New research suggests that government cap cigarette prices and raise an extra £500m per year in doing so – Tobacco Research

New research suggests that government cap cigarette prices and raise an extra £500m per year in doing so – Tobacco Research.

Researchers at Bath University have proposed a new regulatory approach to prevent tobacco companies making excessive profits.  The profits of tobacco companies in the UK are remarkably high, much more so than other industries such as food and drink.  If adopted, in the UK or other countries, this measure would have a profound effect on the profitability of tobacco companies and make them a much less attractive investment for pension fund managers.

The approach borrows from the model used to regulate natural monopolies like water companies, and involves capping the wholesale price eg RPI- x%.   In the UK two tobacco companies dominate the market: Imperial and Japan Tobacco (formerly Gallagher), so effectively are monopoly companies, able to exploit their market dominance to generate excess profits.  In any other industry we might expect the competition authorities to take an interest, but it would hardly be in the public interest to stimulate competition in the tobacco market by splitting these companies up.  Far better to restrict their ability to make excess profits by capping wholesale prices.

“Regulation would set a maximum price that cigarette companies could charge for their product, based on an assessment of genuine operational costs. Retail mark-up would not be affected and nor would the price that consumers pay, but the excess profit currently accrued by cigarette manufacturers would be transferred to the Treasury through increased tobacco taxes.  The system would be set up at no cost to the consumer or taxpayer, funded instead through a levy or licence fee paid by tobacco companies.” say the authors of the report.

Radical tobacco control measures to reduce smoking prevalence once proposed typically become adopted in one or more jurisdictions within a few years and then a snowball effect takes hold.  Smokefree laws were unknown before this century, but now they are rapidly spreading in all parts of the world.  How long before politicians and policy makers adopt this profit capping proposal?

One thing is for sure: in considering whether to divest, future regulatory risk just got a whole lot higher.

Council invests in tobacco, despite anti-cigarette vow | This is Essex

Council invests in tobacco, despite anti-cigarette vow | This is Essex.

Essex CC looks set to continue investing in tobacco companies ie owning a share of the companies that kill more of the county’s citizens than any other preventable cause.  How does being a part of the tobacco industry, for that is what you are if you own shares in it, fit with the duty to improve public health and reduce health inequalities from 1st April?

Has the Director of Public Health expressed a view before this decision was taken?

Has the Council been advised about the requirements of article 5.3 of the Framework Convention on Tobacco Control, the guidelines to which make it clear that local authorities should not be investing in tobacco companies?

Australian government pension fund dumps tobacco – The West Australian

Australian government pension fund dumps tobacco – The West Australian.

Great news from Australia where the Future Fund, a major national superannuation fund for government employees, has decided to pull out of tobacco investments.  Details of the full reasoning are not yet available but

“The board noted tobacco’s very particular characteristics including its damaging health effects, addictive properties and that there is no safe level of consumption,” said fund chairman David Gonski.

“In doing so the board also considered its investment policies and approach to environmental, social and governance issues.”

The Future Fund now excludes just two classes of investment: cluster bomb manufacturers and tobacco manufacturers.  Both are subject to international treaties to which both the UK and Australian governments are signatories.

There is a reluctance in the pension fund community generally to restrict investments, not least because every ethical cause under the sun calls for such restrictions in relation to its single issue.

I have argued before that tobacco is in a different class to all other consumer goods because it kills half its lifelong users, when smoked as intended by the manufacturer.  Thus it is quite different from alcohol, fast food, fossil fuels etc.

However, the really important point about this Australian decision is that it appears to be one of a series now, beginning with New Zealand and Norway, where funds have excluded tobacco, and in which those countries’ international Treaty obligations have been to the fore in the reasoning.

The FCTC is binding on the UK, all parts of government, including local government, and all those who serve local government.  It is surely time that UK local authority pension funds recognise that their current policies are contrary to public health, and in breach of the FCTC guidelines which specify no government investment in tobacco.