Can Lansley rub out tobacco trade... and at what price?

The government has only just introduced a display ban. How come it’s considering plain packaging for tobacco, too?
The government announced this week its intention to consult on the merits of plain or standardised packaging for all tobacco as part of the Tobacco Control Plan it published just over a year ago. It had originally planned on holding the consultation before the end of last year but postponed the move as it sought further legal advice on issues such as intellectual property rights and competition implications.

Other elements of the plan included the display ban on tobacco products that was introduced into large stores in England earlier this month and a commitment to keep tobacco prices high through taxation. In his Budget last month, the chancellor raised duty by 5% above inflation, the equivalent of 37p for a packet of 20 cigarettes.

Is the government talking to the industry about all this?
Tobacco companies will be allowed to respond to the consultation, which is due to finish in July, but it seems the government will not be predisposed to look favourably on their point of view. Asked whether he would discuss his plans with the UK’s main tobacco manufacturers in an interview last week, health secretary Andrew Lansley said: “We don’t work in partnership with tobacco companies because we are trying to arrive at a point where they have no business in this country.”

Japan Tobacco International MD Martin Southgate expressed disappointment that the Department of Health was so unwilling to talk to tobacco companies. Manufacturers have dealings with some government departments, such as HMRC in relation to stamping out the illicit trade. But Southgate said JTI had not had any direct talks with DH for seven years. “Apart from fundamentally different positions, I’m convinced there is some common ground to be found over the illicit trade and education,” he said.

What business do tobacco companies currently have in the UK?
Latest figures from the Tobacco Manufacturers’ Association, whose members include JTI, Imperial Tobacco and British American Tobacco, show that 5,700 people are directly employed by the tobacco industry in the UK. It also claims that 66,000 people are employed in related trades such as the supply chain - and the figure does not include retailers. It estimates that with almost 80% of the price of a packet of cigarettes consisting of tax, tobacco sales brought in £12.1bn in revenue in 2011. This was broken down into £9.5bn in duty and £2.6bn in VAT.

What about the cost to the public purse of treating tobacco-related illness?
In announcing the consultation this week, Lansley said that smoking accounts for 100,000 deaths every year in the UK and that one in two long-term smokers will die prematurely from a smoking disease. Figures published by anti-tobacco group ASH in July 2011 claim that smoking costs the NHS approximately £2.7bn a year for treating diseases caused by smoking.

So is there any evidence plain packs will reduce smoking?
Plain packaging has not been brought in anywhere else in the world yet. Australia looks set to go ahead at the end of the year, but this is subject to a legal challenge from Philip Morris, BAT and Imperial.

Alongside the consultation this week the government published a 126-page report entitled Plain Tobacco Packaging - A Systematic Review, compiled by the Institute for Social Marketing, the University of Stirling. The lead investigator Professor Gerard Hastings has strong anti-tobacco credentials. Without any actual case studies to refer to, the report examined a number of models that found that generally shoppers found plain packs less appealing than branded. However it also found that only a slight majority of people supported plain packs and this was higher among non-smokers.

What are the arguments against plain packs?
Tobacco companies argue that as they make a legal product, they should be able to compete with rival producers, just like any other product. “Our trademarks are protected by law and we have a fundamental right to differentiate our brands from those of our competitors,” says Imperial Tobacco UK general manager Amal Pramanik.

JTI’s Southgate said forcing tobacco into plain packs was “commercial vandalism”. They received support this week from the British Brands Group. “Branding fulfils many significant and positive functions for consumers and markets,” said director John Noble. “Take it away and consumers lose out and markets become commoditised, with price rather than quality the influencing factor.”

And of course there’s always the illicit trade isn’t there?
The DH consultation clearly states that views will be sought on the impact of standardising packs on the illicit trade. Tobacco companies and retailers are clear it would be more than welcomed by the criminal gangs that now control a large proportion of the smuggled and counterfeit market. “Logic dictates that making all tobacco products available in the same packaging will increase the already high level of counterfeit product available in the UK, placing further pressures on retailers and government tax revenues,” said Pramanik.

Is it legal?
The $6bn question (actually, at least treble that). All eyes will be on Australia in coming months as the world’s leading tobacco manufacturers press their legal case against the government there in a bid to stop a ban on branding coming into force in December. Should the suppliers win, it would certainly make other governments more wary of bringing in a similar measure. But even if they lose, we can expect them to continue to use all legal channels available, including those in Europe, to block any introduction in this country.

There will clearly be issues around iintellectual property rights. Challenges could easily come from both within the UK and overseas.