I would have raised the standard rate of income tax to pay for some of these projects. That would be more expansionary and prove more helpful to industry than the Government's deflationary methods. The hon. Gentleman cannot argue the point he has made.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

Order. I am sorry to interrupt again, but we are getting away from the amendment, which is concerned with beer and not the general Budget strategy. Will the hon. Gentleman please return to the question of beer?

Photo of John Horam John Horam , Gateshead West

Certainly, Mr. Weatherill. I believe that the argument about the EEC is a little spurious. The Government have increased the tax on beer by the amount in the Budget because they needed the revenue. That is the brutal truth.

Photo of Robin Cook Robin Cook , Edinburgh Central

Does the hon. Gentleman support it?

Photo of John Horam John Horam , Gateshead West

If one has to raise revenue, I would rather raise it by this means than by failing to index the tax thresholds. I voted in favour of the Labour Party amendment yesterday. If I have to choose between the two—

Photo of John Horam John Horam , Gateshead West

I cannot give way to the hon. Gentleman. You are already looking at me askance, Mr. Weatherill. The hon. Gentleman has already intervened.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

Order. It will help everyone if the hon. Gentleman addresses me and confines himself to the subject of beer.

Photo of John Horam John Horam , Gateshead West

The argument about the EEC is thin. It is obvious that the Government raised the tax on beer because they needed the revenue. If the Labour Party had won the last election and had been confronted with the same problem of EEC harmonisation, I doubt whether it would have behaved very differently from the Government. These identical problems arose over tobacco taxation in the lifetime of the previous Labour Government. For the Opposition to pretend that they would have behaved in a radically different manner when confronted with these problems is less than honest. I do not think that it is a good point to raise the EEC issue. We have to face reality.

If hon. Members, like me, want higher spending on public sector projects to help to reflate the economy—I am prepared to accept a higher public sector borrowing requirement than the Government—the fact still remains that revenue has to be found somewhere. I am more prepared to find it by increases in some Excise duties than through a failure to index the income tax thresholds. I supported the main Opposition yesterday, but I see no case for supporting this amendment today.

Photo of Mr Peter Rees Mr Peter Rees , Dover and Deal

I am a little diffident about intervening in what has become an interesting and perhaps even perceptive and illuminating debate involving the hon. Member for Gateshead, West (Mr. Horam), representing the Social Democratic Party, and various Opposition Members. I believe that the hon. Member for Gateshead, West, with all the detachment that he can now bring to the debate, was able, in his encounter with the hon. Member for Edinburgh, Central (Mr. Cook), to illuminate some of the central problems that bedevil the Opposition.

I hope, Mr. Weatherill, that it will not be taken as a criticism of the Chair when I say that we have had a fairly wide-ranging debate. At times, it might have escaped the attention of the Committee that we were debating amendment No. 53, designed to reduce the proposed increase in Excise duty on beer to 15 per cent., which would have involved, as the hon. Member for Blackburn (Mr. Straw) stated, an increase of 1½p instead of 4p on a pint. I do not know whether the hon. Gentleman was disposed to emphasise that this would have involved a loss of revenue of £240 million. The hon. Gentleman candidly admits that fact.

As the hon. Member for Gateshead, West reminded the Committee, we have to consider the revenue implications of these amendments. I emphasise to my hon. Friend the Member for Rutland and Stamford (Mr. Lewis) that no hon. Member, certainly none on the Government side, is particularly anxious to introduce any tax or duty. There may occasionally arise external reasons for doing so. However, our Finance Bill debates are essentially concerned with the balance of taxation. As the requirements of Government increase and since we are less ready to borrow than previous Administrations, we must scratch around for increases in revenue. One of the areas that we chose was the duty on alcohol and in particular on beer.

5 pm

The hon. Member for Blackburn phrased his attack in three ways. He said that the increase would hit one of the few pleasures left. That was a slightly apocalyptic view of what is happening in Britain. The hon. Member for Isle of Ely (Mr. Freud) could tell the hon. Gentleman a thing or two about the pleasures left throughout our happy isle. The hon. Member for Blackburn was partly supported by the hon. Member for Liverpool, Walton (Mr. Heffer), who always makes powerful contributions to our debates. However, he has a romantic view of British life. His emotions are fixed where Wat Tyler's were before he was struck down. The hon. Gentleman regards beer as the prerogative of the ordinary working man. I have news for the Labour Party. The ordinary working man—and I resent the narrow interpretation of that phrase—has broadened his tastes. He is enjoying wine, and I am delighted.

We are not aiming at the ordinary working man, but we must consider how best, in a difficult time. We can increase our revenues. It might be thought that we are singling out beer. The proposal in clause 1 increases the duty by 38 per cent. I remind the Committee of what the right hon. Member for Leeds, East (Mr. Healey) did in April 1975 since I want to demonstrate that there is noting socially divisive about our proposals and that we are not singling out any group of our fellow countrymen.

The right hon. Gentleman increased VAT. He increased the basic rate of income tax from 33 per cent. to 35 per cent. He increased the duty on beer by 2p—a 40 per cent. increase. The increased duty on beer in 1975 was proportionately perceptively greater than the increase proposed this year.

Photo of Mr Joseph Dean Mr Joseph Dean , Leeds West

What was the 40 per cent. a proportion of?

Photo of Mr Peter Rees Mr Peter Rees , Dover and Deal

It was a 40 per cent. increase on the previous duty.

I shall remind the Committee of the Labour Administration's curious record. For example, the duty on beer was increased by 35·7 per cent. in 1974. In 1975 it was increased by 46·2 per cent. We propose an increase of only 38 per cent. I concede that the increase tailed off in 1976–77 and that there was no increase in 1978–79. We are redressing the balance. We are bringing back the real rate of duties to what it was under the Labour Administration.

Let us put the problem in perspective. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) will recall the increase in beer duties which he supported. In his Budget Statement the then Chancellor, in the ringing phrases to which he is prone, said: Now, however, when I am forced to call for general sacrifices, when rich and poor alike face increases in essentials like rent and rates and fuel prices, it would clearly be wrong to leave untouched such forms of consumption as smoking and drinking, when the effective tax burden on them would otherwise continue to fall. Instead of changing the rate of VAT on these goods, I have decided that the duties should be increased to give precise effects on the bar or retail prices of all these goods across the board. I hope it will be appreciated that the size of these increases reflects the fact that in the circumstances of this Budget the alternative to them would have been either a higher target for the revenue from direct taxation or an increase in the standard 8 per cent. rate of VAT."—[Official Report, 15 April 1975; Vol. 890, c. 305–6.]

Photo of Mr Eric Heffer Mr Eric Heffer , Liverpool, Walton

Is the Minister of State aware that some Government Back Benchers at that time thought that their Ministers were not listening enough to their own supporters?

Photo of Mr Peter Rees Mr Peter Rees , Dover and Deal

History might vindicate the hon. Member for Walton, who has always taken an idiosyncratic line. I shall leave him to justify his part in supporting or not supporting the Labour Administration. I want to put the problem in its true historical and political perspective.

Photo of Mr Robert Sheldon Mr Robert Sheldon , Ashton-under-Lyne

In putting the problem in its true perspective, the Minister quoted the former Chancellor of the Exchequer. We are objecting not only to the increase but to the particularly heavy impost on beer.

Photo of Mr Peter Rees Mr Peter Rees , Dover and Deal

The right hon. Gentleman is entitled to say that we are proposing a 31 per cent. increase in the duty on fortified wine, 17 per cent. on table wines and 14½ per cent. on spirits. He will remember that under the Administration of which he was a distinguished ornament the balance of duties was distorted. For example, the duty on wine was increased by 98 per cent. in 1975 and by 66 per cent. the previous year. There must be a balance. I assume that the right hon. Gentleman does not want his fellow countrymen to concentrate exclusively on beer. He will want them to sample wine so that the pleasures of life may be widely diffused.

The hon. Member for Blackburn made a trumpery point and said that the increase was to subsidise cuts in tax on the rich. He will find it hard to find such cuts. Perhaps he is thinking of capital transfer tax. The current year's cost of the reliefs proposed is only £5 million. The hon. Member's argument does not stand close scrutiny.

The hon. Member for Blackburn said that we are imposing the tax because of our slavish adherence to the European Community. That view was echoed by some of his hon. Friends. Proposals have emanated from the Commission to harmonise throughout the Community the duties on alcoholic drinks. We have been the subject of infraction proceedings before the European Court. Neither the Commission's proposals nor the infraction proceedings have been brought to a firm conclusion. We had an interesting, if short, debate in December last year about the proposals. I explained the Government's position then. It remains the same.

The Commission's proposal is that the ratio between wine and beer duties should move over seven years to the ratio of 3:1. If the increases in beer and wine duties encapsulated in clause 1 find favour with the Committee, the ratio will be 4·2:1. There is no slavish adherence.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

The Minister does not understand the central issue of my amendment, which has not been selected. Cannot he understand that under the Labour Government the ratio between beer and wine went up to 5:1? As a result of the Budget judgment, it is being reduced to nearly 4:1. Is the Minister saying that his right hon. and learned Friend's attitude and proposals have not been influenced in any way by the infraction proceedings? Is he saying that this has nothing to do with the European Commission and the court?

Photo of Mr Peter Rees Mr Peter Rees , Dover and Deal

It would have been perverse of the Government, in the face of the court's interim judgment and in the face of what we know about the proposals, to have tilted the balance still further against wine.

Photo of Mr Peter Rees Mr Peter Rees , Dover and Deal

The ratio that is implicit in clause 1 will only put back the ratio to what it was when we entered the EEC. I want to rebut the absurd suggestion—the point may have escaped the hon. Member for Nuneaton (Mr. Huckfield), who usually has a quick and agile mind—that clause 1 has been introduced by this Government in slavish adherence to the EEC proposals.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Treasury)

Does the Minister of State accept that if the EEC initiative had not been made the Chancellor would have had a greater discretion in deciding on the balance between the increase in duty on beer and that on wine and spirits?

