Finance Bill

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Mr. Banks: I said ``logically''; I did not advocate banning, because that would clearly be completely unenforceable. If we think we have problems with drug abuse on our streets, try banning alcohol or tobacco and see what would happen. I was saying that banning would be the logical conclusion if we considered health alone.

Mr. Flight: I thank the hon. Gentleman for that comment.

What have we done? We have created about 150 Russian-style professional smuggling organisers—serious heavy criminals—just as prohibition did on a far bigger scale with bootleggers in the United States. I may add that the United States has been substantially stuck with the drug mafia as a direct result of the prohibition policies of the 1930s.

Mr. Alun Michael (Cardiff, South and Penarth): Would the hon. Gentleman watch his language? The Government do not create criminals; they see an opportunity in a market. I am sure that he would agree that it is they who must take responsibility for that.

Mr. Flight: Of course I agree, but with respect to the right hon. Gentleman, that is a rather self-righteous comment. If, as a result of Government policies--and given human nature--a criminal body emerges, the Government indeed have a role in creating an environment that leads to criminals.

Mr. David Taylor: Is that not just a classic example of the millennia-old logical paradox of post hoc ergo propter hoc? That fact that two incidents occur in sequence does not necessarily link the former to the latter.

Mr. Flight: With respect to the hon. Gentleman, I think that a common sense issue is at stake. The result of the price of tobacco here compared to that on the continent, just as of the complete prohibition of alcohol in United States when lots of people wanted to drink it, is to create an environment that bad people will exploit. If hon. Members cannot see that that is likely, they are living in an unrealistic utopia.

Mr. David Taylor: The hon. Gentleman referred to the Government creating Russian-style mafias. That is the phrase to which my right hon. Friend the Member for Cardiff, South and Penarth (Mr. Michael) and I especially object.

Mr. Flight: The policies that the Treasury has pursued under both the present and the previous Administration have undoubtedly led to our current problems. It is widely believed that the reason why the Taylor report and the Rocques report have not been published is because they make exactly that point.

Mr. Michael: I think that the hon. Gentleman does not understand the point that my hon. Friend and I are making. Government policy may create an environment—as the hon. Gentleman said once—in which crime and offending increases. Government certainly has a responsibility to seek to reduce offending and therefore to minimise the environment in which it happens. In so far as the hon. Gentleman criticises Government policy on that basis, there is a reasonable point for debate. However, to say that Government action causes offending is to appear to condone that activity. That is something that parliamentarians of every party should be careful not to do.

Mr. Flight: Yes, the Government have created an environment; the environment has led evil people to exploit it. With the greatest respect, I think that it is slightly pedantic not to accept that if Government policies—whoever is in power—lead to such things happening, the Government are responsible. My point is that that policy has led to the creation of such a mafia in this country.

Mr. Brian H. Donohoe (Cunninghame, South): Are the Opposition arguing for the legalisation of cannabis, ecstasy and all other drugs as that is the direction in which the hon. Gentleman's argument logically takes us?

Mr. Flight: We are debating the imposition of an increase in duty on tobacco. We are not debating cannabis but whether the duty policies that are being followed are being effective in their objective of both reducing smoking and generating the maximum revenue. My assertion is common sense and should be accepted by every hon. Member. Indeed, Government figures show that the results of the pricing policy to date have been counter-productive on both issues. While getting off the escalator is a good thing, widening the pricing gap is likely to worsen the present problems.

I turn now to another important point on which there is some muddled thinking. The starting point in terms of consumption is whether or not duty is paid. Within the non-paid category there is clearly that which is legal and that which is bootlegging and smuggling. No duty is paid on something like 80 per cent. of hand rolled. What proportion of that is illegal is not precisely known. The figure for packaged cigarettes is around 40 per cent. non-duty paid and again it is not precisely known how much is smuggled. We do not know whether the Rocques report had any evidence to offer on that point. Those figures show the counter-productive nature of the overall pricing strategy with regard to its objectives.

