Angela
Eagle: That point overlooks the overall fact that all
smoking is dangerous to health, whether one smokes premium brands,
cheap brands or counterfeit brands. The Government’s policy is
designed to reduce and minimise the number of people who
smoke.
Mr.
Jeremy Browne: The previous intervention was good. People
in higher income deciles might carry on smoking premium brand
cigarettes, and that would be easily measurable through official
statistics. However, if cigarettes bought legally—even lower
premium brands—became prohibitively expensive for people on low
incomes, there may seem through official statistics to be have been a
reduction in smoking propensity in low income deciles, but those people
may actually be smoking more because they are financially induced to
buy smuggled or illegally produced cigarettes that are not showing up
in official statistics. That is the point that was being made, and it
is worthy of a reasonable
answer.
Angela
Eagle: I have two observations to make. One is that the
way we measure the amount of smuggled or counterfeit products on the
streets is not the same as the way we measure smoking prevalence. In
other words, we know about smoking prevalence from social surveys
carried out by ONS, but we do not always have detailed knowledge of
precisely what brands are smoked. Some tobacco companies undertake
their own surveys with respect to that, and we receive pieces of
information that we put together to make an overall picture. I
understand the hon. Gentleman’s point, but we should
focus on the larger issue because we wish to discourage people from
smoking altogether and not lose sight of the big
picture.
Mr.
Stuart: It is not the same
point.
Angela
Eagle: Of course not, but reducing the prevalence of
smoking is the best way to tackle those inequalities, particularly in
life expectancy.
Mr.
Hands: I am not sure whether the Minister has really got
to the heart of my question: is it Government policy to try to narrow
that differential—to increase the specific amount of
duty—or is it their policy to widen that differential by
increasing the ad valorem part? At the moment there are conflicting
signals between what they said in their response to the EU consultation
and what they did in the PBR, so which is
it?
Angela
Eagle: I was going to come on to that. If the hon.
Gentleman and other Opposition Members would let me get on, I might be
able to answer some of the questions that the hon. Gentleman asked in
his speech. First, though, I should like to congratulate him on being
an ex-smoker. It is always an achievement when addictions are overcome,
and I am glad that he has managed to move into the category of
ex-smoker.
3.30
pm
Mr.
Hands: I thank the Minister for her congratulations.
Coming from the hon. Lady, who is described as “a saint”
in The Daily Telegraph today, I take that as a real
tribute.
Angela
Eagle: I hope that many others who smoke will follow the
hon. Gentleman’s example.
The hon.
Gentleman talked about the difference between the ad valorem and the
specific elements of the current tax on tobacco. There is a point about
sequencing. He quoted at great length from the consultation document
issued by the Commission and our response to it. We are trying to
change the structure of EU directives on tobacco to deal with some of
the points that he made and to try to ensure that the specific element
becomes more important than the ad valorem element. To do that, we have
to persuade all member states to agree to change the directive. For the
reasons that he read out as part of the Government approach to this
renegotiation, that is clearly extremely important. However, while we
attempt to achieve that very desirable shift, we have to work within
the current directives.
When the
changes were announced at the PBR, they were, as the hon. Gentleman
pointed out, designed to try to keep the price of tobacco as broadly
neutral as possible in the context of a temporary VAT cut. VAT is an ad
valorem tax, and we got the closest fit to achieving the price
stability that we wanted in that context by using the ad valorem parts
of tobacco tax.
If we are
successful in the EU directive negotiations, we want more concentration
on the specific element of tax on tobacco across the whole of the EU,
not just in the UK. For the reasons that the hon. Gentleman
quoted, it makes sense for us, as a Government, to put the matter to the
EU Commission as part of that process. We will be able to make progress
there, but he must recognise that there are 27 EU member states, with
different tax rates on tobacco and many different approaches. The hon.
Gentleman is a member of the European Scrutiny Committee, so he will
know that trying to get agreement on EU directives is sometimes quite
difficult—it can be like herding ferrets, especially where tax
is concerned. However, we are doing our best to come up with a
structure for tobacco tax that allows us more successfully and
accurately to pursue some of the social and health issues that we
talked about. The hon.
Gentleman asked whether we had thought about minimum excise taxes. Our
lowest taxes are much higher than a lot of the minimum taxes in the EU.
