(Except clauses 1, 3, 7, 8, 12, 20, 21, 25, 67 and 81 to 84, schedules 1, 18, 22 and 23, and new clauses relating to microgeneration) - Clause 6
Finance Bill
1:00 pm
David Gauke (Shadow Minister, Treasury; South West Hertfordshire, Conservative)
It is a pleasure to see you back in the Chair, Mr. Gale. I want to pursue the point relating to hand-rolled tobacco raised by my hon. Friend the Member for Braintree, particularly with regard to the difference between the duty on hand-rolled tobacco and that on manufactured cigarettes. I have been approached in respect of the matter, as I suspect other members of the Committee have been, by Philip Morris Ltd. Unlike most of its competitors, Philip Morris does not produce any hand-rolled tobacco, although it is a substantial producer of manufactured cigarettes. It has therefore taken an unusual position for a business because it is in favour of higher taxes to equalise the position of hand-rolled tobacco with that of manufactured cigarettes.
The figures that Philip Morris presented to me raise an interesting point. It provided them before the increases in the last Budget, but those changes did not fundamentally change the position. According to the figures, the tax on a packet of 20 manufactured cigarettes was £4.07, whereas the tax on an equivalent amount of hand-rolled tobacco was £2.15. That is clearly a substantial difference, which must be one of the causes of the substantial increase in the use of hand-rolled tobacco as a percentage of overall tobacco use in this country, to which my hon. Friend referred. As he said, the proportion appears to have doubled.
I have seen two sets of Government figures. Both show that in 1990 the use of hand-rolled tobacco represented 11 per cent. of tobacco use. That has increased to either 22 per cent., according to an answer given by the Minister of State, Department of Health, the hon. Member for Don Valley (Caroline Flint), to a written parliamentary question, or 24 per cent., according to the Treasury’s pamphlet “New Responses to New Challenges: Reinforcing the Tackling Tobacco Smuggling Strategy”, which was published in March 2006. There is clearly a substantial increase in the relative use of hand-rolled tobacco. It is worth pointing out that in the 16 to 24-year-old age group, the use of such tobacco among males increased from 10 per cent. in 1990 to 25 per cent. in 2005, and from 2 to 12 per cent. among females in the same period.
I assume that those increases are largely driven by the different taxation system. I suspect that the Government have a good reason for having lower taxation for hand-rolled tobacco, namely smuggling. I should be grateful if the Financial Secretary could confirm that.