Tobacco tax: budget is ‘just what the Doctor ordered’



Tuesday 21 March 2000

ASH/ Press releases/

 

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Press Release – The Budget
21st March 2000
ASH
Action on Smoking
and Health

Tobacco tax – budget is “just what the doctor ordered”

Overall reaction. ASH applauded the Chancellor’s 5% real increase (about 25p per pack) in cigarette duties and for maintaining the sound health and economic policy of raising tobacco taxes,while keeping his nerve in the face of a sustained campaign by the tobacco industry to try to reverse it.  Clive Bates, Director of ASH said:

“The Chancellor kept his nerve and hundreds of lives will be saved as a result.  If tobacco taxes don’t keep pace with rising incomes, then cigarettes become more affordable meaning more people smoke and more people become ill and die early. Tobacco taxes are one of the few budget decisions with life and death consequences, and the Chancellor’s budget put health first.”

He is sticking with his pledge to deal with smuggling as a law and order issue with a reasonable package of enforcement measures, but they must know that much more is needed. We are concerned that in a budget that stressed fairness there was no sign of money from increased tobacco taxes being recycled back directly to the smoker through better NHS support for the 70% of smokers that want to quit.

Why tinkering with tobacco tax can’t deal with smuggling. There are two types of smuggling.  First, the ‘white van’ trade which is driven by cross border tax differentials, and second ‘container fraud’ which is the diversion or misdescription of freight containers of up to 10 million cigarettes on which duty has not been paid anywhere – this type of smuggling is driven by the difference between taxed and untaxed price.  About three-quarters of cigarette smuggling is ‘container fraud’.  If duties were reduced to the point where cross-channel bootlegging was no longer attractive,container fraud which would remain very profitable would pick up the slack.

“Trying to deal with smuggling by reversing the tax policy is doomed to fail – it may deter the cross-channel bootleggers, but the organised crime gangs will just take over and supply the illegal markets with cigarettes by the container-load.The result would be Treasury revenue losses, more smoking and very little impact on smuggling.”

Is this a fair tobacco tax budget?  The Chancellor emphasised fairness in his budget and ASH and 40 other organisations [1] argued that £60 million of new tobacco tax money should be recycled to smokers through NHS spending on support for smokers that want to quit.   Tobacco taxes are regressive and tobacco is highly addictive – the only way to square high tobacco tax with a fairness doctrine is to maximise opportunities for smokers to quit.

“This is supposed to be the budget of fairness, but we have seen the Government cutting support for smokers in recent weeks. It’s now up to Alan Milburn to spend some of his NHS tobacco tax windfall on proper support for smokers -he needs to increase spending by sixty million pounds and then they can justifiably claim their tobacco tax policy is fair.”

[1] ASH and 40 other organisations made a detailed submission to the Chancellor – submission is at www.ash.org.uk/papers/tax2000.htmland press release www.ash.org.uk/press/000316.html

 

Contact Clive Bates, ASH (0207) 739 5902

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