(Except clauses 1, 3, 16, 183, 184 and 200 to 212, schedules 3 and 41 and certain new clauses and new schedules) - Clause 179 - Rates of tobacco products duty

Finance Bill – in a Public Bill Committee am 9:10 am ar 18 Mehefin 2013.

Danfonwch hysbysiad imi am ddadleuon fel hyn

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

Photo of Sir David Amess Sir David Amess Ceidwadwyr, Southend West

With this it will be convenient to discuss clause 180 stand part.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

What a pleasure it is, Mr Amess, to be back in this Committee. I have missed it so much that I shall start with a cigarette—metaphorically speaking. I know that Government Members are keen on escalators, and what we are talking about today is the increase in duty by 2% above inflation on cigarettes, cigars, hand-rolled tobacco, other smoking tobacco and chewing tobacco. I do not know whether it is in order to chew tobacco during a Committee, although I sincerely hope that hon. Members would frown on that pretty unsavoury activity. In case anyone is tempted to take it up, let me say that it is bad for them.

In Labour’s last Budget, the then Chancellor announced that tobacco duty would increase by 1% above inflation in 2010 and by 2% above inflation for the following four years. The clause proposed by the Minister maintains that 2% rise, increasing, together with the consequential VAT arrangements, the average price of a packet of 20 cigarettes by 26p, a pack of five small cigars by 9p, a 25g pack of hand-rolled tobacco by 26p and a 25g pack of pipe tobacco by 14p.

As the explanatory note to the clause states, smoking kills half of all long-term users, and is the biggest single cause of inequalities in death rates between the richest and the poorest in the United Kingdom. That issue is very much to the fore in my own constituency; sadly, in Nottingham East, we have high death rates from smoking-related ailments.

Over the years, a link has clearly been made between the price of tobacco products, the level of demand and issues around health. Successive Governments have chosen to maintain high tobacco duty rates to support health objectives. It is right that we continue to keep tobacco rates high for that very reason, especially as we want to discourage young people and children from taking up the habit.

The Minister will be aware of the questions raised by the tobacco industry in recent years about the role of the sub-economy tobacco sector and trade in cheaper and illegal cigarettes. Indeed, the Government introduced legislation in the 2011 Budget to reduce tax differentials, to address the exploitation of the tax structure by those producing cheaper cigarettes and the revenue loss caused by the down-trading from more expensive brands to the cheaper cigarettes.

In a previous Finance Bill debate, my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson) asked the previous Economic Secretary and the Minister’s predecessor, the hon. Member for Norwich North (Miss Smith), whether she believed the changes had been successful. At the time, when the Budget 2012 decisions were taken, she said that the 12 months’ data were not yet available to her. She said:

“I would like to be able to assess the impact of the Budget 2011 measures prudently before committing to further changes in the structure of cigarette duty…we will have to wait for official data to be released, because information is vital in this area.”––[Official Report, Finance Public Bill Committee, 19 June 2012; c. 520.]

That was fair enough; at the time, the hon. Lady was seeking 12 months. However, we now have this further year lapse. Is the current Economic Secretary in a position to give us an update on this change in terms of the differentials? Clearly, cracking down on illegal grey market or black market tobacco products is incredibly important, especially if we are to ensure that the duty framework is effective. That is something that charities such as Action on Smoking and Health and researchers at the university of Bath have been trying to solve.

For clarity’s sake, now that we have had this further year since the new duty structure began, will the Minister tell us when the most recent assessment was made regarding the impact of changes to tobacco duty on the sub-economy tobacco sector and what its finding was? Will he consider undertaking some further work to try to understand the impact of the changes in the duty structure, looking ahead to the next Budget in terms of how best to ensure that the policy is successful?

Many hon. Members have sought to grapple with this issue, and we are all sadly familiar with the amount of evasion of cigarette duty. When people are picking up cigarettes, it is sometimes difficult to tell which are duty-paid packs. Some interesting ideas about how to tackle that problem have been floated in recent years. I am not sure how some could be implemented, but one suggestion was printing a mark that indicated whether duty had been paid on the side of each cigarette, to make that visible to the outside world. That might have a beneficial side effect: the cigarette would look less cool as a product if it had all sorts of writing and marks along its side. I do not know how feasible that idea is, but has the Treasury thought about alternative ways of marking products, including the cigarette itself?

