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					Strengthening Sanctions Against Retailers


                                                        APPENDIX 2
                 Partial Regulatory Impact Assessment

Contents                                                      Page


1.    Title of the Proposal                                    2

2.    Purpose and Intended Effect of Measure                   2

3.    Background                                               2

4.    Rationale for Government Intervention                    3

5.    Options                                                  4

6.    Costs                                                    9

7.    Benefits                                                 18

8.    Summary tables of ongoing costs and benefits             22

9.    Risks                                                    26

10.   Consultation                                             27

11.    Equity and Fairness                                     27

12.   Rural Proofing                                           28

13.   Impact on small businesses                               28

14.   Competition Assessment                                   28

15.   Securing Compliance                                      28

16.   Post-implementation Review                               29

17.   Summary and Recommendation                               29




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PARTIAL REGULATORY IMPACT ASSESSMENT -
STRENGTHENING SANCTIONS AGAINST RETAILERS FOR
UNDER AGE SALE OF TOBACCO

                                                                  December 2009

Title of Proposal

1. Strengthening Sanctions Against Retailers for Under Age Sale of Tobacco
   in Northern Ireland.

Purpose and Intended Effect of Measure

2. To reduce smoking prevalence amongst children and young people by
   reducing the availability of tobacco to this group through ensuring that the
   minimum age of sale policy is enforced by retailers.

Background

3. Smoking is the single greatest preventable cause of morbidity and
   mortality in Northern Ireland. Evidence shows that 77%1 of adult smokers
   in Northern Ireland started to smoke in their teens. For these reasons the
   Government is committed to doing everything possible to stop smoking
   among children and young people.

4. The Young Peoples Behaviour and Attitudes Survey 2007 (YPBAS) shows
   8.8% of children aged 11 – 16 are regular smokers. YPBAS reports
   19.7% of young people it surveyed were under 11 years old when they
   had their first cigarette. Although there are no specific figures for Northern
   Ireland, studies conducted in England indicate that for just over half (57%2)
   of children who smoke, their usual source of cigarettes is shops. Scotland
   estimates that 82%3 of 15 year olds and 47% of 13 year olds who smoke
   regularly buy their cigarettes from shops.

5. The law against selling tobacco to children under 16 was set out in the
   Children and Young Persons (Protection from Tobacco) (Northern Ireland)
   Order 1991. On the 1 September 2008 this law was updated by “The
   Children and Young Persons (Sale of Tobacco etc.) Regulations (Northern
   Ireland) 2008, which increased the legal age for purchasing tobacco to 18.
   The law is enforced by District Councils, largely by their Environmental
   Health Officers (EHOs), through the monitoring of premises as well as
   undertaking test purchases using under age buyers. The current penalty
   for selling to children is a fine of up to £2,500. (A warning notice stating
   that ‘It is illegal to sell tobacco products to anyone under the age of 18


1
  Northern Ireland Continuous Household Survey. 2007-08
2
  Smoking, Drinking and Drug Use Among Young People in England Survey. 2004
3
  Scottish Schools Adolescent Lifestyle and Substance Use Survey (SALSUS) 2006 National
Report.


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   must be displayed. Failure to display this notice at the point of sale can
   result in a fine up to £1,000.)


Rationale for Government Intervention

6. Conventional economic theory dictates that market forces are the best way
   to allocate resources, and that government intervention is only justified
   where there is clear evidence of market failure. In a properly functioning
   market, consumers have perfect information, and therefore internalise all
   their costs and benefits.

   However, in the case of tobacco consumption, particularly among children
   and young people, these conditions do not hold true.

   Children and young people rarely have full knowledge of the long term
   health implications of tobacco use, often leading them (along with other
   influences) to make the ill-informed decision to commence smoking. This,
   along with the addictive nature of nicotine, leads to too many children and
   young people becoming addicted and then continuing to smoke into
   adulthood. Many of the costs associated with tobacco use are not
   experienced purely by the smoker, but are passed on to those around
   them and onto society as a whole. These external costs caused by the
   use of tobacco can be divided into three main types:

      • the direct physical cost for other people who are exposed to
      environmental tobacco smoke;

      • the financial externalities that cause monetary loss to others, such as
      the financial costs imposed by smoking on the health service; and

      • the emotional costs suffered by other people from the suffering,
      illness and early death of tobacco users, who may or may not be
      related to them personally.

   The external costs are not easy to assess accurately. However, it is clear
   that not all the costs of smoking are restricted to smokers themselves, and
   combined with the inadequate access to information, this provides
   economic justification for government intervention in the tobacco market.

7. In 2003 the Department published a Five Year Tobacco Action Plan. Its
   key objectives are; to help smokers quit, to protect non-smokers from
   tobacco smoke and to prevent people from starting to smoke. While the
   Tobacco Action Plan is aimed at the population as a whole, three target
   groups were identified including: disadvantaged adults who smoke,
   pregnant women who smoke and children and young people.

8. Evidence from England and Scotland shows that shops are the primary
   source for most under-age children and young people to buy tobacco, and
   there is no reason to assume that a similar level of purchasing is not


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   present in Northern Ireland. Strengthened sanctions will therefore be
   important in ensuring that the under-age sale of tobacco is seen as a
   crime, and that the minimum age of sale for purchasing tobacco is
   rigorously followed.

9. In order to assess the current impact on businesses, information was
   sought from District Councils on formal enforcement action taken under
   the present regime.


District Councils Underage Sales Activity – Cautions and Prosecutions

                               Written         Formal         No. of
                              Warnings        Cautions     Prosecutions
                                                              taken
                2005/06           N/A            16             6
                2006/07           N/A            14               1
                2007/08            16            19               13
                2008/09            22            31               30
(Prior to 2008, information on underage sale was not collected on a consistent basis by the
District Councils. Also prior to September 2008, underage sales applied to those under 16.
This was subsequently changed to 18. The information before this time is incomplete and not
directly comparable to the 07/08 period onwards).


10. This Regulatory Impact Assessment (RIA) details the options for
    increasing sanctions on retailers and examines the potential impacts on
    business and also seeks to quantify the possible health impact of the
    options.

11. There are several options which could be implemented to meet the policy
    objective. These include registration, accreditation, positive licensing and
    negative licensing. These options are examined in detail below.

12. In conjunction with introducing one of the options detailed below,
    consideration should be given to introducing a fixed penalty notice scheme.
    This would give EHO’s the power to fine those retailers found to be selling
    tobacco to under 18’s. A fixed penalty scheme would enhance the current
    system whereby retailers can be taken to court for continually breaking the
    law. The introduction of a fixed penalty notice scheme would mean only
    the most serious of offenders would be brought to the courts.

Options

Option 1 – Do Nothing

13. The Do nothing option is effectively the status quo where there would be
    no changes to the current system. All retailers would continue to be able
    to sell tobacco products on the basis that they display appropriate signage
    with regard to the legal age of sale and that they comply with this law.


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Strengthening Sanctions Against Retailers


   Enforcement would continue to be the domain of the District Councils with
   the current level of test purchasing continuing.


