Dáil Éireann debate -
Wednesday, 6 Dec 2000

Vol. 527 No. 4

Financial Resolutions, 2000. - Financial Resolution No. 2: Tobacco Products.

Ms Harney

I move:

(1) THAT in this Resolution–

"Act of 1977" means the Finance (Excise Duty on Tobacco Products) Act, 1977 (No. 32 of 1977); "cigarettes", "cigars", "fine-cut tobacco for the rolling of cigarettes" and "smoking tobacco" have the same meanings as they have in the Act of 1977, as amended by section 86 of the Finance Act, 1997 (No. 22 of 1997).

(2) THAT the duty of excise on tobacco products imposed by section 2 of the Act of 1977, shall, in lieu of the several rates specified in Schedule 3 to the Finance Act, 2000 (No. 3 of 2000), be charged, levied and paid, as on and from 1 January 2001 at the several rates specified in the Schedule to this Resolution.

(3) IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).

SCHEDULE

Rates of Excise Duty on Tobacco Products

Description of Product	Rate of Duty
Cigarettes	£81.68 per thousand together with an amount equal to 18.89 per cent of the price at which the cigarettes are sold by retail
Cigars	£124.840 per kilogram
Fine-cut tobacco for the rolling of cigarettes	£105.347 per kilogram
Other smoking tobacco	£86.609 per kilogram

This resolution provides for an excise duty increase of 2.6p per packet of 20 cigarettes which, when VAT is included, amounts to 3.1p with pro rata increases on other tobacco products with effect from midnight on 31 December 2000. This increase is to off-set the proposed reduction in the rate of VAT on both products from 21% to 20%.

The net effect of this compensatory increase measure will be that on average the retail price of these products will remain unchanged. Cigarette prices have increased in recent years by significantly more than the increase in the CPI. The highest ever single increase was imposed last year. Over the past ten years tax inclusive prices increased by approximately 82% while the CPI increased by nearly 26%. Over the same period the average tax content of cigarette prices has been about 76.5%. Therefore, taxes have played a major role in increasing the price of cigarettes and are helping dampen consumption.

The Government remains very concerned about smoking and its continued adverse effects on health and health spending. In these circumstances it was decided that smokers should not benefit from the proposed reduction in the VAT rate.

Mr. Shatter

Fine Gael will oppose the resolution because the Government has shown it has absolutely no coherent health policy to tackle the problems of tobacco consumption. The Joint Committee on Health and Children published a report in November 1999, which as rapporteur I had the privilege of writing, which was unanimously accepted by all parties represented on the committee. The report, which was laid before both Houses of the Oireachtas, highlighted the fact that there are approximately 7,000 tobacco related deaths in the country annually and that there was a huge upsurge in smoking by teenagers, particularly teenage girls. In the age cohort 15 and 17 years, the number of girls smoking has practically reached 40%. The figure is approximately 40% in the cohort 18 to 35 years, in the context of the overall average number of people smoking, both men and women, although far more women than men smoke.

The joint committee recommended that there should be annual price increases imposed on packets of 20 cigarettes. This was recommended as all research in the area has shown that in the context of young people becoming addicted to tobacco, many starting smoking at 12, 13 or 14 years of age, their capacity to purchase cigarettes is price sensitive. Research endorsed by the WHO illustrated quite clearly that there is a need for a continuing annual increase in the price of tobacco products to act as a disincentive in terms of young people and to reduce the impact of tobacco addiction and smoking related disease.

