Rachel Reeves' taxes on working people

 

Not entirely unpredictably, taxes and spending are set to go through the roof after Labour's first budget since 2010. Having promised not to tax working people, Rachel Reeves announced tax rises for smokers and drinkers, announced a new vape tax and increased the sugar tax. Details below from the Red Book.

 

Alcohol duty will rise in line with the RPI from February 2025 and it was implied that this would be an annual thing. Draft beer duty will be cut by 1.7%, which apparently amounts to a penny off a pint. I will be personally making sure that the IEA's local in Westminster has cut the price of a pint of Paulaner from £7.55 to £7.54. 

While the draft beer duty cut will be barely be felt by drinkers, the vape tax will cost vapers around £300 a year. And yet the beer duty cut will cost the government £100 million a year while the vape tax will only bring in £15 million. Is it really worth it?

 

My comment on behalf of the IEA:

 

"A wealth of economic evidence shows that taxing e-cigarettes leads to more people smoking. Taxing vape juice shows that the government is not serious about its 'smokefree' ambitions.  

 

“Reeves says that yet another 'one-off' tax hike on tobacco will dissuade vapers from switching back to smoking, but with 26% of the cigarette market already in the hands of organised crime, the legal price of cigarettes is irrelevant to a growing number of smokers. Tobacco duty revenue has fallen by £1.5 billion in the last two years and it will go on falling, despite the tax rate rising, because smokers feel no moral duty to buy legal cigarettes and give money to politicians who so obviously hold them in contempt.  

 

“Cutting draft beer relief so that a pint in a pub is 1p cheaper doesn't come close to compensating from this tax raid. Drink 600 pints and get one pint free? It is a cheap gimmick."

The Guardian view on gambling

It looks like the Guardian has let its anti-gambling correspondent Rob Davies have a go at writing a leader.

 

The Guardian view on gambling: a public health approach is a good bet

The regulation of internet gambling was left out of the last government’s online harms bill. So far, Labour’s plans for the industry are opaque. But the industry’s rapid growth...

 

What growth? The industry only appears to have grown if you don't adjust for inflation. In 2014/15 (the first year for which we have comparable data), gambling spend in the UK was £13.5 billion. If this had kept pace with inflation, it would be £18.1 billion today. In fact, gambling spend last year was £15.1 billion. It has shrunk in real terms.

... coupled with growing concern about problem gambling in the UK and around the world, means ministers deserve to come under pressure if they don’t clarify their intentions soon. 

The sports minister Tracey Crouch resigned in 2018 when a pledge to cap the stakes on fixed-odds betting terminals was delayed. 

 

The idea that the government was delaying the cap was the last lie from the anti-FOBT people in a campaign full of lies. It was originally planned for April 2020 and was brought forward to October 2019. Crouch's dishonest stunt brought it forward by a further six months.

How did that cap on FOBTs go anyway? Weren't they the crack cocaine of gambling, responsible for hundreds of suicides a year? Shouldn't things be much better now they've disappeared? As far as I can see, the only tangible result has been the closure of lots of betting shops and the loss of thousands of jobs. As I predicted.

Six years on, proposals to cap the stakes on digital slot machines are up in the air, after last year’s white paper was shelved. Also on hold are the introduction of a statutory levy on businesses to pay for research and treatment, and the creation of an ombudsman.

 

It's that last bit that really concerns the pressure groups and the 'public health' quackademics. They were told there was a £50 million slush fund coming their way. They are getting impatient.

 

Arguably even more concerning is the lack of any clear direction on restricting gambling advertising, which has become ubiquitous in sport, and particularly football. Recent research showed that Premier League fans were bombarded with almost 30,000 advertisements on a single weekend, with half of clubs found to have promoted betting on webpages aimed at children.

 

The claim here is that fans of the Premier League saw an average of 30,000 gambling advertisements in a single weekend. Does that seem remotely plausible? The source of the claim is some 'research' by people at Bristol University who watched six televised football games in August, but instead of watching the football, they were looking for gambling 'messaging'. This included "static pitchside hoardings, electronic
pitchside hoardings (both full or part), clothing worn by supporters, the front of a player’s shirt, the sleeve
of a player’s shirt, integrated graphic, sponsorship lead-in, commercial advertisement break, interview
or press conference, stadium structure, and ‘other’ to capture anything else."

