Mr. Steven Donaldson:

I thank the Chairman and committee members for inviting us here this morning as representatives of P.J. Carroll to discuss the Government’s proposal on plain packaging. My name is Steven Donaldson and I am the general manager of P.J. Carroll and Company Limited. I am joined by my colleague, Mr. Ronald Ridderbeekx, head of corporate affairs for British American Tobacco in the UK and Ireland.

Founded in 1824, P.J. Carroll is proud to be one of Ireland’s oldest and best known businesses. Now a member of the BAT group, we currently employ 30 people, support the pensions of hundreds of former employees and indirectly support thousands of jobs across Ireland.

At the outset, let me say that we fully accept that smoking causes serious and fatal diseases. Therefore, we fully recognise and accept the Government’s right and interest in regulating on smoking and health issues. I also want to state unequivocally that in no way do we market our products to children. We fully support Government efforts to tackle youth smoking and we work in partnership with others to achieve this. We do not seek to turn non-smokers into smokers. There are 970,000 adult smokers in Ireland and more than 100,000 of them switch brands each year. Our business consists of offering quality tobacco products to these well-informed adults who make the choice to smoke. We fully accept that there is a long-term declining trend in the number of smokers and in the amount that these smokers consume.

It is our view that the legislation on plain packaging, under consideration by the committee, is a disproportionate measure. It will not achieve its stated aims but will risk a number of important undesirable consequences. I will address the following four points. First, the proposal will not reduce smoking rates or stop children from taking up smoking. In fact, evidence from Australia indicates there has been no change in rates of smoking even though plain packs have been on the market for 15 months. Second, the proposal will only benefit the criminal black market by providing a boost to an already thriving illicit trade in Ireland. Third, by depriving P.J. Carroll of our legitimately held trademarks - enshrined in Ireland’s Constitution and protected by EU and international law - plain packaging will damage Ireland’s reputation as a positive environment for business. It will give other industries cause for concern that their trademarks are not safe in Ireland. Finally, and crucially, there is a better way to achieve the Government's public health objectives. Proven measures such as a stronger focus on education, enforcement of existing laws and a ban on proxy purchasing can and will deliver results.

There is no credible evidence to suggest that plain packaging will reduce smoking rates. Extensive research has been carried out into why people take up smoking. All of the research points to parental influence, peer influence, social and cultural norms, price and access as the key factors, not packaging. Evidence offered by lobbyists for plain packaging points to a range of studies on attitudes and intentions to support their claims but fails to point to any real world evidence on the effect on smoking behaviour. Studies referenced by the Minister for Health, Deputy Reilly, deal only with how people intend to react to the idea of plain packs, not what they actually do as a result of plain packs in the real world. Studies have shown that uglier packs are less attractive but they have failed to make the critical connection between uglier packs and the decision to take up smoking. The evidence offered in favour of plain packs is analysed in detail in our submission, which I encourage committee members to consider if they have not already done so.

Australia is the only country in the world to introduce plain packaging, in late 2012. The evidence from Australia has demonstrated that the desired outcome of a reduction in smoking prevalence has not been achieved. The evidence available from Australia, in reports from independent researchers KPMG and London Economics, shows that smoking rates in Australia have remained on trend, a small annual decline. In fact, the consumption of smoking is declining at a slightly slower rate than in the previous ten years, which is not what was predicted. Since plain packs were introduced in Australia 15 months ago, there has been absolutely no impact on smoking rates.

I will turn to the issue of smuggling. Plain packaging will create a big opportunity for criminals; they will only have to produce one pack design ever again if they so choose. By making it harder for consumers to distinguish between brands, price will become a more important factor in Ireland. More people will turn to the cheapest available cigarettes and these will be found on the black market. Estimates of the size, and cost to the Exchequer, of the Irish black market in tobacco vary but are between €240 million and double that amount. Either way, it is substantial. To put this in perspective, criminals already sell twice as many cigarettes in Ireland as P.J. Carroll but none of the criminal gangs behind the tobacco black market will appear before an Oireachtas committee. They do not obey any tobacco control regulations, they do not pay tax, they do not ask for ID and they do not care what is in the cigarettes they sell. The Minister for Finance, Deputy Michael Noonan, recently told the Dáil: “As we continue to use price to discourage people from smoking, I think we will divert more and more of the trade to the illicit trade.” The Minister is correct, and it will be compounded by a measure that creates a lack of differentiation between a legal, duty paid pack of 20 for sale at €9.50 and a smuggled pack at half the price.

