The rise of illicit tobacco

November 12th, 2013 at 3:00 pm by David Farrar

The Herald Sun reports:

ILLEGAL tobacco is booming across Australia, funding international criminal gangs, and costing taxpayers more than $1 billion each year.

And the introduction of plain packaging for legal cigarettes has failed, according to a report released this morning.

That report states that ­tobacco consumption in Australia will rise this year for the first time since 2003.

Demand for cheap counterfeit and contraband cigarettes is accelerating, driven by excise increases on legitimate tobacco.

This is the risk of increasing the excise tax.

Don’t get me wrong. If one could wave a magic wand, you’d have a country where tobacco was never made legally available. Could you imagine the US FDA giving approval to a product that kills so many people, if you were applying for permission to introduce it as a new product. They’d never ever approve it.

However we live in a world where tobacco is legally available in pretty much every country on earth.

I’m supportive of measures to reduce the smoking rate, and price is definitely a good lever. However the experience in Australia does show that there may come a level at which rising the price via excise tax will be counter-productive as t will just push people from the regulated legal market to the unregulated illegal market.

The Tobacco Plain Packaging Act, passed in 2011, made Australia the first country to remove all logos, colour and design from cigarette packets.

But a report compiled by the international auditing firm, KPMG, and released exclusively to theHerald Sun, shows that while sales of legal cigarettes and tobacco have slipped slightly in the past 12 months, surging demand for counterfeit and contraband cigarettes and chop chop tobacco has more than made up that shortfall.

This is the big challenge of public policy – unintended consequences.

Three years ago, then prime minister Kevin Rudd announced a 25 per cent increase in tax on cigarettes along with the plain packaging plan, the government convinced the changes would slash tobacco consumption by 6 per cent.

But – based on the survey – smokers have been driven to purchase illicit tobacco products, none of which displays the mandatory health warnings.

If people want to smoke, they will find ways to do so.

But KPMG estimates that 1433 tonnes of illegal tobacco has entered Australia in the last 12 months, an increase of 154 per cent.

It calculates that illicit tobacco is 13.3 per cent of total Australian sales and getting towards a market share enjoyed here by the world’s biggest manufacturer, Imperial Tobacco.

That’s a huge proportion.

Tags:

Youth Drinking

August 5th, 2013 at 9:00 am by David Farrar

I was one of those who strongly opposed the recent attempt to increase the alcohol purchase age from 18 to 20. A hysteria had been generated about drinking in NZ, and especially youth drinking – and many blamed the change in the purchase age in 1999.

The reality is that a number of surveys had shown that youth drinking had declined, not increased, since then. Once these facts got out to MPs, I think it helped the majority of them make the sensible decision not to scapegoat 18 and 19 year olds.

One of the significant pieces of research is a study done by Auckland University every few years of almost 10,000 secondary students. Their 2000 and 2007 studies showed a significant decline in youth drinking during that period.

Well last week the 2012 study came out, and the data was fascinating. It showed beyond any doubt that there had been significant drops in the number of school students who drink, and who drink regularly or binge, since 2000.

schooldrinking

 

That is a seismic shift. It totally blows away the myths about youth drinking having got far worse, based on anecdotal stories and media horror stories.

  • The proportion of students who have drunk alcohol has dropped 25%, or around a third from 2000.
  • The proportion of students who are current drinkers has dropped 25%, just over a third from 2000
  • The proportion of students who drink regularly (weekly) has dropped 9%, just over one half from 2000
  • The proportion of students who have binge drinked (five or more in a session) in the last month has dropped 18%, or just under a half from 2000

Also of interest:

  • The proportion of students who have driven after drinking has fallen from 7.8% to 3.9% – a drop of a half.
  • The proportion of students who have been in a car with a driver who has been drinking has fallen from 27.8% to 18.4% – a drop of one third.

On the non alcohol side:

  • The proportion of students who have smoked cannabis dropped from 38.2% to 23.0%
  • The proportion of students who smoke tobacco weekly dropped from 6.7% to 3.2%
  • The proportion of students who have had sex dropped from 31.3% to 24.4%
Tags: , , , , ,

Smoking and health insurance

June 4th, 2013 at 12:00 pm by David Farrar

One of the reasons we have an excise tax on tobacco is because as taxpayers we have to fund the healthcare of those who smoke, and the rationale is they should pay for the costs of their choice – not us. And as it happens the level of tobacco excise tax is well above the level needed to cover the estimated costs associated with smoking.

