Steep rise in tobacco duties will save 2000+ lives per year & young smokers could retire with over a million!



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Tuesday 17 March 1998

Budget Press release: 17 March 1998

Excise duties rise. ASH was satisfied by the rise of 21 pence on a pack of cigarettes, though we had called for a rise of 24 pence. People respond to price signals by giving up, cutting down or never starting. The 5% duty increase is inline with the Chancellor’s minimum commitment will reduce the 77 billion cigarette consumption (1997) by over 2 billion cigarettes per year which will in turn lead to long term reductions in smoking related deaths of over 2,000 per year – a large health gain from a revenue raising measure.

“The Chancellor has shown the Government’s colours on smoking by giving people serious financial reasons to quit. This is the biggest increase ever and it must be obvious by now that smoking is a mug’s game and its just going to get worse.” said Clive Bates, Director of ASH.

Value of quitting smoking. ASH invited a leading pensions provider, NPI, to illustrate the value of giving up smoking 20/day at the new price at the age of 20 and ploughing the money saved into a personal pension. At retirement at 60, NPI gives the following figures for the value of a pension assuming the stated annual rates of return: 6% – £242,000; 9% – £531,000; 12% – £1,210,000. (NPI’s Pension Global Care Fund has no tobacco investments and has achieved 16.6% per annum against an average of 12.2% in the sector from its launch on 1st March 1994 to 16th march 1998. Past performance is not necessarily a guide to future performance.)

“The money spent on cigarettes could make millionaire pensioners of young smokers that quit now, and they might also live long enough to enjoy it”, said Bates.

Timing. The delay in the price increase to 1 December makes no sense as the delay from announcement in July to price rise on 1st December allowed large scale stock-piling of pre-tax-rise cigarettes in the supply chain. Inflation will whittle away the value of the 21p increase.

Poor smokers. ASH called on the Chancellor to announce a programme to assist smokers in the poorest income brackets. Nothing was announced. Smoking rates decrease with income and tobacco tax is regressive. Labour’s tax policy is supposed to be “fair and based on the ability to pay”. Some of the poorest households spend 25% of their income on smoking. The White Paper (expected in June) on tobacco policy must contain measures that making quitting the as straight-forward as possible. This should include nicotine patches (etc.) available on the NHS, community based schemes, and information programmes targeted at low-income groups.

<fontface=”arial” size=”3″>Smuggling. We are pleased the Chancellor ignored the expensive lobbying operation established by the Tobacco Manufacturers Association and did not allow illegal activity to stand in the way of a health-orientated price increase. However, nothing was announced as a result of the Alcohol and Tobacco Fraud Review. ASH was hoping to hear news of tax stamps and extra spending on Customs and Excise enforcement.

“Overall, we are happy, though not delighted. The budget shows that the Government is ready to wield the trusty sword of price in the war against smoking, but it needs to get the rest of the policy right” said Bates.

Contact Clive Bates, Director (020) 7739 5902
Amanda Sandford, Communications Director (020) 7739 5902

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