Lord Moylan:

Moved by Lord Moylan

17: After Clause 12, insert the following new Clause—“Offence of manufacturing, supplying or offering to supply counterfeit nicotine products(1) A person who manufactures, supplies, or offers to supply counterfeit nicotine products, including tobacco and vape products, commits an offence.(2) A person guilty of an offence under this section is liable—(a) on summary conviction, to imprisonment for a term not exceeding 12 months or a fine not exceeding the statutory maximum, or both;(b) on conviction on indictment, to imprisonment for a term not exceeding 3 years or an unlimited fine, or both.(3) In this section, “counterfeit” means any product or packaging bearing without authorisation a trade mark identical to or indistinguishable from a registered trade mark.”Member's explanatory statementThis Amendment strengthens the criminal penalties for the production and sale of counterfeit nicotine products with a view to protecting consumers, upholding safety standards, and safeguarding legitimate businesses from unfair competition. It introduces a tiered sentencing structure, permitting tougher consequences for serious offences.

My Lords, in approaching this Amendment, I start with a very powerful series of BBC News reports that were broadcast before Christmas—other noble Lords may have seen them. The BBC accompanied trading standards officers—and, I believe, Customs and Excise—on raids of various high street premises in various provincial towns. They were shops that looked like stores; you would call them mini-markets or something like that. They had goods on the shelves—packets of soup and whatever it might be that you might conceivably want to buy—but their business was not actually selling these things, and nobody who went into those shops was particularly interested in buying the packets of soup that adorned the shelves.

Those were going into those shops to buy illegal cigarettes and illegal vapes. The shops were extremely well stocked with these, not just under the counter but in cupboards, attics, holes under the floorboards and so on. It really was quite shocking to see the extent of the sale of counterfeit products. They were, of course, all counterfeit products; some might have been genuine cigarettes illegally imported without paying duty, but many were counterfeit. They met no safety standards. They were seized by the authorities on those occasions. The young people—it is usually young people—manning the counters in these premises know how to run very fast, and you do not often lay hands on them. But they are just, so to speak, the small players. There are big operators behind these sales of counterfeit products.

We could argue about the scale of the problem. Earlier, we had an argument about whether there would be an increase in illicit sales if the Bill became law, but I do not think we need to argue about the scale of current illicit activities because we have data from trading standards on the amount of illegal stuff they seize every year. The figures I have—I do not know whether the Minister recognises them—are 1.19 million illegal vapes, 19 million cigarettes and over 5,000 kilogrammes of hand-rolling tobacco seized in 2023-24. Even if the figures were half those this would still represent a major problem.

This is, as I say, a multi-million pound industry. It is connected to, part of and a manifestation of organised crime. It is allegedly linked, as you would expect organised crime to be, to other illegal activities, such as money laundering, people trafficking and so forth. As somebody who comes from a local authority background and has always been interested in the public realm, and for a couple of years chaired the Built Environment Select Committee in your Lordships’ House, something that particularly strikes me as troubling is the devastating effect it has on our high streets, because it sucks all life out of them. It is impossible for genuine small traders and small shops to compete with the rents that these people are able to pay, so they suck out the life from the high street. Our urban centres can be hollowed out as a result of these activities. It is not simply the crime or the effect on those who might be smoking dangerous products; it is the social effect on our urban places.

Noble Lords might ask, “Is it not already illegal to sell counterfeit goods?” The answer is that it is illegal, but there is no specific legislation that deals with counterfeit tobacco and nicotine products—cigarettes and vapes—and my amendment is intended to address that. I think everybody should be able to rally around it. I have taken what I would call a firm approach. Some people might say it is harsh, but I do not think one can be too harsh in matters such as this. It is a tiered approach. It makes it an offence to be involved in the sale of counterfeit tobacco or nicotine-related products. On summary conviction, there could be a term of imprisonment of up to 12 months and a fine not exceeding the statutory maximum, and, on indictment, imprisonment up to three years and an unlimited fine.

This is absolutely essential in our toolbox for dealing with this existing problem—I will not say that this Bill makes it worse or better—that is unlikely to get better on its own. It will get better when we take firm action against it, and the firm action we need requires an appropriate legal basis. This would help greatly and would give trading standards and Customs and Excise an additional tool in their box for dealing with people who are genuinely very bad and tied in with a lot of activities we do not approve of.

I believe in this passionately, and I cannot think of any reason why the Government would resist this amendment, apart from the “not invented here” type of reason. So, given that I won over the Minister on one matter earlier today—she heard me proudly just now move an amendment formally, which of course I had never done before—can I persuade her to come on board with this one as well? If she does not pick it up in exactly this form today, can she give an undertaking, which I am sure the whole House would welcome, that she will come back at Third Reading with something that has a similar effect? I beg to move.

