Study calls for tobacco profits cap

In collaboration with the Press Association

Setting up an independent regulatory agency to cap cigarette manufacturers's profits would raise an extra £500 million a year, academics say.

The creation of an "Ofsmoke" agency to regulate the industry - similar to those in force for utility companies - would increase tax revenue and protect public health.

The University of Bath study said the agency would have the potential to increase UK annual tobacco tax revenue by approximately £500 million a year for HM Treasury.

The money would fund, twice over, UK wide anti-tobacco smuggling measures and smoking cessation services in England.

Authors of the study Dr Robert Branston and Professor Anna Gilmore said regulation would set a maximum price that cigarette companies could charge for their product.

They said that under their plan the price that consumers pay in shops would not be affected.

Instead a slice cigarette manufacturers's profits would be paid to the Treasury through increased tax.

The system would be set up at no cost to the consumer or taxpayer and would be funded instead through a levy or licence fee paid by tobacco companies.

Dr Branston said: "A handful of companies dominate the market and cream off massive profits.

"With such a deadly product, competition isn't attractive, so we've identified regulation as an attractive alternative that stands to benefit government and public health.

Professor Gilmore said: "The tobacco industry is likely to argue that this type of direct economic regulation is an extreme reaction, but it's hard to argue that nothing should be done given the extent of market power that these firms are enjoying and the number of deaths the sector causes.

"If it came to a choice between increasing income tax or capping the excess profits of companies whose products kill one in two users, I could hazard a guess which one the public would prefer."

Deborah Arnott, chief executive of health charity Action on Smoking and Health, added: "Capping their profits is not extreme it's essential."

Dr Jean King, Cancer Research UK's director of tobacco control, said that the idea was "an extremely interesting proposition". 

She added: "Tobacco remains a uniquely dangerous product and we must find ways to try and stop the tobacco industry from attracting new customers. Tobacco is extremely addictive and will kill half of all long term smokers, the vast majority of whom will have started smoking before turning 18.

"Putting a cap on profits from tobacco would send a strong message to an industry that makes billions of pounds every year. Its products are extremely cheap to produce but carry a huge cost to the health and lives of far too many people. Smoking rates have continued to fall over time and we should be thinking about ending industry profits based on addiction and death."

The study is published in the journal Tobacco Control.

Copyright Press Association 2013

References

  • Branston J.R. & Gilmore A.B. The case for Ofsmoke: the potential for price cap regulation of tobacco to raise 500 million per year in the UK, Tobacco Control DOI: