Will a pack of cigarettes costs £20 by 2020?

Australia’s radical step to increase tobacco prices to £20 a pack has prompted fears that a massive duty hike could be the next restriction imposed on UK retailers.

The Australian government’s newly-unveiled budget committed to increasing tax on tobacco by 12.5% per year until 2020. It means that a single pack of cigarettes will cost Australian smokers more than $40 (£20) in four years’ time.

Simon Clark, director of smokers’ group Forest, told Retail Express that tobacco prices will continue to rise in the UK – and that a move in the same direction as Australia cannot be ruled out.

“George Osborne has already committed to increasing tobacco costs with duty prices being inflation plus 2%,” he said, and added that whether Osborne goes above that level remains to be seen.   

“Punitive hikes in tobacco duty benefit no one apart from the criminals who sell illicit tobacco on the black market,” he said. “They penalise legitimate retailers and hurt law-abiding consumers.”

Retailers said high tax and legislation are already damaging the industry. “My tobacco sales are down, while papers and other accessories are increasing,” said Ashok Shukla of Parkstone Late Store in Poole, Dorset.

“This means one thing only: illicit tobacco is being brought into the market more and more. Everyday people cannot afford to pay higher prices, so they will turn to the people selling tobacco illicitly.”

Giles Roca, director general of the Tobacco Manufacturers’ Association, said it would not be surprising to see Australia’s latest change implemented here.

“The Government has long pursued a high tobacco tax policy, accounting for up to 88% of the price of some tobacco products,” he said. “The results of this are clear: one in three smokers buy their tobacco from non-shop sources.”

Roca also expressed concern that the UK copying Australia’s crackdown would have more severe consequences.

“The UK has much more porous and fluid borders than Australia,” he explained.

“Imitation would be fiscally irresponsible, and would boost the black market while damaging legitimate retailers.”

Paul Baxter, chief executive of the NFRN, agreed that any similar moves in the UK would lead to an increase in the illicit trade.

“There is already evidence in Australia that shows growth in sales of illegal and counterfeit tobacco when cigarette duty goes up,” he said.