Examination of witnesses (Questions 1420
- 1439)
WEDNESDAY 16 FEBRUARY 2000
MR M BROUGHTON,
MR K CLARKE,
MR C BATES
and MR D CAMPBELL
1420. Yes, it is. Given that you are making
very serious accusations or statements, you cannot base them on
supposition and your interpretation and say that means that it
is actually accurate. That is why I should like to ask Mr Broughton
what his interpretation of those two sentences is.
(Mr Broughton) Frankly again it ism as you are seeing
and I am seeing as well, two lines out of a report. I do not know
what they mean quite honestly. I do not know what they mean. I
could put several interpretations on them. I could certainly put
the interpretation, I can see why Mr Bates would put that interpretation
on, I can see that interpretation, but I do not think it is the
only interpretation.
1421. The point is that it is an interpretation,
it is not a 100 per cent fact. Am I right?
(Mr Bates) All we can do is present documents and
attempt to interpret them as best we can. The danger is that we
could approach this with a sledgehammer and present you with 150
documents which build up a much larger more elaborate case. Here
I am saying that, as far as the documents we have seen and what
is written there, a reasonable interpretation, a reasonable person
looking at that, taking into account the terminology used in all
the documents and everything we have seen, that is what that means
and Mr Broughton rightly confirms that that is a plausible and
reasonable interpretation.
(Mr Broughton) It is plausible. May I just say that
I think the point you are making is a very fair one. I do not
think this Committee should assume that an interpretation made
by the head of an organisation whose sole objective in life is
to harass the tobacco companies as far as they possibly can, through
whatever means possible, is a purely objective interpretation.
Chairman: We shall have to make our own judgements.
Mr Burns: May I move on?
Chairman: I am sorry, I thought you had finished.
Mr Burns
1422. I have not even started my main question.
I was with certain incredulity beginning to understand that a
lot was interpretation and personal opinion and we certainly do
not want this Select Committee to be used as a kangaroo court.
I think it is only fair on both sides of any argument that both
sides have the opportunities to make their points but with respect
that the points should be based on fact rather than on interpretation
and personal views because of the seriousness of the allegations.
(Mr Bates) I do agree with you actually. We are not
suggesting that people should be led from this meeting in handcuffs
and charged or convicted. All we are saying is that there is a
case to answer and as far as we are concerned BAT should look
into it properly and not just wave away these things and that
DTI should launch an investigation into the conduct of BAT. The
level of confidence that we need in these things is that required
to suggest there is a case to answer, not to prove absolutely
with one document beyond reasonable doubt that they had been up
to smuggling. I think they have, they may have a defence.
(Mr Campbell) I do sympathise with your point because
it troubled us immensely as we went through these documents. There
are documents which are grey, there are documents which we threw
to one side saying it could not be fair to put this meaning. I
understand the point you are making but I do say that if you read
it in the context and look at the marketing information for the
country concerned, you will see that those were smuggling routes.
I think I could assist you further by taking you perhaps to documents
which are completely unambiguous on their face and on their meaning.
In 1993, as I am sure the Committee is aware, Canada faced the
position that the United Kingdom is in now in that there was massive
smuggling, primarily recycling through the United States—its
Andorra—and Indian reservations which were the routes across
the St Lawrence. In that context several companies planned massive
increases in smuggling; one of them, RJ Reynolds has already been
convicted in the American courts, its executives are going to
gaol as we speak and it faces a racketeering action in the United
States by the Canadian Government. British American Tobacco, acting
through its current managing director, Mr Ulrich Herter, not only
endorsed the massive increase of smuggling into Canada in June
of 1993 as company policy, it is on the letterheading of BAT Industries
and I do not want to be accused of having anything out of context
here, so as soon as I have finished speaking I am going to pass
this letter right over to Mr Clarke and I am going to find the
additional pages of the correspondence which you will notice are
not there, but they will be with him by the end of the session.