I am never quite sure whether I should declare an interest in this debate as someone who has smoked the occasional cigar, but on this set of amendments I declare an interest in that I have teenage children. I see their actions, which chime very much with what the noble Lord, Lord Moylan, has just discussed.

We are in danger of creating a two-tier system—we do this across the board, and I am afraid we in this House are guilty of it—whereby we have excess intense regulation, which affects law-abiding citizens and consumers, and we focus on that, feeling that we have done our job and can sit back and relax, having stopped smoking, drinking or whatever it may be. But the reality is that we simply end up creating a second and entirely unregulated market.

I saw the same documentaries that my noble friend saw and was surprised, but not by the clandestine nature of organisations and illegal groups of pirates supplying illegal cigarettes and vape products under the counter or under the table in a pub—these were shops that were well advertised. In fact, I was quite impressed with some of the branding. Some of them were chains; they have become multinational corporations with headquarters, running an effective illegal system that pays no taxes. Clearly, as these documentaries showed, they had other issues, such as money laundering and very bad employment systems.

In conversations with the Minister, I have been encouraged by the realisation of this two-tier issue. It is not simply in the physical sense; it is also online. The teenagers I speak to say they have never actually bought a legal packet of cigarettes. It would not occur to them: at £20 a packet, they would be better off taking up cigars. Instead, they buy everything online, where there are no age checks. They can usually get hold of somebody else’s credit card, and it is delivered to the house. I find it very alarming that we will spend our time in these debates, and the Government will spend a huge amount of effort on a so-called ban of smoking and nicotine products, while at the same time allowing an illegal market to flourish.

From conversations with the Minister, which I found extremely helpful, I am aware that online sales are hard to regulate because of how enforcement happens at the local level: there is no one authority, although specific authorities will take leads in certain areas. There does not seem to be enough money or focus on this important issue. I am saying this because I care about the retailer and about the end ambition, in some measure, of this overall government initiative. It would be extraordinary if we focused all our efforts on a great sledgehammer to crush legal, law-abiding and decent retailers who are trying to do their job, and law-abiding consumers, without realising that we are creating another monster that needs to be tamed.

I shall talk about the two amendments in my name. First, the Bill does not provide a deterrent; the proposed fixed penalty of £200 is nothing to those involved in this illicit trading and organised criminal activity. It is obvious that the unscrupulous retailers will simply absorb the costs and just continue with what they are doing.

It is worth mentioning at this point—and I have seen this—that when people are selling illegal tobacco it is not under the counter. You can have a nice card with all the different brands laid out for you to pick and choose from. It is very professional: a serious bit of criminality out there. I might add that I do not smoke, but I have seen it with others. That is why I am seeking through this Amendment support to introduce a stepped penalty regime, escalating for repeat offenders and enabling referral to national and enforcement bodies where organised criminality may be involved. If we want to stand any chance of cutting down this illicit trade and the sale of tobacco and vapes, enforcement must have real teeth. Without a stepped penalty regime and referral powers, the Bill and the generational ban will be nothing more than symbolic.

Amendment 63 is on the points I have just made about having a more robust and stepped approach to penalty notices. I want to strengthen enforcement further by introducing a new statutory referral duty where a fixed penalty notice is issued. If the Bill does not confront the organised criminal network, it will just continue. We want local authorities to issue fixed penalties, and then to refer the matter to the National Crime Agency and relevant police forces and to share intelligence, which is key. It is further my intention that this amendment place a statutory duty on the NCA and police to investigate whether organised crime, excise or VAT evasion is at scale or other serious offences are involved.

My Lords, I wanted to speak to two amendments in this group that are about the opposite ends of the retail spectrum. On the one hand, there are law-abiding shopkeepers who need to be given a certain leeway if they mess up at the start of this legislation. At the other end of the spectrum are those open lawbreakers who hide in plain sight.

I added my name to Amendment 63 in the name of the noble Lord, Lord Udny-Lister, which is about giving relevant authorities the discretion to issue a warning notice to first-time offenders. Because this is totally novel and internationally unique legislation, enforcement will be important; but because this is a bit of an experiment, some leeway has to be given to allow it to settle in without criminalising people unnecessarily.