Option 2 – Registration of Retailers

14. Option 2 would essentially be the same as Option 1 except there would be
    a requirement for all businesses who sell tobacco products to register with
    a specified agency (possibly the District Councils). This would not involve
    any scrutiny of the business prior to registration and would merely provide
    a comprehensive list of businesses in addition to the Do Nothing option.

15. To operate successfully there would have to be some incentive for
    retailers to register their businesses. It is envisaged the consequence for
    the retailer of failing to register would take the form of a low level penalty.
    The line between registration and licensing can become blurred as a
    licence can be nothing more than registration with relatively low levels of
    checking and information requirements. Therefore, for the purposes of
    this analysis, registration is the provision of the minimal amount of
    information with no prior checking required. Registration will be more
    about persuading retailers to register with less emphasis on the
    consequences of not registering.


Option 3 – Accreditation

16. Accreditation is also known as a non mandatory licence. In addition to the
    requirements under Option 1, this would involve shops implementing
    agreed procedures which would see them being “accredited” retailers.
    (For example this could take the form of procedures for checking
    identification of individuals). If at some stage in the future the business
    was found to be no longer implementing the procedures then accreditation
    would be withdrawn. However, lack of accreditation would not prevent a
    retailer from lawfully engaging in the business activity. Accreditation
    involves a voluntary scheme with no compulsion for businesses/retailers to
    join.


Option 4 - A negative licensing system

17. A negative licensing scheme is not technically a licensing scheme but
    rather the creation of an additional penalty for infringement of the law on
    under age sales. In addition to the obligations under option 1, it would not
    require the retailer to hold a licence before commencing business, but the
    right to sell tobacco products could be suspended or withdrawn if a retailer
    was found to repeatedly sell or supply tobacco products to customers
    under 18. A series of informal and formal warnings would be issued
    before prosecuting the retailer and withdrawal of their right to sell tobacco
    products.



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18. Under this option retailers would have the presumed right to sell tobacco
    products, but if they were in breach of the law that right would be removed
    and they would be temporarily prohibited from selling tobacco products.
    This could mean a substantial loss of revenue for the retailer.

19. A new offence of selling tobacco whilst subject to a prohibition order would
    have to be created. If tobacco is to be put on a similar footing to alcohol
    then it is likely the new offence of selling tobacco whilst subject to a
    prohibition order would be a fine for up to £5,000 and up to six months
    imprisonment (The current level of fines for alcohol sales).

20. This option has been adopted by and came into force in England on 1 April
    2009. It is however too early to assess how effective it has been in
    reducing underage sales.


Option 5a – A positive licensing system – administered by the Northern
            Ireland Courts Service

21. A positive licensing system is where retailers are obliged to apply for a
    licence before they can legally sell tobacco products`. Such a system
    would actively link compliance with tobacco control legislation with the
    right to sell tobacco products.

22. The retailers would have to apply to the courts service for a licence. The
    eligibility of the retailer would be checked (to ensure they were not subject
    to a ban from selling tobacco) before a licence to sell tobacco products
    would be issued. As with a liquor licence this would then be displayed by
    the retailer in their premises. It is recognised that a licensing system itself
    is not sufficient to ensure compliance therefore a comprehensive
    monitoring system would also have to be established. This could involve a
    wide range of enforcement activity involving formal visiting of premises,
    test sales as well as acting on information provided by the public.

23. A new offence would have to be created of selling tobacco products
    without a licence. Again if tobacco is to be put on a similar footing to
    alcohol then it is likely the new offence of selling tobacco products without
    a licence would be accompanied by a fine of up to £5,000 and up to six
    months imprisonment.


Option 5b – A positive licensing system – administered by District
            Councils

24. This option is essentially the same as option 5a except it would be
    administered by the District Councils.




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Option 6 –    Combine a Registration Scheme with a Negative Licensing
              System

25. In addition to the requirements under Option 1, this option would see
    businesses who sell tobacco products having to register with a specified
    agency (probably the District Council), which would provide the Councils
    with a comprehensive list of retailers. In addition a penalty would be
    created which would see the right to sell tobacco being suspended or
    withdrawn if retailers are found to repeatedly sell tobacco products to
    underage customers. Under this option, businesses would continue to
    have a presumed right to sell tobacco, but if they were in breach of the law
    that right would be removed.

26. This is essentially the scheme being proposed for Scotland. The main
    difference being the creation of a national registration database
    administered by the Scottish Government.


Short listing Options

27. The aim of the policy is to ensure that retailers comply minimum age of
   sale requirements. In support of this aim, licensing models have a number
   of desirable characteristics:

       Notification. Businesses supply information to a regulatory authority.
        Notification is useful when it is important to know the identity and
        source of a potential externality in advance.

       Prior approval. This is when approval from a regulatory authority is
        required before business activities are commenced. This would
        generally be used when there are location specific issues with an
        activity or when the authorities have limited knowledge about the risks
        associated with an activity.

       Standards.     Certain standards are put in place which have to be
        complied with as a prerequisite for commencing or continuing to trade.
        In this case, it is the requirement not to sell tobacco to underage
        children and young people. This characteristic is considered essential.

       Enforcement or compulsion. Having the ability to legally enforce
        standards is key to compliance. Therefore enforcement is deemed to
        be an essential and the most important characteristic. Licensing is not
        voluntary so conducting activities without a licence is unlawful and
        standards are legally enforceable. This means contravention of
        standards will lead to the suspension or revocation of permission to
        sell tobacco products.




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  Strengthening Sanctions Against Retailers


  28. To assist with enforcement it would be helpful to have a comprehensive
      list of businesses which sell tobacco. Therefore notification is thought to
      be essential. Prior approval would require businesses to “sign up” to a set
      of standards before they commenced business. This could be seen as
      restrictive to business practices as it may be necessary to carry out checks
      on the businesses before approval is give to trade. Prior approval could
      also bring with it additional costs which may have to be charged to the
      business. This may prove to be burdensome and unpopular. Therefore
      prior approval is seen as desirable rather than essential.

                                       Characteristics

                             Notification   Prior Approval   Standards    Enforcement

Option 1 – Do nothing            X                 X                         X
Option 2 - Registration of                       X                          ?
retailers
Option 3 – Accreditation          ?                                          X
Option 4 - Negative               X                X                          
licensing system
Option 5(a&b)- Postive                                                      
Licensing System
Option 6 - Registration +                         X                          
Negative Licensing



  29. The Do Nothing only meets one of the characteristics and usually in
      appraisal it would be taken forward to full consideration as a base case.
      However it would be very difficult to fully cost the current regime and
      therefore we have adopted an incremental approach to the costs. The Do
      Nothing has therefore been excluded at this stage.

  30. Option 2 meets the notification criteria giving enforcement agencies a
      comprehensive list of retailers. It is however questionable whether Option
      2 would significantly impact on enforcement on its own. While complete
      vendor information is important to inform enforcement activity, without
      additional enforcement activity the actual impact on enforcement is
      uncertain. Despite this, Option 2 is taken forward for further consideration
      at this stage.