Photo of Mr Peter Rees Mr Peter Rees , Dover and Deal

It is a statement of the obvious if the hon. Gentleman is saying that there might have been no infraction proceedings and that therefore those proceedings could have been totally disregarded. I am concerned to rebut the frivolous suggestion that we are slavishly adhering to a proposal that is not yet Community law.

I hope that my proposition will find favour, if not with Opposition Members, at least with the people who follow our debates outside the Chamber. It is not for me to enter the domestic debates between the hon. Member for Blackburn and his former colleague, the hon. Member for Gateshead, West. On close examination, the three bases on which the hon. Gentleman mounts his case fall apart. The real question, to which he did not address himself, was properly drawn to our attention by the hon. Member for Gateshead West.

I have costed the various amendments that have been put forward so far by the Opposition. First, we debated an amendment to reduce the proposed increases in the duty on petrol and derv. That amendment, if carried, would have cost £700 million. Yesterday we debated an amendment that was designed to reintroduce a lower rate band, which would have cost £1,100 million. Later yesterday we debated an amendment fully to valorise and index personal allowances. That would have cost £2,200 million. Today's amendment, if it found favour, would cost £240 million. I am bad at mental arithmetic, but I am told that the total cost of the Opposition amendments would be £4,240,000,000. At a rough calculation, that would involve an increase in the basic rate of tax of over 5 per cent.

Photo of Mr Robert Sheldon Mr Robert Sheldon , Ashton-under-Lyne

The argument that the Minister is using has been used on many previous occasions. It was demolished best by the late Iain Macleod, who said, in reply to an intervention of that kind, that if he were in Government he would be able rationally to produce an alternative Budget but all that he could do, knowing that some of his amendments would fall, was to table those amendments that he would like to be debated and, if the amendments were successful, the time would come to look at those matters again.

Photo of Mr Peter Rees Mr Peter Rees , Dover and Deal 5:15, 6 May 1981

If the right hon. Member for Ashton-under-Lyne had said candidly "These amendments are in the alternative", his intervention might have carried more weight. As it is, we have been confronted with an irresponsible and frivolous series of amendments.

Cynical observers of our debates outside would say that there is an irreducible minimum of humbug in democratic adversarial politics, but on this occasion the Opposition, lashed to a synthetic frenzy by the imminence of the county council elections, have gone beyond the irreducible minimum. How synthetic their frenzy has been can be demonstrated by the palpable lack of support on the Opposition Benches. The amendment demonstrates, if demonstration is needed, how utterly frivolous and irresponsible the conduct of affairs of the Opposition would be. I ask my right hon. and hon. Friends to reject the amendment with total contempt.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Treasury)

I have to work myself into a synthetic frenzy, but I need lessons from the Minister of State on how to do that.

The central issue raised by the hon. Members for Rutland and Stamford (Mr. Lewis) and for Gateshead, West (Mr. Horam) and the Minister of State is how to pay for the amendments that we tabled today and earlier. The Minister and the hon. Member for Gateshead both know that the role of an Opposition in tabling amendments to a Finance Bill is necessarily different from the role of the same people presenting a Budget. That does not mean that an Opposition should be irresponsible, flippant or frivolous—to use the Minister's words—in tabling amendments; it means that if we were sitting on the Government Benches we should have the weight of expert advice, and would be able to offer a comprehensive judgment of the state of the economy. When the Minister of State was recently asked what level of public sector borrowing requirement he had in mind in his alternative policies to those of the Labour Government, his answer was: Our answer then was what the market would take".—[Official Report, 12 March 1981; Vol. 1000, c. 1089.] He consistently refused to put a figure to the alternative economic policies of the Conservative Opposition.

We have expressed both here and outside our views about the scale of reflation. In summing up in the Budget debate on 12 March, I mentioned the TUC's proposal for a £6 billion reflation of the economy. That is not necessarily what we would adopt if we came to power tomorrow, but it is the kind of reflation that is desperately needed. The figure is more than the total of our tax amendments, which the Minister put at £4,240,000,000.

Photo of Mr Nigel Lawson Mr Nigel Lawson The Financial Secretary to the Treasury

Will the hon. Gentleman explain what he means by a £6 billion reflation? What public sector borrowing requirement would that involve for the coming year?

Photo of Jack Straw Jack Straw Shadow Spokesperson (Treasury)

I shall be delighted to explain that. One interesting fact that has emerged from the work done by the Library is that if the economy is reflated by £6 billion the increase in the public sector borrowing requirement is only about £3 billion.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Treasury)

The work is available in the Library. It has been done on the Treasury's own computer model. If the Financial Secretary thinks it is rubbish, let him have it analysed by his own economists who are responsible for the equations in the Treasury model, and then come back to the House with his comments.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Treasury)

The right hon. Gentleman says that it is an illusion. I referred to it in my speech on 12 March, but not a word has been said about it since then. I hope that he will now study the matter. That run on the Treasury's model showed that if demand was increased by £6,000 million, the PSBR would go up by only £3,000 million. We are arguing for substantial reflation. If we were sitting where the right hon. Member is sitting we would be able to argue for that in terms not only of reductions in income tax but of increases in public expenditure.

Photo of John Horam John Horam , Gateshead West

The House does not expect the main Opposition party to have available the full research facilities which produce a full Budget in the same way that the Government have such facilities available. That would be ludicrous. However, surely the hon. Gentleman could have produced at least a list of priorities. Does he think that reducing the increase in beer tax is more important than reducing the petrol duty? How do income tax reductions fit into the general picture?

Photo of Jack Straw Jack Straw Shadow Spokesperson (Treasury)

This is a specific debate about an amendment relating to the increase in beer duty. It would not be appropriate to make the points suggested by the hon. Gentleman. However, I accept his general point. If he had bothered to listen to what we have been saying he would know that we have put forward a coherent and costed alternative. If he has any doubt about that he should read Hansard of 12 March.

We tabled the amendment because we object to the way in which the beer drinker is being heavily discriminated against. He is bearing a 38 per cent. increase compared with a 17 per cent. increase for wines and spirits. Even within the Government's economic strategy it would have been possible to raise the same revenue by placing an equal amount on wine, beer and spirits. The Government did not do so because of the so-called initiative of the EEC. The Minister's remarks about that initiative were wholly unconvincing. He said that it would be perverse to tilt the balance against wine. I took that as an admission that the Government had been forced to tilt the balance against beer. If he is saying that the EEC initiative has nothing to do with the Government's decision, it is an extraordinary coincidence that only in December he said that it could be applied in Britain by raising duty on beer by 4p. Only four months later, the Chancellor announced an increase in beer duty of exactly 4p. That may be coincidence, but we believe it to be more than that.

Because we find the Government's arguments about the EEC directive unconvincing, and because we believe that the overall increase on beer is discriminatory against beer drinkers and the domestic beer industry, we shall vote for the amendment.

Question put, That the amendment be made:—

The Committee divided: Ayes 234, Noes 285.