Photo of Fiona O'Donnell Fiona O'Donnell Llafur, East Lothian 9:15, 18 Mehefin 2013

Does my hon. Friend agree that plain packaging might give an opportunity to highlight whether or not duty has been paid more dramatically on the packet?

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

That is exactly what I am looking for from the Minister. We now have innovations in printing technology and in the ways that many marks and excise duties can be displayed. I absolutely agree that the pack  is a feasible option for that; that is why I also wanted the Minister to consider whether the individual cigarette could be marked in some way. I am not sure about the feasibility of that idea, but it would help if he looked into it.

Other ideas floated include a minimum excise tax. Will the Minister consider those issues? We need to step up our efforts now to make it clear not just to those engaged directly in sub-economy sales but to the public at large that it is important that such products are bona fide.

Clause 180 is interesting. It narrows the general exemptions granted to herbal smoking products so that the exemption is granted only to products used exclusively for medical purposes—although I am not quite sure what those would be. There has been an anomaly on herbal smoking products, including herbal cigarettes, herbal rolling mixtures and herbal shisha, which have apparently been exempt from tobacco duty until now.

We support the clause. Although some might view herbal products as less harmful than tobacco products, many in the health sector have long argued against that view. In its response to the Government’s consultation, ASH stated that herbal smoking is no safer than tobacco, and the Royal College of Physicians has supported the change, saying that herbal smoking products are distinctly unhealthy. Now seems the right time to end the anomaly; indeed, there are European directives driving this question forward—I hope Government Members will not be put off by that.

It is important that we take notice of the health issues relating to such products. Will the Minister tell us what consideration has been given to the possibility that some herbal product smokers will switch to tobacco products if the price differentials between the two decrease? What will be the health implications for those smokers? Some people might worry that that could be a by-product of the measures. If both herbal and tobacco products are equally bad, it is not a massive issue, but we do not know what assessment has been made of the relative health impact of herbal smoking products as opposed to conventional tobacco.

Certain retail establishments promote shisha and other such products. What guidance have the Minister and the Treasury provided to retailers and others so that everybody is clear about how the rules will apply under the new arrangements set out in clause 180?

Photo of Stephen Williams Stephen Williams Democratiaid Rhyddfrydol, Bristol West

Good morning, Mr Amess. It is a pleasure to follow the hon. Member for Nottingham East. I agree with everything he said and with what he asked. There is a broad cross-party consensus on the need to halt the smoking of tobacco. It is in that cross-party vein that I speak on the clause today, in my role as chair of the all-party group on smoking and health.

APPGs have had some bad publicity recently and we do not need to go into why. However, it is important to put on the record that the vast majority of APPGs—certainly the one I chair—do a very good job in the House of raising awareness of issues. There cannot be a more important aspect of public health than reducing the rate of smoking. As the shadow Minister said, smoking is the biggest contributor to early death.

The clause maintains the tobacco duty escalator. On Thursday last week, we talked about getting rid of the fuel duty and the beer duty escalators, and segued into whisky. I am disappointed that the hon. Member for Islwyn is not here, but I will say, as I was not able to last week, that in that segue on whisky he should have said that the superior whisky of Wales is made in the superior valley of Wales: the Cynon Valley. He can have the pleasure of reading that in Hansard this afternoon or on Thursday.

The clause raises the duty by 26p per pack. That means that most standard brands of cigarettes will cost between £7 and £8, or roughly 40p a cigarette. I want to focus on an area that I thought the shadow Minister described too gently as “the sub-economy”. I would describe as criminal activity the selling of cigarettes that are either counterfeit, faking well-known brands, or are completely fictitious brands—the so-called “illicit whites” as they are known in the trade, particularly in respect of handrolled tobacco. A large amount of handrolled tobacco consumed is bought and sold illegally in this country.

I want to ask the Minister about the resources the Treasury has allocated to HMRC to tackle tobacco smuggling. I was quite disappointed by the Minister’s written answer to me on 5 June, when I had asked about the resources given to advertising the reasons why tobacco smuggling was wrong. I was surprised to learn that in 2011-12 and 2012-13, HMRC spent nothing on advertising about tobacco. I have put similar questions to the Home Office and am awaiting answers.

