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The economics of smoking

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THE ECONOMICS OF SMOKING The UK cigarette and tobacco market grew by 22.7% between 1997 and 2001, to reach an estimated value of �15.52 billion (UK Tobacco Industry Fact Sheet, 2002). Total volume of products in the market continued to decline, while price increases, including taxation, contributed to a rising market value. However, this was dampened due to factors like consumers switching to cheaper brands, while smuggled products and goods legitimately purchased from overseas also reduce the market value. The UK cigarette and tobacco market is dominated by three main companies: Gallaher Group PLC, Imperial Tobacco Group PLC and British American Tobacco PLC, which accounted for 94% of UK tobacco sales for 2001. The EU is following a policy to reduce tar levels in cigarettes and ban advertising and to change on-pack descriptions and branding. Top 10 UK cigarette brands: 2001 % share of UK cigarette market Manufacturer Lambert & Butler KS 11.9 Imperial Tobacco Benson & Hedges KS 9.7 Gallaher Mayfair KS 5.2 Gallaher John Player Superkings 5.1 Imperial Tobacco Marlboro Lights KS 4.8 Philip Morris Silk Cut KS 4.4 Gallaher Rothmans Royals KS 4.3 BAT Regal King Size 3.9 Imperial Tobacco Embassy No 1 KS 3.2 Imperial Tobacco Sovereign KS 3.2 Gallaher Source: Tobacco Category Review, Gallaher Group, 2002 Despite the negative effects of smoking, overall about half of all persisting regular cigarette smokers are killed by tobacco and many people continue to smoke (1996 - UK - 28% of adults regular smokers) ...read more.


In many countries, including the UK, governments impose sales (or excise) taxes on cigarettes, which can have an effect on the market for cigarettes. Research shows that the demand for tobacco products is related to their price. As prices rise, demand falls. So high tax levels are one important means of reducing tobacco consumption. High tobacco prices are also a deterrent to children tempted to take up smoking. The real price of tobacco - that is, after allowing for inflation - has increased significantly in recent decades. But people's real incomes have also risen. Tax - that is, duty and VAT - currently accounts for almost 80% of the price of a packet of cigarettes. Cigarette tax at a high level in the UK so that the price of cigarettes in the shops will be high. This acts as an incentive to smoke less. Source: WHO Tobacco Control Report, 2002 UK government policy towards tobacco taxes has remained largely unchanged since the Conservative government introduced the so-called escalator tax in the early 1990s, and the Labour administration, which took power in 1997 and was re-elected in 2001, has continued this policy with above inflation annual increases on tobacco taxes effectively becoming the norm. As such, the UK tobacco sector is one of the most heavily taxed in the world, and UK cigarette prices are the highest in the EU, with taxes accounting for around 84.5% of the retail cost of a typical packet of cigarettes. ...read more.


In other words, because of the very democratic norms, espoused by the society, governments in the developed countries introduce stringent measures to provide a better living conditions for all; something which may well entail a reduction in absolute individual freedoms. Such curtailments could range from the speed limits on the roads to ban on smoking in public places, or a comprehensive ban on tobacco advertising as adopted by the European Union in 1998 and is to come to full effect by October 2006. Surely, the population of the developing countries deserves a similar benefit of democratic values. Allied with democratic values is the overarching issue of human rights, embodied in the WHO constitution which states that The enjoyment of the highest attainable standard of health is one of the fundamental rights of every human being without distinction of race, religion, political belief, economic or social conditions." (Leary, p.2) However, given the irrefutable addictive nature of the product, it has to be asked: What happens to the human rights of someone who has been enticed via sophisticated advertising and led to smoking addiction in a young age? It is with regard to children and the youth that the 'human right to health' is of particular relevance for the global tobacco control initiatives and for government to intervene in the market for cigarettes towards the best interest and well being of the consumer. ...read more.

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