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Raise tobacco tax to make smoking revenue-neutral

Comment 1st July 2010

Increase tax on tobacco, at least to the point where the revenue raised by the tax pays for the costs to society caused by smoking.

Why does this matter?

The centre-right think tank Policy Exchange argues that there should be a 5% rise in tobacco duty in this budget, and in the next five, pushing the price of a packet of cigarettes to £7.42. This, it says, would make smoking 'revenue neutral':

"It is a popular myth that smoking is a net contributor to the economy. Our research finds that every single cigarette smoked costs the country 6.5p. In order to balance income and costs, tobacco duty should be progressively increased until the full societal cost of smoking is met through taxation. As a start, the next budget should increase tobacco duty by 5%. This will reduce tobacco consumption by 2.5% and provide an additional £400m for the Treasury."

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