UK government tax policy drove cigarette prices up by over 100 per cent between 1994 and 2006
Back in 1994-95, the illicit tobacco trade barely existed in the UK, according to HM Revenue & Customs (HMRC).
From 1994 to 2006, tax driven prices rose by over 100 per cent from £2.52 to £5.05 for a pack of 20 cigarettes in the most popular price category.
Yet smoking incidence fell only five percentage points from 27 per cent in 1994 to 22 per cent in 2006, according to the Office for National Statistics (ONS).
Escalating into trouble
Focusing on 1994 to 2000, cigarette prices rose by almost 55 per cent. Every year the government was “escalating” the tax at 3 per cent and then 5 per cent above inflation believing it would reduce consumption.
But, according to the ONS, the adult smoking rate of 27 per cent in 1994 was unchanged six years later.
Prices race ahead but people keep smoking
|Incidence of smoking||27%||-||-||-||27-28%||-||27%|
|£ per 20 most popular priced cigarettes||2.52||2.70||2.89||3.08||3.36||3.64||3.88|
And by 2000 a staggering 31 per cent of the market was smuggled, counterfeit or the result of cross-border shopping, according to industry estimates.
Stepping off the escalator
After 2000 the government abandoned the escalator, increased taxes broadly in line with inflation and began to more actively tackle smuggling.
Health education campaigns and other measures have been introduced and smoking incidence has resumed its decline, standing at 21 per cent in 2007.
By 2008, HMRC estimated that 13 per cent of cigarettes and 56 per cent of hand-rolling tobacco sales were illicit.
Cross-border shopping, however, takes the figures to 21 and 67 per cent. A typical pack of 20 cigarettes cost around £2.40 in Spain but nearer £6 in the UK.