The
Chairman: Perhaps it would be easier if I clarified the
procedure that we are now following. The amendments have been proposed
and in the course of the debate it became clear that it was difficult
to isolate remarks on the amendments from the substance of the clause,
so I incorporated the clause stand part debate into that on the
amendments. The clause stand part debate may continue and references
may be made to the amendments, although I hope that they will not be
repetitious. At the end of the debate we shall dispose of the
amendments and I shall put the question that the clause stand part
without further debate.
Sir
George Young (North-West Hampshire) (Con): It is a
pleasure to serve under your chairmanship,Mr. O’Hara,
and to return to the Standing Committee on the Finance Bill after a gap
of some 10 years. I
welcome any measure that deals with smuggling and indeed any that deals
with smoking. I happen to be opposed to both. I listened carefully to
the Minister, but did not hear any estimate of the impact of clause 2
on the substantial evasion of revenue listed in the background
notes—the figure of some £2.9 billion. That should be of
interest to any Treasury Minister. I would like to know what the impact
on that figure would be if the measures in clause 2 were
implemented. I have
looked through the Red Book to see if it contains such an estimate.
Under the heading “Budget Policy Decisions” is a section
entitled “Protecting Tax Revenues”, which is what clause
2 does, but there is no estimate in that column of the impact of
extending the use of the memorandum of understanding. Likewise, I
looked at the text of the Red Book to see what will happen to tobacco
revenues, but the only reference to a revenue forecast that I could
find was on page 265, which
states: “The
tobacco forecast includes an estimate of the impact of the smoking ban
on consumption in enclosed
workplaces” which will
reduce receipts. However, it does not say if clause 2 would increase
receipts. It would be
helpful if the Minister could tell us by how much the £2.9
billion loss would be reduced if clause 2 were to stand part of the
Bill. Listening to his remarks I can see that on the one hand revenue
might increase because if access to illicit tobacco is eliminated and
people have to buy through the tobacconist, there will be more revenue
for the Treasury, but on the other hand, if overall demand is reduced
and the manufacturers produce fewer cigarettes, there will of course be
less revenue. All I
seek is an estimate of by how much the Treasury will benefit if the
measures in clause 2, which seem entirely sensible, are adopted. By how
much will the Treasury be better off? I am sure that the Treasury would
not put such a clause before the Committee unless it had made some
estimate of the benefit that would accrue to the public
Exchequer.
Jeremy
Wright: May I take this opportunity to say how pleased I,
too, am to serve under your chairmanship, Mr.
O’Hara? I
support the intention that the Government have demonstrated in clause 2
of cutting back on the smuggling of tobacco and increasing the revenue
that the Exchequer can then retain, but I am concerned about the burden
of obligations that will be placed on tobacco manufacturers. Will the
Minister make it clear that those burdens have been thought through
properly and that the language in the clause will assist tobacco
manufacturers in knowing exactly what they have to do to
comply? It will be
difficult for tobacco manufacturers or anyone else to moderate their
behaviour to avoid someone else behaving in a criminal way, but
that
is what clause 2 expects of them. Under proposed section 7A of the
Tobacco Products Duty Act 1979, “A manufacturer of
cigarettes or hand-rolling tobacco shall so far as is reasonably
practicable avoid...supplying cigarettes to persons who are likely
to smuggle them into the United Kingdom”
or “supplying
cigarettes...where the nature of the circumstances of the supply
makes it likely
that” smuggling will take
place. We have
broadly clarified the fact that the likelihood will be based on a
balance of probabilities, whether or not it is stated in the Bill, but
there remains the difficulty of what it is that a tobacco manufacturer
can reasonably be expected to anticipate in the behaviour of the person
to whom he is supplying the tobacco. That is a substantial difficulty.
In the situation described by the hon. Member for South-East
Cornwall—a large gentleman and a tea chest full of
money—it is pretty clear that something illicit is about to
happen. However, such situations are not faced by every tobacco
manufacturer when supplying its product.
There should be some clarity
about the circumstances in which tobacco manufacturers should look to
understand their obligations. Some assistance is given under subsection
(2) of proposed section 7A.
Stephen
Hesford: The hon. Gentleman misleads himself. Subsection
(2) of proposed section 7A sets out some of the things that the tobacco
manufacturers will have to consider. As has been said, this is not a
new thing. It is an ongoing process; we are including something in the
Bill that is already in train. If a manufacturer knows that the market
of a tobacco supplier who is buying huge quantities of tobacco is a
tiny home market, it will be obvious that the tobacco is being sold
elsewhere. I am not sure what point the hon. Gentleman is
making.
Jeremy
Wright: I suspect that the hon. Gentleman may have been a
little too hasty in his intervention as I was about to deal with
subsection (2). Indeed, I had started to do so.
