HL Deb 18 March 1999 vol 598 cc826-8

3.19 p. m.

Lord Jacobs asked Her Majesty"s Government:

In view of the success of Customs and Excise in detecting the illegal importation of hard drugs, what new measures are being taken to prevent the loss of £1 billion per year from tobacco smuggling.

Lord McIntosh of Haringey

My Lords, the Comprehensive Spending Review of July 1998 allocated Customs £35 million to tackle evasion of alcohol and tobacco duties, and this has enabled them to employ over 100 extra front line staff who will be operationally effective from 1st April. The Paymaster General announced after the Budget an independent evaluation of the strategy and measures deployed to tackle excise duty fraud and evasion and in particular the growing threat of tobacco smuggling.

Lord Jacobs

My Lords, I thank the noble Lord for his reply. Does he agree that HM Customs and Excise have been exceedingly successful in detecting hard drugs coming into this country where a packet the size of a packet of cigarettes may have a street value of several thousand pounds? Can he therefore explain why Customs and Excise have had difficulty in detecting what must be a convoy of 40-tonne trucks coming into this country loaded with tobacco?

Lord McIntosh of Haringey

My Lords, I do not believe it is true that Customs and Excise have been notably unsuccessful. The seizures in 1997–98 were valued at £76 million compared with only £29 million in the preceding year. One of the problems has always been that, for example, the illegal freight import of tobacco is not so easily susceptible to detection by sniffer dogs, although some have been trained for that purpose, and we do not yet have in place extra equipment at all ports to enable us to identify freight loads.

Lord Higgins

My Lords, should not Customs and Excise be congratulated on their actions in the detection of illegal drugs? But is it not the case that other European Union governments take a more schizophrenic attitude to the taxation of tobacco than do we who give priority to health? That being so, can the noble Lord inform the House whether the list of unfavourable tax practices that is being examined by the Paymaster General includes the taxation of tobacco?

Lord McIntosh of Haringey

My Lords, I do not understand what the noble Lord means by "schizophrenic". Perhaps at a later time he will explain to me his use of that word. The list to which the noble Lord refers contains possible examples of harmful tax competition. I do not believe that excise duties fall into that category.

Lord Gisborough

My Lords, will the noble Lord look into his history book? Mr. Pitt, the younger, reduced the tax on tea from 110 per cent. to 25 per cent., thereby ruining the smuggling trade and increasing the take by the Exchequer.

Lord McIntosh of Haringey

My Lords, I hope that the noble Lord is not inviting us to, Watch the wall, my darling, while the Gentlemen go by". A significant element in the growth of smuggling is the big difference in duty between our tobacco taxes and those of other countries. But that is by no means the whole story. There are issues related to transportation costs and tobacco margins. It is also true that Italy and Spain have much lower tobacco duties, but they still have a very serious smuggling problem.

The Earl of Northesk

My Lords, is it not the case that persistent application of the escalator by successive Chancellors has meant that the annual revenue loss has risen from £560 million in 1996 to £1.5 billion in 1999? Does this not represent a triumph of ideology and political correctness over common sense?

Lord McIntosh of Haringey

My Lords, the noble Earl attacks the escalator policy. Presumably, he also applies that to fuel duties and calls that "ideology". First, it was begun by his own government and, secondly, the reason for the escalator policy on fuel duties is based on global warming and environmental protection. The escalator for tobacco is a public health issue. I do not believe that those are negligible considerations.

Lord Stoddart of Swindon

My Lords, does my noble friend agree that the law of diminishing returns appears to be operating in relation to the over-taxation (if I may put it that way) of tobacco? Does my noble friend also agree that that has an adverse effect on government health policy since the Government and the authorities are increasingly unable to determine whether tobacco smoking is increasing or decreasing?

Lord McIntosh of Haringey

My Lords, I simply do not agree with my noble friend that we have reached the point of diminishing returns. In purely financial terms the income from tobacco excise duty is very substantial. While I do not in any way condone smuggling or underestimate the cost to the Exchequer of that activity, nevertheless it is important for both public health and financial reasons that we should continue this policy.

The Earl of Onslow

My Lords, is it not true that the Government believe that if wages are taxed and social costs are imposed on wages on the Continent jobs will come to Great Britain? However, the Government then state that if they tax petrol and tobacco it will have only a beneficial cost. I am a simple fellow. Is it not self-evident that if a whacking great tax is imposed on tobacco a person will bring a Ford transit van across the channel loaded to the axles with smoke-your-own and say that all of it is for his personal consumption even though that person does not smoke? One does not have to be other than a simple fellow like myself to understand it. Why cannot the Government understand that—or are they not simple? Perhaps they should be.

Lord McIntosh of Haringey

My Lords, the noble Earl is, as he knows, a very subtle fellow. I am astonished to find him arguing from the Conservative Benches in favour of tax harmonisation, as he appears to be.