Division No. 173][5.25 pm
Abse, LeoClark, Dr David (S Shields)
Adams, AllenCocks, Rt Hon M. (B'stol S)
Allaun, FrankCohen, Stanley
Alton, DavidColeman, Donald
Anderson, DonaldConcannon, Rt Hon J. D.
Archer, Rt Hon PeterConlan, Bernard
Ashley, Rt Hon JackCook, Robin F.
Ashton, JoeCowans, Harry
Atkinson, H.(H'gey.)Cox, T. (W'dsw'th, Toot'g)
Barnett, Rt Hon Joel (H'wd)Craigen, J. M.
Beith, A. J.Crowther, J. S.
Bennett, Andrew(St'kp't N)Cryer, Bob
Bidwell, SydneyCunliffe, Lawrence
Booth, Rt Hon AlbertCunningham, G. (Islington S)
Boothroyd, Miss BettyCunningham, Dr J. (W'h'n)
Bottomley, Rt Hon A.(M'b'ro)Davidson, Arthur
Bray, Dr JeremyDavies, Rt Hon Denzil (L'lli)
Brown, Hugh D. (Provan)Davies, Ifor (Gower)
Brown, Ron (E'burgh, Leith)Davis, Clinton (Hackney C)
Brown, Ronald W. (H'ckn'y S)Davis, T. (B'ham, Stechf'd)
Buchan, NormanDeakins, Eric
Callaghan, Jim (Midd't'n & P)Dempsey, James
Campbell, IanDewar, Donald
Campbell-Savours, DaleDixon, Donald
Canavan, DennisDobson, Frank
Cant, R. B.Dormand, Jack
Carmichael, NeilDouglas-Mann, Bruce
Carter-Jones, LewisDubs, Alfred
Duffy, A. E. P.McMahon, Andrew
Dunn, James A.McNamara, Kevin
Dunnett, JackMcTaggart, Robert
Dunwoody, Hon Mrs G.McWilliam, John
Eadie, AlexMagee, Bryan
Eastham, KenMarshall, D(G'gow S'ton)
Edwards, R. (W'hampt'n S E)Marshall, Dr Edmund (Goole)
English, MichaelMarshall, Jim (Leicester S)
Ennals, Rt Hon DavidMartin, M(G'gow S'burn)
Evans, loan (Aberdare)Mason, Rt Hon Roy
Evans, John (Newton)Maxton, John
Ewing, HarryMaynard, Miss Joan
Faulds, AndrewMeacher, Michael
Field, FrankMellish, Rt Hon Robert
Fitch, AlanMikardo, Ian
Flannery, MartinMillan, Rt Hon Bruce
Fletcher, Raymond (Ilkeston)Miller, Dr M. S. (E Kilbride)
Fletcher, Ted (Darlington)Mitchell, R. C. (Soton Itchen)
Foot, Rt Hon MichaelMorris, Rt Hon A. (W'shawe)
Ford, BenMorris, Rt Hon C. (O'shaw)
Forrester, JohnMorris, Rt Hon J. (Aberavon)
Foster, DerekMorton, George
Foulkes, GeorgeMoyle, Rt Hon Roland
Fraser, J. (Lamb'th, N'w'd)Mulley, Rt Hon Frederick
Freeson, Rt Hon ReginaldNewens, Stanley
Freud, ClementOgden, Eric
Garrett, John (Norwich S)O'Halloran, Michael
Garrett, W. E. (Wallsend)O'Neill, Martin
George, BruceOrme, Rt Hon Stanley
Gilbert, Rt Hon Dr JohnPalmer, Arthur
Ginsburg, DavidParker, John
Golding, JohnParry, Robert
Gourlay, HarryPavitt, Laurie
Graham, TedPendry, Tom
Grant, George (Morpeth)Penhaligon, David
Grant, John (Islington C)Powell, Raymond (Ogmore)
Grimond, Rt Hon J.Prescott, John
Hamilton, W. W. (C'tral Fife)Price, C. (Lewisham W)
Hardy, PeterRace, Reg
Harrison, Rt Hon WalterRadice, Giles
Hart, Rt Hon Dame JudithRees, Rt Hon M (Leeds S)
Haynes, FrankRichardson, Jo
Healey, Rt Hon DenisRoberts, Albert (Normanton)
Heffer, Eric S.Roberts, Allan (Bootle)
Hogg, N. (E Dunb't'nshire)Roberts, Ernest (Hackney N)
Holland, S. (L'b'th, Vauxh'll)Roberts, Gwilym (Cannock)
Home Robertson, JohnRobertson, George
Homewood, WilliamRobinson, G. (Coventry NW)
Hooley, FrankRooker, J. W.
Howells, GeraintRoss, Ernest (Dundee West)
Huckfield, LesRoss, Stephen (Isle of Wight)
Hughes, Mark (Durham)Rowlands, Ted
Hughes, Robert (Aberdeen N)Sever, John
Hughes, Roy (Newport)Sheerman, Barry
Janner, Hon GrevilleSheldon, Rt Hon R.
Jay, Rt Hon DouglasShore, Rt Hon Peter
John, BrynmorShort, Mrs Renée
Johnson, Walter (Derby S)Silkin, Rt Hon J. (Deptford)
Johnston, Russell (Inverness)Silkin, Rt Hon S. C. (Dulwich)
Jones, Rt Hon Alec (Rh'dda)Silverman, Julius
Jones, Barry (East Flint)Skinner, Dennis
Kaufman, Rt Hon GeraldSmith, Rt Hon J. (N Lanark)
Kerr, RussellSoley, Clive
Kilroy-Silk, RobertSpearing, Nigel
Lambie, DavidSpriggs, Leslie
Lamborn, HarryStallard, A. W.
Lamond, JamesSteel, Rt Hon David
Leadbitter, TedStewart, Rt Hon D. (W Isles)
Leighton, RonaldStoddart, David
Lewis, Arthur (N'ham NW)Stott, Roger
Lewis, Ron (Carlisle)Strang, Gavin
Lofthouse, GeoffreyStraw, Jack
Mabon, Rt Hon Dr J. DicksonSummerskill, Hon Dr Shirley
McCartney, HughThomas, Dafydd (Merioneth)
McDonald, Dr OonaghThomas, Jeffrey (Abertillery)
McElhone, FrankThomas, Dr R.(Carmarthen)
McGuire, Michael (Ince)Thorne, Stan (Preston South)
McKay, Allen (Penistone)Tilley, John
McKelvey, WilliamTinn, James
MacKenzie, Rt Hon GregorTorney, Tom
Urwin, Rt Hon TomWilliams, Rt Hon A.(S'sea w)
Varley, Rt Hon Eric G.Williams, Sir T.(W'ton)
Wainwright, R.(Colne V)Wilson, Gordon (Dundee E)
Walker, Rt Hon H.(D'caster)Wilson, Rt Hon Sir H.(H'ton)
Watkins, DavidWinnick, David
Welsh, MichaelWright, Sheila
White, Frank R.Young, David (Bolton E)
White, J. (G'gow Pollok)
Whitehead, PhillipTellers for the Ayes:
Wigley, DafyddMr. James Hamilton and Mr. Joseph Dean
Willey, Rt Hon Frederick
Adley, RobertEdwards, Rt Hon N. (P'broke)
Aitken, JonathanEggar, Tim
Alexander, RichardElliott, Sir William
Amery, Rt Hon JulianEyre, Reginald
Atkins, Robert(Preston N)Fairbairn, Nicholas
Baker, Kenneth(St.M'bone)Fairgrieve, Russell
Baker, Nicholas (N Dorset)Faith, Mrs Sheila
Banks, RobertFarr, John
Beaumont-Dark, AnthonyFell, Anthony
Bell, Sir RonaldFenner, Mrs Peggy
Bendall, VivianFinsberg, Geoffrey
Bennett, Sir Frederic (T'bay)Fisher, Sir Nigel
Benyon, Thomas (A'don)Fletcher, A. (Ed'nb'gh N)
Benyon, W. (Buckingham)Fletcher-Cooke, Sir Charles
Berry, Hon AnthonyFookes, Miss Janet
Best, KeithForman, Nigel
Bevan, David GilroyFraser, Rt Hon Sir Hugh
Biffen, Rt Hon JohnFraser, Peter (South Angus)
Biggs-Davison, JohnGardiner, George (Reigate)
Blackburn, JohnGardner, Edward (S Fylde)
Blaker, PeterGarel-Jones, Tristan
Body, RichardGilmour, Rt Hon Sir Ian
Bonsor, Sir NicholasGlyn, Dr Alan
Bottomley, Peter (W'wich W)Goodhew, Victor
Bowden, AndrewGood lad, Alastair
Boyson, Dr RhodesGorst, John
Braine, Sir BernardGow, Ian
Bright, GrahamGower, Sir Raymond
Brinton, TimGrant, Anthony (Harrow C)
Brittan, LeonGray, Hamish
Brotherton, MichaelGreenway, Harry
Brown, Michael(Brigg & Sc'n)Griffiths, Peter Portsm'th N)
Browne, John (Winchester)Grist, Ian
Bruce-Gardyne, JohnGrylls, Michael
Buchanan-Smith, AlickGummer, John Selwyn
Budgen, NickHamilton, Hon A.
Burden, Sir FrederickHamilton, Michael (Salisbury)
Butcher, JohnHampson, Dr Keith
Butler, Hon AdamHannam, John
Cadbury, JocelynHaselhurst, Alan
Carlisle, John (Luton West)Hastings, Stephen
Carlisle, Kenneth (Lincoln)Havers, Rt Hon Sir Michael
Carlisle, Rt Hon M. (R'c'n)Hawkins, Paul
Chalker, Mrs. LyndaHawksley, Warren
Chapman, SydneyHayhoe, Barney
Churchill, W. S.Heddle, John
Clark, Hon A. (Plym'th, S'n)Henderson, Barry
Clark, Sir W. (Croydon S)Heseltine, Rt Hon Michael
Clegg, Sir WalterHicks, Robert
Cockeram, EricHiggins, Rt Hon Terence L.
Colvin, MichaelHill, James
Cormack, PatrickHogg, Hon Douglas (Gr'th'm)
Corrie, JohnHolland, Philip (Carlton)
Costain, Sir AlbertHooson, Tom
Cranborne, ViscountHordern, Peter
Critchley, JulianHowe, Rt Hon Sir Geoffrey
Crouch, DavidHowell, Rt Hon D. (G'ldf'd)
Dean, Paul (North Somerset)Hunt, John (Ravensbourne)
Dickens, GeoffreyHurd, Hon Douglas
Dorrell, StephenIrving, Charles (Cheltenham)
Douglas-Hamilton, Lord J.Jenkin, Rt Hon Patrick
Dover, DenshoreJessel, Toby
du Cann, Rt Hon EdwardJopling, Rt Hon Michael
Dunn, Robert (Dartford)Joseph, Rt Hon Sir Keith
Durant, TonyKershaw, Anthony
Dykes, HughKimball, Marcus
Eden, Rt Hon Sir JohnKnight, Mrs Jill
Knox, DavidRenton, Tim
Lang, IanRhodes James, Robert
Langford-Holt, Sir JohnRidsdale, Sir Julian
Latham, MichaelRifkind, Malcolm
Lawrence, IvanRoberts, M. (Cardiff NW)
Lawson, Rt Hon NigelRoberts, Wyn (Conway)
Lee, JohnRossi, Hugh
Le Marchant, SpencerRost, Peter
Lester, Jim (Beeston)Royle, Sir Anthony
Lewis, Kenneth (Rutland)Sainsbury, Hon Timothy
Lloyd, Ian (Havant & W'loo)St. John-Stevas, Rt Hon N.
Lloyd, Peter (Fareham)Scott, Nicholas
Loveridge, JohnShaw, Giles (Pudsey)
Luce, RichardShaw, Michael (Scarborough)
Lyell, NicholasShelton, William (Streatham)
McCrindle, RobertShepherd, Colin (Hereford)
Macfarlane, NeilShepherd, Richard
MacGregor, JohnShersby, Michael
MacKay, John (Argyll)Silvester, Fred
Macmillan, Rt Hon M.Sims, Roger
McNair-Wilson, M. (N'bury)Skeet, T. H. H.
McNair-Wilson, P. (New F'st)Smith, Dudley
McQuarrie, AlbertSpeed, Keith
Madel, DavidSpeller, Tony
Major, JohnSpence, John
Marland, PaulSpicer, Jim (West Dorset)
Marlow, TonySpicer, Michael (S Worcs)
Mates, MichaelSproat, Iain
Mather, CarolSquire, Robin
Maude, Rt Hon Sir AngusStainton, Keith
Mawby, RayStanbrook, Ivor
Mawhinney, Dr BrianStanley, John
Maxwell-Hyslop, RobinSteen, Anthony
Mayhew, PatrickStevens, Martin
Mellor, DavidStewart, Ian (Hitchin)
Meyer, Sir AnthonyStewart, A.(E Renfrewshire)
Miller, Hal (B'grove)Stokes, John
Mills, lain (Meriden)Stradling Thomas, J.
Mills, Peter (West Devon)Tapsell, Peter
Miscampbell, NormanTaylor, Robert (Croydon NW)
Mitchell, David (Basingstoke)Taylor, Teddy (S'end E)
Moate, RogerTemple-Morris, Peter
Montgomery, FergusThomas, Rt Hon Peter
Moore, JohnThompson, Donald
Morgan, GeraintThorne, Neil (Ilford South)
Morris, M. (N'hampton S)Thornton, Malcolm
Morrison, Hon C. (Devizes)Townend, John (Bridlington)
Morrison, Hon P. (Chester)Townsend, Cyril D, (B'heath)
Murphy, ChristopherTrippier, David
Myles, Davidvan Straubenzee, W. R.
Neale, GerrardVaughan, Dr Gerard
Needham, RichardViggers, Peter
Nelson, AnthonyWaddington, David
Neubert, MichaelWakeham, John
Newton, TonyWaldegrave, Hon William
Onslow, CranleyWalker, Rt Hon P.(W'cester)
Oppenheim, Rt Hon Mrs S.Walker, B. (Perth)
Osborn, JohnWaller, Gary
Page, Rt Hon Sir G. (Crosby)Walters, Dennis
Page, Richard (SW Herts)Ward, John
Parris, MatthewWarren, Kenneth
Patten, Christopher (Bath)Wells, John (Maidstone)
Patten, John (Oxford)Wells, Bowen
Pawsey, JamesWheeler, John
Percival, Sir IanWhitelaw, Rt Hon William
Peyton, Rt Hon JohnWhitney, Raymond
Pink, R. BonnerWickenden, Keith
Pollock, AlexanderWiggin, Jerry
Porter, BarryWilkinson, John
Prentice, Rt Hon RegWilliams, D.(Montgomery)
Price, Sir David (Eastleigh)Wolfson, Mark
Prior, Rt Hon JamesYoung, Sir George (Acton)
Proctor, K. HarveyYounger, Rt Hon George
Pym, Rt Hon Francis
Raison, TimothyTellers for the Noes:
Rathbone, TimMr. Robert Boscawen and Mr. Peter Brooke
Rees, Peter (Dover and Deal)
Rees-Davies, W. R.

