The Khan Review: Tax Increases Proposed to Fund Stop Smoking Services

/ 6 min read

The Khan Review: Tax Increases Proposed to Fund Stop Smoking Services

The ongoing Khan Report recommendations are still making waves as officials now make the difficult decision about which are possible to implement, and the best way to do so to ensure maximum impact.

The recommendations are the result of an in-depth critical review of the UK’s current stop smoking services. The review was enacted in the wake of a startling prediction that the UK, under the current cessation remit, will miss it’s “smoke free” by 2030 deadline by at least seven years.

Sajid Javid, UK health Secretary, commissioned ex Barnardo’s chief turned anti-smoking tsar, Javed Khan to carry out the review. There have been mixed reactions to his 15 recommendations, of which some are already being hailed as oppressive or simply unfeasible.

Many however have welcomed the hard-line approach, including Professor Sir Chris Whitty who states that the tobacco industry has “addicted millions of Britons at a young age”, and should face stern reprimand in response.

Even Javid himself is said to be privately against some of the ideas, the Daily Mail reports, but has stressed the Government will “carefully consider” all of the challenging but evidence-backed recommendations.

The recommendations set out by Khan have been broken into 4 primary stages of action targeting different areas to create an end-to-end cessation journey.

Starting with implementations to prevent youth access, then discouraging and providing alternatives to current smokers, while adding financial pressures to companies benefitting from addiction, which can then be reinvested into cessation services.

Khan’s First Step - Invest Now

Only one of the 15 recommended actions comprises the entirety of Khan’s first step towards making a smokefree UK possible by 2030. This means the number of adult smokers must fall to 5% or below, from the current rate of 15%.

Of the 15 raised, four have been flagged as critical actions – ‘must-do’s’ that, according to Khan, are vital to making the 2030 goal possible again. This first recommendation is one of these four critical actions.

The first stage of Khan’s plan is called “Invest Now”. This recommendation calls for urgent investment of a minimum of £125 million per year into smoking interventions. The source of these funds has been split between 3 potential options observed by Khan and his team:

Additional funding from within Government

Khan has stated throughout the report that he understands the pressures faced by the treasury and as such has stressed that only six of the 15 recommendations require any additional investment beyond current levels, however the additional £125 million investment is certainly one of them.

While there is credibility to fears that in order to find this money, UK taxpayers at a domestic level might see increases – after all, it wouldn’t be a stretch to assume parliament might apportion part of the blame to smokers themselves, seeing increasing our general taxes as a justified shift to counter the tobacco-related pressures faced by institutions like the NHS.

Thankfully, this has not been proposed, in fact Mr Khan, OBE, has instead proposed that “If the government cannot fund this themselves, they should 'make the polluter pay’ and either introduce a tobacco industry levy, or generate additional corporation tax, with immediate effect.”

Essentially, Khan feels big tobacco should be footing the bill for the damage they have done with ‘lethal products’.

Michelle Mitchell, CEO of Cancer Research UK said:

“Smoking is not only the biggest cause of cancer, but it also hits the most deprived the hardest. Amidst the current cost of living crisis, smoking continues to pull our most disadvantaged communities further into poverty by costing them billions each year.

All the while, the tobacco industry continues to profit significantly at the expense of our nation’s health. This review suggests the vital measures needed to achieve a smokefree world for all by preventing young people from starting to smoke and supporting those who do to stop.

But these will only be possible with investment. It is high time the industry foots the bill and pays for the damage it causes.”

A ‘polluter pays’ industry levy

Khan has flagged the possibility of passing the costs of enhancing cessation services onto the companies that have essentially created the problem.

The review found that Government should make 'the polluter pay' by forcing the so described 'dying' tobacco industry pay an extra £70 million in tax every year to fund towards the £125 million needed to support quitting and to support the provision of e-cigarettes like the EDGE Pro or EDGE GO on the NHS.

Khan’s report states that Despite high tobacco duties (around £10 billion per year), tobacco manufacturers still make significant profits – approximately £1 billion every year in the UK).

The tobacco industry’s profit margin is as high as 67%, far higher than the margins for any other consumer staple product, which typically range from 12 to 20%.

A tobacco ‘polluter pays’ levy could be introduced in the form of a charge applied as a percentage of these profits. This has wide public support.

The Khan Report states that a recent Action on Smoking and Health (ASH) and YouGov survey suggested that 76% of adults support a levy. It isn’t the first time this has been suggested either - A levy was put forward by the All-Party Parliamentary Group (APPG) on Smoking and Health in their 2021 report on delivering a smokefree 2030.

The smokefree 2030 fund model, developed by ASH, projects that this could raise £700 million each year across the UK.

The ’polluter pays’ principle has been widely accepted for over 30 years. It began with the landfill levy, and has more recently encompassed the sugar tax and even the post-Grenfell cladding levy, not to mention the latest windfall tax on energy companies.

Kahn states that “This principle applies as much, if not more, to the tobacco industry. Tobacco manufacturers make lethal products, which have killed 8 million people in the UK over the last 50 years. That’s more than 400 people a day, and far more than COVID-19”.

A corporation tax surcharge

This approach would impose a surcharge of a percentage on manufacturers’ profits, realised as an additional percentage of corporation tax. There is already an example of this in place for banks.

Alternatively, a levy could be designed to deliver a fixed sum annually to the government, with contributions of individual firms based on a measure such as market share.

In this latter approach companies who contribute less to the problem would face lesser charges than the biggest offenders, which is the fairest approach.

The Bigger Picture

It’s certainly a fairer approach to place the burden of funding the changes to anti-smoking services on the multi-billion pound organisations who provide and promote addictive products.

The costs to health and wealth through smoking are staggering, especially when we consider that the people most heavily impacted by the cost of smoking are also those in our poorest communities.

If the Khan Review is taken at face value, the importance of finding the additional £125 million needed to bolster support services is clear to see.

Time will now tell how far the UK government will go to embrace this approach, and whether they agree with Mr Khan about where this funding should ultimately come from – will it be fairly apportioned to the companies peddling the products, or could we see subtle increases to taxation at a domestic level?

There is much to be said about the outcomes of the review and the implication for our lifestyles, join us as we explore these 15 new proposals and how they could impact us all in our Khan Review blog series examining the key areas for change: Stop The Start, Quit For Good, and System Change.

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