Tobacco tax proposals should go up in smoke
A new report from Policy Exchange (strapline: David Cameron’s favourite think tank) has apparently “re-ignited” the “controversial” debate about tobacco.
The document is an enthusiastic embrace of central planning dogma over free market common sense. As Ayn Rand said, if you end with the wrong conclusions you should always check your premises – the authors seem to start with socialist principles and they reach correspondingly extraordinary conclusions.
The British government have got tobacco tax pretty much spot on, the authors have concluded. The only marginal failing is that cigarettes aren’t taxed quite enough – a packet of twenty cigarettes should cost you £6.36 rather than the prevailing price of £6.13.
They have totted up the costs of tobacco consumption to “society” – including (but not limited to) NHS treatment of smoking-related illnesses, house fires, employee absenteeism, litter collection and even lack of economic productivity caused by early death.
The last of these assertions is particularly offensive. If I drop dead in my mid 40s from lung cancer, I have – I’m told – let the side down. I should have been economically productive for another couple of decades, for the sake of the nation’s GDP. The authors do not seem to realise that people get paid to work. They benefit from their own productivity. Their productivity is not a social benefit – except very marginally – from which society as a whole gains.
The cost of smoking-related diseases is very real. And the NHS picks up a fair chunk of the bill. But if every smoker quits their habit tomorrow, they are still going to die of something. The question isn’t how much smokers cost the NHS – but how much less would they cost the NHS if they didn’t smoke. The Policy Exchange research assumes they would cost nothing. But dying of Alzheimer’s as an ex-smoker (or non smoker) in your 80s is going to cost much more than dying as a chainsmoker of heart disease in your 50s. And that doesn’t start to factor in the saving made on state pensions by smokers having the courtesy of dying many years younger.
A second collectivist fallacy perpetuated by the report is to assume that illness or absenteeism (in the form of cigarette breaks) is somehow a burden on society. It is not. It is a matter entirely for the employer and employee – though it could be argued that anti-discrimination legislation prevents employers from choosing (if they wish) to employ only non-smokers. I would have been surprised if the IEA had not hired me on the grounds that I smoke tobacco, but I would have respected their right to reach such a conclusion. If legislation stopped them from not employing me on those grounds, it should be repealed.
With regard to house fires, buildings insurance companies – just like life insurance companies – are certainly entitled to charge higher premiums to smokers if they wish. The fact that they do not suggests that the risk is too trivial – why should the government step in and over-rule them by collecting extra taxes on cigarette smokers to cover the costs of extra house fires (indeed, this raises the issue of whether the tax would be distributed to fire insurance companies…)?
But the most exasperating element of the document is its reliance on the theory of Marxist false consciousness. What we smokers really want is to give up smoking. And what we need is taxpayers’ money spent on encouraging us to do so. It’s not enough that 65% of smokers apparently want to give up. It is not sufficient that pharmaceutical companies can – and do – spend millions advertising their array of chewing gums and nicotine patches on primetime television. You would have thought that allowing Pfizer to advertise nicotine products in the middle of Coronation Street whilst simultaneously banning tobacco companies from being allowed to decorate a Formula One motor racing car would be advantage enough. Not according to this report. The two thirds of smokers mercilessly trapped in their habit need an extra shove from the public purse. So, whilst even the most evangelical public-spenders accept that slashing public information budgets is an easy win, the authors actually advocate increasing the government’s advertising budget by £100m.
It seems that the authors suffer from two problems identified by Hayek. The first is the “fatal conceit”. They believe they have calculated the exactly correct tax to internalise all social costs – an additional 5%. This is remarkable. If a government has the information to do this, then central planning in the Soviet Union would have been effective. And maybe we should do this for all products: 4.3% tax for chips, 11.45% for cream cakes, a 2.657% subsidy for footballs (because of the “social” benefit of exercise). Why pick on cigarettes? Secondly, as Hayek identified, once the state provides and regulates certain things (e.g. the provision of health or labour market contracts) the lovers of state control see external costs and benefits all over the place. There is then literally no limit on the government intervention that can address those costs and benefits and the inevitable result is serfdom.