I asked about those issues because the most recent inquiry and report of the all-party group on smoking and health looked at tobacco smuggling and at good practice from around the country. In the north-east of England, collaboration between the police, HMRC, the UKBA, council trading standards and NHS-funded bodies showed that advertising can play a role in persuading people that it is a bad idea to turn up at a car boot sale or public houses and buy under-the-counter, illegally sourced cigarettes. The people behind such activity are not terribly nice; they tend to be involved in other activities such as fencing stolen goods or smuggling drugs or other illegal products.

Our inquiry found that the most effective advertising in the north-east of England was showing a child smoking, and persuading parents that illegally sold cigarettes would be sold to under-age people. That was the most effective message in persuading people that it was a sinister activity.

Photo of Mike Thornton Mike Thornton Democratiaid Rhyddfrydol, Eastleigh

As a quick aside, I congratulate my hon. Friend on his medal and the recognition recently given him by the World Health Organisation on his fight against such a pernicious and addictive drug. [Hon. Members: “Hear, hear.”]

Does my hon. Friend agree that, while historical evidence has shown that sharp increases in tax rates have resulted in a sharp decrease in smoking rates, perhaps the time has come to treat the illegal smuggling of tobacco in the same way and with the same fierceness that we treat illegal drug smuggling in this country?

Photo of Stephen Williams Stephen Williams Democratiaid Rhyddfrydol, Bristol West

I thank my hon. Friend for his intervention. A fiver or a legally sourced drink may well go his way later for mentioning the UN medal from the World Health Organisation that was presented to me last week.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

Why aren’t you wearing it?

Photo of Stephen Williams Stephen Williams Democratiaid Rhyddfrydol, Bristol West

It does not come with a ribbon; it comes in a box so, unfortunately, I cannot wear it—[ Interruption. ] I have not brought it with me either.

As for what my hon. Friend said about treating the issue with seriousness, that is what I am talking about. I want to express caution about treating it the same as other narcotics. Tobacco is a legal product. I have no desire to make tobacco an illegal product, but I am worried about those who sell it illegally. I urge the Minister to consider increasing the resources available to either HMRC or other agencies within the Treasury to spend on advertising in such areas because, as we all know, it can have an effect.

As well as the report from the all-party group, members of the Committee are probably aware that the National Audit Office published a report on 6 June on progress in tackling tobacco smuggling. The report stated that HMRC had collected £9.9 billion worth of tobacco duties, making a significant contribution to the funding of public services and bridging the deficit. However, we have lost an estimated £1.9 billion in revenue that has not been collected, and that is the estimated size of the illegal market. It is said that approximately just below 10% of boxed cigarettes are sold on the illicit market, but 38% of hand-rolled tobacco is sold that way and that is where much of the revenue is lost.

The National Audit Office draws attention to the fact that each £1 that HMRC and the Treasury spend on tackling the illegal trade is effective; £69 million was spent in the year under study, and it is thought that that led to a recovery value of £919 million in illegally sourced goods that were intercepted. I am sure that most members of the Committee agree that that is a pretty big return. In the first comprehensive spending review of the coalition Government in 2010, an extra £25 million was allocated for the next few years to source extra intelligence officers, particularly in eastern Europe from where much of the illegally sourced tobacco comes, and that is starting to make a significant impact on the destruction of the activities of criminal gangs.

The coalition Government are undertaking a mini expenditure review for their final year and the first month or so of 2015-16. We know that the Treasury has essentially settled its spending review, so I urge the Minister, within whatever spending envelope the Treasury has settled with itself, to regard the resources that it gives to the HMRC on tobacco smuggling as a value-for-money exercise. The first report under my chairmanship in 2010 showed—and it informed the comprehensive spending review that year—that each £1 spent on such matters is incredibly effective and is likely to lead to a huge increase in the tax revenue going into the Treasury.

I have gone somewhat wider than the narrow parameters of the clause, but this is an important topic. It is an opportunity to raise our legitimate tax base and, more importantly, to lead to a healthier and longer living population, which has both societal and economic benefits.

Photo of Ian Mearns Ian Mearns Llafur, Gateshead 9:30, 18 Mehefin 2013

It is a pleasure to serve under your chairmanship again, Mr Amess.

I concur entirely with what the hon. Member for Bristol West has just said. I want to thank the Treasury officials who penned the explanatory notes on the clause, which are worth relaying and putting into the public record. They state:

“Smoking kills half of all long-term users and is the biggest single cause of inequalities in death rates between the richest and poorest in the UK.”