This got me wondering about how the costs are calculated in countries where people generally pay for their own healthcare, such as the US.

So my question is, does anyone know what the difference is in premiums in the US for health insurance for a smoker and non-smoker?

Also does anyone know what the difference is in NZ for life insurance premiums between a smoker and non-smoker of the same age?

Tags: ,

Would this work?

June 1st, 2013 at 11:00 am by David Farrar

8744031

 

Stuff reports:

If the gory photos on cigarette packs and the threat of a hideous death weren’t enough, now an academic has come up with a grim countdown-to-death for smokers.

Smokers will literally be able to see the minutes of their life expectancy drop away with each smoke, if Massey University College of Health head Professor Paul McDonald’s idea gains traction.

He is proposing an idea in which each cigarette would be marked with six rings and a message saying each ring smoked past would take a minute off life expectancy.

If adopted, New Zealand would be the first in the world to print warnings directly on to cigarettes.

The idea is still in its infancy but a preliminary survey of 10 smokers by Prof McDonald showed it would have a “profound” effect.

I’d be wary of any study with just 10 people in it.

As with plain packaging, I’d trial ideas like this in a geographic region so one can establish whether smoking rates there change more than the rest of the country.

The Dominion Post asked four smokers if Professor Paul McDonald’s idea would encourage them to quit.

- Luke Eling, 23, a chef from Brooklyn: It wouldn’t help.

It’s killing you but you are going to die anyway, so bugger it.

I would see if I can smoke it faster than six minutes.

- Robbie King, 33, a body piercer from central Wellington: If it was actually true and you could gauge it like that, it may help. Yes, smoking can be bad for you but my grandfather lived till 97, smoking five times as much as me.

- Mark Speedy, 35, a milkman from Churton Park: It wouldn’t stop me. What if you have a heart attack? Is it a minute off that? Obviously not.

- Sue Barratt, 54, works in insurance, from Karori:

It probably wouldn’t. I still enjoy smoking – that’s the problem.

I do feel guilty about smoking, more than I used to.

I suspect most smokers already know it kills you.

Tags: ,

The plain packaging decision

February 19th, 2013 at 2:13 pm by David Farrar

For some reason the Government has been unable to e-mail out the official statements, so this is based on listening to the press conference. But the decision appears to be:

  1. New Zealand will follow Australia and legislate to allow for mandatory plain packaging of tobacco products
  2. The regulations to implement the law will not be activated until the conclusion of the WTO cases a number of countries have filed against Australia for its decision

 The second part of the decision is sensible. Implementing it prior to the WTO cases being concluded would just open New Zealand up to possible trade sanctions. As a country that has benefited from WTO decisions in our favour (such as apple exports to Australia), it is important we obey the rules we agree to.

In terms of the main decision to implement plain packaging, if legal, my views are:

  1. It is desirable and appropriate for the Government to take measures to reduce smoking rates, considering the cost to the health system of smoking, and the devastation to families by early premature deaths. Various policies have lowered the smoking rate massively over recent times.
  2. Tobacco is a dangerous addictive product that kills even if taken as intended. It is fundamentally different to say alcohol which is fine in moderation. Also in my experience the vast majority of tobacco users are addicted and desperately want to give up and regret they started. By contrast the vast majority of drinkers have no desire to give up alcohol, rightfully so.
  3. I do not like the precedent of the Government confiscating intellectual property such as brands from private businesses. Tobacco companies may not be popular, but they sell a legal regulated product. My concern is that various groups will use this decision to advocate plain packaging and confiscation of brands and intellectual property for other companies such as alcohol and “fast” foods and “fizzy” drinks. Make no mistake that this is on their agenda.
  4. Taking the competing beliefs of (1), (2) and (3), I would support plain packaging if it stops young people taking up smoking. Tobacco is different to other products and I believe the gains from fewer young people smoking outweighs the damage caused by the precedent of intellectual property confiscation.
  5. However there is no evidence that plain packaging will reduce the uptake rates of smoking, or the overall smoking rates. The so called evidence is laughable – basically a few surveys of teenagers asking them if they find plain packs less attractive than branded packs. Of course they say yes. That is very different from whether the pack design would affect their decision to take up smoking or keep smoking.
  6. My preference, as previously stated, was to trial plain packaging in one area of New Zealand, and compare to change in smoking rates to the control group in the other area. This would allow its effectiveness to be measured without being contaminated by other policies or initiatives such as increases in tobacco taxes. If it was shown to be effective, then  it would be rolled out to all of NZ and made permanent.

