THURSDAY 27 JANUARY 2000

MR MARTIN BROUGHTON, MR PETER WILSON, MR GARETH DAVIS, MR DAVID DAVIES AND DR AXEL GIETZ

  1060. You must have been aware that there was a significant element of black market smuggling and illegal activity.
  (Mr Wilson) Of course and I was delighted when the authorities did stop it, but they stopped the smuggling, not us, as we were not doing anything illegal. I was very unhappy about it. I deplore smuggling.

  1061. Did you inform the authorities that you were worried about what was going on before the visit by the European Commission?
  (Mr Wilson) Absolutely. We gave the details of our customers. We gave the details of our shipments.

  1062. Was that before or after the European Commission?
  (Mr Wilson) I cannot recall the timing of it.

  1063. Would you accept that, as manufacturers, you do have a responsibility to look at where your product ends up?
  (Mr Wilson) Yes, to the best of our ability. Let me make it abundantly clear: I deplore smuggling. We have spent many, many years and a lot of money building up a successful distribution system in this country and to see it undermined by the smuggling—80 per cent of hand rolling tobacco—is something that I have been very public about. Indeed, on the Andorra situation, I have not tried to hide it or pretend it did not exist. I was interviewed on television about it. This is a situation I deplore. We have been lobbying; we have been informing government; we have been alerting government for many years as to the risks that lie ahead in a situation where the levels of duty in this country so far exceed the levels of duty in other European countries and now, increasingly even worse, outside Europe.

  1064. I accept that that is what you have been doing because it is in your interests to have the domestic market here more on a par with our neighbours. What I am asking though is do you also talk to governments when you suddenly begin to realise that something is happening at the end of your distribution chain which can only be due to illegal activity? The Andorra situation is so classical. You were importing millions of cigarettes there for a very small population and there was no export by Andorra of cigarettes. You must have known that as well. Therefore, they were all coming out illegally.
  (Mr Wilson) The answer to your question is yes, we work very closely with Customs and Excise on this whole thing. We have recently given them a list of all our customers and the brands we supply to those customers. Invoices for all our export business are available to Customs and Excise. We do alert them whenever we see something going wrong. A very good example of that is another concern I have related to the Internet. That worries me a lot because it is going to be very hard to control that. Whenever we come across a new Internet site selling cigarettes, probably from Spain or somewhere which is illegal, to sell them into this country at Spanish duty rates via the Internet, we certainly bring that to the attention of Customs and Excise. I deplore smuggling and we will do whatever we can in order to bring it to an end. It is not in our interests; it is not in the interests of government; it is certainly not in the interests of the Department of Health. It is making more and more low price cigarettes available in this country. It provides no control over the access of children to cigarettes and it is a direct consequence of the enormous disparity of duty rates.

  1065. Can I ask whether your colleagues have the same policy of proactively informing the Customs and Excise when you discover an Andorra type situation?
  (Mr Davies) Philip Morris has pursued a policy of cooperation with governments throughout Europe and with the European Union institutions. Some of these are formalised in written agreements between us and the authorities; some are of a more informal nature. It is not an infrequent event for them to contact us and seek information. We furnish that information and seek to work with them to determine what has occurred, because it is our policy that if it is demonstrated to us that any of our customers is involved in this trade we would terminate that customer, and we have done so.

  1066. You terminate the customer's contract, I hope, rather than the customer.
  (Mr Broughton) Mr Wilson has said everything that was necessary and I would endorse it.
  (Mr Davis) We in turn have very full cooperation with Customs even to the point where we worked very closely with them to stop the distance selling, man in black case, which is very similar to what Mr Wilson said about the Internet.
  (Dr Gietz) I concur with everything Mr Wilson said. We are dead against smuggling. We do everything to cooperate with the authorities and we also have terminated contracts with people who were found to sell on into illegitimate channels.

  1067. I have a specific question for Mr David Davies. Could you explain to the Committee the function of Operation Whitecoat and indicate the role of Professor Roger Perry of Imperial College in his capacity as an adviser to the Environment Committee in 1991? Can you say whether your company paid any remuneration to him?
  (Mr Davies) That is the name given to activities in which we engaged in the late eighties and early nineties which were designed to solicit the support of those who shared our views in relation to environmental tobacco smoke and indoor air quality; and to facilitate the expression of those views by such people. Mr Perry was one such person. He was affiliated with the industry in the late eighties. He subsequently became affiliated directly with Philip Morris. He was compensated by us for research projects that he undertook and for the preparation of monographs and for holding conferences. His affiliation with the industry and with Philip Morris was very well known. It was declared to the Environment Committee. In fact, in what I view as a rather unfortunate incident when he organised a conference in the late 1980s, the World Health Organisation declined to participate because of his affiliation with Philip Morris.