Fixed penalty notices are precisely designed to enable offenders to avoid criminal prosecution and reduce the burden on the courts. That is how they are usually used. I am just worried about the overcriminalisation of shopkeepers via this Bill; it is important to be proportionate and allow that discretion. Allowing trading standards officers to issue warnings to first-time offenders would promote the idea that shopkeepers can learn what the rules are and find out that they have had their warning. I am sure that many initial breaches are likely to be unintentional, and a warning will help a business to understand the rules and allow them not to repeat the mistake, and so on. Therefore, fines are reserved for repeat or serious offences; that is an important way in which to approach this.

In relation to an earlier amendment about communicating what the Bill will do, although I do not necessarily agree with it, it is obviously important that people understand the implications of the Bill when it becomes law. If it passes, which it will, there will have to be quite a steep learning curve for all sorts of different parts of society.

I want to draw attention to something called Local Vape Action, which has just been launched in Maidstone in Kent. It is a local partnership involving retail shops working with the local community and doing education, engagement and enforcement. There are initiatives happening locally where people are trying to say, “We are the good guys; we are the people who are compliant; we’re trying to keep to the rules”. They are trying, for example, to improve the appearance of high streets, making sure that legitimate vape retailers—not the ones that the noble Lord, Lord Moylan, described—want to take some responsibility for not being the rogue traders. I think that is to be commended.

In this group, therefore, I commend Amendment 17 in the name of the noble Lord, Lord Moylan, because although I am not usually one for creating new criminal offences, I think there is something to be said for tackling this issue of counterfeit nicotine production and sales. Making a specific offence would tackle one of the thorny issues that rumbled under our Committee deliberations and throughout the first group that we discussed today on Report, which is that an unintended consequence of this legislation is the potential for the growth of a black market in tobacco and vapes. Even though the noble Lord, Lord Moylan, rightly said that this criminal law could stand regardless of the Bill, I think the Bill gives an added impetus to it.

I know that the Minister and supporters of the Bill like to console themselves that this black market thing is just a tobacco industry talking point, and I know that Action on Smoking and Health claims that the concern about turbocharging the illicit market is just the corporates crying wolf. But as I tried to say in Committee, maybe because of where I live, around there I can see the explosion of shops that sell a few vapes, do a bit of barbering and those sorts of things, but it is not the case that there is not a problem. It is not always to do with official statistics. I think the Government should avoid burying their head in the sand. It would be better to take seriously the need to clamp down on illegitimate activities, precisely in order to safeguard legitimate businesses from unfair competition, but also for the sake of consumers.

The noble Lord and others have vividly reminded us of the BBC’s in-depth investigations, and it was genuinely shocking to see what was happening in many high streets throughout the country. One thing that stood out for me was when one of the trading standards officers went on record to say, “We’re losing the war against the criminal gangs”. It seems to me that if we are losing the war, we should fight the battle. We need to do something. We cannot just say, “We’re losing the war”, and then pass a law that could make it worse. That is a defeatist attitude. In that sense, I regard this as a useful thing: the Government would surely benefit from a legislative tool to strengthen enforcement action against those criminals trading in illegal tobacco and so on, and to clamp down on the rogues.

When we have this conversation, statistics are used all the time. There is a world in which we have official statistics and official data about this. There is also another world, in which lots of people live, where you can buy your tobacco and vapes cheap, illegally, in local shops, and that does not seem to be reflected in the figures. The polling company Opinium did a big poll of 6,000 adult vapers in December. Of the people interviewed, 27% of adults were aware of illegal vape sales in their local area, 29% of current vapers have knowingly purchased illegal vapes and 9% of daily vapers admit purchasing illegal single-use vapes, post the ban on them. Among the people asked, consumer confidence in the legality of vapes when purchasing from retailers varies significantly depending on where you live. “Depending on where you live” is a code for saying working-class areas versus other areas. As the Majority of people are working class in this country, in certain areas you will be more likely to be able to buy cheap tobacco and vapes in shops where there is no clamp-down.

As a consequence, I want the good retailers to be treated proportionately and not criminalised unnecessarily, which is why I support one of the amendments. We should throw the book at the rogues that are exploiting consumers’ illegal activity, often using illegal migrants working as slave labour in these shops.

My Lords, I am delighted to have the support of the noble Baroness, Lady Fox, on my earlier Amendment on the communications strategy, and that she has come around to my point of view on this. It clearly is vital that we have an excellent, proactive communication strategy in relation to this new policy, as I argued on the first group.

These amendments seek to ensure that penalties for offences are fair and proportionate. I am very sympathetic to Amendment 60 from the noble Lord, Lord Udny-Lister, which looks like a very useful attempt to take a stepped approach to fines; it seems a very reasonable way to go about this. I look forward to hearing what the Minister says about that, and why she feels, if she does, that it is not necessary or appropriate.