Last year the Minister for Finance added an additional tax to tobacco products. He did so pri marily because of the publicity arising from the joint committee's report and the public hearings of the committee which illustrated the extent of our problem in terms of tobacco related disease, and the extent of the huge family difficulties and traumas created. In implementing what is proposed the Minister failed, as is often the case with the Government, to take the full proposal of the committee on board. The committee was conscious that tobacco products, and cigarettes in particular, are included in the basket of items which make up the CPI. In recommending annualised increases in cigarette taxes the committee simultaneously recommended that tobacco should be taken out of the CPI basket. The Minister provided for a price increase, which was welcomed by this side of the House, but failed to take cigarettes out of the basket. As a consequence it is estimated he added between 0.8% and 1% to the consumer price index. The only reason there was no increase in the price of tobacco products in the budget is because the Minister for Finance, in the 13 months since the report of the joint committee was published, has failed to address the issue of removing cigarettes from the basket of products which goes to calculate the CPI. The Belgian Government removed cigarettes some considerable time ago to good effect.

In her speech the Tánaiste recognised that an increase in tobacco prices is designed to dampen the demand for tobacco products. The Minister referred very briefly to health problems. The Irish Cancer Society, the Irish Heart Foundation, Ash and a whole series of other organisations, which do very important work in this area, support the proposition that there should be annualised price increases on packets of cigarettes. The total failure of the Government to address this issue in a comprehensive way and to implement recommendations supported by all the Fianna Fáil members represented on the Joint Committee on Health and Children means that a policy that the Government seemed to start, which was welcomed on this side of the House last year, has been brought to a halt.

The Minister for Finance apparently only suddenly realised the importance of the consumer price index issue. He said in his budget speech that he would consider it. If Belgium could address this issue, there is no reason this State should not have addressed it. An increase should have been put on the price of tobacco products in this budget and the next budget and we should not apologise for it because increasing the price of tobacco products acts as a disincentive to young people purchasing cigarettes and, I hope, ensures that in future years we will suffer to a lesser degree from tobacco related disease.

To date the Government has addressed, in a piecemeal way, some of the problems that need to be addressed in dealing with cigarettes and smoking related disease. It has treated the report of the joint committee as a restaurant menu and taken and implemented two or three of its recommendations. Some of the reports' recommendations were replicated in a report the Minister for Health and Children published three months after the publication of the report of the joint committee.

The majority of recommendations and proposals to tackle the problem, particularly that of young people addicted to tobacco, have not been implemented. The Minister for Enterprise, Trade and Employment can correct me if I am wrong, but I think it is estimated that in excess of £1 billion in taxes were acquired by the State last year from taxes imposed on tobacco products. Despite that level of funding having been acquired, to date not one of the recommendations in that report on joint initiatives by schools and health boards to provide smoking cessation programmes in secondary schools have been implemented. It remains the case that people addicted to tobacco products cannot get products to help them come off that addiction through chemist shops by way of a medical card or under the £42 per month health benefit that can be reclaimed.

The Government has tinkered with the issue. Tonight a message has gone out that it is not serious about this issue, that much of what the Minister for Health and Children has been saying about the tobacco issue has been a public relations exercise, designed to genuflect in the direction of work the joint committee undertook over a period of 18 months, but it lacks serious and coherent intent.

It is interesting to note that it was only three weeks ago he was reported in one of the major weekly medical papers as being in favour of the removal of cigarettes from the consumer price index. He was praised for the approach he articulated. It is clear that what he then said was pre-budget public relations blather and was not part of Government policy. It was assumed by many people that in conducting that interview and stating that as a policy, he was speaking on behalf of the Government. It was expected by Fine Gael that the Minister for Finance would have announced in the budget that tobacco products were to be removed from the basket of items from which the consumer price index is calculated. It was anticipated and expected that an additional minimum 50p tax would be imposed on a packet of 20 cigarettes. It is most regrettable the Government is not doing that. It is sending out the wrong message from this House and it is undermining the work being done by the health community, including organisations such as the Irish Heart Foundation, Ash and the Irish Cancer Society.

