Response to a request for inquiry about heated tobacco products

We have replied to Dr Verrall in response to her request that we inquire into the Government's decision to halve the excise tax on heated tobacco products.

8 November 2024

Hon Dr Ayesha Verrall
Member of Parliament
Parliament Buildings

Tēnā koe Dr Verrall

Request for inquiry about Heated Tobacco Products

Thank you for your letter dated 18 October 2024, in which you asked the Auditor-General to investigate the Government’s decision to halve the excise tax on Heated Tobacco Products (HTP).

The concerns raised in your letter fall outside the mandate of our Office and accordingly, we are not able to carry out any work in relation to the issues outlined. I set out more detailed reasons for this below.

A policy decision outside our mandate

In your letter, you set out your view that the decision to reduce the excise tax on HTP is not justifiable. This is on the basis that:

tobacco excise tax has been a highly effective measure in reducing smoking rates;
there is no clear evidence that HTPs are less harmful than cigarettes or are effective in helping people become completely smokefree;
the decision may give rise to health harms;
it may only benefit one provider; and
it lacks an effective evaluation framework to monitor the impact of the policy and measure outcomes.

This Office has a range of functions that help Parliament and the public to hold public organisations to account for their performance and use of public money. Those functions include annual audits of all public organisations, monitoring expenditure against parliamentary appropriations, in-depth audits of the performance of public organisations, and carrying out inquiries into concerns about the use of public resources.

In this context, our work can include examining whether a decision-maker has followed an appropriate or agreed process in making a particular decision. It is not our role to express a view about the merits of a particular decision or the policy sitting behind that decision. The decision by the Government to reduce the amount of excise tax on a particular product is a policy choice for the Government to make, and it is not within our mandate to question or examine it.

Concerns about the probity of the decision

You outline in your letter your concerns about the probity of this decision. You say that recent changes to tobacco control policies lack public support, sound policy logic, or a robust evidence base, and “there appears to be no motive for these policy changes other than addressing industry priorities”. In particular, you outline concerns that these government policy decisions have been influenced by the tobacco industry, including close relationships between Ministers and the industry and a “revolving door” of government officials and industry personnel – intended to “achieve influence”. You have noted that “an investigation would assist in excluding any concerns about corruption.”

As explained above, it is outside the mandate of the Auditor-General to examine the reasoning contributing to a government policy decision, including the extent to which industry lobbying influenced that decision. It is also not our role to investigate allegations of corruption or criminal behaviour, which might be better considered by the Serious Fraud Office. Similarly, any questions about whether the decision has inappropriately affected the market for these products or advantaged a particular participant in that market could be considered by the Commerce Commission.

As you note in your letter, questions about whether documents requested under the Official Information Act 1982 have been appropriately disclosed have been considered by the Ombudsman, who has also notified the Chief Archivist about the level of record-keeping observed in that investigation.

Breach of obligations under the Framework Convention on Tobacco Control

Your letter also raises concerns that New Zealand may have breached its obligations under the World Health Organisation Framework Convention on Tobacco Control (the Convention), on the basis that Article 5.3 of the Convention sets out an obligation that parties protect tobacco control policies from the interests of the tobacco industry and requires complete transparency in any dealings with the industry.

It is also outside the Auditor-General’s role to reach a conclusion about whether there has been a breach of the Convention. That is a legal question that I am unable to consider.

Your letter refers to work from our Office that has “addressed New Zealand’s international obligations”, and specifically notes our work in 2016 about the Saudi Arabia Food Security Partnership. In that case, we referred to World Trade Organisation obligations as background to the issue of sheep exports, and to describe the issues being considered by the Government at the time. We also referred to international obligations relating to procurement. However, we did not make any conclusions about whether international obligations had been met.

Conclusion

Although the Auditor-General has a broad mandate under the Public Audit Act, for the reasons set out in this letter, that mandate does not enable us to look at the issues you have raised.

Thank you for writing to us. Given the public interest in this matter, we intend to publish this letter on our website.

Nāku noa, nā

Andrew McConnell

Deputy Controller and Auditor-General