Action on Smoking and Health

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ASH welcomes Budget commitments in support of a smokefree generation

Wednesday 22 November

There was good news for public health in today’s Budget announcement as the Chancellor renewed the tobacco tax “escalator” for the remainder of this parliament. Duty rates on all tobacco products will increase by 2% above (RPI) inflation and on hand rolling tobacco by 3% above (RPI) at 6pm today. The Minimum Excise Tax on cigarettes and the price at which it applies has been uprated in line with wider cigarette duty. The new MET will be £5.60 (previously £5.37) for a pack of 20 and will apply to cigarettes sold at or below £7.63 (previously £7.35) for a pack of 20 from 6.pm today. [1]

There is good evidence of the effectiveness of tax increases in reducing smoking prevalence both by encouraging quitting and discouraging uptake among young people, who are particularly price sensitive.  [2] [3]

Today’s announcements are in line with the recently published Tobacco Control Plan for England [4], which sets out targets for the reduction of smoking prevalence and the ambition to bring about a smokefree generation.

ASH Chief Executive Deborah Arnott said:

“We congratulate the Chancellor for renewing the tax escalator thereby committing to reducing the affordability of tobacco year on year during this parliament. These measures will help bring the end of the tobacco epidemic a step closer by discouraging young people from taking up smoking and encouraging adult smokers to quit.”

However, smoking prevalence remains high among the most vulnerable groups in our society. Among individuals in routine and manual socioeconomic groups the smoking rate rises up to 25%, among the unemployed it’s 30%, 40.5% among those with a serious mental illness, up to 77% among people experiencing homelessness and over 80% among prison populations. [5] [6]  More must continue to be done to tackle these inequalities.

Deborah Arnott continued:

“The Government has already highlighted the burning injustice that if you are born poor, you are likely to die up to ten years earlier than those who are better off. Smoking is the cause of around half of this difference. Poorer more disadvantaged smokers find it hardest to quit and the Government needs to do more to help not just by increasing taxation but also by ensuring they are offered evidence-based treatment to help them quit.”

HM Treasury have said that the changes add 28p to the price of a pack of 20 cigarettes, 41p to a 30g pack of hand-rolling tobacco (HRT), 14p to a 10g pack of cigars and 18p to a 30g pack of pipe tobacco.

Tobacco duties were forecast to rise by the predicted inflation level two quarters after Spring Budget (i.e. Q3). They are now forecast to rise by the predicted inflation level two quarters after an Autumn Budget (i.e. Q2 in the following year). In the first year of the new system, this inflation level has been reduced to reflect that not a full year elapsed between Spring Budget 2017 and Autumn Budget.

ENDS

Notes and Links:

Action on Smoking and Health is a health charity working to eliminate the harm caused by tobacco use. For more information see: www.ash.org.uk/about-ash

ASH receives funding for its programme of work from Cancer Research UK and the British Heart Foundation.

ASH staff are available for interview and have an ISDN line. For more information   contact ASH on 020 7404 0242 or out of hours Deborah Arnott on 07976 935 987 or Hazel Cheeseman on 07754 358 593.
References

[1] HMT. Autumn Budget 2017. 22 November 2017.

[2] The World Bank. Curbing the epidemic: governments and the economics of tobacco control. May, 1999.

[3] Amos A, Bauld L, Clifford D, et al. Tobacco control, inequalities in health and action at a local level. York, Public Health Research Consortium, 2011

[4] DH. Towards a smoke-free generation:  a tobacco control plan for England. July 2017.

[5] ONS Adult Smoking Habits in England 2016. June 2017.

[6] ASH. The Stolen Years. 2016

Tobacco Tax Gaps: Illicit cigarettes a growing proportion of a declining market – enforcement funding cuts must be addressed

26 October 2017

Official estimates released today by HM Revenue & Customs show that while the size of the illicit market for cigarettes in 2016/17 has remained fairly stable since 2010, as smoking prevalence has declined significantly, it has become a higher proportion of the total market. More promisingly the amount and proportion of the handrolled tobacco market that is illicit has continued to fall. However, because cigarettes form the largest part of the market with the highest taxes, and taxes have increased over the years, this means the total tax gap has grown from £1.9 billion in 2010/11 to £2.5 billion today. [1]

In 2016 smoking prevalence fell to its lowest recorded level of 15.8%, 4 percentage points below 2010 when it was 20.2% of the adult population, with the biggest fall of 1.4 percentage points occurring between 2015 and 2016. [2] As a result the proportion of the market accounted for by illicit has increased between 2015 /16 and 2016/17 from 13% to 15% of cigarettes although it has continued to fall from 32% to 28% of handrolled tobacco.

In 2010/11 the volume of illicit tobacco on the market was estimated by HMRC to be 5 billion cigarettes and 4.2 million kilogrammes of handrolled tobacco, in 2016/17 it was 5.5 billion cigarettes and 2.7 million kilogrammes of tobacco. Although the published data appear to show a significant rise in the size of the illicit from 2015/16 to 2016/17 from 5 to 5.5 billion, these are rounded figures and the actual change is much smaller from 5.1 billion to 5.3 billion. [3]

In the long run achieving the Government’s objective of a ‘smokefree generation’ when fewer than 5% of adults smoke [4] will lead to declines in tobacco tax revenues. In the interim tax revenues can be maximised by continuing to drive down illicit trade and increasing tobacco taxes. However, cuts to local enforcement teams are undermining this opportunity.

HMRC’s illicit tobacco strategy has been in place since 2000 and has been well funded and effective. However the success of the strategy in recent years has been undermined by cuts in funding to local authorities, limiting their ability to carry out enforcement activity. In 2009 spending on trading standards was £213 million by 2016 this had fallen to £124 million. [5] Teams have been cut to the bone, with the NAO calculating that the number of full-time equivalent Trading Standards staff decreased by 56% in seven years, from 3,534 in 2009 to 1,561 in 2016, with 81% of trading standards teams reporting that funding reductions have had a negative impact on their ability to protect consumers in their area. [6]

There is also a pressing need for Government to do more to require the tobacco companies to control their supply chains. The majority of the illicit market is made up of tobacco company products smuggled in to the UK from other countries.

In response to these challenges ASH today calls on the Government to introduce a licensing system for tobacco manufacturers and retailers to provide funding for improved enforcement and other measures to reduce smoking prevalence. There is strong public support for the licensing of tobacco retailers (net support 76%) and for requiring tobacco manufacturers to pay for measures to reduce smoking prevalence (net support 71%). [7] Surveys of small retailers show strong support for licensing with 69% of retailers supporting the introduction of a tobacco license that retailers could lose if they broke the law. [8]

Deborah Arnott, Chief Executive of public health charity Action on Smoking and Health (ASH) said:

“Funding cuts to local authorities and the failure of the tobacco companies to prevent diversion of their products to the smuggled market have undermined the effectiveness of the Government’s anti-smuggling strategy for tobacco. We call on the Government to introduce licensing for tobacco manufacturers and retailers and to make the big tobacco companies pay for it. The US does this and there’s no reason why the UK can’t follow suit. It’s strongly supported both by the public and by retailers and would help achieve the Government’s ambition for a ‘smokefree generation’ as well as increasing tax revenues.”

While tobacco companies are keen to highlight the issue of counterfeit tobacco it is their legitimate product which makes up the largest share of the illicit market with counterfeit products estimated to be only around 8% of the illicit market. Over many years companies have been shown to be complicit in smuggling activity through a failure to control their own supply chains and at times supplying products knowing they will return to the UK market as illicit tobacco. [9] Better controls of the tobacco industry require both domestic and international action. The UK Government must ratify the Illicit Trade Protocol at the earliest opportunity to support the global effort to clamp down on the illicit market in authentic tobacco products.[10]

Deborah Arnott added:

The tobacco industry has a history of fuelling the trade in illicit tobacco, that’s why an international treaty has been negotiated to stop it doing so in future. Tobacco smuggling is a global problem and requires a global solution, the UK can’t succeed on its own and we call on the Government to ratify the Illicit Trade Protocol without further delay.”

 

ENDS

Notes and Links:

Action on Smoking and Health is a health charity working to eliminate the harm caused by tobacco use. For more information see: www.ash.org.uk/about-ash

ASH receives funding for its programme of work from Cancer Research UK and the British Heart Foundation.

ASH staff are available for interview and have an ISDN line. For more information contact ASH on 020 7404 0242 or out of hours Deborah Arnott on 07976 935 987 or Hazel Cheeseman on 07754 358 593.
References

[1] HMRC. Tobacco Tax Gaps data. All figures based on mid-range estimates. October 2017.

[2] Office for National Statistics. Adult smoking habits in the UK: 2016. 15 June 2017.

