Health Commission backs call for a polluter pays levy on tobacco manufacturers

Action on Smoking and Health (ASH) today [17 September 2024] welcomed a report from IPPR’s Health Commission [1] which sets out a vision for future health policy. One of the key asks in the report is for the government to adopt polluter pays approach to fund prevention and create market incentives for business to move away from the sale of unhealthy products.

They back calls made by health charity ASH, the Smokefree Action Coalition and the APPG on Smoking and Health for a price-cap style levy. [2] This would cap the wholesale price of tobacco and so reduce the profit margin the companies can make. Retail prices would be kept the same by the introduction of a new polluter pays levy, which would go to the state and could fund prevention activities to support more smokers to quit. ASH estimate that such a levy could raise £700m in the first year.

Currently tobacco companies make significantly higher profits than other manufacturers. Imperial Tobacco, the biggest tobacco transnational in the UK with over 40% of the market, made a net operating profit margin of 66.5% in the UK in 2023, while BP’s net operating profit in September 2023 was estimated to be 11.1%. The average for UK manufacturing is under 10%. [3]

A levy would require primary legislation so as a first step the government should introduce a windfall tax in the Budget.

Commenting on the report Dr Rob Branston, University of Bath, who has worked with ASH to develop the model said:
“Tobacco companies make excess profits in the UK, far in excess of most companies, while selling a lethal product. The government could raise an additional £700 million a year while having the additional benefit of maintaining current high retail prices, which disincentivise smoking. As a first step tobacco manufacturers should be subject to a windfall profits tax in the forthcoming Budget.”

Working with Landman Economics, ASH estimates that smoking costs public finances £11.3bn per year with the total cost to the economy estimated to be £46bn a year. Investment in tackling smoking in this parliament would reduce the costs to public finances by 4% and the costs to the economy as a whole by 17%. [3]

Deputy Chief Executive of ASH, Hazel Cheeseman said:
"Spending to reduce smoking makes sound economic sense, providing immediate returns which grow over time. However, governments often find it difficult to spend on prevention even when the evidence of impact is clear. A levy on tobacco companies provides the resources needed to create a smokefree country at pace, delivering benefits for British productivity and reducing demands on public finances.”

For more information about the economic impact of tobacco and fiscal measures to address this see the ASH budget submission: https://ash.org.uk/uploads/ASH-Autumn-2024-Budget-representation-FINAL.pdf?v=1726563960

ENDS

Notes to the Editor
Action on Smoking and Health is a health charity working to eliminate the harm caused by tobacco use. For more information see: ash.org.uk. ASH receives funding for its programme of work from Cancer Research UK and the British Heart Foundation.

Contact: press@ash.org.uk for further information

Notes
[1] https://www.ippr.org/media-office/cross-party-commission-concludes-three-year-enquiry-with-bold-plan-for-21st-century-health

[2] https://ash.org.uk/resources/view/appg-on-smoking-and-health-manifesto-for-a-smokefree-future

[3] https://ash.org.uk/uploads/ASH-Autumn-2024-Budget-representation-FINAL.pdf?v=1726563960