A robust campaign, spearheaded by doctors, public health experts, and cancer activists, is urging the UK’s Finance Minister, Rachel Reeves, to implement a new tax regime targeting the exorbitant profits of the four largest tobacco companies. The core argument is that the tobacco industry, responsible for significant health damage and economic burdens, should financially contribute to measures aimed at reducing smoking.
The campaign to tax the profits of tobacco companies is driven by the need to address the significant health and economic impacts of smoking. By making the tobacco industry pay for the harm it causes, the UK can move closer to achieving its smoke-free 2030 ambition, reduce the burden on public finances, and promote a healthier and more productive society.
The activists are advocating for a dual financial approach: a one-off corporate tax surcharge of £74 million and a new annual levy of £700 million on the profits of these tobacco giants. These companies, which produce 95% of all British cigarettes, generate an annual profit of £1 billion from selling their products in the UK alone. However, the economic and health costs attributed to smoking are staggering, with ASH calculating that smoking results in £17 billion in economic damage and health costs each year, primarily due to lost productivity and NHS expenditures.
The disparity between the industry’s profits and the societal harm caused is stark. Globally, the six largest tobacco companies earned $62 billion in 2016, surpassing the combined profits of major corporations like Coca-Cola, Walt Disney, FedEx, Google, Starbucks, and McDonald’s. Tobacco companies enjoy exceptionally high profit margins; for instance, Philip Morris had a 39% profit margin in 2018, significantly higher than food giants like Nestlé, which had a margin of only 15%.
The proposed one-time corporate tax surcharge is a well-established financial tool, previously used to regulate industries with monopoly-like pricing power, such as banks, energy suppliers, and water companies. This surcharge would be included in the budget to fund quit aid for smokers. The second tax, an annual levy on tobacco companies’ profits, is estimated to raise £700 million. For example, Imperial Tobacco would need to surrender £66.50 of every £100 in profits. Similar proposals have been made in the Netherlands to finance a tobacco addiction fund through such a tax.
Hazel Cheeseman, the head of ASH, strongly supports this initiative, emphasizing that the tobacco industry must pay for the health damage it causes, which results in the deaths of 76,000 British people annually. The letter to Minister Reeves has been signed by prominent organizations including the British Medical Association, the Royal College of Physicians, Cancer Research UK, and the British Heart Foundation, as well as numerous researchers and academics. Public support for the levy is also significant, with three out of four people backing it according to a YouGov poll conducted on behalf of ASH.
The Labour government, led by Keir Starmer, is building on the previous Conservative government’s plans to introduce an age-related tobacco ban and is considering tightening the Smoking and Vapes Bill with a possible ban on smoking in certain outdoor spaces. This initiative has cross-party support, with Javed Khan, who conducted a review of smoking policy for the Conservative government in 2022, and former Conservative health minister Steve Brine, both endorsing the taxation of industry profits.
As Minister Reeves prepares to announce her first budget on October 30, which includes measures to address the £40 billion budget gap, the call for a ‘polluter pays’ levy on the tobacco industry is gaining momentum. This approach is seen as a crucial step towards funding tobacco control measures and reducing the financial burden that smoking imposes on public finances and the broader economy.
The economic rationale behind this proposal is compelling. Investing £125 million annually in tobacco control measures could yield a net benefit of £5.3 billion to public finances by 2030 and a long-term net benefit to society of £827.8 billion over 50 years. This investment would not only reduce smoking rates but also alleviate the cost of living crisis for some of the poorest in society and boost economic growth.
