A British Man's Take on Debt, Saving & Investing

Smoking and the Economy

Posted on April 24, 2012 by Lee

Now I’m not one to encourage smoking or the mass-uptake of the habit by society, but I couldn’t help but wonder what the true story is for the UK economy. I caught a sound-bite from an unknown politician a day or so ago saying something along the lines of “We must eradicate smoking from this country, or suffer the bankruptcy of the NHS.”

Bold words, and an excellent soundbite; it pushes the blame for the National Health Service’s problems onto someone other than the government.

But is the state of the NHS really the fault of the smokers?


Smoking Related NHS Expenditure

The NHS doesn’t keep statistics on what is and what is not ‘smoking related’, so there is a degree of artistic license in painting such figures.

In 2009 a Freedom of Information Act request  sent to the NHS estimated that £1.7 billion pounds a year is spent by the NHS on treating smoking-related conditions. The BBC in 2008 estimated it at £2.7 billion.


Revenue from Cigarette Taxes

There are two government revenue streams from cigarettes; Excise Duty and VAT. Approximately 89% of the retail price of a packet of cigarettes goes to the treasury, rather than the manufacturer or retailer. In 2010/11 (bearing in mind cigarettes have gone up twice since then in the 2011 and 2012 budgets – but that is the latest statistic available at present) the treasury profited by £11.1 billion pounds.

We could also say there is a third revenue stream when retailers sell to underage purchasers, and get caught out by police or local authority trading standards agents, with fines applied both on-the-spot of £80 a pop, and larger court-imposed fines when taken further or for repeat offenders. This would be difficult to quantify, however and has been ignored for the purposes of this article.

So, even if we revise the NHS smoking-related costs upward a couple of hundred million to £3 billion, that’s still a net profit of £8.1 billion to the treasury overall.


Benefits Beyond Taxation

I’m going to be a little tongue-in-cheek here, but it is food for thought all the same. Smoker’s on the whole live shorter lives than non-smokers. An unpublished study by a large (>5,000 employer) government organisation (you’ll have to take my word for this one) found that smokers take less sick days than non-smokers (which is why it wasn’t published!), work longer hours overall and are more amenable and adaptable to short-notice changes.

So smokers despite their occasional breaks from the workplace are more focused. They work longer hours thereby effectively negating those additional breaks, are more adaptable and won’t be a drain on their pension for 40 years.

Sounds like a winner all round to me?

So why is the government push push push when it comes to making people quit?

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Category Economics, Tax
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2 Comments to “Smoking and the Economy”

  1. Maggie Jones says:

    I have read intensely what you have written, and although I agree !! the N.H.S has been a pain for over 40 years now and they still cannot sort it !!
    We gave up smoking 5 months ago saving over £400 a month so where now we have to pay for diesel prices so giving up smoking !! yes helps but now the government take it in fuel !! also why do the immigrants get free N.H.S !!!!!! this is our downfall, if they have no health insurance refuse them !! or bill them !! and bill drink related matters.

    • Rob says:

      I’ve always been a big advocate of hospitals charging small fees for visits. For example, I think that you should pay a small fee every time you visit A&E. It gets rid of time-wasters and every little bit helps. If you can’t afford it or are in need of regular visits you should also be able to easily get round it. Call me old fashioned, but I think everyone should get health care immigrant or not.

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