When the New Zealand government announced its intentions to effectively ban cigarettes, it set in train a potentially bizarre trend in tobacco policy. Before New Zealand had even implemented its policy and given others the chance to see if the policy worked, the UK announced its plans to follow suit with an age-based sales ban.
Since then, a new government in NZ has announced the legislation will be repealed. Which leaves the UK, should it continue down this route, to find out if this policy will be effective.
Smoking has always been a tough issue for governments to take on. In the case of the age-based sales ban, the headlines focus on saving youth from picking up the deadly habit. However, the data reveals that youth have for the most part already stopped smoking.
Youth smoking rates have declined dramatically over the last decade, to the point where smoking amongst the young is on the verge of ceasing to exist. In New Zealand only 1.1% of 14 year olds smoked daily in 2021. This is down from 15% in 2000. The same trend exists in the UK. 3% of 15 year olds smoked regularly in 2021, down from 5% in 2018 and 30% twenty five years ago. Vapes have a part to play here, but as for smoked tobacco, this is an effective win for public health.
So what is the purpose of this novel policy to ban kids from smoking tobacco when they’re stopping taking it up on their own? Cigarettes are no longer cool.
From the prohibition of alcohol in the 1920s to the ongoing and unsuccessful war on drugs, history has taught us that banning the supply of a good without addressing the underlying demand does little to tackle the fundamental problem. It simply moves the source of supply from legal to illegal sources. Especially when the law can be easily thwarted (like asking someone born a year before you to buy your cigarettes), consumers who want a product will find ways to access it. On top of that, those willing to supply the product illegally have an increased monetary incentive to do so. If reducing tobacco consumption is the goal, then it is demand, not supply that governments should be focused on.
Evidence from many countries’ attempts to ban tobacco products illustrates how supply-side policies play out in practice. Bhutan in 2010 became the first country in the world to ban the cultivation, manufacture, supply and sale of all tobacco products. Despite the prohibition, the intended decline in smoking did not materialise, with the smoking rate remaining at a high 24.8% in 2014, only declining marginally to 23.9% in 2019. How? Supply simply switched from the legal to the illicit, the government lost excise revenue and the financial benefits flowed to those smuggling tobacco across the Indian border. Smuggling became such a problem that the ban was removed in 2021.
Similarly, South Africa, as part of its national COVID-19 response, banned the sale of all tobacco and vaping products between 27 March and 17 August 2020. Supply immediately shifted from legitimate retailers to illicit sources and an estimated 93% of smokers continued to purchase cigarettes from spazas, corner stores and social media fora, in spite of the ban.
Canada created a similar black-market boom in the 1990s when it quadrupled excise tax to disincentivise smoking. Cigarettes smuggling soared, to the extent that illicit tobacco gained a 60% share in some states and smoking rates remained unchanged. In the wake of black market-related crime and other social issues, policing costs and lost revenue, the Government resolved to cut excise taxes.
More recently in 2019, Massachusetts instated a ban on flavoured tobacco and menthol cigarettes. The reduction in legal sales was matched by a corresponding increase in sales in neighbouring states, as smugglers imported the products to supply the market.
When the NZ government came up with the age-sales ban, academics modeled the lives that would supposedly be saved, without accounting for the inevitable switch to illegal supply. In the real world:
a) the number of youth smokers trying to pick up the habit is nearing zero; and
b) as for the remaining percentage who still want to smoke, the invisible, illicit hand will sell them a cigarette if they want it.
But if the UK wants to spend time and resources to find that out for us all over again, all power to them.
About the author
Philip Barry is a director of independent economics advisers TDB Advisory Ltd (TDB). In 2022/23, British American Tobacco, Imperial Brands, and Japan Tobacco International commissioned TDB to undertake a cost-effectiveness review of New Zealand’s Smoked Tobacco Amendment Act.