Justine Greening (Shadow Minister, Treasury; Putney, Conservative)

I want to make a few comments about the clause. We recognise that it introduces an inflationary increase to maintain the price of cigarettes and hand-rolled tobacco, and we support that. However, will the Minister give us an update for the record on where we are in terms of duty in relation to tax revenue maximisation, and how the proposed increase relates to that?

During the Public Bill Committee debate on last year’s Finance Bill the then Financial Secretary, the hon. Member for Wentworth (John Healey), said that

“any big rise in the rates of tobacco duty will reduce revenue and increase smuggling, so that is a central consideration for us as we weigh up these duty decisions.”——[Official Report, Finance Public Bill Committee, 10 May 2007; c. 73.]

It would be helpful to have the Minister’s statement on whether that is still the Government’s position and whether the aim of this inflationary increase is to continue to be somewhere close to the tax revenue maximisation point. In addition, will the Minister give us a brief update on the Revenue’s understanding of the impact of the smoking ban on consumption and duty?

A key point is that the Government are considering their smuggling strategy, having had one in 2003-04, but it seems that progress on bearing down on smuggling has plateaued, although I recognise that there was some progress. I understand that that is why the Government are considering the matter again. However, the Tobacco Manufacturers’ Association said:

“The increase in tobacco tax announced today will do little to reduce the level of tobacco smuggling and cross border shopping which lost the Treasury £4.5 billion in revenue last year. The decision helps to maintain the UK’s position as one of the world’s most profitable destinations for tobacco smugglers and this is of great concern to the TMA and its member companies.”

We can put those comments in the context of who is making them, but smuggling takes a hell of a lot of money that would have gone to Her Majesty’s Revenue and Customs in duty. The latest estimates show that up to 18 per cent. of cigarettes and 62 per cent. of hand-rolled tobacco consumption is smuggled, and that 70 per cent. of all large-scale cigarette seizures are counterfeit. On top of that, many other smokers choose to buy their tobacco products from elsewhere in the EU where taxes and prices are considerably lower. That is another statistic provided by the Tobacco Manufacturers’ Association.

Smuggling is not an issue only for the Treasury, and I am interested in the Minister’s response because of my broader concerns. Other people who are hit by smuggling are smaller tobacconists and shopkeepers, and those who trade in legitimate cigarettes but are often undercut by those who do not.

I understand that much of the smuggling strategy is focused on border control and some of the more major mainstream franchises or smuggling outfits—the big business involved in smuggling. The end destination of cigarettes and hand-rolled tobacco is often small traders, and I want to find out whether the reworked smuggling strategy will have more focus on tackling smaller traders who are happy to sell smuggled products and often undercut competitors and small shopkeepers who prefer to sell only legitimate cigarettes. Can the Minister give us some clarity on that?

I want to follow up some parliamentary questions that I tabled a few months ago and perhaps to get some clarity from the Minister on the issues raised in them. I tried to find out the level of resourcing for the smuggling strategy and how many customs officers there were in HMRC. I assumed that the answer would be quite straightforward until I got an answer back saying:

“There is no separate group of staff identified as ‘customs officers’.”—[Official Report, 18 December 2007; Vol. 469, c. 1482W.]

To help me table parliamentary questions that will get answers, let me say that I was talking about the men who are generally at ports and airports and who tend to be dressed in uniforms—

See this speech in context