Clause 4 - Rates of tobacco products duty
Finance Bill
10:30 am
Mr Howard Flight (Arundel and South Downs, Conservative)
It is certainly sensible that the Government have got off the escalator but the 6p increase and pro rata equivalent increase in rolled tobacco still increases the price differential between here and continental Europe and in the bootleg market. I call for a stepping back and rethink because the policy on the taxation of tobacco has become counter-productive.
I should declare an interest as a smoker—I should also welcome your chairing our deliberations, Dr. Clark. Over the past four years, cigarette smoking has gone up by 6.5 per cent. The Government sneaked out some figures earlier this month announcing that the revenue loss has been £3.7 billion. Theoretically, the tax on cigarettes should be aimed at the most effective point on the curve, both to discourage smoking in terms of demand and price and to deliver Government revenue. The first reason is health-related, the second pragmatic. However, we have clearly gone massively too far in the other direction because we are in the territory of diminishing returns on both fronts. We are not achieving the objective of discouraging smoking and we are losing revenue like billy-oh.
On reducing smoking and associated matters, we are also causing harm. The group among whom smoking has most increased is the young, particularly young women. The policy on duty is divisive because the affluent can pop across to France and buy all the cigarettes that they want cheaply. Those that get sucked into smuggling are very much the less affluent and those who are not close to the channel ports. On Second Reading, the hon. Member for Barnsley, Central (Mr. Illsley) had the honesty to admit that in his constituency one can hardly buy cigarettes other than on the black market. Small shopkeepers have been driven out of business and the constituency has become a black market territory. I was slightly horrified—although I did not believe it—to hear the hon. Member for West Ham talk even of the suggestion of banning. In my mind is the United States experience of prohibition. Whether we have absolute banning or the existing taxing strategy, it inevitably leads to bootlegging; that fact is as old as the hills.