BROWN IGNORED ADVISER'S PLEA TO SLASH DUTY ON TOBACCO

Gordon Brown ignored a warning from his own anti-smuggling adviser
that he should cut the duty on tobacco to halt soaring levels of
contraband and to curb the menace posed by criminal gangs also linked
with hard drugs, The Telegraph can disclose.

The Chancellor of the Exchequer was told that other measures to curb
smuggling would fail unless the price of cigarettes was slashed in
line with other European countries.

Despite estimates that the black market was costing the Treasury up to
pounds 3 billion in lost revenue, Mr Brown refused.

The call was made by Martin Taylor, the City businessman whom Mr Brown
appointed as the Government's so-called "Smuggling Tsar" a year ago.
He concluded that increases in cigarette duty had been a major
contributor to the growth in smuggling.

Mr Taylor, who is now chairman of W H Smith, was appointed to evaluate
methods used at ports and airports to combat smuggling and to come up
with new ideas.

Although he was told that levels of duty were not within his remit,
the businessman was so concerned that he added a covering letter
spelling out his concerns when he delivered his report to the
Chancellor last November.

His report was not published by the Treasury, although Mr Brown said
at the time that he was following its main recommendations, including
the installation of electronic detection devices at ports.

The Taylor report leaves no doubt that higher duty is directly linked
with the growth in smugglers' profits, and acts as an incentive to yet
more smuggling. It says that health policy is being undermined by the
wave of cheap cigarettes. In the past, economists have estimated that
cigarette duty needs to be cut by as much as 1 pound per packet to
curb smuggling. The level of duty in Britain is twice the European
average.

A packet of 20 cigarettes costing pounds 3.64 has a tax of pounds
2.88. The same packet sold in France costs pounds 1.98 with a tax of
just pounds 1.50. The report was kept confidential for fear of giving
away sensitive information on Customs and Excise measures to catch
criminals.

But its findings indicate that the scale of tobacco smuggling and the
involvement of hard-drug gangs may be far greater than previously thought.

It estimates that in the north of England smuggled cigarettes now
account for half of all packets smoked.

It said that smugglers are gaining the upper hand and that without
effective action, most of the tobacco distribution in Britain will
slide into criminal hands.

The report stressed the problems for health policy in the growing loss
of control over tobacco distribution. The more easily available
smuggled cigarettes become, the less effective are health drives
designed to discourage smoking among young people. Mr Taylor said: "It
is certainly true that if we didn't have a duty differential [with the
EU] we would not have smuggling on this scale."

Customs and Excise say seizures of smuggled cigarettes are running at
120 million a month.

But duty losses were estimated at pounds 2.5 billion last year, a
figure likely to rise to pounds 3 billion this year.