Question proposed, That the clause stand part of the Bill.

Photo of Robin Cook Robin Cook , Edinburgh Central 5:30, 6 May 1981

I am slightly hesitant about rising to exercise the Opposition's constitutional right to challenge the Government's legislation, because of the Minister's most recent speech. I assure him that I am not required to lash myself into a synthetic frenzy, as there are no local elections in my constituency tomorrow. We satisfactorily disposed of many Conservative councils last year in Scotland and no doubt we shall dispose of some additional ones next year without any synthetic frenzy on our part.

Three issues raised by the clause were not dealt with fully and comprehensively in the preceding debate on amendment No. 53 on beer. These issues deserve to be aired in the House of Commons and the Committee is entitled to some response from the Treasury Bench.

The first of these issues is the rate of duty on spirits. The Bill increases the duty on spirits by 14 ½ percent. That is virtually 15 per cent., and that is the percentage by which it would have been necessary to increase personal allowances to carry out the terms of the Rooker-Wise amendment. That would have been necessary for the full uprating.

The Opposition accept the case for revalorisation for spirits. We accept it also for uprating personal allowances. If an explanation is required, it must come from the Treasury team, which accepts the argument for revalorisation for spirits but rejected the very same principle when it considered uprating personal allowances.

I understand why the Treasury team accepted one case and not the other. It would cost revenue to uprate personal allowances and it increases revenue to uprate and revalorise the rate of duty on spirits. The Opposition will not let any such self-serving considerations cloud their logic. We pressed for the uprating of personal allowances, as the hon. Member for Gateshead, West (Mr. Horam) was kind enough to remind us, and we accept the requirement for an uprating of the duty on whisky and other spirits in line with inflation. I said last year in Committee that I had been a member of the Select Committee on Expenditure that submitted a report five years previously on preventive medicine. The committee recommended that the price of alcoholic drink should remain at the same level relative to average incomes". In the four years since the report was lodged, earnings have increased by three-quarters. The retail prices index has increased by two-thirds. The duty on spirits has increased by only one-quarter. The level of duty on spirits and the overall price of spirits has fallen relative to income and to the RPI. That has resulted in an inevitable increase in consumption. It has faltered slightly over the past year but the level of spirit consumption stands 25 per cent. higher than in 1977 when we submitted the report.

I am aware that in the right quantities spirits can be a life-enhancing force. I shall not suggest what the right quantity is. Each member of the Committee will have his own idea of what the right quantity is for him or her. Nevertheless, it is plain that we cannot sustain this growth in total consumption without spirits being consumed increasingly in the wrong quantities.

Therefore, it is inevitable that the House should accept the case for increases in duty as a contribution to stabilising the consumption of spirits. Therefore, the Opposition accept the case for increasing the duty on spirits in line with inflation. I appreciate that within that overall increase in consumption, there has been a change in drinking pattern which has affected many of the hon. Members whose constituencies produce whisky.

There has been a shift within the overall consumption pattern to increasing consumption of white spirits—vodka and gin. I find that pattern incomprehensible, particularly as I note that those who drink the gin and vodka can only bring themselves to drink such spirits by adding other substances to obscure the taste. Nevertheless, that pattern has undoubtedly created difficulty in the whisky industry. It is right to serve notice on the Minister that, when in Standing Committee we debate clause 11, which makes some fairly sweeping changes to the arrangements of Excise on whisky, some of the Committee, particularly Scottish Members who represent distilleries, may want to draw attention to the anxiety about the state of the whisky industry.

That is the first point raised by the clause, to which we did not refer in detail in the preceding debate. The second point was touched upon in the preceding debate by way of comparison and contrast to what was being done with the rate of duty on beer. That is the rate of duty on wine.

I regret that the hon. Member for Gateshead, West has absented himself from the Chamber because I hoped that he might be here to support and sympathise with the thrust of my general comments. [Interruption.] I shall not speculate whether he was dealing with wine, beer or spirits, but it was hard that he should have tackled the Opposition Front Bench for being under instructions when he was obviously well briefed on the case against increasing the tax on wine.

As the Minister will be aware, the duty on wine proposed in the Finance Bill is to be increased by 17 per cent. That is not even one half of the increase of the duty on beer. The Committee is entitled to ask why. Earlier, I developed the general social case for uprating the level of duty on alcoholic drink in order to try to stabilise consumption. If we attach weight to that argument, there is a much more compelling case for increasing the duty on wine faster than the duty on beer because over the last five years consumption of beer has been static. There is no social case for using the price signal to try to stabilise the consumption of beer—it is stable. The consumption of spirits has risen by 20 per cent., but the consumption of wine, in the same five years, has risen by 35 per cent.

Therefore, if we attach weight to the social argument—the requirement to try to stabilise the consumption of alcohol—that case applies with greater force to wine than to beer. In the Finance Bill, logically we should expect to find a proposal for a rate of increase in the duty on wine which is higher, not lower, than the rate of duty on beer. We find instead the reverse.

That brings me to the third point that must be developed during the debate. As my hon. Friend the Member for Blackburn (Mr. Straw) said in the previous debate, some of us nurse the suspicion—perhaps it is unworthy, and the Minister may be able to remove it when he responds—that we can detect, in the curious preference for wine rather than beer and the curious penalty on the beer drinker rather than the wine drinker, the unseen hand of Brussels once again drafting our fiscal policy.

In response to the previous debate, the Minister said that it would have been perverse, in the light of the discussions in the Common Market, to increase the rate of duty on wine faster than the rate of duty on beer. With respect, in our amendment in the preceding debate, we asked him not to do that but to increase the rate of duty on beer by no more than the increase in the rate of duty on wine—in other words, that there should be a comparable increase. That would not have been perverse; it would have preserved the status quo. I should have thought that such an argument would have carried some weight with a Conservative at heart. We are not asking for the sort of change which the Minister implied in his response.

There was a debate on that matter last December. Around that time, the Minister made a number of statements to the papers which were properly interested in and anxious about that matter. He said to The Times that as a result of the EEC pressure, he thought it extremely unlikely that the beer duty would be sharply increased, contrary to what has been claimed by the British brewers. 5.45 pm

The Minister said to The Economist:Whatever solution is adopted, it will be phased in over seven years. In the House on 3 December, he said that the requirements of the Commission could be achieved if he were to reduce the rate of duty on wine by 17 per cent. and raise the rate of duty on beer by ½p on a pint.

A mere five months after that relaxed attitude to the requirements of the EEC, we have suddenly lurched in with a sharp increase—the sort of sharp increase which the brewers feared last December—and on the Minister's sums, we are already half way to achieving the ratio which was required by the EEC. We have moved from 4.9:1 to 4.2:1. Our target is about 3.5:1. That is the ratio which the Minister is arguing for in Brussels.

