Clause 1
Finance (No.2) Bill
10:30 am
John Healey (Financial Secretary, HM Treasury; Wentworth, Labour)
I welcome you to the Chair, Mr. O’Hara. It is a pleasure to serve under your chairmanship again. In my experience you Chair proceedings with a firm and fair hand and I know that you will continue to do so. I am grateful to you for the guidance that you have given us on the grouping of new clauses to be discussed as part of the clause stand part debate.
I shall mention my views on the new clauses later, but first let me deal with clause 1, which increases the rate of duty on cigarettes, cigars, hand-rolling tobacco and other smoking and chewing tobacco products. It does so in line with inflation, therefore increasing the typical price of cigarettes by 9p, including VAT, and did so with effect from 6 pm on Budget day, 22 March 2006.
The Committee is aware that smoking kills more than 100,000 people in this country each year. It is the greatest cause of preventable illness and premature death in this country. So the duty increase, in line with inflation, will help to maintain the real price of tobacco, the contribution to Government revenues and the price support—a level of pricing that encourages people to smoke less or to quit, and discourages children or young people from taking up the habit in the first place.
Duty rates form an important part of our strategy to drive down the level of smoking in this country and of our target to reduce the prevalence or level of smoking to 21 per cent. by 2010. Those measures run alongside important provisions that we are making through the NHS to support those who want to quit and also the public places smoking ban due to come into effect in the summer of next year. So the duty increase continues a well-established policy—a twin track of maintaining the high real price of cigarettes while clamping down hard on the unregulated supply of cheap smuggled tobacco. That will help to reduce smoking, and lower the financial, social, personal and health costs associated with it.
On the new clauses, I welcome the interest of the hon. Member for Wycombe (Mr. Goodman) in evidence-based tax policy decisions. I say to him and his colleagues on the Opposition Front Bench, we publish more information relevant to their new clauses than they might realise. In fact, we might publish more than they care to read. In relation to new clause 1 on tobacco, I gathered up on my way here a selection—not an exhaustive list—of the documents that we have published in the last 18 months.
“The Demand for Tobacco Products in the UK”, published in December 2004, is a detailed model for the elasticities of tobacco demand. The pre-Budget report 2004 included an update on our strategic approach to measuring and tackling indirect tax losses, including from tobacco, and in late 2004 we published an analysis of, and plans to deal with, counterfeit cigarettes. I have brought also a copy of a quarterly publication that includes a tobacco fact sheet—hon. Members might or might not be aware of it—with data on tobacco clearances and duty, and on the state of the market. As I said, it is a quarterly publication and the hon. Gentleman might care to pick up the next one, which is out later this month.
In December 2005, as part of last year’s pre-Budget report, we published an analysis of indirect tax losses which took into account the impact of duty. This year we have published a detailed fresh analysis of how we will reinforce our strategies for tackling tobacco fraud and smuggling. Furthermore, of course, there are the Budget notices—once again I have brought only one copy with me—published alongside the Budget, which are legally binding, and which we attempted to write in plain English, setting out the changes announced in each Budget, how they impact, and on whom.
We make a considerable effort to assess the impact of tax regimes on specific industries and the wider economy. We meet regularly with and take into account the views of organisations with special interests. We frequently reassess the general design or specific aspects of the operation of areas of the tax system, and when we do so we run a public, open consultation process.
In each year’s pre-Budget report and Budget, we give updates on tax and wider policy, and each year we publish a pre-Budget report for the excise regimes—an analysis of the tax gap, the losses and the impact of the rates. Ours was the first finance Ministry to make such a systematic analysis of the operation of the tax system and the first to put in place comprehensive strategies for reducing the tax gap, and I believe that we are still the only Government to do so. In those circumstances, when we come to decide on whether the proposed new clauses should become part of the Bill, I hope that hon. Members of all parties will bear in mind the quantity and the quality of what we already produce.