The New Nicotine Alliance (NNA) has urged the Treasury to establish a formal review of the UK’s new Vaping Products Duty, warning that higher prices for legal vaping products could encourage illicit trade and undermine efforts to help smokers switch away from cigarettes.
In a letter to financial secretary to the treasury James Murray, dated 12 October, the consumer association called for immediate monitoring of the duty’s impact, followed by an initial assessment 12 months after the transitional period ends and a comprehensive review after 24 months.
The duty, which came into effect on 1 October, imposes a tax of £2.20 per 10ml of vaping liquid, regardless of nicotine strength and including nicotine-free products.
The NNA said the government should consider the potential unintended consequences of increasing the cost of legal vaping products before the tax becomes established.
It pointed to research into Canada’s vaping market, which found that the country’s legal market declined significantly following taxation and regulatory changes, while the number of people vaping did not appear to fall to the same extent.
The paper, Estimates of the Illegal Vaping Market in Canada (II), by Ian Irvine of Concordia University, draws on Statistics Canada sales data and identifies substantial grey-market activity, particularly in provinces with more restrictive taxation and regulation.
According to the NNA, the Canadian experience highlights the risk of assuming that consumers will simply stop using a product when prices rise, rather than changing where and from whom they buy it.
The association also cited the UK government’s own impact assessment, which acknowledges that higher prices could lead some consumers to switch to tobacco products.
The introduction of the duty is accompanied by a new duty-stamping and enforcement regime. While the NNA said these measures could improve enforcement, it argued that they would not eliminate the economic incentive to seek cheaper products outside the legal market.
The association also warned that the additional tax could affect the budgets of stop-smoking services and NHS trusts, potentially undermining initiatives such as the NHS Swap to Stop scheme, which uses vaping as a smoking cessation tool.
The areas identified for evaluation include smoking and quitting behaviour, the price difference between vaping products and cigarettes, perceptions of relative harm, and the development of illicit markets.
The NNA said the review should track legal vaping sales and tax receipts, smoking and vaping prevalence, smoking cessation and switching behaviour, retail prices, illicit and counterfeit sales, cross-border purchasing, consumer responses and potential regulatory workarounds.
It also highlighted the transitional arrangements allowing retailers to continue selling eligible duty-free stock until March 31, 2027. The association argued that the full impact of the duty on retail prices and consumer behaviour might not become apparent until after this period.
It therefore proposed that monitoring begin immediately, with an initial assessment 12 months after the transition ends and a comprehensive review after 24 months.
“A fall in legal vaping sales should not automatically be interpreted as a public-health success,” the NNA said in its letter, arguing that the government must establish whether consumers have stopped vaping, reduced consumption, switched to other nicotine products, returned to smoking or moved to unregulated sources.
The association added that the government should be prepared to review and adjust the policy if evidence shows that the duty is discouraging smokers from switching, encouraging illicit trade or generating substantially less revenue than expected.