Tuesday 4 May 2010

Treasury on tobacco

The Regulatory Impact Statement for the recent tobacoo excise changes makes interesting reading (aren't Google searches wonderful?). Note especially that Treasury's less than impressed with thie RIS.
Treasury’s Regulatory Impact Analysis Team has reviewed this Regulatory Impact Statement and considers that the level of analysis presented is not commensurate with the significance of the proposals, which represent a significant increase of 33 per cent on manufactured cigarettes and 51 per cent on loose tobacco as a proportion of the price.

Information gaps include:
• The problem of equalisation is based on an assumed consumer switch from manufactured to loose tobacco due to an excise differential arising from changes to tobacco content in manufactured cigarettes. As this change does not trickle through in observed prices, it is not clear consumers are aware of the change in tobacco content (and be a reason for any behavioural changes) or that consumers readily switch between the two types of tobacco products;
• On equalisation, no alternative options have been considered. For example, the excise could be changed to directly link to tobacco content instead of product packaging;
• The problem of setting the rate of the excise, it is not clear that the rate will be set at the level that achieves the highest net benefit to society; 
Highest net benefit would weight consumption benefits appropriately; I see no attempt to quantify those forgone befits in the RIS.

As for the costs of smoking on the health system, according to the less than adequate RIS:
A 2007 estimate put the cost of smoking to the health system at $300 to $350 million per annum; however current work within the Ministry of Health suggests that figure may be as high as $1 to $1.6 billion per annum2.

FN2: Please note that this analysis is work in progress and methodological issues are currently being addressed.
Oh, it will be interesting to read whatever MoH finally produces here. I wish more of the press corps here would have noticed something odd with the "costs to the health system" jumping by more than a billion dollars since the last estimate; I've only seen blogs worrying about it.

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