Chancellor urged to make Big tobacco pay for the massive burden it puts on public finances

• New analysis finds the cost of smoking to public finances is nearly double the revenue raised by tobacco taxes; and that
  
• spending £125 million a year to deliver a smokefree 2030 could provide a net benefit to public finances of £5.3 billion by 2030
  
• a cost-benefit analysis of this investment found a net benefit to society over 50 years of £827.8 billion.

Action on Smoking and Health (ASH) is today publishing new evidence on the extent of the burden smoking puts on the public finances, demonstrating that in 2022 the costs are nearly twice as much as the revenues from tobacco excise tax and VAT (£21 billion compared to £11 billion in taxes).

Last year’s Khan Review, on making smoking, obsolete commissioned by the government, concluded that to deliver the Government’s smokefree 2030 ambition (smoking rates of 5% or less) would require an additional £125 million annual investment in tobacco control measures.[1] However, on current trends we won’t get there until 2039.[2]

Howard Reed of Landman Economics, who carried out the analysis for ASH, said:
“Smoking rates are going down but they’re not going down fast enough. The £125 million additional annual investment that Javed Khan recommended to deliver the Government’s smokefree 2030 ambition is less than 1% of the annual cost of smoking to public finances. Our model shows by investing £125 million a year now to deliver a smokefree 2030, the government could save £5.3 billion by 2030 and the longer-term net benefit to wider economy would be £827.8 billion.”

The analysis by Howard Reed of Landman Economics for ASH is based on the latest evidence on the costs of smoking to the UK economy, society and public finances. It shows that the burden smoking puts on the NHS (£2.2 billion) and social care (£1.3 billion) is only a small part of the £21 billion total cost to the public purse. The biggest burden, £17 billion, is due to reductions in taxes and increases in benefits as a result of the sickness, disability and premature death caused by smoking. Smoking doesn’t just harm public finances, it also damages the wider economy at a total cost of £173 billion in 2022.

Reed’s analysis also shows how additional investment to increase the rate of decline in smoking prevalence sufficiently to achieve the Government’s smokefree 2030 ambition (smoking rates of 5% or less) could reduce the burden on public finances by £5.3 billion by 2030. Analysing the longer-term benefit to society and the economy in line with Government requirements for deciding on whether a project should be given the green light [3] finds a net benefit over 50 years of £827.8 billion. The full report and analysis can be found here.

ASH and the multi-university research consortium SPECTRUM are calling on the Chancellor to make Big Tobacco to pay for the burden it puts on public finances and the damage it does to economic productivity. Our recommendations for the March Budget are in line with the Khan review, which recommended that if the government could not find the £125 million investment he called for from the public purse, it should ‘make the polluter pay’.[1] The ASH and SPECTRUM budget representation can be found here.

Dr JR Branston, University of Bath and SPECTRUM consortium, said:
"Four manufacturers, BAT, Imperial, JTI and PMI, known collectively as Big Tobacco, are responsible for about 95% of UK tobacco sales and hence tobacco related deaths. The profit margins the tobacco transnationals make from selling their highly addictive products are much higher than the 10% typical for manufacturing, which is totally unacceptable for a product which is lethal when used as intended. The Chancellor should implement a corporation tax surcharge in this Budget, which could raise £74 million this year backed up by legislation to implement a ‘polluter pays’ levy for future years which by limiting Big Tobacco’s profits to the 10% average for manufacturing business could raise hundreds of millions a year.” [4] [5]

Investing more to help smokers quit would also help alleviate the cost of living crisis. Smoking is concentrated in the poorest and most disadvantaged in society who can significantly increase their disposable household incomes by stopping. The average cost of smoking (£2,451 a year) is now equivalent to the average household’s annual energy bills (£2,500).[6] Smoking is not a lifestyle choice but an addiction. Most smokers started in childhood, with two thirds of those trying one cigarette going on to become daily, addicted smokers.[7] Once addicted, smokers find it difficult to quit and are much more likely to succeed if they get help; help which needs funding.