So not really advertisements, then. And far from being 'bombarded' by them, people would have seen them - if at all - in the corner of their eye. Every time a logo appeared somewhere on the screen, it was counted as a 'message'. And because they counted "the maximum number of logos per format that were visible during each individual camera shot", this added up to a very large number. They then added in coverage on TalkRadio, Sky Sports News and social media for good measure.

This is the kind of meaningless garbage academics want to spend millions of pounds on once they get their hands on the levy money.

In 2023 the Guardian banned all gambling advertising, because of the risks.

 

I'm sure that was a huge blow to the industry.

 

Meanwhile, the NHS has doubled the number of specialist clinics in England to 15.

 

That is a good thing. It will be interesting to see how busy they are. It's just a shame that taxpayers are paying for them now that the NHS has refused to use the industry's money.

 

Last week’s report from the Lancet medical journal grouped gambling with tobacco, alcohol and other “unhealthy commodity industries”, and argued convincingly that governments and regulators should strive for a common approach.

 

The Lancet report is a long document with remarkably little substance. 'Public health' academics want to get their hands of gambling, that much is clear, but they don't have much idea of what they're going to do with it when they do. Banning advertising is about their only concrete proposal. The other ideas that 'public health' chancers have come up with are demented and show their total ignorance of the industry and its customers.

 

Anti-gambling activists want gambling treated as a 'public health issue' because they think - correctly - that a 'public health approach' means incrementally banning things. But gambling is not a public health issue by any reasonable definition and there is nothing to be gained by having people who know nothing about it getting involved. 

 

This would include a recognition of corporate practices designed to influence both consumer behaviour and regulation – and a robust challenge to the industry’s preferred framing. This treats problem gambling, like other addictions and obesity, as the result of poor choices by individuals, rather than as the predictable result of an environment in which people are encouraged to adopt risky habits.

 

Problem gambling is a recognised psychological disorder and it cannot be dealt with unless it is understood as such. The 'public health' framing thinks it is all about tHe InDuStRy and that is why a 'public health approach' will never work. Paradoxically, treating problem gambling as a public health issue is antithetical to treating it as what it is: a (mental) health issue.

Sin taxes and the Laffer Curve

It's the Budget tomorrow. Either Rachel Reeves has being engaging in some epic expectation management or if it is going to be the mother of all tax grabs. In expectation of the latter, every killjoy pressure group in the land has been lobbying for taxes on activities of which they disapprove. 

I wrote about this for The Spectator last week, but it is worth underlining how unwilling smokers and drinkers are to be squeezed any further. Between 2021/22 and 2023/24, the smoking rate fell by 10% but the number of legal cigarettes sold fell by 31%. The shortfall has obviously been taken up by the black market and the government is receiving much less tobacco duty revenue as a result.

UK tobacco duty revenue (HMRC)

2020/21: £9,964 million

2021/22: £10,278 million

2022/23: £10,004 million

2023/24: £8,804 million

 

From an all-time high of £10.3 billion two years ago, revenues have fallen by £1.5 billion in just two years. Dig deep, nonsmokers!

Alcohol duty revenues tell a similar story. They had already begun to decline by August 2023 when the government introduced a 'simplified' new alcohol duty system which led to some serious price hikes for some drinks. This came alongside a large rise in alcohol duty overall, which rose in line with the Retail Price Index. As with tobacco duty, alcohol duty was bringing in record amounts in 2021/22, but despite significantly higher taxes, revenues are now lower.

Wine duty revenue (HMRC)

2020/21: £4,659 million

2021/22: £4,734 million

2022/23: £4,391 million

2023/24: £4,611 million

Spirits duty duty revenue (HMRC)

2020/21: £4,115 million

2021/22: £4,401 million

2022/23: £4,136 million

2023/24: £4,137 million

 

Revenues from beer and cider duties have fallen too.

 

All these figures are in nominal terms. Adjusted for inflation, tobacco duty revenue has fallen by £3.6 billion (-29%) since 2021/22 and alcohol duty revenue has fallen by £1.9 billion (-13%). By raising taxes, the government has created a blackhole of £5.5 billion, helped close more pubs and pushed even more smokers to the illicit market. Way to go!

