27 APRIL 2004

Mr David Ramsden, Mr David Hartnett, Mr Chris Tailby, Mr David Hubbard and Mr Peter Hopkins

  Q140  Chairman: You are talking about lost revenue, are you not?

  Mr Hubbard: Yes. It is not net benefit; it is half of the additional revenue that would be created.

  Lord Barnett: It is obvious you have had plenty of consultations, and we appreciate that. And I now see that there is such a body as a Joint Alcohol and Tobacco Consultation Group, from whom we have had representations. Is not the problem that consultations tend to be with people representing the largest bodies and the small ones do not get through to you and are hit very often by these taxes? Your estimate is that you are going to raise £160 million from this, and there are one off costs to the industry which would be quite substantial to them, and you are not giving them much back. Would you have in mind to give them a little more to help them with the capital costs?

  Q141  Chairman: We did not raise the excise duty this year. That is what they were given back. That is outside our remit but that is what the Chancellor did.

  Mr Hubbard: In answer to the second part of Lord Barnett's question, plainly the impact on small businesses was something that Ministers particularly wanted to assess, and there is in the small firms impact test section of the regulatory impact assessment an acknowledgement that the impact in gross terms of the compliance costs would be proportionately higher on the small business sector. They have about seven per cent of the market and would bear in gross terms 12 per cent of the compliance costs on an ongoing basis. But in the same way the offsetting measures are also intended to be targeted more beneficially on the small business sector. There is a capital assistance scheme of £3 million pounds which we are going to discuss with the industry how best to expend, but that would be targeted, we hope, on the small business sector for expenditure on machinery in 2005-06. On your more general point about the ability of small firms to be represented in discussions with the Revenue departments, this is something we are very conscious of. Plainly there are small business federations that make representations and we have internally small business units and we do try to capture their views because they are very important to governments of most complexions and certainly this one.

  Q142  Lord Sheppard of Didgemere: If you keep attacking your largest companies sufficiently enthusiastically, they will all become small, so we will build up quite a small business sector in the UK. There have been different statements made on what your policy is about recovering the costs and so on. You seem to have changed your mind between statements this time, have you not, or is that my imagination?

  Mr Hubbard: In one case the government have decided to be more generous to the industry than initially they had in mind and that is on the question of who would bear the costs of printing and distribution of duty stamps. When we went out to the industry to ask them to help us to calculate the compliance costs, we asked them to make the assumption that they were bearing the 1p or 2p costs of the stamp printing and distribution, but then the government in the Budget decided that the Customs & Excise would bear that cost, so dependent on how the scheme is implemented in detail, that is a £5 million to £10 million per annum element of the costs which will not fall on industry now. It will come from Customs.

  Mr Ramsden: My Lord Chairman, we could carry on getting more into policy development.

  Chairman: I am trying very hard to keep us out of it. I am about to bring this to a conclusion. To some extent your activities generally seem to be like a series of poor defenders trying to stop Thierry Henri, and every time you think of one way of stopping him he then hammers you with another. Thank you very much. We have found it tiring and you must have found it exhausting. You have been immensely helpful and I know there are problems at your end, but we really would want to see you again when we have had a lot more evidence because we feel we have a responsibility to you to enable you to comment on and answer things that are said to us before we write our always dispassionate report. I really have to say to you that, much as we have exhausted you once, we may well at least once want to exhaust you a little bit more solely to make sure we end up with a balanced report. In other words, as you know, our problem is that we are not experts, so we cannot say to the outside people, "You are wrong". I know there are difficulties but you ought to know at least that we would want to have another short session with you. That does not prevent me from thanking you today for what I found was an excellent session. I am even beginning to think I understand one or two things, which is very dangerous indeed. Thank you very much for coming.