Thursday 18 March 2010

Back-of-a-fag-packet fun

On a good day, the Righteous seem to accept that smokers pay a shedload in extra taxes (although they prefer to focus on a non-existent figure, being the amount of tax 'lost' due to smuggling*, which is about as relevant as the number of goals I've never scored in a Cup Final).

But a figure that the Righteous are determined to ignore when wailing on about 'the cost of smoking' (to the NHS or the economy or the taxpayer or whomever) is the saving in old age pensions.

In a fairly unscientific manner, I would guesstimate the saving as follows. In round figures, there are 12 million pensioners, a fifth of whom have smoked (sure, more will have smoked in the past; but those that did are less likely to live to pension age and/or die earlier so on). The smokers live an average of 12 years in retirement and the non-smokers live on average 22 years. This averages out at twenty years claiming a pension (which is 'about right').

If the smokers lived as long as non-smokers, the total number of smoking pensioners would be 2.4 million pensioners x 22 years/12 years = 4.4 million pensioners, so there'd be 2 million more pensioners.

The total average taxpayer-funded pension is (let's say) £10,000 a year (not just state pension but public sector pensions, other benefits and so on), 2 million x £10,000 = £20 billion, which dwarfs even today's made-up figure of total cost of smoking £13.74 billion, even ignoring £10 billion-plus in VAT and duty on tobacco.

Unless of course, smokers' life expectancy is not ten years shorter than otherwise...

* For a timeless classic of the genre, try this one in the Grauniad: "Poor people and children are most at risk from contraband tobacco..."


dearieme said...

What "we" mustn't do is persuade hardened smokers to give it up. The taxes would be lost to the rest of us, without - it would seem -extending the poor buggers' lives.

Mark Wadsworth said...

D, that is awesome. Do you think it's true or is it some Big Tobacco-sponsored hoax?

Dick Puddlecote said...

I knew I could trust you to have an input on the Policy Exchange stuff. I'll be pinching bits later as I've had a look at the report. Some jaw-dropping assumptions in there. One literally made me laugh out loud. ;-)

Dick Puddlecote said...

Oh, I forgot to mention. The report took into account the effect to the economy of reducing tobacco industry income and associated benefits.

They valued it at £nil.

Anonymous said...

There are far more other factors left out too.
Smoker life dependancy, I would hazard a guess that financially better off smokers live longer than poor ones.
Just taxing the poor again.
Just another "FINK TANK" trying to make a name for itself.

Mark Wadsworth said...

DP, the people who favour the pub smoking ban argue along the same lines - they say that a closed pub doesn't mean jobs are lost, because the ex-staff can go and do something else.

Like most leftie arguments (or indeed most political arguments), that has some superficial appeal, but if we extend the logic, then it wouldn't make any difference how many businesses the government shut down, i.e.

"Coal mines shut? So what? Get a job in a pub."

"Pub shut? So what? Get a job at the steelworks."

"Steelworks shut? So what? Get a job grooming dogs and horses."

"Foxhunting banned? So what? Get a job in tourism."

... and so on ad infinitum

Anonymous said...

2.9 billion lost productivity in smoking breaks? That is £3000 per smoker - perhaps £4000 per working smoker. The average wage of smokers is way less than the national average. Call it £20,000 to be generous. I'm not an economist, so I'm assuming productivity approximately equals wages. So we are saying that smokers spend, on average, one fifth of their working day on cigarette breaks. About 1.5 hours, That is 10 nine minute breaks (in addition to lunch, coffee and tea (maybe). Bear in mind that many workers spend time outside and don't need special breaks. I don't think the estimate is realistic.

Anonymous said...

Sorry, ignore my comment above. My initial division was out by a factor of 10.

Tim Almond said...

And what about NHS costs? While people who smoke cost the NHS money, so do extremely infirm old people.

Anonymous said...

Did they remember to add in the damage to our Balance of Payments from importing all those tobacco leaves? Or the cost of landfilling all those cigarette packets? Or - gasp - the cost of treating the industrial injuries from the cigarette factories? Not to mention the CO2 emissions from the cigarettes. (It's a wonder the AGW-ists haven't come up with that one yet.)

On the other hand, they also haven't factored in the cost of treating the diseases that the smokers would get if they didn't die first from smoking.

It's all just tosh really isn't it?

DaveA said...

Let me try and analyse and dismiss some of these figures.

Assumptions, male and female smokers die on average 7 years younger than non smokers, 72 and 75 respectively.

There are 12 million smokers in the UK.

The Dutch study put the lifetime costs of treating smokers as £165,000 versus £210,000 for non smokers. I.e. £45,000.

