Clause 76 - Rates of tobacco products duty

Finance (No. 2) Bill – in a Public Bill Committee at 5:00 pm on 5 January 2022.

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

Photo of Helen Whately Helen Whately The Exchequer Secretary

The clause implements changes announced in the autumn Budget 2021 on tobacco duty rates. The duty charged on all tobacco products will rise in line with the tobacco duty escalator, with additional increases made for hand rolling tobacco and to the minimum excise tax on cigarettes.

Smoking rates are falling in the UK, but smoking remains the biggest cause of preventable illness and premature deaths in the UK, killing around 100,000 people a year and about half of all long-term users. All those 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% to 12% of the population by 2022, as set out by the Department of Health and Social Care in its tobacco control plan. We have announced that we aim to reduce smoking prevalence in England to 5% or less by 2030. That 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 per year, including a £2 billion cost to the NHS because of the disease caused by smoking. At autumn Budget, the Chancellor announced that the Government would increase tobacco duty in line with the escalator. The clause specifies that the duty charge on all tobacco products will rise by 2% above retail price index inflation. 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 1%, to 3% above RPI inflation.

The clause will continue our tried-and-tested policy of using high duty rates on tobacco products to make tobacco less affordable and to continue the reduction in smoking prevalence. That will reduce the burden placed on our public services by smoking. I commend the clause to the Committee.

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

As the Minister set out, the clause raises the duty on tobacco products, in line with the duty escalator, by RPI plus 2% for cigarettes and RPI plus 6% for hand-rolling tobacco. The minimum excise tax has been increased. We do not oppose those increases, but I will take this opportunity to make a couple of wider points about action to prevent smoking and the Treasury’s role in it.

Action on Smoking and Health stated that last year’s Budget was

“a small step forward on tobacco, but on its own won’t deliver on the Government’s commitment to a Smokefree 2030.”

In fact, projections show that the Government will miss that target by seven years, and double that for the poorest in society. As the Minister knows, tobacco duty has a dual role: raising revenue for the Government and reducing smoking rates. The latter role is most effective when combined with a comprehensive funded strategy to reduce smoking. Unfortunately, the funding for such a strategy has been repeatedly cut in recent years as part of broader cuts to public health grants. The Minister mentioned that smoking has fallen, but recently published evidence shows a 25% increase in smoking among young adults since the first lockdown, so it is clear that there is a lot of work to be done.

In a debate on smoking last year, the Under-Secretary of State for Health and Social Care, Maggie Throup, said in response to a question on taxation:

“That is a matter for Her Majesty’s Treasury. However, the Department continues to work with HMT to assess the most effective regulatory means to support the Government’s smoke-free 2030 ambition, which includes exploring a potential future levy.”—[Official Report, 16 November 2021; Vol. 703, c. 181WH.]

Will the Minister tell us what work the Treasury is doing to design a levy on tobacco manufacturers, along the lines of the “polluter pays” principles, to pay for campaigns to stop smoking and other public health measures? Those large and profitable companies often pay relatively little tax in this country, while those who smoke rightly pay a large amount of tax every time they buy a pack of cigarettes. Many public health experts urge the Government to look at the idea of a levy, and I strongly hope that the Minister will say more on that.

Photo of Helen Whately Helen Whately The Exchequer Secretary

I am glad to hear that the Opposition will not oppose the clause. The hon. Lady has said that it is not enough on its own, and the Government agree. Our tax treatment of tobacco is just one of a set of policies in place to reduce smoking. I assure her that the UK is seen as a global leader on tobacco control. Over the last two decades, we have implemented regulatory measures to stop young people smoking and non-smokers from starting, and to support to help smokers quit.

The hon. Lady also asked about a tobacco levy. I can tell her that the Government consulted on proposals for a tobacco levy in 2015. That consultation concluded that a levy is not the most effective way to raise revenue or protect public health. It would add complexity and additional costs, while the amount of revenue it could raise is uncertain.

Photo of Abena Oppong-Asare Abena Oppong-Asare Shadow Exchequer Secretary (Treasury) 5:15, 5 January 2022

I appreciate the time the Minister has taken to answer this question. The Department of Health and Social Care is saying something completely different. Last year, the Health Minister, the hon. Member for Erewash, said that taxation was a matter for the Treasury and that the Department was working with the Treasury to look at an effective regulatory means to support the Government’s smoke-free 2030 ambition, which included exploring a potential future levy. Could I have clarification on that?

It seems that the Department is saying something different from what the Minister has just said—that the consultation was done in 2015 and it was decided that a levy was not appropriate? I am not trying to be difficult here, but I think the Government need to explore this idea. A number of health experts and even the Health Minister are saying that, so some work needs to be done on this in detail. The last review was done in 2015, and we have moved on a number of years.

Photo of Helen Whately Helen Whately The Exchequer Secretary

I am happy to take that point away and look into the position taken by my colleagues in the Department of Health and Social Care and the Treasury. I will get back to the hon. Lady on the question of the levy. I can assure her that work is currently happening on a tobacco control plan. The Government are considering policy and regulatory changes, which will be part of our ambition to be smoke-free by 2030. Those will be set out in due course in our tobacco control plan. I commend the clause to the Committee.

Question put and agreed to.

Clause 76 accordingly ordered to stand part of the Bill.