Tobacco tax - budget is "just what the doctor ordered"

Overallreaction. ASH applauded theChancellor's 5% real increase (about 25p per pack) in cigarette duties and formaintaining the sound health and economic policy of raising tobacco taxes,while keeping his nerve in the face of a sustained campaign by the tobaccoindustry to try to reverse it. Clive Bates, Director of ASH said:

"TheChancellor kept his nerve and hundreds of lives will be saved as a result. If tobacco taxes don't keep pace with risingincomes, then cigarettes become more affordable meaning more people smoke andmore people become ill and die early. Tobacco taxes are one of the few budgetdecisions with life and death consequences, and the Chancellor's budget puthealth first."

Heis sticking with his pledge to deal with smuggling as a law and order issuewith a reasonable package of enforcement measures, but they must know that muchmore is needed. We are concerned that in a budget that stressed fairness therewas no sign of money from increased tobacco taxes being recycled back directlyto the smoker through better NHS support for the 70% of smokers that want toquit.

Whytinkering with tobacco tax can't deal with smuggling. There are two types of smuggling. First, the 'white van' trade which is drivenby cross border tax differentials, and second 'container fraud' which is thediversion or misdescription of freight containers of up to 10 millioncigarettes on which duty has not been paid anywhere - this type of smuggling isdriven by the difference between taxed and untaxed price. About three-quarters of cigarette smuggling is 'container fraud'. If duties werereduced to the point where cross-channel bootlegging was no longer attractive,container fraud which would remain very profitable would pick up the slack.

"Tryingto deal with smuggling by reversing the tax policy is doomed to fail - it maydeter the cross-channel bootleggers, but the organised crime gangs will justtake over and supply the illegal markets with cigarettes by the container-load.The result would be Treasury revenue losses, more smoking and very littleimpact on smuggling."

Isthis a fair tobacco tax budget? The Chancellor emphasised fairness in his budget and ASH and 40 otherorganisations [1] argued that £60 million of new tobacco tax money should berecycled to smokers through NHS spending on support for smokers that want toquit. Tobacco taxes are regressive andtobacco is highly addictive - the only way to square high tobacco tax with afairness doctrine is to maximise opportunities for smokers to quit.

"This issupposed to be the budget of fairness, but we have seen the Government cuttingsupport for smokers in recent weeks. It's now up to Alan Milburn to spend some of his NHS tobacco taxwindfall on proper support for smokers -he needs to increase spending by sixtymillion pounds and then they can justifiably claim their tobacco tax policy isfair."

[1] ASH and 40 other organisations made a detailed submissionto the Chancellor - submission is at www.ash.org.uk/papers/tax2000.htmland press release www.ash.org.uk/press/000316.html

Contact

Clive Bates, ASH

(0207) 739 5902

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