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Jane Griffiths (Reading, East): Does my hon. Friend share my concern that legitimate, law-abiding newsagents, tobacconists and off-licences in my constituency who do not wish to sell smuggled and contraband goods are being intimidated into doing so, with threats of damage to their property and sometimes threats to their children?

Mr. Illsley: My hon. Friend has anticipated my next point. I am grateful for her intervention because it emphasises the point that I am about to make. The retail magazine in question decided to draw attention to the issue of legitimate traders selling contraband goods at a lower price. Members of Parliament--I am sure that many colleagues took part--were invited to go to newsagents who had volunteered to take part in the scheme and who had, in so doing, allowed their names to be published in the magazine.

On the day that I visited one particular newsagent, I was surprised to pull up outside his shop at the same time as the local constabulary and the local press. I went into the shop and found out that, that morning, the newsagent had received an anonymous message on an answering machine telling him that, if he went ahead with the promotion to reduce the number of smuggled cigarettes by drawing attention to the problem, he would face the problems that my hon. Friend the Member for Reading, East (Jane Griffiths) has outlined. He was frightened out of going ahead with the idea that the magazine had promoted. The publicity event at which that newsagent and I were to speak to the local press had to be cancelled because he was so afraid of the consequences of going through with it. He felt that way not because of the criminal element to which the hon. Member for North Dorset referred, but because of a semi-criminal element among his fellow retail newsagents and tobacconists.

As my hon. Friend the Member for Reading, East said, newsagents and tobacconists seem to be in a catch-22 situation: either they stop selling cigarettes or choose to sell smuggled cigarettes, or perhaps they are forced to sell smuggled cigarettes because their colleagues want to do so. It is a difficult situation.

As the hon. Member for North Dorset said, the retail price of a packet of cigarettes is about £4.20, whereas a packet of smuggled cigarettes typically costs £2. Additionally, all brands are available from those who will take the risks associated with smuggling. However, I must tell my hon. Friend the Member for Erewash (Liz Blackman) that I am not sure that reducing our tobacco duty to bring it into line with other European countries' is the answer to the problem. As she said, sales of cheaper European cigarettes are undercut by even cheaper eastern European cigarettes.

We have to pay more attention to the issue. We have either to try harder to prevent smuggling by providing more money for that effort or to re-examine tobacco duties within the overall European context. Hand-rolling

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tobacco is one of the biggest earners for smugglers, as the price paid for it here is very substantially more than that paid in the rest of Europe.

Dr. George Turner (North-West Norfolk): Does my hon. Friend accept that, in the long term, if the Government are to achieve their health objectives, they will have to accept a reduction in revenues from tobacco duty? Is it not therefore logical for the Government to attack the smuggling problem rather than to reduce the price of cigarettes? As we know, cigarette pricing is one of the greatest influences in encouraging people to stop smoking.

Mr. Illsley: I do not disagree with my hon. Friend. We have to find solutions other than reducing tobacco duty to tackle the smuggling problem. Although we can consider that option, as I said, the idea is to increase the duty to try to stop people smoking, and perhaps to prevent young people from taking up the habit by pricing them out of the market. However, I am worried that that policy is being defeated by the general availability of very cheap cigarettes. There is no easy answer to the problem; if there were one, I am sure that previous Governments or the current one would have found it.

People in my own area have health problems such as heart disease and lung cancer that are caused primarily by smoking. I should like extra resources to be provided to stop smuggling and for education programmes to appeal to young people not to smoke. As I am sure my hon. Friends will agree, banning tobacco advertising is a step in the right direction.

I am the honorary adviser to the Northern Licensed Victuallers Association, which has made representations to the Government on alcohol smuggling. The hon. Member for North Dorset dealt in great detail with alcohol smuggling. Contraband alcohol is often sold in legitimate retail outlets by publicans, licensees or off-licensees. In the past, however, wholesale licences were one way of stopping such sales. Wholesalers had to have a wholesale licence to operate, but would lose their licence and have to cease trading if they were found to be selling contraband alcohol. I again suggest that Ministers consider that approach. I know that it was abolished a few years ago, but perhaps that measure could be revived to combat smuggling.

The climate change levy is referred to only briefly in the Bill. The levy, along with the 80 per cent. rebate for the integrated pollution prevention and control industries, is administered by the Treasury, but much of the detail of how to qualify for rebate and exemption is dealt with by the Department of the Environment, Transport and the Regions.

