Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses(Questions 160-179)



  160. The chap who comes into the pub and says "here, I want some cigarettes"?
  (Mr Broadbent) I am interested in the person supplying in the pub.

  161. Finally, on this advertising campaign, I have done a little focus group on this side of the Committee and not a single person, with the exception of Barry Gardiner who says he vaguely remembers something he saw about a year ago, has seen any of these adverts or remembers seeing them. It is not a very effective advertising campaign if people do not remember them.
  (Mr Broadbent) I bought some leaflets just in case that I will hand out after the hearing. Like all campaigns which are intended to get value for money it is a targeted campaign, so although at the general public level there are recognition rates around the 40% mark, if you look at HGV drivers we have increased recognition rates from 60% odd to over 80%.

  162. So they know they have got to really hide it.
  (Mr Broadbent) They know they have got to really hide it, indeed. Or, indeed, retailers. Recognition rates have gone up very materially with retailers. We focus advertising on certain groups.

  163. Not on smokers?
  (Mr Broadbent) We do a certain amount of general advertising as well. We target it at what we perceive to be particularly high risk groups.

Mr Davidson

  164. I wonder if I could just follow on the points about resourcing starting with counterfeiting. Around 17% or so of the trade, as I understand it, is counterfeit. Can you just clarify are there particular brands that are counterfeit, that disproportionately are counterfeit, and what have you done to publicise that?
  (Mr Broadbent) As my colleague mentioned, probably the most popular counterfeit brand is Benson & Hedges, which is interesting because the smuggled brands are predominantly Regals and Superkings.

  165. Sorry?
  (Mr Broadbent) There are two brands which make up about half of the entire smuggled market and they are Regals and Superkings and they are both made by the same tobacco manufacturer. The most popular counterfeit brand is Benson & Hedges which actually is much less of a problem in smuggling.

  166. Have you considered the question of publicising the fact that there is, say, a 50/50 chance that a packet of such and such a brand will have a combination of camel's droppings and cabbage because it is completely counterfeit? That would damage their sales I would have thought.
  (Mr Wells) One of the things that is important to distinguish is between sales in the retail market, which we believe are predominantly legitimate (in other words the retail market is rarely the source for smuggled cigarettes) and the typical sources for illegal cigarettes. We have considered whether it would be wise in terms of those typical illegal sources to make the point that a large proportion are counterfeit, and indeed there has been some publicity in the tabloid press about that. In our view, whether these are cigarettes that are illegal are the genuine product (in the sense that they are the brand they are purported to be) or whether they are counterfeit makes little difference from our point of view; we are equally concerned either way. Equally, from a health point of view, cigarettes, whether they are counterfeit or legitimate, do damage to your health. We have considered that but decided against it.

  167. You presumably want to damage the market and making it known that, for a particular brand, very few of them are legitimately made and smuggled but there is a large proportion of them that are counterfeit and if you are buying brand X in a pub it is likely to be camel droppings and cabbage would damage their trade quite considerably. They might then buy other smuggled brands but at least you might have knocked one element of it on the head. I am surprised that you have not considered doing something like that.
  (Mr Broadbent) It is quite interesting and we should think about it. There are two issues, one is how big a share of the total market is the counterfeit Benson & Hedges, but also we would need to be very careful if we advised people about buying Benson & Hedges because we must not damage the legitimate trade.

  168. On the question you mentioned about Hong Kong being a particular place from which counterfeit cigarettes are coming, presumably in those circumstances from China, I am not clear to what extent that in itself has been publicised. Having been to Hong Kong not all that long ago, they seemed very keen to indicate that they are above board and a centre of probity and so on and so forth. I am pretty sure if it was going to damage Hong Kong's international reputation they would see their way to taking action on this if they were incentivised in some way by the threat of bad publicity. Have you considered that?
  (Mr Broadbent) Again there may be a role for publicity. We have made our anxieties known to the authorities in Hong Kong. There is obviously a question about at what point you go public if you like. We have never hidden the fact that we think there is product coming out of the Far East but, there again, there is product coming out of many places.

  169. A delegation of MPs went there and several other places in China and nobody mentioned this to us at all. If it had been such a big issue I would have thought it would have been drawn to our attention in some way. The staff in the British Consulate did not mention it either. You might be passing it on but passing this information on in secret does not seem particularly helpful. Maybe I could move on. I wanted to pick up this question of the tobacco companies. I understand the point about Andorra but what is the saying "as one Andorra closes another opens"! You mention that there were other locations where this was happening. Presumably you are able to identify the companies who are selling into markets in exactly the same way. I must confess I cannot identify a reason why you should not publicise that.
  (Mr Broadbent) No, I entirely understand that. Let me try and go through it. About half the smuggled market is made up of two brands, Regals and Superkings, which are both manufactured by Imperial. Very significant volumes of those brands are exported to third countries where there is no material domestic market share that Imperial holds. We have a system in place with all manufacturers where we seek to go through with them what their export destinations are, who the customers are, what the contracts are, and we issue warnings to them in the form of red and yellow cards if we think they are high risk customers. When we seize goods we also have a system where the tobacco company is asked to track and trace where those goods came from. Clearly when one company accounts for 50% of the smuggled market share, you are very dependent on the co-operation you get from that company in being able to respond quickly and fully to those flows. Although Imperial put out a press release just a few days ago saying they had a good history of co-operation with Customs & Excise, our view would be different; I think it has been quite a challenging process.

