§ Mrs. Jacqui Lait (Hastings and Rye)
I am delighted to have this opportunity to continue to remind the Treasury and my hon. Friend the Paymaster General of the concern that a number of my hon. Friends and I feel about the smuggling of tobacco and alcohol.
In the current climate, it is difficult to balance the various claims. Some claim that the supply of tobacco and alcohol to vulnerable groups has not increased. But those of us who know of this problem are very much aware that more and more cheap tobacco and alcohol is available for consumption by them. Our high tax policy has been effective and successful in the past—the UK is one of the few countries in the world where the consumption of tobacco has gone down largely because of that policy—but if no tax is paid, that deterrent effect disappears.
The tobacco and alcohol lobby is crying foul because of the volume of smuggled tobacco and alcohol, while the health lobby seems to say that there is no noticeable impact on vulnerable groups. We must also try to balance the fact that we have low official claims by the Inland Revenue of the amount that is lost through the smuggling of tobacco and alcohol with the fact that the tobacco and alcohol lobby alleges, and in some cases can prove, huge effects on our revenue.
My personal interest in this matter came about not because of those conflicting claims but because, in my constituency on the south coast, I see the direct effects of smuggling on many people and businesses. Newsagents find that their sales of rolling tobacco papers have shot up, while they are selling small quantities of hand-rolling tobacco.
Off-licences tell me of the offers of cheap and obviously smuggled alcohol which turn up at their back doors. Pubs and clubs also say that they have had knocks on the back door with offers of cheap alcohol. It is difficult for them to resist when they know that, in these hard times, their competitors down the road may be succumbing to the temptation of cheap supplies and making larger profits. I have no difficulty in understanding the problems that people have and the temptations to which they succumb, and I make no moral statement of what is right or wrong, especially given that the south coast, particularly my constituency, has a history of smuggling that goes back to the 18th century.
I wanted to bring this issue to the attention of the House today because I recently received a witty company report from the Tobacco Alliance about a company called Tobacco Smugglers and Co. It went through the profit and loss account of a mythical company that was making approximately one trip abroad every day, and estimated that the company could make a profit of £5 million a year. That is not an insubstantial sum of money, and it brought home the issues surrounding the importation of cheap tobacco and alcohol.
Evidence of my eyes and ears has, more than anything else, made me more and more concerned about the subject. I am particularly concerned about the health of those who can get cheap supplies. I am fascinated that those involved in lobbying on health issues find it so difficult to come to terms with the fact that vulnerable groups such as the young, among whom tobacco smoking 871 is increasing, have access to much cheaper cigarettes. They cannot seem to grasp the threat which that poses to young people's health in the long term.
One of the most profitable and easily smuggled forms of tobacco is hand-rolling tobacco, which goes to a different group: those who already smoke. I suspect that, the more that such people have access to cheap hand-rolling tobacco, the more they will smoke. In the long run, GPs' surgeries and hospitals throughout the country will find an increase in chest diseases, lung cancers, and all the diseases that we have tried so hard to reduce by means of high taxation.
I should like the various health charities to reconsider their policies to take account of what is happening on the ground. A recently published occasional paper from the Centre for Health Economics at York university, entitled "Should cross-border shopping affect tax policy?", concludes:Incentives to engage in CBS"—cross-border shopping—are small, available data does not indicate a large increase in cross-channel journeys or sharp falls in UK sales, the economic effects of substantial tax cuts are uncertain and may have detrimental health and social consequences.That smacks of an ostrich-like attitude.
We must also look at the associated effects on the rule of law. If there is one country that prides itself on being ruled, as far as possible, by a legal system that is approved by its citizens, it is the United Kingdom. But because of the ease with which tobacco and alcohol can be smuggled, we are undermining that law.
It is easy for the licensed trade to get hold of cheap alcohol and tobacco, and it affects honest traders. When we go around rest homes, schools and industrial estates, we see the availability of that cheap source of supply. It makes a mockery of both police and customs when the general population can get their hands on what they well know are illegal and smuggled products.
We must ensure that never again do I sit at a table having lunch with nice, middle-class people, four of whom smoke and admit to the fact that they do not pay the full price for cigarettes. If the middle class admits that, we are returning to the abuse and undermining of the rule of law that existed in the 18th century.
If we are lucky, we see small articles in our national papers about prosecutions, such as when the Eastbourne cigarette smuggler was sent down, or the group of Barnsley miners were caught. Trade papers may cover those matters better, but they do not reach the national consciousness, and the bulk of people are coming to believe that smuggling is legitimate.
Unfortunately, I must also tell my hon. Friend the Paymaster General that, while efforts at prevention are admirable, in the long term they are ineffective. I base that on research that I have done into the history of smuggling in the 18th century, and on current costs. I should be grateful if my hon. Friend would disprove those statements some time, because I would be less sceptical about prevention if I knew that it was cost-effective.
It has been shown that, historically, the valiant and complex arrangements that were made to try to prevent the smuggling of tea, brandy, lace and all the other goods that are so romantically associated with smuggling, cost considerably more than the goods that were ever prevented from entering this country. I fear that we are going down that route again.
