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Mr. Mackinlay: It is a subsidy.
Mr. Wilshire: I shall deal with the subsidy argument later.
It is a harmless bit of fun which we all enjoy, so why not keep it? There must be, and there are, other justifications that are just as powerful. First, I am convinced that duty free keeps ticket prices down. Anyone who does not believe that should consider why Heathrow airport has been given permission to raise landing charges by 7.5 per cent. in anticipation of loss of revenue.
Figures tell us that, if we lose duty free, £10 will be added to the price of a one-way ticket to anywhere in the European Union. At present, most of us probably spend £10 on duty free, but, under the current regime, we have a bottle of something to remind us of the pleasure. In future, we will simply part with £10, and have nothing to show for it. Duty free keeps prices down.
Secondly, the profits made at Heathrow--I make no attempt to speak for anywhere else--have been used to fund capital investment. The Heathrow express rail service has had £440 million spent on it, and it owes a lot to duty free. The improved terminal 2 has had £54 million spent on it, and it, too, owes a lot to duty free. Baggage handling, now that it works, is a plus for the airport, and £250 million has been spent on it.
Let me pick up a point made by the hon. Member for Thurrock about terminal 5. It is important that that terminal should be built at Heathrow. My constituents want it and, provided we get the environmental safeguards, duty-free profits will be needed to make it a going concern. At the last general election, when I said these things, neither my Labour nor my Liberal Democrat opponent criticised me; they, too, understood the importance of terminal 5 to my constituency.
It is vital that duty free should help to keep Heathrow as Europe's No. 1 hub. If it does not remain No. 1, my constituents and local businesses will suffer. The argument touches on the point made by the hon. Member for East Antrim (Mr. Beggs) about jobs. Inside the boundary fence at Heathrow, there are 55,000 jobs, and I represent many of those people. It is reasonable to estimate that, if duty free goes, about 1,200 of those jobs will be at risk. I do not know how to calculate the knock-on effect on associated jobs outside the airport.
I am realistic. I am aware that there is a case against duty free, but I find that case spurious. There are those who argue that duty free is not appropriate within the
European Union. Why ever not? Duty-free sales between sovereign, independent nations are well established. The nations of the EU are sovereign and independent, and anyone who argues that we should not have duty free within the EU is admitting that he wants a single country. I do not, and duty free helps to show that we are not one and the same place.
The second argument that I hear against duty free is that it is a silly anomaly, which no longer makes sense--it cannot be had on Eurostar, and one cannot do this or that. Perhaps it is an anomaly, but what is wrong with anomalies? Let me set out an alternative anomaly. Duty free is abolished, and you, Madam Speaker, decide to fly from Heathrow to Lisbon. British Airways will be anxious to continue to sell you something. You will have to decide, before leaving Heathrow, whether to buy from British Airways at British tax rates, or to wait until you are flying over France, when you can buy at French rates. Alternatively, if you are very lucky, the aircraft may fly for 30 seconds over Andorra, where you can buy duty-free goods. Would it be better to wait until Spain? Failing that, you may decide to buy just before you land in Lisbon, if the Portuguese rate is more attractive. To say that duty free is an anomaly may be correct, but there are other equally stupid examples of what will happen if we no longer have duty free.
A convincing argument for some people--the hon. Member for Thurrock rather likes it--is that duty free represents a loss of revenue to the Treasury. As the hon. Gentleman so prosaically put it, it is a subsidy. He is wrong; duty free is no such thing. Duty-free sales are based on what can best be described as a human weakness, from which I suffer more than most. I cannot resist a bargain. Hon. Members should do what I do. They should go to Heathrow, and talk to the people who run duty-free outlets. They should talk to my constituents who work in those outlets: they will tell amazing stories of what people will buy because it is cheap. I do not for one minute believe that, if we abolish duty free, all that purchasing will shift to duty-paid goods. If it does not, my constituents will lose their jobs, and manufacturers will have to lay people off because their sales will go down.
Fiona Mactaggart (Slough):
I, too, have a number of constituents who work at Heathrow. Does the hon. Gentleman agree that Heathrow estimates that only about 50 per cent. of air-side sales are of duty-free goods? The duty-free taster gets us to buy other goods on which tax is paid. The Treasury receives a lot of revenue from those sales, which would not be earned if the duty-free taster did not persuade people to shop at Heathrow.
Mr. Wilshire:
I agree. I am conscious of the fact that, if I say too much, I shall take the hon. Lady's speech from her. She will advance the same arguments from the west of the airport that I advance from the south. If she will forgive me, I shall not go down that track, but she is absolutely right.