  31. Option 3 would be a voluntary accreditation scheme and therefore it is
      unlikely to assist significantly with the enforcement of the legislation. Also,
      a voluntary scheme doesn’t compel notification and therefore fails to meet
      this criteria fully. Option 3 is therefore excluded from the short list.

  32. Option 4 would provide a more powerful enforcement tool but it would not
     assist with providing more complete information of the retailers. It is likely
     to impact positively on standards as there would have to be an education
     campaign to alert retailers to the new penalties for failure to comply with
     standards. Option 4 is taken forward to full costing.




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33. Option 5a and 5b positive licensing systems administered by either the
    District Councils or the Court Service would cover all the characteristics
    and could therefore be taken forward to full costing. The Court Service
    was thought to be a possible administrator of a licensing system given that
    liquor licences are currently issued and administered by the courts.
    However, there is a move to have liquor licences administered by the
    District Councils.     This is in line with decentralising and reducing
    bureaucracy, and therefore it would be counter productive to place the
    responsibility of issuing tobacco licences on the courts. For this reason
    only a positive licensing system administered by the District Council is
    taken forward for full consideration i.e. District Councils have the power to
    issue licences. The revocation of the licence could be either within the
    power of the Councils with appeals going to the Courts or this power could
    be placed entirely with the courts.

34. Option 6 contains 3 of the 4 characteristics, combining those of a
    registration scheme and a negative licensing system. It covers Notification,
    Standards and most importantly Enforcement. Option 6 is taken forward
    to full costing.


Costs of Short Listed Options

Option 2 – Registration

35. Registration for retailers could be a relatively simple operation. This could
    involve a central registration of retailers administered by DHSSPS or such
    retailers could be asked to register with their local District Council. The
    range of information a business could be asked to supply will impact on
    the cost of this option. Also, the more information that is required, the
    nearer this option would move to that of a positive licensing scheme. For
    the purposes of this analysis it is assumed that only the most basic
    information is to be requested and that only a basic database will be
    required to store it.

36. A range of registration facilities could be offered from on line registration to
    postal registration and walking in off the street to the place of registration.

Retailers

37. The cost of compliance to the retailer would be relatively small. A small
    registration fee may be payable to cover the cost of maintaining a register
    (In the RoI a 50 Euro fee is being suggested) or as suggested by Scotland
    registration could be free.

38. The introduction of a registration scheme by itself would not result in a loss
    of revenue to retailers. It is only if registration is accompanied by
    increased enforcement activity is there likely to be an impact on retailers.
    It is possible in being compelled to register; retailers may be made more
    aware of their responsibility with regard to underage sales. There may


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   also be a slight increased deterrent in that District Councils would have a
   detailed list of all retailers and there would be a higher probability that an
   enforcement officer could call. There could therefore be some fall in
   illegitimate sales in that retailers may be less likely to sell to underage
   customers.

Implementation/ Enforcement

39. The cost to the District Councils or DHSSPS would be that of setting up
    and administering a simple database. It has not been possible to
    accurately estimate the cost of setting up the database as this will vary
    from council to council. It is however anticipated to be relatively minor.
    For example, for a national database, Scotland anticipate a set up cost of
    £7,500, a first year running cost of £40,000 and an annual running cost
    thereafter of £10,000. A database for a District Council would be much
    smaller and therefore could be considered minimal.

40. It is not envisaged there will be any additional enforcement costs with this
    option as enforcement activity will remain at the same level as the Do
    Nothing.

Education/Information

41. There would have to be an education/information campaign to make
    existing and potential retailers aware of their new obligations. The
    campaign could consist of Environmental Health Officers, who examine
    premises for their compliance with signage, distributing leaflets and giving
    advice as well as a public information campaign. Given that all existing
    retailers would have to register it is envisaged the campaign would cost in
    the region of £30,000.


Option 4 – A negative licensing scheme

42. As detailed above this is not a licensing scheme per se but the introduction
    of an additional penalty for infringement of the law. Therefore there will be
    limited additional costs in setting up the system with retailers incurring no
    direct costs. However, for the scheme to be effective, retailers will have to
    consider the risk of being subject to a prohibition order a real possibility. It
    is therefore envisaged that a more rigorous tobacco enforcement regime
    would have to be employed with prohibition orders being seen as the
    consequence of non compliance.

   Education/Information

43. Initially there would have to be an education/information campaign to
    make the retailers aware of stricter sanctions if they are found to be in
    contravention of the law. It is envisaged this would not have to be at the
    same level as a registration scheme or a positive licensing scheme as at
    present the obligation for retailers would not change. It is assumed the


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   cost of this campaign would therefore be half of the other schemes at
   £15,000.

   Implementation & Enforcement

44. For this option to be effective enforcement should be at a similar level as
   that of the positive licensing scheme. Both schemes would require a
   comprehensive enforcement campaign to be implemented to ensure
   compliance is maintained. While Tobacco Control Officers and EHO’s
   currently carry out enforcement, it is recognised there is a difference in the
   level of test enforcement activity between District Councils. It is important
   that some consistency is brought to such activities and that the retailers
   who break the minimum age of sale law are subject to real consequences
   for their actions.

45. A negative licensing scheme may give the District Councils more flexibility
    in their enforcement activity as they may feel less compelled to visit each
    establishment as often as under a positive scheme. It is likely a positive
    licensing scheme could have certain conditions attached to it which would
    require annual monitoring. Therefore it is important that guidelines are
    given to District Councils with regards to enforcement activity to ensure a
    sufficient level of enforcement is attained.

46. While it is recognised there will have to be more stringent enforcement of
    the legislation it is not envisaged there will be a large number of
    prosecutions each year. This is due to both the increased education
    campaign raising awareness of the retailer’s obligations and the
    introduction of the threat of prohibition. Evidence from Australia claims
    there are higher compliance levels with positive licensing schemes than
    with negative ones. However, this outcome seems to be closely linked
    with enforcement activity. It is therefore difficult to estimate what
    differential, if any, would occur between these schemes. For the purpose
    of this analysis it is assumed slightly more prosecutions will take place
    under a negative licensing scheme compared with a positive one as non
    compliance is thought to be higher. An arbitrary 10% has been assumed
    in this instance.

47. The costs of enforcing prohibition orders will depend on where the power
    to enforce such orders lies. If it lies with the District Councils then the cost
    of imposing the orders will be the administration costs of the Councils (with
    only the cost of appeals invoking court costs). If the power lies with the
    Court Service the cost is likely to be higher. As noted above the number
    of prosecutions each year is anticipated to be low and therefore costs are
    expected to be minimal over and above current levels.

Retailers

48. The costs for retailers in complying with a negative licensing scheme are
   likely to be minimal as they will need to do no more than ensure
   compliance with the law on underage sales. This is something that they


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    should already be doing therefore the introduction of additional sanctions
    for non-compliance should not impose an additional burden in terms of
    staff training or other compliance costs.