We need to emphasise that point.

As a former chair of the Gateshead Smokefree Alliance and a colleague of the hon. Member for Bristol West in the all-party group on smoking and health, I think that it is our duty to try to control tobacco as much as we can. It is a massive detriment to public health, the health of the individual and the prospects of prosperity for an awful lot of people.

Every time a football match from Wembley stadium is broadcast on television, or if we have the luck to attend a match there, we should look at the crowd. The crowd at Wembley, when it is full, is about 90,000. That is roughly how many people die young from the impact of smoking every year. Just think about all the individual bums on seats at Wembley stadium; that is how many people are dying prematurely as a result of smoking in this country annually. We forget that at our peril.

There have long been debates in this country about the efficacy of smoking and how much smoking contributes to the public purse. However, I think we all now know that its contribution is far outweighed by its impact on the health service bill of this country and on people’s ability to carry on working into later life, and by the fact that so many people die prematurely.

The hon. Member for Bristol West talked about the north-east of England. We have had significant success through campaigns such as Fresh in the north-east of England. In my constituency, the Smokefree Alliance has been part of a partnership project to reduce overall levels of smoking in the general population. We have been so successful that smoking in the general population in Gateshead has fallen from over 30% to the national average of about 21% or 22% in less than a decade. That is vital work.

Even within a community such as Gateshead, we see significantly different levels of smoking in the general population from neighbourhood to neighbourhood and from electoral ward to electoral ward. It is quite clear that the size of family or household income has a significant bearing on whether an individual is likely to smoke. The prevalence of smoking among the poorest communities is still far too high. Anything we can do, through price and taxation, to try to deter people from smoking has to be seen as a positive.

Behind the whole matter is an organisation called the Tobacco Manufacturers Alliance, which has for decades peddled the myths, first, that smoking is not dangerous, and then that it is not as dangerous as it is cracked up to be. However, we know for a fact—this is on the record—that while executives of large companies involved in the tobacco trade peddle the substances that kill so many people and damage families, they would not dream of taking up the habit themselves. I call it a habit: it is actually a serious addiction. Both the British Lung Foundation and the British Heart Foundation have to be congratulated on their stance on the matter.

I have a number of suggestions, which are not part of the clause, that I wonder whether the Government would consider. With my own eyes I have seen how illegal, counterfeit and contraband cigarettes and tobacco reach the streets. Living in a place such as Gateshead, I do see that going on—cigarettes being sold from a holdall from the back of a car. An awful lot of that is not systematic, large-scale smuggling; it is done when people return from their holidays.

As a football supporter, on a number of occasions I have had the opportunity to follow Newcastle into Europe—[Interruption.]. There is no accounting for taste. I have seen groups of football fans—some are friends of mine—bringing back the maximum allowance through customs for personal use. Would colleagues believe that that allowance is 3,000 cigarettes? Three thousand cigarettes are being brought back through customs in holdalls, plastic bags or bin bags on a large scale. People say to each other, “You don’t smoke, but bring back your allowance”, and then they get sold on.

What is 3,000 cigarettes for personal use? For those who are unfortunate enough to have the addiction and need to smoke 60 cigarettes a day, that is 50 days’ worth of tobacco and, for those who smoke 40 a day, that is 75 days’ worth of tobacco. We are not part of the Schengen agreement, we do not have open borders and, frankly, I am glad about that in many respects. So, when people come through customs, they can be asked by customs officials, “Three thousand cigarettes—that is your personal allowance. Will you be smoking them?” A bit of investigation goes a long way. Customs officials should ask themselves whether the person looks like a smoker: does the person have tar stains on their fingers, or do they smell like they smoke?

Photo of Brooks Newmark Brooks Newmark Ceidwadwyr, Braintree

I am a non-smoker as well as a non-drinker. Notwithstanding that, if the allowance is 3,000 cigarettes, that is what the rules are, so those people are not breaking the rules. Frankly, it would be wrong of customs officers to ask people whether that is for their personal use. Either the law should be changed, or the question should not be asked.

Photo of Ian Mearns Ian Mearns Llafur, Gateshead

The law is 3,000 cigarettes for personal use. So, if it is only for personal use, it is worth while for officials to ask the question sometimes, because I have seen that regulation flouted on numerous occasions, I am afraid to say.

