All-Party Parliamentary Group (APPG) on illicit trade

On 23 August 2017, an All-Party Parliamentary Group (APPG) on illicit trade within a range of sectors, including alcohol and tobacco (but excluding illicit goods such as firearms and narcotics), was announced.¹²³
The announcement of the APPG came one month after Japan Tobacco International (JTI) hosted an anti-illicit tobacco event, co-hosted by three Members of Parliament (MPs): Ian Paisley, Stephen Hepburn, David Morris.⁴
In response to the launch of the APPG, an Imperial Tobacco spokesperson said that the company was “looking forward to engaging with the APPG if called upon to do so”.⁵ Paul Baxter, Chief Executive of the National Federation of Retail Newsagents – which has previously received funding from British American Tobacco (BAT), also expressed support for the APPG stating that “the businesses of legitimate independent retailers… are being devastated by illegal tobacco and alcohol sales.”¹

Background

The group was set up by Dr. Matthew Offord, the Conservative Member of Parliament (MP) for Hendon.⁶⁷ Before setting up the APPG, Offord had spoken on tobacco twice in the UK Parliament: he asked for an estimate of the cost of illicit cigarettes in Northern Ireland on the public purse,⁸ and asked how tax revenues would be impacted by plain packaging laws.⁹ According to the website TheyWorkForYou, Offord voted against relaxing the smoking ban in 2010, against introducing a ban on smoking in private vehicles where there are children present, and in favour of making it an offence for someone in charge of an enclosed vehicle to fail to prevent smoking within it if someone under 18 is present.¹⁰
In August 2018, the other APPG’s office holders were John McNally (SNP), Lord Harris of Haringey (Labour), Lord Porter of Spalding (Conservative), Ian Austin (Labour), and Craig Mackinlay (Conservative).¹¹ The latter hosted a 2016 roundtable with the Tobacco Manufacturers’ Association (TMA) to discuss the impact of illicit tobacco trade on retailers.¹²

Test Purchases with a Tobacco Consultant Drove APPG Chair’s Interest in Illicit Tobacco

Offord has stated that his interest in illicit trade came after taking “the opportunity” to travel around his constituency “purchasing illicit cigarettes as part of a team which gathers intelligence on the trade” and becoming “increasingly surprised at the quantity of illicit cigarettes that were so easily available”.¹³
In November 2016, Offord accompanied a test purchasing team, led by Will O’Reilly, as they travelled around his constituency looking for illicit tobacco.¹⁴ O’Reilly, a former Detective Chief Inspector with the Metropolitan Police, became a consultant for Philip Morris International (PMI) in November 2011, and has appeared in the press as an “expert” working for PMI in tackling tobacco smuggling.¹⁵¹⁶

APPG Secretariat: “Sponsored by Coco-Cola”

The APPG’s secretariat is provided by Westminster-based public affairs agency Connect.¹¹¹⁷
Connect’s involvement in the APPG has been sponsored by Coca Cola since March 2018.¹⁸
According to the APPG’s Parliamentary Register, the value of the secretarial support so far is between £9,001-10,500.¹¹

”Expert Advice” from Consulting Firm Linked to British American Tobacco

When the APPG was announced, it was revealed that it would take “expert advice” from PA Consulting Group – an international consulting and technology company.¹⁹ PA Consulting also funded Connect’s support prior to Coca-Cola’s sponsorship of the APPG secretarial function.²⁰
The consulting firm has advised BAT on multiple projects,⁵ and in its own words, “working as part of the BAT project team within and across each technical workstream”²¹ while supporting the tobacco company’s tobacco track and tracing initiatives.
PA Consulting’s website has stated since 2010, and as of August 2018 continues to state, that the company is “supporting BAT in their next anti-illicit trade development projects”.²¹²²

2018 Inquiry & Report into State of Illicit Trade in UK

In December 2017, the APPG announced that it would be undertaking a formal inquiry into the state of illicit trade in the UK.²³ The announcement was welcomed by Julian Hunt, Vice President Public Affairs and Communications at Coca-Cola European Partners, who said:

