Tobacco industry to get a regulator?

18 January 2013

You have to be dedicated to be a smoker these days. Huddling outside in a blizzard just to get your lukewarm nicotine hit, it would be amazing if tobacco companies were still making millions upon millions of lovely profit from their poor, addicted customers.

Amazing if it weren’t completely true, and now the University of Bath is calling for a regulatory body, codenamed OfSmoke, to oversee the goings on of tobacco companies and, crucially, cap the profits they can make.

But this is not bad news for weary consumers as the retail price of cigarettes (which is already mostly tax) would not change; instead the cigarette manufacturers would pay a chunk of their profits over to the UK Government in additional tax. The study suggests a maximum cost per cigarette ceiling and that the scheme has the potential put an extra £500 million into HM Treasury coffers.

The report authors say this extra money would fund, twice over, UK wide anti-tobacco smuggling measures and smoking cessation services in England..

Report co-author Dr Robert Branston said: "A handful of companies dominate the market and cream off massive profits. With such a deadly product, competition isn't attractive, so we've identified regulation as an attractive alternative that stands to benefit government and public health."

Co-author Professor Anna Gilmore added: "The tobacco industry is likely to argue that this type of direct economic regulation is an extreme reaction, but it's hard to argue that nothing should be done given the extent of market power that these firms are enjoying and the number of deaths the sector causes."

"If it came to a choice between increasing income tax or capping the excess profits of companies whose products kill one in two users, I could hazard a guess which one the public would prefer." Not that anyone was suggesting an increase in income tax to pay for smoking-related costs anyway.

But would it really work? Would tobacco companies face up to the extra operating cost, or would bootlegging from other jurisdictions without an extra levy become commonplace. Dr Jean King, Cancer Research UK's director of tobacco control, said that the idea was "an extremely interesting proposition".

She added: "Tobacco remains a uniquely dangerous product and we must find ways to try and stop the tobacco industry from attracting new customers. Tobacco is extremely addictive and will kill half of all long term smokers, the vast majority of whom will have started smoking before turning 18.

"Putting a cap on profits from tobacco would send a strong message to an industry that makes billions of pounds every year. Its products are extremely cheap to produce but carry a huge cost to the health and lives of far too many people. Smoking rates have continued to fall over time and we should be thinking about ending industry profits based on addiction and death."

So is a tobacco regulator a genuine future possibility? Would this scheme really make tobacco companies think again about “attracting new customers”? For a business based on “addiction and death” this seems very short-sighted- how else are they going to maintain their stream of (capped) profits if not by recruiting new smokers to burn their money?


  • Alexis
    The government made £12billion tax from tobacco last year. They get enough money from it, as do the tobacco companies. Either ban it, or tax the hell out of it. At the moment everybody is happy with the situation as it is, no matter how much the government says they want you to quit.
  • PJH
    For a £6.50 packet of fags: £1.08 is VAT £4.12 is Excise £1.30 is the net cost of the packet. Note that the £1.30 is the cost to the customer, not pure profit; of what's left after the cost of the raw materials both the producer and seller have to pay business and employment taxes. Government is already raking it in from cigarrettes - they want to impose sanctions on the profits of private businesses? What next? Capping profits on McDonalds? Pubs? Saxa (salt)?
  • Fagbucks
    cap profits. could you get around that by doing what starbucks does and simply say you aren't making any in the uk.

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