Labor’s tobacco excise plan: bad politics, bad policy

Smokers not happy with SA Health's new policy

Smoking certainly has horrendous health and economic consequences, but Labor’s plan to tackle it through punitive taxation is misguided and mistaken, writes Terry Barnes.

Tobacco smoking arguably is the greatest avoidable cause of death and illness of our time. TheAustralian Health Survey of 2013 reported that 16 per cent of Australians still smoke daily – more,according to the latest Newspoll, than those who would prefer Bill Shorten was our prime minister.

Smoking kills about 16,000 Australians every year. According to a 2003 study by the Australian Institute of Health and Welfare, smoking-related conditions claim directly about 8 per cent of Australia’s total health expenditure, equivalent to $12.5 billion out of a total spend of $155 billion in 2013-14. This doesn’t include flow-ons such as shortened life expectancy and working capacity, lost productivity, and welfare and carer support costs.

Yesterday, Shorten, shadow treasurer Chris Bowen and shadow health minister Catherine King announced a future Labor government would continue annual 12.5 per cent increases in tobacco excise for a further four years from July 2017. The goal, says Labor, is to raise the taxation component of a packet of cigarettes to more than 75 per cent of the retail cost, consistent with what the World Health Organisation considers international best practice in tobacco control.

Labor says this would catch us up to the United Kingdom, France, New Zealand and 30 other countries. The rationale is simple: far more expensive cigarettes and other tobacco products would price them out of the reach of those who use them most, people in the less well-off reaches of Australian society.

Coincidentally, Labor estimates its excise haul would raise $3.8 billion in the current forward estimates period (2015-16 to 2018-19), and a whopping $47.7 billion over the next decade, raising the excise share of retail tobacco sales from 63 per cent up to 2016-17 to meet the WHO’s target.

Yes, smoking has horrendous health consequences for individuals and families, while also imposing crippling costs on our economy and society. But in both political and policy terms, however, Labor has badly misjudged its solution.

First, the politics.

Labor, the party of the poor and vulnerable, wants to introduce a regressive fiscal measure hitting that group very hard indeed. The Department of Health cites 2013 survey data showing that, while smoking rates continue to decline, people living in lowest socio-economic status (SES) areas were three times more likely to smoke daily than people with the highest SES areas, and smoking rates among unemployed persons remained steady over time. Furthermore, daily smoker rates are far higher for more marginalised people in our society, including people with mental health problems, prisoners and Indigenous Australians.

All of these groups are Labor’s natural constituency.

For many of these people, just giving up their smoking habit is a very difficult, if not an impossible choice, even with nicotine patches or other cessation aids. Indeed, this July, riots broke out in the Victorian prison system when it went smoke-free. It appears Labor hasn’t considered these side effects of its policy prescription.

When it’s also remembered that most of the lowest SES areas are in fact Labor seats, it’s obvious that for a great many Labor voters, Shorten’s taxing them so punitively is electoral folly.

So much so that Shorten was called out yesterday by his own Western Australia Labor senator, Joe Bullock.

“Why would we want to hurt our own voters?” Bullock asked.

And if Shorten was trying to wedge Prime Minister Malcolm Turnbull over potentially raising the GST rate “on everything” above 10 per cent, that’s another political own goal. All the Coalition has to do is recommit to stopping excise indexation at the currently-planned level to highlight how Labor is slugging its own supporters and, if so minded, it can simply pinch Labor’s revenue for its own budget bottom line at no political cost.

On policy, too, Labor also has been foolishly short-sighted.

Overall, daily smoking rates appear to be bottoming out: it’s still debateable from research to date whether Australia’s cigarette plain packaging regime, let alone the systematic excise hikes, have made a significant difference to those absolute rates. A few more years of data and a more nuanced policy might have been wiser.

More seriously, Labor’s excise sledgehammer leaves poorer smokers who can’t quit with two invidious options: either to surrender more of their scarce employment or welfare income to their nicotine habit, or to source cheaper cigarettes in a reinvigorated black market. Is that truly Shorten’s intention?

Labor has also completely ignored the fact that while nicotine is addictive, it is far less dangerous to smokers than the highly toxic chemical cocktail in tobacco smoke that is the real killer. Its excise plan would be far more useful if combined with giving smokers safe and affordable access to low-risk tobacco alternatives, such as e-cigarettes containing nicotine.

Nicotine is not legally available in Australia unless in “tobacco prepared and packed for smoking”. That includes nicotine-containing e-cigarettes and other “vaping” devices. Yet in the United Kingdom, public health authorities and the National Health Service promote e-cigarettes as emerging and far safer keys to helping people quit smoking manageably and forever. Surely Labor would have done better to look also at liberalising access to safer nicotine consumption but, for many if not all tobacco control advocates and politicians, fearful that this would undo years of good work, clearly that’s a step too far.

All in all, Shorten and Labor are well-intentioned but misguided and mistaken in wanting to tackle tobacco smoking more aggressively through punitive taxation. But policy not fully thought through, nor considered against its likely unintended consequences, is bad policy and bad politics. If this week’s Newspoll is any guide, they will have another term in opposition to get it right.