Chancellor urged to raise taxes for cigarillos to equal cigarettes in Budget

7 February 2020

Chancellor urged to raise taxes for cigarillos to equal cigarettes in Budget

Action on Smoking and Health (ASH), the Tobacco Control Research Group at the University of Bath, and Cancer Research UK are calling on the Chancellor to raise taxes on cigarillos to discourage youth uptake. Yesterday, the organisations met with the Exchequer Secretary Simon Clarke, to discuss their recommendations for the forthcoming Budget, raising concerns about a new mentholated cigarillo brand launched by Japan Tobacco International [1] which circumvents legislation prohibiting the sale of menthol flavoured cigarettes from May.

Menthol is being banned because it increases the probability that young people will start smoking and makes it harder for them to quit. [2] [3] Unlike conventional cigarettes, cigarillos, which have an outer wrapping of tobacco leaf, are exempt from the menthol ban, as well as from existing legislation requiring cigarettes to be sold in minimum pack sizes of 20 and in plain standardised packaging. They are also taxed less than conventional cigarettes, at the same rate as cigars. [4]

Deborah Arnott, chief executive of ASH, said, “Getting round the ban by launching a mentholated cigarillo, which is essentially a cigarette wrapped in tobacco leaf, is breathtakingly cynical even for the tobacco companies. Their own research tells them menthol makes it easier for young people to start smoking because it masks the harshness when they first try to inhale. Legislating to extend the menthol ban to cigarillos will take time. In the interim the Chancellor should use the Budget to increase the tax on cigarillos to be no less than that on cigarettes, to help discourage young people with limited disposable income from buying these products.”

The benefits of increasing tobacco tax, and moving towards eliminating the significant differential between cigarettes and handrolling tobacco were set out in the meeting. It has been estimated using HMRC data that if taxes were increased by 5% above inflation on factory made cigarettes and 15% on handrolled tobacco HMT would raise an additional £440 million in year one, while reducing smoking prevalence by 0.17 percentage points. [5]

The Minister was also presented with new research on tobacco industry pricing by the Tobacco Control Research Group at the University of Bath. This finds that the introduction of the Minimum Excise Tax (MET) in addition to the tax escalator of 2% above inflation was successful in increasing the price of the cheapest FM cigarettes and narrowing the price gap between manufactured cigarette brands. The enhanced tax increases on handrolled tobacco of 3% above inflation were, however, insufficient to narrow the price gap with factory made cigarettes.[6]

Dr Rob Branston, Senior Lecturer in Business Economics at the University of Bath, and one of the authors of the research 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 year-on-year until it is equivalent to that of factory-made cigarettes and ensure minimum excise taxes are uprated at every budget.”

The recommendations, endorsed by 24 other public health organisations [7] also included reinstating the tobacco tax escalator and setting it at 5% for cigarettes and an additional 10% for handrolled tobacco for the life of this parliament. This would benefit the Exchequer and support delivery of the Government’s manifesto commitment to increase healthy life expectancy by five years by 2035.[8]

Deborah Arnott said:

“Raising taxes on tobacco to reduce affordability is the most effective way to reduce smoking, while increasing government revenues. [9] The Government must renew the tobacco tax escalator to increase taxes above inflation for the life of this parliament. This is essential if the Government’s manifesto commitment to increase healthy life expectancy is to be achieved.”

ENDS

Notes and Links:

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

References

[1] Convenience Store. Sterling mentholated cigarillos have been launched at an RRP of £4.50 for a pack of ten. 2020.

[2] Villanti A, Collins L, Niaura R, Gagosian S, Abrams D. Menthol cigarettes and the public health standard: a systematic review. BMC Public Health. 2017.

[3] Campaign for Tobacco-Free Kids. Impact of Menthol Cigarettes on Youth Smoking Initiation and Health Disparities. 2019.

[4] HM Revenue & Customs. Tobacco Products Duty rates. 2018.

[5] Calculations by Landman Economics for ASH using HMRC short-run elasticity of -0.57.

[6] Hiscock, R., Augustin, N. H., Branston, J. R., & Gilmore, A. B. (2019). Introduction of standardised tobacco packaging and minimum excise tax on in the UK: a prospective study. The Lancet, 394, S13. https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(19)32810-7/fulltext This work was funded by Cancer Research UK and the British Heart Foundation (Project Number C27260/A23168).

[7] ASH. ASH/UKCTAS budget submission endorsed by 24 other public health organisations and accompanying letter to the minister. 2020.

[8] The Conservative and Unionist Party Manifesto 2019. Get Brexit Done Unleash Britain’s

Potential. 2019.

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

Note to editors

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.

The UK Centre for Tobacco & Alcohol Studies (UKCTAS) was created in 2008 and includes research teams in twelve UK universities.

CRUK is the world's largest independent cancer research charity, conducting research into the prevention, diagnosis and treatment of the disease. CRUK has over 40,000 volunteers, and campaigns for evidence-based policy implementation.