As for the idea of doubling gaming duty to 41%, as being pushed by the Social Market Foundation, it would wipe out much of the legal market by demanding companies hand over much more than they make in profit. That might be a feature rather than a bug as far as anti-gambling groups are concerned, but it is not what Rachel Reeves wants.

 

As I said to the Telegraph recently....

 

“If Rachel Reeves thinks there is easy money to be had by squeezing drinkers and smokers, she will learn the hard way that higher taxes do not always produce more revenue. 

“Tobacco duty revenue has fallen by £1.5bn in the last two years as smokers turn to the black market. Tax revenue from wine and spirits has fallen by hundreds of millions.

“Britain is not a low tax country with plenty of money to spare. We have some of the highest taxes on alcohol and tobacco in Europe and people have had enough.”

 

Farewell, disposable vapes

Part of me wishes that disposable vapes had never been invented. Until they arrived, it seemed like the battle for tobacco harm reduction in Britain had been won. The kind of people who want to ban everything wanted to ban e-cigarettes, but most people could see that they were a relatively harmless substitute for cigarettes and were helping to drive down smoking rates.

Then along came the Elf bars and Geek bars and the mood began to sour. Whether it was because of the price or the colours or because it was simply a fad, they became somewhat popular with teenagers, just as Juul had become popular with high school students in the USA a few years earlier.

 

Read the rest at the Spectator.

Will the tobacco turf wars come to Britain?

The old adage that there is no smoke without fire has taken on a sinister meaning in Australia after a series of arson attacks on tobacconists. The word “series” barely does it justice. “Endless succession” is closer to the mark. When a shop selling illegal tobacco was firebombed in Adelaide last Tuesday, it was the 16th such incident in South Australia and the 130th nationwide since the “tobacco turf wars” began last year. It was followed by another firebombing in Adelaide on Saturday, an arson attack on a gym in Melbourne on Sunday, two tobacconists set ablaze in Melbourne on Tuesday and a smoke shop in New South Wales being ram-raided and blown up yesterday. 

With drive-by shootings and murders in broad daylight, Australia’s black market in tobacco and vapes should be a cautionary tale, but it has received little attention in the Northern hemisphere. The root of the problem is obvious. Australia has the highest tobacco taxes in the world and has banned e-cigarettes entirely. The market for both products is now largely in the hands of criminal gangs who encourage shopkeepers to sell their products by telling them to “earn or burn”. 

One of the more peculiar elements of “public health” ideology is the belief that taxes and regulation do not fuel the illicit trade, but when your nightly news bulletins start to resemble something from Judge Dredd, that becomes difficult to sustain. Even the Australian Broadcasting Corporation (ABC), which makes the BBC look like GB News, has had to acknowledge that “excessively high” cigarette taxes are responsible for the self-described “world leader in tobacco control” becoming a basket case.

 

Read the rest at The Critic.

Looting

Ahead of the Budget on 30 October, Rachel Reeves is being bombarded by lobbyists urging her to loot their enemies. The New Economics Foundation wants a ‘jet-setter tax’ on frequent fliers of €100 per flight. Action on Smoking and Health wants a levy on tobacco companies. Greenpeace reckons it can raise at least £26 billion a year by levying a wealth tax on the ‘super-rich’. An assortment of think tanks and pressure groups linked to the Labour donor Derek Webb think they can squeeze another £3 billion out of the gambling industry by doubling gaming and betting duties. Meanwhile in Scotland, the neo-temperance lobby are demanding a ‘levy’ on alcohol retailers who, they claim, are getting rich off the back of minimum pricing (a policy that only exists because they lobbied for it). 

The appeal of these taxes lies in the old adage ‘Don’t tax you, don’t tax me, tax that fellow behind the tree’. They will, supposedly, only affect faceless corporations and ‘those with the broadest shoulders’, and who cares about them? Alas, it is more complicated than that and the Labour party is starting to realise that if there were billions of pounds lying on the pavement, the last government would have picked them up. Putting VAT on school fees and taxing non-doms were the closest thing Labour had to a magic money tree before the election, but it is now widely recognised that they will raise little if any revenue and the overall impact on the public finances could well be negative. 

