The plain packaging debate is back. Today, the goverment announced a new, independent review which will investigate whether requiring standardised tobacco packaging has an impact on public health.

The system has already existed in Australia since the end of last year. There’s very little early evidence available of the impact it’s had on smoking levels, although some research has found that the appeal of smoking has declined there since the policy change.

The review will be focused on the ‘health impacts’, but it’s worth looking at what we know about the wider impacts as well. One of our Twitter followers asked us whether the tax paid in to the Treasury makes up for the costs to the NHS for treating smokers, and figures are out there to provide some idea of what the answer might be.

What smoking costs the NHS

It’s not that easy to work this out – people aren’t admitted to hospital for ‘smoking’ but conditions where smoking might have played a part. So even though we know that 463,000 adult hospital admissions last year were attributed to smoking, we need to be more sophisticated when estimating the particular strain placed on the health service by smokers and how this translates into costs.

Most of the research in the field derives from estimates made back in 1991. Back then, smoking was said to cost the NHS £1.4-£1.7 billion a year (closer to £2-2.5 billion in today’s prices). Since then, other research has put the cost at £2.7 billion in 2006 (£3 billion today) and even £5.2 billion in 2005/06 (over £6 billion today).

All the studies use slightly different intepretations of how much smoking contributes to different diseases, and in turn what those diseases cost to treat.

If current research is anything to go by, smoking is likely to be costing the NHS between £2.5 and £6 billion in today’s prices, although there’s a considerable degree of uncertainty to the estimates.

What smoking costs the UK

While smoking has a direct impact on the NHS, it can also be said to have an indirect impact on society more widely (for instance, fire services need to be called out to incidents caused by smoking and ill health can result in more absenteeism). The think tank Policy Exchange made an attempt at quantifying the wider costs, coming up with a £14 billion total (including the £2.7 billion NHS costs).

This is even more uncertain an estimate since it’s based on estimating lost economic output from workers dying early from smoking-related conditions and even taking smoking breaks at work. Even then, it’s complicated since people dying earlier can also reduce social care and pension costs.

So the ‘real’ costs of smoking can go some way beyond admissions to hospital alone, although it’s a mammoth task to put a number on this.

So is the Treasury clawing the money back?

Smokers will be all too familiar with the price of cigarettes, but perhaps not with how much of it is actually tax. 

According to HM Revenue and Customs (HMRC) figures, the typical price of a pack of 20 cigarettes was £6.83 last year. Of this, a full £5.61 was tax, incuding tobacco duty and VAT. So 82% of the price of a pack is tax which goes back to the Treasury. Hand-rolling tobacco is less burdened by tax (67% goes to the Treasury) and cigars even less so (45%).

The government takes in a total of about £9.5 billion in tobacco duties, and the Tobacco Manufacturers’ Association estimates another £2.6 billion goes to the Treasury in VAT. So the Treasury is taking in about £12 billion directly from tobacco sales.

Even here, you could argue indirect benefits such as taxes from people employed in the tobacco industry and the contrubtion of tobacco sales to the economy as a whole could add to the Treasury’s intake. Again, that’s where we go beyond the realm of fact and into very complicated and uncertain estimates.

The direct tax and duty take more than makes up for the NHS costs, although the bigger ‘unknown’ of the wider costs to the economy creates a big grey area.