We are negotiating within Europe to give us more flexibility to levy a
higher proportion of specific duty on cigarettes, as we wish to do. We
are awaiting the development and evolution of those negotiations and
their outcome before deciding how to change the structure of our own
cigarette
duties.
Mr.
Hands: Can the hon. Lady answer the question about the PBR
and the 2 per cent. ad valorem rise, on which we will also vote today?
Surely the Treasury could have structured a rise in specific duty that
would have raised the equivalent sum across the whole sector on a
revenue-neutral basis, because it still appears that the ad valorem
rise is entirely contrary to the policy—at least, the policy
submitted to the EU and that she has just outlined—that she
wants, which consists of a higher specific duty and lower ad
valorem.
Angela
Eagle: As I mentioned earlier, because VAT is an ad
valorem tax, as is that part of tobacco taxation, when trying to have a
simple approach to a temporary reduction in VAT, it makes sense to deal
with it in that way, which is what we
did. The
hon. Gentleman also mentioned revenue maximisation. It is certainly
true that we would wish, as a matter of policy, to be somewhere around
revenue maximisation, and he is right to quote the statements I have
made in that context on earlier occasions in relation to previous
pre-Budget reports and Budgets and in Committee. However, there are
indications relating to our judgment, which is based on the available
evidence, that we are close to that point, but can still expect some
increase in revenue from the increases in clause 12. Some of those
indications are: a strong receipts performance, a falling tax gap and a
continuation and tightening of the anti-smuggling strategy. The hon.
Gentleman mentioned another indication: the weak pound and the reduced
demand for overseas travel, which change the elasticities around
revenue maximisation calculations. Our best assessment is that we have
not yet gone beyond revenue maximisation, but I have always made it
clear that, as a matter of policy, we wish to stay as close to that as
possible for the social and health reasons we talked about
earlier.
Mr.
Hands: I thank the Minister for being so generous in
giving way. She said we have not reached maximisation point, but are
quite close. It sounds as though she has a fixed idea of where that
point is. It would be helpful if she would share that with the
Committee.
Angela
Eagle: I have just told the hon. Gentleman that the
elasticities have changed and mentioned three of the reasons why, so
the point is not fixed. Analysis of our receipts performance, what is
going on elsewhere and the impact of those changes, such as the scale
of smuggling and the strength of the pound, are all relevant. I have
just gone through some of the factors that can be brought to bear when
calculating the elasticities, so it is not a fixed point. We analyse it
when we are doing our revenue calculations and do not just pluck it out
of the air. We believe that some of the changes I have mentioned have
had an impact on elasticities and allowed us to increase the duty rates
without going beyond revenue maximisation. We always keep those
calculations under analysis as we consider what future duty
rates should be.
The hon.
Gentleman talked about cheap whites. There is a limit on the import
from non-EU countries of cheap whites for own use of 200 cigarettes per
person, meaning individuals who come across the border with their own
shopping. Commercial imports need to be properly imported with duty
paid through excise warehouses. We therefore ensure that they have
appropriate health warnings, as required by UK law. Goods not in either
of those categories are classed as smuggled, and that is how the
breakdown of cheap whites that are available or that one might come
across at one’s local football match would be
categorised.
Mr.
Hands: Will the Exchequer Secretary clarify that? For
example, when the Jin Ling, which is the most popular of the cheap
whites, comes from Kaliningrad to the UK via Poland, at which precise
point do the Government try to intervene? What discussions has the hon.
Lady had with the Polish authorities? Surely one of the problems is
that, as Poland is in the EU, the intervention could also happen at the
EU external
border.