49. Under negative licensing the only “loss” to the retailer would be loss of
    illegitimate business – loss of sales to underage children and young
    people or if they are found to be in breach of the law, loss of legitimate
    sales under a prohibition order. In England and Wales, the law states that
    a prohibition order can be sought when a conviction has been made and
    where, on at least two other occasions within a 2 year period, the person
    has committed similar offences. Scotland are proposing a similar scheme.

50. For retailers themselves the fall in cigarette consumption is not considered
    to impact on their revenue significantly as it is assumed that children and
    young people unable to buy tobacco will spend their money on other items
    in the shop.

51. In terms of loss of revenue due to prohibition it is assumed a similar level
    will apply as under the positive licensing scheme. However, as mentioned
    previously Australian evidence claims higher compliance levels with
    positive licensing schemes. Therefore a 10% increase in non compliance
    rates is assumed under the negative licence option.

52. The following is assumed:
    a) based on the current level of warnings and proceedings brought by
    councils it is assumed 11 retailers will lose their licence each year.
    b) one of the banned retailers would have been detected as having
    continued to have sold tobacco without a licence receiving a fine of £5000.
    c) that a ban of 6 months is imposed. (the ban length HMRC can impose
    for sale of non-duty paid tobacco) which would lead to the loss of an
    average monthly profit of £228 (assuming an average annual turnover for
    a small corner shop of £180,0004 a year, at least one-tenth of which is
    tobacco sales); and
    d) shops would lose other retail sales, like magazines and sweets – at an
    estimated loss of profit of £150 per month.

    Tobacco Industry

53. It is expected there will be a loss to the tobacco industry from reduced
    sales to the under 18’s as it is assumed the threat of losing their ability to
    sell tobacco would increase the vigilance of retailers to the extent that
    under age sales from shops would fall. DoH, in their regulatory impact
    assessment examining sanctions on retailers, assumed that the magnitude
    of the fall would be the same for both positive and negative licensing
    options at around 10% (assuming 57% of under 18’s purchase cigarettes
    in shops). However, this assumption was questioned within the Scottish
    consultation paper as being too low. Evidence from Australia shows

4
 The Northern Ireland Annual Business Inquiry (NIABI), 2006. Department of Enterprise
Trade and Investment


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    positive licensing has resulted in compliance rates within the retail sector
    of 96% in some areas which has translated into a 50% reduction in
    cigarette consumption amongst the local students. Whilst the very positive
    results are acknowledged, it should be noted that the compliance rates for
    the positive licensing scheme were for one year only and emerged 7 years
    after the licensing was introduced. The same paper quoted compliance
    rates in previous years of between 22%-52%.

54. Consideration also needs to be given to displacement activity. The
    analysis carried out for raising the age of sale of tobacco made the
    assumption only half of any reduction in sales from shops would feed
    through to a reduction in underage consumption of cigarettes as children
    and young people will invariably switch to other sources. It is thought
    reasonable to adopt a similar assumption for this analysis. The 10%
    adopted by the DoH is used as the basis for the analysis, and it is
    decreased by 1% to reflect the fact a negative licence may not increase
    compliance to the same extent as positive licensing.           Cigarette
    consumption by children and young people is therefore expected to fall by
    9% in this option.

55. Sensitivity analysis will be carried out around the reduction in consumption
    achieved. If as evidence from Australia suggests, a 96% compliance rate
    is achieved, there could be a reasonable expectation of a 27% 5 fall in
    cigarette consumption by children. The Australian compliance rate was
    closely linked to enforcement and while it is assumed that the negative
    licensing scheme will have the same level of enforcement as a positive
    licensing scheme, we have reduced the decrease by 10% to reflect the
    fact a negative scheme may not increase compliance by the same amount.

56. To calculate the effect on the tobacco industry the same methodology
    which was set out in the regulatory impact assessment for increasing the
    age of sale to 18 has been applied. Costs to the industry are therefore
    estimated to be between 64% to 171% of those calculated for increasing
    the age of sale to 18. (9% - 24% compared to 14%).


Option 5b – A positive licensing scheme – administered by District
Councils

57. It is inevitable that this option would increase the bureaucratic burden on
    retailers and indeed District Councils. Under a positive licensing scheme,
    retailers would need to apply to the licensing authority for a licence to sell
    tobacco products. They would also have to meet the costs of complying
    with the licensing requirements and pay a designated fee.

58. Retailers would apply to their District Council for the licence, this could be
    in person, by post or through a web based application. The District

5
 57% of children buy cigarettes from shops. Assuming displacement at 50% and 96%
compliance 27% reduction could be achieved.


                                          13
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   Council would be responsible for checking the eligibility of the retailer and
   issuing the licence. They would also be responsible for monitoring
   compliance, most likely through the Environmental Health Service.

59. Revocation of the licence could either be the responsibility of the District
    Council or through the Court system.

60. There would be an initial learning curve for the retailers as to how the
    licensing system would be administered and a comprehensive educational
    campaign would have to be organised to advise retailers to their new
    responsibilities.

61. Under a positive licensing scheme some of the costs of the scheme would
    be recovered through the licence fee. Licensing schemes are costly to
    administer because of the number of staff needed to process the
    paperwork. The initial administration would also need to be well planned
    as it is likely a large proportion of the existing retailers would require a
    licence at the same time.

62. Consideration also needs to be given to increased monitoring and to the
    introduction of more stringent enforcement programmes to support the
    introduction of a licensing regime.       This may require additional
    enforcement resources to be made available to District Councils.

63. It is difficult to put accurate values on the costs of some of the actions
    which would be required to introduce a licensing system, not least
    because there is no definitive list of retailers. Thought needs to be given
    to the cost of a licence, for how long it would run, and how it would be
    renewed. In their RIA for Sanctions on Retailers the Department of Health
    (DoH) proposed introducing a tobacco licence fee of around £200, just
    under half that of the cost of a liquor licence in England and Wales (the
    rationale for the reduced fee being the reduced amount of training that
    would be required for tobacco sales). A Scottish Public Consultation
    paper sought views on the issue as to where the burden should lie. Both
    papers however agreed that bureaucracy and administration, as far as
    possible, should be kept to a minimum, with the Scottish Consultation
    Paper suggesting online licence applications as a means of reducing
    expense.

64. The actual cost of the licence will need to be a matter for further
    consideration and consultation. The licence can be raised on the basis of
    full cost recovery – i.e. the fees and fines paid for administering the system
    with costs passed on to the retailers, or with a certain amount of cross
    subsidisation, from the health service – the anticipated ultimate
    benefactors of the policy (through reduced health care costs in the longer
    term). International experience would suggest there is no consensus on
    this point with different jurisdictions adopting different approaches. In
    Australia, the fees range from being free to the equivalent of around £100,
    while in New York City and Quebec, licences are also free.