“We are concerned that one of the unintended consequences of the introduction of the Government’s tax on the category is that it may encourage the illicit import and sale of many popular soft drinks brands attracting the Government’s tax from April onwards. We hope this inquiry will raise awareness of the importance of compliance with the new legislation and identify ways in which the Government can take steps to stop disreputable traders selling soft drinks on which the tax hasn’t been paid.”²³

Methodology

The inquiry consisted of an online survey for organisations containing a range of rank order, tick box, and open-ended questions relating to illicit trade⁴ and multiple oral evidence hearings.²⁴ Survey respondents included BAT, JTI, the Tobacco Retailers’ Alliance, the TMA, various alcohol industry groups, the British Soft Drinks Association and the Institute of Economic Affairs (IEA) which has a history of close collaboration with the tobacco industry.⁴ Those who gave oral evidence included Steve Carden of PA Consulting Group, Christopher Snowdon of the IEA, Gavin Partington of the British Soft drinks Association as well as representatives of Crimestoppers, HMRC, Trading Standards North West and law enforcement agencies.¹³

“Researched and Funded” by Connect, PA Consulting and Coca-Cola

The APPG report, published on 16 July 2018, was:

“researched by Connect and PA Consulting and funded by PA Consulting and Coca Cola European Partners”.¹³

The launch event featured speeches from PA Consulting’s Steve Carden and Coca Cola’s Julian Hunt.²⁵

Findings

Key themes from the report included:

• Government should co-operate with industry in tackling illicit trade.

Joint working between enforcement agencies and industry is a key focus of the report with its primary recommendation being the creation of a UK Anti-Illicit Trade Group to enable collaboration between Government agencies, trade associations, businesses and other groups with an interest in illicit trade.¹³ The report argues that “A single forum to share information and test implications of policy would better mitigate against new government policies indirectly increasing opportunities for illicit trade in the UK.”

• Public health regulations have the unintended consequence of increased illicit trade.

The report argues that there is not currently an overarching understanding within Government of how policy impacts on illicit trade, and that for example the soft drinks Levy will lead to an increase in illicit trade of soft drinks. This conclusion was based on data from the Federation of Wholesale Distributors (FWD), which counts tobacco companies, alcohol companies and Coca Cola as supplier members.²⁶ A footnote states that the cited FWD data was taken from an evidence submission to the inquiry from the British Soft Drinks Association.
The findings echo arguments frequently used by the tobacco industry in attempts to blame tobacco control regulation for illicit trade and to push for less regulation. For example, the TMA’s evidence submission to the inquiry claimed that “restrictions on industry and government cooperation taken up by some Local Authorities… can seriously hinder the industry’s ability to engage enforcement agencies to work together to crack down on the illicit trade” and that “government policies have consistently driven consumers to the illicit tobacco market and made it easier for criminals to profit”.¹³
For counters to these arguments in a tobacco-specific context see Action on Smoking and Health’s Tobacconomics report and Countering Industry Arguments Against Plain Packaging: It will Lead to Increased Smuggling.

Impact: 2019 Budget

The UK 2019 budget, presented by the Chancellor of the Exchequer in October 2018, has indicated that the government plans to adopt the APPG report’s primary recommendation to create a UK Anti-Illicit Trade Group.
The budget states that membership of this Group will be made up of senior officials from England, Wales, Scotland and Northern Ireland, but does not outline the roles (if any) that trade associations and other bodies will play in the group:

“To signal its intent to put an end to the illicit trade in all its forms, the government will act on the recommendations of the recent All Party Parliamentary Group report by supporting the creation of a UK-wide Anti-Illicit Trade Group. This will bring together senior officials, representing each of the four parts of the United Kingdom, to share best practice and develop a national strategy for tackling this criminal activity and the societal ills that it fuels.”²⁷

TobaccoTactics Resources

• Tobacco Smuggling
• Tobacco Smuggling in the UK
• BAT Involvement in Tobacco Smuggling
• Will O’Reilly
• PA Consulting Group

Other APPGs listed on TobaccoTactics:

• (APPG) for Vaping (E-Cigarettes)
• All Party Parliamentary Small Shops Group

Relevant Link

• The establishment of the APPG on illicit trade followed the APPG on Smoking and Health’s 2013 inquiry into the illicit trade in tobacco products which made several recommendations at the national level. See its report: All Party Parliamentary Group on Smoking and Health: Inquiry into the illicit trade in tobacco products