[3] Data provided by HMRC to ASH.

[4] Department of Health. Towards a smoke-free generation: tobacco control plan for England. July 2017.

[5] CTSI. Total GB trading standards spend falls to £1.99 per person, per year. August 2016.

[6] National Audit Office. Report by the Comptroller and Auditor General: Protecting consumers from scams, unfair trading and unsafe goods. NAO. HC851. 2016.

[7] Opinion research by YouGov for ASH. Total sample size was 12696 adults. Fieldwork was undertaken between 16th February 2017 and 19th March 2017.

[8] ASH. Counter arguments: How important is tobacco to small retailers? ASH, October 2016.

[9] ASH/UKCTAS budget submission endorsed by 36 other public health organisations and accompanying letter to the minister.

[10] World Health Organisation Protocol to Eliminate Illicit Trade in Tobacco Products

In advance of the Budget, Treasury urged to do more to support the Government ambition for a “smokefree generation”

24 October 2017

The Government received a timely reminder of the importance of effective taxation and regulation of tobacco products from public health experts in a meeting yesterday with the Exchequer Secretary to the Treasury. The meeting was ahead of the Budget on November 22nd.

Representatives from Action on Smoking and Health (ASH), the UK Centre for Alcohol and Tobacco Studies, and Cancer Research UK met with the Minister to outline their priorities and recommendations for the 2017 Budget, as endorsed by 35 other public health organisations.[1] These include a continued commitment to the tobacco tax escalator to raise tax on tobacco above inflation every year during this parliament.

Deborah Arnott, Chief Executive of public health charity Action on Smoking and Health, said:

“Raising taxes on tobacco to reduce affordability is the most effective way to reduce smoking. [2] We call on the Government to renew the tobacco tax escalator which increases taxes above inflation for this parliament. This will demonstrate that the Government’s stated commitment to a smokefree generation is genuine.” [3]

New research on tobacco industry pricing by the University of Bath and Kings College London, and funded by NIHR, has just been published [4] and shows that the tobacco industry has undermined tobacco tax policy to keep tobacco cheap. The Government is urged to take action to prevent this in future.

Professor Anna Gilmore, senior author on the study and Director of the Tobacco Control Research Group at the University of Bath, said:

“The tobacco industry uses cheap products to hook children into a deadly habit and keep smokers who would otherwise quit, smoking. The government has closed some loopholes enabling it to do this, but more needs to be done. It should increase the tax on roll your own tobacco which is much lower than that of factory made cigarettes and ensure minimum excise taxes are uprated at every budget.”

Also on the agenda for the meeting was the sale of illicit tobacco. One of the most effective ways to reduce this illicit trade, which harms the public purse as well as consumers, is to implement a tobacco supply chain licensing system which should be independent of, but paid for by the tobacco manufacturers, as required by the terms of the WHO Framework Convention on Tobacco Control Illicit Trade Protocol.

Professor John Britton, Director of the UK Centre for Tobacco and Alcohol Studies, said:

“The tobacco industry has a history of fuelling the trade in illicit tobacco. [5] It is only right that they should meet the costs of a new system to prevent such skulduggery in the future.”

The Department of Health published its Tobacco Control Plan for England in July, called “Towards a Smokefree Generation”. [3] The plan sets out several ambitious targets for reducing smoking prevalence. These ambitions will only be realised by ensuring that tobacco products continue to be made less affordable and by providing adequate funding for stop smoking services and initiatives that limit smoking initiation, especially among young people.

ENDS

Notes and Links:

Action on Smoking and Health is a health charity working to eliminate the harm caused by tobacco use. For more information see: www.ash.org.uk/about-ash

ASH receives funding for its programme of work from Cancer Research UK and the British Heart Foundation.

ASH staff are available for interview and have an ISDN line. For more information contact ASH on 020 7404 0242 or out of hours Hazel Cheeseman on 07754 358 593.

References

[1] ASH/UKCTAS budget submission endorsed by 36 other public health organisations and accompanying letter to the minister.

[2] WHO report on the global tobacco epidemic 2015. Raising taxes on tobacco.

[3] Towards a smoke-free generation: tobacco control plan for England. Department of Health, July 2017

[4] Hiscock R. Branston JR. McNeill A. Hitchman SC. Partos TR. Gilmore AB. Tobacco industry strategies undermine government tax policy: evidence from commercial data. Tobacco Control 2017.