We fully acknowledge and support the valuable work of An Garda Síochána and the Revenue Commissioners in their efforts to tackle the black market. While acknowledging their contribution to the committee, it is worth noting that they indicated they have not yet seen any evidence from Australia on the impact of plain packaging on the black market. However, the most recent KPMG report points to a 13% increase in the level of tobacco smuggling in Australia in the first six months after it was introduced. The market has shifted, with new illegal plain pack lookalike brands and what are known as illicit whites gaining market share rapidly. If the trend is replicated in Ireland, we will see large growth in smuggled tobacco. This will undermine the interests of honest retailers, the law-abiding and tax compliant tobacco industry, Government excise returns and public health objectives. The black market in cigarettes already costs the state hundreds of millions of euro and provides children with access to cigarettes. Plain packaging, while well intentioned, will only make this worse.

I would like to briefly touch on intellectual property issues. Our trademarks identify the origin and quality of our products. They tell the consumer that what is on the pack is what is in the pack. The removal of the legitimately held intellectual property rights of P.J. Carroll and other companies is a disproportionate measure in light of the less trade restrictive alternatives available. We also believe it is in breach of Irish and European law and international trade law. It will seriously damage Ireland’s reputation as a good destination for business, as evidenced by the concerns expressed by many business organisations to this committee. A number of countries are currently challenging Australian plain packaging legislation at the World Trade Organization. It is one of the biggest disputes ever to appear before the WTO, with 35 parties, including the EU and therefore Ireland, involved. We encourage this committee not to consider the introduction of any such legislation until the outcome of this dispute is known. Otherwise, it is possible that plain packaging legislation will need to be repealed.

Let me be clear that there is a better way. There is no disagreement between P.J. Carroll, the Government or the committee. We have a shared objective of preventing children from taking up smoking. We support proportionate and evidence-based measures to achieve this objective - measures which will not result in the undesirable consequences I have already outlined. First, we do not believe that any adult should be able to purchase tobacco for children. We believe that any adult who does so is knowingly breaking the law and there must be effective criminal penalties for these adults. Second, certain education programmes have proven particularly successful at stopping children from starting to smoke. These education programmes focus not just on the awareness of risks of smoking, but also provide young people with the life skills to resist peer pressure and make their own choices. Germany, Sweden, and some states in America have achieved excellent outcomes by using education to address youth initiation. In Germany, smoking among children 12 to 17 years has seen a significant decline over the past ten years, from 27.5% to 11.7%. Germany does not ban advertisement or display of products. Instead, it focuses on education programmes such as Class2000, ClearSight and "Be smart-don't start". Education and preventing access are proven ways to stop children from starting smoking. They tackle the real drivers of youth initiation – peer pressure, social and cultural norms and access. Packaging is not why children or adults start smoking and plain packaging will not make them stop.

Last week, this committee discussed with business groups the need to carry out a regulatory impact assessment, RIA, on the legislation. The following day, the Department of Health told stakeholders that it was finally going to carry out an RIA. The Cabinet handbook and Taoiseach’s guidelines are clear that an RIA should have been carried out before the Minister brought the proposal to legislate to Cabinet last November. This committee should not have been asked by the Minister to hear evidence without having an RIA to assess the costs and benefits.

I thank Deputies and Senators for the opportunity to discuss this important issue. We sincerely urge members to gather more evidence before making recommendations on the proposal. The committee must consider the outcome of an RIA before making any recommendations to the Minister. We ask that the committee look further at the evidence from Australia. The evidence clearly shows that the Australian plain packaging experiment is failing. We urge the committee to await the outcome of the major dispute at the WTO.

We believe this further evidence will show committee members and Government that this legislation will not achieve its aims but will have serious negative consequences. These include boosting an already thriving black market that undermines health objectives, costing the taxpayer further millions in lost taxes, costing jobs around the country, illegally confiscating intellectual property and severely damaging Ireland’s reputation as a result. I thank members for listening this morning and I look forward to answering questions.