Clause 2
Finance (No.2) Bill
12:15 pm
John Healey (Financial Secretary, HM Treasury; Wentworth, Labour)
If the hon. Gentleman will allow me, I shall explain the position. If he feels that I have not dealt with it, he can respond. I do not think that he appreciates the fact that clause 2 mirrors the memorandum of understanding. Those of our UK manufacturers that have a memorandum of understanding in place will find it much easier to comply with the clause than those that do not. We want manufacturers that do not have one to be covered by the same regime, and clause 2 will ensure that they are.
Memorandums of understanding go beyond the provisions and purpose of clause 2. They cover issues that help us to work with the tobacco manufacturers to deal with counterfeit cigarettes, and they set out levels of co-operation that support other anti-smuggling strategies. Memorandums of understanding are important. They are the basis on which clause 2 is built. The clause mirrors the memorandums of understanding in many ways but does not replace them, because they play an important and much wider part in our anti-smuggling activities.
I shall deal with the comments of the hon. Member for Wycombe, amendment by amendment. The problems appear to have been raised more by tax advisers than by tobacco companies and the industry itself. He described the amendments as probing amendments. I hope that I can reassure him and other Committee members on the points.
Amendments Nos. 10 and 11 seek to introduce a defence for tobacco manufacturers, based on the balance of probability, against the accusation of facilitating smuggling. My hon. Friend the Member for Wolverhampton, South-West was right: the amendments are not necessary, as the conventional legal interpretation of “likely” is based on the balance of probability. The clarification proposed in amendments Nos. 10 and 11 is simply not necessary.
Amendments Nos. 12 and 13 seek to exempt tobacco manufacturers that have entered into memorandums of understanding with HMRC from the requirements to maintain and provide a written policy setting out their approach to controlling and monitoring their supply chains. Likewise, amendments Nos. 17 and 18 aim to remove the content of the supply chain policy and the manufacturer’s compliance with it from the list of factors taken into consideration when determining the amount of any penalty.
As I have said, the draft legislation is designed to mirror those memorandums of understanding. UK manufacturers with MOUs supply us with their documents already. Although a manufacturer might have agreed particular terms in an MOU, which might be helpful evidence of its willingness to comply, such agreements are voluntary. They do not provide any means of enforcement if a manufacturer does not adhere fully to the terms agreed.
An additional point worth making is that the clause as drafted will create equality of responsibility among tobacco manufacturers. In other words, it will ensure that those manufacturers that have entered into and complied fully with a memorandum of understanding are not disadvantaged. Providing exemptions on the strength of a memorandum of understanding would send the wrong signal to manufacturers, providing a potential incentive to enter into a voluntary agreement for the purposes of avoiding the clause’s obligations.
Amendment No. 14 refers to any notice given by HMRC to the manufacturer to provide within a reasonable period specified information about supplies of its brands to particular customers and markets. Such notifications will be made by HMRC where there is a particularly high risk of smuggling, and as a result manufacturers will be expected to exercise greater control over their supply chain policy.
It is a general principle of public law that HMRC must act reasonably. The addition of the word “reasonable” is therefore unnecessary, as it is implicit not just in the provision but in the clause as a whole.