Campaigners call for tobacco windfall tax and yearly surcharges on ‘lethal trade’

Doctors and health charities have urged Rachel Reeves to hit tobacco firms with a financial double whammy, including a windfall tax in the budget, to help fund Labour’s drive to eradicate smoking.

They are suggesting a one-off £74m surcharge and a new £700m-a-year permanent levy on the industry’s “obscene” profits from selling its lethal products.

Keir Starmer has made clear his readiness to take bold action to stamp out smoking – the UK’s biggest cause of preventable illness – while the chancellor is searching for ways to bring in new income for the government in the package of measures she will reveal on 30 October.

Doctors, public health experts and cancer campaigners are urging Reeves to impose the charges on the four global tobacco firms which between them provide 95% of all the cigarettes sold in the UK and generate about £1bn in profits.

The first charge – modelled on windfall taxes previously levied on banks, energy suppliers and water companies – would yield £74m to fund an expansion of services to help smokers quit. It could be imposed through a corporation tax surcharge included in the budget, they say.

Reeves should also legislate to introduce a recurring annual levy on the profits tobacco firms make, they say, which in the case of Imperial Tobacco is a £66.50 margin on every £100 of sales. Such a move could produce as much as £700m a year in extra revenue, it has been estimated.

The “polluter pays” levy would work by capping the price cigarette manufacturers can charge and the profits they can make, while simultaneously maintaining the retail price through additional taxation.

Hazel Cheeseman, the chief executive of Action on Smoking and Health (ASH), said: “Besides killing 76,000 people a year in the UK with its products, big tobacco makes absolutely obscene profits. It’s time to hit this lethal trade with a new double whammy of financial penalties that would recognise its leading role in damaging the public’s health.”

She has coordinated a letter to the chancellor, urging her to enact both measures. It has been signed by medical groups such as the British Medical Association and the Royal College of Physicians, health charities including Cancer Research UK and British Heart Foundation, directors of public health across the UK and academics.

In the letter, also sent to the prime minister, Keir Starmer, they say: “In other UK markets where monopoly-like pricing power is an issue, government regulates the prices the relevant companies can charge, for example for water, gas, electricity.

“These are life-enhancing products yet we think it is appropriate to limit their profits by regulating prices. Why not also do so for tobacco, which is life-destroying?”

Three in four voters back a levy on tobacco profits, YouGov polling for ASH has found.

Ministers are finalising the detail of the smoking and vapes bill, which will set out their plans to bring an end to smoking. It may include a ban on smoking in some outdoor areas, such as outside pubs, but the licensed trade has warned that could devastate their businesses.

Dr Javed Khan floated both forms of financial penalty in the review of smoking policy he undertook for the Conservative government, published in 2022.

“If money is tight, as it is now, I recommended that government should look at a statutory levy on the tobacco industry to pay for the work needed to make smoking obsolete.

“The chancellor needs to carefully consider this as part of accelerating progress on smoking alongside planned legislation to create a smoke-free generation,” Khan said.

Smoking is believed to cost £17bn a year in England alone, mainly through lost productivity by those too sick to work, as well as £2.4bn in NHS costs.

Steve Brine, who was a public health minister under the Tories and chaired the Commons health committee until the election, also endorsed the idea of a raid on profits.

“If ever there was a time for a government to look seriously at a levy on the tobacco industry it is now,” he said.

“A levy is a proportionate response to the price we pay as taxpayers for the profits made by a small number of transnational tobacco companies.”

Whitehall sources said that departments do not comment on speculation about possible tax changes apart from at fiscal events.

A government spokesperson said: “Smoking claims 80,000 lives a year, puts huge pressure on our NHS, and costs taxpayers billions.

“Prevention is a key part of our plan to reform the NHS and we’re considering a wide range of measures to make Britain smoke-free. We will set out more details in due course.”

In a separate letter to Starmer and Reeves, the Association of Directors of Public Health and NHS bosses welcomed Labour’s pledge to tackle the UK’s increasingly poor population health. But they urged them to restore the public health grant, which Whitehall gives local councils, to the level it was at in 2015-16.

They said this would aid the government’s promised shift to preventing illness rather than just treating it.