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8 Regulatory approaches to tobacco products in Britain

8.1 The evolution of British laws and voluntary agreements
8.2 The regulation of nicotine, tar and additives in cigarettes
8.3 Anomalies in current nicotine regulation
8.4 Novel nicotine delivery devices from tobacco companies
8.5 Tobacco regulation in the USA
8.6 Future nicotine regulation in the UK
8.7 Economic effects of nicotine regulation
References

8.1 The evolution of British laws and voluntary agreements

Cigarettes are exempt from most forms of consumer protection legislation. This anachronistic situation has arisen, first, because cigarettes were already on the market when consumer protection laws were being developed and, secondly, because the extent of the harm caused by cigarettes to the consumer is such that they do not, and without radical changes probably cannot, meet the safety requirements imposed on other products.

On occasions when the tobacco industry has faced the threat of product legislation, its response has been to make voluntary concessions. Over the years, these have resulted in a complex set of regulations known as 'voluntary agreements', negotiated in private between representative bodies of the industry and government officials. The choice of voluntary agreements with, rather than legislation on, the tobacco industry also partly reflects a British tradition to seek solutions by consensus. However, whilst the voluntary system gave an impression of regulation and an air of respectability to the industry, it was fatally flawed both because it was industry led and because the partial controls involved were easily evaded. The agreements themselves were difficult to monitor and there were no real penalties for violations. For many years, the only exceptions to the voluntary agreement approach were in the areas of fiscal policy and in the supply of tobacco to children (which has been restricted by law since 1908).

The entry of the UK into the European Community (now the European Union (EU)) largely brought about an end to the voluntary system of control. The introduction of the single market in 1992 meant that laws affecting trade had to be harmonised, with the standard chosen being that providing the highest level of health protection. Hence, in situations in which the EU had legislated, the old voluntary agreement in that area would be superseded, requiring the UK to introduce legislation. In December 1998, the government produced the first ever White Paper on Tobacco, Smoking kills,1 which set out a wide range of measures to control tobacco, including support for the recent European Directive (98/43/EC) to ban advertising and sponsorship of tobacco products in the EU. The regulation of tobacco products in Britain is therefore currently undergoing a period of change, but throughout this century cigarettes have enjoyed a relative freedom from legislative control.

8.2 The regulation of nicotine, tar and additives in cigarettes

Filters, low tar cigarettes and the Federal Trade Commission test

Ever since health concerns regarding smoking were first raised in the 1950s, tobacco product manufacturers have responded by trying to make their products appear to be less dangerous.2,3 The first development in this respect was the introduction of filter tips in the mid-1950s, and subsequently ventilated filters in the 1970s. The second major development was the introduction of 'low tar' brands of cigarettes, a development which has continued to the present day, but which has failed to deliver substantially less toxicity.4.5 As discussed in earlier sections of this report, such initiatives may well have helped to keep people smoking by providing 'health reassurance'.

In response to health claims made by the tobacco industry for lower tar cigarettes, in 1967 the US Federal Trade Commission (FTC) established a standardised protocol for assessing tar and nicotine yields. Now commonly known as the FTC test, it was adopted by the International Standards Organization (ISO) and later broadened to include measurement of carbon monoxide (CO) yield. Routine monitoring of tar and nicotine yields of cigarette brands in Britain began in 1972, and in 1975 the industry agreed to display tar bands (high, medium, low) on packets.

Tobacco substitutes

Following the introduction of filter and low tar cigarettes, the tobacco industry considered the value of introducing synthetic tobacco substitutes into cigarettes. A proportion of the natural tobacco was replaced with material of lower biological activity, offering the prospect of reducing the toxicity of the cigarettes. Having abided by guidelines for the testing of substitutes,6 the tobacco industry marketed the first two major tobacco substitutes: Cytrel 361 and 'New Smoking Material' (NSM 14) in 1977. These were a commercial failure, and were eventually withdrawn. A large-scale epidemiological study to examine the long-term impact on health of these products was also abandoned as it failed to enlist an adequate sample of substitute cigarette smokers.

