Memorandum submitted by the Tobacco Workers'
Alliance
INTRODUCTION
The Tobacco Workers' Alliance is a coalition
of workers in all the unions involved in the tobacco manufacturing
industry, comprising members from Amicus, Transport and General
Workers Union and the GMB Union. The General Secretaries of these
unions fully support the Tobacco Workers' Alliance in their campaign
to defend the jobs of their members.
SMUGGLING AND
THE EFFECT
ON THE
ECONOMY
1. We cautiously welcome the Chancellor's
decision to make only an inflationary rise in tobacco taxation.
We are encouraged by the added investment in HM's Customs and
Excise and the apparent, but small, decrease in tobacco smuggling.
However, despite the best efforts of Customs Officers, smuggling
is still of major concern to UK manufacturing jobs, legal sales
and law and order.
2. The revenue loss to the Treasury is still
at an extraordinary level. The Treasury is losing over £3
billion in unpaid duty.
3. European tax harmonisation does not look
like a possibility in short to medium term. The cigarette tax
burden compared with the overwhelming majority of our EU competitors
is increasing as is the tax differential.
4. The idea that a reduction in tax would
cost the Treasury money is without a doubt false. An increase
in tax on tobacco at this stage will increase the smuggling market
and decrease the retail market. This would surely not meet the
criteria of a successful policy towards tobacco.
5. The Government's policies towards tobacco
are making only a small impact on what is still a major concern
for those that are employed in the industry. The Tobacco Workers'
Alliance believes that public policy should be a two-way street.
If a Government policy is not working it should listen to those
involved as to why and act accordingly.
Points to note:
— Treasury is losing over £3 billion
a year in unpaid duty
— Pack of cigarettes is £3.30
cheaper in Spain
— 50g pack of hand rolling tobacco
costs £9.32 in UK, same pack in Belgium costs £2.50
— Smuggled cigarettes can be widely
bought in the UK for around £2.50 a packet.
— Terrorists and criminal gangs are
estimated to be making a billion pound profit each year from smuggled
cigarettes.
RECOMMENDED ACTION
6. The Tobacco Workers' Alliance calls upon
the Government to take immediate steps to protect British tobacco
manufacturing jobs by tackling the threat posed by bootlegged
tobacco. These are:
— An immediate reduction or at least
freeze in duty on tobacco products
— A full review of British tax policy
on all tobacco products
7. We believe a reduction in tax could substantially
reduce smuggling whereas a freeze in duty would go some way towards
stabilising the rate of smuggling. Therefore helping to safeguard
the jobs of the 7,000 people employed directly in the industry
and some 120,000 indirectly, which are being put at risk by the
Government's present policy on tobacco taxation.
8. If the Government were to regain the
£3 billion, it would be enough to cover the costs of buildings
and equipment for the NHS.
LAW AND
ORDER—THE
CRIME OF
SMUGGLING
9. The price differential with mainland
Europe is now so great that organised criminal gangs and former
drug smugglers have turned to tobacco smuggling in preference
to other activities, because rewards are high, risks are low and
the punishments, if caught, are relatively mild. In Northern Ireland,
the percentage of gangs involved in cigarette smuggling has increased
by 10% from 2002. [14]
10. Customs and Excise have admitted that
the more successful they are getting at detecting smuggled goods
the more sophisticated the criminals are becoming with their smuggling
techniques. The smugglers are using well established routes which
are enabling them to meet the demand of the British public for
cut price cigarettes. They are increasingly turning to guns and
violence to protect their lucrative trade.
11. The Government need to understand that
the smoking population of the UK are not only disgruntled with
the exorbitant taxes on tobacco products but are also reluctant
to assist in preventing the crime of smuggling by purchasing their
tobacco from the higher priced legal vendors.
12. If this continues there is a very real
risk to the 6,800 jobs directly provided by tobacco manufacturing
throughout Britain, with the majority of plants being in areas
of high unemployment.
Is increasing tobacco duties the best policy for
reducing tobacco consumption?
The answer to this is simply yes to a point
but that point we believe as do many others has been well exceeded
by the UK Government as can be easily demonstrated by the resultant
disorderly market.
THE BUDGET
AND TOBACCO
TAXATION
— The British tobacco industry directly
employs 6,800 people, supplies a home market worth £12 billion
a year in sales, delivers £10 billion a year in tax revenue
and achieved a balance of trade surplus of £691.5 million
for the year 2000.
— The Government's previous policy
of increasing tobacco duties by a minimum of 5% in real terms
each year has resulted in the highest level of tobacco taxation,
not only in the European Union but also in the world.
— This widening gap between Britain
and the rest of the European Union has resulted in escalating
levels of tobacco smuggling—estimated by Customs and Excise
to have been £3.3 billion in lost revenue during 2001-02.
SOCIAL AND
ECONOMIC COSTS
13. Disproportionate tobacco taxation has
led to a variety of social and economic problems:
— Organised and violently competitive
criminal networks now dominate smuggling operations—Kent
Police state: "These are professional criminals . . . here
specifically to smuggle."
— High, regressive taxation discriminates
against the poorest sections of society
— Due to the increase in contraband
tobacco, children are increasingly exposed to tobacco products
via illegal sources—street corner smugglers are under no
moral restriction or obligation not to sell to underage teenagers
and young children.
— The resulting loss of jobs in tobacco
manufacturing would place great strains on local economies that
have already suffered due to the general strains on the British
manufacturing sector (interest rates, strength of the pound, globalisation,
etc).
— The destruction of the UK tobacco
manufacturing sector as a result of a triumph of the disorderly
market would place a great strain on the national economy—declining
treasury revenue, increased law and order costs, poor balance
of trade implications and increased social costs as a result of
the loss of quality manufacturing jobs in areas that can least
afford to lose them.
IS HISTORY
REPEATING ITSELF?
14. The problem of spiralling cigarette
bootlegging is starting to mirror what has happened to Hand Rolling
Tobacco (HRT). Today an estimated 75% of all HRT consumed in Britain
is from non-duty paid sources and consumption is on the rise.
The price differential is so great that repeated freezes in duty
have not impacted on the problem.
15. Trends show that the cigarette market
is going the same way. It is already estimated that 22% of cigarettes
consumed in Britain are from non-duty paid sources.
16. If the comparison with HRT is continued
the result will be an increase in the consumption of cheaper continental
brands, and more worryingly, unheard of brands from the Far East,
South America and Eastern Europe.
17. This further threatens British tobacco
manufacturing jobs, yet achieves nothing towards reducing tobacco
consumption.
18. The amount of revenue lost to the Government
rises as the problem of tobacco smuggling increases:
— 1999-2000 £2,600 million
19. The Government needs to address the
serious issue of exorbitant taxation on tobacco products which
has resulted in high levels of smuggling which is not only threatening
our members jobs but also law and order.
November 2004
14 Northern Ireland Threat Assessment 2003. Back
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