NB The study was funded by the NIHR Public Health Research Programme (project number 13/43/58).

[5] See evidence set out in ASH/UKCTAS budget submission page 8 points 36-38

 

Note to editors

The National Institute for Health Research (NIHR): improving the health and wealth of the nation through research.

Established by the Department of Health, the NIHR:

  • funds high quality research to improve health
  • trains and supports health researchers
  • provides world-class research facilities
  • works with the life sciences industry and charities to benefit all
  • involves patients and the public at every step

 

For further information, visit the NIHR website www.nihr.ac.uk

ASH / UKCTAS joint response to HM Treasury consultation on tax treatment of heated tobacco products

In June 2017 ASH and UKCTAS jointly submitted a response to the HM Treasury consultation on the tax treatment of heated tobacco products. The submission is available for you to read via the link below.

ASH / UKCTAS response to HM Treasury consultation on tax treatment of heated tobacco products

ASH response to DCLG consultation on 100% retention of business rates

In April 2017 ASH submitted a response to the Department for Communities and Local Government consultation on 100% retention of business rates. You can read this submission by following the link below.

ASH response to DCLG consultation on 100% retention of business rates

ASH response to HMRC consultation on sanctions to tackle tobacco duty evasion and other excise duty evasion

In April 2017 ASH submitted a response to the HMRC consultation on sanctions to tackle tobacco duty evasion and other excise duty evasion. You can read the submission by using the link below.

ASH response to HMRC on tackling tobacco duty evasion

The Economics of Tobacco

The costs of smoking to the economy include the expense of treating diseases caused by smoking as well as reduced productivity and environmental costs.  March 2017.

 

The Economics of Tobacco

Timeline of changes in tobacco taxation in the UK from 1993 to the present

ASH analysis of tobacco tax increases in the United Kingdom

Timeline_tax_increases.pdf

 

ASH response to EU consultation on excise duties applied to manufactured tobacco

In February 2017 ASH submitted its response to an EU public consultation on excise duties applied to manufactured tobacco. You can read the submission by using the link below.

ASH response to EU consultation on excise duties applied to manufactured tobacco

ASH: Tobacco Tax in the 2017 Spring Budget

A joint submission by ASH and the UK Centre for Tobacco and Alcohol Studies for the 2017 Spring Budget.

ASH: Tobacco Tax in the 2017 Budget

Letter to Financial Secretary to the Treasury re Spring Budget 2017

Letter to Financial Secretary to the Treasury re ASH/UKCTAS Spring Budget submission 2017

Letter to Financial Secretary to Treasury re Budget 2017

Autumn Statement 2016 – Joint submission by ASH & UKCTAS

A joint submission by ASH and the UK Centre for Tobacco and Alcohol Studies to the Chancellor of the Exchequer in advance of the 2016 Autumn Statement.

Autumn Statement 2016 - ASH & UKCTAS submission

Tobacco Policy and the European Union

This fact sheet summarises tobacco control policy formulated by the European Union.  Aug. 2016.

20. Tobacco Policy and the European Union

Briefing: Impact of “Brexit” on UK Tobacco Control legislation

A briefing summarising the impact of the UK’s vote to leave the European Union on tobacco control laws.

Briefing: Impact of "Brexit" on UK tobacco control legislation

Taxation, Customs and Excise

Regulation Description
United Kingdom
Finance Act
UK Finance Act 2001 (Legislation In Force)
(External Web Page)
Provisions in the Act set out rates of duty on tobacco products.
The Finance Act 2006 (Tobacco Products Duty: Evasion) (Appointed Day) Order 2006
(External Web Page)
This Order imposes a duty on tobacco manufacturers to avoid supplying cigarettes or hand-rolling tobacco to persons likely to smuggle them into the UK.
The Tobacco Products (Amendment) Regulations 2006
(External Web Page)
These regulations set out the obligations of tobacco companies not to facilitate smuggling. In the case of seized goods, tobacco manufacturers are required to supply detailed information about the products such as the intended customer and destination.
Tobacco Products Duty Act 1979 Chapter 7 This sets out the duty of tobacco manufacturers not to facilitate smuggling and is the primary law supporting the 2006 Tobacco Products (Amendment) Regulations
Fiscal markings on tobacco products
UK Tobacco Product Regulations 2001 (In Force)
(External Web Page)
In 1999, amidst concern for the rise in tobacco smuggling, The Chancellor of the Exchequer commissioned Martin Taylor to conduct an independent evaluation into the government anti-smuggling strategy. The result was a series of recommendations represented in a report Tackling Tobacco Smuggling, which is the main statement of policy on tackling tobacco smuggling.One of the recommendations adopted by the Government from Mr Taylor’s study was to print prominent fiscal markings on tobacco product packaging to indicate ‘UK Duty Paid’ to distinguish between legitimate trade and contraband trafficking.

