Tobacco and Vapes Bill

Written evidence submitted by Rohan Pike Consulting Ltd. (TVB38)

Executive Summary

The proposed UK Tobacco and Vapes Bill has the potential to take the UK down a similar path to Australia’s failed tobacco policy settings. Australia’s ‘de facto’ prohibition of tobacco and vaping , via excise rates and bureaucracy , has helped create a thriving and highly profitable black market controlled by increasingly powerful criminal networks .

The UK, up to now, have managed the delicate balance between encouraging tobacco harm reduction while suppressing the supply of illicit products quite well. Indeed, the UK provides the world ’s leading example for illicit tobacco control strategy , however " regulation creep" threatens t o empower the key drivers of the illicit market.

While I’m sure the authors of your aspirational strategy for a "smoke-free generation" mean well , h istory and r esearch has shown that merely banning a widely popular and accessible product will not automatically lead to a change in those behaviours . Instead, harsh regulations simply shift the market from legal retailers to criminals and an unregulated black market , as they have in Australia . O nce a n underground market is established for a product that is in high demand , it is exceedingly rare for harsh restrictions (such as large fines, intense policing, border enforcement etc.) to be successful in reducing it.

The proposed licen s ing scheme is one way of preventing an illicit market from flourishing ( if it is strictly enforced ) , but the broader tobacco policy settings , including excise rates and access to flavoured vapes, must also encourage consumers to use legal product s and not to seek more attractive alternatives .

Introduction

I make this submission as a 5 8 year old law enforcement consultant who has never smoked. I understand that this submission will be released online by the UK government and used in discussions and future reports. I am willing to provide further oral evidence to the committee if required.

My background includes 23 years as an investigator in the Australian Federal Police (1991-2014) and another 2 in the Australian Border Force (ABF) (2015-2016), formerly known as Australian Customs. In both organisations , I had a particular interest in financial crime generally and the involvement of organised crime in exploiting public policy.

While in the A BF , I formed relationships with numerous organisations including Her Majesty’s Revenue and Customs and the UK Border Force in order to learn and implement their world -leading illicit tobacco policies. The UK’s "Leaf to Light" , and the more recent "Stubbing out the Problem" , National Illicit Tobacco Strategies set the global benchmark for implementing the WHO Protocol to Eliminate Illicit Tobacco.

My dedicated investigators and analysts were the first Australian team to recognise that illicit tobacco-related crime was greatly under-reported and was causing billions of dollars to be channelled to organised crime groups. As a result, I established the ABF Tobacco Strike Team which later expanded into becoming the Illicit Tobacco Task Force that is still in place today. Despite the formation of this multi-agency Taskforce, illicit tobacco continues to be a serious and expanding problem for the Australian community.

I n the past 8 years, I have continued to closely analyse the global illicit tobacco market and the effects of government policy on this crime type. I am keen to warn countries of the mistakes Australia has made and continues to make in this policy area.

I am making this submission under my own name drawing on my personal experiences. While I applaud the efforts of the UK government in its determination to prevent the expansion of illicit tobacco to date, I fear that the aspirational and unrealistic goal of creat ing a smoke-free future will lead to policies that so discourage the legal tobacco market that a thriving black market will be established in its stead. Having close family members living in the UK, I also have a personal interest in alerting the UK government to some the potential negative consequences of the tobacco policies that are being contemplated.

The Australian Experience

Th ere are several important lessons this committee can learn from Australia’s failed tobacco policy.

The first is a failure to acknowledge the existence of an already growing illicit market. Obviously, while a black market remains under-reported , the actions taken to subdue it will not be sufficient. In Australia, relevant Federal agencies such as the Australian Border Force, the Taxation Office and the Health Department have deliberately under-estimated the size and danger of the illicit tobacco market. These inaccurate government estimates were only loosely based on evidence and, in hindsight, could be seen as self-serving. Law enforcement agencies may like to espouse that they had the problem under control and the Health department and their supporting lobbyists could point to the ongoing success of their policies to reduce smoking . The reality of the situation has only now become apparent , causing the government much embarrassment and various agencies struggling to mount a meaningful response. They have simply left the problem unchecked for so long it is too difficult to address it without a massive investment .