Deborah Arnott, Chief Executive of Action on Smoking and Health, said:
“The public health minister Neil O’Brien said last year when he was responsible for levelling up, that he believed that ‘flooring it’ on prevention and public health were vital for the future of our NHS.[5] He’s right, but it’s not just vital for the NHS. Achieving the Government’s smokefree 2030 ambition would put billions into public finances, increase economic growth, and alleviate the cost of living crisis for some of the poorest in society. But the government need to put their money where their mouth is, and make it happen.”

Around three quarters of both adults (76%) and tobacco retailers (73%) in England support a levy on manufacturers to pay for tobacco control measures. [8] [9]

In the UK, in 2021, 13.3% of people aged 18 years and above smoke cigarettes, which equates to more than one in 8 adults amounting to 6.6 million people, based on estimates from the Annual Population Survey (APS).[10]

ENDS

Notes to the Editor
For interviews and more information contact press@ash.org.uk or Deborah Arnott on Mob: 07976 935 987

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 receives funding for its programme of work from Cancer Research UK and the British Heart Foundation, and provides the secretariat to the All Party Parliamentary Group on Smoking and Health.

Landman Economics was established in 2008 by Howard Reed, previously chief economist at the Institute for Public Policy Research. Howard’s areas of specialist expertise include quantitative analysis and economic modelling. For more information see: http://www.landman-economics.co.uk/

SPECTRUM is a public health research consortium of academics from 10 UK universities and partner organisations funded by the UK Prevention Research Partnership. For more information see: www.spectrum.ac.uk

References

*The cost of unmet need has now been added to Table 7.3 increasing the 50-year NPV gain to the UK economy from £775.7 billion to £827.8 billion. The overall substance and conclusion of the CBPF model remains unchanged.

[1] The Khan review: Making smoking Obsolete. Independent review into smokefree 2030 policies by Dr Javed Khan OBE. Published by Office for Health Improvement and Disparities. June 2022. Available from: https://www.gov.uk/government/publications/the-khan-review-making-smoking-obsolete

[2] Cancer Research UK. Smoking prevalence projections for England based on data to 2021. December 2022. https://www.cancerresearchuk.org/sites/default/files/cancer_research_uk_smoking_prevalence_projections_england.pdf

[3] HM Treasury. Guidance. The Green Book (2022).
Updated 18 November 2022.

[4] Branston JR, Gilmore AB. The failure of the UK to tax adequately tobacco company profits. J Public Health (Oxf). 2020 Available from: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7044670/

[5] Dr Henry Featherstone. Establishing a Smokefree 2030 Fund. Available from: https://ash.org.uk/uploads/Featherstone-H.-submission-to-APPG-Smoking-Health_-Establishing-a-Smoke-free-2030-Fund-FINAL.pdf

[6] Based on October 2022 figures when the average energy cost was capped at £2,500 according to the BEIS Energy Price Guarantee Policy Paper
updated 29 November 2022.

[7] Birge M, Duffy S, Miler JA, Hajek P. What proportion of people who try one cigarette become daily smokers? A meta-analysis of representative surveys. Nicotine and Tobacco Research. 2018;20(12):1427-33. DOI: 10.1093/ntr/ntx243.

[8] ASH. Public support for Government action on tobacco: Results of the 2022 ASH Smokefree survey. Available from: https://ash.org.uk/uploads/Public-support-for-Government-action-on-tobacco-Results-of-the-2022-ASH-Smokefree-survey.pdf?v=1659737830

[9] ASH. Regulation is not a dirty word. November 2022. Available from: https://ash.org.uk/resources/view/retailers-report-2022

[10] ONS. Adult smoking habits in the UK: 2021. Available from: https://www.ons.gov.uk/releases/adultsmokinghabitsintheuk2021