Angela
Eagle: It would depend on who brought in the pack of cheap
whites and why. If they were imported via Poland, they would be dealt
with at the excise warehouse. If the hon. Gentleman brought a pack
in—even though he has given up—after visiting some of his
family in Kaliningrad, he would be allowed 200 sticks before having to
pay duty. Anything else that appears is
smuggled. The
hon. Member for Taunton asked about the differential between premium
brands and lower-priced brands. I understand his point. There is often
switching, and even now we could say that there would be switching from
potentially counterfeit to cheap, up to premium brand or not. We have
to be aware of that and look at how it is going, but I emphasise that
Government policy is to try to reduce the prevalence of smoking
of any brand. That is the aim of the excise duty policy in
clause
12. The
hon. Member for Hammersmith and Fulham asked about statistics and
wondered whether it is true that one in three cigarettes smoked in the
UK fall outside UK duty paid. Our statistics show that 13 per cent. of
cigarettes smoked in the UK are smuggled and 8 per cent. are from legal
cross-border shopping, so one in five—not one in
three—are outside UK duty paid. We must never be complacent
about our ability to tackle smuggling but we have made good progress,
often reaching targets years in advance and regularly discovering and
destroying 2 billion to 2.6 billion cigarette sticks a year. That is
our new target. We have made seizures of around 1.8 billion sticks,
which is rather a lot, and, believe it or not, 450 tonnes of
hand-rolling tobacco. We are getting the figures of smuggled cigarettes
down, but it is a constant battle, which the UK Border Agency and Her
Majesty’s Revenue and Customs are fighting well. In answer to
the hon. Member for Hammersmith and Fulham, we co-operate a lot with
our colleagues in other countries to protect borders as best we
can. Finally,
the hon. Member for Taunton asked about the distributional effect. The
best way to reduce the impact of duty increases, distributionally or
otherwise, is to reduce smoking prevalence, which is why a lot of the
work that is being done by health authorities to offer assistance and
free Nicorette patches to those who wish to give up is having an
effect. We have already dramatically reduced smoking prevalence and
seek to drive it down further. Clause 12 and the changes in duty before
us are one part of that, and I commend them to the
Committee. Question
put and agreed
to. Clause
12 accordingly ordered to stand part of the
Bill.
Clause
13Rates
for
2009-10 Question
proposed, That the clause stand part of the
Bill.
Mr.
Gauke: As my hon. Friend the Member for Hammersmith and
Fulham did on tobacco, I shall curtail my remarks on clause 13, on the
basis that we have already debated vehicle excise duty for next year in
Committee of the whole House. I have some fairly narrow points on
clause
13. It
is, of course, a fact that the Government have significantly changed
their position. I made that point last week. Much of the credit for
that shift must go to my hon. Friend the Member for Putney (Justine
Greening), who has done sterling work. I pay tribute to her once
again.
I have been
comparing the VED bands implemented by the clause with those set out by
the Government. It is not entirely fair to use that announcement as a
baseline and then compare pluses and minuses and say where there are
increases and reductions—it is a trick of the Prime Minister to
do that in other contexts, and I do not want to go down that route.
However, by comparing what was announced in the 2008 Budget with
what we have now, I note that vehicles that emit 150
g/km are being charged more than was originally proposed, while
those that emit more than 150 g/km are being charged
less.
3.45
pm It
might be helpful if I give the Committee an example. Under proposals in
the 2008 Budget, a car that emits 130 g/km would pay £90 VED
under the provisions in clause 13. Now, the VED payable on that car is
£120, which is £30 more. Equally, we could find examples
for
higher-emitting cars where there is a reduction in the VED to be paid if
we use the 2008 bands as our baseline. Will the
Minister set out how many motorists will lose and how many will win
when comparing those two measurements? Using the same test, and
comparing what was announced last year with what we have now, it is
clear that the measures are beneficial to those cars that emit
more.
I do not want
to overstate the environmental arguments because there are none, at
least according to the Government’s figures. It appears that the
change in VED announced last year will have a very, very small impact
on the total amount of CO2 emitted. Nevertheless, when the
proposals in the 2008 Budget were announced, the Chancellor stated that
there was a need for an incentive to encourage drivers to choose the
least-polluting cars, and one could argue that that incentive has been
diminished. I do not want to overstate the point, as the environmental
impact of what was announced in March 2008 appears to be so minimal
that unwinding that announcement cannot, I assume, cause any harm.
Nevertheless, I would be grateful for the Minister’s response on
that.
By comparing
the Red Book for the 2009 Budget with that of last year, I note that
last year the VED reforms for 2009-10 were due to raise £465
million. The Budget announcement for 2009, which uses that as the
baseline, has largely been unwound. The cost of using that baseline is
£475 million—£10 million more than was going to be
raised.
Why have the
Government continued to introduce the banding on the basis of CO2
emissions this year, even though they have largely unwound the
position set out in the 2008 Budget? They are not making a particularly
environmental case for the reform of
VED.
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