T hree things have undermined the government ’ s previous stance on the size of the illicit market. The first was research undertaken the governments own agency, the Australian Criminal Intelligence Commission (ACIC). 9 years ago, the ACIC began sampling wastewater at numerous locations around Australia. This analysis, while primaril y directed at uncovering illicit drug consumption , also track ed the consumption of nicotine. The results show that nicotine consumption has remained level in that time nullifying previous government claims that their tobacco policies were causing a decline in consumption.

The second factor which has shown government rhetoric to lack credibility is the outbreak of widespread violence between rival illicit tobacco organised crime gangs. In my home State alone, Victoria, there have been several executions of crime figures and more than 130 tobacco outlets firebombed by gangs fighting a turf war. This crime outbreak has been regular front page news for the past 18 months and the community is rightly asking government s across the country why they didn’t prevent it and what are they going to do about it. The illicit tobacco problem has directly affected both the State and Federal government ’s credibility with regard to law and order in the community.

The third consequence of Australia’s unbalanced tobacco policy has been the affect of the exponential tobacco excise rises ha ve had on government revenue. Whereas three years ago, the government had received $16 billion in tobacco tax receipts per year and had forecast similar future returns, the last 3 financial years have seen a 25% reduction year on year with receipts now expected to be $9 billion and falling further. This revenue decline would be understandable , and even desirable, if it came with a corresponding drop off in tobacco consumption , however that is not the case. Consumers are merely accessing the illicit market in ever expanding numbers. The excise rate is now so extreme it is the primary driver of the criminal market and all the violence it brings.

I note that the United Kingdom has the world’s second highest tobacco excise rate. This fact alone will be driving your illicit market. Additional regulation designed to make legal tobacco less attractive will further push consumers to seek an alternative product. The size of the UK illicit market, as reported by HMRC, is purported to be only 7%. If that were accurate, there would be very little to worry about . Ho wever , given your price point, cost of living pressures and the size of other illicit markets in Europe , that figure seems unlikely. I also understand that other independent statistics producers in the UK put the figure at three times the HMRC figure.

E fforts to alert the Australian government over many years to this growing threat were stymied by "illicit tobacco deniers" within the bureaucracy and that type of interference may well be present in the UK . The result of Australia’s under-report ing has been a free for all for organised crime. I encourage you to seek a better understanding of the size of your current market before passing further regulations that may help drive it.

Vaping Regulation

Another area where Australia has failed is in relation to our vaping regulations. Poorly informed policies have been driven by moral panic and ha ve resulted in reduced health outcomes and increased crime.

Australia n health authorities ha ve always been totally opposed to vaping. They have taken a puritanical approach whereby any new policies have discouraged vaping so much so that accessing a legal vape is extremely difficult. It has become a virtual prohibition. These unenforceable policies started with regulations much like those now being proposed in the UK. Australia then progressed to a prescription model, flavour bans, disposable vape import bans and finally a regime whereby only chemists are allowed to sell vapes , but only after a detailed conversation between pharmacist and consumer .

These regulations have been driven by the small, but loud, portion of the population concerned about youth vaping rates. In reality, the percentage of youths who vape is dwarfed by adult vapers , many of whom switched to vaping from smoking to improve their health. That safer alternative is now much harder to access and more expensive.

Approximately 1% of vapes in Australia are purchased through our newly enacted and highly inconvenient legal m odel . 99% of the vapes consumed are an illicit, unregulated product smuggled into the country. Not only are the desired health outcomes undermined by this policy , but it ha s become yet another commodity organised crime has exploited to be come further enriched. Perhaps the most damaging outcome from discouraging vaping so comprehensively , has been recent evidence showing a move away from vaping and back to far more harmful combustible cigarettes. This is a disastrous health outcome.