Photo of Stephen Williams Stephen Williams Democratiaid Rhyddfrydol, Bristol West

Does the hon. Gentleman—my hon. Friend in this context—agree that one of the big problems in this area is that the tobacco companies over-export, to certain small European countries, a volume of cigarettes that it would be completely impossible for the smoking population of those countries to smoke themselves, specifically to facilitate this market back into the United Kingdom with the duty not paid?

Photo of Ian Mearns Ian Mearns Llafur, Gateshead

I concur with that entirely. Believe it or not, that happens in places such as Andorra. There is a huge trade in people going from the south of France to Andorra on a day trip to get huge amounts of cigarettes. They take them back into France, which they can do that without any problem, and then they transport  them into the UK at the end of a holiday or whatever. The problem is that that tobacco is then sold on through contraband markets on the streets of the United Kingdom at a knock-down price, avoiding the duty that should be paid to the Treasury.

What my hon. Friend—in this context—says is absolutely true: the tobacco manufacturers are behind much of that trade. Despite the crocodile tears that they often cry, they are behind it, and that needs to be said out loud in the context of this discussion.

I will not go on any longer, but I want to leave Members from all parties with this vision: think of Wembley stadium, full of people. If those people were all smokers, next season half of them might not be there. The year after that, half of those people might not be there. That is because half of all smokers will die at a much younger age than would otherwise be the case. Anything that we can do to alleviate that problem, we should engage in, because that is our business.

Photo of Steven Baker Steven Baker Ceidwadwyr, Wycombe

I am astonished that anyone still smokes. Anyone who, like me, has seen a loved one destroyed by a smoking-related illness knows what it can do, and anyone who can read can see the warnings on the packet. It must represent a profound challenge to those who believe in nudge that people still smoke at all. With all that in mind, will the Minister explain how the figures in the table in clause 179 were reached? We see figures such as “£176.22 per thousand cigarettes”, cigars at “£219.82 per kilogram”, and so on—why not a round number? Why not £175 per thousand cigarettes? Or £180, or £200? How do we get to these odd numbers if we are believers in nudge and want to take the issue seriously?

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

It is a pleasure to see you in the Chair again, Mr Amess. We have had a good, robust debate. It is fair to say that, unsurprisingly, all members of the Committee agree that cigarette smoking—tobacco consumption—is bad for one’s health, and that the Government are right to have a strategy, as did the previous Government, to try to reduce people’s tobacco consumption for precisely the health reasons that we have just heard about.

I thank the hon. Member for Nottingham East for his comments and what I take to be his broad support for the changes that we are discussing relating to clauses 179 and 180. I also thank the hon. Member for Gateshead and my hon. Friends the Members for Wycombe and for Bristol West for their comments. May I also take the opportunity to congratulate my hon. Friend the Member for Bristol West on what he has achieved? It may have been understated. On 31 May, World No Tobacco Day, the World Health Organisation handed out six awards to people in Europe who have made an outstanding contribution to fighting tobacco consumption. He was the recipient of one of those awards, which I think was awarded to him on 5 June. [Hon. Members: “Hear, hear!”] I congratulate him on that; it shows the passion that he has put into his work on this issue, which he holds very dear.

I will now address my comments to clause 179. Increasing tobacco duty rates reduces the affordability of smoking, which is widely acknowledged to be effective in encouraging smokers to give up smoking. It also deters young people  from taking up the habit. The previous Government announced plans to increase tobacco duty rates by 2% above inflation until 2014-15. Such duty increases were incorporated into forecasts of the public finances, so failure to implement them would have led to a revenue shortfall.

Smoking causes almost 100,000 deaths in the UK every year, and is still the single largest cause of preventable illness and premature death. Treating smoking-related illnesses has been estimated to cost the NHS almost £2.7 billion a year. Maintaining high levels of tobacco duties is a key part of the Government’s strategy to reduce smoking.

Clause 179 will increase smoking duties by 2% above the retail prices index, as was pre-announced by the previous Government. The new rates took effect from 6 pm on 20 March 2013. The duty increases added 26p to the price of a typical packet of 20 cigarettes or a 25 gram packet of hand-rolling tobacco.

Research has consistently shown that the price of tobacco products affects demand. By increasing the duty on tobacco, we hope to reduce smoking prevalence, which would bring significant positive health impacts. It will help to reduce health inequalities and reduce the cost to the NHS of smoking-related illness.