What it says here from the Director of the BAT Group Company,
Imperial Tobacco Limited in Canada, in Montreal, is that an increasing
volume of our domestic sales in Canada will be exported then smuggled
back for sale here. There is no ambiguity there. Perhaps you might
think, and you would certainly want to know and I did want to
know, did Mr Ulrich Herter, then managing director tobacco, now
the chief executive for Mr Broughton, hold up his hands in horror
and say you must not do that. It is one thing if smugglers happen
to take our product through but quite another to plan for a massive
increase in smuggling which, as this Committee will know, had
the purpose and effect of defeating the health policy of the Canadian
Government.
1423. Do we have copies of those letters?
(Mr Campbell) No.
1424. Then may I ask a question. How long have
you had copies of those letters?
(Mr Campbell) I have had them for about three weeks.
1425. Why are you springing them on the Committee
now when you are covered by privilege with the press looking on
rather than supplying them to us in advance so that we could look
at them and prepare for this hearing.
(Mr Campbell) How many volumes would you have liked?
1426. Obviously that letter—
(Mr Campbell) Every one of these documents—and
I have three volumes—deals with smuggling.
1427. I accept that. I will ask the questions.
Obviously, because you have taken that letter out and basically
sought to read it into the record just now, it has a special importance
to you because you have not tried, fortunately, to read the other
three files into the record during the course of this afternoon.
I can only assume that letter is particularly important to you
and particularly damning from your point of view.
(Mr Campbell) I think so, yes.
1428. Why—I get back to my original question—did
we not get that letter in advance rather than having it sprung
sight unseen on us by reading it into the record when you have
had it for a week?
(Mr Campbell) I wonder whether you had troubled yourself
to read The Guardian articles which led to this hearing.
1429. Yes.
(Mr Campbell) If so, you would have seen this letter
referred to. You would have seen the quotations.
1430. Yes, but you have the full text of it,
The Guardian article does not.
(Mr Campbell) I am not trying to read it into the
record. Yes, we do not have the space in The Guardian.
1431. That is besides the point you are sidestepping
the principle.
(Mr Campbell) If you want five volumes or 50 volumes
of documents concerned with smuggling, they are available. But
if I may finish the point on this one
1432. No, actually because with respect I should
like to move on because we are not going to be here all night.
(Mr Campbell) It is only two sentences. It is to say
that the response of Mr Herter on behalf of British American Tobacco
was not to say stop smuggling in Canada, he said pay us the two
per cent royalty on those volumes. In other words, if you as one
of our group companies are going to smuggle more into Canada to
defeat the health policy of the government and evade taxes we
should like to have a two per cent profit here in London. I hand
over those pages now.
1433. I now want to go back to something, I
shall be quite frank, which I do feel rather queasy about which
was discussed at the beginning of this hearing and that is that
this Committee's aim is to produce a report on the health effects
of tobacco amongst other things and that what we are seeking is
information, accurate information on the whole area. We are, as
has been mentioned, covered by parliamentary privilege, but with
privilege comes responsibility as well and it does no committee
any good, nor does it enhance the reputation of the select committee
system, if that privilege is then used to become a kangaroo court.
So there is an important balance between unproven allegations
and facts. What I am interested to know is that in the submissions
we received in advance, the answers to questions since we started
here today, a number of very serious and very eye-catching allegations
has been made with a dearth of fact. Certainly Mr Campbell's submission
has some very serious allegations in it but basically no facts.
They are taken as facts in the way it is written, but nothing
to back that up.
(Mr Campbell) May I respond?
1434. I will finish my question first. Mr Bates's
document does have many sub-paragraphs and lots of extracts. As
we found out a few minutes ago, discussing the China one, that
is open to interpretation and it is not a killer fact to prove
something. People may draw an interpretation of that and of course
what we have are only selected extracts. We do not have the document
in its entirety so that we can form a common view. What I should
like to know, and this is my final question, the straightforward
question, is why was The Guardian article far less, for want of
a better word, sensational in its accusation than the briefs which
have been given to us, the discussions we have today, which are
covered by parliamentary privilege?
