Clause 12
Finance Bill
3:30 pm
Angela Eagle (Parliamentary Secretary, HM Treasury; Wallasey, Labour)
I hope that many others who smoke will follow the hon. Gentleman’s example.
The hon. Gentleman talked about the difference between the ad valorem and the specific elements of the current tax on tobacco. There is a point about sequencing. He quoted at great length from the consultation document issued by the Commission and our response to it. We are trying to change the structure of EU directives on tobacco to deal with some of the points that he made and to try to ensure that the specific element becomes more important than the ad valorem element. To do that, we have to persuade all member states to agree to change the directive. For the reasons that he read out as part of the Government approach to this renegotiation, that is clearly extremely important. However, while we attempt to achieve that very desirable shift, we have to work within the current directives.
When the changes were announced at the PBR, they were, as the hon. Gentleman pointed out, designed to try to keep the price of tobacco as broadly neutral as possible in the context of a temporary VAT cut. VAT is an ad valorem tax, and we got the closest fit to achieving the price stability that we wanted in that context by using the ad valorem parts of tobacco tax.
If we are successful in the EU directive negotiations, we want more concentration on the specific element of tax on tobacco across the whole of the EU, not just in the UK. For the reasons that the hon. Gentleman quoted, it makes sense for us, as a Government, to put the matter to the EU Commission as part of that process. We will be able to make progress there, but he must recognise that there are 27 EU member states, with different tax rates on tobacco and many different approaches. The hon. Gentleman is a member of the European Scrutiny Committee, so he will know that trying to get agreement on EU directives is sometimes quite difficult—it can be like herding ferrets, especially where tax is concerned. However, we are doing our best to come up with a structure for tobacco tax that allows us more successfully and accurately to pursue some of the social and health issues that we talked about.
The hon. Gentleman asked whether we had thought about minimum excise taxes. Our lowest taxes are much higher than a lot of the minimum taxes in the EU. We are negotiating within Europe to give us more flexibility to levy a higher proportion of specific duty on cigarettes, as we wish to do. We are awaiting the development and evolution of those negotiations and their outcome before deciding how to change the structure of our own cigarette duties.