HMRC has its head in the sand about illicit tobacco

A study published last week estimated that 26.8 billion cigarettes are smoked each year in the UK. The state-funded pressure group Action on Smoking and Health (ASH) described this as a “staggering figure” and claimed that it was a “stark reminder of the deadly toll of inaction”. Seizing the opportunity to remind people about the ludicrous Tobacco and Vapes Bill, they said: “Everyday that passes without this legislation is a day lost in protecting our children from addiction and improving public health.”

It is ASH’s job to say things like this, of course, but it is nevertheless perverse to claim that smoking has been the subject of political inaction. It would be truer to say that “tobacco control” is one of the few things that pygmy politicians have been obsessed with in this era of displacement politics. And since the generational tobacco sales ban will not have any effect on anyone until its first victims turn 18 in January 2027, there is no need for parliamentarians to make haste. 

Whether 26.8 billion is a “staggering figure” depends on how you look at it. It seems a big number but it is simply a function of 7.5 million smokers consuming an average of 10.4 cigarettes a day. Both of these figures are the lowest on record, no doubt as a result of all that government “inaction”. The study also found that only 5.5 per cent of smokers consume more than 20 cigarettes a day. When it comes to snouts, Britain has become a nation of lightweights.

The more interesting thing about 26.8 billion cigarettes being smoked each year is that only 14 billion cigarettes were sold legally in the UK last year. On top of that, legal sales of hand-rolling tobacco account for between 4.5 billion and 6.3 billion cigarettes (depending on how many fags you think can be made from a kilogram of loose baccy), but that still leaves between a quarter and a third of all the cigarettes smoked unaccounted for. 

 

Read the rest at The Critic. 

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Just rejoice at this news

Some good news for consumers and taxpayers in the Politico newsletter...

 

EU funding cuts force health NGOs to slash staff

Health NGOs are making staff redundant and leaving Brussels after the European Commission failed to pay out expected grants, leaving some without most of their funding for the rest of the year.

Get in!

The European Public Health Association (EUPHA), based in Utrecht, the Netherlands, said it would file a complaint to the European ombudsman over the missing grants, which forced it to close its Brussels office and make its head of advocacy in the Belgian capital redundant in June.

“It’s a huge issue when the Commission agrees to fund us, sign [agreements] with us, but withholds it without explanation. Not only it betrays trust, it also probably breaches its own legal obligations,” said Charlotte Marchandise, executive director of EUPHA. 

In the unlikely event that you are feeling sorry for the EUPHA, bear in mind that the appalling Martin McKee used to be its president and it has long had a reprehensible anti-vaping stance.

EUPHA is one of 30 health NGOs that signed agreements with the European Commission outlining their planned activities last year, in anticipation of operating grants for the following financial year. Operating grants go toward daily overhead costs like staff salaries and without which many NGOs say they cannot survive. 

They're not really NGOs then, are they?

The call to apply for those grants never arrived, however, while Commission officials have informally told NGOs to expect no funding.

 

Based. 

Other health NGOs have had to take similarly dramatic cost-cutting measures after learning no grants from the Commission would arrive this year. Last week, the European Public Health Alliance (EPHA), one of the biggest health NGO networks in Brussels, confirmed it would cut five of its 13 staff. 

Haha! YES!!

Incredibly, it gets even better...

 

The European Alcohol Policy Alliance (Eurocare) is also in danger of losing two of its four staff, Anamaria Suciu, policy and advocacy manager, told POLITICO. The Commission’s operating grant typically accounts for 60 percent of Eurocare’s funding in a given year, she said. 

 

Why on earth is the EU giving fat sums of money to a temperance group? And yes, it is a temperance group. Even if you believe the specious reasoning that the EU needs to fund 'civil society' lobbying as a counterweight to industry lobbying, why have they picked a bunch of teetotal Methodists to represent civil society? Make it make sense.

 

Politico is firmly on the side of the Brussels blob for some reason...

 

Brussels is an increasingly inhospitable environment for NGOs since the European election last year.

 

Cry me a river.

 

Under a right-wing majority led by the European People’s Party, lawmakers such as the European People’s Party’s Dirk Gotink — appointed to head a probe into NGO funding on Wednesday — claim NGOs have used European money to “shadow lobby” for green policies. A POLITICO fact-check found little evidence for shadowy lobbying, however. EU funding is publicly disclosed and allows NGOs to counter the lobbying activities of better-resourced private interests.

 

This is what the self-serving activists of the sockpuppet state claim. In fact, these NGOs usually either have a vast amount of money from big foundations or are heavily reliant on the EU. If they have foundation money, they don't need more and if they can't raise money from the public then why should anyone care what they think?

 

There's a good interview with Dirk Gotink in which you can see what he actually means by 'shadow lobbying'. Keep up the good work, sir!

 

 

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High taxes fuel illicit trade - shocker!

It's almost surreal to hear people insist that the black market in tobacco is (a) negligible, and (b) unrelated to tobacco taxes. In places like Australia and the UK, this not only contradicts our "lived experience" but also basic economics. 

And yet the UK government is so sanguine about the illicit trade that it didn't bother modelling the impact of the generational tobacco ban on it, and the recently leaked tobacco tax report from the European Commission confidently proclaimed that...

 

“while price levels may act to incentivise the illicit trade of tobacco products (ITTP) the main driver is not the relative levels of price or taxation, instead other drivers are at play such as the permeability of borders; the severity of sanctions for offenders; the geographic proximity to illegal production and/or distribution sites…  In other words, there is no direct proportionality between tax levels and the level of illicit trade” 

 

I've been doing some work on this using the most up-to-date cigarette tax/price/affordability figures and looking at their relationship with illicit cigarette sales. The results shouldn't surprise anyone. There is a very strong relationship. For example...

 

 

Epicenter published my findings yesterday. You can read the report here. 

 

 

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The crack cocaine of amusement arcades

You probably know them as amusement arcades but the Gambling Commission knows them as Adult Gaming Centres. The pressure group Gambling With Lives claims that they offer “the most addictive gambling products out there”. The Association of Directors of Public Health has complained about their “proliferation”. The Local Government Association wants more powers to “curb their “spread”. GB News found a “gambling survivor” who dubbed them the “crack cocaine of gambling”. And, inevitably, the Guardian has been writing a series of pearl-clutching articles about them, bemoaning the fact that they are “disproportionately concentrated in Britain’s most-deprived areas” (i.e. seaside towns and city centres). 

If this all sounds familiar it is because it is a carbon copy of the campaign against betting shops and fixed-odds betting terminals (FOBTs) a decade ago. The anti-gambling lobby are mostly focused on suppressing online gambling these days, but they have found time to relive past glories and go after slot machines again. FOBTs were de facto banned in 2019 when the stake limit was lowered to an unplayable £2. The number of FOBTs in Britain fell from a peak of 34,949 in 2015 to zero in 2021. As anyone could have predicted, players switched to low-stake machines in betting shops and amusement arcades or went online. 

 

Read the rest at The Critic. 

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Tobacco and Vapes Bill - live!

The video of the IEA's recent panel discussion about the generational tobacco sales ban (AKA Prohibition 2.0) is now available. It includes some legal knowledge from Sir Robert Buckland, some strong words from Clive Bates, and a few thoughts from my good self.

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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.

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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.

 

 

 

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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.

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