Adam Smith Institute report: Plain packaging has failed in Australia and will fail in Britain

Plain packaging has failed in Australia and will fail in Britain, says report:

• Plain packaging for cigarettes does not appear to have reduced smoking rates in Australia, the only country to have tried plain packaging so far.
• Illicit cigarette sales are way up, particularly "illicit whites" which are not legally sold anywhere in the world.
• The proliferation of "illicit whites" has made cigarettes even more accessible to young people than before.
• The report comes ahead of the government's plain packaging consultation announcement next Monday, March 31st. 

Plain packaging for cigarettes appears to have failed in the one country to have implemented it, Australia, a new report by the Adam Smith Institute and Reason Foundation has found. The report comes ahead of the government's plain packaging consultation announcement next Monday, March 31st. 

The report, "Smoking, Plain Packaging and Public Health" (http://www.adamsmith.org/sites/default/files/research/files/ASIsmokingplainpackagingWEB.pdf), looks at surveys of smokers in Australia which show that, although plain packaging may have led to stronger intentions to quit, many reported engaging in defensive behaviors such as covering up health warnings and even smoking more. In the year to July 2013 the proportion of smokers had not declined.

Another study, which looked at discarded packs, found that consumption of cigarettes in the year to July 2013 remained at the same level as in 2012, but found that the proportion of illicit cigarettes had increased substantially. This was corroborated by the most recent Annual Report of Australia’s Customs and Border Protection Service, which shows that the number of illicit cigarettes entering Australia has indeed risen dramatically in the past three years.

The discarded pack study concluded that contraband—much of which is in the form of finished cigarettes that are not legally sold anywhere in the world, known as “illicit whites”—now accounts for more than half of illegal sales and about 7.5% of all sales in Australia. 

The wide availability of illicit whites, in part due to Australia’s plain packaging rules, means adolescents now likely have greater access to cigarettes than previously—and at lower prices. Moreover, these illicit whites have no health warnings. On this basis, it seems reasonable to conclude that plain packaging has been at best useless and at worst counterproductive.

The author of the study, Julian Morris, Vice President of Research at Reason Foundation, notes that “On the basis of what we currently know, it appears that Australia’s experiment with plain packaging has failed to reduce rates of smoking among any of the target groups. Worse, it may have made smoking more attractive to the youth. Until we understand better the impact of plain packaging in Australia, it would be misguided to move forward with similar restrictions in Britain.”

For further comments or to arrange an interview, contact Kate Andrews, Communications Manager, at kate@adamsmith.org / 07584 778 207.

The Adam Smith Institute is an independent libertarian think tank based in London. It advocates liberal public policies to create a richer, freer world.

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Eamonn said:

"I am always very suspicious when officials take power to remove people's assets. There are already perfectly good laws obliging people to pay their bills, including their tax bills. And there are punishments if they don't – but those punishments only come after the sentence of a court.

"If we allow the authorities to take cash from our accounts for any amount they think we owe them, then none of us is safe. They become a law unto themselves. This is a very worrying threat to civil liberties. And just because it is done by other countries, that do not have our common-law safeguards, is no reason for us to do it."

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Eamonn said:

"Tax reduces people’s ability to act morally.

They might prefer to spend their money on helping their children become good citizens, caring for their elderly relatives or supporting good causes.

Instead they see it taken and going on bank bailouts or expensive prestige projects.”

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“Most people are perfectly capable of managing their retirement income and do not want to fall back on the state anyway. The new rules recognise that.”

Ben Southwood Writes for the Guardian's Expert Panel

The Adam Smith Institute's Head of Policy, Ben Southwood, contributed to the Guardian's expert panel for the 2014 Budget.

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"According to the Intergeneration Foundation, the median age of an actual voter in 2010 was 49. With this in mind it shouldn't be surprising that we have a state pension "triple-lock", or that the so-called rabbit hat in chancellor George Osborne's 2014 budget was a radical pension reform, handing over much more leeway to savers to organise their own finances. Other than this reform the budget was boring, and the sums of money involved, were, in budget terms, pitiful.

"The announcements with the biggest cheers included halving bingo duties to 10%, taking 1p off beer duty, and scrapping inheritance tax for workers in the emergency services who die on the job.

"Where was the long-awaited merger of employee national insurance contributions (NICs) and income tax? Everyone now knows that the two sources of revenue go into a single homogeneous pot – but failing to merge them obscures the fact that the low NIC threshold means workers earning just £149 a week end up paying what is effectively income tax.

"Where was the accelerated and increased hike in the personal allowance? One of the government's greatest successes has been taking the low paid out of tax (3m more now pay no income tax at all, they say). Where was the expected extra cut to corporation tax? The rate will fall to 21% this year and 20% next year, but research suggests it is one of the least efficient taxes.

"Last, but certainly not least, where was the change to the Bank of England's remit? CPI targeting failed spectacularly in the last recession, allowing a deep, long-lasting slump. Current growth is well below where it should be with such a strong labour market.

"All in all the chancellor delivered an uncontroversial, tinkering, centrist budget. Its pro-retiree slant might be electorally sensible, and perhaps even a simplifying improvement. But it has left the bigger fiscal and macroeconomic issues completely untouched."

Adam Smith Institute Budget Reaction: Well, that was boring

Commenting on the 2014 Budget: 

“Well, that was boring. The total tax and spending changes barely scratch the surface at around £2bn/year in each direction – that’s a tiny 0.3% of the £732bn the government is expected to spend this year. The exception may be the pensions announcements, which may prove to be very significant in the years to come.

