Friday, 11 July 2025

HMRC greatly underestimates the black market in tobacco

Since writing about HMRC's implausible claim that only 6.9% of cigarettes in the UK were 'non-duty paid' in 2022/23, they have produced new figures claiming that the figure for 2023/24 was 10.5% (oddly, the previous year's number has been upgraded to 9.1%). I have been trying to think of any scenario in which this could be true. It is not just that the estimate doesn't not match what I'm seeing on the street, but that it is mathematically impossible under any reasonable set of assumptions.
 
Put simply, HMRC estimates the amount of non-duty paid tobacco being sold by estimating the total consumption of tobacco (number of smokers x average annual cigarette consumption per smoker) and subtracting the amount of legal tobacco sold (via tax receipts). 

HMRC's tobacco bulletin shows that the number of cigarettes sold legally fell from 23.6 billion in 2021 to 13.2 billion in 2024, a decline of 44.4%

The ONS's Annual Population Survey says that the number of smokers in the UK fell from 6.6 million in 2021 to 6 million in 2023, a decline of 9%. ONS figures are not yet available for 2024, but the Smoking Toolkit Study reports that smoking prevalence in England fell from 14.7% in 2021 to 14.2% in 2024, a decline of less than 4% (accounting for population growth the decline in the number of smokers is even smaller). Quite clearly, there has not been a 44.4% decline in the number of smokers since 2021, nor anything close to it. 

Are smokers consuming fewer cigarettes? Apparently not. On the contrary, the ONS's Adult Smoking Habits in Great Britain survey finds that average daily cigarette consumption per smoker rose from 9.8 in 2021 to 11.3 in 2023. (The figure for 2021 is a modelled predicted estimate, but the 2023 is nonetheless higher than in any year since 2016.) An academic study published last year found that the decline in average cigarette consumption per smoker has plateaued since 2019. 

Have smokers switched to hand-rolling tobacco? Perhaps, but the tobacco bulletin also shows a decline in the legal sale of rolling tobacco, from 8.6 million kilograms in 2021 to 4.5 million kilograms in 2024, a fall of 47.6%. Overall, using the conventional estimate of how many cigarettes are made from a kilogram of loose tobacco, the number of cigarettes bought on the legal market in the UK fell by 45.5% between 2021 and 2024. 

HMRC also produces a tax gap estimate for hand-rolling tobacco. It is higher than the cigarette tax gap estimate at 22.9% but, implausibly, the figure for 2023/24 is the lowest estimate on record. Its estimate for the tobacco tax gap overall is 13.8%, fractionally higher than in 2022/23 but still one of the lowest on record. 

None of this stands up to basic arithmetic. We have a 45.5% decline in the quantity of duty-paid cigarettes sold (including hand-rolled cigarettes), but no decline in the number of cigarettes consumed per smoker and an overall decline in the number of smokers that is vastly smaller than 45.5%. 

It is a mathematical impossibility than only 10.5% of cigarettes consumed in the UK are non-duty paid. Even if there was no black market for tobacco in 2021 - an impossible proposition - it would now be much bigger than that now. 

For the sake of argument, let's assume that the next ONS smoking prevalence survey shows a 15% reduction in the number of smokers between 2021 and 2024 (although there is no reason to think that the decline is that large). Given what we know about daily cigarette consumption, this should translate into a 15% reduction in duty-paid tobacco sales if the non-duty paid market stays the same. This would mean legal sales of manufactured cigarettes fell from 23.6 billion in 2021 to 20.1 billion in 2024. In reality, only 13.6 billion cigarettes were sold in 2024, a shortfall of 6.5 billion cigarettes that can only have come from the non-duty paid sector. 6.5 billion equates to 32% of the total and that is with the profoundly unrealistic assumption that no non-duty paid cigarettes were sold in 2021. 

