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Session 1999-2000
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Standing Committee Debates
Finance Bill

Finance Bill

Standing Committee H

Thursday 11 May 2000


[Dr. Michael Clark in the Chair]

Finance Bill

(except clauses 1, 12, 30, 31, 59, 102 and 113)

Clause 14

Fiscal marks on Tobacco Products

Amendment proposed [this day]: No. 8, in page 9, leave out lines 14 to 21 and insert—

    `(5) No regulation under this section shall come into force until it has been published by a notice sent by post to all persons to whom (to the best of the Commissioners' knowledge) section 8H might apply.' [Mr. Heathcoat-Amory.]

4.30 pm

Question again proposed, That the amendment be made.

The Chairman: I remind the Committee that with this we are taking amendment No. 9, in page 9, line 23, leave out from `under' to end of line 25 and insert—

    `regulations made under section 8C above.'.

I am minded to put the question on clause stand part at the end of the debate on the amendment.

Mr. Richard Ottaway (Croydon, South): On a point of order, Dr. Clark. A point of order was raised this morning, in response to which the Financial Secretary agreed to write to members of the Committee about the 3.41 per cent. increase in relation to the retail prices index. He said in response to my hon. Friend the Member for West Dorset (Mr. Letwin) that it was based on market expectations. One of the problems of having a 9 o'clock start to our proceedings on Thursdays is that we do have not have a full opportunity to digest the world's financial press. I had missed the headline of today's Financial Times, which stated:

    Pound's fall cheers industry.

It probably cheers the Government, too. The article stated:

    The pound fell sharply against the dollar and the euro yesterday as the expectation—

an important word—

    spread that UK interest rates are near their peak.

If the Minister were right that the forecast is based on market expectations rather than on what the Treasury expects the RPI to be, he may wish to revise his letter to take it into account that expectations have peaked and that, in all certainty, the figure of 3.41 per cent. is wrong.

The Chairman: Mr. Ottaway, your point of order has been heard by the Minister, and it is for the Minister rather than the Chair to respond to it. I have little doubt that he will do so in a moment.

Mr. Michael Jack (Fylde): On a point of order, Dr. Clark. This morning, Mr. Cook was generous in his anticipation of points of order to say that members of the Committee could remove their jackets if they so wished, but he was courteous in inviting the Committee to inquire of yourself what your ruling would be on the same subject. I seek your guidance.

The Chairman: Mr. Jack, you will recall that, when I chaired the Committee on Tuesday, I invited gentlemen to remove their jackets. I do so again this afternoon, if that is their wish.

The Financial Secretary to the Treasury (Mr. Stephen Timms) I am particularly grateful to you, Dr. Clark, for that final comment. I welcome you back to the Chair. I cannot help but notice that your return is accompanied by the sun coming out.

At the end of our previous sitting, I was responding to the intervention by the hon. Member for Guildford (Mr. St. Aubyn) about the implications for small retailers of the notice power. I was saying that the law provides for the content, the position and the colour of the mark to be set by regulation or notice. Any changes to the specification of the mark would affect initially only a handful of manufacturers and importers.

It would become a matter for retailers if it were decided to end the currency of the old mark, which the hon. Gentleman was anticipating. Given the way in which the Bill is drafted, that can be achieved only by regulation. We would have to return to the list in new section 8C(2)(e) to end the currency of the old mark. As the hon. Gentleman will recognise, it is not among those items in new section 8C(3)(a) to (d), which, we propose, should be susceptible to change by notice.

I shall now deal with amendment No. 9. I share the Committee's desire to ensure that those who might be affected by the new offence of suffering premises to be used for the sale of unmarked tobacco are aware of their obligations. After all, one of the key benefits of the new offence is its deterrent value. Clearly, if it is to be an effective deterrent, people need to know that the offence exists. Customs is already planning a publicity strategy to ensure that everyone who—to the best of their knowledge—might be affected by the offence has reasonable warning of its introduction.

As part of the strategy, every registered business in the country will receive a written notice about the change, which will be included with every VAT return. Articles will appear in the trade press, and letters sent to trade associations. That is a more reasonable and less costly approach than a mailshot, which could include hundreds of thousands of people. Indeed, the mechanics of drawing up a list of every conceivable business that might be affected would be difficult. There are 100,000 retail tobacco outlets in this country, including pubs, clubs and garages, and other businesses might also be affected. To be convicted of the offence, it would be necessary to prove beyond a reasonable doubt that a person had actual or constructive knowledge that illicit tobacco was being sold on the premises. It would be necessary to pass over that hurdle before a conviction could be obtained.