                                       14
Strengthening Sanctions Against Retailers


65. For the purposes of this paper, it has been decided to follow the DoH
    methodology. It is unlikely licensing would be free as there would have to
    be some level of cost recovery to make the system viable. It is also
    thought that retailers would value their licence more if they have to pay for
    it. The cost of liquor licences have therefore been taken as a starting point.
    The cost to obtain a liquor licence through the court in Northern Ireland is
    £432. On the same rationale as in England and Wales it is assumed a
    tobacco licence would cost in the region of £200 (around half that of a
    liquor licence).

66. Consideration will also have to be given on the length of duration for the
   licence. A liquor licence runs for 5 years, with renewal costing half the
   price of an initial application. It would seem reasonable to assume a
   similar time scale for tobacco licences.

 Retailers

67. It is assumed around 95% of current retailers purchase the licence (5%
    are assumed not to because of bureaucracy and cost). With an estimated
    3533 retailers in NI there would be a cost of around £671,000.

   Loss of income

68. Retailers could lose income in two possible ways – (i) reduced tobacco
    consumption by teenagers, and (ii) revocation of licence. In relation to
    reduced consumption, it is assumed that any reduction in tobacco
    consumption could be recouped by increased sales of non tobacco
    products, therefore no significant cost has been assumed in this case. In
    terms of licence revocation, while details as to when a licence would be
    revoked would have to be determined, it is assumed only a small number
    of retailers will fall under this category each year.

69. The following is assumed:

   a) based on the current level of warnings and proceedings brought by
   councils it is assumed 10 retailers will lose their licence each year.
   b) one of the banned retailers would have been detected as having
   continued to have sold tobacco without a licence receiving a fine of £5000.
   c) that a ban of 6 months is imposed (the ban length HMRC can impose
   for sale of non-duty paid tobacco) which would lead to the loss of an
   average monthly profit of £228 (assuming an average annual turnover for
   a small corner shop of £180,000 a year, at least one-tenth of which is
   tobacco sales); and
   d) shops would lose other retail sales, like magazines and sweets – at an
   estimated loss of profit of £150 per month.

     Implementation and Enforcement

70. It is difficult to put a cost estimate on administering a positive licensing
   scheme for retailers without the detail as to how the scheme might operate.


                                       15
Strengthening Sanctions Against Retailers


   Extrapolating figures used by DoH suggest a cost of around £500,000.
   However this would have to be examined in more detail should this option
   be chosen.

71. As with the negative licensing scheme it is recognised that there will have
    to be more stringent enforcement of the legislation. A comprehensive
    enforcement campaign would have to be implemented to ensure
    compliance is maintained. Again, it is recognised there is a difference in
    the level of test enforcement activity between District Councils. It would be
    important that consistency was brought to their activities and that retailers
    who break the law are subject to real consequences for their actions. The
    conditions of a positive licensing scheme are likely to include the
    requirement for annual monitoring. This would mean all retailers would
    need to be visited at least once a year and would compel the Councils to
    increase enforcement activity.

72. Again, as with negative licensing, while there will be more stringent
    enforcement, it is not envisaged there will be a large number of
    prosecutions each year. Therefore costs are not anticipated to be
    significant. The costs of revoking licences will depend on where the power
    to revoke the licence lies. If it remains with the District Council then the
    cost will be less than if it lies with the Court service, though neither option
    is assumed to result in large costs over and above the current level.

   Education/Information

73. An information campaign would have to be run to inform retailers of the
    requirement for them to obtain a licence. It is estimated that 3533 retailers
    would have to be contacted and provided with information packs. It is also
    likely information sessions would have to be held. A cost of £30,000 has
    been included for this purpose.

   Tobacco Industry

74. The losses to the tobacco industry are similar to those identified in the
    negative licensing option. The threat of losing their licence, and hence
    their ability to sell tobacco would increase the vigilance of retailers to the
    extent that under age sales from shops would fall. As discussed in option
    4 above, DoH considered the magnitude of the fall in the number of
    cigarettes consumed by children/young people, would be in the region of
    10% for a positive licensing option. This has been used as the lower
    estimate for the losses.

75. As also highlighted within the negative option, compliance rates of 96%
    have been reported in Australia. Therefore sensitivity analysis has been
    carried out on the reduction in consumption that could be achieved with
    positive licensing being estimated to bring about a 10% – 27% fall in
    consumption of cigarettes by under age children and young people.




                                        16
Strengthening Sanctions Against Retailers


76. To calculate the effect on the tobacco industry, the methodology which
    was set out in the regulatory impact assessment for increasing the
    minimum age of sale to 18 has been applied. Costs to the industry are
    therefore estimated to be between five-sevenths and almost double those
    seen in the option to increase the age to 18 (10% and 27% compared with
    the 14% assumed in the option for increasing age to 18).


Option 6 – Registration Scheme with a Negative Licensing Scheme.

Retailers

77. This option would largely have the combined costs of options 2 and 4
    together. Registration would consist of businesses having to supply their
    details to the local District Council. This would be facilitated through the
    same avenues as described under option 2. There would be no additional
    burden on the retailers in terms of compliance with licensing conditions.
    The negative licensing scheme would be invoked if a retailer was found to
    be regularly in breech of the law.

 Loss of Income

78. There would be a potential loss of income to retailers due to the loss of
    illegitimate business i.e. any current sales to under 18’s, and loss of
    legitimate sales if they were found to be in breach of the law and subjected
    to a prohibition order. The level of losses could be expected to be greater
    than the negative licensing scheme on it own, and are assumed to be
    more akin to that of the positive licensing scheme. The registration
    scheme will provide District Councils with a comprehensive list of retailers
    to assist with enforcement, as well as raising the awareness of retailers
    about their obligation with regard to the age of sale law.

Education/information

79. An education and information campaign to make existing and potential
    retailers aware of their new obligations to register, and of the new
    sanctions which could be imposed should they break the law. Again, the
    campaign would consist of mail shots to retailers as well as Environmental
    Health Officers distributing leaflets and giving advice. All existing retailers
    would have to register, therefore it is essential they are all made aware of
    the change in law. It is therefore envisaged that the campaign would cost
    in the region of £30,000.

Implementation and Enforcement

80. The administration costs would be a combination of Option 2 & Option 4.
    There would be some administration costs for the District Councils of
    setting up a database to contain the names of the retailers but this is
    considered to be minimal.



                                        17
Strengthening Sanctions Against Retailers


81. As with the negative licensing scheme, enforcement costs are estimated to
    be the same as under the positive licensing scheme.             However,
    compliance rates are expected to be higher than under the negative
    licensing scheme alone, with marginally fewer prosecutions. The level of
    prosecutions is assumed to be the same as under a positive licensing
    scheme.

 Tobacco Industry

82. The potential losses to the tobacco industry are estimated to be the same
    as under a positive licensing system.


Benefits

Option 2 – Registration

Monetary Benefits

83. The main monetary benefits would be any fee that would be chargeable
    for registration. Given that it is unlikely a fee would be charged this is
    thought to be negligible.

