Clause 1 - Rates of tobacco products duty
Finance Bill
11:00 am
Mr Christopher Chope (Christchurch, Conservative)
I, too, welcome you to the Chair, Mr. Gale. The Financial Secretary thinks that we are engaged in a wrestling match. I assure him that there will be nothing sham about what Conservative Members will do in the Committee: we will want to discover the facts and look at the evidence. On that basis, I have some questions that I hope he will be able to answer.
First, why does the Red Book projection for yield from tobacco duty in the coming year show a reduction of £100 million compared with the yield last year? Is that because there has been a reduction in tobacco consumption, or because the Government have not got as far as they would have liked in dealing with the problem of smuggling? What will the impact of the measure be on consumption?
The Financial Secretary says that the Government have been successful. I think that he said they are on track to put the smuggling problem into reverse. In 1996–97, smuggled cigarettes were 4 per cent. of the cigarette market. Now they are 21–23 per cent., and the loss of revenue is about £3.5 billion each year. This is a Labour problem. There was no problem on this scale when the Conservatives were in power, and I hope that the Financial Secretary will address that serious issue.
The evidence from the tobacco manufacturers is that, since 1997, consumption, which up to then had been on a decline since the early 1970s, has increased by about 5 per cent. Why is that? I suspect that it is because there is easy access, particularly by young people, to imported, illegally smuggled and cheap cigarettes, which are available at the school gate, and indeed inside the school ground in many places. Therefore, young people have access to much cheaper cigarettes than those available at retail tobacconists. As the Financial Secretary said, we have by far the highest tobacco tax, not simply in Europe but anywhere in the world. As a result of the clause, duty on cigarettes will be more than £3.50 out of a retail price of about £4.50.
I hope that the Financial Secretary can answer some of the questions that arise from the clause. Although we have not tabled an amendment seeking a freeze in tobacco duty this year, we are waiting for the information from the Treasury on the present situation. I understand that, normally by this stage in the year, the information on the impact of anti-smuggling measures has been produced. Perhaps the
Financial Secretary can tell us what progress has been made and whether there has been a reduction in smuggling in the past year or a continuing increase. Perhaps he can tell us whether consumption has gone up or down. Can he also explain why in countries such as Spain the smuggling level is 5 per cent., while in this country it is more than 20 per cent.? To what extent is that related to the level of tax that the Government insist on imposing on legitimate smokers? Has the Treasury now abandoned the belief that additional taxation has an effect on the level of smuggling? That seems to be implicit in the clause.
I hope that the Financial Secretary will be able to answer some of those questions and address the problem of the £3.5 billion of lost revenue. That is the total yield from national insurance contributions. An enormous sum is missing. It is feeding a black market involving criminal gangs on a scale unprecedented in this country. It is a serious issue on which to start the Committee's proceedings.
I lack the experience of many Committee members, having served on a Finance Bill Committee only once. That was in 1986 when I had a non-speaking part. I noticed that the then Opposition concentrated on speaking at great length because that was all they could resort to as a form of opposition. We intend to speak briefly, to the point and to try to persuade the Government to respond to the serious issues that we raise.