Custom-made cuts?

An EU ruling on hard-line tactics by UK Customs and Excise may prove to be a boost for the trade's campaign to reduce duty. By Michelle Perrett

Imagine you and some friends have decided to take a trip to Calais to stock up on cheap booze and cigarettes. The trip goes well until you find yourself confronted by Customs and Excise officers while driving back into the UK. Before you know it they have taken all your shopping and impounded your car - they suspect you of smuggling.

But now a situation like this has prompted someone to challenge the law that allows Customs to seize goods and vehicles, and the result could have far-reaching implications for the pub trade.

A victory in the high court last month won by a group of shoppers and cross-Channel operator Hoverspeed ruled that Customs and Excise is breaching EU law by seizing goods and vehicles from holidaymakers.

Customs was accused of being "heavy handed" and its methods of search and seizure were seen as being "incompatible" with EU human rights laws.

This decision is extremely significant since it implies the government's strategy of tackling bootlegging by catching offenders, impounding goods and removing vehicles is no longer viable. Chancellor Gordon Brown has persistently declined the trade's request for a cut in duty rates to prevent the influx of cheap booze into the country.

Instead, he has favoured enforcement of the current laws and stricter penalties for offenders.

But the trade claims this is not working, and has warned that the number of smugglers who are caught by customs is a drop in the ocean compared to the vast number who continue to bring in alcohol and cigarettes undetected.

This latest court case has thrown doubt on government policy and is being hailed by trade campaigners as a breakthrough.

It has far-reaching implications for the pub industry and has again brought fresh calls for a cut in beer duty from organisations such as the British Beer and Pub Association (BBPA).

A government report by the National Audit Office released in February revealed that smuggling was costing Britain £750m a year in lost duty. To combat this the government has invested £209m in its "hard-line" strategy.

But the latest research from The Publican's own Market Report (available from Monday 19 August) reveals that, on average, 36 per cent of licensees are aware that bootlegged alcohol is being sold in the catchment area of their pubs.

Last year this figure was 39 per cent, indicating that the money invested in customs' tough approach against bootlegging has led to only a very small drop in smuggling.

Criticism on the policy has also been made by Europe's internal market commissioner Fritz Bolkestein, who last year openly slammed British duty rates and claimed that this was at the root of Britain's smuggling problems.

Customs has defended its approach, saying that it plans to continue with its current "hard line" approach but will be reviewing some of its policies following the case. It may consider making an appeal to the House of Lords.

"The court has confirmed that it is not legal to bring back alcohol and tobacco other than for your own use without payment of UK duties and those who try to smuggle properly expect to have their goods and vehicles seized," it said.

But Stuart Neame, of Kent brewer Shepherd Neame, feels that the ruling may justify a U-turn by the government on duty rates and will almost certainly spark a surge in smuggling that will force ministers to address the issue.

"As soon as Customs admits defeat, I think bootlegging will return to the levels before the restrictions. If they can't fight it by being tough there is only one issue to consider and that is duty rates," he said.

But he also feels that the trade should unite to push for a cut in duty and has argued that a reduction of between six and eight pence a pint would make smuggling an unprofitable business. He has also argued that the government would recoup the cost of the duty cut through an increase in legitimate tax revenue.

"The onus is on the trade to push the arguments that a duty cut would solve the problems and leave the exchequer better off," he said.

It is hoped that the court case may also give the Chancellor what could be seen as a get-out clause. In the past he has stuck firmly to his enforcement policy - perhaps partly to avoid having to make an embarrassing U-turn. But now that the court has made its ruling, he will need to re-examine the issue and could change tack without losing face.

Mr Neame's view is shared by Cheltenham's Liberal Democrat MP and chairman of the All-Party Parliamentary Beer Group, Nigel Jones, who has called for excise duties to be lowered so they are more in line with the rest of Europe.

He said: "The reason that Britain has a smuggling problem is because our excise duties are so high. Successive governments have used drinkers and smokers as cash cows to be milked for extra revenue."

He does not feel that a harmonised EU duty is the answer but has called for cut in duty of six pence a pint which the beer group believes will eradicate the profits of smugglers.

"Latest estimates show that well over a million pints of beer a day arrive in Britain across the Channel, mainly from France - and up to two-thirds ends up being sold on illegally," he said.

Mark Hastings, spokesman for the BBPA, said: "Cutting beer duty would save hundreds of millions of pounds on funding Customs and Excise officers searching and seizing booze. It would mean more beer being purchased in Britain, which means more money for the Treasury to spend on public services. It's a win-win situation."

The year so far...​

January 2002​Paul Boateng, the financial secretary to the Treasury, denies that a cut in duty rates will prevent the bootlegging of alcohol.Government will not cut beer duty (30 January 2002)

February 2002​A Report by European internal commissioner Fritz Bolkestein says the difference in duty rates between states such as UK and France is leading to more smuggling.Report advises freeze on duty (21 February 2002)Alcohol smuggling is costing the country £750m in lost duty every year according to a report from the National Audit Office.Smuggling costs £750m in lost duty (15th-February-2002)

March 2002​The Wine & Spirit Association welcomes the European Commission's report on duty rates.EC duty rates report welcomed by WSA (12 March 2002)

April 2002​The Chancellor announces a basic sliding scale on beer duty, benefiting small micro breweries. But the trade attacks his decision to increase duty on premium packaged spirits.Chancellor accused of "conning" beer drinkers (18 April 2002)PPSs hit by 65 per cent duty rise (18th April 2002)

May 2002​The BBPA joins forces with the Conservative and Liberal Democrat parties to lobby the government for the sliding scale scheme to be expanded.MPs will lobby to force introduction of sliding scale for beer duty (2nd May 2002)

June 2002​Stuart Neame, of Kent brewer Shepherd Neame, says the government's hard-line policy on seizing cars used by alcohol smugglers is in "serious disarray".Neame: Government's smuggling policy in 'disarray' (17 June 2002)

July 2002​Licensees in the North East fear a new booze cruise taking drinkers to France could be devastating for trade.New booze cruise could kill pub trade in the North East (12 July 2002)

Aug 2002​The BBPA calls for a duty cut after customs loses its case in the High Court.