Tobacco Products Duty (Alteration of Rates) Order 2020

(Limited Text - Ministerial Extracts only)

Monday 7th December 2020 General Committees

[The Chair]

Before I call the Minister, I am required to remind hon. Members of the social distancing regulations. Hansard colleagues would be grateful if you sent any speaking notes to [e-mail] rather than sending hard copies.

[The Exchequer Secretary to the Treasury (Kemi Badenoch)]

I beg to move,

That the Committee has considered the Tobacco Products Duty (Alteration of Rates) Order 2020 (S.I. 2020, No. 1256).

The order increases the excise duty rates on tobacco products. The duty charged on all tobacco products will rise in line with the tobacco duty escalator, with an additional 4% rise for hand-rolling tobacco and an additional 2% rise for the minimum excise tax. As hon. Members will recall, the Government committed in the spring Budget to maintaining the tobacco duty escalator, which increases tobacco duties by 2% above retail prices index inflation each year until the end of the Parliament. The order therefore specifies that the duty charged on all tobacco products will rise by 2% above RPI inflation. In addition, duty on hand-rolling tobacco will rise by an additional 4% to 6% above RPI inflation. The order also specifies that the minimum excise tax—the smallest amount of duty to be paid on a pack of cigarettes—will rise by an additional 2% to 4% above RPI inflation.

Let me take the opportunity to provide some context on the steps that we are taking and to explain the rationale behind them. The UK already boasts comprehensive and globally admired tobacco control legislation that has led to a decline in smoking rates. However, too many people still class themselves as smokers. Smoking remains the biggest cause of preventable illness and premature deaths in the UK, killing approximately 100,000 people a year and about half of all long-term users, and the country spends large amounts on covering the health costs of smoking. All those factors mean that we need to continue to encourage more people to kick the habit. We have already set out plans to reduce the number of smokers from 14% of the population to 12% by 2022, and we have announced that we aim to curb smoking once and for all by 2030 in England.

We are also taking more measures to stamp out the underground trade in illicit tobacco. Hon. Members may have seen the Government’s recent consultation on tougher penalties for tobacco tax evasion, including proposals for £10,000 fixed penalties and escalating fines for repeat offenders. The Government have also committed to strengthening trading standards and Her Majesty’s Revenue and Customs so that they can even better combat the illicit tobacco business. That work includes creating a UK-wide HMRC intelligence-sharing hub.

The measures that I have outlined will all play their part in helping to reduce the prevalence of smoking. However, all the evidence shows that increasing the cost of tobacco products through taxation is also an important deterrent. Indeed, the World Health Organisation has found significant increases in the taxes on and the prices of tobacco products to be

“the most cost effective measure to reduce tobacco use.”

That is why we included a commitment in our recent tobacco control plan and our prevention Green Paper to continue our policy of maintaining high duty rates for tobacco products.

In the absence of a Finance Bill, we have decided to implement the increases to tobacco duty rates that I have outlined via the order. I acknowledge that a statutory instrument is not the usual mechanism for increasing tobacco duties. However, hon. Members may recall that such a method was used to amend rates in 2008, so it is not without precedent. The order will protect up to £100 million of revenue—money that we would forgo if duty rises were delayed until the spring.

These measures constitute additional protection for public health, while providing a boost to the public purse. I therefore commend the order to the Committee.

--- Later in debate ---

[Kemi Badenoch]

I thank the hon. Lady for her contribution to the debate. She asks why the rate for hand-rolling tobacco and the minimum excise tax have been increased more than for cigarettes; the answer is that the additional rate increase for hand-rolling tobacco supports the Government’s objective to reduce smoking, which I know the Labour party shares. Narrowing the taxation gap between hand-rolling tobacco and cigarettes, which are taxed at a much higher rate, makes it less likely that cigarette smokers will trade down to hand-rolling tobacco to avoid duty rate rises. This approach is supported by public health groups.

We all share the same ultimate goal: to protect public health by deterring people from taking up smoking and by encouraging smokers to quit. I think the hon. Lady’s questions about doing more for public health would be best answered by the Department of Health and Social Care, which owns this policy area. However, as I outlined earlier, this country benefits from some of the most advanced anti-smoking policies in the world, and I am glad to say that those measures have succeeded in dramatically lowering smoking levels in recent years, as the hon. Lady acknowledged. That should also answer her question about the impact of funding changes: the fact is that smoking is reducing despite any funding changes, so we think we have made the right decisions, although we all acknowledge that we cannot sit on our laurels—there is always more to do.

A significant proportion of the population still smokes—a habit that, as we all know, has immense health and economic costs. As I mentioned, we are in the process of introducing a wide range of measures that will further help us to bring down the number of smokers, and I am sure that the hon. Lady will see many of those policy changes in due course. However, the evidence clearly shows that taxation also has an important part to play in turning the tide against tobacco; it is not just about health policy.

The order will ensure that, in the absence of a Finance Bill this year, we are still able to use the tobacco duty escalator to achieve its goal. As well as safeguarding public health, it will help us to protect the public purse. It will allow us to bring in up to £100 million of revenue that would have been forgone if duty rises had been delayed until the spring. I am very appreciative of the support across the House for this legislation, which will help us to stamp out smoking and build a cleaner, healthier future for the people of this country.

Question put and agreed to.