In London, a startling trend has emerged in the tobacco market, with legal sales plummeting by nearly half since 2021, despite only a marginal decrease in the number of smokers. The number of cigarettes purchased through legal channels has seen a sharp decline of 45.5% between 2021 and 2024, while the number of smokers has only dropped by 0.5% during the same period. These perplexing statistics point to a significant surge in black market tobacco sales, raising concerns about the potential implications for public health and government revenue.
Expert analysis provided by Dr. Christopher Snowdon from the Institute of Economic Affairs sheds light on the gravity of the situation. According to Dr. Snowdon, official figures released by HMRC reveal a substantial increase in illicit tobacco sales in the UK over the past few years. The data indicates a drastic drop in the number of duty-paid cigarettes sold, plummeting from 23.6 billion in 2021 to 13.2 billion in 2024, marking a decline of 44.4%. Similarly, sales of duty-paid hand rolling tobacco (HRT) have fallen from 8.6 million kilograms to 4.5 million kilograms, a decline of 47.6%. These figures underscore the alarming trend of dwindling legal tobacco sales amidst a steady smoker population.
The Rise of the Black Market
The unprecedented decline in legal tobacco sales poses a significant challenge to the government, especially considering the relatively stable smoking habits observed among the population. Despite research indicating consistent daily cigarette consumption averaging around 10.5 cigarettes per smoker since 2020, the substantial drop in legal sales cannot be attributed to reduced smoking habits alone. The graph illustrating changes in the number of smokers and legal tobacco consumption since 2021 paints a stark picture of the shifting landscape in the tobacco market.
The sharp increase in tobacco duty rates implemented between October 2021 and October 2024 has further exacerbated the situation, with minimum excise tax on cigarettes rising by 39% and duty on HRT increasing by 76%. Paradoxically, these tax hikes have not resulted in higher revenue; on the contrary, cigarette duty revenue has decreased by 20% and HRT duty revenue by 19%. This downward trend in tobacco duty revenue, dropping from £10.4 billion in 2021 to £8.4 billion in 2024, underscores the urgent need for government intervention and policy reform to address the growing prevalence of black market tobacco sales.
A Call to Action
The alarming statistics surrounding the surge in black market tobacco sales serve as a wake-up call for government officials and policymakers. Dr. Snowdon highlights the disparity between official estimates of the tobacco tax gap and the reality on the ground, emphasizing the need for more robust data collection and analysis to combat illicit tobacco trade effectively. Despite claims from pressure groups like ASH suggesting a consistent decline in the illicit tobacco market alongside rising taxes, the evidence presented paints a starkly different picture of the situation.
As the Tobacco & Vapes Bill progresses through Parliament, the discrepancies in tobacco market data and the growing prevalence of black market sales underscore the critical need for accurate assessment and targeted interventions. Without a comprehensive understanding of the scale and impact of illicit tobacco trade, efforts to curb its growth and protect public health remain compromised. The onus is now on policymakers to address this pressing issue and safeguard the integrity of the tobacco market for the benefit of both consumers and government revenue.
The surge in black market tobacco sales in London and across the UK presents a multifaceted challenge that demands immediate attention and decisive action. With legal sales dwindling, revenue losses mounting, and public health implications looming large, the need for a concerted effort to combat illicit tobacco trade has never been more urgent. By addressing the root causes driving the growth of the black market and implementing targeted strategies to curb its expansion, policymakers can work towards restoring integrity to the tobacco market and safeguarding the interests of both consumers and the government alike.