Therefore the lifetime savings to the NHS are 12,000,000 x 45,000 = £54 billion

If you annualise this out over the mean age of women and of men of 73.5 54,000,000,000/73.5 = £735 million per year.

So our net “cost” is not -£2.7 billion it is +£735 million.

Passive smoking can easily be dismissed as fiction, most smokers I know make a point of getting into to work earlier and leave later to make up time. Also if you work at a computer you are entitled to a 5 minute break under ‘elf and safety. I am yet to be sold on the idea hat smokers have more day to day sickness. The cost of cleaning the streets is irrelevant as the cleaners are there for the larger and more unsightly fast food wrappers. Fire is possible but on economic output most smokers have retired from work and living on a pension. Does not the Policy Exchange know the age of retirement is 65? The Government further saves £1 billion in old age pensions due to premature mortality of smokers.

80,000 people in this country are directly or indirectly employed by tobacco companies. So if the average salary is £25,000 a year tax, NI and employer NI works out about at £7,000 per person. Tobacco is now the UK’s largest manufacturing industry and export earner and corporation tax is £500 million pounds.

Hence 80,000 x 7,000 = £560,000,000

So let us summarise the costs and revenues.

Costs = £507 million in fires.


Tax 10,000,000,000
Net health care gain 735,000,000
Corporation tax 500,000,000
Income Tax NI 560,000,000
Pensions 1,000,000,000


So the net benefits to the government are £12,795,000,000 - £507,000,000

= £12, 288,000,000

Mark Wadsworth said...

JT, see Dave A's calc's.

AC, all complete tosh... but fun!

DA, are you sure the pensions saving due to dying earlier is only £1 billion? My MFP says £20 billion, although wide margin of error - might be only £10 billion, but certainly a lot more than £1 billion.

And I think you missed off another few £billion for VAT.

JuliaM said...

"For a timeless classic of the genre, try this one in the Grauniad: "Poor people and children are most at risk from contraband tobacco...""

I suppose it's just the alternate version of'XXX happened: women and minorities hardest hit'

dearieme said...

"Do you think it's true": dunno, Mark. I loathe cigarette smoking, but I call to mind my own dictum:-

"All medical research is rubbish" is a better approximation to the truth than almost all medical research.

Pavlov's Cat said...

I have often thought that this is one of the reasons why successive Japanese govts with its aging top heavy population has not embraced the Smoking bansturbating of the West like they do many other things. And use smoking as a way of thinning the herd

No nasty pictures on fag packets, even the warnings just say "Smoking may be bad for you"

It could also be that the largest shareholder of Japan Tobacco (formally 100% state owned) and responsible for about 95% of cigarettes sold in Japan is the Japanese Govt

Mark Wadsworth said...

PC, the problem is that the Japanese are the heaviest smokers but have the longest life expectancy. Maybe the Japanese govt should clamp down on smoking to see if they can thereby shorten lifespans?

Pavlov's Cat said...

Damn, I really didn't think that through did I.

DaveA said...

Hi Mark,

The £10 billion figure includes direct taxation and VAT.

Mark Wadsworth said...

PC, I dunno. Maybe if the Japanese stopped smoking they'd live to 150?

DA, thanks, £10 billion it is then.

Anonymous said...

Mark, you commented on Dearieme's link -, saying :
"D, that is awesome. Do you think it's true or is it some Big Tobacco-sponsored hoax?"

It doesn't appear to be a hoax. Try these links for verification:

Fisher's publications on the subject:

And the Mrfit study results:


Mark Wadsworth said...

T, ta, most interesting.

dearieme said...

@Tony - I love this: "None of the hypotheses proposed to explain the unexpected higher rates of lung cancer mortality among SI [quitters] as compared with UC subjects [puffers] were sustained by the data. Thus we conclude that the difference observed is due to chance, and that a longer period of sustained smoking cessation plus follow-up is necessary to detect a reduction in lung cancer mortality as a result of smoking cessation intervention in a randomized clinical trial." That conclusion is "science" worthy of the Global Warmmongers.

Robin Smith said...

How does the production of wealth forgone (therefore deflated rental values) from :

* dying early
* being off work sick
* being less productive due to a less efficient cardiovascular system

... factor into the equation ?

Say £20Bn too ?

James Higham said...

How about a tax on non-smokers for being insufferably self-righteous?

sobers said...

My old GP used to tell his patients that the govt wanted them to die young through smoking as they saved on the pension payments (this was back in the 70s and 80s). This tactic had more success than all the usual health arguments. People hated the idea of being done out of their pensions by the govt.