Cigarettes (Hansard, 27 January 1977)

§ Mr. English

asked the Chancellor of the Exchequer (1) what is his policy towards the EEC First Directive on Tobacco Taxation on tobacco prices; and whether he will include a change to the EEC regulations on tobacco in his next Budget;

(2) what is his policy toward the proposals being put up by the tobacco manufacturers, with support from the unions, for a two-tier taxation system on cigarettes thus preserving the flexibility to allow small cigarettes a smaller tax burden; and what is the outcome of this consideration;

(3) whether it is the intention of the Government to adopt the EEC First Directive for tax on tobacco from January 1978; and what estimates have been made of the effect this would have on the output and work force of the tobacco industry;

(4) whether the adoption of the EEC First Directive on tobacco tax will reduce 762W the range of cigarette prices in the United Kingdom; and, if so, by how much;

(5) if he will consider a switch from tobacco tax based on weight of raw tobacco to one which takes no account of different sizes of cigarette prices, except in so far as the ad valorem element is reflected.

§ Mr. Robert Sheldon

The Government are committed to the implementation of the EEC First Directive on Tobacco Taxation by 1st January 1978. This commitment, which was accepted by the Government of the day on Accession, requires the United Kingdom to switch from a duty charged on the weight of tobacco used in the manufacture of cigarettes to a duty charged, at uniform rates, both on each cigarette, irrespective of size, and on the retail value.

Provision for the switch, which was started in the Finance Act 1976, will have to be carried to completion in the next Finance Bill.

This second step is likely to involve a further reduction in the range of cigarette prices in the United Kingdom, but the extent will depend upon the Chancellor's Budget decision within the wider latitude provided by the Directive and on how the major manufacturers respond. In reaching his decision the Chancellor will take full account of any possible effects on the output and the work force of the United Kingdom tobacco industry, and upon health.

Any amendment to the First Directive to provide for a two-tier system on cigarettes, proposed by one United Kingdom tobacco group, would require first a proposal to that effect from the EEC Commission and second the unanimous approval of member States.