Mr. Oliver Letwin (West Dorset): Did the Financial Secretary use the expression ``constructive knowledge''? If so, what does it mean?

Mr. Timms: That point that I made was that it would have to be proved beyond a reasonable doubt that a person had actual or constructive knowledge that illicit tobacco was being sold on the premises. The person would have to know that the tobacco being sold was illicit, and should not be sold. If the person knew that, and was doing it, he could be convicted.

Mr. Letwin: I entirely understand the Financial Secretary's point. Opposition Members would not quarrel with the proposition that people should be convicted if they know that they are committing an offence. However, if they know what they are doing, they would presumably have knowledge of it. Why would the knowledge need to be constructive?

Mr. Timms: The word ``constructive'' came to mind because managers of premises such as pubs or factories might turn a blind eye to hawkers and people selling illicit products or making illicit tobacco available for sale under the counter. That is the reason for the language that I used.

Mr. Letwin: This point may become important later in the courts under Pepper v. Hart. Does the word ``constructive'' mean that the person ought to have known?

Mr. Timms: No; it means that the person had actual or constructive knowledge, not that he ought to have had it.

Mr. Andrew Tyrie (Chichester): The problem is with the word ``constructive''. If that word were deleted from the record, would it make any difference to what the Financial Secretary is trying to convey to the Committee? Does the word ``constructive'' add anything?

Mr. Timms: As you would expect, Dr. Clark, I chose my words with care. My use of the term ``constructive'' did indeed add to my point, as, indeed, do all the words that I have used. The term ``constructive knowledge'' has a proper meaning in case law precedent—turning a blind eye or being grossly negligent.

Mr. Letwin: This is obviously not a political matter, but it is important. The Financial Secretary explained the matter as I would have expected him to—namely, that a person is considered to have had constructive knowledge of something happening if as a reasonable man he should have known about it, as in the case of a pub owner who should have known what was happening because he was on site.

The Financial Secretary seems to be saying that the courts will be able to judge whether a person who did not know about an incident should have. If it is judged that he should have known had he been a reasonable man, he could be put in prison.

Mr. Timms: If a person deliberately turned a blind eye to something that was happening or had been grossly negligent in not being aware that it was happening, the courts would have that power.

The amendments would not improve the existing provisions for pack marks, and would limit the ability of commissioners to react to changing circumstances. Amendment No. 8, in particular, might jeopardise the use of a valuable aid for Customs and Excise that will add to its armoury against smuggling. I hope that Opposition Members will not present themselves as the smuggler's friend by pressing the amendments to a Division.

Mr. David Heathcoat-Amory (Wells): I am grateful to the Financial Secretary for attempting to give us some reassurances about the amendments and explaining the background to how regulations will be made. However, he has not met our case. He explained that the changes to be made by notice rather than by regulations to be laid before Parliament will be comparatively minor. However, breaches of the resulting rules will still incur a disciplinary sanction. It is therefore important for those who face the possibility of being disciplined to know about the offences and the requirements on the content and type of mark with which they must comply.

It is obviously for the convenience of Customs and Excise to be able to make such changes speedily. However, we do not legislate for the convenience of revenue authorities. Opposition Members feel that it is a good discipline for Customs and Excise to have to ensure that regulations are correct by consulting properly in advance, so that such changes are kept to a minimum.

In addition, any necessary changes can be made quickly by laying appropriate regulations. It is not necessary to return to the House and make changes to primary legislation through a Finance Bill, which would, I agree, be unnecessarily clumsy and might delay matters. However, it is a reasonable discipline to place on Customs and Excise that, if it has made a mistake or wants to make changes to stop an emerging loophole, it must do so in the way specified elsewhere in the clause by drafting regulations for parliamentary scrutiny.

We believe that it is an unnecessary weakening of parliamentary scrutiny to give such additional powers to Customs and Excise, especially as records show that not all notices issued by it reach the regulated community, or reach it in a timely manner.

4.45 pm

The Bill is written for the convenience of the Treasury and Customs and Excise, and the regulated community may incur penalties. That is a significant and countervailing factor that will induce us to press our amendment if the Financial Secretary is unwilling to give the matter further thought.


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