872 The latest figures that I have been able to find show that the employment costs of the increased number of excise verification officers whom Customs and Excise has rightly hired are about £7.2 million a year. The revenue value of the goods recovered, at the latest date that I have been able to find—in more than a year—is slightly more than £6 million. We are obviously already losing money on our prevention system.
I very much hope that my hon. Friend will be able to disprove those figures, but if not, we need to consider carefully whether prevention is working and how cost-effective it is.
There are many Members in the Chamber who would agree with me that the anecdotal evidence of the ineffectiveness of prevention continues to encourage the public to believe that they can get away with smuggling. Anyone who has gone to Calais will tell of the 40-tonne trucks returning from the continent empty, picking up beer and moving it through Dover.
I am told by my hon. Friend the Member for Dover (Mr. Shaw) that there is a constant trail of Transits coming through the docks, often with three or four people, many of them saying, "This is for personal consumption"—which is quite all right, and I have no quarrel with that—"This is for my daughter's wedding," "This is for the great party we have promised ourselves for our 25th wedding anniversary," or whatever.
However, the ordinary member of the public sees vast quantities of wine, spirits, cigarettes and hand-rolling tobacco going through Dover docks unhindered, unchecked. That cannot be helpful for the image of customs officers, who are trying hard to do a good job in difficult circumstances.
I realise that many of the more sophisticated smugglers are checked up on and followed outside the docks to try to obtain a better picture of the distribution pattern, so that one is able to arrest those who are involved in smuggling on a much more serious and substantial scale. However, the image that the public have of the acceptability of vast quantities of tobacco and alcohol coming in unchecked, which most people suspect will be sold on, one way or another, greatly damages the role and authority of customs.
We also have, as an extension of the way round the controls, the current controversy on tobacco by post from companies based outside the United Kingdom. We expect a pronouncement on that case on Friday. I suspect that, whichever way that pronouncement goes—I know that the Government and the European Commission agree that tobacco by post should be opposed—any judgment will be pursued much further up the line for final decision.
Whichever way that goes, if there is any loophole by which tobacco and alcohol can be sold direct to the customer by post, one suspects—indeed knows—that the large tobacco and alcohol companies will feel that they must join in. It is not only cheeky young entrepreneurs who will feel that they can get away with it. The larger companies will go down the same route, to protect themselves. That reduces the single market, and the policy of high taxation, to farce.
The tobacco subsidies paid by the European Commission to farmers in several countries in the European Union are also farcical. In 1994, nearly £1 billion was paid in subsidies. We do know that many jobs depend on the continuing farming of tobacco, and the 873 Spanish embassy tells me that, in Spain alone, more than 800,000 people are engaged in tobacco farming. Equally, I welcome the fact that there is no longer any intervention provision for tobacco in the European Union, and that subsidies are no longer available for destroying unusable and unwanted tobacco.
I ask my hon. Friend the Paymaster General to urge on the Agriculture Ministers a reform of the common agricultural policy to end those subsidies, and perhaps to use that money to help farmers to adjust to producing new products that are so new that they may not already receive CAP subsidies. We can then start to change the CAP and bring it closer to the market. What better way to start than by abolishing tobacco farming?
I have outlined the problems. It is always easy to produce problems, but I also want to offer a few solutions. I am sure that they will not be new to my hon. Friend.
The few solutions that I produce are, of course, not the only ones. The parliamentary beer group is investigating the issue, and doubtless will come up with further solutions. I know that many other organisations and groups are seeking how best to amend the rules and regulations to end this unfortunate trade.
I have said that, in my opinion, prevention is not cost-effective. Having said that, in the short run there is nothing else that we can do but continue to use it, and make it more cost-effective.
I urge on my hon. Friend the thought that it should be made more obvious to the general public that, if one indulges in illegal importation, there is a much greater chance that one will be caught for small amounts. Larger smugglers should have much higher-profile prosecutions, so that the national papers carry more than an inch of coverage of the outcome of the case.
I would, in the longer term, draw parallels with what happened in the 18th century. Smuggling died away only after Sir Robert Peel, Disraeli and Gladstone reduced the duties. I fear that, in principle, we must go down that route. We have built a new and lucrative smuggling trade and it is up to us to dismantle it. It is obviously difficult because there are cultural and taxation differences, and Spain, France, Portugal and Belgium will see no need to increase their duties.
However, I want the health lobby to become much more proactive in urging its opposite numbers on the continent to go down the route of a high taxation policy. I was pleased to notice that Action on Smoking and Health suggested precisely that. It must persuade not only its counterparts but the other lobbies in this country to do so. The Department of Health should also raise the profile of the issue on the continent, so that it becomes much more politically and culturally acceptable for tobacco and alcohol duty to increase.
We must ensure that the European Commission does its work. I understand that we continue to await proposals from the Commission for ways to tackle the problem, and I hope that my hon. Friend the Paymaster General will be able to give me some positive news of what is happening in that regard.
Only when national Governments act together to work out a solution which takes the profit out of smuggling will we be able to solve the problem. It is not an entirely British one, because other countries also need to face the 874 reality of the threat to health that we have faced for so long and to work together to try to solve the smuggling problem.