Part of the Australian anti-vaping stra te gy has been to enhance the law enforcement response. Tens of millions of additional law enforcement dollars have been directed at the border based on the unrealistic goal to stop all illicit vapes from entering. The ABF recently reported to government that , even with their best efforts and increased resources, they aim to stop only 25% of illicit imports.

UK health authorities have generally accepted the global research and rightly treated vaping as the most effective smoking cessation tool. As a result, vaping has been encouraged as a means to transition smokers away consuming nicotine. The proposed Tobacco and Vaping Bill is moving away from th at commonsense approach. By making vaping less desirable, you risk moving consumers back to the danger ous combustible products , as we have . Vaping should be seen not as a threat but rather an opportunity to improve the health of the community.

Tobacco Licensing

Despite a long history of relative success with Liquor Licensing, Australia has been slow to embrace licenses to help regulate tobacco sales. In the last couple of years, the size and damage caused by the illicit tobacco market has become apparent and all States have either implemented or are drafting their own tobacco licensing scheme.

States that have established a scheme have failed to stem the rapid expansion of pop-up tobacco stores distributing their illegal product s . Licensing has not proved to be the panacea authorities had hoped. This is due to several factors including:

1. The illicit market is already well established. There are said to be ov er 1,200 illegal stores in Victoria alone. It is extremely difficult for any agency to suppress a crime type that is already so entrenched with the illegal activity so normalised across the community .

2. The primary driver of the market, high Federal tobacco excise, continues to increase and therefore pour further fuel on this fire. It is so far proving futile to attempt to douse th os e flames with increased regulation.

3. The agencies given responsibility of enforcing these regulations, (primarily Health inspectors) do not have the staff, enforcement powers, training, investigative know-how or willpower to adequately address this organised crime problem.

4. The prescribed penalties are not sufficient to deter criminals from entering the market.

5. The penalties are rarely enforced due to time and funding restraints .

6. Enforcement a gencies become focussed on the licensed premises. These are the retailers who are choosing to follow the regulations . The real problem lies with the criminal groups who simply ignore the regulations and provide the consumer with a cheaper and more attractive alternative. The ir shops are where the enforcement focus should be.

In Australia, tobacco policy is set by the Health Department. Health officials have little knowledge or expertise in enforcement. As a result, laws are enacted without due consideration for the ir practical application. Health officials in Australia also fail to grasp the concept of deterrence. People breaking laws or regulations may change behavior if they have a genuine and ongoing fear getting caught and if caught, can expect some form of harsh punishment . Unfortunately, t obacco crime in Australia is virtually risk free in that hardly anyone is prosecuted . On the rare occurrence a penalt y is levied , it is insufficient to deter that person or criminal group from trying again.

If the UK decides to enact a licensing scheme as a means to prevent the distribution of illicit products and allow legal retailers to operate on the level playing field , then it needs to be strictly enforced. An effective scheme will require a great deal of political will and perhaps far more funding than is currently being proposed .

Conclusion

The Australian community is suffering from the lack of foresight Health authorities have given to the consequences of their tobacco policies and also our government’s failure to listen to all affected stakeholders . As a result, t heir decision making has been myopic and ill-informed. I see this proposed UK legislation as potentially heading down the same failed path that we have taken. I am hopeful that this committee will learn from some of our past failures , invite opinions not just from the health sector but also from retailers and harm reduction experts and then set a more progressive course based on realistic goals.

I encourage the committee to spend less time, public money and effort in enacting unenforceable laws and more time analysing the sensible example s set by f orward thinking countries such as Sweden, New Zealand and even, to some extent, the USA , where ongoing nicotine use is a ccepted , smoking rates are falling and consumers are encouraged to explore healthier methods of nicotine consumption.

Rohan Pike

6 January 2025