Draft Consumer Rights Act 2015 (Enforcement) (Amendment) Order 2023

Gareth Davies Excerpts

Wednesday 5th July 2023 General Committees

[The Exchequer Secretary to the Treasury (Gareth Davies)]

I beg to move,

That the Committee has considered the draft Consumer Rights Act 2015 (Enforcement) (Amendment) Order 2023.

It is a great pleasure to see you in the Chair, Ms McVey. I thank right hon. and hon. Members for attending. This daft statutory instrument will enable trading standards to exercise their investigative powers fully to check compliance with the Tobacco Products (Traceability and Security Features) Regulations 2019.

Smoking is the single leading cause of preventable death and disease in the UK, accounting for approximately 76,000 deaths each year. Half of all smokers will die as a result of smoking-related illnesses. It is estimated that smoking costs the NHS in England alone £2.6 billion per year. The Government are committed to addressing the harms of tobacco. In April, the Department of Health and Social Care announced a package of measures intended to cut smoking rates, including expanding access to new treatments, rolling out a national incentive scheme to help pregnant women quit, and using a new approach to health warnings.

Alongside that approach, His Majesty’s Revenue and Customs has a role to play, first, in charging duty on tobacco products to deter smoking and to raise revenue to cover the cost to the NHS. Theory and evidence alike show that high duty rates reduce the affordability of tobacco products and so support the Government’s public health objective to reduce smoking prevalence. Meanwhile, revenues from tobacco duty were approximately £10 billion in 2022-23.

HMRC has another key role in tackling the illicit market. One of the main challenges to dealing with smoking prevalence, aside from the addictive nature of nicotine, is the illegal trade in tobacco products, which increases both the affordability and the health risks for smokers. The evasion of tobacco duty also has significant negative impacts on the economy, public health, legitimate businesses and overall public safety. It cheats the Exchequer of revenues and blunts the effectiveness of tobacco duty as a tool for reducing smoking.

The tobacco track and trace system introduced in 2019 helps to prevent the illegal trade in tobacco products by making it more difficult for smugglers and counterfeiters to operate.

[Sir Greg Knight (East Yorkshire) (Con)]

May I refer the Minister to the explanatory memorandum, which his office has kindly produced? Paragraph 7.6 states:

“The provisions in the Tobacco Products Duty Act 1979 provide powers to make regulations to issue penalties of up to £10,000; to seize product involved in a contravention of applicable law and to exclude retailers from the TT&T registration system, therefore restricting their ability to buy duty paid tobacco for retail purposes.”

Is there, or will there be, a right of appeal should there be mitigating circumstances in a particular case? For example, if a rogue employee brought in the contraband, but the owner of the corner store were not aware, it would seem very unfair to prevent that store from being able to sell legitimate cigarettes in future.

[Gareth Davies]

My right hon. Friend makes an important point and he is right to seek clarification. My understanding is that, yes, it is right that people may appeal. All penalties are subject to review. There is a process of appeal to HMRC should that circumstance that he describes happen.

As I was pointing out, the 2019 track and trace system provides a way to verify the authenticity of tobacco products and ensures that they have legally procured distribution. The tobacco products are tracked from the point of manufacture to the point of retail, and at all stages in between. Failure to comply with the requirements of the tobacco track and trace regulations in the UK may result in an issue of financial penalties, the seizure of tobacco products found at non-compliant premises, and the exclusion of retailers from the TT&T registration system.

These sanctions are part of a Government commitment to introduce new anti-evasion measures. In 2019, our election manifesto contained a pledge to consolidate and introduce new anti-evasion measures. The measures I have outlined today achieve that. This statutory instrument will bolster the Government’s efforts to tackle the illicit tobacco market and reduce tobacco duty fraud. I therefore commend the order to the House.

--- Later in debate ---

[Gareth Davies]

Many excellent points have been raised, and I will do my best to address as many of them as possible.

First, the Labour party spokesperson, the hon. Member for Erith and Thamesmead, asked about the timing of the measure. One of the reasons for the timing of the measure is that the track and trace system that was implemented in 2019 needed time to bed in. We wanted it to get working. It was only in 2020 that we started the consultation on sanctions, and, now that the track and trace system is in place, we are in a position to execute on that.

The hon. Lady asked about the £1 million grant, which was to launch Operation CeCe. The money was provided in the 2020 Budget, and it has resulted in £7 million of illicit tobacco products coming off the streets of the UK. It has been a tremendous success, and we have now committed to extending the operation to 2025 with additional funding of £800,000.

The hon. Lady asked about resourcing, which was a common theme in the contributions of my right hon. Friend the Member for North West Hampshire and the hon. Member for Walthamstow. I will come to the powers of trading standards in a minute, but the key aim of the draft order is to change how trading standards operates with HMRC. Trading standards will gather information and refer cases to HMRC for sanctions to be administered, and HMRC will administer all the penalties. We are not giving trading standards additional powers. It is not required even to execute on the track and trace regulations. It is up to trading standards, but we are asking it to gather information that could then be provided to HMRC. That is why we feel that there is no additional burden on trading standards; if anything, much of the burden of administering the penalties is on HMRC.

The hon. Member for Erith and Thamesmead asked about the review of the policies. All policies remain under review, but HMRC and Border Force will be producing a new strategy on tackling illicit tobacco later this year, and I expect this policy and the success of Operation CeCe to form part of it.