(Mr Campbell) I do not accept the premise. I do not
think that in any way The Guardian was less sensational. It is
perfectly clear from the headline and from the text that what
was being said in plain language and with the force of the presentation
was that British American Tobacco PLC deliberately arranged for
the smuggling of cigarettes as a major and substantial part of
its corporate policy. The same article also alluded to the peso
brokering traffic in the Caribbean, that is the narcotics connection,
and made clear the prominent involvement of executives such as
Mr Herter who was named, as I recall, in the article. All these
matters were put on the record. I think they were sensational,
if you want to put it that way. They occupied three pages, the
front page and two other pages of a prominent national newspaper
and I think that is what is in my trade called a sensation.
(Mr Broughton) It just so happens that this document
is a document which I think—I cannot remember accurately—Mr
Campbell said was the unimpeachable, categoric, ultimate document
to prove that BAT manages smuggling. I have to say that it is
typical of the interpretation which he puts on a document which
does absolutely no such thing whatsoever. I do know something
about this document and I can give you the background to this
document and it is totally different to the one Mr Campbell was
suggesting.
Chairman
1435. Could you give us that background very
briefly?
(Mr Broughton) I shall try to give it to you briefly.
Substantial smuggling was occurring in Canada. The Imperial Tobacco
Company, Mr Don Brown specifically, had negotiations with the
Government, extensive negotiations, well over 12 months as I recall,
trying to get the Government to take action. Government promised
action, it did not take the action, his competitors were continuing
to export to the USA and some of the cigarettes were coming back;
some were staying in the USA but some were coming back through
the Indian reservations. Mr Brown explained to the Government
that this was an impossible situation to continue losing share
and unless the Government took action they would have to continue—continue—the
original position of exporting to the US, indeed they were under
legal pressure from US persons. There are constraints on competition
and constraints on the strength of trade if you refuse to supply,
so he was under pressure from that side. Every single export which
was made to the US after this process was reinstated was registered
with the Canadian Government, registered with each province in
Canada, submissions were made to each province to try to stop
this. This was not managing exports, this is the classic case,
pretty well identical to the one we were talking about earlier
of supplying Tescos and the Carrefours on the other side of the
Channel, knowing that some of it is going to finish up back in
the UK. This was supplying exporters, legitimate traders, in the
US knowing that some of it was going to come back into Canada
and telling the Government it was going to come back into Canada
and asking them please for God's sake to try to do something to
stop it coming back into Canada. If that is Mr Campbell's unimpeachable
definition of BAT managing smuggling, well that is all I can say
to it.
Dr Stoate
1436. May I just say for Mr Clarke's information
and also for the record that The Guardian article, which I have
in front of me, in fact refers 11 times to specific BAT documents.
So it is quite wrong to say that The Guardian article did not
directly refer to individual documents. It does on 11 occasions
(Mr Clarke) It does not refer to complete documents.
Bear in mind that it is a sentence from a document and in The
Guardian article some of the documents are unidentified. You cannot
find them without knowing what the document is from which it is
taken.
1437. There were enough references. I can help
you because there were enough references on 11 occasions to identify
those documents in BAT files and I am quite sure your archivist,
given this information, could have found those documents. That
is simply for the record. The other thing I should like to put
on record is that I resent your notion that somehow this inquiry
this afternoon is at the behest of ASH or at the behest of The
Guardian. It is a most serious inquiry and the reason I say that
is because as a doctor I can tell you that 120,000 people a year
die of cigarette smoking in this country; 50 per cent of regular
smokers will die of their habit. It is the only legally available
product that kills 50 per cent of its users when used as the manufacturers
intend. Therefore it is not a frivolous inquiry, it is a serious
inquiry and we are looking at smuggling as one aspect of a very
much wider inquiry, as well you know, into the whole process of
what the companies are doing and what we can do as a committee
to reduce the death toll.
(Mr Clarke) May I respond to that first of all? I
understand this is an inquiry into the health and tobacco issue,
which is a perfectly legitimate thing and a very sensible subject
for the Health Select Committee of the House of Commons to choose.
