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Tobacco and Primary Medical Services (Scotland) Bill

Imperial Tobacco UK

The Committee has called for evidence on the general principles of the Tobacco and Primary Medical Services (Scotland) Bill (SP Bill 22) introduced by the Scottish Government on 26th February 2009. This letter forms a brief memorandum from Imperial Tobacco United Kingdom ("ITUK") for this purpose.

1. Introduction to Imperial Tobacco UK

ITUK is a long-established business and is a subsidiary of Imperial Tobacco Group PLC ("ITG"). Based in Bristol, ITUK is the UK trading division of ITG and is responsible for the sale and distribution of lmperial Tobacco's products in the UK. ITUK is the market leader in the UK for cigarettes, hand rolling tobacco and hand rolling papers. Its brands include Lambert and Butler, Richmond, Superkings, Golden Virginia, Drum and Rizla. ITG also owns Sinclair Collis Limited, which is a UK based cigarette vending machine operator of sites throughout Scotland, England and Wales. Imperial Tobacco employs in excess of 2,600 people across the UK, the majority of whom are members of our UK operation - ITUK.

2. Summary of Imperial Tobacco's Views

This memorandum provides ITUK's views on the proposals contained in the Tobacco and Primary Medical Services (Scotland) Bill that seek (1) to ban the display of tobacco products from retail premises and (2) an outright ban on all tobacco vending machines. Our views on these proposals are also set out in detail in our submission to the UK Government's 2008 consultation "Future for Tobacco Control", and are available on our website at www.imperial-tobacco.com

The sale of tobacco products is already highly regulated in Scotland. We are opposed to additional regulation that further restricts or prohibits retailers from displaying tobacco products and interferes with adult free choice and free competition.

It is our view that the proposals as contained in the Bill are not based on any sound evidence. Indeed, the available real-world evidence demonstrates that the plans to ban retail display and vending outlined in the Bill will not achieve the Scottish Government's objectives of reducing youth smoking rates, nor of discouraging those who have already stopped smoking from starting again. Instead, such bans will have significant unintended consequences by facilitating the sale of illicit products and by further damaging the many retailers and small shop-keepers who are already significantly affected by the economic downturn.

ITUK supports the Scottish Government's objective of reducing consumption of tobacco products among those under the age of 18 and participates in a range of TGP17

programmes designed to discourage youth access to tobacco products. However, the most recent data on smoking incidence amongst 11 to 15 year olds in the UK indicates that existing regulation is already sufficient. 3. On the need and justification for the creation of offences in part I of the Bill relating to tobacco displays and sale of tobacco products from vending machines:

It is ITUK's view that:

a. The proposal to ban tobacco displays will be ineffective in achieving the Scottish Government's stated policy objectives.

• The Scottish Government believes that there will be a benefit from a display ban due to a reduction in those '...under 18 year olds who take up smoking due to awareness of tobacco products from display...', and that this will lead ‘…to a long term reduction in adult smoking rates’1. Three studies from Wakefield and Henriksen are cited to support this position. Imperial Tobacco provided a comprehensive review of the available evidence, including these three studies, in its submission to the UK Department of Health Consultation on the Future of Tobacco Control.2 Many of the studies are flawed, and taken as a whole this evidence does not demonstrate that retail display bans would reduce tobacco consumption or prevent smoking relapse.

• The evidence from Canada and Iceland (where display bans have been introduced) also supports a different conclusion. For example the 2007 Health Canada CTUMS survey3 reported that Saskatchewan, which was the first Canadian province to impose a ban on the display of tobacco products, was the only province in which the rate of smoking prevalence had actually increased since the 2006 CTUMS survey.

• Overall the data from both Canada and Iceland strongly suggest that the display of tobacco products has had absolutely no impact on overall rates of tobacco consumption or specifically on youth smoking rates. Claims to the contrary fall down on closer examination.

• Since the publication of the Tobacco and Primary Medical Services (Scotland) Bill, the government of New Zealand has decided not to go ahead with its plans to ban tobacco displays. Prime Minister John Key expressed concern that while there is no evidence to prove that hiding tobacco out of sight reduces smoking, the move would place a huge

1 Tobacco Provisions to be contained in the Health (Scotland) Bill http://www.scotland.gov.uk~Publications/2009/02/27120518/0 2 lmperial Tobacco Group Plc and lmperial Tobacco UK: Joint Submission to the Department of Health Consultation on the Future of Tobacco Control, September 2008, Chapter 2. Retail Display And Plain Tobacco Packaging: http://www.imperial-tobacco.com/ 3 Health Canada - Tobacco Control Programme; Canadian Tobacco Use Monitoring Survey (CTUMS) - 2007 TGP17

burden on retailers. He said: "there is no international evidence that it actually works and it's hugely expensive to do it".4

b. Existing legislation to crack down on under-age smokers should be rigorously supported and enforced.

