A proposed tobacco levy scheme combining wholesale price caps with higher taxation could raise up to £4.9 billion for the Treasury over five years while reducing smoking-related harm, according to new research from the University of Bath and the University of Sheffield.
The study, published in the journal Social Science & Medicine, is said to be the first real-world modelling of a so-called “polluter pays” tobacco levy scheme in the UK.
Researchers found that introducing caps on the wholesale prices tobacco companies can charge, alongside increases in tobacco taxation, could generate between £1bn and £4.9bn by 2029 depending on how aggressively the policy is implemented.
The modelling also suggested the policy could prevent more than 10,000 hospital admissions and save nearly 44,000 years of life over a 20-year period.
Under the proposed approach, the government would impose maximum wholesale prices on tobacco products to limit manufacturers’ ability to use pricing as a promotional tool. Taxes would then be increased to prevent retail prices from falling, with the additional revenue flowing to the Treasury rather than tobacco companies.
Dr Rob Branston, co-director of the University of Bath Tobacco Control Research Group and co-author of the study, said the policy could reduce smoking while capturing more revenue from tobacco manufacturers.
“Tobacco prices vary considerably: you can go into a shop and buy 20 cigarettes for about £13, or you can pay almost £20 – and those cigarettes are equally as harmful,” he said.
“If you introduce a polluter pays levy and then charge them all at £20, not only will fewer people be able to afford to smoke, but you'd also likely gain more tax revenue for the government.”
The University of Sheffield’s Addictions Research Group carried out a microsimulation exercise tracking 250,000 adults in England across six different pricing and tax scenarios.
Researchers said the strongest modelled intervention – an immediate hard cap combined with higher taxes – could lead to 1,636 fewer deaths and more than 10,000 fewer hospital admissions by 2044.
Dr Duncan Gillespie, senior research fellow at the University of Sheffield’s School of Medicine and Population Health and lead author of the study, said all scenarios modelled produced lower smoking prevalence and higher tax revenues.
“While industry revenues declined, consumer expenditure remained largely unchanged, showing that meaningful improvements in public health can be achieved without placing an additional financial burden on consumers,” he said.
The research comes after the passing of the Tobacco and Vapes Act, which aims to create a “smoke-free generation” by progressively raising the legal age for tobacco sales.
The study was funded by the UK Prevention Partnership through the SPECTRUM Consortium, Bloomberg Philanthropies through the Bloomberg Initiative to Reduce Tobacco Use, and Action on Smoking and Health (ASH).