In other words, if there was no non-duty paid market in 2021, non-duty paid cigarettes would make up 32% of the market in 2024. If we assume, as HMRC does, that 8.8% of the market was non-duty paid in 2021, total cigarette sales (including non-duty paid) would have been 25.9 billion. If cigarette consumption then fell by 15%, the total market would be 22 billion in 2024, but we know that legal sales were 13.2 billion in 2024 so the non-duty paid market must therefore be 40% of the total.  A similar calculation can be done with hand-rolling tobacco and will produce a similar finding (since the decline in legal sales is almost identical). 

One can play around with these figures as much as one likes using different assumptions, but in no reasonable scenario do non-duty paid cigarettes make up 10.5% of the market, nor does non-duty paid tobacco overall make up 13.8%. It seems to me that HMRC's model is broken.



Wednesday, 9 July 2025

Following Australia down the road to ruin

I've written about the Tobacco and Vapes Bill for the Telegraph. We must never forget how stupid and reckless this legislation is.
 

Illicit vapes and counterfeit cigarettes are being sold more or less openly on high streets up and down the country.  We have the second highest cigarette taxes in Europe (after Ireland) and the government is on the cusp of introducing the Tobacco and Vapes Bill which will ban a growing number of adults from buying tobacco products from 1 January 2027. Even the Australians haven’t been daft enough to dabble with this form of prohibition. 

The Tobacco and Vapes Bill will also allow the government to restrict the flavours of legal vapes, thereby giving the black market a lucrative new niche. Not content with banning disposable vapes last month, the government is going to double the cost of using refillable e-cigarettes by imposing a tax of £2.20 (plus VAT) per bottle next year.

If you wanted to make a bad situation worse, you could hardly design a better set of policies than this. Sales of legal cigarettes nearly halved between 2021 and 2024 despite the number of smokers only falling by 5 per cent. It is obvious that the illicit market picked up the slack and yet HMRC claims that only one in ten cigarettes smoked in Britain is illegal. Reassured by such Panglossian factoids, virtue-signalling politicians have given the Tobacco and Vapes Bill minimal scrutiny and are patting themselves on the back for creating a “smoke-free Britain”. It is a fantasy bordering on madness. 

They have picked the worst time to be complacent. The police are too busy to play whack-a-mole with Britain’s countless illicit tobacco retailers. A £2 billion drop in tobacco duty revenue has already been added to Rachel Reeves’ black hole. For the time being, the violence associated with Britain’s booming black market tobacco trade is less visible than Australia’s but it will only take a bit more prodding from guileless politicians for it to come out of the shadows.

 

 

 



Monday, 7 July 2025

The commercial determinants of health?

I've written a two-parter on my Substack about an issue of a journal, guest edited by Chris van Tulleken, dedicated to the "commercial determinants of health" and - his main obsession - "conflicts of interest".

In part one I look at van Tulleken's contribution.

In part two, I look at articles by Lord Bethell, Anna Gilmore, May van Schalkwyk, and others.



Friday, 27 June 2025

Alcohol advertising ban on the way?

The government is reportedly looking at a ban on alcohol advertising, although on current trends it will probably do a U-turn on that too.

I wrote about it for The Critic and discussed the evidence for alcohol ad bans (there isn't much of it) with Reem at the IEA. I wrote about the evidence based two years ago in this report
 

It took Keir Starmer less than a year to dash what few hopes we had of him. There was talk of the Labour Party having more room to manoeuvre on public sector reform than the tentative Tories. It was assumed that the state of the public finances would leave the government with no choice but to tighten its belt. Withdrawing the Winter Fuel Allowance from wealthier pensioners was largely symbolic, but it showed that Sir Keir was prepared to take tough decisions. 

All that fell apart upon contact with the first set of local elections. What we have instead is yet more borrowing, much more spending, and the hope that the economy will somehow grow. It is Sunakism with a dash of socialist spite directed at farmers and private schools. 