  170. What a wonderful euphemism that is! It would be helpful if you could give us a note as to what the new Andorras are and also some information about the companies who are exporting there with no record of having sales there. I think that that would certainly be something that would really be quite helpful to the Committee and we would want to take that up with the companies involved. I am fascinated by your concept of yellow and red cards. It would be helpful if you could give us a list of the occasions when they were issued.
  (Mr Broadbent) I can give you a couple of examples now. We issued a red card and a yellow card to Imperial in relation in one case to Afghanistan and another case to Moldova. That would be an example where we would say they are very, very high risk exports.

  171. It would be helpful if we had a list of dates of those and then possibly the Committee would want to follow up whether or not exports continued from the companies involved.
  (Mr Broadbent) I am happy to try and help the Committee. I just need to be conscious that the information is often given to us in confidence. We can give it to you and you must make your own judgments.[6]

  172. Indeed. Can I clarify about retailers. It is my impression that just over the Channel in France there are a number of British retailers who are selling British brand tobacco which is clearly for carriage back into the United Kingdom and that is where a number of Britons are buying their over the limit cigarettes to try and smuggle in. What dialogue have you had with companies in these matters?
  (Mr Broadbent) There are a number of outlets, some are British owned, some are French owned. Of course, if you speak to the owners they say, "It wasn't us, it is somebody else." That analysis is largely right. Where we have focused in that case is on a very, very tough interdiction policy. One of the announcements in the autumn was that white van trade was down by 76% last year. That is one of the areas where we have have made most rapid progress.

  173. Can I follow up this point about "it wasn't us, it was somebody else". There are several schools in my area who do not accept that line with heroin or any other product. Can you clarify whether or not any of major supermarkets—Sainsbury, Tesco, Safeway—are in that position of selling goods which are likely to be imported into this country and using the defence "if we did not do it, somebody else would do it"?
  (Mr Broadbent) That last bit I would say was my own phrase and I recognise it was probably a slightly sloppy one.
  (Mr Wells) There are several UK supermarket chains including Tescos that operate in Calais. I know a number of others do also. In fact, most of the smuggled tobacco, strangely enough, is retailed in Luxembourg and Belgium rather than France because the rates are cheaper in Luxembourg and Belgium.

  174. Tesco have branches there then, do they?
  (Mr Wells) I am not sure that they do. Clearly there is a perfectly legitimate shopping market going on in France. It is perfectly legitimate to buy your cigarettes or alcohol or any other products in France and bring them back for your own use. That is not an insubstantial amount of the tobacco consumption in the United Kingdom.

  175. That was one of the points I wanted to pursue as well, the question of how much it is appropriate for individuals to come back into this country with duty paid. I think I heard you say the figure of 800 at one point. Is that correct? That would be your indicative level?
  (Mr Broadbent) For cigarettes.

  176. Anybody bringing in more than 800 in would be liable to seizure?
  (Mr Broadbent) 800 is simply an indication of what is reasonable for personal use. You can bring in any amount you wish if it is for your personal use. It is re-selling it for use of other people which is the offence. 800 is the indication we give. Above that you may have to answer questions. In fact, many of the people who are stopped with more than 800, we ask them a few questions and they say, "I have got 1,500 but I smoke them," and that is fine. Above 800, if you are stopped, you have got to satisfy us that they are for your personal use.

  177. Has there been any co-operation from companies like Tesco in limiting sales to 800 or 1,000 or any reasonable amount?
  (Mr Broadbent) There have not been lengthy discussions about trying to limit sales in supermarkets overseas. There is work, for example, with P&O to get people to understand the 800 limit if they get stopped above 800.

  178. I wonder if I could pick up this question of free import of goods that are bought overseas. Presumably other elements of Customs would seize pornography which might very well have been bought legitimately but standards vary. The fact that something has been bought duty paid somewhere else in the EU does not automatically give someone the right to import it, does it?
  (Mr Broadbent) There is an absolute prohibition on certain forms of obscene material. In the case of tobacco you are allowed to bring tobacco to this country as long as it is for your personal use. The 800 is just an indication.

  179. Because pornography raises issues beyond sales within a Single Market, am I right in thinking that since the EU does not have competence in health matters that it would be entirely appropriate for the British Government to say "for health reasons we are raising tax levels and we are saying either no imports duty paid or 800 maximum"?
  (Mr Broadbent) No, I do not think it does have that freedom because the Government's freedom is constrained by Article 7 (as amended) of the Convention which says we shall not take steps that will restrict freedom of trade.

6   Ev 55-60 Back

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2003
Prepared 10 January 2003