Sustained investment of around £300 Mn a year for the next parliament could provide an average return of £370 Mn a year to public finances, increasing total employment by 103,100 by 2029.
Calculations by Landman Economics for ASH. See CBPF Model of Smoking (V 2.2 May 2024).
The £300 Mn pa needed to invest in tobacco control could be secured by capping the profits of the Tobacco Transnationals which supply over 95% of the UK market for cigarettes. Tobacco manufacturers make on average 50% net operating profits far higher than UK manufacturing (under 10%) or energy companies (BP’s current net operating profit margin is 6.49%).
See short presentations on the potential for a profit cap to raise the funds needed, on the ‘polluter pays’ model plus detailed ASH briefing paper.
Wider UK society
The £93.0 Bn cost of smoking in 2023 to wider UK society consisted of:
- £34.1 Bn lost productivity (due to early death, and reductions in employment, and earnings due to tobacco consumption)
- £20.5 Bn costs for health, social care and fires
- £38.3 Bn for lives lost using HMT green book QALY values
The financial cost of smoking to the UK economy is 54.7 Bn which is equivalent to 2% of GDP. The value of lives lost is not included as this is a subjective measure rather than a direct financial cost.
In the CBPF Model of Smoking (V 2.2 May 2024) chapters 2 - 4 and table 7.1 set out the detailed cost breakdowns.
Public finances in England
Public health policy is devolved so the focus is on comparing the public finance costs for England compared to the benefits of investment in tobacco control measures. The £18.5 Bn cost to public finances in England in 2023 consisted of:
- £11.3 Bn lost tax receipts from reduced productivity
- £4.1 Bn increased social security spending
- £3.1 Bn service costs for health, social care and fires
Once tobacco excise taxes of £7.1 Bn and reduced pension payments due to early death of £0.2 Bn were taken into account, the net loss to public finances in England was £11.4 Bn.
Smokers and their families
On average in 2023 smokers spent £2,486 on tobacco, similar to the energy price guarantee of £2,500 and 11% of the £22,213 gross disposable household income per head (GDHI) for England.
In 2019, the last year for which comprehensive data were available, 1.5 million households including smokers lived in poverty including 1 million children, 2.2 million working-age adults, and 400,000 pensioners.
People who smoke in England spent £13.7 Bn in total on tobacco in 2023, lining the pockets of the tobacco manufacturers. On average UK manufacturing companies make under 10% net operating profit, while tobacco manufacturers make around five times that amount.
Benefits to public finances when smoking goes down
Sustained investment of around £300 Mn a year for the next parliament could provide an average return of £370 Mn a year to public finances in England. This is made up of:
- £155 Mn reduction in tax receipts once reduced tobacco excise taxes of £1.42 Bn are taken into account
- £412 Mn reductions in social security spending net of £19 Mn in increased pension costs
- £115 Mn reduction in public service costs (health, social care and fire)
Improved economic productivity also has a significant employment impact, and could increase employment by 17,200 a year totalling 103,100 by 2029. This is made up of:
- 28,100 due to higher employment probability of non-smokers
- 75,000 due to consumer expenditure switching out of tobacco
The higher employment probability of non-smokers is due to better health and well-being, longer healthy life expectancy, and higher productivity. The large employment impact of consumer spending switching out of tobacco is due to the high excise taxes, and lack of any domestic production of tobacco or cigarettes. This means that spending on tobacco has little or no employment benefits, unlike spending on other goods and services.