Budget 2011: Tax restructuring will be good for health

Wednesday 23 March 2011

ASH welcomes the decision by the Chancellor to maintain the tax escalator introduced by the previous Government by raising cigarette duty by 2% above inflation. [1] ASH is particularly pleased that the Chancellor has heeded the recommendation of health groups to change the tax structure in order to narrow the gap between the highest and lowest cigarette brands, and between hand-rolled tobacco and manufactured cigarettes, in line with the revised European Union tax directive. [2] This will reduce the likelihood of smokers ‘trading down’ to cheaper brands and instead should help more smokers to quit. However we are disappointed that he did not accept our recommendation to raise taxes by 5% above inflation which would have been popular with the public. [3]

Deborah Arnott, Chief Executive of ASH said:

“This modest tax rise is welcome although a bigger increase would have had an even better health outcome. We are pleased that the Chancellor has recognised the importance of raising taxes to drive down smoking.

To complement the rise in tobacco duty we look forward to the launch of the Government’s plans to tackle the illicit trade of tobacco. A strong anti-smuggling strategy is vital to avoid the tax policy being undermined by criminals.”
[1] Link to 2011 Budget: http://cdn.hm-treasury.gov.uk/2011budget_complete.pdf
[2] EU Tobacco Tax Directive.
ASH is a health campaigning charity working to reduce the harm caused by tobacco. The UK Centre for Tobacco Control Studies is a network of nine universities in the UK working in the field of tobacco control involved in research, policy development, advocacy, teaching and training.
The Budget submission to HM Treasury by ASH & UKCTCS has been endorsed by 68 UK health and welfare organisations. Available at: http://www.ash.org.uk/files/documents/ASH_766.pdf
Key recommendations included:

  •  Raising the tobacco tax escalator from 2% to 5% above inflation for the period 2011 to 2014
  •  Reduce the differential between tax levels on hand-rolled tobacco (HRT) and cigarettes to discourage smokers from switching to hand-rolled cigarettes
  •  Set ambitious targets to reduce the illicit market share of cigarettes to 5% by 2012-13 and of HRT to 33% (from the current levels of 11% and 49% respectively)
  •  Implement legislation throughout the UK similar to that in Scotland to require registration of tobacco retailers. This would protect the rights of legitimate sellers and penalise sellers of iilicit tobacco

[3] . A poll for the Daily Mail in June 2010 in advance of the emergency budget found that 81% of those sampled supported increasing tobacco taxes by 50% to help tackle the budget deficit. BPIX survey for The Mail on Sunday. Published 10th June 2010. http://www.dailymail.co.uk/news/article-1286199/David-Cameron-told-Heres-37bn-cuts-started.html