Ms Fitzgerald

Deputy Shatter has spoken fairly comprehensively on this issue, but actions speak louder than words in this area. This is a serious public health issue. It is clear from all the evidence that young people are becoming more and more addicted to cigarette smoking. It is a particular problem in the case of young women – the World Health Organisation has recognised this. Enormous amounts of money are invested by international advertisers in this area. In every magazine there are advertisements targeted at young women and we see the results. More and more young women are smoking. It is also very clear from research – Deputy Shatter also made this point – that annualised increases on this product should be part and parcel of any Government policy in this area. If we are serious about dealing with the major public health issues involved, the major individual health costs, the major cost to the State and coherence in Government policy, I am sure the Minister for Enterprise, Trade and Employment will agree, on reflection, it was a mistake not to have moved forward in the budget on this issue by way of an annualised increase.

Mr. D. Carey

I join my colleagues in their criticism of the Minister for Finance for not removing this item from the basket of goods from which the cost of living index is calculated. When large increases are imposed on the price of tobacco products, the revenue collected should be spent in the area of health care. There has been no evidence during the past year that the additional revenue collected was spent in that area. In every other country where severe measures such as this were taken, there is no indication that the revenue collected was spent in the area of health care or on what areas it was spent. It is ridiculous that the price of tobacco products will be increased while no action will be taken to discourage people from taking up the habit of smoking by way of initiatives in schools and hospitals and by national advertising on the electronic and television media. I am unhappy there is no absolute evidence of a willingness in the Department of Health and Children, to which this additional revenue should be allocated, to do something about cigarette smoking which is so harmful to everyone.

Ms Harney

I thank the Deputies for their interventions. Ireland has the second highest level of excise duty on cigarettes in the EU, 146.34 per 1,000 cigarettes compared with an EU average of 90.35. Notwithstanding what Deputy Shatter said about the consumer price index – the Minister referred to it in his budget speech – the consumer price index is drawn up following the household budget survey which is based on a calculation of what people spend their money on. A total of 4.8% of the spend in Ireland is on cigarettes.

As constituency representatives, many Members will be aware – it has frequently been my experience – that when constituents come to talk about their financial circumstances concerning housing or some other matter, they may have a piece of paper with a list of their outgoings per week or per month and I am often astonished that one of the big spend items for many people on very low incomes is cigarettes. It is not infrequent that people on relatively low incomes spend £40 to £50 a week on cigarettes, which is incredible.

Last year we introduced a 50p increase on the price of a packet of 20 cigarettes. That was done for health reasons and £132 million collected in revenue went to the health services.

Mr. D. Carey

There is no evidence of that, given that more people are smoking.

Ms Harney

The consumption of cigarettes went down last year by 1.66%.

Mr. Shatter

That is because the price of them was increased.

Ms Harney

I admit we are not doing that this year in order to curb inflation. We had several discussions about breaching confidentiality in this matter in relation to cigarettes. The CPI is compiled by the CSO, which also compiles a figure that excludes cigarettes. That is ignored. The international way of compiling the CPI, both here and in Europe, includes people's expenditure on particular product and cigarettes form a high proportion of what people spend their money on in Ireland, as is the case in other European countries.

If the Minister excluded it and made a unilateral decision informing the CSO accordingly we would probably be accused of fiddling the figures to get inflation down. I admit we have a number of strategies, including health strategies. Prices alone will not dictate whether people continue to smoke and a number of measures have been taken, such as the banning of advertising and the ten-cigarette pack. The latter is used by younger people in particular as they do not have the money for the larger pack, so that is being done to discourage smoking among the very young and particularly among young women. Many of the latter smoke for weight-related reasons. Instead of having a biscuit, glass of wine or other dessert they have a cigarette. We need to engage in a very active and aggressive health education campaign in relation to cigarette smoking. It is not just about the price, though price has a huge part to play.

When the Government took office, health service spending was £2.75 billion and as a result of today it has gone to £5.29 billion, almost double. There are real issues regarding improvement in service as a result of the increased spending but we have not been found wanting regarding the money we have earmarked and ring fenced for the health services.

