Budget 2016: Tobacco duty up – again
So the Chancellor has announced that tobacco duty will go up – again.
No surprise there. The tobacco escalator is something Osborne committed himself to for the whole of this parliament.
The good news it isn't worse. ASH wanted an increase of five per cent above inflation for all tobacco including cigarettes and Cancer Research have been campaigning for a £500 million levy to be applied to the tobacco companies, a sum that would almost certainly have been passed on to the consumer, as Osborne himself said last year when he rejected the idea.
Instead we've got two per cent above inflation for cigarettes and an additional three per cent (five per cent in total) for hand rolling tobacco.
More surprising is the Chancellor's announcement of an "effective floor" on the price of cigarettes.
Anyway, here is Forest's response that you also read on our website here:
Campaigners have expressed disappointment that tobacco duty will continue to rise by two per cent above inflation.
Simon Clark, director of the smokers' group Forest which runs the Axe The Tobacco Escalator campaign, criticised both the increase and the Chancellor's announcement of an "effective floor" on the price of cigarettes:
"Increasing the cost of tobacco benefits no-one apart from the spivs and criminals who sell illicit tobacco on the black market.
"Punitive taxation penalises law-abiding consumers and hurts every taxpayer who has to pay to reduce the loss of revenue.
“In the last parliament tobacco duty increased by 40 per cent and the total tax on the cheapest cigarettes in the UK is now a staggering 88 per cent.
"The total shortfall in tobacco revenue since 2010 is £10.7 billion. A large chunk of that has disappeared into the pockets of criminal gangs.
"In 2014/15 alone the revenue the government lost to illicit trade was £2.1 billion with a further £500k being lost to legitimate cross-border shopping."
Forest was also critical of the Chancellor's announcement of an “effective floor” on the price of cigarettes. According to Forest director Simon Clark:
"A floor on the price of cigarettes will hurt the low paid and others who can least afford it. The Chancellor is trying to price the less well off out of the market but all it will do is drive them to the black market."
A national poll conducted last week found there is little public support for further increases in tobacco duty.
According to the Populus survey of more than 2,000 people, only 24 per cent of the public think tobacco duty is "too low". In contrast 38 per cent think it’s "too high" and 31 per cent think it’s "about right".
PS. The image above was commissioned for Forest's Axe The Escalator campaign. I rather like it.
I'm having a Natalie Bennett "brain fade" moment.
Figuring out the price increases on different types of tobacco is not as easy as you might think.
For example, is the two per cent above inflation increase on cigarettes based on the retail price index (RPI) that today stood at 1.7 per cent, or the consumer price index (CPI) that stands at one per cent?
Answer: it's the RPI.
And what about hand rolling tobacco? Initially I thought the Chancellor had increased the duty on that by three per cent above inflation.
Not at all. I'll let the FT explain:
Tobacco duty will rise by 2 per cent above inflation from 18:00 UK time today, while duty on hand-rolling tobacco will increase by 3 per cent above that rate – in other words 5 per cent above the RPI measure of inflation.
Finally, what's the "effective floor" that Osborne intends to introduce next year? Is it a form of minimum pricing for tobacco?
Er, not exactly. It's a reference to minimum excise tax which something else although the impact may be similar.
Anyway, here's my response to a query from a journalist a few minutes ago. In the absence of any government figures (there's been a cock-up, apparently, behind the scenes and the official figures have been delayed), it some time to work out:
A pack of 20 premium cigarettes will now cost approximately £9.61, an increase of 21p (from £9.40).
A 25g pouch of hand rolling tobacco will now cost approximately £9.93 (from £9.56), an increase of 37p.
Anyway I'm just grateful I'm not doing any interviews on the subject.
Btw, a 25g pouch of rolling tobacco will be banned under the EU's Tobacco Products Directive. Instead, consumers will have to buy a 50g pouch which will cost almost £20.
Thanks, EU.