We believe that Amendment 63 is not necessary, as the ability to give warnings already exists. On Amendment 17 on counterfeit products, I am delighted to return the compliment to the noble Baroness, Lady Fox, who says that she does not like to have unnecessary new offences, by telling her that we understand that this is currently an offence under the Trade Marks Act and that offences under that Act are automatically lifestyle offences, meaning that a proceeds of crime application can be used to remove criminal earnings. Maybe the Minister can comment on these various amendments.

My Lords, my noble friends Lord Moylan and Lord Udny-Lister benefited this debate by coming forward with their amendments in this group based on their extensive experience in local government. I warmly welcome Amendment 17; counterfeiting nicotine products is not a victimless crime. It undercuts legitimate businesses that are already operating under considerable regulatory and financial pressure.

Let us be clear that the cumulative burden placed on small businesses, regulatory or otherwise, is already substantial. These businesses, as other noble Lords have said, are already playing by the rules. They pay their taxes and comply with an ever-increasing, complex regulatory framework. It is simply not fair that they should find themselves undercut by operators selling counterfeit products outside that framework entirely.

Beyond the commercial harm, there is a serious consumer safety dimension. Counterfeit nicotine products are unregulated, untested and potentially dangerous. I ask the Minister to confirm that the Government share the view that the robust criminal penalties for counterfeiting are not only appropriate but essential. I would be grateful to hear what steps are being taken to ensure that enforcement capacity exists to make sure that these penalties are meaningful.

At earlier stages of the Bill, I know there were some concerns about the capacity of trading standards, for example. The sum that the Government have made available for local trading standards is to be welcomed, but some still wonder whether it will be enough or whether it is a drop in the ocean.

My noble friend Lord Udny-Lister’s amendments reflect a sensible approach to fixed penalty notices. A step penalty structure that treats a first offence differently from repeated non-compliance is surely right. While some local authorities may already have discretion to issue a warning instead of a fixed penalty for first-time offenders, as my noble friend has raised, it is important that first-time offenders are not treated unduly harshly given the complexity of some of the regulations that these small retailers will have to face. I hope the Minister, if she feels that she cannot accept the amendments as they stand, can say some positive things about them.

My Lords, this has been a helpful debate on an issue that concerns us all in this Chamber.

On Amendment 17 tabled by the noble Lord, Lord Moylan, I agree with his desire to take robust action against counterfeit products—I am sure we all do—but I cannot accept the amendment simply because I do not believe it is necessary, not because of specific objections. I heard his invitation for me to continue as I started, but, unfortunately, I cannot do so for this amendment. We believe it is not necessary, as referred to by the noble Baroness, Lady Northover, because protections against trademark infringement are already a matter for existing legislation.

On the point about necessary legislation addressing counterfeit products, which I accept, I say to the noble Lord and the noble Baroness, Lady Fox, that the Trade Marks Act 1994, as we have heard, already provides significant penalties for breaching these rules. They include: on summary conviction, imprisonment for a term not exceeding six months or a fine not exceeding the statutory maximum, or both; or, on conviction on indictment, a fine or imprisonment for a term not exceeding 10 years, or both. These are significant penalties.

In terms of duplication, I argued on the Crime and Policing Bill that it was probably not necessary to legislate for assaulting a shop worker to be against the law, as assaulting anyone is. I asked why there was a specific point about shop and retail workers and was told that this would make a special case of shop workers to emphasise their vulnerability. The point about duplicating Laws has never held the Government back before, because they keep doing it.

I must admit that I have a different view. Where we already have legislation covering the specific points we are talking about, as we have here with the Trade Marks Act 1994, there is no reason to go further. The legislation is already working. It is fair to raise the example that the noble Baroness gave, but I do not share her view on that duplication, as it was important specifically to identify shop workers. Maybe we just need to disagree on the duplication or otherwise of legislation.

While trademark protection is not a matter for the Bill, powers in Part 5 will enable the Government to introduce regulations relating to packaging, product safety and product registration. Those who breach these regulations following their implementation may face significant penalties of up to two years’ imprisonment, a fine or both. The penalties broadly mirror the penalties provided by the noble Lord’s Amendment, albeit I accept he proposes a slightly higher maximum term of imprisonment of three years instead of two.

The noble Lord, Lord Moylan, raised legitimate points about the scale of the illicit market and also potential connections to other illegal activities. On that point, HMRC and Border Force’s joint illicit tobacco strategy sets out the continued commitment to tackle and disrupt the organised crime groups behind the illicit tobacco trade, a commitment supported by over £100 million of new funding.