Rishi Sunak left a bunch of displacement policies behind him and the new government has been dutifully pushing them through Parliament, but Starmer can’t rely on this stockpile for much longer. The Pet Abduction Act is already law. The Football Governance Bill has had its third reading. The Tobacco and Vapes Bill is in the House of Lords. There is a danger that the well of headline-grabbing policies that are cheap to implement but ultimately futile runs dry. 

And so Labour’s policy wonks have had a pow-wow and come up with the idea of banning alcohol advertising. What could be more Sunakian? According to the Telegraph, health officials are “exploring options for partial restrictions to bring [alcohol promotion] closer in line with advertising of unhealthy food”. It is rumoured that a ban of some sort will be part of Wes Streeting’s optimistically titled Ten Year Plan for the NHS next week. 

  




Thursday, 12 June 2025

European Commission comes after vapers again

A leaked document reveals that the European Commission has some dramatic plans for EU-wide taxes on vapes, heated tobacco and nicotine pouches. It predicts that its proposed vape tax of €3.60 per bottle will wipe out 40% of the market. They say that like it's a good thing. It's time to fight again.

I've written about it for The Critic... 
 

The idea that the Commission is driven by health concerns goes for a Burton when the report moves on to vapes, heated tobacco and nicotine pouches. It wants to tax all these too, even though various member states do not. The case for leaving them alone is simple: they are much less dangerous than cigarettes and if you tax them, fewer people will use them to give up smoking. 

On the other hand, governments lose tobacco duty revenue when people quit smoking and that is what really worries the European Commission. The leaked report openly states that one of its “specific objectives” is to “discourage tax induced substitution between different tobacco products and their substitutes”. This is an extraordinary admission. They know that price is one of the factors that leads people to switch from smoking to vaping and they think that this is a bad thing

The report proposes a minimum tax on vape juice of €3.60 per 10ml bottle. To put this in context, a bottle of e-cigarette fluid in the UK typically costs £2 or £3 and can sometimes be as cheap as £1. The Commission is proposing that the cost of vaping should at least double. It expects a €3.60 tax to reduce sales by 40 per cent which would be the ruin of many independent vape shops but a boon to the cigarette business.

 



Monday, 9 June 2025

We're doctors, we say what we want

Ian Gilmore has been mouthing off in the letters section of the Financial Times. I have written about it for The Critic...
 

Prof Ian Gilmore, who runs the neo-temperance pressure group the Alcohol Health Alliance, is cheesed off with the chief executive of the brewer Asahi for saying that while he is “absolutely not denying that there are risks” associated with drinking, there is also “lots of evidence” that moderate alcohol consumption can have health and wellbeing benefits. For this measured and inarguable contribution to an article about how the alcohol industry could be facing its “tobacco moment”, Prof Gilmore has accused him — not unpredictably — of using a “tactic” from Big Tobacco’s “playbook”:

As a biomedical scientist and liver specialist, I know of no credible, independent expert in the field who would support these statements of disinformation.

Really?! Not a single one? What about the countless epidemiologists who have identified clear reductions in heart disease, stroke and diabetes risk among moderate drinkers for decades in every corner of the world? What about the National Academies of Sciences, Engineering, and Medicine which confirmed last year, for the umpteenth time, that moderate drinking reduces the risk of premature mortality? What about Professor Sir Richard Doll, one of the legends of public health, who concluded in 2002 that “the inverse relationship between ischemic heart disease and the consumption of small or moderate amounts of alcohol is, for the most part, causal” and should “now be regarded as proved”? Hell, even the Chief Medical Officer’s cherry-picked panel of anti-alcohol academics who lowered the drinking guidelines in 2016 had to admit that there were some health benefits from moderate alcohol consumption. 

 



Friday, 6 June 2025

Snowdon on Fire at Will

I returned to the Spectator's Fire at Will podcast this week with Will Kingston, talking the nanny state. And you can hear more from Will on next week's episode of Last Orders if all goes to plan.