Smoking in the UK – economic analysis of its costs Essay
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United Kingdom was the original state of smoking prevalence and smoking has caused widespread death of the first countries. According to ASH1 (2011) “there are about 10 million adults who smoke cigarettes in Great Britain” which is “about a sixth of the total UK population”. Throughout the United Kingdom, there was about one-third per cent of all the middle age’s deaths caused by smoking. Therefore, United Kingdom is one of the most importance states of tobacco control.
Government control on cigarette consumption through different instruments such as advertising-all advertising and promotion of tobacco are banned in the UK; taxation-taxation is probably the most effective means of reducing tobacco consumption.
Raising tobacco prices through taxation can result in significant benefits to the economy. For instance, a 5% price increase would result in 190,000 fewer smokers and increase government revenue by ï¿½520 million per year in the first five years.
As can be seen in figure 1, the numbers show that between 1991 and 2001 the retail price of cigarettes increased by about 80% in real terms.
This is explained to a large extent by tax increases; over the same period the proportion of tax in the retail price rose from 73% to 80%.
1.2.1 External benefit
External benefit is the benefit to the third party who is not involved into the activity which causes the cost (Anderton, 2008:96)
1.2.2 External cost
External cost is the cost to the third party who is not involved into the activity which causes the cost (Anderton, 2008:96)
This topic exist the relationship between demand and price which is if price increases, the quantity demanded becomes lower. Furthermore, taxation is a factor of the increase and decrease of demand and supply. Besides, advertising also is an important factor to influence the demand of cigarette.
This article will tell you the positive and negative externalities of cigarette smoking. Moreover, it offers how effective the government had been done for reducing consumption of cigarette and also the other opinions of government instruments which can control the consumption of tobacco are included.
2.1 External benefit of smoking
Nowadays, there is a great deal of data show that cigarette is not good for our human. However, smoking cigarette still has its advantage. According to an article published in 1995 in Neuroscience & Biobehavioral Reviews, the smoking rates of schizophrenics have much higher than people with other mental illnesses. Therefore, smoking cigarette can alleviate symptoms of mental illnesses such as anxiety and schizophrenia.
2.2 External cost of smoking
2.21 Secondhand smoking
In a research, passive smoking cause about 600,000 deaths per year all over the world. (ASH 1,2011)Thus, secondhand smoking is a big problem in UK. It is not only passive smoker easier than the smoker to get decease; it is also influence the later generations. According to an article Smoking in Public place (2003) shows that the link between passive smoking and both lung cancer and coronary heart disease, increasing the risk for each by around 25%. Secondhand smoking also does harm to babies and children which “with an increased risk of respiratory infections, increased severity of asthma symptoms, more frequent occurrence of chronic coughs, phlegm and wheezing, and increased risk of cot death and glue ear.”(ASH1, 2011)
2.3 The policy of UK Government
?2.31 The ban of advertising
Advertisement has high influence in propagating. Thus, prohibiting the advertising of cigarette is a useful way to control the consumption of tobacco. The Tobacco Advertising and Promotion Act which was enacted in 2003, ‘prohibited virtually all forms of tobacco advertising and promotion’, including ‘print media’ and ‘billboards’, and ‘sponsorship of sport’ was finally forbidden by July 2005. Moreover, as the ASH (2011) said that the UK Government estimated that banning cigarette advertising would lead to the decrease of consumption of around 3%.
2.32 The prohibiting in public place
Smoking in public places and workplaces is now banned by law in UK. Except some places which include “guest bedrooms in hotels and certain rooms in care homes, hospices and prisons”. (ASH, 2011)Other public place and work place must no smoking such as restaurant. One typical example is Pizza Hut restaurants where smoking has no longer been permitted in all the 350 restaurants since early this year (Smoking in public place, 2003)
Raising tobacco prices through increase taxation is a useful means. Smoking always bad for our health and a lot of young people also smoke. Controlling consumption of tobacco by taxation is probably the most effective (and certainly the most cost-effective) means. As we can see in Table2, the tax of cigarette was always increasing from 1990 to 2011.So when the price of tobacco increase, the demand of cigarette follows decrease. According to ASH 3″the Treasury earned ï¿½10.5 billion in revenue from tobacco duties for the financial year 2009-2010 (including VAT)” Thus, government can control the consumption of cigarette reducing so that decreases the death of people who died because of smoking.
From a data “The UK tax paid tobacco market is worth around ï¿½14 billion. The market is dominated by cigarettes, which represent 93.3% of the total duty paid market”(ASH,2011), we can imagine how great extent the government increases the duty of cigarette. The taxation is about 76% of the price of a packet of cigarettes. The price of cigarettes has a major effect on cigarette consumption. Higher tobacco taxes reduce smoking and smoking related sickness people, so the number of smoker will cut down. Some people who have no high income will stop smoking, or never start because of the high cost.
Advertisement is a very useful way to propagate. Thus, the government in UK is aware enough of this fact and declares martial law of advertising. AS the ASH said that the Government estimated that the ban on tobacco advertising in the UK would lead to a drop in consumption of around 3%, saving approximately 3000 lives in the long term.(ASH,2010)Most conspicuous forms of tobacco advertising and promotion in the UK were banned and all the package of cigarette must be normal not magnificent.
All forms of tobacco advertising and promotion are banned in the UK with the exception of limited advertising at the point of sale. “This will end when a ban on the display of tobacco products in large shops enters into force from 6 April 2012. Small shops will have until April 2015 to comply with the law.”(ASH3, 2011)Moreover, the UK government introduced picture warnings on cigarette packs in October 2008. The picture of package will make smoker feel nausea because the picture is about what result after people smoking such as yellow tooth or black lung. This is also the efficacious means to reduce the consumption of tobacco and the number of smokers.
All in all, smoking has more disadvantages than advantages even only harm and no good. As we all know, teenager smoking is also a problem which must be solved. It is easy to get disease and smokers often live in a short life. So governments try various devices to restrain the consumption of cigarette to resolve these problems.
In order to efficaciously control the consumption of cigarette, government can set up more festival about banning smoking and propagate some preferential policy. For example, when people agree to give up smoking, the person will get corresponding subsidize.
Anderton.A(2008) Economics(5th Edition) Harlow Person Education
ASH1(2011)[online]Smoking statistics Available at
[Accessed at 16/12/2011]
ASH2 (2011)[online]Tobacco regulation Available at
[Accessed at 16/12/2011]
ASH3 (2011)[online]Tobacco economics Available at
[Accessed at 16/12/2011]
Neuroscience and Biobehavioral Reviews. [online]Volume 29, Issue 6. 2005; 1021-1034 Available at http://www.sciencedirect.com/science/article/pii/S0149763405000874[Accessed at 7/12/2011]
Parliamentary Office of Science and Technology (2003) Smoking in public place Available at http://www.parliament.uk/documents/post/pn206.pdf