The tax take for cigarettes is more than £1 billion. It is £1.023 billion, a considerable amount of money. The price of cigarettes has risen much faster than the CPI, increasing by 49.9% since 1990, while next year it is envisaged that consumption will be down by another 0.5%. I admit openly that the only reason the price of cigarettes is not going up is the effect it would have on the CPI and the effect it would have on inflation. As Deputy Shatter has acknowledged, it has added almost one percentage point to the rate of inflation in the past year, though that will be out of the equation after next month. From the Government's point of view health must be a priority. Cancer and heart disease are caused by smoking but speakers have mentioned inflation already, and will probably mention it again when debating the next financial motion. There are a number of things we need to do and the Minister gave a commitment to look at how the CPI is compiled. I am not sure if we can move in that direction. They have not been able to do so in Europe.

Mr. Shatter

They have done so in Belgium.

Ms Harney

They have done it in Belgium but not for the harmonised EU index.

Mr. D. Carey

The Tánaiste is against harmonisation.

Ms Harney

I am against the harmonisation of tax, yes. We are talking about different things.

Mr. Shatter

I congratulate the Tánaiste on her honesty, though I am absolutely appalled by what she just said. She confirmed to the House that the reason there is no additional imposition of taxes on cigarette products is not for health reasons but because the Government is fearful of the impact on the CPI. For the sake of the CPI the Government is prepared to sacrifice the health of our young people. For the sake of the CPI the Government is willing to allow more people suffer serious cancers such as throat cancer or cardiovascular disease. Let us look at the logic of what the Tánaiste said.

If the Tánaiste is concerned with health issues this matter could have been dealt with in a better and more coherent way which would have resulted in praise from this House for a coherent health policy. To tackle part of the problem of the CPI my party proposed some weeks ago that the VAT rate be reduced from 21% to 19%. The Government has chosen to reduce the VAT rate to 20%. In the context of dealing with tobacco products and health issues, if the Government were taking a comprehensive overall policy view and there was genuine concern about averaging our VAT rates to a level that was in synchronisation with other EU countries while also maintaining a dynamic health policy, a choice could have been made. The choice could have been to reduce the VAT rate to 19% and to impose an additional 50p tax on a packet of cigarettes. Cigarettes could have been kept within the basket and a major problem with the CPI would not have been created.

The other choice arose 13 months ago when an Oireachtas joint committee unanimously recommended that tobacco products be taken out of the CPI. The Tánaiste was concerned that she or the Minister for Finance would have been accused of massaging the figures.

Ms Harney

The figures relating to the price of cigarettes—

Mr. Shatter

It would have been difficult to level that accusation from this side of the House in circumstances where this time last year Fine Gael's health spokesperson called for the removal of tobacco products from the CPI. Clearly that criticism could not have been levied.

In the context of the overall figures, the average smoking rate among young women in their late teens and early 20s is approximately 40%, while it is somewhat below that for young men. According to the latest figures for the overall population, 34% of people smoke, which is one third of the population in practical terms; however, two thirds do not, so it does not figure in their annual cost of living index problems.

The Government should have a coherent anti-tobacco health policy which is reflected in its financial policy approach. What this Government has is a piecemeal, hiccup policy where it occasionally dips into the area to take an initiative, though when it sees the consequences in the CPI it panics and draws back. I welcome the figures given to us by the Tánaiste, as they confirm something I have been saying for three years, something the Oireachtas Joint Committee accepted and something the World Health Authority articulated in 1998, which is: if one increases the price of tobacco products the level of consumption goes down. The Tánaiste confirmed that that has happened in the past 12 months but it will not happen in the next 12 months. Why? Because the Government did not get its act together and tackle the problem in a coherent way. That is a disgrace and is something that should have been properly addressed by now. All the public relations hand-wringing the Minister for Health and Children engages in on this issue has now been seen as having no substance or weight.

