Doctors and health charities have urged Rachel Reeves to hit tobacco companies with a double financial blow, including a windfall tax in the budget, to help fund Labour’s drive to ban smoking.
They are proposing a one-off surcharge of £74 million and a new permanent levy of £700 million a year on the industry’s “obscene” profits from the sale of deadly products.
Keir Starmer has made it clear he is prepared to take bold action to eradicate smoking – the biggest cause of preventable disease in Britain – as the chancellor looks for ways to bring in new revenue for the government with the package of measures that it will unveil on October 30. .
Doctors, public health experts and cancer campaigners are urging Reeves to lay charges against the four global tobacco companies, which together supply 95% of all cigarettes sold in Britain and generate around £1 billion in profits .
The first levy – based on windfall taxes previously levied on banks, energy suppliers and water companies – would raise £74 million to fund an expansion of services to help smokers quit. This could be imposed through a corporate tax surcharge included in the budget, they say.
Reeves should also introduce legislation to introduce a recurring annual levy on the profits tobacco companies make, they say, which in Imperial Tobacco’s case amounts to a margin of £66.50 on every £100 of turnover. Such a move is estimated to generate as much as £700 million a year in additional revenue.
The ‘polluter pays’ levy would work by placing a cap on the price cigarette manufacturers can charge and the profits they can make, while at the same time maintaining the retail price through additional taxation.
Hazel Cheeseman, the CEO of Action on Smoking and Health (ASH), said: “As well as killing 76,000 people a year in Britain with its products, the big tobacco industry is making absolutely obscene profits. It is time to hit this deadly trade with a new double whammy of financial penalties that would recognize its leading role in harming public health.”
She has coordinated a letter to the chancellor urging her to implement both measures. It has been signed by medical groups such as the British Medical Association and the Royal College of Physicians, health charities including Cancer Research UK and British Heart Foundation, UK public health directors and academics.
In the letter, also sent to the Prime Minister, Keir Starmer, they say: “In other UK markets where monopoly-style pricing is a problem, the government regulates the prices that the relevant companies can charge, for example for water, gas, electricity.
“These are life-extending products, but we think it is appropriate to limit their profits by regulating prices. Why don’t we do the same for tobacco, which is life-destroying?”
Three in four voters are in favor of a tax on tobacco profits, according to a YouGov poll for ASH.
Ministers are finalizing the details of the Smoking and Vaping Bill, which will set out their plans to end smoking. It could include a ban on smoking in some outdoor areas, such as outside pubs, but licensed trades have warned this could devastate their businesses.
Dr. Javed Khan highlighted both forms of financial punishment in the smoking policy review he undertook for the Conservative government. published in 2022.
“If money is tight, as it is now, I have recommended that the Government look at a statutory levy on the tobacco industry to pay for the work required to make smoking obsolete.
“The chancellor must consider this carefully as part of accelerating progress on smoking, alongside planned legislation to create a smoke-free generation,” Khan said.
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It is believed that smoking costs £17 billion per year in England alonemainly due to lost productivity of those too sick to work, and £2.4 billion in NHS costs.
Steve Brine, health minister under the Tories and chairman of the House of Commons health committee until the election, also supported the idea of a raid on profits.
“If there was ever a time for a government to seriously look at a tax on the tobacco industry, it is now,” he said.
“A tax is a proportionate response to the price we as taxpayers pay for the profits made by a small number of transnational tobacco companies.”
Whitehall sources said departments do not comment on speculation about possible tax changes, except at tax events.
A government spokesperson said: “Smoking claims 80,000 lives a year, puts enormous pressure on our NHS and costs taxpayers billions.
“Prevention is a key part of our plan to reform the NHS and we are considering a wide range of measures to make Britain smoke-free. We will announce more details in due course.”
In a separate letter to Starmer and Reeves, the Association of Directors of Public Health and NHS bosses welcomed Labour’s pledge to tackle Britain’s worsening public health situation. But they urged them to return the public health grant, which Whitehall gives to local councils, to 2015-16 levels.
They said this would support the government’s promised shift to preventing disease rather than just treating it.