I am sorry that the hon. Member for Esher and Walton (Mr. Taylor) is no longer here, because I agree with what he said about certain processes being exempt from the levy. He referred to air separation. That industry supplies gases for industrial use, but it is also a process in itself. Certain glass furnaces in my constituency are fuelled by an oxygen process, but following the climate change levy negotiations they no longer qualify for a rebate. The gas consumption of a glass furnace also increases with its age, so a furnace that qualifies for an 80 per cent. rebate today

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may fall foul of the targets some years down the track, at a point in the cycle where the company cannot afford to refurbish it.

I hope that the Government will bear those difficulties in mind in future years when they consider the rate of the levy and the exemptions. They should be aware of how the levy works in practice and how it affects air separation companies, for example. The hon. Member for Esher and Walton mentioned the British Oxygen Company, which has a plant in my constituency. Glass companies are also very concerned about these issues.

8.57 pm

Mr. Nick St. Aubyn (Guildford): I was interested to hear the hon. Member for Barnsley, Central (Mr. Illsley) setting out his latest criticisms of the climate change levy, an earlier complex stealth tax that we were given too little time to consider in the previous Session. He told us of some of the many problems that it is causing. We shall no doubt hear a similar story in a year or two if the aggregates tax goes ahead. The problem with stealth taxes is that no one, not even in the Government, understands them. It is only later, when they hit people between the eyes, that the problems become apparent.

Mr. Illsley: In my defence, I should say that I raised the issue of the climate change levy more than 12 months ago, not only in meetings with Ministers but in debates on industry. Many of the fears of industries such as the glass industry were allayed by the 80 per cent. rebate.

Mr. St. Aubyn: The hon. Gentleman was brave enough to defy the Millbank thought police and give his own view. I congratulate him on that, but the Government cannot have listened to him, because there are still problems, as he said, that are a great worry to business. The same will be true of the aggregates tax and all the other stealth taxes.

The problem lies not only in understanding the stealth taxes but in quantifying them. A year ago, the Chancellor predicted how much he would raise in revenue in the year now ending. According to his estimate in this year's Budget, he has raised £8 billion more than he expected to raise just 12 months earlier. That shows how inaccurate Government forecasts are from one year to the next.

Mr. Letwin: Is my hon. Friend aware that, if one looks at the figures for the public sector net cash requirement and the repayment of the public sector debt, over the last two years, the forecasting error of Her Majesty's Treasury is some £55 billion, which is the single largest forecasting error in British economic history?

Mr. St. Aubyn: I am grateful to my hon. Friend. I was not aware of that fact, but I do know that the Government are hopelessly off-target when they try to project what is happening to our economy and even what is happening to their own finances.

Mr. Michael Jabez Foster (Hastings and Rye) rose--

Mr. St. Aubyn: I shall give way in a moment.

The Government preen themselves on the fact that, this year, there has been a substantial debt repayment. However, over the next few years, their own predictions

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forecast massive borrowing nearly twice the size of that repayment. Indeed, given their forecasting error, according to my hon. Friend the Member for West Dorset (Mr. Letwin), it could be several times as big. With their stealth taxes and lack of clarity, the Government have created a far more volatile situation for tax collection and the economy as a whole.

That is why we shall take no lectures from the Government when, for example, we announce that we are concerned about the history and performance of the tobacco tax regime. I welcome the comments of my hon. Friend the Member for North Dorset (Mr. Walter), as we know that the amount raised by tobacco tax has gone down. When we call for a review of that area of policy, we should be mindful of the fact that, under the previous Chancellor, the Conservative Government undertook a review of alcohol taxation. Following that review, we decided to have lower rates of alcohol tax.

The Government's policy on alcohol duties has been influenced by the previous Government's review, and it is significant that, in the current Parliament, the take from alcohol duties has been sustained; in fact, it has gone up by nearly 10 per cent. By contrast, the Government have ratcheted up the rate of tobacco duty, and receipts from tobacco duties have declined significantly. Therefore it is not enough for the Government to say that any discussion of a review of tobacco taxes would inevitably mean less money for our schools and hospitals, because their strategy on tobacco tax has failed. Their aggregate levels of tax are so volatile and their predictions so uncertain that they cannot possibly argue that a small change in one area of tax policy would have consequences for spending on our schools and hospitals.

That brings me to a much more important point. The Conservative Opposition have identified savings that might be made in the running of government, which add up to £8 billion a year without affecting a single penny of the money spent on our schools and hospitals.

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