New voluntary agreements on tar reductions

Following the failure of tobacco substitutes in the 1970s, new voluntary agreements on product modification were drawn up in 1980, mainly with a view to achieving reductions in the tar yields of British cigarettes. The 1980 agreement adopted a target of 15 mg sales-weighted average tar yield (SWAT) per cigarette to be achieved by the end of 1983, and the 1984 voluntary agreement proposed a reduction of SWAT to about 13 mg per cigarette by the end of 1987. No limits for nicotine were set. It was suggested that CO yields should be reduced to the lowest possible levels.7 In the 1970s, it was also suggested that cigarette smoking could be made less hazardous by reducing tar and other toxins relative to nicotine.8 Although this was never explicitly adopted as a public health strategy, the UK government recognised its potential advantages in light of the compensatory nature of people's smoking. It therefore tolerated reductions in the average SWAT/
nicotine (T/N) ratio, which declined between 1972 and 1987.9

As stated above, following the UK's entry to the EU the voluntary agreements on reductions in tar yields were superseded by EU regulations. These have progressively reduced the tar yield of manufactured cigarettes, the most recent regulation stipulating an upper limit of 12 mg per cigarette by 31 December 1997. There is now a clear downward trend in nicotine yields in the UK - and indeed across the EU - in line with the enforced reduction in tar yields.

A separate EU directive on labelling required FTC/ISO tar and nicotine yields to be printed on the side of cigarette packets. It is not clear whether smokers notice this information or whether the information has any meaning to them,10 but this change led to the end of the tar band system in the UK. Tobacco companies began to use descriptive terms such as 'light' and 'mild' for lower delivery brands. Low tar cigarettes (defined as those yielding less than 10 mg tar) began to take an increasing market share.

However, FTC/ISO measures of tar and nicotine yields from cigarettes smoked by machines bear little relation to the actual amounts obtained from cigarettes by human smokers because, as argued in Chapter 6 and explicitly acknowledged by the FTC,11 they do not allow for compensation in smoking behaviour. It was also argued in Chapter 6 that there is no strong evidence of any reduction in actual exposure of smokers to tar since the 1960s. However, many consumers still believe that low tar cigarettes are safer.12

The introduction of additives

Prior to 1970, the use of additives in UK cigarettes was largely proscribed. The Finance Act (1970) enabled tobacco duty to be charged on additives and substitutes used in the manufacture of smoking products;6 this, in turn, enabled the Commissioners of Customs and Excise to relax the restrictions on the ingredients that could be used in tobacco manufacture. Statutory control over the materials used in the manufacture of tobacco products finally ceased with a radical revision of the tax system in 1978.

A voluntary agreement was concluded in 1977 in which the tobacco industry agreed not to introduce new products containing additives other than those found acceptable to the then scientific committee, the Independent Scientific Committee on Smoking and Health (ISCSH). The government stated, however, that it would amend the Medicines Act (1968) to control the use of tobacco substitutes and additives in smoking products in the UK if the need arose at any time.6

In 1978, a list of permitted additives was drawn up.6 The ISCSH recognised the potential value of using flavouring additives to improve the acceptability of low tar cigarettes, but stated that no additional 'dependence inducing' compounds could be incorporated into tobacco. It also recognised that additives could be used in the manufacture of cigarettes for technological reasons, provided they were safe, for example, to:

prevent the fall of ash
control the rate of burning, and
inhibit the formation of mould.

At that time, the term 'additive' referred to any substance added in the course of manufacture of a smoking product to alter the smoking quality, appearance or any other characteristic of that product. It excluded additives in filters, cigarette papers, filter wrappers, tips and overwrappers. The definition was extended in 1983 to include assessment of all parts intended to be burnt, so cigarette papers were then encompassed within the voluntary agreements.7

A further voluntary agreement for the approval of new additives to tobacco was agreed in 1997, replacing the 1984 agreement. While the advisory scientific committee of the Department of Health (DoH) (the Scientific Committee on Tobacco and Health) expressed a clear reservation about the possibility that additives could prolong the use of cigarettes by making them more palatable, the committee recommended only that the use of additives in tobacco products be closely monitored.12 The new voluntary agreement required tobacco manufacturers to provide toxicological and other data for any new additives that they wished to add to the approved list, but such information was not required for the 600 existing approved additives.

