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Eighth Standing Committee on Delegated Legislation
Thursday 29 April 2004
[Mr. Nigel Beard in the Chair]
The Customs and Excise Duties (Travellers' Allowances and Personal Reliefs) (New Member States) Order 2004
Motion made, and Question proposed,
That the Committee has considered the Customs and Excise Duties (Travellers' Allowances and Personal Reliefs) (New Member States) Order 2004 (S.I. 2004, No. 1002).—[John Healey.]
2.30 pm
The Economic Secretary to the Treasury (John Healey): I welcome you to the Chair, Mr. Beard. It is a real pleasure to serve on a Committee under your chairmanship for the first time. I am looking forward to it. I am also pleased to see the hon. Member for Hertford and Stortford (Mr. Prisk). He and I have conducted a fair bit of business during the past week and we have a fair bit in prospect over the next couple of months when the Finance Bill arrives in Committee, and I look forward to that, too.
The order was laid on 1 April alongside a written statement I made to Parliament on that day. The provisions of the order relate to eight out of the 10 new European Union member states that are taking advantage of a derogation allowing them to delay meeting EU minimum duty levels on certain tobacco products. In introducing the order, the Government are using a provision agreed in 2001 that allows existing member states to maintain the same restrictions on the import of cigarettes and other tobacco products brought in from new member states for the traveller's own use, as currently apply to travellers arriving from third countries
The order provides a relief from excise duty subject to certain conditions on restricted amounts of cigarettes and some of the tobacco products acquired in eight of the 10 new member states during transitional periods—the periods in which their derogations from the minimum duty levels apply. The restrictions will apply from 1 May to cigarettes bought duty paid in the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia. The restrictions will apply to manufactured tobacco products such as cigars, cigarillos and smoking tobacco bought duty paid from the Czech Republic, and smoking tobacco bought duty paid in Estonia.
I shall also mention two related statutory instruments, which I referred to in my statement to Parliament on 1 April. They are subject to the negative resolution procedure. All three statutory instruments will come into force on 1 May. The legislation maintains quantitative restrictions on the amount of tobacco products that may be imported by travellers from some of the new EU member states without the payment of UK duty. It also makes minor amendments to existing law updating references to
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the EU directives that will be amended or affected as a result of enlargement.
The Government have considered very carefully whether the UK should take up the option that was agreed for existing member states in 2001. We have considered carefully the move to continue quantitative restrictions on travellers bringing in tobacco products from the new EU member states. We were faced with two competing concerns. First, we recognise and strongly support the right of citizens to shop as they choose across borders in the EU. We are committed also to the right of UK consumers in the single market to bring back as much tobacco and alcohol as they wish for personal use. However, that principle of free trade in the single market is based on all members abiding by formally agreed, basic, common standards. One underpinning feature of the single market is the setting of minimum rates of excise duty that all member states agree to apply.
As well as playing a role in the operation of the single market, EU minimum rates of tobacco duty affect the pursuit of EU-wide health objectives by reducing tobacco consumption. Research has consistently shown that the price of cigarettes affects demand and shows that smoking is the single greatest cause of preventable illness and causes the premature death in the UK of 120,000 people each year. Of course, the effects of tobacco are not restricted to just smokers themselves.
In addition, however, while the EU minimum rates are not met there are uncertainties over the impact of enlargement on excise duties and, in particular, the risks of smuggling are heightened. Mr. Beard, you will remember that, in 2000, the Government introduced what we called the tackling tobacco smuggling strategy. You will remember from your experience on the Treasury Select Committee that, before the intervention of that strategy, the illicit tobacco market in the UK was set to reach 34 per cent. last year. You may be aware that with the introduction of that strategy and the actions that we have taken, it was instead 18 per cent. and that it is on a downward trend. In the past three years, therefore, the tackling tobacco smuggling strategy has safeguarded more than £3 billion of revenue for the public purse.
Enlargement potentially damages the continued success of that strategy, because we cannot be certain how smuggling patterns will react. The risks appear to be significant because of the potential smuggling profits of air passenger smuggling.
Mr. Michael Jack (Fylde) (Con): Will the Minister give us, by way of illustration, some comparative price data so that we may understand the level of risk to which his earlier remarks referred?
John Healey: I am delighted to do so because it is an important point and it illustrates vividly the potential risk that we face if we do not continue those quantitative restrictions. The right hon. Gentleman may be interested to know that the price of a typical packet of 20 cigarettes is 40p in Latvia, 55p in Lithuania and 65p in Poland. In the current EU, the lowest price for a packet of 20 cigarettes is £1.40. It may interest the right hon. Gentleman and other
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members of the Committee to know that one budget airline has started offering one-way flights to Prague for £1. If, in the three countries that I mentioned, one buys cigarettes to the level of the minimum indicative levels, which set guideline limits of 3,200 cigarettes for UK travellers returning from the 14 countries of the current EU, and brings them back to the UK, one stands to make—I should not put it like that, so let me say that the difference compared to buying that quantity of cigarettes in the UK is more than £600.
Although quantitative restrictions will not influence the actions of the large-scale smugglers, those that use containerised freight traffic to smuggle their goods—the vast majority of tobacco smuggling in this country is through freight, not through passenger traffic—it is simply not safe to assume that organised air passenger smuggling will be unaffected. Those low-duty rates, low prices and low costs of travel mean that the new member states must be seriously considered as attractive destinations, not just for low-level individual smugglers and bootleggers but for the organised gangs that operate and run air passenger courier smuggling operations.
Members of the Committee may be interested to know that five other member states—Belgium, Denmark, Finland, Germany and Sweden—have said that they intend to take up the option of applying the restrictions that we are considering. Austria has indicated that it is likely to maintain the quantitative restrictions that already apply. In addition, France and Ireland are still considering their position.
In practice, travellers to the UK from eight of the 10 new European Union member states who are carrying more than the permitted amount of tobacco products, will be advised that they should not enter the blue channel, but should contact a Custom's officer either at the red channel or the red point phone. They should do so in order to make a declaration of the quantity of the products they are carrying above the restricted levels.
In applying the restrictions, Customs officers will use the same procedures they use for cases where travellers from third countries have exceeded quantitative restrictions. So, if a traveller declares tobacco goods over the allowance, he will be required to pay the duty on the excess by cash, cheque or credit card. If he is unable to pay at the time, the goods will be held by Customs pending the duty payment. If a traveller fails to declare their liability to pay that duty and is instead stopped by Customs in the blue channel, all goods subject to the limits are liable to be seized.
As one would expect of the travel industry, it is making the travelling public aware of the continuation of those restrictions and their implications, particularly in relation to bringing excisable goods back into the UK. Public notices, posters and leaflets have been prepared and are being displayed at ports and airports, and reminders will also be provided in travel ticket wallets. Further information on the restrictions is also available through the Customs and Excise website and its national telephone advice line on 0845 010 9000.
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As I made clear in my statement to Parliament on 1 April, the Government will review the operational and principled justification for the retention of quantitative restrictions after 12 months—in the light of the developments in smuggling and shopping patterns, its impact on our health objectives and the progress made by new member states to comply with minimum duty levels.
Mr. Jack: The Economic Secretary said in his opening statement that there are other orders related to the one under discussion, so the answer to my question may lie within them. I apologise for not having had the chance to study them. In the Czech Republic section of the schedule, cigars, cigarillos and smoking tobacco are covered but those items are not universally covered in the sections on other countries. For example, the order relates only to cigarettes for Hungary, Poland and Slovakia. Will the Minister explain what appears to be an inconsistency in dealing with the totality of tobacco products to which he refers?
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