A science-based approach is far preferable to making a decision based on hope.

However the decision has been made, and will be implemented so long as legal under WTO rules we have agreed to. What my hope is that the Government will still at least try and monitor its effectiveness and see if it impacts smoking rates by trying to isolate the impact of plain packaging from other changes such as excise tax increases, or advertising campaigns.

Tags: ,

Trying to suppress free speech

October 26th, 2012 at 10:00 am by David Farrar

Bean Heather at Stuff reports:

A tobacco giant is being accused of illegally advertising cigarettes under the guise of a “public awareness campaign”.

The Health Ministry has received 14 complaints against British American Tobacco New Zealand’s “agree/disagree” campaign opposing plain packaging.

The complainants say the company’s campaign – which has included television, radio and print ads – breaches the tobacco advertising ban.

But the ministry has disagreed, with chief legal adviser Phil Knipe claiming that there were “insufficient grounds to support enforcement action at this time”.

Of course the complaints went nowhere. The ban on advertising of tobacco is designed to stop marketing of cigarettes – not designed to stop a company from voicing its opinion on a regulatory issue. I suspect those who complained know that.

As it happens I think the BAT campaign is stupid, and in fact likely to be counter-productive to their cause. So don’t think I am defending the campaign. But BAT have the right to voice their concerns over a proposed law.

The name of the company is very different to the name of a cigarette brand. I doubt 99% of those who smoke a BAT cigarette know whom BAT is.

Advertising Standards Authority chief executive Hilary Souter said she had also received complaints calling the campaign illegal, all of which had been referred to the ministry.

“Whether or not the ad is a tobacco ad is outside our mandate,” she said.

On Friday, the authority also dismissed five complaints against British American Tobacco (BAT) regarding other aspects of its campaign. Most complainants felt the campaign was misleading, confusing facts with opinions.

One complainant called it “an attack on the sovereignty of political discourse in New Zealand”.

Actually those trying to suppress the rights of free speech are the real attack on the sovereignty of political discourse.

Tags: , ,

Herald on plain packaging

April 28th, 2012 at 11:15 am by David Farrar

The NZ Herald editorial:

The Government has been persuaded to follow Australia’s decision requiring cigarettes to be sold in plain packs.

The theory seems to be that if all brands are forced into the same style of packet – perhaps a dirty light brown, dominated by health alerts and grisly pictures, the manufacturer identified in small type of a standard font – smoking will lose much of its remaining appeal. This must be the insult to trump them all.

Tobacco companies maintain plain packs will do nothing to reduce smoking and it is hard to disagree. Their business is not one of those that has to compete on artificial brand distinctions with a necessarily identical product. Smokers discern different blends and so long as they can find their preferred brand they are unlikely to care about the packet.

Social science claims to have found that cigarette packaging has some effect on younger people.

A recently published paper was based on group discussions and interviews with young smokers and non-smokers when they were shown plain white packs with prominent health warnings. They offered observations such as: “It looks so boring”, “it’s just budget … it’s like, lame”. Research of that sort insults everyone’s intelligence.

I’ve blogged on this myself. The research is far far from convincing.

Plain packs seem unlikely to bring the anti-smoking campaign much closer to its goal of a smokefree New Zealand by 2025. That goal, endorsed by the Government, could require much more drastic steps, especially in taxation.

A working paper produced in the Ministry of Health is said to suggest raising the cost of cigarettes to $100 a pack in order to reach the target.

The Maori Party seems particularly determined on the issue. With 44 per cent of Maori still smoking, more than twice the proportion overall, the party makes no apology for tax increases that hit the poor hardest.

A 12 per cent excise increase in 2010 is reckoned to have lowered tobacco sales by 10 per cent over the following year. Price is clearly the weapon that works, the only feature of a cigarette packet that counts.

If the cost needs to reach $100 a pack, and they are currently around $20, then they need to go up $80 a pack over 13 years, so an increase of around $5/year.