Photo of John Pugh John Pugh Democratiaid Rhyddfrydol, Southport

The Minister has to be clear that not all counterfeit or smuggled tobacco is sold from the back of a white van; some is found in shops and looks very similar to tobacco that is legally imported or not counterfeit. On packaging, there is now technology that enables people to be able to tell through track and scan whether tobacco has had duty paid on it. However, it is questionable to what extent that is available to either trading standards or Customs and Excise. Would the Minister care to comment on that, because it is crucial to getting the money into the Revenue?

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

Of course I will comment on that—I was moving on to the broader topic of the illicit trade in tobacco, which was raised by a number of Members. In terms of providing more information on the Government strategy, we are fully committed to tackling the illicit trade in tobacco and ensuring that smuggling does not undermine the health and revenue benefits of real increases in tobacco duties.

Following the 2010 spending review—the issue of resources was raised by my hon. Friend the Member for Bristol WestHMRC has invested £25 million to further strengthen the strategy and maintain downward pressure on the illicit market. Hon. Members have talked about new technologies that can potentially be used, such as packaging and tracking. HMRC keeps such things under constant review and looks at best practice and what other countries might be doing. At this point I cannot commit to any particular new method that we might adopt, but I can assure my hon. Friend that we are constantly looking at new methods to try to tackle the illicit trade.

On the results of HMRC’s activities, the illicit market for cigarettes has reduced from 21% to 9%, and for hand-rolled tobacco from 61% to 38%, since the launch  of the first tobacco anti-fraud strategy in 2000. The latest industry estimate suggests that non-UK duty-paid consumption is beginning to increase. However, the data do not disaggregate illicit consumption from legitimate cross-border duty-free shopping.

The hon. Member for Gateshead talked passionately about the number of cigarettes that individuals are allowed to bring into the country for personal consumption. He mentioned 3,000, but the number was 3,200. However —I am sure he will support this—that number was drastically reduced to 800 by the Government at the end of 2011, so it is currently 800. That is the lowest that we thought we could go to and at the same time stay within EU rules. We have taken the toughest stance that we could on that allowance. I hope that that helps to allay the hon. Gentleman’s concerns.

Photo of James Duddridge James Duddridge Chair, Regulatory Reform Committee, Chair, Regulatory Reform Committee 9:45, 18 Mehefin 2013

Can the Minister confirm whether it is a personal allowance only for personal use? I can draw an example from Irish whiskey, but it could apply equally to smoking. I am not sure whether Mrs Duddridge or I—perhaps both—have committed a criminal act. She recently went to Ireland and brought back a bottle of Irish whiskey. Mrs Duddridge has never consumed whisky and it was never intended that she would consume it. What if I consumed it? It could very much apply to cigarettes. Has she committed a criminal act? Or, if I had brought back cigarettes and offered one to my hon. Friend in the Strangers Bar this evening after a pint of Sajid’s beer, would we both be committing a criminal offence?

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

I thank my hon. Friend for his question. He is right to assume that it is for personal consumption. That is the intention of the rules. I am sure he understands why such a restriction is in place. I cannot comment on an individual case without knowing the details. I hesitate to do so. However, if it is a gift for someone, without charge, that is acceptable. I hope that that helps to allay his concerns.

On prosecution rates, as the illicit cigarette market has steadily declined over the past two years, nearly 3.6 billion cigarettes and more than 1,000 tonnes of hand-rolling tobacco have been seized. There have been 431 prosecutions and more than 1,600 assessments and penalties issued.

My hon. Friend the Member for Bristol West raised the issue of media and advertising. HMRC has a national media and communications strategy that optimises the use of free media opportunities to amplify its impact. It works in collaboration on joint communications programmes with other parts of government and other non-government entities, such as the Work for England programme, to try to change behaviour and attitudes towards the purchase of tobacco and the tobacco trade in general. My hon. Friend mentioned that there might be some room for improvement, and I am more than happy to sit down with him and discuss in more detail any fresh ideas he has on this important subject, if he would find that useful.

Finally, my hon. Friend the Member for Wycombe raised the issue of the numbers, how they are reached and whether they are rounded. They are simply calculated by uprating last year’s figures. We try to be as accurate as we can be in the presentation of those numbers.