• The evidence demonstrates that factors such as rebelliousness, risk taking, family structure, relationships, socioeconomic status, educational achievement and the influence of peers are the true determinants of youth smoking; not the display of tobacco products.5

• Two recently-introduced regulatory measures in the UK were aimed specifically at reducing youth smoking - raising the minimum age of purchase to 18 and the introduction of graphic health warnings on packets of tobacco products. We cannot understand why the Scottish Government is attempting to introduce such drastic and controversial regulation before assessing the impact and effectiveness of these new regulations.

• Government should focus its efforts on greater enforcement of the existing minimum age laws. These efforts should be supplemented with additional resources to support Trading Standards in tackling illegal selling.

• We also believe that the Government must give greater support to existing proof of age schemes. Initiatives such as "No ID No Sale" and "Citizencard" have already contributed to a 7 per cent decrease in youth smoking prevalence from 13 per cent in I996 to 6 per cent in 2008.

• It is illogical for the Government to demand ever-more graphic and shocking health warnings on cigarette packets and then to require that packets carrying those warnings are hidden from view until after a purchase has been made.

c. There will be an increase in illicit trade.

• HM Revenue and Customs ("HMRC") currently estimates that as much as 17% of all cigarettes and 59% of all hand-rolling tobacco consumed in the UK in 2006/7 was either smuggled or purchased abroad6. This represents an estimated loss to the Treasury each year of up to £4.1 billion in excise revenues.

4 John Key, 24 February 2009, http://www.3news.co.nz/full-interview-with-John- Key/tabid/572/articlelD/92515/caV765/Default.aspx 5 Imperial Tobacco Group PIC and lmperial Tobacco UK: Joint Submission to the Department of Health Consultation on the Future of Tobacco Control, September 2008, Chapter 4. Youth Smoking: http://www.imperial-tobacco.com/ 6 'Measuring Indirect Tax Gaps', HMRC, 2008 TGP17

• The illicit trade is made up of three main elements: counterfeit (illegal copies of genuine UK brands which are sold illegally in the UK)' non-UK products on which duty is paid in the country of origin but which is then re- sold in the UK through illicit channels; and so called 'cheap white sticks' which are brands manufactured outside the UK specifically to serve the smugglers and are for sale in the UK through illicit channels.

• HMRC data for cigarette seizures across the UK during 200718 indicate that 46% of the total was counterfeit UK Brands, 44% was non UK brands or 'cheap white sticks' and 10% of it was UK Brands bought outside of the UK7.

• Data from pack collections conducted around different locations in Scotland during the latter half of 20088 indicate that around 26% of all cigarettes and nearly 73% of all hand-rolling tobacco consumed in Scotland were not UK Duty Paid. This compares with 23% and 65% respectively for the rest of the UK. These data are broadly consistent with the HMRC estimate for the UK and suggest that the extent of the illicit trade in tobacco is greater in Scotland than in the UK as a whole. In the same exercise 2% of all cigarette packs collected in Scotland were found to be counterfeit, compared with 2.9% for the rest of the UK.

• Retailers in legal retail channels may be faced with 'opportunities' to sell any of these three variants. In a 2009 survey conducted for the Tobacco Retailers' Alliance of over 1100 retailers throughout the UK, 56% were aware of smuggled tobacco being sold in their area and 24% had been approached by someone offering to sell smuggled tobacco to them9.

• A retail display ban will exacerbate these significant levels of illicit trade taking place throughout Scotland, as already acknowledged by HM Treasury and by HMRC. The distinction between tobacco products that are sold legally, and counterfeit or other non UK duty paid tobacco that is illegally traded on street corners, in pubs and at car boot sales will become further blurred.

• Any proposal to hide tobacco products from view will increase opportunities to stock and sell smuggled or counterfeit products. This will make the work of HMRC, Trading Standards and other anti-illicit trade authorities more difficult and will exacerbate the already-significant UK revenue losses, estimated to be somewhere between £2.5 and £4 billion per annum. Consumers are unlikely to be able to differentiate between legal products (which they would assume to be displayed correctly) and

7 Tackling Tobacco Smuggling Together, HMRC, November 2008 8 Cigarette and Roll Your Own UK pack collection data Conducted for ITUK between July 2008 and January 2009 9 Opinion Research Business Survey for the Tobacco Retailers Alliance, March 2009 TGP17

illegal products, which are currently more likely to be stored under the counter and out of sight.

