New report finds major benefits to the health of the nation from increasing tobacco taxes



Friday 05 March 2010
Following an extensive economic evaluation of the benefits of increasing tobacco prices on the health of the nation, ASH has today published its report The Effects of Increasing Tobacco Taxation.

Produced by independent economist Howard Reed[1], the report[2] shows that raising tobacco prices through taxation by 5% above inflation will:
• lead to a reduction in the number of smokers by 190,000;
• save the NHS over £20 million a year by reducing the cost of treatment of smoking-related diseases;
• reduce smoking-related absenteeism in the work place saving over £10 million a year;
• increase government tax revenues by over £500 million a year; a total of £2.6 billion in the first five years; and
• result in wider economic benefits in the first five years of over £270 million per year.

Based on these results ASH, supported by 49 other public health organisations including the British Heart Foundation, Cancer Research UK and the Foundation for the Study of Infant Deaths, has called on the government in its pre-Budget submission to the Treasury to increase the price of tobacco through taxation by 5% above inflation in the impending Budget and by a minimum of the rate of inflation in subsequent years[3].

Launching the report, Deborah Arnott Chief Executive of ASH said:
“Smoking is a childhood addiction and not an adult choice. By increasing tobacco taxation we help to discourage children from buying cigarettes. An above-inflation rise would also help adults stop smoking.”

The report used two economic analysis models (cost benefit analysis [CBA] and public finances analysis [PFA]) to calculate both the economic and revenue benefits of increasing taxation. The report’s author, Howard Reed, commented;
“The economic analysis and forecasts in this report clearly show that an above-inflation rise in the price of tobacco is good for the health of the individual as well as for the health of the country.”

Supporting the economic models and results is emeritus professor of health economics and primary care at the London School of Hygiene and Tropical Medicine, Joy Townsend, who said:
“This is an excellent and valuable report. It uses sound well-developed economic models, which illustrate most effectively how great an impact raising taxes can have in reducing the demand for tobacco, and the clear and significant benefits for both public health and public finances. The Government should act on its recommendations.”

This report is supported by a range of health and welfare campaigning organisations including the Foundation for the Study of Infant Deaths (FSID) FSID’s Director Joyce Epstein said:
“Scientific evidence shows that every year the lives of over 100 UK infants could be saved, if no pregnant woman smoked. Smoking by fathers increases the risk of infant death as well. Our organisation supports increasing the price of tobacco because it will encourage smokers to consider quitting and so protect their children.”

The tobacco industry argues that a high price would lead to increased smuggling. However, analysis by the World Bank has shown that high availability of illicit tobacco is linked, not to taxation, but to corruption and tolerance of contraband sales. Indeed, both low-tax and high-tax jurisdictions suffer from the illicit tobacco trade.

A study conducted for ASH found that the tobacco industry has increased its prices way above inflation in recent years hiding behind the smoke-screen of tax rises, which they blame for the increase.[4].
ENDS
Notes:
References
[1] Howard Reed is a widely published economist whose technical expertise lies in microeconometric analysis and econometric modelling. Howard is the director at Landman Economics and was previously the chief economist at the Institute for Public Policy Research and a programme director at the Institute for Fiscal Studies
[2] Full results in the report – see executive summary for tables. Link. www.ash.org.uk/tax/analysis
[3] Full list of signatories of supporting organisations is included in the Budget submission see: http://www.ash.org.uk/files/documents/ASH_720.pdf
[4] ASH press release 11 July 2008 www.ash.org.uk/ash_4kkkdstl.htm

Editors notes
1. There have been three previous influential reports in the last decade in relation to tobacco use:
a. Smoking Kills (1998): a government white paper that provided a comprehensive strategy for a wider public health campaign
b. Beyond Smoking Kills (2007): an ASH commissioned report which reviewed progress made since Smoking Kills and future action on how to tackle health inequalities and young people.
c. A smokefree future: a comprehensive tobacco control strategy for England (2010) is the recently launched government strategy which aims to reduce smokers from 21% of the population to 10% by 2020.
2. ASH was established by the Royal College of Physicians in 1971 as an independent health charity. The purpose of ASH is to eliminate the harm caused by tobacco.
3. Around 10 million adults smoke in Great Britain, with two thirds starting before the age of 18. [Smoking and drinking among adults, 2007. General Household Survey 2007, ONS.]
4. 22% of men and 21% of women over the age of 18 smoke. [GHS 2008, ONS]
5. Smoking related diseases cost the NHS £2.7 billion a year. [Beyond Smoking Kills, ASH, 2008]