Sorry, I have noticed one more question, which was about packaging and was asked by the hon. Member for East Lothian. The Government still have an open mind on standardised packaging and any decisions will be made after full consideration of all the consultation responses and evidence we received. Her Majesty’s Treasury and HMRC will work closely with Department of Health colleagues in reaching that decision, but that is rightly a Department of Health process.

Photo of Fiona O'Donnell Fiona O'Donnell Llafur, East Lothian

I wonder whether the Minister will take this opportunity to correct the statement made by the Prime Minister during his speech on the Queen’s Speech about the absence of a Bill. He said that consultation was still open when it in fact closed last year.

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

I hope that I have already addressed that point. I am happy to state that the consultation responses have been received and that consultation is closed. We are now considering evidence and any other relevant information we have to make the decision.

Photo of Stephen Williams Stephen Williams Democratiaid Rhyddfrydol, Bristol West

In the context of the Minister’s ideas of where a small amount of expenditure may go a long way, I refer him to the intervention made by my hon. Friend the Member for Southport on the equipment for assessing whether duty has been paid on a box of cigarettes. My understanding from talking to some trading standards officers is that this equipment, which is a small handheld device—it is not big—is not widely available to trading standards officers in local government. The tobacco companies have their own, because it is in their interest to ensure that duty is paid and that counterfeit brands are not being sold. A small allocation of additional resource within the agreed budget may make a big difference for trading standards officers.

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

My hon. Friend refers to the tracking equipment and its possible use, and I can confirm that we are discussing the matter at EU level with partner nations. We are looking at the matter as part of our review of the tobacco directive. I hope that that reassures him that we are taking the matter seriously and that we are looking at adopting the equipment and taking it further.

Clause 180 makes changes to the tax treatment of herbal smoking products to align UK legislation with the European directive on the structure and rates of excise duty on manufactured tobacco. The change was announced at Budget 2012 and will come into effect from January 2014. It will ensure that herbal smoking products no longer enjoy an unfair advantage over tobacco smoking products. Herbal smoking products will be treated as if they contain tobacco and will be liable to tobacco products duty. Herbal smoking products that are used exclusively for medical purposes and licensed as such will remain exempt from tobacco duty.

Herbal smoking products include herbal cigarettes, herbal pipe tobacco and herbal water pipe tobacco. Herbal smoking products do not contain nicotine, but there is no evidence that they are any less harmful than tobacco products. Herbal smoking products are exempt from excise duty. That provides an unfair advantage over tobacco-based smoking products and contravenes the European directive on tobacco taxation. The directive  states that products consisting of substances other than tobacco that conform to the criteria of cigarette and smoking tobacco shall be treated as such for duty purposes. It also states that herbal smoking products that are used exclusively for medical purposes shall be exempt from excise duty.

The changes made by clause 180 will create a level playing field by imposing a duty liability on herbal smoking products at the same rate and in the same way as their tobacco equivalents. The Government are committed to encouraging smokers to quit and discouraging young people from taking up tobacco.

A couple of questions were raised on the matter, and I hope I have answered the first one. The hon. Member for Nottingham East asked about switching from herbal tobacco to regular tobacco. Evidence shows that herbal tobacco is no less harmful than other tobacco products. There will be an exemption for where herbal tobacco is consumed solely for medicinal purposes. That will be through a marketing licence granted by the Medicines and Healthcare products Regulatory Agency, an independent regulatory body that is responsible for ensuring that medicines work and are acceptably safe.

Photo of Stephen Williams Stephen Williams Democratiaid Rhyddfrydol, Bristol West

I apologise for making so many interventions. This will be the last one, and it is about the effect of smoking a shisha pipe, or hookah as some call it. Many people think it is a relatively harmless activity, but one session on a hookah pipe is the equivalent of smoking about 80 to 100 cigarettes. It is incredibly harmful.

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

My hon. Friend makes a good point. He is right to emphasise that it is not well understood how damaging some herbal tobaccos can be to one’s health.

The hon. Member for Nottingham East also asked about guidance and the impact on manufacturers and importers. First, a very small number of manufacturers and importers deal with herbal tobacco in the UK. They will face one-off costs that will apply under the Bill. HMRC is working closely with the businesses that are affected to help to ensure that the changes are well understood and comply with the new legislation. One reason why the provision will come into effect on 1 January 2014 is to give businesses time to adjust.

Question put and agreed to.

Clause 179 accordingly ordered to stand part of the Bill.

Clause 180 ordered to stand part of the Bill.