Ben Woods, Business writer
Wednesday, March 19, 2014
A disturbing rise in the sale of illegal tobacco has been recorded in Norfolk. EDP business writer Ben Woods investigates the effect this is having on the rural economy.
While the evidence points to a rise in illicit tobacco locally, the national picture is far more complex.
During the course of this investigation, it became clear that the global tobacco industry and leading campaign groups were at odds over the severity of the problem across the UK.
A report published online last week accused major cigarette companies of planting misleading stories and misquoting government data about smuggled and counterfeit tobacco to try to stop the introduction of plain cigarette packaging.
Research by the University of Bath said cigarette companies were claiming that illicit tobacco was increasing in parts of the UK when independent data showed it was not.
“Industry data on levels of illicit tobacco should be treated with extreme caution,” warned the report, entitled ‘Tobacco industry manipulation of data on, and press coverage of, the illicit tobacco trade in the UK’.
Deborah Arnott, chief executive of public health charity Action on Smoking and Health (ASH), claims cigarette companies are trying to “hijack the debate” on illicit tobacco for their own gain.
She has pointed to UK Border Force and the HMRC figures which show the illicit market share of cigarettes has fallen by 13pc since 2001.
But Will O’Reilly – an ex Scotland Yard detective chief inspector carrying out research on behalf of US tobacco company Philip Morris – said a study in Australia by auditor KPMG showed the illegal tobacco market had risen to 13pc since the introduction of standardised cigarette packaging.
He would not comment on the paper by the University of Bath, but stood by his previous comments. He said: “Since 2009 the levels of illegal tobacco products have slowly been rising in Australia. Since the introduction of standardised packaging for cigarettes in December 2012, however, the illicit trade has risen significantly.
“The UK Government stated it will wait and reflect on the evidence following the introduction of plain packaging in Australia,” he added. “With the UK recording increasing levels of illicit trade over the last year these latest findings show this was the right decision.”
The UK government announced in November last year that it would carry out an independent review of tobacco packaging in England amid calls for tougher action to discourage young people from smoking.
The review, which will be led by paediatrician Sir Cyril Chantler, will closely analyse a pilot scheme in Australia, which became the first country to legislate for standardised packaging in 2011.
Ms Arnott said: “UK customs figures show the size of the illicit market has fallen to less than half what it was in 2000 for cigarettes, and under two thirds what it was for hand-rolled tobacco.
“But the tobacco industry, which has repeatedly been proved to be involved in illicit trade itself, is desperate to hijack the debate on illicit tobacco.”
Criminal gangs with links to drug trafficking and illegal weapons are undercutting the high street and targeting young people to turn a quick profit on smuggled or counterfeit cigarettes, trading standards chiefs have warned.
These fears have been underscored by a tenfold increase in illicit tobacco complaints across the county – while the amount of tobacco seized has also risen.
The consumer watchdog has discovered illicit tobacco on sale at corner shops, car boot stalls, people’s homes and on the streets of the county.
Within the last year, a stash of counterfeit hand-rolling tobacco was found stored at the back of a butcher’s in Great Yarmouth, while police officers unveiled a haul of more than 160,000 duty-evaded Russian cigarettes at a house in Wisbech two years ago.
It is feared that young people – who may have been refused a tobacco sale at a local shop because they are under 18 – are being targeted by people selling illicit products on the streets, or by corner shop owners who are flouting the rules and selling smuggled or counterfeit tobacco under the counter, Norfolk Trading Standards said.
Tests on confiscated counterfeit tobacco have revealed traces of sawdust, asbestos and rat droppings – posing a serious health risk if smoked.
David Collinson, head of Norfolk Trading Standards, said the increase was sparked by the economic downturn, as a squeeze on consumer spending encouraged smokers to find cheaper ways of buying cigarettes and tobacco.
“We see illicit tobacco as an emerging threat to Norfolk people and we are actively developing intelligence across Trading Standards to identify the source and supply of illicit products,” Mr Collinson said.
• Smuggled: these are generally legitimately manufactured tobacco products which have evaded payment of tax by being illegally transported, distributed and sold.
• Bootlegged: these are tobacco products which are purchased in a country with a low level of taxation and illegally brought into the UK, evading payment of tax.
• Counterfeit: these are illegally manufactured tobacco products which are often made abroad, but sometimes in the UK. They are sold cheaply and tax free and vast profits are made throughout the supply chain.
• Jin Ling: a counterfeit Chinese cigarette brand which has become a big player in the illicit tobacco market. Smuggled cigarettes make their way into the UK from a range of continents, including the Far East and eastern Europe.
“In the last year we have seen a marked increase in the quantity of illicit tobacco that we are seizing.
“This has come across from information passed on by the public or through our own intelligence systems.
“People who deal with illicit products in one type often deal with other illegal counterfeit products. When we enter premises we often find weapons or illegal drugs.”
Figures revealed by Norfolk Trading Standards show that complaint allegations about illicit tobacco in Norfolk rose from 10 – between April 2011 to March 2012 – to 111 between April 2012 and December 2013.
And the amount of counterfeit hand-rolling tobacco confiscated by the watchdog also rose from 950g to 13.3kg over the same period.
Mr Collinson added: “We see illicit tobacco as being a significant contributor to giving children easier access to smoking.
“The people trying to sell it to children don’t care about the impact they are having on their health – to them it is all about the money.
“It also has a significant impact on businesses and the wider Norfolk economy.”
The news comes as the Tobacco Retailers Alliance said that such was the threat to small businesses that last year 29% of east of England corner shops were considering laying off staff to cope with the blow to their trade.
While consumer spending has come under pressure since the recession, the average retail price of a standard packet of 20 cigarettes has risen from £4.50 to nearly £8 over the past ten years, according to the Tobacco Manufacturer’s Association.
Smuggled and counterfeit tobacco can be difficult to spot, but signs of foul play can include missing health warnings on packages, poor print quality on cigarettes, misspelled words, or health warnings that are not printed in English.
Last year, a public accounts committee report revealed the UK economy lost £1.9bn through tobacco smuggling, which is equal to 20% of all the duty collected on cigarettes.
But the UK Border Force and the HMRC claims to have reduced the illicit market share of cigarettes from 22% between 2000/2001 to 9% in 2012/2013.
Deborah Arnott, chief executive of public health charity Action on Smoking and Health (ASH), said the rise in both reports, and tobacco seizures, demonstrates that agencies are getting better at tackling the issue.
Ms Arnott said: “As action to fight illicit tobacco becomes more effective, more smugglers are caught and more information about the illicit market is gathered, of course the number of intelligence reports and even seizures is likely to increase.
“That doesn’t prove the size of the illicit market is increasing.”
• If you want to report a case of illicit tobacco trading, contact the Citizens Advice Consumer helpline on 08454 040 506 or you can speak to someone anonymously at Crimestoppers on 0800 5551111.
• Has your business been hit by fraud? Contact business writer Ben Woods on 01603 772 426, or email email@example.com