The Chancellor's abandonment of his pledge on tobacco follows intense lobbying by tobacco manufacturers, who say recent increases in smuggling are linked to increases in duty. But anti-smoking campaigners say there is no evidence that the move will decrease smuggling and make the Treasury richer.
In 1997 the Government promised that cigarette duty would rise by 5 per cent each year. Last month Mr Brown promised that proceeds from future rises would go to the NHS, but at the same time heremoved his earlier pledge.
The Government already faces criticism for a series of broken promises. Yesterday it emerged that plans for free museum entry had been dropped, and today The Independent reveals a change of heart over housing benefit reform.
The Treasury is also facing scrutiny from a House of Commons committee over levels of tobacco smuggling. The Treasury sub-committee is likely to recommend a radical shake-up of anti-smuggling machinery in which Customs and Excise is merged with the Inland Revenue - though the Government may resist this.
Mr Brown's move, which is bound to cause anger in the Department of Health, reveals the extent of the Government's anxiety over tobacco smuggling. Since 1998 the Chancellor has been forced to cut his estimate of this year's tobacco tax revenue from almost pounds 9bn to pounds 5.7bn, even though cigarette consumption is believed to be rising slightly.
Revenue lost through tobacco smuggling is expected to total pounds 2.5bn this year, a significant increase on the pounds 1.7bn lost in 1998.
Customs and Excise officials say one in six cigarettes and three quarters of all rolling tobacco smoked in this country now is illegally smuggled.
Only a small proportion of the smuggled tobacco arrives in Britain through the "white van" trade from Europe. The majority arrives in large containers which come from either from Eastern Europe or the Middle East, or from British manufacturers.
Clive Bates, director of Action on Smoking for Health, said Mr Brown had "pulled the wool over everybody's eyes" by glossing over the change in his pre-Budget statement.
"This can only herald a slow-down in increases in tobacco tax, though I doubt there will be a freeze given the Government's promise to put the extra money into the NHS," he said. Evidence from other European countries showed lower tax did not necessarily mean less smuggling, he added.
John Carlisle, spokesman for the Tobacco Manufacturers' Association, said Mr Brown's move was a step forward but should be followed by cuts in tax. "We still haven't convinced the Government of the seriousness of the situation," he said.
The Treasury sub-committee of the House of Commons, with Sir Michael Spicer as chairman, is examining the relationship between tobacco duty and smuggling as well as the possibility of a merger between Customs and the Inland Revenue. Dawn Primarolo, the Paymaster General, will appear before the committee next week.
A Treasury spokeswoman denied that it had accepted the cigarette manufacturers' arguments over tobacco tax.
Mr Brown has announced a series of initiatives to tackle the problem, including "fiscal marks" which will show whether tax has been paid and will prevent retailers from stockpiling cigarettes before a Budget.
THE TWISTS AND U-TURNS
Promise: One of Labour's key pledges at the 1997 election was a plan to cut hospital waiting lists by 100,000 during the Parliament.
Result: By October 1999 they had risen from 247,510 to 456,033.
What happens now? Alan Milburn, the Secretary of State for Health, has decided to concentrate on tackling heart disease instead.
Promise: In 1997 Labour said: "We will set targets for universal provision for three-year-olds whose parents want it."
Result: In 1998 the Government omitted the pledge, which might mean up to 600,000 new places, from its annual report.
What happens now? David Blunkett, Secretary of State for Education, has promised to double numbers of three year-olds in nursery to 360,000 by 2002.
Ethical arms dealing
Promise: In July 1997 Robin Cook promised not to sell arms "for internal repression or international aggression".
Result: In July 1997 it became clear that sales of Hawk jets and armoured cars to Indonesia would go ahead.
What happens now? The row continues, with Hawks having been seen flying over East Timor and the vehicles used to suppress protests.
Promise: Chris Smith said there would be free admission to galleries and museums by 2001.
Result: This week it emerged that Mr Smith had dropped the pledge after he found that pounds 100m from the Treasury would not cover the cost.
What happens now? Pensioners and children will get free entry from spring 2000, but the rest will have to wait.
Promise: In 1997 the Government promised that cigarette duty would rise by 5 per cent each year.
Result: In November 1999 Gordon Brown, the Chancellor, quietly dropped the pledge as tobacco manufacturers blamed high tax for a rise in smuggling.
What happens now? The tax will probably continue to rise slowly, with decisions taken on a year-by-year basis.Reuse content