New Clause 2 - Tobacco products statutory scheme: consultation

Tobacco and Vapes Bill – in a Public Bill Committee at 2:15 pm on 14 May 2024.

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“(1) The Secretary of State must consult and report on the desirability of making a scheme with one or more of the following purposes—

(a) regulating, for the purposes of improving public health, the prices which may be charged by any manufacturer or importer of tobacco products for the supply of any tobacco products;

(b) limiting the profits which may accrue to any manufacturer or importer in connection with the manufacture or supply of tobacco products;

(c) providing for any manufacturer or importer of tobacco products to pay to the Secretary of State an amount calculated by reference to sales or estimated sales of those products (whether on the basis of net prices, average selling prices or otherwise) to be used for the purposes of reducing smoking prevalence and improving public health.”—

This new clause would require the Secretary of State for Health and Social Care to consult on proposals for regulating the prices and profits of, and to raise funds from, tobacco manufacturers and importers.

Brought up, and read the First time.

Photo of Bob Blackman Bob Blackman Conservative, Harrow East

I beg to move, That the clause be read a Second time.

The clause stands in my name and the names of other hon. Members. Clearly, its concern is consultation on proposals for the regulation of profits from big tobacco —a recommendation of the all-party parliamentary group and of Javed Khan’s excellent report. The provision is designed to look at the profits of big tobacco, but big tobacco would not be allowed to pass on any calculated levy to its end customers. At the moment, it makes a veritable fortune every single year from selling its products. The new clause would limit big tobacco’s profits and, in doing so, its ability to market its products, but there would be no impact on, for example, tobacco taxation. My right hon. Friend the Minister might be concerned that the measure might delay the Bill, but the clear intention is to give the Secretary of State the power to conduct such a consultation; it would not prevent the Bill from going on to the statute book or from being enacted.

There has been a lot of debate over this issue for a long time. The Treasury appears to decline to do anything in this regard for some reason, but in my view, and that of the all-party parliamentary group, it is clear that this consultation could be done. The money raised from any such regulation could be directed at the national health service for smoking cessation services and to combat the effects of tobacco and other products, ensuring that people who wanted to quit could be assisted to quit.

I would welcome the Minister’s views. I do not want in any shape or form to impede the progress of this legislation, but I do want to get on record that I will continue to press for this provision, even if it is not agreed today, because I think it will bring into the health service much-needed money from big tobacco to help combat the impact of its products.

Photo of Preet Kaur Gill Preet Kaur Gill Shadow Minister (Primary Care and Public Health)

I thank the hon. Member for Harrow East for raising the issue. As we know, separately from the Bill the Government are also introducing a one-off increase to tobacco duty as well as a vaping excise duty. I know that similar proposals to this one have been raised with the Government in the past, through the great work of the APPG on smoking and health. Previous Ministers expressed concerns that the proposals as previously drafted would serve to make tobacco companies pass on the cost to consumers in the shops. Undoubtedly, none of us wants any policies introduced that would come at the expense of consumers but miss their target: the tobacco giants. When it comes to addiction, we know that our most deprived communities are most likely to smoke. I am conscious of making their lives any more difficult. That said, I am certainly no proponent of any policy that would make tobacco cheap and easily available, and indeed it was a Labour Government who brought in a specific tobacco duty in the 1970s in the first place.

I understand that the revised proposal includes provisions to ensure that the Government can raise additional revenue from the enormous profits of tobacco producers, while ensuring the costs are not passed on. It is a complicated proposal that would require a team of officials within the Department of Health and Social Care to conduct market analysis, and for a tax to be set at a rate to hit those profits while regulating the prices in shops. Undoubtedly, something with as many moving parts as that would require thorough analysis and consultation, and I recognise that that is what the clause seeks to do. Given the existing levers we have available to us in tobacco duty and the focus we are trying to put on delivering a smoke-free future, I am reluctant to introduce something to the statute book that would distract from that priority. Through the Bill, there is already much consultation to be getting on with: on vapes, flavours, packaging and much more besides. I congratulate the hon. Member and the APPG on their excellent work, but this is not our priority at present.

Photo of Mary Foy Mary Foy Labour, City of Durham

We heard during our evidence session about the immense damage that is done to our health, wellbeing and the economy, costing the public finances nearly double the amount raised by tobacco taxation. We also heard about the inordinate profits of the tobacco industry and about the idea of a polluter pays levy, which could raise up to £700 million a year. I hope Members would agree that that would help to deliver the smoke-free future that we all want to see.

I am vice-chair of the APPG and we have called for this proposal for many years, and it was great to see it in Dr Khan’s recommendations. The levy is popular and feasible and, as the report from ASH shows, is supported by voters of all political persuasions and the majority of tobacco retailers.