Deputy Carey raised the tobacco taxes issue earlier and the Tánaiste admitted the State took in more than £1 billion in tobacco taxes. The £132 million she mentioned derived from the 50p increase imposed on tobacco products last year but even that £132 million was not used to tackle the problem of tobacco consumption.

Mr. D. Carey

Hear, hear.

Mr. Shatter

It went into the health budget and the cardiac strategy. That strategy is valuable and important but is not solely tobacco-related. That £132 million was substitute finance going into the general area of health policy and the Tánaiste should inform us how much was used by the Government to engage in the "active and aggressive" education and advertising campaign she says is needed and which the joint committee called for. The Government has failed to put such a campaign in place in the past 12 months.

Ms Fitzgerald

What the Tánaiste said is quite contradictory. She said smoking is a major public health issue but it appears from the budget that as soon as she had to make a critical decision she balked at it. The policy is in shreds because an annualised increase is a key component. The last time there was an increase in cost the decrease in the number of smokers was quite substantial. What we are seeing here tonight is a sacrifice of a major public health goal which the Government professes to have but when push comes to shove, it is taking a different policy decision in the budget tonight.

Mr. D. Carey

In my constituency I see an increase in the numbers of young girls coming out of secondary schools at lunch time smoking cigarettes. That is a total change from the time I was at school when it was only the fellows who smoked – young girls did not smoke. That will have a long-term adverse effect on the health of the nation and has resulted in many of the difficulties women experience. The Minister got an extra £150 million in last year's budget to apply to preventing the growth in the use of tobacco by young girls, but nothing happened in that year. How can we expect something to happen this coming year?

Mr. Shatter

Perhaps when the Tánaiste responds she might explain why the Minister for Health and Children is not in the House supporting Government policy on this issue, or whether he does support it? Will she explain if what he said three weeks ago should be taken seriously or if we should take seriously now, as part of Government policy, the fact that there is no intention to introduce such further increases?

Ms Harney

I thought I had responded. The 50p increase imposed last year was the highest any Government ever imposed on cigarettes, believe it or not, and my memory of it is that Fine Gael did not oppose the increase. I do not think there was a vote in this House.

Mr. Shatter

We did not oppose it. We supported it.

Ms Harney

That is what I said. I am acknowledging that.

Dr. McDaid

Fine Gael in Government never put an increase on cigarettes.

Ms Harney

Deputy Shatter does not even know when he is being praised.

Mr. Shatter

It comes as such a shock.

Ms Harney

Not at all. I was quite fair. If it was not for the CPI implications, they would have been increased and I would have been one of the strong advocates of that, as I was last year, notwithstanding the fact that—

Mr. D. Carey

That is not a reason to create ill health.

Acting Chairman (Mrs. Barnes)

Deputy Carey, allow the Tánaiste to continue.

Ms Harney

Deputy Carey talked about all the young people smoking cigarettes. If we take a few steps outside this House to the Members' Bar, we will see a high proportion of public representatives, including colleagues of my own party, smoking.

Mr. D. Carey

Including the man beside the Minister.

Dr. McDaid

Deputy Carey's party never imposed an increase on the price of a packet of cigarettes.

Ms Harney

In relation to the Minister for Health and Children, no Minister for Health has done more to seek to discourage people from smoking. We live in a free society and people make choices that damage their health, whether it is in relation to alcohol or drug or tobacco abuse. Increasing prices has a role to play but it is not the only role that we have to adopt in relation to this issue. We have to educate and inform people—

Mr. Shatter

The Minister is not doing anything about that. Where is the advertising campaign and the spend on it?

Ms Harney

For the first time an office of tobacco control is being established. That office's main remit will be to ensure that throughout the country at local level there will be staff in place to implement a preventative strategy, a tobacco free initiative.

Mr. Shatter

The Government has taken 18 months to establish it.

Acting Chairman

Deputy Shatter, the time has concluded.

Ms Harney

The important thing is that we are committed to it and we are doing it. It is being done for the first time.