• A display ban is likely to lead to an eventual reduction in the number of retail outlets selling tobacco. If consumers are further displaced from the legitimate retail chain to illicit channels, it is inevitable that both public health objectives and Government revenue streams will be compromised.

• At a time when UK Treasury via HMRC is spending taxpayers' resources on combating the illicit tobacco trade, it is iniquitous that the DOH is seeking to introduce measures that would serve to exacerbate the same trade. d. Businesses, particularly small shops, could be badly hit.

• The costs of implementing a display ban would have a disproportionate effect on small businesses already struggling to cope with the economic downturn and at a time when Government is reiterating its support for small shops.

• Recent data from Canada indicate that a significant proportion of the total retail universe was placed at risk by the introduction of a tobacco display ban. Around 7% of all retail businesses in Canada have closed during the last 9 months of 2008. e. The proposal to ban tobacco displays is anti-competitive.

• The evidence demonstrates that the display of tobacco products in retail premises has no bearing on whether or not adults or young people choose to smoke. On the contrary, the display of tobacco products enables adult smokers to make an informed choice from the extensive range of tobacco products, brands and prices available in retail outlets. We believe it is wholly unreasonable for adult smokers to be denied the same rights as any other consumers of a legal product.

• Under the proposed legislation it would be an offence to display a product that it remains legal to sell. This undermines the right to commercial free speech under Article 10 of the European Convention of Human Rights and is contrary to the principles of free movement of goods already enshrined in Article 28 of the EC Treaty. f. Imperial Tobacco is strongly opposed to the proposal to ban the display of 'smoking related products' (such as cigarette papers, tubes, filters and pipes), with specific regard to cigarette papers.

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• None of the available data, including data available from market intelligence, supports the claim that the display of tobacco accessories has the effect of encouraging young people to smoke, prevents existing smokers from giving up or causes relapse in ex-smokers. This lack of evidence was acknowledged in the UK Government's consultation document on the Future of Tobacco control.10

• The demand for tobacco related accessories is determined by the extent of tobacco smoking and not vice versa. Non-smokers do not start smoking because they have seen a particular brand of rolling papers, pipes, tubes or filters on display. Similarly, the display of tobacco related accessories has neither the purpose nor the effect of increasing the consumption of tobacco.

• Imperial Tobacco is concerned about the continued increase in availability of counterfeit rolling papers sold in the UK. This trade damages legitimate retailers and manufacturers of genuine products and exposes consumers to unregulated products. Banning the display of rolling papers would make it easier for counterfeit papers to enter the retail supply chain. g. The proposal to ban tobacco vending machines in Scotland is an unnecessarily drastic step to take when there is no evidence that young people are using vending machines to flout the age law

• There is a lack of definitive evidence that minors access cigarettes from vending machines in great numbers, and the incidence of those who do appears to be declining, as demonstrated by a 2006 Government study11.

• The implementation of the smoking ban in public places (including licensed outlets such as pubs, bars and restaurants) has caused a major decline in vending sales. Less than 1 per cent of all tobacco sales come from vending machines. It is highly unlikely that many licensed outlets would opt to continue to sell tobacco (i.e. over the bar) in the event of a ban on vending. In such a scenario it is most likely that, if smokers are unable to purchase tobacco from a vending machine, the void would be filled by illegal sellers who move from pub to pub selling non UK duty paid cigarettes.

• The Scottish Government's own report1 does not make a convincing case for the additional benefit of Option 3 (Ban Sale of Tobacco from Vending Machines) over Option 2 (Introduction of Age Restricting Mechanisms). Vending operators have proposed viable solutions for restricting access to

10 DOH consultation on the future of tobacco control, May 2008. p 29 11 Smoking, Drinking & Drug Use, 2006, The Information Centre for Health & Social Care TGP17

vending machines by age which the UK authorities have accepted as a proposal in the Health Bill.

• The number of jobs and the likely impact upon them is underestimated. As well as the 14 Sinclair Collis employees cited in the RIA, the National Association of Cigarette Machine Operators (NACMO) estimates that an additional 28 people would lose their jobs.

• The Scottish Government has overestimated the potential benefits and underestimated the negative impact of banning cigarette vending machines. A less drastic option that addresses the Scottish Government's objective is clearly available.

4. Conclusion

ITUK has given this call for evidence thoughtful consideration. Our experience of the UK DOH consultation is that of some 96000 responses received by the DOH, 70,000 were pre-written or emails orchestrated by groups funded by the Department of Health. We trust that in this call for evidence our expert response will be given its due weight and treated in an objective manner. We would welcome the opportunity to provide the Committee with our evidence within the context of an oral hearing.

Arnal Pramanik General Manager ITUK

And

Dr Steve Stotesbury Corporate Affairs Manager ITUK 6th April 2009