We are investing more than ever to tackle illicit vapes, which were also raised by noble Lords. In 2025-26, we are providing £10 million of new funding to trading standards, as I have mentioned before. That has supported the seizure of some half a million vapes between April and June 2025. HMRC figures also show there has been a reduction in the tobacco duty gap estimate as a proportion of total theoretical tobacco duty liabilities, going down from 21.7% in 2005-06 to 13.8% in 2023-24.

The noble Lord, Lord Johnson, raised the important point about online sales, as he has done previously with me. I reassure him once again that the Majority of the measures in the Bill actually apply to products sold online. We are also taking powers to introduce a retail licensing scheme. Our call for evidence, which closed in December, asked about how retail licensing should extend online, so I hope the noble Lord will find that helpful.

Amendments 60 and 63, tabled by the noble Lord, Lord Udny-Lister, are of course similar to the amendments he introduced in Committee. On the issue of warning notices and escalating fixed penalties for repeat offences, local trading standards must have regard to the Regulators’ Code, underpinned by the Legislative and Regulatory Reform Act 2006, when carrying out their enforcement activity. As such, they take a proportionate approach, which the noble Baroness, Lady Fox, endorsed—which was helpful. In the first instance, they must support businesses to be compliant through advice and guidance, an approach that was clearly highlighted during oral evidence presented to the Public Bill Committee in the other place. This includes issuing warning notices to encourage compliance before escalating to formal action and penalties.

Fixed penalty notices are an important and proportionate tool to help trading standards bring retailers back into compliance without needing to undergo court proceedings, which are burdensome on both the local authority and the retailer. Introducing fixed penalty notices was overwhelmingly supported in the 2023 consultation on creating a smoke-free generation, and £200 was the most popular suggestion for the level of the fine. Therefore, we believe what we have in the Bill is right. I have heard the noble Lord takes a different view. However, it would perhaps be helpful to the noble Lord to know that Ministers have within the Bill the ability to change the level of penalty by regulations.

On the issue of the general concerns about wider criminality that were raised, trading standards, the police and HMRC already work closely together. They routinely share intelligence on illicit activity and organised crime through established multi-agency databases, regional tasking groups and intelligence networks. All local trading standards services across the UK use a single intelligence database. This is shared with HMRC, and we understand it will be shortly uploaded to the police national database. That will bring further efficiencies and effectiveness to information exchange.

These ways of sharing intelligence enable tackling the concerns of wider criminality, including tax evasion and the links to organised crime, and enable them to be flagged to the relevant enforcement agencies and investigated as appropriate. However, not every fixed penalty notice that is issued may be linked to wider criminality. Therefore, these amendments would risk increasing the administrative burden for our enforcement agencies, which I know that the noble Lord does not wish, without adding meaningful value. I hope that this provides reassurances to noble Lords and that the noble Lord, Lord Moylan, feels able to withdraw his amendment.

My Lords, that is a disappointing response. I repeat that my Amendment does not rest on any claim that this Bill is going to make a bad situation worse. I do not want to get into that argument. It is a bad situation already. We should be willing to acknowledge that perhaps it is worse than we realise—especially those of us who do not spend a lot of time on provincial high streets and in working-class areas where this happens and is widespread. We need vigorous tools to deal with it.

I entirely accept what the noble Baroness, Lady Fox, said about the need for nuance in how enforcement is carried out. I am aware of the enforcement code that regulators use, including trading standards, because I have worked with it. One wants to be lenient to the honest shopkeeper who muddles up a 40 year-old with a 41 year-old. However, it is not possible to sell counterfeit goods accidentally. You know if you are selling counterfeit goods—it is a deliberate action—especially if you have them stashed in the attic and under floorboards. You are not making an honest mistake when you sell them. We need to be very hard on these people.

My noble friend Lord Udny-Lister has got something, in arguing for a gradation of fines and punishments that will bite harder on people who are repeat offenders or more serious offenders. The Bill misses a trick on that.

On this side—and, I suspect, if they reflect on it, in other parts of the House—there is concern that the Government have not got this element of the Bill right and that they will have to come back to it. The ideal thing would be if they came back to it before the Bill was enacted, at Third Reading, perhaps with something along the lines that my noble friend Lord Udny-Lister produced. It is possible that they could put it right later when they discover that they have made a mistake, but that is much more messy and would not have the desired effect.

I am disappointed. The Government will have to return to this, and the sooner the better. In the meantime, I beg leave to withdraw my amendment.

Amendment 17 withdrawn.

Amendment 17A not moved.

Clause 13: Displays of products or prices in England