It is as well to remind the Committee that the movement in the ratio is not in the interests of the British economy. Therefore, it is perhaps unfortunate that we should be faced with a Treasury team which is making a move towards that ratio in the Finance Bill at the request of pressures which are not responsible for the British economy. One of its colleagues the hon. Member for Southend, East (Mr. Taylor) said in the debate in December last year that if that change took place—in other words, if the duty on beer were increased or if the duty on wine were decreased—and if we believed in capitalism, more wine and less beer would be drunk. The hon. Member probably slightly confused his terms. Presumably he meant to say, "If we believe in market forces". However, it was plain what he expected to happen. Without wishing to subscribe to the same credo of the belief in capitalism as the hon. Member for Southend East, I entirely agree that that is what one would logically expect to result from such a shift. People would drink more wine and less beer.

Britain imports the bulk of the wine which we drink. Some wine is produced in England and is excellent in its own way, but it is a small fraction of the total amount of wine consumed in Britain. One of the reasons why the Commission is anxious to make the change is so that we can drink some of the confounded wine lake which has been the result of the common agricultural policy. Even in that matter, the Continent's aggressive agricultural policies find their way into influencing our fiscal policies.

The other side of the coin is that, just as we import almost all the wine we drink and therefore an increase in consumption of wine will result in pressure on the balance of payments, so we produce the great bulk of the beer which we drink in Britain at home. It is domestically produced. A shift from the consumption of beer to the consumption of wine will result by that token, in a reduction in employment in our economy. Those are two results from such a change in fiscal policy which are adverse to the interests of the British economy and which should be of concern to the Treasury team.

I do not make that statement to prove that our membership of Europe has not been in the best interests of the British people and the economy. That is so self-evident that it no longer requires frequent repetition.

If, as a result of our membership of the EEC we must truckle to the Community even in the matter of fiscal policy about where we put excise duty on beer and wine and if in the course of so doing we must penalise the beer drinker as against the wine drinker, surely we should at least be seeking the economic advantage which we can obtain in return. The obvious place to look, as my hon. Friend the Member for Blackburn said, is to the removal of discrimination against our whisky exports in other member States. It continues in France, Italy and Denmark, despite our having secured a court ruling.

It is interesting to contrast the attitude of other Governments to pressures for EEC harmonisation with our ready submission. The French Government were challenged before the European Court last year about discriminating against whisky. Not only is it taxed at a heavier rate than brandy, but the French will not allow it to be advertised with the same freedom as cognac. When pressed, the French advocate stated that, since whisky and gin are drunk as aperitifs, on an empty stomach, they are dangerous, whereas cognac, drunk after the meal as a digestif, is safe. One can only applaud the commitment to national self-interest that can produce such a tenuous argument with a straight face. If other governments indulge in procrastination and delay over harmonising excise duties, why should we rush with indecent haste to implement the Excise duty regime required of us, even before the final outcome of the proceedings before the European Court?

I await with eager anticipation the Minister's axplanation of why, in deciding which Excise duties should be increased to produce a given amount of revenue, the Government have chosen to favour wine at the expense of beer? I hope that he can state a logical and rational principle to defend the choice.

Photo of Mr Albert McQuarrie Mr Albert McQuarrie , Aberdeenshire East

The hon. Gentleman said that the increased consumption of spirits in the United Kingdom may be as much as 25 per cent., but much of the 25 per cent. increase was exported outside the EEC. The increase has helped those rural areas in which distilleries are the only source of employment. If we over-tax spirits, employment will be lost and those areas will become depopulated.

Photo of Robin Cook Robin Cook , Edinburgh Central

The figure that I quoted was for consumption within the United Kingdom. I was not talking about increased exports. It was a crude figure for the increase in consumption of all spirits, which conceals a shift from whisky to other spirits. For social reasons, the increased consumption is regrettable and should cause us concern, but the consumption of whisky has declined, which will concern the hon. Gentleman's constituents. As a patriotic citizen, I am doing my best to reverse the pattern. The employment in distilleries is important, and we shall be pressing the Minister on the matter when we debate clause 11, which proposes relaxing the Excise regime for bonded warehouses and which will cause a significant number of redundancies. If we did not have such high unemployment, that might be bearable in the central belt in major urban areas, but it would have a major impact on small rural populations, where only a few redundancies can run down the local economy. I am ad idem with the hon. Gentleman on that point.

I was coming to a conclusion, I hope without lashing myself into a synthetic frenzy. I hope that the Minister will not dwell on EEC pressure, but will give us a logical and rational explanation of why the increase in duty on beer it so much higher than that on wine. I hope that British economic interests will not once again be surrendered to Brussels pressure.

Photo of Mr Paul Dean Mr Paul Dean , Somerset North

I wish to make two points—and I declare an interest.

First, the law of diminishing returns will continue to operate in the current financial year. That is clearly shown in the figures for the production and sale of beer, which, in turn, affects Excise duty and VAT. Exactly the same is true of spirits. In the 1980 Budget forecast, the revenue expected from duty on spirits was calculated as £1,270 million. The figure was revised down by £110 million, and even if the revised figure is achieved, there will be less revenue in real terms from spirits in 1981–82 than in the previous year, and there is likely to be a further loss in 1981–82.

Governments of all political colours have used tobacco and drink as a convenient milch cow to raise additional revenue, but the reliance on an almost automatic increase in revenue from those sources is becoming doubtful. I hope that the Government will take account of the serious revenue implications of the trend.

Secondly, the increases in duty in clause 1 highlight the need to defer duty on wines and spirits. Every time that the duty increases, the trade has to borrow more to finance payments. The Government hope to simplify the revenue control on wine and spirit warehouses, and a later clause deals with some aspects of that.

The Government have a wholly welcome objective of saving Customs and Excise and Inland Revenue staff and simplifying procedures, as outlined in the discussion paper put out by the Customs and Excise in September 1980. In terms of that objective, the proposals are no doubt very welcome, but we must accept that they will almost certainly transfer to the trade concerned some of the cost and administration now carried by the Customs and Excise. It is therefore reasonable to suggest that if the trade is to co-operate with the Government in trying to introduce simpler procedures, a reasonable quid pro quo for that should be the credit period for duty. I hope that my hon. and learned Friend the Minister of State will be able to give us information on the progress being made in negotiations in this regard.

6 pm

Photo of Mr Jo Grimond Mr Jo Grimond , Orkney and Shetland

I am glad to follow the hon. Member for Leeds, West (Mr. Dean), who has drawn attention to the diminishing returns caused by increases in duty on beer and spirits. The Committee should be reminded of the immense contribution that the whisky industry in particular makes to the Revenue. It also provides valuable employment in parts of Scotland where diversity of employment is often difficult to achieve. The industry now faces considerable difficulties. Among them, as has been mentioned, has been the high rate of interest and the general recession.

Chancellors of the Exchequer are apt to treat whisky as though it came out of some bottomless well in Revenue terms. Indeed, they seem as addicted to increasing charges on whisky as others are to drinking it. The industry is an considerable difficulties, at any rate in some parts. To illustrate the contribution made to the Revenue, I point out that the Highland Park distillery in Orkney has, in current stock, whisky that will pay £40 million to the Revenue. The Scapa distillery in my constituency, on the other hand, has reduced its production from 13,000 gallons per week to 1,000 gallons per week. That is an extremely serious reduction.

We are apt to underestimate the importance of the whisky industry both to certain parts of Scotland and to the Revenue. When one takes into account the tax that it provides, from the point of view of my constituency it is a more valuable resource than oil. For a start, it is renewable. It has been made for 200 years and will continue long after oil has run out. Even at this moment there is whisky worth £40 million to the Revenue lying in barrels in one distillery in my constituency.

I do not altogether begrudge Chancellors what they can get from the industry, as it is clearly a very easy touch, but I beg Ministers to take care, as the old saying goes, not to kill the goose that lays the golden eggs. It would be disastrous for my constituency and for other parts of Scotland if the industry were seriously contracted.

I therefore ask the Minister, when he winds up the debate, to tell us how firm the Government's expectations are. As has been pointed out, last year they overestimated. If the duty were reduced consumption and revenue might well be increased, although some might argue that that would be dangerous in that it might encourage drinking. How firm are the Treasury estimates?

Secondly, what are the Government's expectations with regard to exports? As we all know, whisky is an extremely important export. One cannot conduct an export industry without a firm home base. There have already been difficulties about whisky in the Common Market. Johnny Walker Red Label has had to be withdrawn from the home market owing to difficulties in selling it abroad. What do the Government feel about the export prospects of the industry?

My general plea, which I think was also the plea of the hon. Member for Leeds, West, is therefore that the Government should carefully monitor the state of the industry and not take it for granted that they can get out of it just as much as they want in order to balance their books. They should recognise that the law of falling demands may come into play if the industry is too heavily taxed. Above all, they should remember that all this takes place against a background of depression and of very high interest charges which are only now beginning to fall.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

I hope that the right hon. Member for Orkney and Shetland (Mr. Grimond) will forgive me if I do not follow him in what he said. I wish to refer to the amendment that I put down but which, unfortunately, was not selected. That is, of course, no reflection on you, Mr. Weatherill. The subject of that amendment and the main burden of my remarks appertain to a matter already mentioned several times today—the European Commission's proposals as subsumed in its consultative document 7854/79. Before proceeding to that I declare an interest, in so far as an interest needs to be declared, in that I have recently been re-elected as political secretary of the National Union of Labour and Socialist Clubs, which represents nearly 150 Labour clubs affiliated to the Labour Party. As such, they have a very definite and specific interest in the matters under discussion in amendment No. 53 and, indeed on clause stand part.