In the coming Budget, I hope that the Treasury will no longer continue to use excise duty as the milch cow to solve all its revenue problems. Even the Institute for Fiscal Studies is changing its mind and beginning to realise that, apart from beer duty, no increase in revenue would be obtained by an increase in excise duty. It was not quite so firm about that a few months ago.
We must, please, ensure that we change our mindset, as I have urged the health lobby to do, in terms of the revenue that comes from tobacco and alcohol. We must move towards a system where the profit is taken out of smuggling and we get rid of that lucrative but distressing trade.
§ The Paymaster General (Mr. David Heathcoat-Amory)
My hon. Friend the Member for Hastings and Rye (Mrs. Lait) has taken a close interest in this subject. She has been active in trying to protect the legitimate interests of her constituents, and of the alcohol and tobacco trade more generally, for at least as long as she has been a Member of the House. She has shown by her speech that she knows a great deal about the subject.
I am sure that my hon. Friend will agree that the single market in Europe has brought great benefits to the British economy. The abolition of routine frontier controls has led to administrative savings, and also brought about greater freedoms of movement for goods and people. It has also created problems, or highlighted existing ones, particularly connected with cross-border shopping and the smuggling of excise duty goods.
It is important to distinguish between commercial imports, which are taxed at United Kingdom rates in the normal way; legitimate cross-border shopping, where private individuals bring back goods for their own use and consumption; and those who illegally abuse cross-border shopping—what we call bootlegging or smuggling. We are most anxious to do something about that last category.
My hon. Friend mentioned the differences in the estimates given by the trade, Customs and Excise and other bodies when trying to assess the amount of revenue lost through cross-border shopping or smuggling. It is a statistical minefield, but I am glad to say that considerable progress is being made in reconciling the differences, which are frequently due to differences of definition rather than differences in the underlying data. We hope to publish that work later in the summer.
It is important to recognise that the duty receipts from tobacco and alcohol are holding up quite well, but I concede that, although our duty receipts are firm, some individual traders can be seriously hit. They represent one of the direct effects of smuggling described so well by my hon. Friend. I do not wish to be complacent about the difficulties faced by some parts of the trade.
As for smuggling, we have to be clear that the goods in question are not brought back into this country for personal consumption, but are sold on. That is a crime, which we take seriously.
My hon. Friend made a fair point about the health effects of smuggling. Certainly, higher tobacco prices have helped to reduce consumption, which has had a good effect on the nation's health. Perhaps we should be alert 875 to a secondary effect of the pricing, because, if tobacco is bought cheaply from abroad or smuggled in and sold in uncontrolled outlets, that may have an opposite effect on health, particularly if that tobacco is hand-rolling tobacco, which tends to be stronger.
My hon. Friend also raised an important point about the CAP tobacco regime. It is one of the dottier features of the European Union that substantial amounts of European taxpayers' money is used to subsidise the production of tobacco, which tends to be of a particularly harmful type, while the Commission at the same time is concerned about health and lung cancer. The tobacco regime currently costs about £940 million a year. I am advised that tobacco is the most heavily subsidised crop per hectare in Europe, and receives a subsidy more than 20 times that for cereals. That regime is to be reconsidered in 1996, when the Government will press for its reform.
As for our own responsibilities in countering smuggling, I wish to emphasise to my hon. Friend—I think that she knows it, but I should like to put it on the record—that we take our task extremely seriously. To that end, excise verification officers, or EVOs, have been appointed to carry out visits, particularly inland, to pubs, clubs, markets, restaurants and so on to check for smuggled alcohol or tobacco that perhaps is being resold. Those EVOs work closely with the police and local trading standards officers.
There are about 250 single market excise officers, and during the financial year 1994–95 they made nearly 3,000 detections, including goods with a revenue value of just over £6 million. They have so far successfully prosecuted 466 people, and prison sentences of up to 27 months and 876 fines of up to £10,000 have been imposed. So far, 717 vehicles engaged in such activities have been seized. The goods intercepted are also seized. Civil penalties are available for less serious offences, but more serious ones are taken through the criminal courts.
A successful 24-hour hot line has also been launched, so that people can give information in confidence to Customs and Excise. My hon. Friend mentioned people who are aware of smuggling, and I hope that they, whether ordinary members of the public or in the trade, will not hesitate to give information in confidence to Customs and Excise via that hot line number, which has been widely advertised.
We are aware, of course, that it is the duty differential between this country and the continent which provides the incentive for much of the cross-border shopping and smuggling. We would welcome moves towards greater approximation with other member states, but we must be realistic and recognise that that will be a slow process, because those member states take different positions on that.
A radical and immediate fall in our higher duty rates would be extremely expensive. For example, it would cost some £6.5 billion per year to reduce our tobacco and alcohol rates to French levels. I think that my hon. Friend would agree that that is unrealistic in present fiscal circumstances.
We are fully aware of the difficulties, and we are determined to do all we can to crack down on the illegal and anti-social smuggling of tobacco and alcohol products that undermines the legitimate trade which my hon. Friend has done so much to support.