[Sir Alan Haselhurst in the Chair] — Clause 1 — Rates of Tobacco Products Duty

Part of Finance Bill – in the House of Commons at 2:45 pm on 13 May 2003.

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Photo of Jonathan Djanogly Jonathan Djanogly Conservative, Huntingdon 2:45, 13 May 2003

Many of my hon. Friends have discussed in detail loss of revenue owing to smuggling and I shall not go over all those arguments again. They made sophisticated arguments, and none more so than my hon. Friend Mr. O'Brien, and I thought that it would be more appropriate to make a more basic observation.

The tax increases will hit the poorest members of our society disproportionately. Taxes that are paid on things always attack the poorer members of society but the tobacco tax is especially disproportionate. We must face the essential point that people who cannot afford to go on a booze cruise are likely to be the people who will be induced to buy smuggled goods off a barrel in the street. The impact of the measure is doubly disproportionate toward poorer people.

Jon Trickett said that he was surprised that our party was talking about Europe, but this is not a question of what my colleagues or I say about other countries. The fact of the matter is that this country's policy is to dig its head in the sand. It is no wonder that hundreds of thousands of people go abroad to buy cigarettes from our European neighbours every year because they are less than half the price of those sold in this country. It is a straightforward and unsophisticated argument.

The amount of revenue lost was mentioned earlier in the debate and I said that I was always dubious about the figures that are bandied around. I have seen a figure of £3.5 billion cited as the amount of lost revenue, although I heard my hon. Friend Mr. Baron cite a figure of £7 billion. I am not sure which figure is true, but that confirms my view that we do not know how much is being lost, although I am happy to accept the figures that my hon. Friend mentioned. Additionally, when we talk about lost revenue, we do not discuss the hundreds of millions of pounds that we also spend on extra customs officials, special equipment and operations to root out smugglers.

The Government receive significant revenue from tobacco but by setting the tax rate so high that British people increasingly buy legally from the continent—that has nothing to do with smuggling—they will lose out on the potential tax take while doing nothing to improve public health in this country.