We all know from direct experience that there is a divisive situation behind what is bootlegged and what is legal. The pricing system broadly enables the more privileged members of society to buy tobacco easily at a lower price and then leads those who cannot afford to travel as much to break the law and to buy smuggled goods. That leads to the process that occurred under prohibition—an established criminal body managing to structure itself beyond the law.

Finally, I understand that the Government's target is to reduce the smuggling element to about 20 per cent. How idiotic. The target should be no smuggling. We should have a price strategy where the target is no smuggling. As many hon. Members will be aware, Sweden woke up to the problem a while ago and adjusted its pricing downwards by 30 per cent. to try to get closer to that position on the graph which would demonstrate that smoking is being discouraged without the duty straying excessively into the territory of diminishing returns.

Mr. Mark Hendrick (Preston): Is the Opposition's policy one of tax harmonisation across the European Union? If not, is not what he suggests a de facto means of tax harmonisation?

Mr. Flight: Before the UK joined what was then the common market, the price differential between tobacco here and tobacco in Europe was considerably less. The widening of that price differential has been entirely a decision of this country. It is self evident that where one lives in close geographic proximity it is unwise for politically correct or other reasons to have tax strategies that widen the pricing gap on retail goods because it leads to the distortions of which we are all aware. It has nothing to do with either tax harmonisation or common currencies. The power lies with this country and this Parliament to determine what is wanted.

I have gone on too long, so I shall conclude. The taxation strategy for tobacco went off the rails a long time ago. Instead of achieving its objectives, it has led to the undesirable development of a Russian-style smuggling mafia, and many more young people have taken up smoking than might otherwise have been the case. It is time for a breath of fresh air in both Westminster and Whitehall, and I hope that, by coming off the escalator, the Government are signalling a change in Treasury thinking.

Mr. Timms: We have had an interesting debate, which I have listened to carefully. I wish to comment on some of the points that the hon. Member for Arundel and South Downs (Mr. Flight) made. He misrepresented the Government targets, but I will come to that later. I draw his attention to the submission from Action on Smoking and Health, which was prepared in the run-up to the Budget. In section 2, entitled ``Tobacco taxation—a successful policy'', it describes how tobacco duty rises since 1997 have affected smoking:

    ``Over this period there has been a sharp drop in teenage smoking''.

The hon. Gentleman's point about increases in smoking is not right. Evidence from the general household survey is that, overall, smoking prevalence has not been increasing since 1997. The key indicator is the number of people who smoke, determined on the basis of personal interviews.

Mr. Flight: I referred to evidence that showed a 6.5 per cent. increase in consumption since 1996 and, in particular, an increase in consumption by young people. With the greatest respect for the organisation that he quotes, I believe that what it is saying is wishful thinking.

Mr. Timms: The hon. Gentleman is wrong. It is true that trade estimates on the number of cigarettes consumed show a 6 per cent. rise, but that is based on debatable assumptions about how the amount of hand-rolling tobacco is translated into the number of cigarettes. The key measure is not the number of cigarettes consumed but the number of people who smoke. The general household survey shows clearly that that has not been increasing. Indeed, the data show a considerable drop in teenage smoking since 1997. His pessimism on both fronts is ill-founded.

Mr. Letwin: I am interested in the Financial Secretary's argument. Is he asserting that Her Majesty's Treasury's economists have advised him that the price level is more likely to have an elasticity effect on determining whether people smoke than it is on determining the number of cigarettes that they smoke? If so, it would be counter to every elasticity study that I have ever seen.

Mr. Timms: No, I am advising the hon. Gentleman that the general household survey shows clearly that the prevalence of smoking has not been rising. That is an observed fact. The key objective of the Department of Health, quite rightly, is that the number of people who smoke should be controlled.

Mr. Letwin: The Financial Secretary is too intelligent for that. Surely, he recognises that we are debating whether the duty has been responsible for, on the one hand, decreasing the number of people who smoke—I accept his evidence that that is not increasing—or, on the other hand, whether it has been connected with the fact that the amount smoked by those who smoke has risen. If the duty were effective in either case, one would expect it to have been effective on the amount smoked by smokers, and not on determining the number of smokers. That suggests that, rather than duty, a third party cause, such as social convention among the young, is limiting the growth in the number of smokers. Is that not the case?

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