The anti-smoking smash and grab
17 January 2013
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18 January 2013
Economic Theory
25 June 2024
A curious little idea was reported by the BBC and the Telegraph this week, when two academics from Bath University called for the UK’s tobacco industry to be ‘regulated like water companies’. Anna Gilmore of the UK Centre Tobacco Control Studies – a campaign group based at the University – came up with the idea in 2010, but it got no media attention until it was repackaged this month with the fictitious ‘Ofsmoke’ added to the mix as a potential regulator.
The scheme relies on the conceit that tobacco resembles a privatised utility that requires a watchdog to keep prices down. In truth, the tobacco industry is not a monopoly, let alone a natural monopoly, and prices are only high because anti-smoking groups have put pressure on governments to price smokers out of the habit for decades. When they say ‘regulate like water’, what they really mean is that the state should set a maximum price on cigarettes in order to maximise tax revenues and minimise industry profits. By keeping prices at current levels but replacing the industry’s profits with more tax, they estimate that the government could squeeze out an extra £500 million per year. This, they say, would pay for all UK anti-smuggling and smoking cessation programmes twice over. What they do not mention is that existing tobacco duty already pays for them more than twenty times over.
The authors complain that the tobacco industry is ‘incredibly profitable’, but they do not mention that by far the biggest earner from tobacco sales is the government; tax on a pack of cigarettes typically makes up 80 per cent of the price. They attribute the profitability, in part, to a lack of competition. ‘A handful of companies dominate the market and cream off massive profits,’ laments one of the authors, while glossing over the fact that it is almost impossible for a new entrant to enter the market because every form of marketing and advertising has been banned at the behest of the ‘tobacco control’ lobby.
To heal these self-inflicted wounds, the authors envisage a system in which the state sets the price, designs the packaging, and pillages the profit while the industry gets on with the mundane job of manufacturing the product. Perhaps one day the government will take the final step of making the cigarettes as well, thereby leaving tobacco companies free to concentrate on their core purpose of collecting £12 billion of tobacco duty.
There are several practical and legal obstacles that make the Bath University ruse unworkable – even Britain’s advanced nanny state is surely not ready for the virtual nationalisation of Imperial Tobacco – but the fact that such a policy can be insouciantly and sincerely proposed is further evidence of the totalitarian mindset at work within the ‘public health’ industry which sees no separation between private enterprise and the state. Whether it’s a minimum price for alcohol or a maximum price for cigarettes, profits are there to be pillaged and prices are there to be fixed. It is a historical fact that prohibitionists tend to see private industry as something to be mistrusted and fought. At the risk of mixing zoological metaphors, the current crop sees industry as both scapegoat and cash-cow.
Christopher Snowdon is the author of Sock Puppets: How The Government Lobbies Itself and Why.
The scheme relies on the conceit that tobacco resembles a privatised utility that requires a watchdog to keep prices down. In truth, the tobacco industry is not a monopoly, let alone a natural monopoly, and prices are only high because anti-smoking groups have put pressure on governments to price smokers out of the habit for decades. When they say ‘regulate like water’, what they really mean is that the state should set a maximum price on cigarettes in order to maximise tax revenues and minimise industry profits. By keeping prices at current levels but replacing the industry’s profits with more tax, they estimate that the government could squeeze out an extra £500 million per year. This, they say, would pay for all UK anti-smuggling and smoking cessation programmes twice over. What they do not mention is that existing tobacco duty already pays for them more than twenty times over.
The authors complain that the tobacco industry is ‘incredibly profitable’, but they do not mention that by far the biggest earner from tobacco sales is the government; tax on a pack of cigarettes typically makes up 80 per cent of the price. They attribute the profitability, in part, to a lack of competition. ‘A handful of companies dominate the market and cream off massive profits,’ laments one of the authors, while glossing over the fact that it is almost impossible for a new entrant to enter the market because every form of marketing and advertising has been banned at the behest of the ‘tobacco control’ lobby.
To heal these self-inflicted wounds, the authors envisage a system in which the state sets the price, designs the packaging, and pillages the profit while the industry gets on with the mundane job of manufacturing the product. Perhaps one day the government will take the final step of making the cigarettes as well, thereby leaving tobacco companies free to concentrate on their core purpose of collecting £12 billion of tobacco duty.
There are several practical and legal obstacles that make the Bath University ruse unworkable – even Britain’s advanced nanny state is surely not ready for the virtual nationalisation of Imperial Tobacco – but the fact that such a policy can be insouciantly and sincerely proposed is further evidence of the totalitarian mindset at work within the ‘public health’ industry which sees no separation between private enterprise and the state. Whether it’s a minimum price for alcohol or a maximum price for cigarettes, profits are there to be pillaged and prices are there to be fixed. It is a historical fact that prohibitionists tend to see private industry as something to be mistrusted and fought. At the risk of mixing zoological metaphors, the current crop sees industry as both scapegoat and cash-cow.
Christopher Snowdon is the author of Sock Puppets: How The Government Lobbies Itself and Why.
6 thoughts on “The anti-smoking smash and grab”
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Norwich prison is selling 12.5 gms of tobacco for £7. The pice in UK shops is about £4 for 12.5gms. I asked the CAB if this is legal and was told that sellers can charge what ever they like and it was upto the consumer whether they wanted to buy it or not.
So, basically, it’s like this Godber – the screws have almost doubled the value of tobacco as a commodity to barter wiv. Manna from heaven for us non smokers.
Fletch. I was referring to the cost of tobacco in the prison shop. The prisoners have their own scam, if a pouch is borrowed two have to be repaid. Anybody doing this should be locked up 🙂
Come to think of it, the Anti Tobacco lobby do have a similarity to Mr. McKay.
Four pounds for 12.5g? Hmm… that would come out to… 320 pounds per kilogram?
Here in the USA in Pennsylvania we pay …. hmmm…. a bit less than $15/lb, which would come out to about $32 per kilogram, or … hmm… just about 20 pounds per kilogram.
Mr. Snowdon, when you speak of the government getting 80% of the price in tax, I think you may be underestimating them. Granted, there might be some slight transportation charges involved but I doubt it’d be more than a pound per pound (so to speak) so it looks to me like the British government is making somewhere on the order of 300 pounds per kilogram of tobacco — all of it with no effort, no investment, and no guilt.
I’d say the present-day tobacco situation is about as clear an example as any anarchist could ever dream of in encouraging citizens to disrespect the rule of their governments and regard them as nothing more than mobsters out to steal people’s money through completely illegitimate taxes.
Nice, eh?
Michael J. McFadden
Author of “Dissecting Antismokers’ Brains”
The Government must continue to raise the duty on tobacco products in order that terrorists can make a fortune from smuggling. Terrorists need the money to finance the killing of our troops and workers.