Craig Mackinlay is MP for South Thanet.
Last month in Parliament, I hosted an event with independent retailers from across the country. They had come to deliver a simple message: illegal tobacco is hurting their businesses, harming their communities, and destroying their livelihoods.
It was an important event – and I believe in working together to tackle our shared problems. In this case, that means talking to all parties that have a stake in this issue, especially retailers, who have to bear the consequences of illegal tobacco day in, day out.
In its latest report, the Intellectual Property Office found that tobacco remains the most investigated item by Trading Standards throughout the country. The most recent data released by the Treasury show that black market tobacco cost the taxpayer £2.4 billion in 2015/16.
This represents the second highest loss to the Exchequer after VAT fraud, and I believe in any event that this is a woeful underestimate.
Although HM Revenue & Customs has made significant progress in reducing the size and cost of the illegal tobacco trade since the turn of the millennium, much of that progress has been reversed since 2010, and the upward trend looks set to continue.
The last two governments failed to understand the root cause of the illegal tobacco market, despite the fact that there is widespread consensus about what drives it. Research released in July shows that the overwhelming reason that smokers buy black market cigarettes is because they are cheaper. According to the Royal United Services Institute, high cigarette prices in the UK are the result of the Government’s high tobacco tax policy, which ‘has the unintended yet inevitable consequence of generating an illicit market that generates substantial profits for sellers.’
This is counterproductive on a number of levels. A flourishing illegal market hurts public services, which rely on tax revenue; it hurts businesses, which depend on loyal customers and the revenue they bring in; and it hurts communities across the country, which suffer when criminals are allowed to flourish by poor public policy. This is simply not good enough. Criminals cannot be allowed to prosper whilst ordinary, hard-working people suffer.
Theresa May said in her conference speech that we, as Conservatives, need to remember the good that government can do. We also need to remain vigilant about the harm that it can do – and the policy of high tobacco taxation is a prime example of this, which simply enriches foreign exchequers and delivers cash to increasingly organised criminals who may go on to indulge in more dangerous activities.
Hitesh Pandya, a retailer in my constituency who I have known for many years, knows this all too well. Like every other independent retailer in this country, he understands the realities of the black market better than politicians ever will. That’s why I invited him to speak at my event. Hitesh relies on tobacco for around 50 per ent of his shop’s revenue. He has told me that he knows when people buy their cigarettes from abroad or from illegal sellers, because he can see it in his bottom line at the end of the week. It’s this kind of intelligence that is essential if we are going to reduce the scale of the illegal tobacco market, now flourishing in “fag houses” and via social media.
In order to tackle this problem effectively in the future, we need to listen to those who understand it best. In 1789, Charles James Fox stated in a speech on the Tobacco Excise Bill, which would subject tobacco to excise duties for the first time, that far from ‘producing a large increase of revenue, he had heard persons, who might be supposed best to know the subject, say that the bill would produce a contrary effect’. As a good Tory, I usually prefer Edmund Burke to Fox, but the Whig leader’s point is as true today as it was in the year of the French Revolution: if the Government gets tax policy wrong it can have severe consequences. My friend Hitesh and others like him know this all too well.