It is a reminder that before you hike up taxes, you should give a little thought to the unintended consequences, and yet the wider economic consequences of windfall taxes on industries that have not been the beneficiary of any obvious windfall are rarely considered. It is probably fair to say that the New Economics Foundation does not have the best interests of either the airline industry or business travellers at heart. For anti-alcohol, anti-gambling and anti-smoking groups, creating unemployment in the industries they attack is not so much an unintended consequence as the whole point. 

Read the rest at the Spectator.

Last Orders live

If you couldn't make it in person, here it is...

Christopher Snowdon on NTD

I was on NTD this week doing a long form interview about coercive paternalism with Lee Hall. I enjoyed it and hope you will too.

Looting for 'public health'

There is a budget on its way and the 'public health' vultures are circling.

 

"Campaigners" - i.e. ASH and some of their pals - are still calling for a levy on tobacco companies, partly because tobacco duty revenues of £10 billion a year are not enough for them and partly because the industry supposedly earns "absolutely obscene profits". According to the Guardian...

 

Reeves should also legislate to introduce a recurring annual levy on the profits tobacco firms make, they say, which in the case of Imperial Tobacco is a £66.50 margin on every £100 of sales.

 

This is such obvious nonsense that I never bothered to look up what the actual profit margin is, but the excellent Tim Worstall has...

 

A recent set of accounts from Imperial Brands, which owns Imperial Tobacco. Now, the question is, can you see a 66% net profit in there? Can you see 66% of anything that could in fact be taxed away? 

The company's post-tax profits were £2.3 billion from £32.5 billion of revenue. Not too shabby (regulation has turned the industry into an oligopoly, after all), but hardly extraordinary.

Who is really profiteering from tobacco? Step forward, the government. While Imperial gets less than £2.5 billion for making the product, governments around the world are creaming off more than £15 billion.

Where does the 66% claim come from? It comes from this study published in 2015. The estimates are based on the "author’s calculation" but since the author is the economically illiterate prohibitionist clown Anna Gilmore, they are very wrong. 

Her estimates are based on UK sales whereas the figures above are global but that makes no difference to the overall picture. Indeed, tobacco duty is well above average in the UK so the government's share is even higher.

Meanwhile, the government expects to make £3.6 billion from gambling duty this year, but that isn't enough for Derek Webb's mates at the Social Market Foundation who have just released a report calling for Remote Gaming Duty to be doubled from 21% to 42% - because arbitrary and capricious tax hikes on one of Britain's few world-leading British industries are just what we need to attract inward investment.

Incidentally, some activist-academics have their concerns about a tax raid on gambling companies...

https://t.co/IyuOGONi0m

If this happens, would increased funding for treatment, prevention etc come from these generalised funds or would the levy still be on the table?

— Heather Wardle (@shwardle) October 12, 2024

Don't worry, Heather. I'm sure you'll get your money one way or the other.

Twilight of the pubs

Am I alone in thinking that modern politicians do not much care for pubs? They are happy to be photographed pulling a pint during an election campaign and have no problem drinking subsidised pints in the House of Commons bars, but there is something about the spontaneity, earthiness and insobriety of the traditional British boozer that sits uneasily with their vision of a regimented society. If the political class are not deliberately trying to undermine the pub trade, they are doing a good job of doing it accidentally.

In the first six months of 2024, pubs were closing at the rate of fifty a month. The total number of pubs in Britain has fallen by 14 per cent since the start of the pandemic. Pubs find themselves in a vicious downward spiral. To compensate for having fewer customers, they have raise the price of a pint, but higher prices mean that even fewer people walk through the door and so prices rise again. Drinking in a pub has for centuries been a great leveller. Everyone could afford to do it. It has increasingly become a luxury leisure activity.

After the exodus of daytime drinkers following the 2007 smoking ban, many pubs cut costs by reducing their opening hours. With the triple whammy of higher energy costs, higher food prices and above-inflation hikes of the minimum wage, some of them have now reduced the number of days they trade and many are closing long before 11.20pm. A survey by industry analysts CGA recently found that third of operators have reduced their trading hours due to cost pressures in the last year.

 

Read the rest at the Telegraph.

Child obesity stats

As you may know, I have a long-running obsession with the fact that Britain's child obesity stats are a complete fiction. This came up in Radio 4's More or Less today in which I featured. The hook was the silly story in The Times claiming that child obesity is in decline (thanks to the sugar tax, of course). This is not true (as I discussed on my Substack).

You can listen here or, better still, subscribe to the podcast.