The Tobacco Product Regulations 2001 requires tobacco products to carry a ‘UK Duty Paid’ marking and any retailers failing to comply are liable to a fine up to £5000.

England
Channel Tunnel
The Channel Tunnel (Alcoholic Liquor and Tobacco Products) Order 2000 (In Force)
(External Web Page)
With the Channel Tunnel an increasingly popular thoroughfare between the UK and mainland Europe, this legislation deems goods being brought into Britain via France to be commensurate to goods being imported as soon as they enter the control zone of the French side.This enables determinations to be made on imported tobacco and alcohol via the tunnel in the same way that they are in the United Kingdom.

This order applies to certain provisions relating to the relief from payment of excise duty on imported alcohol and tobacco conferred on Community travellers.

European Union
EU Tobacco Tax Directive
Council Directive 2010/12/EU of 16 February 2010 amending Directives 92/79/EEC, 92/80/EEC and 95/59/EC on the structure and rates of excise duty applied on manufactured tobacco and Directive 2008/118/EC
(external)
The EU Directive (17778/09 5807/10) has been adopted which updates EU rules on the structure and rates of excise duties on cigarettes and other tobacco products. It updates previous directives: 92/79, 92/80 and 95/59.The directive is intended to ensure a higher level of public health protection by raising minimum excise duties on cigarettes, whilst bringing the minimum rates for hand-rolled tobacco gradually into line with those for cigarettes. The measures will also narrow the differences between Member States’ tobacco taxation levels and so help tackle intra-EU tobacco smuggling.
Anti-Smuggling Measures
Agreements between the European Union and international tobacco companies to tackle the illicit trade in tobacco products.
Imperial Tobacco
(external page)

BAT Agreement
(external page)
Japan Tobacco International Agreement (pdf)
Philip Morris International Agreement (pdf)
These legally-binding agreements require the tobacco companies to implement rigorous controls to prevent the illicit trade of tobacco. If any of their own products are found to be smuggled within the EU the companies are required to pay seizure payments.
‘Personal consumption’ guidelines for Tobacco and Alcohol
Minimum Indicative Levels for tobacco products, HMRC (pdf) Minimum Indicative Levels (MILs) are used to assist Border officials in determining whether tobacco products imported from other EU Member States into the UK are for personal use. From 1 October 2011 the MILs will be reduced from 3200 cigarettes and 3kg of hand rolled tobacco to 800 cigarettes and 1kg of rolling tobacco.
EU Council Directive 92/12/EEC (In Force)
(External Web Page)
This directive rules on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products.In addition, the directive lays down arrangement for products that are subject to excise duties and other taxes that are levied directly or indirectly on the consumption of these products.

Importantly, in the absence of restrictions on the movement of products such as tobacco and alcohol between member states, Article 9 of Directive 92/12/EEC sets out guidelines for national governments on quantities considered not to be of commercial volumes.

Excise Duties
EU Council Directive 92/79/EEC
(External Web Page)Council Directive 92/80/EEC
(External Web Page)

EU Council Directive 95/59/EC
(External Web Page)

The EU has applied limits governing the structure of tobacco duties (see directives 92/79/EEC on cigarettes, 92/80/EEC on products other than cigarettes and 95/59/EC). These may have had some effect in raising minimum duties, but their prime purpose is to stop the use of the excise tax system acting as a protectionist barrier to trade.A new proposal to restructure and raise minimum excise duties (Council Proposal COM/2001/0133 final) had been proposed by the Commission. The proposal included measures to discourage traffic flows of contraband tobacco products from low tax bracket member states to higher rate member countries. But the proposal suffered a defeat in the European Parliament and was not adopted.
EU Council Directive 2007/74/EC
(External web page)
 This directive allows member states to reduce the duty-free import limit from 200 cigarettes to 40 cigarettes for travellers arriving from a non-EU country. Similar rules apply to other tobacco products. Member states may apply the rules to people arriving by air, land or sea.

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