Cigarettes may cost £50 in New Zealand: can it happen here?

Cigarettes and ashtrayRafael Ben-Ari/ABACA USA/Empics Entertainment

The New Zealand Ministry of Health is said to be investigating the feasibility of raising the price of a packet of cigarettes to $100 New Zealand dollars. That's around £50.

So will this become policy, and could it happen in the UK?

New Zealand

Reports hit the news outlets yesterday after 3 News obtained a confidential document under the Official Information Act, which outlined the projected effect of various price rises. They found that people would keep smoking regardless of the cost of a packet of cigarettes - up to a point. In fact, even if they cost £20 a pack, people would keep up their habit. It would take a massive hike to £50 a pack to get people to stop smoking altogether.

There are serious question marks over whether this is likely to happen. The New Zealand authorities have plans to stop residents from smoking completely by 2025, but the officials there have confirmed that this drastic scenario is 'probably unrealistic'. It said that this was an internal discussion paper, and was not intended to portray government policy.

The experts believe, however, that there will be a big increase in the price of cigarettes through increased taxation, as it is one of the main drivers of behavioural change.

The UK?

So could it happen here? Tobacco is certainly the last acceptable target for tax. In the budget last month George Osborne slapped another 37p on the price of a packet of cigarettes, bringing the price of a pack to an average of £7.36.

There was barely a murmur as a result of the move, and when the tobacco industry complains it tends to be seen as a business peddling poison, it doesn't tend to garner a great deal of sympathy. Compare that to the outcry over increases in duty on alcohol, fuel and pasties.

We now make £11.1 billion a year from tobacco duty and VAT - compared to just £6.8 billion in 1990, and this rate is unlikely to slow. Whether Osborne would ever go as far as increasing taxation to these dramatic levels is another question. It's more likely that the UK will stick with small rises, public health campaigns, and consultations into plain packaging, as being less politically sensitive.



We also have to consider that if the price of cigarettes was increased, we would doubtless see a massive increase in smuggled tobacco. Already an estimated 11.67% of all cigarettes that are sold are the result of smuggling, and this sort of move would massively increase that number - possibly reducing the overall tax revenue and undermining any health benefits.

But do you think? Would you support huge increases in tobacco duty? Let us know in the comments.

Five biggest taxpayer stings
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Cigarettes may cost £50 in New Zealand: can it happen here?

Most recently HM Revenue & Customs let Vodafone off the hook - for quite a sum. Vodafone paid out just £1.25 billion despite an original tax bill being closer to £8 billion (HMRC has always refused to reveal how much it thought the Vodafone final bill was). The episode was made even more shaming and painful because Vodafone was given several years to come good with the cash owed - even though it was sitting on a substantial cash pile at the time.

The Exchequer is estimated to have lost around £10 million to Goldman Sachs recently through an 'error' made by HMRC. The episode relates to an employee benefit trust run by Goldman allowing employees to take non-repayable loans that had no National Insurance contributions tied to them. HMRC did claw back the full amount from more than 20 businesses - but not Goldman. HMRC remains cagey about the details of the deal. Little HMRC accountability or transparency.

Huge problems with QinetiQ, the former Defence Evaluation and Research Agency, or DERA. A lack of clarity on contractual arrangements at the outset didn't help, allowing private equity company Carlyle to hammer the price down (why would you start negotiations when you didn't know the company's true value?). The Ministry of Defence behaved, it was said, like "an innocent at a table of card-sharps". Estimated cost to the taxpayer - £90 million. Huge sums were later made by QinetiQ management when the company listed.

The TaxPayers' Alliances estimates £2.7bn worth of taxpayer cash was wasted with a super-expensive 'National Programme for IT in the NHS'. The Department of Health, in the end, had very little to show for it as a consequence. Another example of poor management and a seemingly ingrained inability to provide taxpayers' with value for money.

"BT is paid £9 million to implement systems at each NHS site, even though the same systems have been purchased for under £2 million by NHS organisations outside the Programme", the Commons Public Accounts Committee noted.

Contentious. The Office for National Statistics estimated this has declined 3.4% since 1997, "with inputs increasing by 38%." The Centre for Economics and Business Research estimate that this inefficiency costs the taxpayer £58.4 billion a year.

Given the above record, are there any deals that the taxpayer has actually won out on? Not many, but the one successful project was the roll out of new Jobcentre Plus offices. It came in £314 million under budget, claims the Taxpayers' Alliance. A small cheer.


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