[PDF] Smoking and the public purse

Publisher:
Institute of Economic Affairs (IEA)
Publication date:
04 August 2017

Abstract

This discussion paper provides the first estimate of the net effect of smoking on UK taxpayers per annum. Up until now, estimates have used a methodology that typically includes intangible costs, including costs to smokers themselves, while ignoring tangible savings to the state and tax revenues from tobacco duty. • We estimate a net saving of £14.7 billon per annum at current rates of consumption, with the costs smokers incur significantly outweighed by the sum of tobacco duty paid and old-age expenditures avoided due to premature mortality. • The government spends £3.6 billion treating smoking-attributable diseases on the NHS and up to £1 billion collecting cigarette butts and extinguishing smoking-related house fires. But these costs are covered more than four times over by early death savings and tobacco duty revenue. • In the absence of smoking, the government would spend an extra £9.8 billion annually in pension, healthcare and other benefit payments (less taxes forgone). Duty paid on tobacco products is £9.5 billion a year. In total, the gross financial benefit to the government from smoking therefore amounts to £19.3 billion. Subtracting the £4.6 billion of costs (above) produces an overall net benefit of £14.7 billion per annum.