I understand that and I have not been asked to give evidence on
that but it is a subject with which I am familiar. Obviously I
have views on that which is why I have taken up this post with
British American Tobacco with a completely clear conscience. I
take the view, which I think is the position of the present Government
as well as ours, that no-one is talking about banning smoking.
Smoking is a product which carries health hazards, we know that
and that the sale of tobacco should be conducted to adults and
adults who are properly informed of the health hazards. I smoke
and among the many other things I do in life I make my own judgement
about the risks I incur. I have taken part in motor racing, for
a time the Government would not let me buy T-bone steaks. I do
all kinds of things which incur a certain amount of risk. So long
as I am an adult, so long as I am properly informed, so long as
the tobacco companies join with the Government in giving proper
information, I think in a liberal society like ours people make
their own judgements and that is the basis on which we appear.
You had almost finished that, I think. So far as I understand,
the evidence had been taken on health and tobacco and then The
Guardian produced an article on smuggling. Using the methods used
by Mr Bates and Mr Campbell you could have had the whisky distillers
here, you could have had the brewers, you could have had the manufacturers
of motor cars, you could have had anybody who has their product
smuggled worldwide. I can tell you that in Colombia in days gone
by everything was smuggled. If you go to Paraguay or Andorra everything
is smuggled. If you go to South-East Asia, to Myanmar to Vietnam,
parts of China, a lot of things are smuggled. Of course it is
serious if any company, whatever its product, if it is a publicly
quoted company in the United Kingdom, is unethically taking part
in that smuggling. However, I can tell you that there are stacks
of publicly quoted companies in this country who make products
which are smuggled and they are losers by the smuggling and we
should like governments to be more effective in stopping it, including
the British Government. That is a separate issue, probably more
for Treasury and Government rather than this Committee.
1438. I wish to come onto that. I should like
to expand on that but just before I do I should like to clarify
one point. You do not see therefore any ethical conflict between
your role as deputy chairman of BAT and your previous role as
Secretary of State for Health. Even given the fact that you pointed
out the health risks of smoking do you see any conflict?
(Mr Clarke) I took exactly the same view when I was
Secretary of State for Health. I was quite against the idea of
prohibiting the product, making it illegal, anything of that kind.
I took the view that it was the duty of the Government to give
information about the health hazard, that it was a product which
should only be sold to adults and I was involved, not knowing
I was ever going to have any contact with a tobacco company in
the way I now have, in supervising negotiations then of a voluntary
agreement with the tobacco companies about warning notices and
so on. My views and my behaviour have not changed all the way
through from being Secretary of State for Health to my position
now.
1439. That is fine. Can you therefore outline
what was your strategy at the time when you were Secretary of
State for Health, your strategy to reduce the burden of smoking
related illness in this country?
(Mr Clarke) At that time and until the first year
or so as Chancellor, I thought the best strategy, the proper strategy
for the Government was to raise the tax steadily to increase the
price in order to make people think about smoking. By about 1994
it became clear to me that the policy was not working, indeed
it had gone wrong in a way which should have been predicted. The
idea was that you steadily raised the revenue from tobacco until
such stage as you got a downward demand. The Government was quite
braced for declining revenues in due course if that meant that
we were actually reducing the consumption of tobacco to those
adults who enjoyed smoking sufficiently to be prepared to take
the risk. I do many riskier things in my life than smoke, so I
am one of those who would do that. What began to go wrong, and
actually if I had known then what I know now about the history
of Canada, Sweden, other places, and Mr Bates and ASH are still
blind to this, what we failed to judge, was what we were doing
was making a market for smugglers. If Pitt the Younger had come
back and advised me he would have told me that this policy is
a disaster. What you are doing is creating a hugely profitable
trade which criminals move into. The result now is that we are
not serving any health purpose because the price of cigarettes
is getting cheaper for those who have access to the 25+ per cent
on the market which is smuggled.
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