Clause 99 - Rates of tobacco products duty

Finance (No.2) Bill – in a Public Bill Committee at 9:25 am on 27th April 2021.

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Question proposed, That the clause stand part of the Bill.

Photo of Kemi Badenoch Kemi Badenoch The Exchequer Secretary, Minister for Equalities

Clause 99 consolidates changes announced and implemented in November 2020 concerning tobacco duty rates. The increases made then ensured that the duty charged on all tobacco products rose in line with the tobacco duty escalator, with additional increases for hand-rolling tobacco and to the minimum excise on cigarettes.

Smoking rates in the UK are falling. However, smoking remains the biggest cause of preventable illness and premature death in the UK, killing around 100,000 people a year and about half of all long-term users of tobacco. All these factors mean that we need to continue to encourage more people to kick the habit. We have already set out ambitious plans to reduce the number of smokers from 14% of the population to 12% by 2022, as set out by the Department of Health and Social Care in its tobacco control plan, and we have announced that we aim to curb smoking once and for all by 2030 in England. This includes a commitment to continue the policy of maintaining high duty rates for tobacco products to improve public health.

According to Action on Smoking and Health, smoking costs society almost £14 billion a year in England, including £2 billion in costs to the NHS for treating disease caused by smoking. In November 2020, my right hon. Friend the Financial Secretary announced increases to tobacco duty that, in the absence of an autumn Budget, were implemented by a Treasury order. The order was made under existing powers in the Tobacco Products Duty Act 1979 and helped to protect revenues. However, the life span of an order made under these powers is time-limited to one year, so this clause consolidates those increases. This will ensure that the duty charged on all tobacco products increases in line with the escalator, which is 2% above retail price index inflation. In addition, duty on hand-rolling tobacco increases by a further 4% to 6% above RPI inflation. The clause also increases the minimum excise tax—the minimum amount of duty to be paid on a pack of cigarettes—by an additional 2% to 4% above RPI inflation.

These new tobacco duty rates took effect on 16 November 2020. Recognising the potential interactions between tobacco duty rates and the illicit market, the Government recently consulted on tougher penalties for tobacco tax evasion. This includes proposals for £10,000 fixed penalties and escalating fines for repeat offenders. The responses indicate that there is broad support for tougher sanctions and, as announced on 23 March, we intend to legislate in the next Finance Bill. The Government have committed to strengthening trading standards and Her Majesty’s Revenue and Customs, so that these organisations can combat the illicit tobacco business even more effectively. This work includes creating a UK-wide HMRC intelligence-sharing hub.

The clause will continue our tried-and-tested policy of using high duty rates on tobacco products to make tobacco less affordable, to continue the reduction in smoking prevalence. and to reduce the burden that smoking places on our public services. I therefore move that the clause stand part of the Bill.

Photo of Abena Oppong-Asare Abena Oppong-Asare Shadow Exchequer Secretary (Treasury)

As the Minister said, this clause incorporates the legislation on changes in tobacco duty that the Government introduced in the Tobacco Products Duty (Alteration of Rates) Order 2020. I spoke during the debate on that order, so I will not repeat the points that I made then. However, I do have a few questions for the Minister.

First, why did the Government not raise the tobacco duty at Budget 2021? I note that the Minister has quoted data from Action on Smoking and Health. After the Budget, it said:

ASH is disappointed that the Chancellor hasn’t increased taxes on cigarettes by per cent above inflation as we recommended. The Government says it is willing to take bold action to make smoking obsolete, which we welcome, but that has to include further tax rises. Making tobacco less affordable is crucial to discouraging children from starting to smoke and delivering the Smokefree generation the Government has said it wants to see by 2030.”

I hope the Minister can respond to the concerns from ASH and clearly set out what the Government’s approach to tobacco duty will be going forward.

9.45 am

More broadly, I want to press the Minister on the issue of smoking and public health. We have seen the importance of public health more than ever over the past year. Many people are concerned that the dismantling of Public Health England will have an adverse effect on the nation’s health, including action on preventing harm through smoking. We need reassurances that the new Office for Health Protection will be able to fulfil that important role effectively. Of course, that is partly from funding, but the Government have cut the public health grant by more than a fifth since 2015-16, despite a growing and urgent need for investment in public health and prevention.

ASH has called on the Government to increase the public health budget by £1.2 billion in order to reverse the cuts that have taken place since 2015 and then to provide additional investment in the most deprived areas with the greatest need. Can the Minister update us on the Government’s plan for the public health budget? Finally, can the Minister tell us whether the Government will provide further funding to local authorities to support local smoking cessation services?

Photo of Kemi Badenoch Kemi Badenoch The Exchequer Secretary, Minister for Equalities

I thank the hon. Lady for her questions. What I would say about the Office for Health Protection is that it is being set up to improve the work that Public Health England was doing. I am assured by health Ministers that it will continue to tackle issues such as tobacco smoking and its health implications.

The current smoking prevalence rate is 13.9%, which is the lowest level on record and a great public health success story. The UK is seen as a global leader on tobacco control, and over the last two decades we have implemented regulatory measures to stop youth smoking, prevent non-smokers from starting, and offer support to help smokers quit. Local authorities are responsible for delivering local “stop smoking” services and support to meet their population’s needs and to address inequalities. The Government set the national policy through the current tobacco control plan, and we will publish the next tobacco control plan this summer in order to outline our ambition for a smoke-free society by 2030.

Given the success that we have had in reducing smoking, we believe that the duty rates have been set at the right level. We review our duty rates at each fiscal event to ensure that they continue to meet our two objectives of protecting public health and raising revenue for vital public services. The tax information and impact note published alongside the Budget announcement sets out the Government’s assessment of the expected impact.

We are committed to improving public health by reducing smoking prevalence. We co-ordinate our efforts through DHSC’s “Tobacco Control Delivery Plan 2017 to 2022”, and we will continue our tried and tested policy of using high duty rates to make tobacco less affordable and continue the reduction in smoking prevalence, which should reduce the burden that smoking places on public services, as I mentioned earlier.

The hon. Lady asked why we are introducing clause 99, given that no increase in tobacco duties was announced in the spring Budget. Although the autumn Budget was cancelled, the Government proceeded with the uprating of tobacco duties in order to safeguard revenues, maintain our commitment to the duty escalator and protect health objectives. The Tobacco Products Duty (Alteration of Rates) Order 2020, implementing the duty increases, took effect on 16 November 2020. However, the hon. Lady should note that although an order may be used to alter tobacco duty rates, the changes expire after one year, which is why the increases need to be consolidated into the Finance Bill. It is not the first time that a Treasury order has been used to increase tobacco duties; the same method was used in 2008. I hope I have answered all her questions.

Question put and agreed to.

Clause 99 accordingly ordered to stand part of the Bill.