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

Greg Knight 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 ---

[Kit Malthouse (North West Hampshire) (Con)]

It is always a pleasure to see you in command, Ms McVey.

This is a seemingly innocuous and small slip of paper, but I want to raise a number of issues about which the Committee needs to be aware. First, anybody who is familiar with schedule 5 of the Consumer Rights Act 2015 will know that the implications of entering trading standards into the schedule can and will be profound. The schedule contains some draconian powers—powers that are now to be bestowed on trading standards—which have caused alarm pretty much ever since Gordon Brown amalgamated Customs and Excise with the Inland Revenue.

As a scholar of Daphne du Maurier, Ms McVey, you will know that the excise men, as they used to be known, have historically, since 300 or 400 years ago, had significant powers to deal with smuggling. With that came a culture in the then Customs and Excise of a slightly brutal approach towards their customer base. They were well used to smashing their way into warehouses without a warrant and could demand all sorts of documentation without any cause for suspicion. I am afraid that the amalgamation of Customs and Excise with the Revenue meant that that culture, which was a little bit like Japanese knotweed, infected the whole of what is now HMRC, to the extent that we do not now see a professional organisation that sits down with other professionals in the accountancy or legal profession and decides what is due. Instead, we see more of a brutal, demanding and aggressive organisation.

Unfortunately, through the schedule, the powers have been spread to other organisations, such as district councils and the Competition and Markets Authority, and we are now giving those powers to trading standards. For example, schedule 5 includes the power for an enforcement or investigation organisation to enter premises without a warrant. There is no requirement to go to a judge and offer any evidence as to why the organisation needs to enter those premises; it can just enter. The only restriction is that those premises, as I try to remind myself from the Act, cannot be wholly or largely residential, but I am not sure who makes that decision.

As my right hon. Friend the Member for East Yorkshire said, an awful lot of corner shop owners will be affected by this legislation, many of whom live above the shop, as my great-grandparents did in Harrogate. The question of who decides whether that premise—that corner shop—is largely or wholly residential will be an interesting one for the enforcement authorities to consider. I can see situations where they may well smash their way into a corner shop and there is a perfectly innocent family sleeping upstairs who will be traumatised by their entry. This is a draconian set of powers.

Similarly, there is the ability to demand documentation without any suspicion or recourse to law whatsoever. Much of it can be suspicionless, as far as I can tell from the Act. I ask colleagues to be under no illusion: this seemingly innocuous bit of paper is actually conferring significant powers on trading standards and we should not underestimate that.

[Sir Greg Knight]

Could not the concerns that my right hon. Friend raises be addressed by the Government in the guidance they will issue in due course?

[Kit Malthouse]

They certainly could be. This bit of legislation will go through today and I hope the Government will take those things into account. The explanatory memorandum states that respondents to the consultation were in favour, but I am not sure about the wider group. For example, I would be interested to know the view of the Association of Convenience Stores on the wider acquisition of the powers and the fact that they are being given to trading standards. My right hon. Friend is quite right; that could be addressed in the guidance. As I say, I want nobody to be under any illusions about what we are doing here.

Secondly, while this is an attack on the sale of illicit tobacco at the front end, I would be interested to know what the Minister is doing at the most vulnerable point for the smuggling of illicit tobacco: the border. We are seeing large amounts of illicit tobacco coming through the post, for example. It is mailed in packages from overseas through fast parcel delivery, often through the Royal Mail warehouse at Langley, near Heathrow.

I do not know whether colleagues know this, but that warehouse takes in 100% of overseas mail coming by Royal Mail route, and the ability to scan parcels quickly there is very restricted. We have never invested in proper parcel scanning at that facility, and those who would smuggle these goods—which, of course, can now be bought online and shipped from overseas—recognise the weakness in that route. I would love to see some of the £10 billion we are raising from tobacco every year invested in enforcement at the border, rather than it all being hived off to subsidise other activity. If we were really serious about stopping this trade, we would concentrate on the most vulnerable point, which is this funnel at the border where we could detect a lot of it.

Thirdly, this is yet another step in the phoney war against smoking that is taking place in this country. We never take what strikes me as the brave step of doing something imaginative to phase out smoking. We nip, we tuck, we chisel away, and we try to scratch the surface. We make life difficult for often marginal businesses such as corner shops, which are almost regulated out of existence now—they all have to have sliding doors in front of cigarettes and cannot display them in certain places—and yet we are not brave enough to do what other countries have done, which is to progressively raise the age at which people can buy cigarettes.

If we did that year after year, in time, only the over-60s or over-70s would be able to buy cigarettes, and we would have effectively phased them out in a generation. I do not understand why successive Governments have not been brave enough to do that, given the appalling statistics that the Minister mentioned. I speak as somebody who lost two grandparents and my grandmother’s twin sister to smoking-related cancer; both twins died of smoking-related cancer. I have seen the effects for myself, and I wish we could be braver about it and do something sensible, rather than running this phoney skirmish war that drags in so many innocent, struggling businesses.

The final point I want to raise is about the impact on local government. As the hon. Member for Erith and Thamesmead said, trading standards is not what it was. It is hard enough for consumers to get the attention of trading standards on anything these days. All our postbags will have been filled with letters from people who are frustrated by the fact that trading standards is not addressing their issue.

The explanatory memorandum says that there will be no impact on local government, stating:

“There is no, or no significant, impact on the public sector.”

If this measure is going to be effective, and if we are going to have all these inspections and regulation, surely this must fall within the additional burdens doctrine. Greater capacity must be given to trading standards to deal with this issue. If not, what part of its work is going to give? Where will the activity come from that the Minister now expects to be expended on illegal tobacco? We cannot just expect trading standards to expend ever more activity for the same number of heads and bodies and hours worked. If the Government really want this to be effective—and I have to say, I have my doubts—where will the extra capacity come from?