As usual, my right hon. Friend the Member for North West Hampshire makes some incredibly insightful points that are based on his extensive experience. As I pointed out, trading standards is already covered by schedule 5 to the Consumer Rights Act. The draft order is about changing the approach to enforcement so that it is focused on track and trace. To date, it has been focused on the amount of illicit tobacco that has been found, and we have found that organisations and individuals have been holding a small amount of illicit tobacco to avoid significant penalties. The measure will change the approach so that new measures and regulations are tied to the 2019 track and trace regulations, and it will provide additional penalties and enforcement mechanisms for HMRC.

[Kit Malthouse]

I am no lawyer, and maybe I am reading this wrong. I acknowledge that schedule 5 already includes local weights and measures authorities. That is not necessarily the full extent of the powers of trading standards. I accept that, in legislation, it has the powers to smash its way into premises in pursuit of weights and measures issues, but it do not have those powers in anything else. My reading of the legislation is that it expands that power beyond weights and measures and into the regulation of tobacco. Its current ability to demand documents and enter without a warrant is being expanded so as to include enforcement of tobacco regulations. I do not think that that part of its work is currently included. If it were, why is the measure necessary?

[Gareth Davies]

This measure is necessary, first, to increase the penalty up to £10,000 for HMRC; secondly, to give trading standards the ability to share data with HMRC, which was not previously the case; and, thirdly, to shift the focus on to track and trace and away from the amount of illicit tobacco that is found. Trading standards is empowered to gather information and refer cases to HMRC for further investigation. I can write to my right hon. Friend on his specific point on weights and measures—he will forgive me for not having the same mastery of detail as him on that point. I hope the three points I mentioned clarify what we are seeking to do with this specific measure.

My right hon. Friend quite rightly asked about the border, where typically a lot of illicit tobacco enters our country. HMRC and Border Force work very closely together. As I mentioned in response to the hon. Member for Erith and Thamesmead, a new strategy will be published this year to outline how HMRC and Border Force interact and what more they can do to tackle illicit tobacco coming into our country. I can tell my right hon. Friend that 8 million cigarettes were seized between 2015 and 2021, and so there is a reasonably effective operation in place, but they can always do more.

[Kit Malthouse]

I recall that Border Force ran a competition looking for fast scanning technology. It awarded some money to a series of companies and there was some prize—I have in mind £1.5 million—for whoever could come up with this ability to whizz parcels through and scan them at speed. When I visited Langley, there were just two standard airport scanners, one of which was on the blink, for something like 1 million parcels a day, which is nuts. When he writes to us, will the Minister also update us on where that competition has got to?

[Gareth Davies]

I am very happy to do that. I am not familiar with that particular case.

The principle is right, in terms of ensuring that tobacco is tracked. We have a similar system for alcohol. The whole point of track and trace is to ensure that, from the point of manufacture to the point of sale, we are tracking and monitoring where illicit tobacco is going. We believe that will be an important way of bringing down the illicit trade that riddles our country and many countries in the world.

My right hon. Friend also asked about tackling smoking. That is an issue that unites the whole House. We all want to see smoking rates come down. He may describe the measures we have taken to date as piecemeal—I do not want to put words in his mouth—but they have had success. We have a prevalence rate of 13%, which means that 13% of our country smoke. That is lower than many countries and has come down quite significantly in recent years.

Some of the measures we are taking are based on the Khan review, which recommended the use of vaping to bring people off tobacco smoking. We are providing 1 million vaping kits for those who wish to come off smoking. Duty, as I said in my opening remarks, is a key way in which we can disincentivise the smoking of tobacco. We can always go further and I welcome the challenge.

[Kit Malthouse]

I mean, sliding doors are bonkers, right?

[Gareth Davies]

I very much welcome the challenge, and I can imagine that my right hon. Friend will be right there with us as we announce further measures in the Department of Health and Social Care.

Finally, the hon. Member for Walthamstow asked about the powers. I hope that I have addressed many of those points already, in terms of trading standards not gathering additional powers but seeking to work more closely on data sharing with HMRC, which will have the burden of executing and administering the additional penalties that we are able to operate today.

The hon. Lady quite rightly asked how we are keeping trading standards officers safe. We are in constant discussions with Border Force. We have not had discussions with the National Crime Agency, but I will write to her on what discussions have taken place across Government. The safety of trading standards officers is not directly related or relevant to this order, but the hon. Lady is right to raise it at any opportunity, because we want those who are gathering information with a view to prosecution and penalty execution to be as safe as possible. I expect them to work closely with local police officers wherever they deem a danger to exist.

The sale of illicit tobacco undermines public health policy by offering a cheaper option to those who might otherwise see price as a reason to stop smoking. It damages legitimate businesses and makes tobacco more accessible to children. The evasion of tobacco duty also has a significant impact on our economy and a negative impact on public health, legitimate businesses and overall public safety. It cheats the Exchequer of revenues of billions of pounds each year, and it blunts the effectiveness of tobacco duty as a tool to reduce smoking. This amendment to the Consumer Rights Act is important in tackling the trade in illicit tobacco. These changes will facilitate the UK Government in their objectives to protect public health, raise revenue and combat organised crime.

I hope that the Committee has found today’s sitting informative. I am certainly grateful for the interventions made and speeches contributed. I commend the order to the Committee.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Consumer Rights Act 2015 (Enforcement) (Amendment) Order 2023.