The part of the Budget that traditionally clobbers the working man is the part that we have been discussing this afternoon. The Chancellor's proposals this year, however, have not only clobbered the working man by increasing the duty on beer more than proportionately to the increase in duty on wine. There is also a rather sinister twist. The Government are in fact making him pay even more towards the cost of supporting the common agricultural policy, because that is the basic aim of the consultative document to which I have referred.

I oppose the increases and I support the Opposition amendment. The purpose of my amendment was to highlight the relationship between the duties on beer and on wine. I ask the Committee to bear with me while I explain briefly the historical backround to the points about the relationship and the ratio that I seek to make.

The history of the Commission's endeavours to harmonise beer and wine duties is best and most succinctly explained by the European Communities Select Committee in another place in the 1979–80 Session, in its sixty-fifth report, entitled "Taxes on Alcoholic Drinks", document 7854/79. As that report makes plain, we are now disussing a European Commission compromise because its initial attempts at harmonisation in 1972 failed. It is therefore on the compromise proposals submitted by the Commission in 1977 that I suspect that the Government intend to base much more of their progress than the Minister of State would admit today.

The essential ingredient of the Commission's compromise, as embodied in the document to which I have referred, is, first, that all member States of the European Community should have the same rates of VAT on alcoholic drinks, but, most important—and this is the point that we have tried to bring out today—the ratio between wine and beer duties should not exceed 3:1. That is based not on the volume or quantity, but on the alcoholic strength.

The Commission's compromise also suggests that beer excise duty should be based on final volume. That would also have implications for our industry, but I shall not dwell on that this evening. The essential point is that, much more precisely than ever before, the Commission's compromise tries to tie the hands of the Government by specifying excise duties and the ratio between them, particularly with regard to beer and wine.

The Minister of State cannot deny that. That is the intent of the document and its proposals. It seeks to fetter the hands of the United Kingdom Government by specifying the relationship between those two sets of duties.

I do not accuse the hon. and learned Gentleman of deceiving the Committee, because he used a rather nice turn of phrase in what he said, but he said that the Commission's proposals did not seem to matter that much. I suggest that they matter a great deal. In fact, they very much influenced what the Chancellor did in the Budget.

Paragraph 14 of the report from another place states: The Commission takes the view that the Council's failure to act in the alcoholic beverages sector is particularly serious, since this is an area in which there are infringements of the directly applicable provisions in Article 95 of the Treaty. In other words, the Council and the Commission must take those proposals seriously because they appertain to article 95 of the treaty. That is why the Commission started infraction proceedings and why we had the interim judgment of the Court in February 1980.

I do not wish to dwell upon the Court's judgment against France, Italy and Denmark, except to say that I would not mind betting that both the Court and the Commission would welcome the swift adherence of those countries even to its interim judgment in the same fashion as the British Government propose to respond. This is only an interim judgment, yet the United Kingdom Government have responded almost with alacrity and keenness. That has not been the attitude of the other countries to which I have referred, and they have a final Court judgment against them.

Even if the hon. and learned Gentleman pretends not to be that concerned about it, his right hon. and learned Friend the Chancellor was when he wrote to me—this must have been uppermost in his mind when framing his Budget—on 6 February and said: The allegation"— that is, the allegation made by the Commission and the Court— is that the level of duties indirectly protects home-produced beer against imported wine". That is what the Chancellor thinks the Commission's proposals are all about, but page 2 of the main Commission document states The Community's policy must be to secure some reduction in the overall level of taxes levied on wine in order to improve outlets for wine production". There is no doubt in the mind of the Commission or the Court about what that consultative document purports to do.

The Customs and Excise memorandum of 24 April last year said: The Court's interim judgment found beer and wine to be in competition"— I do not accept that they are in that direct kind of competition— and felt that the evidence supported the view that duty movements in the United Kingdom since accession showed 'a protective trend' against United Kingdom imports of wine. That point was further reinforced in the Customs and Excise prepared memorandum of 17 November last year,which said: The Commission has alleged that by charging a lower duty on beer than on wine the United Kingdom is indirectly protecting the United Kingdom beer industry against imported wine and that this amounts to a breach of Article 95 of the Treaty of Rome". That memorandum went on to suggest how that could be remedied by an increase in beer duty, a decrease in the duty on wine or a combination of both.

I must refer to the Minister of State personally, because in our debate on December 3 he replied on behalf of the Treasury. That speech was remarkable for giving no indication at all of how the Government would respond to those proposals. Although on that occasion he did not give the House any indication of how the Government would respond, I suggest that the Government had already decided how to respond to that Commission document—by an increase in beer duties. The Government want to make that adjustment as speedily as possible because the hon. and learned Gentleman will have to attend a ministerial Council meeting on 4 June, and he will want to be able to say that the United Kingdom has already made the adjustments so that the Council of Ministers, the Commission and the Court have nothing more to worry about. I suggest that that is what is behind the increase in beer duties in the Finance Bill.

What worries me about the keenness and speed with which the Government want to move into conformity with the Commission document and Court judgment is that if the duties on beer protect our beer industry, they also protect the people who drink the beer. If we impose a duty against wine to protect the beer industry, that duty also protects beer drinkers. That is why I am concerned that, without telling the House of Commons, the Government have already made up their minds about how they will respond to that document. They ought to have made a statement to the House before announcing these increases in duty, and that was the purpose of my amendment.

6.15 pm

The Select Committee was clear in its recommendation about how the Government ought to respond to the Commission, when it said in paragraph 31 In the United Kingdom case, the Committee consider that excise duty should be brought into this ratio by lowering duties on wine, not raising those on beer". The Government have done exactly the opposite. No wonder the hon. and learned Gentleman would not commit the Treasury in that December debate. In fact, in an excellent speech, my right hon. Friend the Member for Llanelli (Mr. Davies) pointed out that the Germans and Italians did not have duties on their native wine and asked why we should have this imposition forced on our beer industry.

My right hon. Friend also pointed out that, by what he seemed to say, the Minister of State was almost proposing that many of the Chancellor's powers should be stripped and taken away. In fact, the hon. and learned Gentleman went almost as far as to admit that. My right hon. Friend accused him of being forced to negotiate under duress, and he replied: We are concerned to try to harmonise the structure of Excise duties. Of course, to a degree that involves a circumscription of the rights of the House and the Government."—[Official Report, 3 December 1980; Vol. 995, c. 605–6.] In other words, the hon. and learned Gentleman actually admitted that he was about to cave in. Even if the Minister of State now pretends that in some way the Commission's directive and document do not matter that much, he was certainly paving the way for the great sell-out when he made that speech before Christmas.

The effect of the increase in beer duties and the less than proportional increase in the duty on wine is that we have now reverted to the ratio position prior to our accession to the Community. In other words, the "protective trend" that the Court and the Commission were worried about—the holding down of a beer duty that protected the beer industry against imported wine—has been abolished by the Government. The Government have carried out precisely what the Commission document sought to correct and what the Court judgment sought to implement. To say that it "would have been perverse to have done otherwise" is to conceal and fudge what the Government have achieved. The Minister could almost go the Council of Ministers meeting on 4 June and stick out his chest with pride because of the speed with which his Government have conformed with the directive.

I am worried because, having abolished the protective trend—which was the Commission's concern and the Court's accusation—the Minister must go further if he is to implement the directive completely. He knows that the directive's ultimate aim is a 3:1 ratio. Currently, as has been said, there is a 4·2:1 ratio. The ratio is to be based on alcoholic strength. If wine has an alcoholic strength of about 12 per cent. and beer has one of 3·5 to 4 per cent., there is some way to go before we achieve full harmonisation. In future, there may be even steeper increases in the duty on beer.

I tabled an amendment, but it has not been selected. I do not blame you, Mr. Godman Irvine, for that. It sought to expose the Chancellor of the Exchequer's strategy. I suggest that the Government have made up their mind about their response to the Commission's directive. They have put themselves in a position that will enable a pronouncement to be made at the Council of Minister's meeting to the effect that the Government have already conformed because they have already sold out. The Government have clearly caved in as a result of European pressure.

For the sake of European harmony and harmonisation, I wish that the Danes, the French, the Italians and others would cave in speedily as a result of that pressure. Indeed, the Government have gone further. They have surrendered, yet again, the tax-gathering powers that the House has fought to retain over the years. One of the fundamental reasons for the existence of the House is demonstrated by the fact that over the years it has defended its tax-gathering powers. The hon. and learned Gentleman and the Government are busy selling out those powers.

Such steps have been taken in order to help the owners of French and continental vineyards. Members of Labour clubs and working-class men in pubs will be asked, once again, to subsidise those who are far better off and who live in France, Italy and so on. A double burden will be imposed on the working man. A burden will be placed on him to raise money not only for the Government, but to protect well-to-do and traditionally well-heeled French vineyard owners.

Once established, what else will the mechanism be used for? With the accession of Greece to the Community, the price of assistance to retsina producers will be another 1p on the pint. No doubt every country that joins the EEC will insist that its vineyards, wine-producing industries and wine lakes deserve assistance. By putting more duty proportionately on beer, the mechanism could be used for such protection.

Many Labour Members are worried because there have been one or two leaks from the Treasury to the effect that because it had to make a concession on diesel—which it was well advised to do—it may be tempted to make the amount up by putting even more duty on beer. The Government have caved in to European pressure. They are making the working man pay, as he has always had to. However, this time the situation is more sinister, because working men are also paying for the wine lakes of the Common Market.

Photo of Mr Roger Sims Mr Roger Sims , Chislehurst

I declare an interest in the affairs of the Scotch whisky industry. For several reasons I am disappointed that my right hon. and learned Friend the Chancellor of the Exchequer has responded to the representations made on behalf of the industry and by hon. Members by increasing the duty on spirits by about 14·5 per cent. That seems to maintain the disparity between the duties levied on various types of alcoholic drink.