Tags: , ,

More on plain packaging

April 23rd, 2012 at 1:25 pm by David Farrar

Martin Johnson at NZ Herald reports:

The claim by New Zealand’s main tobacco companies that plain packaging will not reduce the prevalence of smoking has been dismissed by a researcher who tested the concept.

Okay, so what was tested.

One study Professor Hoek cited involved group discussions and in-depth interviews with 86 young adults, both smokers and non-smokers, about tobacco packaging including their views about sample plain white packets with expanded health warnings which they were shown.

“That just doesn’t look trendy at all … it’s just budget … it’s like, lame,” one participant said of the plain packaging, according to a paper published in the journal Qualitative Health Research last December.

Other comments included:

“There’s just nothing attractive with it. There isn’t a cool colour, there isn’t any kind of marking that would grab you.”

“For someone who’s starting smoking … it’d be a lot harder to identify with a brand if it’s just colourless.”

So let us accept that packaging can affect whether a packet looks trendy or cool.

The paper concludes that, given tobacco companies’ huge efforts to develop brands that appealed to young adults, “it is logical to assume that decreasing these appeals would, over time, reduce the behaviours they stimulate and support”.

But this is the leap of faith. It is all based on an assumption that having packets with less appeal, will lead to less people smoking.

The reverse psychology that as tobacco companies spend huge money on developing brands that appeal, then getting rid of the brands will decrease demand is also flawed. Because we do not know whether the brands attract smokers to that particular brand, or attract someone to become and remain a smoker.

That is what I’d like to see research on.

I would note that smoking prevalence has been dropping consistently, despite the more sophisticated branding compared to a generation ago.

If there is actual research showing that plain packaging reduces the smoking rate (as opposed to reduces the attractiveness of a packet), then there would be a stronger case for plain packaging.

Tags: ,

Plain packaging

April 20th, 2012 at 2:30 pm by David Farrar

Andrea Vance reports at Stuff:

The government is to forge ahead with a ban on branded cigarette packets.

Cabinet has agreed ”in principle” to introduce a plain packaging regime alongside Australia – but only after public consultation.

Associate Minister of Health Tariana Turia announced the move this evening, calling it ”a significant to our goal of making New Zealand smokefree by 2025.”

The open display of cigarette and tobacco packs in all dairies and other shops is banned from July 23 July this year.

”Plain packaging is the next step to ensure that once they are in the hands and homes of smokers, the packs don’t promote anything other than our serious health warnings and quit messages,” Turia said.

I’m not convinced that plain packaging does much to reduce smoking rates. If having a health warning and photos of diseased organs do not put people off smoking, I don’t see how removing (for example) the Rothmans logo will have any impact.

The arguments for plain packaging are here. Having read the review of the literature, I couldn’t see anything that was near conclusive. At best it seems to be “This might make them less appealing”.

I think the most effective measure is to keep hiking the excise tax.

I also worry about the precedent value. The wowsers want to already ban all alcohol advertising and sponsorship. Is the next step then to have plain packaging for alcohol? No brands for beer!

And then you have that lethal Coke substance. Will that be next for plain packaging?

As I said, I’m in favour of sensible measures which are effective in reducing smoking rates. But I’ve yet to see any evidence that plain packaging has a significant impact, and the precedent it creates may be one we regret.

Tags: ,

Anti-smoking spending

December 6th, 2010 at 1:00 pm by David Farrar

I’ve been sent a copy of an OIA response from the Ministry of Health about how many organisations receive taxpayer funding for anti-smoking programmes, and to what level. The OIA is embedded below.

MOH OIA – Tobacco Spend for Period 200809 200910 201011

As one can see there is a nice wee industry out there all funded by the taxpayer. Around 100 organisations getting around $50 million between them.

Now I’ve not got an issue with the total amount of funding. Smoking is highly addictive and helping people to quit or not start can be a good use of Vote Health dollars.

It is more the sheer number of groups that get funded. I’d rather have a few dedicated highly professional groups, than 100 or so. A large number appear to be Maori groups. Again, I’d rather fund one or two groups with a proven track record in reducing Maori smoking rates, than the 35 that have been getting funding.

The cynic in me wonders how much of the funding goes on lobbying for more money, and reporting on what they have done.

Tags: