Sunday, 7 April 2013

Smokers' Corner

Hello. My name is Kostas Economides and I am a lecturer in the Department of Economics at the University of the South of England (USE for short). Well, actually that is not true really as the names of individuals and institutions in this blog have been changed to protect the innocent - and the guilty!

We had an email the other day from the Dean to remind those of us who smoke that they shouldn't smoke within 20 metres of the entrance to the building. Ideally they should go to the special smokers' shelter next to the bike sheds.

As I am not a smoker it doesn't affect me directly, but I do agree that it is not very pleasant entering or leaving the building when you have to pass through a haze of smoke from people smoking close to the entrance.

It is interesting to see who the smokers are. Gus reckons that there is over representation from Heads of Department and faculty managers (but not the Dean herself, of course). Gus says that he hasn't established the direction of causation - do they smoke because of the extra pressures that they are under or are people who smoke more ambitious? Anyway, he suggests, most of the key policy decisions are probably taken by the little smoking group outside the building before later getting nodded through at the Faculty Executive Committee.

It is interesting to see who smokes what too. Some seem to go for vey upmarket brands, while others prefer to smoke rather weedy roll your own ciggies. There is even a pipe smoker amongst them who likes vanilla flavoured tobacco.

The university has a heavily promoted "Smoking Cessation Programme". Whay can't they just call it a "Stop smoking" or even a "Quit smoking" programme? I sometimes wonder what it consists of. Do they provide free nicotine patches, special hypnosis sessions or is it just individual or group counselling?

I'm lucky, I suppose, that I never started smoking as we all know that nicotine is highly addictive and it must be difficult to kick the habit once you have been smoking for a while.

I do remember one of the lecturers who taught me when I was a student who managed to give up - but he then seemed to get through about four packets of mints every day.

It must cost a lot of money to smoke these days. I decided to look online to find out. I came across an interesting website for the Tobacco Manufacturers Association (TMA) at They say that popular brands now cost an average of £7.98 for a packet of 20. So if you smoke 20 cigarettes a day that would be nearly £56 a week or about £2900 a year. That is a lot of money -- more than I spend on coffee for sure!

Actually there is a lot of very interesting information on the TMA website, although of course they try to use the information there to lobby for reductions in tax and excise duty. Apparently 77% of the price of a pack of cigarettes goes in tax and duty. The total tax revenue from cigarette sales in the UK in the tax year 2011-2012 was about £12.1 billion - £9.5 billion in excise duty and £2.6 billion in VAT.

According to the TMA about 20% of the population over the age of 16 are smokers. That works out to over 10 million people. This is down from 27% in 2000. They also refer to the effect of the "duty escalator" which was introduced in 1993 which automatically put up cigarette prices by more than the rate of inflation until 2000 when it was temporarily put on hold. Because of the rapid rise in the price of cigarettes over this period the TMA argue that there was also an increase in what they call Non UK Duty Paid (NUKDP) consumption - that is cigarettes legally brought in from other EU member states where prices are lower, or smuggled in illegally. This could mean that HMRC missed out on up to £3 billion of tax revenue over that period.

I know that one of the exercises that students taking the econometrics module have to do is to model cigarette demand with a view to estimating the price elasticity of demand for cigarettes. Of course because of their addictive nature this is quite small (cigarettes are price inelastic). There has always been a debate about whether the large excise duty is there to deter consumption or just to raise tax revenue. To be fair, the government has spent a lot of money over the years on anti-smoking propaganda and forcing cigarette manufacturers to display ever stronger messages about the negative health effects of smoking. And now cigarettes must be hidden away from public view in shops and supermarkets. Let's hope it works - although it will make it harder for our students to model the effects of these non-quantitative factors. But that will just make it a more interesting task!

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