Tobacco companies cry wolf: Chancellor urged not to cave into industry threats over smuggling



Saturday 19 March 2011

A submission to the Treasury in advance of next week’s Budget by ASH and the UK Centre for Tobacco Control Studies (UKCTCS) endorsed by 68 health organisations has urged the government to stick to its principles and increase taxation on tobacco well above inflation. [1] Putting prices up through taxation is, to quote the Conservative Chancellor of the Exchequer, Kenneth Clarke, in his budget speech in 1993, “the most effective way to reduce smoking”. [2]

Professor Lindsey Davies, President of the Faculty of Public Health, one of the leading organisations which endorsed the submission said:

“The Government’s commitment to improve the health of the poorest fastest is to be applauded but unless smoking rates amongst the poorest decline significantly it has no chance of success. Work at local level by councils and Directors of Public Health to support and motivate smokers to quit must be backed up at national level by making smoking less affordable. This means increasing taxes now and doing more to tackle smuggling.”

The tobacco industry claims that the rate of smuggling and the volume of contraband sold on Britain’s streets increases when excise duty goes up. But health groups argue that controlling tax fraud is a law enforcement issue and that cracking down on smuggling, not cutting taxes is the way to bring it under control. [3]

Dr. Casey Quinn, health economist with the UK Centre for Tobacco Control Studies at the University of Nottingham, commented:
“In this harsh economic climate, raising tobacco taxes above the rate of inflation provides an important incentive to quit smoking, as well as raising much-needed cash for Government and measures to help smokers quit. Controlling smuggling and increasing tobacco duties should be a key Government priority as this will lead to a win-win situation: increased revenue and reduced costs to the health service as smokers quit and smoking-related diseases decline.”
Deborah Arnott, Chief Executive of ASH said:

“Every year the industry trots out the same argument that putting up taxes increases smuggling. Since the Government implemented its anti-smuggling strategy there has been a steady decline in the illicit market of cigarettes while at the same time, taxes have increased and smoking rates have fallen. The real reason the industry fears a tax rise is because it helps smokers quit.” [4]
ENDS
Notes:
[1] 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 include:

  • 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 iillicit tobacco

[2] HC Deb 30 November 1993. c939 (budget speech) http://www.publications.parliament.uk/pa/cm199394/cmhansrd/1993-11-30/Debate-2.html accessed 15 January 2011.
[3] Tobacco taxes set to boost smuggling. The Guardian, 6 Feb. 2011 http://www.guardian.co.uk/business/2011/feb/06/tobacco-vat-duty-smuggling and ASH response:

[4] In 2001-02 the estimated illicit market share of cigarettes was 20% (mid-point of range). By 2008-09 this had declined to 11%. (Source: Tackling Tobacco Smuggling Together. HMRC/UK Border Agency, 2008; Measuring Tax Gaps. HMRC 2010.) Tax on cigarettes rose in line with inflation from 2001-2008 and above inflation in 2009 & 2010. Smoking prevalence fell from 27% in 2001 to 21% in 2008-09. (General Lifestyle Survey, ONS, 2009)