The tobacco manufacturers have the money; they should be made to pay to end the epidemic that their products are causing for our communities. However, I understand that there is still a nervousness from the Treasury and a reluctance on both sides to accept the new clause at this time. I hope that it will continue to be explored, so that the onus is put on to big tobacco, not the taxpayer, for paying for the damage caused by these products.

Photo of Andrea Leadsom Andrea Leadsom The Parliamentary Under-Secretary for Health and Social Care

I also pay tribute to the all-party group, and to the work of my hon. Friend the Member for Harrow East over so many years; the effort that he has made to get us to this point really is incredible, and I commend all hon. Members who have been a big part in trying to stamp out this horrible trade and its effect on young lives in particular. I have a lot of sympathy for my hon. Friend’s request, and I hope that I can reassure him that the Government are determined to abide by the polluter pays principle, while not at this point wanting to accept an amendment that introduces a new tobacco levy, essentially because it would take years to bring into action.

The Treasury consulted on a tobacco levy in 2015 and, as set out in the consultation response, the Government’s preferred approach remains to continue with the proven and effective model of dealing with tobacco products through increases in tobacco excise and duties. As all hon. Members know, that generates up to £10 billion a year, which can support a full range of public services, including public health and the NHS. The Department of Health and Social Care will continue to work with the Treasury to assess the most effective regulatory means of making the industry pay for the undoubted and enormous harms that its products cause to our society.

Alongside the Bill, we are taking strong action to reduce the affordability of tobacco, which is an effective measure to trigger smoking cessation. The UK already has some of the highest tobacco taxes in the world. The World Health Organisation recommends that total taxes on tobacco are at least 75% of the retail price on typical cigarettes. The UK comfortably meets that target, with taxes at around 80% of the selling price. The Government have also committed to a tobacco duty escalator, which increases duty by retail price index inflation plus 2%, at each Budget until the end of the current Parliament.

Data from the Office for National Statistics shows that the average price of a pack of 20 king-sized cigarettes has almost tripled in the past 15 years, from £5.37 in March 2009 to £15.66 in March 2024, and I can say that, when I took up smoking at age 14, they were about £1.50 a pack—I know I’m old, but that is an impressive escalation in the price. Cigarettes are also subject to a minimum excise tax, which sets a minimum amount of duty collected on a pack of cigarettes, discouraging manufacturers from selling cheap cigarettes by reducing the profitability of cigarettes sold at or below the minimum excise tax trigger price. The new minimum excise tax is £8.46 for a pack of 20, and applies to a pack of 20 cigarettes sold at or below £12.86.

We are going still further on tobacco tax. As announced in spring Budget 2024, there will also be an additional one-off increase for all tobacco duties, which will come into force on 1 October 2026, when the vaping duty comes into effect. From a financial perspective, that will incentivise people to continue to choose vaping over smoking once the new excise duty on vaping products comes into force. We currently do not believe that a tobacco levy would be an effective way to further protect public health or raise revenue. It would add complexity to the system and impose additional costs, and it would be unlikely to raise the amount of revenue envisaged due to the volatile nature of the tobacco market.

Photo of Bob Blackman Bob Blackman Conservative, Harrow East 2:30, 14 May 2024

If I may, my right hon. Friend must have smoked for only a brief period because she certainly does not look old. Most of what she said was about the end customer and the cost to the end customer. Every time the Government raise tobacco duty, that makes the price for the end customer more expensive. What we are talking about is a levy on the profits of the big tobacco companies, which they would not be allowed to pass on to the end customer by increasing the price. That reduces their profit and potential to inflict more damage on the health of the country—that is what we are looking at. It is estimated that £700 million could be raised through such a levy. Of course, that would be only a dent in their profits, frankly, but it could be directed towards public health measures. Surely that is something that my right hon. Friend will want to look at—if not today, because obviously we do not want to add to the complexity of the Bill, then in the future.

Photo of Andrea Leadsom Andrea Leadsom The Parliamentary Under-Secretary for Health and Social Care

I assure my hon. Friend that I am very taken with that proposal—I very much like it—but I make the point to all hon. Members that this is just not the appropriate place for it. As a matter of fact, as he will know, the Treasury can consult on and impose a tobacco levy at any point; it is not necessary to include powers in the Bill. As I have been saying, it would be complicated and would require consultation, and it could take several years to materialise. Our preference for the time being is to continue with high tobacco taxation and excise as the best means and most efficient process to generate finances that can be put back into public services. The Department of Health and Social Care obviously liaises closely with the Treasury on its plans. I have a lot of sympathy for my hon. Friend’s proposal, but I ask him to not press it to a vote on this occasion.

Photo of Bob Blackman Bob Blackman Conservative, Harrow East

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.