I realise that I need to be constructive. There are good arguments for and against. However, it behoves those of us who speak up to make a practical suggestion about what should be done. I would settle for another postponement. The real impetus behind the argument for abolition of duty free is the assumption that prices will be the same throughout the EU. Indeed, my reason for saying
that duty-paid sales across the channel are not relevant is that the power of different duties is driving massive vanloads of bootleg liquor into this country to be sold heaven knows where.
I would settle for a postponement until duties are the same throughout the European Union, and I urge the Financial Secretary to work towards that goal. I believe that she would be pushing at an open door. It may sound strange for a Tory to say this, but if she wants to improve her Government's poll ratings--perhaps she does not feel that that is necessary--keeping duty free would be a splendid way to do it. Like the hon. Member for Normanton (Mr. O'Brien), I have had a large number of letters saying, "Keep it," and not one representation from a constituent who wants to see it go.
Mr. Gwyn Prosser (Dover):
Hon. Members on both sides of the House will be raising their concerns about the negative impact that the abolition of duty-free and tax-free sales will have on their constituents and on travel industries in their constituencies. For my part, I was concerned about the effects of the abolition of duty free on cross-channel ferries in my Dover constituency long before I became a Member of the House. My first fears were alerted more than 10 years ago when I was sailing on cross-channel ferries in Dover and representing seafaring colleagues in NUMAST--the National Union of Marine, Aviation and Shipping Transport Officers, the Merchant Navy officers' union--and thousands of other people in Dover, Deal and east Kent, who opposed the Channel Tunnel Bill in this House and in the other place.
We opposed the Bill because of the unfair advantage that it gave to the tunnel, because of the huge impact that it would have on our successful ferry services and because thousands of jobs would be lost in our port-related industries. It was during the Bill's passage that we first heard of the European Commission's decision to abolish duty-free sales. We knew that abolition would cause more redundancies in Dover and east Kent than the channel tunnel, as a direct result of which 2,000 jobs would be lost.
The 1987 Conservative Government rejected all our forecasts of job losses, of viability and of building time. Of course, we know now that all their predictions have been proved wholly wrong, but they did at least conduct an impact study on the tunnel's effects on Kent before allowing it to proceed. Support for an impact study on the effects of the abolition of duty free is all that we ask of the Financial Secretary this morning.
Of course, we already have a fair idea of the impact from numerous independent studies. All the results have been hugely negative. Take the most recent study from the Centre for Economics and Business Research Ltd. Figures show that, in the whole of Europe, up to 130,000 jobs will be lost in the first two years after abolition, that, in the whole of the UK, up to 23,000 jobs will be lost by 2005 and that, in the whole of Kent, 5,000 jobs will be lost.
That report shows that the biggest burden will fall on Kent and that the biggest proportion of job losses will take place in my Dover constituency, which houses the busiest ferry port in the world, but still has areas of deep deprivation and high unemployment. However, Dover is fighting back. We have assisted area status, which we must retain, and important investment plans, and we are building our second cruise terminal, which will be the premier cruising port of Europe. Having lost thousands of jobs with the closure of the east Kent coalfield, the introduction of the single market and the opening of the channel tunnel, my constituents deserve better than to be penalised again by a decision that none of the member states seems enthusiastic about, that no member of the public wants to support and that has never been tested by an impact study.
As well as the social and economic impact that has already been identified in our studies, the impact of abolition on smuggling has to be considered. I know that my hon. Friend the Financial Secretary is aware of the bootlegging problem that my constituency faces, despite the excellent work by Customs and Excise officers, albeit under difficult circumstances.
It is important, and this was brought up earlier in the debate, that we differentiate between legitimate "on board" duty-free goods, which are carefully controlled and strictly limited, and shore-based duty-paid goods that are bought in France or elsewhere in the European Union, the sale of which is not controlled and all the limits on which are widely drawn. I have always taken the view that the availability of duty free has acted as a safety valve, relieving the pressure and temptation on most travellers to overload with duty-paid goods. On that basis, abolition will serve only to increase bootlegging and the loss to the Exchequer.
Duty free provides a simple, well-tested regime that everyone understands and is easy to administer. Zero tax plus zero duty equals zero. The industry wants to know what will replace duty free on the ferries sailing, for example, from Dover to Calais. Will goods be charged at UK rates, French rates or something in between? What about the ferries and aircraft that pass over three, four or even more different tax areas? What tax regime will be applied to them? When will it be applied and who will enforce it?
Those questions have been asked over a long period with no answers. It is little wonder that, with just 13 months to go, the industry believes that only chaos will reign if duty free is indeed abolished in June next year. Perhaps the Financial Secretary will have some answers for us this morning.
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