  1068. Has this work finished now?
  (Mr Davies) Yes, it has.

  1069. You do not pursue your views on environmental tobacco smoke in that manner?
  (Mr Davies) Our views in relation to environmental tobacco smoke today—I think we spoke about them briefly two weeks ago—are clearly put forth in our Internet website. There remain different scientific views. However, we acknowledge that many believe that environmental tobacco smoke can be harmful. We are not necessarily in agreement on those but we think today the focus must be on ensuring that there are reasonable restrictions which are created in order to accommodate the interests of both those who choose to smoke and those who choose not to be exposed to smoke. That is why here in the United Kingdom we are a very, very strong supporter of the voluntary agreements that have been put in place and I think are working very well to achieve that.

  1070. Can I return to a question that my colleague, Mrs Gordon, brought up from a slightly different angle and that is to do with under age smoking. As you are aware, the proportion of people aged between 11 and 15 who are smoking has risen from eight per cent in 1988 to about 13 per cent in 1996, which is a quite significant increase over a relatively short period of time. All of your companies have shown through memoranda that you have submitted that you are totally committed to doing whatever you can to prevent or minimise under age smoking and, in a variety of different ways, your companies have different policies. Why do you think it is that there has been so much abject failure—I do not say from your companies specifically but in society generally—in actually tackling under age smoking and getting the figures down to reflect the way in which, throughout the population since the sixties, the proportion of people smoking in this country has fallen? This bucks the trend. Why do you think it is such a failure and that this is happening?
  (Mr Broughton) I think a lot of research still needs to be done to answer that. Personally—I am not speaking here as a formal, corporate view—I think it may be the very success of the 11 and 12 year old education process. It is so strong that in terms of the teenage mentality it raises the issue to one of defiance. I am concerned that there may be a link there between the fact that it is so established with the 11 and 12 age group that this is completely the wrong thing to do that in a funny way it might be appealing to the teenage mentality in terms of defiance. Clearly the parental thing is something there. The sibling and peer pressure is something there, but the increase is quite difficult to explain and I am just concerned it might be linked in some way to increasing the forbidden fruit element.

  1071. The government claim 82 per cent of smokers start smoking as teenagers. Why do you think it is that so few adults start smoking? Is it because so many teenagers have or is it because of a different culture?
  (Mr Wilson) I do not think I know the answer to that. We do not do research amongst teenagers. I associate myself with what Mr Broughton has said about the need for more information.

  1072. Thirdly—obviously this is only for the relevant individuals—do those people support the BAT and RJR proposal for raising the age limit to 18 years for the legal purchase of tobacco?
  (Mr Davies) If the government here were to make the determination that 18 was the appropriate age, we would fully support it.

  1073. That is not the question I asked. The assumption is that it can only be done by the government rather than a code of practice in the context of my question. Do you support the lobby presumably lobbying the government seeking to switch public opinion to get the age limit raised from 16 to 18?
  (Mr Davies) We strongly support the minimum age laws. We defer to the judgment of society and governments representing society as to whether that should be 16 or 18. I do not think that is a judgment that we ought to be making on behalf of any given society. If any government makes a determination that 18 is the appropriate age, that would have our full support.

  1074. That has not quite answered the question in that you have not told me whether you think this is a sensible proposition to move forward on.
  (Mr Davies) Our company's view is that we ought not to be dictating to societies. If you are asking me personally, I think that is probably a sensible proposition but we ought not to be dictating to society what society determines for itself is the right age, whether it be for smoking, for consumption of alcohol or any other matters. Society has to make that judgment.

  1075. Does your company think it is right that the age is 16 at the moment?
  (Mr Davies) In most of the markets which have minimum age laws in which we do business, it is 18. In our internal code which guides our marketing practices in every country where we do business, we use 18.

  1076. If it was 12 in a country, what would you do?
  (Mr Davies) I would oppose that as absurd.

  1077. That is your company telling society what to do.
  (Mr Davies) No. I think there is a range. Today, we have in Europe a number of countries that have adopted minimum age laws. Some are 16, such as the United Kingdom; some are 18. There is one country, Spain, where it is a regional determination and it is 16 in some regions in Spain and 18 in others. Those regions have made a determination of what is appropriate for themselves. Our view is that 16 is probably the minimum that would reflect a sensible approach. The general consensus around the world is that 18 is more appropriate.

  1078. Has your company ever given any public views on whether it thinks it is right or wrong, sensible or not sensible, to ban tobacco advertising?
  (Mr Davies) We have publicly stated our opposition to efforts that have been made to prohibit tobacco advertising.

  1079. If your company can give a view to us about society's rules and regulations on advertising, I am slightly baffled that you are rather reluctant to give a view on the age of 16 and you say it is not for your company to give a view on the rules society determines, but you are quite happy to join in tobacco advertising.
  (Mr Davies) Advertising is an activity in which I engage as a company and I do so, I hope, responsibly. We intend to do so responsibly.