84. Registration may bring with it a small reduction in the number of underage
    smokers. It is possible that the fact retailers have to register makes them
    more aware of their legal responsibilities not to sell tobacco to underage
    children and young people which subsequently translates into a reduction
    in the numbers from this group smoking. It is very difficult to try to quantify
    the possible level of this reduction. Therefore we have not placed a figure
    on the possible health savings for this option. An assumption is made that
    there would be a small positive impact relative to the Do Nothing.

Non Monetary Benefits.

85. The main benefit of compelling retailers to register is the provision of a
    comprehensive list of establishments which sell tobacco. This would
    assist Environmental Health Officers with identifying retailers and would
    assist with enforcement activity. It is also possible that through the fact
    they have to register, retailers would be made more aware of their legal
    responsibility and they would be less likely to sell tobacco to children and
    young people.

86. The comprehensive list of retailers would provide health authorities with a
    database of tobacco sellers, which could also assist with the targeting of
    educational campaigns.

87. For a business to be included on the register, it would not be subject to
    any conditions or restrictions i.e. no prior checks would be carried out as to
    the suitability of business to sell tobacco. The registration process could



                                        18
Strengthening Sanctions Against Retailers


      be quite straight forward and there should be no delay while businesses
      wait for checks to be carried out before business could commence.

Option 4 – A Negative Licensing Scheme

Monetary Benefits

88. There is likely to be a small benefit to the Treasury from fines from non
    compliance. However, this will be equal and opposite of the cost to
    businesses and is not a net gain to the economy.

Health Benefits

89. As with the positive licensing scheme, the greatest benefit of a negative
    licensing scheme would be the reduction in smoking in children and young
    people leading to a long-term reduction in smoking prevalence. Also, as
    discussed above, it is the expectation of a reduction in the tobacco
    consumption in children by about 9%.

Non Monetary Benefits

90. The main benefits of a system of negative licensing would be that it could
    have the strength of positive licensing without the initial bureaucracy and
    paperwork for the licensing authority and the accompanying regulatory
    burden on business and retailers.

91. Provided there is adequate enforcement of the law, it would act as a
    powerful deterrent as retailers would be genuinely concerned about losing
    an important source of revenue. There would also be the recognition that
    any loss of tobacco sales could also bring with it the loss of revenue in
    other areas.

92. Negative licensing may gain more support from retailers. The Health
   Select Committee, in its report in 20006, examined licensing schemes as a
   measure to prevent sales to underage children and young people. It noted
   possible benefits of a negative licensing scheme. Firstly, that it would act
   as a potentially powerful deterrent and secondly, it could be appealing in
   that it is likely to be considered appropriate that the punishment fits the
   crime – ‘shopkeepers who sell to children and young people cannot be
   trusted to retail tobacco responsibly, therefore should not be permitted to
   do it at all’. They also noted, “perhaps the most attractive feature of
   negative licensing is that it would not require a new or extensive
   bureaucracy to support it” as the “punishment could be seen to fit the
   crime”. Retailers who currently comply with the law, would not feel like
   they are being punished for others transgressions by having to now
   purchase and hold a licence.



6
    http://www.publications.parliament.uk/pa/cm199900/cmselect/cmhealth/27/2702.htm


                                             19
Strengthening Sanctions Against Retailers


93. Administration for both District Councils and retailers would be low. It is
    only when retailers break the law that any action would have to be taken.
    This leaves public resources which would be devoted to handling
    registration or checking businesses suitability for a licence under other
    options, free to enforce standards more rigorously.

Option 5b – A positive licensing scheme administered by District
Councils

Monetary Benefits

94. A system of positive licensing would have a number of specific benefits.
    This option could have the greatest immediate impact on reducing the
    number of illegal underage sales by providing a clear incentive for retailers
    to comply with the law. The charge for the licence and the possibility of its
    revocation would provide a visible and strong incentive to comply with the
    law.

95. A positive licensing system would also generate income, through the fee,
   for the licensing authority. While consideration would have to be given as
   to the amount of the licence, a proportion could be directed to appointing
   additional enforcement officers to monitor compliance with the law and
   help increase the compliance rate. It would however be at the discretion
   of the individual councils to do this.

96. Again, there is likely to be a small benefit to the Treasury from fines for
    non compliance. However, this will be equal and opposite to the costs to
    retailers and cannot be considered a net gain to the economy.

Non Monetary Benefits

97. Under a positive licensing scheme, there may be scope for publishing
    prosecutions in order to send a message to the community that the
    Government is serious about enforcing the law. It will also reinforce the
    message that selling tobacco is similar to other activities carrying a
    potential health risk, i.e. that it is a conditional privilege rather than an
    unconditional right.

98. A licensing system fully under the control of the District Councils would
    enable a range of administrative enforcement options such as the addition
    of licensing conditions or licence withdrawal could be administered without
    legal action through the courts. However, as previously discussed,
    Councils may not feel confident about withdrawing licences given the
    potential impact on the viability of small businesses.

99. A positive licensing system could provide health authorities with a
    database of tobacco sellers. This would assist with the targeting of
    educational campaigns, and would give a reliable database for both the
    monitoring of underage sales and the implementation of the minimum age
    of sale legislation.


                                       20
Strengthening Sanctions Against Retailers



100. The Health Select Committee, in their 2000 report3, felt that in England
   the present mechanisms to punish retailers who flouted the law were
   “wholly inadequate” and along with other measures suggested that:-

   “The Department (of Health) might wish to assess the advantages of
   introducing a comprehensive licensing system for all retailers of tobacco,
   which would give consistency with the arrangements for the sale of
   alcohol”

 Health Benefits

101. Perhaps the greatest benefit of a positive licensing scheme would be
   the reduction in smoking in children and young people leading to a long-
   term reduction in smoking prevalence. As discussed above, it is expected
   that a positive licensing system could have an effect of reducing the
   tobacco consumption in this group by about 10%. However, as also noted
   above, there is a possibility that a higher compliance rate may result in a
   greater reduction – up to 27%. Once again, a similar methodology for
   calculating the health benefits has been used as in the Age of Sale RIA.


Option 6 – Registration Scheme with a Negative Licensing Scheme.

Monetary Benefits

102. The monetary benefits from retailers registering are likely to be
   negligible as it is unlikely there will be a significant charge, if any, to
   retailers for registering.

103. Once again, there is likely to be some financial benefit to the Treasury
   from fines levied against retailers who fail to comply with the law. As with
   the other options, this cannot be considered a net gain to the economy as
   the gain for the Treasury is a cost to the retailers.

Non-Monetary Benefits

104. The non-monetary benefits for this option will be a combination of the
   other options. This option has many of the strengths of a positive licensing
   system with fewer of the drawbacks.

105. One of the main benefits is that it could have the strength of a positive
   licensing system without the same degree of bureaucracy. The threat of
   losing their right to sell tobacco should be a powerful deterrent for retailers
   to comply with the law. The registration system supports the enforcement
   of the negative licensing system, but provides a relatively straight forward
   system that wouldn’t require all the checks that a positive licensing system
   would entail. This should reduce the level of administrative burden for
   both the Councils and the retailers.



