Excise duties rise. ASH was satisfied by the rise of 21 penceon a pack of cigarettes, though we had called for a rise of 24 pence. People respond toprice signals by giving up, cutting down or never starting. The 5% duty increase is inline with the Chancellor’s minimum commitment will reduce the 77 billioncigarette consumption (1997) by over 2 billion cigarettes per year which will in turn leadto long term reductions in smoking related deaths of over 2,000 per year - a large healthgain from a revenue raising measure.

"The Chancellor has shown the Government’s colours on smoking by giving people serious financial reasons to quit. This is the biggest increase ever and it must be obvious by now that smoking is a mug’s game and its just going to get worse." said Clive Bates, Director of ASH.

Value of quitting smoking. ASH invited a leading pensionsprovider, NPI, to illustrate the value of giving up smoking 20/day at the new price at theage of 20 and ploughing the money saved into a personal pension. At retirement at 60, NPIgives the following figures for the value of a pension assuming the stated annual rates ofreturn: 6% - £242,000; 9% - £531,000; 12% - £1,210,000. (NPI’s Pension Global CareFund has no tobacco investments and has achieved 16.6% per annum against an average of12.2% in the sector from its launch on 1st March 1994 to 16th march 1998. Past performanceis not necessarily a guide to future performance.)

"The money spent on cigarettes could make millionaire pensioners of young smokers that quit now, and they might also live long enough to enjoy it", said Bates.

Timing. The delay in the price increase to 1 December makesno sense as the delay from announcement in July to price rise on 1st December allowedlarge scale stockpiling of pre-tax-rise cigarettes in the supply chain. Inflation willwhittle away the value of the 21p increase.

Poor smokers. ASH called on the Chancellor to announce aprogramme to assist smokers in the poorest income brackets. Nothing was announced. Smokingrates decrease with income and tobacco tax is regressive. Labour’s tax policy issupposed to be "fair and based on the ability to pay". Some of the pooresthouseholds spend 25% of their income on smoking. The White Paper (expected in June) ontobacco policy must contain measures that making quitting the as straightforward aspossible. This should include nicotine patches (etc.) available on the NHS, communitybased schemes, and information programmes targeted at low-income groups.

Smuggling. We are pleased the Chancellor ignored theexpensive lobbying operation established by the Tobacco Manufacturers Association and didnot allow illegal activity to stand in the way of a health-orientated price increase.However, nothing was announced as a result of the Alcohol and Tobacco Fraud Review. ASHwas hoping to hear news of tax stamps and extra spending on Customs and Exciseenforcement.

"Overall, we are happy, though not delighted. The budget shows that the Government is ready to wield the trusty sword of price in the war against smoking, but it needs to get the rest of the policy right" said Bates.

Further reading: Tobacco taxation in the MarchBudget

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