Ms F. Fitzgerald

Where is the consistency?

Acting Chairman

I must ask the Minister to conclude.

Ms Harney

Fine Gael's Minister for Finance in waiting, as he calls himself, Deputy Noonan, went on at length here this afternoon about inflation and indicated – I agree with him – that it is the number one priority as far as economic policy is concerned. We have a number of strategies to deal with and the money has gone into health related areas and heart related illness.

Mr. Shatter

Not into anti-tobacco campaigning.

Ms Harney

Tobacco smoking is a major contributor to heart disease, as the Deputy knows.

Question put.

Tá

Ahern, Dermot.Ahern, Michael.Ahern, Noel.Andrews, David.Ardagh, Seán.Aylward, Liam.Blaney, Harry.Brady, Johnny.Brady, Martin.Brennan, Matt.Brennan, Séamus.Briscoe, Ben.Browne, John (Wexford).Byrne, Hugh.Callely, Ivor.Carey, Pat.Collins, Michael.Cooper-Flynn, Beverley.Coughlan, Mary.Cullen, Martin.Daly, Brendan.Davern, Noel.de Valera, Síle.Dempsey, Noel.Dennehy, John.Doherty, Seán.Ellis, John.Fahey, Frank.Fleming, Seán.Flood, Chris.Foley, Denis.Fox, Mildred.Gildea, Thomas.Hanafin, Mary.Harney, Mary.Haughey, Seán.Healy-Rae, Jackie.Jacob, Joe.Keaveney, Cecilia.Kelleher, Billy.Kenneally, Brendan.

Killeen, Tony.Kirk, Séamus.Kitt, Michael P.Kitt, Tom.Lawlor, Liam.Lenihan, Brian.Lenihan, Conor.McDaid, James.McGennis, Marian.McGuinness, John J.Martin, Micheál.Moffatt, Thomas.Molloy, Robert.Moloney, John.Moynihan, Donal.Moynihan, Michael.Ó Caoláin, Caoimhghin.Ó Cuív, Éamon.O'Dea, Willie.O'Donnell, Liz.O'Donoghue, John.O'Flynn, Noel.O'Hanlon, Rory.O'Keeffe, Batt.O'Keeffe, Ned.O'Kennedy, Michael.O'Malley, Desmond.O'Rourke, Mary.Power, Seán.Reynolds, Albert.Roche, Dick.Ryan, Eoin.Smith, Brendan.Smith, Michael.Treacy, Noel.Wade, Eddie.Wallace, Dan.Wallace, Mary.Woods, Michael.Wright, G. V.

Níl

Barnes, Monica.Barrett, Seán.Belton, Louis J.Boylan, Andrew.Bradford, Paul.Browne, John (Carlow-Kilkenny).Bruton, Richard.Burke, Liam.Burke, Ulick.

Carey, Donal.Clune, Deirdre.Connaughton, Paul.Cosgrave, Michael.Coveney, Simon.Crawford, Seymour.Creed, Michael.D'Arcy, Michael. Deasy, Austin.

Níl–continued

Deenihan, Jimmy.Dukes, Alan.Durkan, Bernard.Enright, Thomas.Finucane, Michael.Fitzgerald, Frances.Flanagan, Charles.Gormley, John.Hayes, Brian.Hogan, Philip.Kenny, Enda.Lowry, Michael.McCormack, Pádraic.McGahon, Brendan.McGinley, Dinny.

McGrath, Paul.Mitchell, Gay.Mitchell, Olivia.Naughten, Denis.O'Keeffe, Jim.Owen, Nora.Perry, John.Reynolds, Gerard.Ring, Michael.Sargent, Trevor.Shatter, Alan.Sheehan, Patrick.Stanton, David.Timmins, Billy.Yates, Ivan.

Tellers: Tá, Deputies S. Brennan and Power; Níl, Deputies Coveney and Flanagan.

Question declared carried.