                                       21
Strengthening Sanctions Against Retailers


106. The negative licensing system is likely to gain more support from
   retailers, as those who currently comply with the law would not feel like
   they are being punished for others by having to now purchase and hold a
   licence. It is not thought that having to register will be a significant burden
   on the retailer and therefore there should be less resistance than to a
   positive licensing scheme.

107. The register of retailers will provide District Councils with a database of
   tobacco sellers. This could assist with the targeting of educational
   campaigns and would give a reliable database for both the monitoring of
   underage sales and the implementation of minimum age of sale legislation.

 Health Benefits

108. The health benefits of the combined registration and negative licensing
   scheme would be expected to be of a similar magnitude to those of a
   positive licensing scheme. It is expected that there will be a reduction in
   smoking amongst children and young people, leading to a long term
   reduction in smoking prevalence. A positive licensing system is expected
   to reduce children and young people’s tobacco consumption by about 10%
   however, as also noted above, there is a possibility that a higher
   compliance rate may result in a greater reduction – up to 27%. Once
   again a similar methodology for calculating the health benefits has been
   used as in the Age of Sale RIA.


Summary tables of ongoing costs and benefits

109. Below is a summary table of the estimated costs and benefits of
   increasing sanctions against retailers. It is important to note that it is
   difficult to disaggregate the impact of prohibition orders from the other
   measures to reduce smoking prevalence and the costs to the health
   service of smoking from other measures to stop children and young people
   from becoming addicted smokers including the advertising ban, media
   campaigns and the change in the minimum age of sale law for purchasing
   tobacco products.

110. For all the options, the impact in terms of reduced sales to under-16s
   has been estimated. While it is recognised that the legal age at which
   cigarettes can be purchased has been increased to 18, it is also
   recognised that 17 year olds are much more likely to be able to get
   cigarettes from other sources. It is assumed that the threat of losing the
   right to sell tobacco products might increase vigilance to the extent of
   reducing under-age sales from shops by at least 10%.




                                       22
  Strengthening Sanctions Against Retailers



                                 OPTION 2 - Registration
                               Expected ongoing       Expected                      Net ongoing
                                    costs        ongoing benefits                     effects
Retailers
                                     Negligible                     -                  Negligible


District Councils                 (administration of
                                     database)
                                                                    -                       -

Tobacco industry
Short Term                      Negligible but a cost                             Negligible but a cost
                                  over do nothing
                                                                    -               over do nothing
Long term                            Small loss                     -                  Small loss

Taxes
Short Term                      Negligible but a cost                             Negligible but a cost
                                  over do nothing
                                                                    -               over do nothing
Long term                            Small loss                     -                  Small loss

Reduction in prevalence                   -               Small positive impact   Small positive impact




                        OPTION 4 – Negative Licensing System
                             Expected ongoing        Expected                       Net ongoing
                                    costs         ongoing benefits                    effects
Retailers (fines and loss of           £30,000                          -               -£30,000
income)
District Councils                   Administration
                                Additional Enforcement                  -                   -
                                 (possible Court fees )
Treasury (income from fines)
                                                                   £5,000               +£5,000


Tobacco industry
Short Term                                                                             -£47,600 to
                                 £47,600 – £128,400                     -
                                                                                        -£128400
Long Term                                                                             -£495,600 to
                                £495,600 - £1,338,800                   -
                                                                                      -£1,338,800

Taxes
Short Term                                                                            -£451,900 to
                                £451,900 - £1,220,000                   -
                                                                                       -£1,220,000
Long Term                                                                            -£4,692,000 to
                               £4,692,000 - £12,670,000                 -
                                                                                      -£12,670,000

Reduction in prevalence                       -                £149m - £403         £149m to £403m


  111. The estimated profit losses to small retailers noted in the table above
     are based on a number of assumptions:




                                                  23
Strengthening Sanctions Against Retailers


     a) the numbers of prohibition orders would be around 11 per annum,
     based on the number of alcohol licence revocations per annum and the
     number of prosecutions for under-age sales;
     b) one of these retailers would continue to sell tobacco under a
     prohibition order and receive an average fine of £5,000 each;
     c) a ban of six months is imposed (the ban length HMRC can impose for
     sale of non-duty paid tobacco) which would lead to the loss of an
     average monthly profit of £228 (assuming an average annual turnover for
     a small corner shop of £180,0001 a year, at least one-tenth of which is
     tobacco sales); and
     d) shops would lose other retail sales, like magazines and sweets – at an
     estimated loss of profit of £150 per month.

112. The Association of Convenience Stores, in England (ACS) was
   concerned that where a shop is subject to a banning order, regular
   customers would simply stop shopping there. It is expected that similar
   concerns will be raised in Northern Ireland. While it is accepted that this
   may happen in some cases, the focus of the policy is to ensure that
   retailers comply with the law on under-age sales.           Retailers who
   repeatedly break the licensing law will not only expose themselves to
   criminal penalties but also to loss of business.

113. It is important to recognise that the length of prohibition orders would
   be at the discretion of the enforcing authority. Consideration should be
   given to providing detailed guidance on recommended length of prohibition.

114. Either form of licensing, it is thought, will eventually reduce
   consumption and sales of tobacco products in both the under 18 age
   group and in long term smoking prevalence. This will ultimately achieve
   savings for the health service and reduce premature deaths. However, as
   noted above, it is difficult to predict the long-term impact on the health
   service and therefore these figures are indicative only.

115. The losses to the Exchequer and tobacco industry are based on the
   assumption that prohibition orders would result in about one-third of the
   losses predicted from raising the age of sale to 18 through the loss of
   sales to 16 and 17 year olds.




                                     24
     Strengthening Sanctions Against Retailers


            OPTION 5b - Positive Licensing administered by District Councils
                          Expected ongoing Expected ongoing            Net ongoing
                                  costs              benefits            effects
Retailers (licence costs)                 £671,000                          -                     -£671,000
Fines and loss of profits                  £27,680                          -                     -£27,680

District Councils                        £500,000
                                     (Possible additional              £671,000                  + £171,000
                                        Courts costs)
Treasury       (income      from
                                                                         £5,000                    +£5,000
fines)

Tobacco industry
Short Term                                                                                        -£52,800 to
                                     £52,800 - £142,400                     -
                                                                                                   -£142,400
Long term                                                                                        -£550,714 to
                                   £550,700 - £1,487,000                    -
                                                                                                 -£1,487,000

Taxes
Short Term                                £502,100                          -                     -£502,100
Long term                                £5,214,300                         -                    -£5,214,300

Reduction in
                                               -                    £166m - £448m              £166m – £448m
prevalence




     116. Estimates for costs for retailers in the table above are based on two
        assumptions:

         a) the average annual cost for a tobacco-licensed retailer is £2007, and
         that 95% of 3533 retailers obtain licences;
         b) the number of prohibition orders would be 10 per annum.
         c) one of these retailers would continue to sell tobacco under a prohibition
         order and receive an average fine of £5,000
         d) a ban of six months is imposed, which would lead to the loss of an
         average monthly profit of £228 (assuming an average annual turnover for
         a small corner shop of £180,000 a year, at least one tenth of which is
         tobacco sales; and
         d) shops would lose other retail sales, like magazines and sweets at an
         estimated loss of profit of £150 per month.