We have heard a good deal from the hon. Members for Edinburgh, Central (Mr. Cook) and for Nuneaton (Mr. Huckfield) on the difference between the duties levied on beer and wine. I draw attention to the difference in the duties on beer, wine and spirits. The duty and tax on a 10oz drink of beer is about 6·3p. On a comparable measure of imported table wine, the duty and tax is about 9·5p. On a similar measure of imported sherry the duty and tax amount to about 8·2p. However, the duty levied on a comparable measure of Scotch whisky is nearly 15·5p. I hope that we can move towards some form of harmonisation or rationalisation of the rates of duty on the various forms of alcoholic drink instead of maintaining such a disparity.

It is fair to point out that spirits are taxed disproportionately compared with other products. I wonder whether 82 per cent. of the retail price of any other product goes to the Government by way of duty and VAT. I wonder how many of those who pay about £5·85 for a bottle of whisky realise that only just over £1 of that sum goes to the industry. The amount of tax is disproportionate.

I doubt whether the proposed increase will be effective. My hon. Friend the Member for Somerset, North (Mr. Dean) has given figures which show that the point of diminishing return on spirits has been reached, and probably passed. The right hon. Member for Orkney and Shetland (Mr. Grimond) suggested that there might be an interesting effect if the duty were lowered. The right hon. Gentleman has no need of speculation. Curiously, that happened. In 1973, the excise duty on Scotch was reduced in order to compensate for the introduction of VAT, which is levied on both the whisky and the duty. The net effect of that action was to knock only a few pence off the retail price of a bottle of whisky. That year, the Government's revenue from duty on Scotch whisky rose by 14 per cent. Needless to say, the Government increased the duty again the following year. Therefore, one does not necessarily have to increase the duty in order to increase revenue.

Photo of Robin Cook Robin Cook , Edinburgh Central

In Britain, the consumption of spirits this year is 15 per cent. higher than for the year following that cut in excise duty, which was 1974. That gives rise to other considerations of social policy. Is the hon. Gentleman happy to contemplate an indefinite increase in the consumption of spirits in order to assist the Government's revenue?

Photo of Mr Roger Sims Mr Roger Sims , Chislehurst

In terms of assisting Government revenue, I should have thought that on purely fiscal grounds there was no argument against that. The hon. Member for Edinburgh, Central raised another question. I hope that the Government will not be unduly influenced by what the hon. Member for Edinburgh, Central refers to as social arguments. I suspect that he means health arguments, but he seems to think that it is inherently bad that more alcohol is being consumed. If certain individuals are consuming more alcohol than is good for them, of course, that is bad. However, if more people are drinking a moderate amount—as I suspect—that is not especially bad. I hope that my hon. and learned Friend the Minister of State will not be persuaded by ill-founded arguments.

6.30 pm

Alcoholism is a serious problem. I do not underrate it, as it is a subject in which I have taken a great interest. It must be tackled in various ways, but I am not persuaded that raising the price is one of them. I hope that my hon. and learned Friend will not accept the health argument as a reason for increasing the price of alcohol. I do not see why we should penalise the 98 per cent. of purchasers of alcohol who use it properly simply because less than 2 per cent. abuse it. If prices are increased the addict will not reduce his consumption but will continue to buy as much alcohol as before and spend less on the necessities of life, such as food. Alternatively, he will buy an inferior quality of alcohol with all the harm that that involves. The problem of alcoholism is not a straight price problem.

Another aspect of the increase in duty is the level of unemployment. The Government should encourage rather than discourage the creation of more jobs, yet last year the whisky industry had to reduce its work force by nearly 9 per cent. The industry fears that the duty increase in clause 1 will further reduce consumption, and it is already forecasting a reduction in jobs in the coming year of about 4 per cent. We would all regret that. If the Government believe that it is essential to make the increase they could help the industry by agreeing to deferment of duty, to which my hon. Friend the Member for Somerset, North referred. That facility is enjoyed by providers of other forms of alcohol in the trade. It is not necessary for me to develop the arguments in favour of the facility being extended to the Scotch whisky industry. My hon. and learned Friend will be familiar with that. The case is irrefutable. However, I am sure that we shall be told, "It costs money. We canot afford it this year." That is always the argument against it.

If the Government insist on placing a further burden on the industry by the imposition of yet more duty they could help the industry, if not by introducing deferred duty now, at least by holding out some hope that it will be introduced in the near future.

Photo of Mr Joseph Dean Mr Joseph Dean , Leeds West

I shall develop further the point made by my hon. Friend the Member for Nuneaton (Mr. Huckfield). I want to bring into the debate the part of our social life that the increases affect heavily and, in some cases, dramatically.

I hope that the Minister will seriously reconsider the problem before the Chancellor recoups the concession made on derv by placing a further burden on beer drinkers. There are already leaks in the press that he might do that. Before I came into Parliament I was the secretary of a large Labour club. I speak not only from that experience, because since I have been the Member for Leeds, West I have visited local working men's clubs in the little time that I have left from my political and constituency business. I am a member of a number of working men's clubs in my area.

I hope that the Government will look seriously at the effect on clubs of continuing increases in taxes on the most popular drink in those clubs. I know that it will be said that the members, rather than the club, are paying the increase, but the members are the club. I do not know how clubs operate in the South, but working men's clubs in the industrial constituencies in the North are social centres for communities. During the Easter Recess I visited one such club that opens its doors on Tuesday afternoons, for a social function for elderly people from the area. A number of clubs do that.

I should explain to the Minister what has happened over the past 20 years. When I was secretary of a club I liaised with, and knew what was happening in, all working men's clubs. Most clubs kept their heads above water financially by the bar takings. However, that can no longer happen. No working men's or political club that sells alcoholic beverages can keep its doors open without recourse to gaming machines and tombola, which have recently become legalised. In the old days, clubs had to survive on what came in over the bar. Due to inflation under successive Governments, the clubs would be in serious financial difficulty and would quickly go out of business but for the gaming machines and tombola, which contribute massively to the clubs' financial successes.

Clubs are not just beer-drinking dens. Most working men's, Club and Institute Union and Labour clubs are well-appointed buildings with a variety of facilities for members, from a lounge where one can drink and chat, to a large games room with facilities for snooker and so on and a concert room for those who like that sort of entertainment. But all clubs must be subsidised by gaming machines and tombola.

Putting 4p on a pint of beer will have serious consequences, because, although the bar takings in clubs have risen dramatically, the percentage of profits has reduced equally dramatically. The 4p paid on the pint looks good on the bar takings balance sheet on an annual basis, but the calculation of percentage of profit on gross sales dips remarkably.

These organisations are social centres for their areas. In the main they are run or managed within the law as good examples of how people can organise themselves. The CIU clubs are run by men because they still do not accept women in their clubs. Some people have tried to make them progress, but there is little movement in that direction. Clubs are generally managed by officers and members of a committee on a honorary or amateur basis. There is a little remuneration in the form of expenses or honoraria, but that cannot compensate for the number of hours spent by those running the clubs. I know how the decisions of successive Governments to increase the price of beer are greeted by those who use working men's clubs.

I do not want to get involved in a wider political argument, but I know one club, which is not in a highly rated area, that faces a £2,000 increase in its rates this year. That club will need bar sales of between £8,000 and £10,000 to meet that additional cost. In addition, there have been enormous increases under successive Governments in lighting and heating charges. I was appalled when I compared this year's balance sheet and expenses with the levels of seven years ago when I was secretary of that club.

Club members and committees are becoming increasingly concerned and disappointed that Governments appear to regard them as the goose that lays the golden egg. I hope that if the Chancellor of the Exchequer is thinking about transferring the cost of the derv concession on to those who like a pint of beer, the Minister of State will convey to him the points that I have made.

It was claimed earlier that the Opposition were being parochial, political and class-conscious in wishing to protect the beer drinker rather than the wine drinker. I accept that the working-class are drinking more wine. Working-class people tend to buy the occasional bottle of wine to drink with a meal at home at weekends, but there is no doubt that beer from the pumps, supplemented by bottled beer, accounts for the vast majority of bar sales in working men's clubs and political clubs.

I hope that the Government will take into account the effects of an increase in the price of beer and will not treat the issue too lightly. I am putting down a marker for the future, so that the subject will be considered.

Photo of Mr Peter Rees Mr Peter Rees , Dover and Deal

We have had a temperate and far-ranging debate, moving easily from Brussels to working men's clubs. I assure the hon. Member for Leeds, West (Mr. Dean) that I listened to him carefully, and he will appreciate that his comments do not apply only to working men's clubs and Labour clubs. Members of Conservative clubs may express similar sentiments.

It was interesting to hear from both sides of the Committee how many geese are laying golden eggs which the Chancellor of the Exchequer may be threatening My right hon. and learned Friend is acutely conscious of the supply of golden eggs and their source, whether it be the whisky industry, working men's clubs or wherever.

It is a perennial concern of Chancellors to strike the right balance and to ensure that a fair proportion of revenue is extracted from various sources and that none is subjected to the law of diminishing returns. The hon. Member for Edinburgh, Central (Mr. Cook) asked why more duty was not piled on whisky. The answer came more eloquently and effectively that I could have given it from the right hon. Member for Orkney and Shetland (Mr. Grimond) and my hon. Friend the Member for Chislehurst (Mr. Sims), who has a well-known interest in, and experience of, the whisky industry.

Whisky has contributed a fair proportion to our revenue over the years. The increased revenue as a result of the Budget will be about £60 million, and we are sensitive to the charge that if we increase duties unduly whisky will be subject to the law of diminishing returns.

Our researches demonstrate that the elasticity of demand for whisky is greater than that for beer. The researches are not subject to total scientific accuracy, but they show that the elasticity of demand for whisky is 1·3 and that for beer is 0·2, which demonstrates the point made by the right hon. Member for Orkney and Shetland and my hon. Friend the Member for Chislehurst.

