Examination of Witnesses(Questions 240-259)
MR RICHARD
BROADBENT AND
MR MIKE
WELLS
MONDAY 29 APRIL 2002
240. With respect, I can understand all of that,
we have been through that with your predecessors and your predecessors'
predecessors and we note that time after time your manpower has
been cut and you have been starved of manpower. That is a fact,
is it not? If not, put in a table showing your manpower from 1980
to today and that will meet our needs I think, I do not need an
answer on that. You will let me have that?
(Mr Broadbent) Yes. Manpower has declined year on
year every year for the last 10 or 15 years.[9]
241. Coming back to Imperial, you said you are
having an exchange of letters with them with the hope of getting
a memorandum. How long have you been in this exchange of letters
with them?
(Mr Broadbent) We have been talking to Imperial, as
to the other manufacturers, for over 18 months.
242. So you started with them at the same time
as the other manufacturers?
(Mr Broadbent) Yes.
243. When did the other manufacturers sign the
memorandum with you approximately?
(Mr Broadbent) Gallaher is the only one which has
signed, and signed quite recently. The process has really been
understanding the problem, understanding with the companies what
they can do to help us, putting—
244. I did not ask for the process, I just asked
when.
(Mr Broadbent) Gallaher signed their memorandum last
week, the others have not yet signed.
245. Are you near to signing with them?
(Mr Broadbent) Discussions are progressing with particularly
BAT, as I mentioned. There are three major manufacturers.
246. Imperial is the one dragging its feet or
with whom the negotiations are proving most protracted, shall
we say?
(Mr Broadbent) Yes.
247. At what level are you negotiating with
them?
(Mr Broadbent) Chief executive level.
248. At chief executive level, I see. Is there
any sign, or is it too recent, where the memorandum has been signed
that there are any consequential benefits from the memorandum?
(Mr Broadbent) The memorandum is a new initiative
and, as I say, the first one was signed last week so I think it
is a little early yet to judge.
249. It was only that recent. Just before you
came here effectively.
(Mr Broadbent) As it happens yes but not for that
reason.
250. I am sure not. They would not have known
you were coming here, would they? They do not have PR people or
anything like that in the tobacco industry to give them advice
and guidance. I am going to jump around a bit. You mentioned Regals
and Superkings, did I misunderstand you, and I do not mean this
nastily but you mumbled slightly on one of the key words, or it
is my geriatric hearing, did you say they have a very small share
of the legal market or did I misunderstand the adjective that
you used?
(Mr Broadbent) Their share of the legal market is
smaller than their share of the smuggled market.
(Mr Wells) About 10% of the legal market.
251. They make up what percentage of the smuggled
market as far as we can establish?
(Mr Wells) About 50%.
(Mr Broadbent) We estimate about 50%.
252. To someone naive and looking at it in an
unsophisticated way like myself it almost looks as though they
are manufacturing for smuggling. I am sure that is not true but
it could look like that.
(Mr Broadbent) As I say, the issue with the memorandum
is it is important to us that we are clear about the company's
commitment before we sign a memorandum with any company.
253. What is stopping you signing this one?
Is it because they are slow in responding or that you have less
conviction in their commitment?
(Mr Broadbent) I do not think we are ready to sign
a memorandum with them because to sign a memorandum, which is
essentially a statement of intent, a statement of best practice,
to be meaningful has got to be based on a period of a working
relationship. That is why these memoranda are being signed after
18 months' experience. With Gallaher we are very satisfied and
we have signed a memorandum to enshrine that; with Imperial we
are not.
254. It does seem quite a coincidence, as I
think everyone will have observed, they have such a small domestic
share and such a large illicit import share. We can draw our own
conclusions from that even if they are erroneous. Tell me, how
many cigarettes did you confiscate last year?
(Mr Broadbent) As I said, we do not have the final
figures.
255. Just ball park.
(Mr Broadbent) In broad terms I believe the number
is going to come out at roughly the same level as the previous
year. In the previous year it was 2.77 billion.
256. How much?
(Mr Broadbent) It was 2.77 billion in the year before.
257. That is quite a cigarette mountain, is
it not?
(Mr Broadbent) It is.
258. What do you do with them once you confiscate
them?
(Mr Broadbent) I am afraid we destroy them but we
have recently—
259. How do you destroy them?
(Mr Broadbent) We have recently learned to destroy
them in a slightly cleverer way. We turn quite a lot of them now
into power station fuel.
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