Who wins out of minimum pricing?

Last week saw the minimum price of alcohol in Scotland rise from 50p per unit to 65p per unit. Thanks to inflation, 65p today is the same as 50p in 2017, but it won’t feel like that to shoppers who have seen their incomes fall in real terms. 

Those who lobbied for the price hike employed two arguments. The first was that minimum pricing has been a tremendously effective public health policy that saved hundreds of lives and the Scottish government should “build on the success”. The second was that deaths from alcohol are at a fifteen year high in Scotland and that “a radical step change” is required to tackle this “public health emergency”. Fans of George Orwell will recognise this as doublethink, but it worked. Booze prices have now shot up. 

The question that is often asked about minimum pricing is “where does the money go?” It is not a tax so it doesn’t go to the government. Does it go to the retailer? Does it go to the manufacturer? Who is making money out of it?

The answer is that it depends, but there is no reason to assume that anyone is reaping big profits. 

Read the rest at The Critic.

An ultra-processed experiment

An interesting new study was published last week about 'ultra-processed food' (UPFs). The researchers tried to recreate the typical Western (or at least American) diet using 'less-processed food' rather than UPFs. It turned out to be a lot of hassle for no benefit.

 

Selecting less-processed foods according to the Nova classification system does not guarantee a high-quality diet. In this study, we used the Nova classification system to design a Western diet with less processed foods to match the meals of a Western diet with more processed foods. Using less processed foods did not improve the nutritional value of the diet and resulted in projected greater costs and a shorter shelf life than the comparable menu with more-processed foods.

 

Cue Chris van Tulleken accusing all the authors of being in the pocket of Big Food in 3, 2, 1...

 

The three card philanthropist

The recent decision by the British media to portray all gifts to parliamentarians as scandalous, even when they are declared in the proper way, has been a boon to journalists. Up against a deadline and need a story? Simply look up the Register of Member’s Financial Interests and click on the name of any MP. Bridget Phillipson? Taylor Swift tickets from the Football Association. Peter Kyle? Madonna tickets from Sky TV. If the MP’s political stance can be loosely connected to the donor’s interests, so much the better. No one would be surprised that Kemi Badenoch is opposed to having a football regulator, but tell them that she once accepted free tickets from the Premier League and it becomes a story.

The implication is that money buys influence and it cannot be denied that having a word in a politician’s ear — or at least having them think well of you — must be the intention of those who make the donations. The latest of these scoops comes from The Times who today revealed that “Labour received gifts worth £1m from betting firms”. Regular readers of Britain’s newspaper of record know that The Times takes a dim view of betting firms and is therefore appalled that the business secretary, Jonathan Reynolds, accepted tickets from Entain to see England play Denmark in 2021 and the transport secretary, Louise Haigh, watched Barnsley play Sheffield Wednesday on the same company’s shilling. Wes Streeting even had a dinner paid for him by Allwyn, the company that currently runs the (state-owned) National Lottery! Pass the smelling salts.

Rachel Reeves has done particularly well out of the gambling industry, having received “£20,000 in donations from wealthy gambling bosses to fund her private office”, but this is all chicken feed compared to the cash donations to the Labour Party of one man:

In total, the Labour Party has accepted £1.08 million from those who made their money in the gambling sector. Most of this came from the little-known casino entrepreneur Derek Webb, who donated £750,000 this year and £300,000 in 2023.

Webb, a former international poker player and table game designer, has thrown his financial weight behind gambling reform efforts, including legal support for Gambling with Lives, which represents families bereaved by suicide, the successful campaign to curb fixed-odds betting terminals and Clean Up Gambling, a campaign group.

Webb is also the founder of the Campaign for Fairer Gambling, Stop the FOBTs [fixed-odds betting terminals] and the Coalition to End Gambling Ads. He bankrolls the All Party Parliamentary Group on Gambling Related Harm and the “informal” pressure group Peers for Gambling Reform, as well as commissioning numerous reports from economic consultancy firms (one of which I discussed last month). I suspect that he will not be pleased to be grouped in with “betting firms” in The Times article (his company Prime Table Games is no longer operational and I understand that he is no longer actively involved in the sector), but it is nevertheless useful to know that most of the money swishing around in this policy comes from people who want more regulation, not less.

 

Read the rest at The Critic.