Regulate cigarette manufacturers like water companies - report

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The UK government could raise at least £500m a year by capping the amount of profit tobacco companies can make from cigarettes, academics have said.

They are calling for state regulation similar to that used to limit the price of water.

Writing in the journal Tobacco Control, they say reducing profits would allow for higher taxes without changing the price in shops.

However, the industry said the ideas "fly in the face of common sense".

Dr Robert Branston, from the University of Bath, said the tobacco industry was "incredibly profitable", with some companies making 67p in profit out of every £1 received after tobacco duties. He described that as an "incredible sum".

Some industries in the UK are already regulated to prevent companies taking advantage of a lack of competition in the market place. The regulator Ofwat reviews the price water companies can set and Dr Branston wants a similar organisation "Ofsmoke" to limit the profits made by tobacco manufacturers.

The report calculated the effect of limiting profits to levels achieved by food and drinks manufactures in Europe - between 12% and 20%.

Tax potential

Start Quote

Some popular cigarette brands are already taxed at nearly 90%, yet this report chooses to ignore this fact ”

End Quote Tobacco Manufacturers's Association

Even accounting for the cost of setting up a regulator and a fall in corporation tax paid by the tobacco companies, the researchers estimated there was a large amount of extra tax to be made.

"The results suggest that price caps could give the UK government scope to raise tobacco taxes by approximately £500m annually without affecting the price the consumer pays," they wrote.

The report said this was the equivalent of funding anti-tobacco smuggling measures across the UK and smoking cessation services in England twice over.

Dr Branston said: "How can you say it is a bad idea when people are dying? I think there's a lot going for this personally."

The Tobacco Manufacturers's Association said the industry was already high taxed and paid more than £12bn to the Exchequer in 2011-12.

It said: "Some popular cigarette brands are already taxed at nearly 90%, yet this report chooses to ignore this fact and instead concentrate on the profit of a legitimate industry which supports over 70,000 UK jobs.

"The tobacco industry supports any regulation which is necessary, proportionate and evidence-based, but not proposals such as these, which fly in the face of common sense."

Deborah Arnott, the chief executive of the charity Action on Smoking and Health, said, "Tobacco multinationals can continue to charge premium prices and make excess profits because their products are cheap to make, highly addictive and competition in such a highly regulated market is so limited.

"Capping their profits is not extreme, it's essential."

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