Photo of Robin Cook Robin Cook , Edinburgh Central 6:45, 6 May 1981

I remind the Minister of State, for the record, that I did not press for more duty to be placed on whisky or other spirits. I accepted and supported the Government's policy to revalorise duties in line with inflation as a step towards stabilising consumption.

Perhaps I may fortify the hon. and learned Gentleman's resolve to take that step. He will recall that I quoted from a report of the Expenditure Committee in 1976 in which we recommended that the rates of duty on alcohol should keep pace with the rise in earnings. The hon. Member for Chislehurst (Mr. Sims) sat on that Committee, signed the report and did not dissent from that recommendation. I do not know why he dissents from it now.

Photo of Mr Peter Rees Mr Peter Rees , Dover and Deal

I am always happy to be fortified by the hon. Member for Edinburgh, Central, provided we are moving in the right direction. I hope that I did not give a wrong dimension to his remarks. I understood that the main thrust of his first point was that we should preserve the general pattern of excise duties that we inherited from the previous Government. However, that was a slightly distorted pattern. For whatever reason, the duty on beer had been allowed to diminish proportionately after the substantial increases in 1975, which went way beyond the increases that we propose.

We have to take into account other factors, including changing public tastes—the public are acquiring enthusiasm for, interest in, and a taste for wine—and the future of the whisky industry, which has made a substantial contribution to our revenues and to exports.

It was invited to comment on the export performance of the whisky industry. It has been remarkably successful. Exports have risen from 62 million proof gallons in 1970–71 to 107 million proof gallons in 1979–80. It may be encountering a period of slight difficulty. Tastes may be changing in Japan, Suntory whisky may have acquired a hold on the affections of the country that produces it—it is not for me to comment on its charms or otherwise—and the pattern of tastes in the United States may be changing. Such factors have to be taken into account. The right hon. Member for Orkney and Shetland and my hon. Friend the Member for Chislehurst were right to remind us of the contribution of the whisky industry over the years, and I hope that nothing that I say will demonstrate any lack of concern.

The hon. Member for Edinburgh, Central asked me why the duty on wine had not been increased by more. He and his hon. Friend the Member for Nuneaton (Mr. Huckfield) widened that point into a consideration of the harmonisation of duties within the EEC. I shall come to the more general point, but one cogent reason for not further increasing the duty on wine is that the duty was increased considerably in the first two years of the previous Labour Government. If we are looking for a pattern of duties, I must remind the Committee that in 1974 the increase in the duty on wine was about 66 per cent. and the increase in the duty on beer was about 35 per cent. The increase in 1975 was 98 per cent. for wine and 46 per cent. for beer.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

Can the hon. and learned Gentleman tell the Committee how he gets those figures? He said that that was the percentage increase on the previous duty. What does he think the previous duty was, to give increases of that order? Also, he is saying that the last Labour Government put big increases on beer and on wine. Which charge is he making?

Photo of Mr Peter Rees Mr Peter Rees , Dover and Deal

On the previous amendment a powerful attack was mounted from the Opposition Benches that we were discriminating against beer, which was alleged to be the drink of ordinary working men, although I think the taste for it is widely diffused. I said that that was a doubtful argument, given the record of the last Administration. I go a stage further and point out that, even by reference to the extraordinary increases in the duty on beer in 1974–75, there were yet more extraordinary increases in the duty on wine. If we are looking at the pattern, I do not think that we can necessarily freeze it on the basis on which we inherited it from the last Adminstration. Those are the only two points I wish to make.

I turn to the question of the harmonisation of duties under the aegis of the European Community. The hon. Member for Nuneaton, who made his case in more extravagant language than did the hon. Member for Edinburgh, Central, was endeavouring to expose the strategy of my right hon. and learned Friend the Chancellor of the Exchequer. He said that we succumbed with alacrity and too great a speed to the blandishments or threats—I do not know which—of the Commission or the European Court.

We have to view the problem in a slightly different dimension. It could be that, with all his assiduity, the hon. Member for Nuneaton did not follow our debate last December—I do not recall his taking part; he may have had good reasons for not doing so—with all its nuances as closely as those who actually took part. I remind the Committee that we are a member of the European Community, and that to a degree that involves a slight circumscription of our national sovereignty. That may be a matter of regret to right hon. and hon. Members, not only on the Opposition side of the Committee, which includes the right hon. Member for Stepney and Poplar (Mr. Shore) who is well known for his views.

This issue was a matter of negotiation and debate under a succession of Administrations, Conservative and Labour. It was put clearly to the country in the referendum organised by the Administration of which the right hon. Member for Stepney and Poplar was a distinguished member. I do not think one need go too deeply into all the principles underlying our membership. It is implicit in our membership that there will be a certain circumscription of our national sovereignty.

There are corresponding advantages to be set against that. [HON. MEMBERS: "No".] I am coming to that in a moment. On the harmonisation of excise duties Labour Members have made it appear that harmonisation was designed—I cite the unattractive phrase that was used—to clobber the British beer-drinker. "A sinister clobbering of working men" was the phrase used uncharacteristically emotively by the hon. Member for Nuneaton. I do not know what has stirred him on this occasion. It may be that the synthetic frenzy to which I referred in the previous debate has been carried over into this debate. But for one or two uncharacteristic phrases, it was a temperate debate.

One aspect of the harmonisation of duties is the introduction of a ratio between the duties on wine and those on beer. As I said, these are only proposals and no conclusion has yet been reached. There are other aspects which would be of considerable advantage to certain parts of the country. For example, if we could ensure that there was no discrimination duty-wise against whisky then I am sure that even the hon. Member for Nuneaton would recognise the advantages. Certainly they would be recognised by my hon. Friend the Member for Chislehurst and the right hon. Member for Orkney and Shetland. We must look at the package when it finally emerges. It would be doing less than justice to the debate if the hon. Gentleman concentrated on one aspect.

If clause 1 commends itself to the Committee, all that will happen is that the ratio between wine and beer duties will be 4·2, or slightly less, to 1, which was approximately the ratio when we entered the European Community. Therefore it is difficult for hon. Gentlemen to say that there has been a shameful sell-out to the Common Market. All we have done is to move back to the pattern that existed in 1972–73.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

I do not want to keep pressing this point, but it is the crucial one that we have all been talking about. The last Administration deliberately raised wine duty proportionately more than beer duty because they realised that there was a social implication and that beer and wine drinking were not directly in competition. The Government are reversing that whole policy. The hon. and learned Gentleman cannot pass it off just like that. There has been a quite dramatic reversal of policy which, I submit, has been caused because his Government have sold out to the Common Market.

Photo of Mr Peter Rees Mr Peter Rees , Dover and Deal

There has been a dramatic reversal of policy in many fields consequent on the decision of the electorate on 9 May 1979. For some reason the hon. Gentleman does not appear to have noticed the passage of years and the decision of the electorate. This is one of the consequences that he must face. We do not accept the social implications which his right hon. Friends affected to detect when they constructed their Budgets in 1974–75. The hon. Gentleman does not appear to have noticed that the social pattern and social tastes have changed. The hon. Member for Edinburgh, Central has recognised that there is a wider taste for wine. I do not think that we should be expected to express a moral view on that. We recognise it and it reinforces the pattern that we are endeavouring to establish by this budgetary measure.

The idea that there has been undue deference to the Commission is false. We should have been absurdly perverse and had our heads in the sand if we had not taken some account of what was happening. There has been an interim judgment in the infraction proceedings. There has been no final decision yet, and the Commission's proposals have not reached finality. It may be that they will come up for debate in June. The hon. Gentleman assumes too much. These matters take a certain time to establish. May I remind the Committee and the hon. Gentleman in particular that what was proposed was a ratio of 3:1 over seven years?

Obviously the hon. Gentleman has not paid close attention to the figures. If clause 1 commends itself to the Committee we will have a wine-beer ratio of 4·17:1. I do not notice the hon. Gentleman, who was in the House at that time, object strenuously to a ratio of 4·2:1 back in 1972 or 1973. That was achieved independently of our negoiations for entry into the Common Market.

Photo of Robin Cook Robin Cook , Edinburgh Central

Without putting too many charges of "sell-out" or otherwise, may I put to the hon. and learned Gentleman a simple question? If there were no Common Market or if this matter had not attracted the attention of the Common Market would he, of his own volition, have chosen an increase in excise duties on the same pattern as is contained in this Bill?

Photo of Mr Peter Rees Mr Peter Rees , Dover and Deal

That is a hypothetical question, but I shall endeavour to answer it. Yes, I suspect that we would. We shall be raising an additional £370 million of duty by the increase in the duty on beer. Sums of that order cannot be found from an increase in the duties on whisky and wine, or even on whisky, wine and fortified wine.

As I said in the debate on the previous amendment, no one on the Government Benches, unless moved by temperance arguments, relishes increasing the duties, but the money has to be found. We can debate the balance and the pattern. It is dragging in a red herring to suggest that this is a shameful, dishonourable sellout to the forces of Brussels. The hon. Gentleman must use what language he likes, but it does not advance the level of debate to make that kind of point. There are perfectly sound fiscal reasons unconnected with the harmonisation proposals which led my right hon. and learned Friend to make these proposals.

I hope that, on reflection, and having given the subject a full airing, the Committee will recognise that, although there is a change in the pattern of excise duties by reference to what we inherited from the Labour administration, there are sound reasons for adopting the new pattern and, in the absence of constructive suggestions as to alternative sources of revenue, I hope that the clause will commend itself to the Committee.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Schedules 1 and 2 agreed to.

To report Progress and ask leave to sit again tomorrow.—[Mr. Peter Rees.]

Committee report Progress; to sit again tomorrow.