     7
       This figure is an estimate based on both the one-off and ongoing costs for a retailer to
     obtain a licence to sell alcohol. An approximate cost of obtaining a licence for the retail sale of
     alcohol is £432. (DSD). It is assumed that a licence for selling tobacco would be at least half
     this amount because of the less stringent training required.


                                                     25
  Strengthening Sanctions Against Retailers


                  OPTION 6 – Registration with Negative Licensing
                           Expected ongoing Expected              Net ongoing
                           costs                 ongoing benefits effects
Retailers (fines and loss of           £27,680                    -             -£27,680
income)
District Councils              Administration of Register
                                 Enforcement costs                -                 -

Treasury
                                           -                   £5,000            +£5,000


Tobacco industry
Short Term                                                                     -£52,800 to
                                  £52,800 - £142,400              -
                                                                                -£142,400
Long Term                                                                     £-£550,700 to
                                £550,700 - £1,487,000
                                                                               -£1,487,000

Taxes
Short Term                                                                     - £502,100 to
                               £502,100 to £1,355,700
                                                                                -£1,355,700
Long Term                            £5,214,300 to                            -£5,214,300 to
                                     £14,078,600                               -£14,078,600

Reduction in prevalence                    -                £166m - £448m    £166m to £448m




  117.    The estimates for the costs for the retailers above are:
          a. Cost of registration as per option 2
          b. Cost of fines and loss of income as per option 5b

  Risks

    Option 2 – Registration

  118. There is a risk that the registration scheme would have little impact on
     compliance. If the Councils do not use the information to bolster their
     enforcement activity then there is little or no point in maintaining a register.


    Option 4 – Negative Licensing Scheme

  119. Prohibition orders would have a more severe impact on small retailers,
     particularly those who rely on revenue from tobacco sales for a large
     proportion of their profits.

  120. There is a risk that the sanctions may not be enforced consistently by
     District Councils or by Magistrates. This highlights the importance of
     detailed guidance on the expected level of enforcement activity for District
     Councils. Consideration should also be given to guidance for the courts
     should they be the preferred enforcer of prohibition orders.



                                               26
Strengthening Sanctions Against Retailers



121. Some may consider that introducing powers for District Councils to
   seek prohibition orders may not be a sufficiently strong sanction. Under
   the current law, the fines imposed by Magistrates on retailers tend to be
   relatively small. Therefore there may be a reluctance to impose the
   tougher sanction of a prohibition order. For that reason, the sanction may
   not be taken as seriously as intended if orders are seldom sought by
   District Councils or granted by the courts.

122. There is a risk that some retailers may attempt to evade orders through
   transferring ownership of their business to a friend or relative or by setting
   up business at a different address. Prohibition orders will therefore apply
   both to individuals and to premises to minimise the likelihood of this
   happening.


Option 5b – Positive Licensing System administered by District Council

123. This approach would impose a significant new additional regulatory
   burden on both retailers and District Councils. Retailers would be required
   to complete all the necessary paperwork to secure a licence that might
   create real practical and financial difficulty for small newsagents and
   sweetshops.

124. The administrative burden, for the Councils, particularly in the
   beginning (and at subsequent renewal) is likely to be significant as there
   are currently an estimated 3533 retailers selling tobacco products. As
   licensing authorities, they would be faced with a large volume of additional
   paperwork with applications from the large number of retailers.

125. It is not clear that a positive licensing scheme would produce any
   additional health benefits over a negative licensing scheme.


Option 6 – Registration with Negative Licensing System

126. The risks under this option are similar to those under the negative
   licensing scheme.


Consultation

127. A 13-week public consultation will run from 14 December 2009 to 12
   March 2010.


Equity and fairness

128. Through an equality impact screening test, we have considered
   whether these measures will have any disproportionate impacts on any


                                       27
Strengthening Sanctions Against Retailers


   particular group and do not consider that these measures will
   disadvantage any group. Evidence shows that smoking prevalence is
   particularly high among poorer people and in deprived areas, and higher
   among young people from lower socio-economic groups. The Department
   is committed to doing all it can to reduce smoking rates in these groups to
   reduce their disproportionate burden of premature death and serious
   illness.


Rural Proofing

129. It is anticipated that increasing the sanctions will have no
   disproportionate effects on the rural economy. Rural businesses will be
   encouraged to comment during the consultation process


Impact on small business

130. These proposals will impact on small retailers and newsagents both in
   terms of the cost of administering the new system and the possibility of
   loss of revenue from both fines and tobacco sales should they be
   prosecuted for selling tobacco to underage customers. However it is
   envisaged costs to these businesses will not be significant. Again small
   businesses and retailers will be encouraged to comment again as part of
   the consultation exercise.


Competition assessment

131. These measures will not affect retailers equally as some rely on the
   sales of tobacco more than others. For instance a large supermarket may
   not be as reliant on the sale of tobacco products for a high proportion of
   turnover or profit, as would a medium or small convenience-shop.
   However, a negative licensing scheme is unlikely to have a significant
   impact on competition except in the unlikely event that there are a high
   number of prohibition orders imposed by the courts.

132. It is the role of government to attempt to introduce policies which are
   effective but which place the lowest administrative burden on those whom
   the policies effect. Government realises that administration carries a
   financial burden for business, with small retailers often experiencing
   disproportionate adverse effects.


Securing compliance

133. As part of their existing tobacco control duties, District Councils
   monitor and advise retailers regarding compliance with the law on under-
   age sales. As is now the case, that advice would include warnings about
   the possible enforcement implications of non-compliance



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Strengthening Sanctions Against Retailers



Post-implementation review

134. Smoking rates amongst children and young people, and details of
   where they obtain the cigarettes, will continue to be monitored in the
   Young Persons’ Behaviour and Attitudes Survey (YPBAS). The District
   Councils will continue to collect and monitor statistics on prosecutions.


Summary and recommendation

135. Reducing the number of children and young people who smoke is a
   major Government priority. The recent amendment of raising the minimum
   age of sale for tobacco products to 18 should help retailers comply with
   age of sale restrictions and consequently reduce smoking among children
   and young people. It is therefore felt a strengthening of the sanctions
   against retailers who currently sell tobacco products to children and those
   under 18 should be implemented.

136. It is recommended that a registration system, combined with a
   negative licensing system, as per Option 6 above is implemented. It
   is also recommended that this option should be introduced in
   conjunction with a fixed penalty notice scheme, giving District
   Councils the power to fine retailers found to be selling tobacco to
   under 18s. These measures will provide a strong incentive to retailers to
   ensure that they do not sell tobacco to under-age children and young
   people and they also provide the best value for money for local and central
   Government compared to the likely costs of the alternative options.




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