I concede that there is some
assistance for the tobacco manufacturer, but nowhere enough. Subsection
(2) states: “In
particular, a manufacturer...in supplying cigarettes or
hand-rolling tobacco to persons carrying on business...shall
consider whether the size or nature of the supply suggests that the
products may be required for smuggling into the United
Kingdom”. That is a
helpful indication of the sorts of things that tobacco manufacturers
might look for. Indeed, I go further. I concede that subsection (4) of
proposed section 7A
states: “The
Commissioners may notify a manufacturer in writing that they think the
risk of smuggling into the United Kingdom is particularly great in
relation to” particular
people, particular products or particular places.
The clause provides assistance.
My concern is that it could have been phrased the other way around. Why
should not the Government set out the sort of things that they want
manufacturers to consider, giving a
definitive list rather than simply imposing a general obligation on
tobacco manufacturers to avoid getting into trouble with those who
might be about to smuggle the goods that they had supplied? They could
list specific things that tobacco manufacturers should avoid
doing—specific ways to avoid entangling themselves—and if
tobacco manufacturers failed in that, penalties should of course
follow. That broad
obligation given in subsection (2) is not specific enough about what
precisely a tobacco manufacturer should avoid doing. As has already
been observed, the penalties for a tobacco manufacturer failing to
comply with the obligations set out in the clause can be considerable.
I ask the Minister to assist us by being a little more specific about
why the Government chose the language of this clause and did not
tighten it up.
Tobacco manufacturers are being
asked to decide whether they believe it likely that products that they
supply are likely to go on to be smuggled by others. That is a very
subjective judgment. The Government require them to construct policy
statements that say, “We considered the following things before
we supplied our product to the potential smuggler.” Again, there
does not seem to be any aspect of the clause that indicates how to
measure whether that policy document is reasonable. What is to prevent
the manufacturer from saying, “I have considered whether the
person to whom I am supplying is likely to smuggle, and I believe that
he is not likely to do so. That is my decision; I have written my
policy document in those terms and therefore I have done what I need to
do.” There does not seem to be enough specificity in the clause
to make tobacco manufacturers clear about what they have to
do. Finally, the
clause provides for an appeal to the VAT and duties tribunal. It is not
clear—or at least as clear as I should like it to be—what
the grounds for such appeals would be. Again, I ask the Minister to
assist us by indicating in what ways appeals can be made, and the
grounds for them.
Mr.
Goodman: It is also not clear from the clause whether the
person who will hear the appeal is to be somebody other than the person
who made the original judgment.
Jeremy
Wright: My hon. Friend is entirely right. The clause
provides for a review of the original penalty notice to be made by the
commissioners, but it does
not indicate that that review should be made by somebody other than the
author of the original penalty notice, which would be desirable in the
interests of justice. Again, the Minister may wish to assist
us.
Rob
Marris: I welcome you to the Chair,Mr.
O’Hara, and thank the hon. Member for Wycombe for probing the
wording of the Bill. In my experience, on occasion the wording of Bills
is not as good as it should be. That is particularly important in the
case of the Finance Bill, because it does not go to the other place,
where it might be tidied up further. I know that my hon. Friend the
Financial Secretary will think that I am being pedantic, but to
demonstrate that we need to be careful about wording, I refer him to
line 24 on page 2. That sets out the facts that are to be looked at by
manufacturers as guidelines and, inter alia,
says: “shall consider
whether the size or nature of the supply
suggests”. I invite my
hon. Friend to introduce an amendment on Report to change the word size
to quantity or amount, which is more elegant and more
accurate.
Mr.
Dunne: I was disappointed that, in responding to the
debate on the amendments, the Minister did not take the opportunity to
pick up my points about territoriality. It is increasingly clear from
this debate that the clause is directed primarily at UK-based
manufacturers; the Financial Secretary quoted from their
representatives at the beginning of the stand part debate. However, as
has also been made clear by me and others, the bulk of the smuggling
into this country is of cigarettes that have been manufactured outside
this country. I urge the Financial Secretary to address how the clauses
will work in practice against foreign-based firms. In that connection,
has any form of regulatory impact assessment been undertaken on the
impact of this sledgehammer approach on the UK firms that already
co-operate thoroughly with the Government in seeking to reduce
smuggling? It might be that, because this is my first Finance Bill, I
am not aware of the necessity or otherwise for RIAs, which are usually
made for non-financial Bills. It would be helpful if that could be
clarified. The hon.
Member for Wirral, West illustrated very precisely the nature of the
problem. It being
One o’clock, The Chairman
adjourned the Committee without Question put, pursuant
to the Standing
Order. Adjourned
till this day at half-past Four
o’clock.
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