“Much of the budget was gimmicky: inheritance tax exemptions for emergency services personnel who die in the line of duty must only affect a handful of people and giving LIBOR fines to Help For Heroes continues to be one of the most bizarre revenue hypothecations of modern times. Even the much-heralded ‘welfare cap’ can be easily undone by any Parliament that wishes to in future, so cannot count as more than a political stunt.

“If there is cause for optimism it is in the economic data released today, which shows that the labour market is rebounding strongly (even if productivity still leaves a lot to be desired), and the language used by the Chancellor. At last the government is speaking in dynamic terms, recognizing in rhetoric at least that lower tax rates can produce higher revenues. Mr Osborne is talking the talk on taxes, but he doesn’t have much time left to walk the walk.” 

– Sam Bowman, Research Director, Adam Smith Institute

Pensions

“At last Britain's private pension savers will be treated like responsible adults. As lifetimes have lengthened and financial uncertainty has abounded, annuity rates have fallen, leaving savers much worse off then they expected. The rule has long been that, apart from a proportion that can be taken as a lump sum on retirement, pensioners have had to convert their retirement pot into an annuity, paying them a lifetime income. But as lifetimes have lengthened and financial uncertainty has abounded, annuity rates have fallen, leaving savers much worse off then they expected.

“From April 2015, retirees will be able to access their pension savings pretty much as they wish. Instead of being hit by a 55% tax if they took out 'too much', ordinary rates of tax will apply. So it all becomes much easier. You build up a pension pot while you work; on retirement, you can take 25% of that tax-free (a provision designed to help people with moving costs and other changes on retirement); then you can decide whether you will buy an annuity, draw down the pot at a set rate, or withdraw the whole sum, facing tax only at the prevailing marginal rate.

“Most people are perfectly capable of managing their retirement income and do not want to fall back on the state anyway. The new rules recognise that. On the rare occasions when governments treat us like adults, they should be encouraged.”

– Eamonn Butler, Director, Adam Smith Institute

Personal Allowance & National Insurance

“As anticipated, the income tax personal allowance has been raised to £10,500. That’s good, and will help nearly all workers, but the Chancellor missed the opportunity to tackle the National Insurance threshold, which is much lower than the personal allowance and affects low paid part-time workers who may not benefit from the personal allowance rise at all.

“A part-time worker earning £10,500 will pay no income tax, it is true, but they will still face a National Insurance bill for £330 a year. National Insurance is the great elephant in the room in British tax policy: although administered separately, it goes into exactly the same revenue pot as income tax. It desperately needs reform if the working poor are to be given the tax break that almost everyone agrees they need.

“Still, the rise to the personal allowance is better than nothing, and the government is right to pursue tax cuts for lower earners.”

– Sam Bowman

Childcare

“The government is right to recognise that childcare costs are becoming increasingly unaffordable throughout the UK: at £106.38 per week, the cost of 25 hours of childcare is unaffordable for many families.

“Ofsted regulations around childcare, such as stringent qualification requirements and low mandatory child-to-staff ratios, are some of the harshest in Europe, and have caused prices to skyrocket.

“These regulations have real consequences for the consumer: the UK ranks as the second highest spender in Europe on childcare services and parents are spending a staggering 28% on childcare in out-of-pocket costs.

“Unfortunately, the government’s proposals do nothing to address these supply-side factors, and will probably just perpetuate the vicious cycle of high costs. Families would benefit far more from deregulating the childcare sector than from increasing the childcare subsidies, which fund a highly distorted and expensive market.”

- Kate Andrews, Communications Manager and Research Associate, Adam Smith Institute 

Missed opportunities

“The most obvious missed opportunity was the lack of any additional cut to Corporation Tax. Adam Smith Institute research has found that nearly 60% of the Corporation Tax comes out of workers’ wages, with the rest acting as a harmful tax on capital. The Chancellor could have boosted wages and stimulated the economy by cutting Corporation Tax even more, killing two birds with one stone.

“A change to the Bank of England’s remit. Inflation targeting has unequivocally failed, giving us the worst recession and slowest recovery in living memory. If the Bank were tasked with targeting Nominal GDP instead, as many prominent economists are now suggesting, the macroeconomy would likely improve immediately and remain stable during future supply shocks such as the 2008 Financial Crisis.” – Sam Bowman

For further comments or to arrange an interview, contact Kate Andrews, Communications Manager, at kate@adamsmith.org /07584 778 207.

The Adam Smith Institute is an independent libertarian think tank based in London. It advocates liberal public policies to create a richer, freer world.

Comment: Encouraging Signs Abound in the Labour Market

Commenting on the Office for National Statistics's March release of labour market statistics, Ben Southwood, ASI Head of Policy said:

"Encouraging signs abound in the labour market: unemployment was down 63,000 in the three months to January compared to the previous three months, employment was up 105,000, economic inactivity fell 19,000, and total weekly hours worked in the economy grew 0.9m.

"Looking one month ahead, into February, the claimant count fell another 34,600 in that month, while vacancies grew 23,000 in the three months up to an including February (to 588,000) compared to the previous three.

"Even annual nominal earnings growth—heretofore the weakest piece of the puzzle—has edged up to 1.4%.

"But this labour market strength only brings the weakness in output into starker relief. With so many more workers streaming into productive employment we should be seeing growth much faster than the paltry 1.8% managed in 2013.

"This means weak productivity—something no economists has yet given a full and satisfactory explanation for—is still making up the difference. The worry is that there will be no sustained recovery until productivity growth returns."

For further comments or to arrange an interview, contact Kate Andrews, Communications Manager, at kate@adamsmith.org /07584 778 207.

The Adam Smith Institute is an independent libertarian think tank based in London. It advocates liberal public policies to create a richer, freer world.

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