There has been no systematic evaluation of the overall public health impact of additives. Even if lacking direct toxicity, they may well add to the burden of harm caused by tobacco use by making cigarettes more palatable, attractive or addictive. Little is known about the potential harmful effects of many additives when they are burnt with tobacco or in conjunction with other additives. Even for new additives, no criteria are set out for measuring their public health impact.13 This is one of several highlighted areas of concern regarding the influence of additives on smoking behaviour.13

A further weakness of the voluntary agreement on additives is that it can be circumvented by securing approval for the additive in a different EU member state. Directive 83/189/EEC requires the DoH to 'raise no objection' to the use of an additive permitted in any other EU member state provided that certain specified information is supplied.13 However, recent cases in other areas indicate that there may be provision in the law for a country to refuse an additive that is allowed in another country.

Health warnings

In 1971, a voluntary agreement was drawn up between the industry and government which specified that cigarette packs for sale in the UK should carry a health warning. Subsequent agreements have extended and strengthened these warnings.

In 1991, the government announced a series of new, larger health warnings for tobacco packaging in line with EU requirements (Tobacco Products Labelling (Safety) Regulations 1991). By the new regulation, cigarette packs were legally required to carry two health warnings which should cover 6% of the relevant face of the pack (the minimum requirement under the terms of the Directive was 4%). All tobacco products were to carry the general warning 'Tobacco seriously damages health', and the additional warning was to be chosen from a set list of 15. The UK government rotates six of the 15 warnings, but none of these six includes the warnings related to addiction.

Although intended to discourage smoking, there is evidence that smokers pay little heed to health warnings and do not remember them. Paradoxically, health warnings may have given an advantage to the tobacco manufacturers because they can be used as evidence that consumers were warned, and hence as a defence in litigation.

Other nicotine containing products

Oral snuff. In February 1998, the UK government announced a ban on the supply and sale of oral snuff under the 1987 Consumer Protection Act. The regulations which prohibited the manufacture or storage (for supply to other countries) of oral snuff were challenged by the tobacco industry, but formed the basis for the later ban (89/622/EEC) on oral snuff throughout the EU.

Nicotine treatment products. Nicotine treatment products are regulated by the Medicines Control Agency, and are therefore subject to the rigorous regulatory standards and assessment governing pharmaceutical products in the UK (see Chapter 4, Table 4.2 for summary). Any additives must be disclosed by weight in each specific product, and their use justified. Most forms of nicotine replacement therapy are licensed for sale in only a restricted range of outlets, in the case of nicotine nasal spray only on prescription. This paradox arises from the fact that tobacco products are exempt from the regulations that apply to pharmaceutical nicotine products.

Conclusions

Nicotine regulation in the UK has so far mainly served the interests of the tobacco industry rather than those of public health. Low tar cigarettes, additives and health warnings have all been turned to the industry's advantage, despite the best intentions of government. The voluntary agreement approach has been discredited. European directives were a step forward in that they were mandatory, but they were built on measures such as the FTC/ISO test, which is now known to be crucially flawed as a guide to cigarette toxicity.11 A new regulatory framework for nicotine is urgently needed. The following sections discuss the challenges facing future regulators.

8.3 Anomalies in current nicotine regulation

While nicotine itself cannot be completely exonerated from causing adverse health effects, it is clear that its direct contribution to tobacco related harm is relatively minor. It is not nicotine itself, but the delivery of nicotine in combination with a multitude of combustion products that causes most of the deaths associated with tobacco use.14 Tobacco products, particularly cigarettes, are an exceedingly 'dirty' delivery system for nicotine.15 The existing regulatory structures give huge market-place advantages to tobacco products, effectively creating a 'nicotine maintenance monopoly'. Those who want or need nicotine on an ongoing basis have little choice but to obtain it from cigarettes - the contaminated delivery system, with an attendant 50% risk of premature death.16

Nicotine delivery products which do not qualify as tobacco products and are not pharmaceutical products are also at great risk of being banned pursuant to consumer protection and poisons laws (see below). The result of this regulatory environment is that tobacco products are given an overwhelming market-place advantage over the other nicotine delivery systems.4

There is an overwhelming case for ending this regulatory advantage. The present 'upside down' regulation framework for nicotine products should be adjusted to promote health, without relaxing the standards for medicines. Adjusting regulations to allow a wider range of more consumer-acceptable smoking cessation and smoking reduction products, and distinguishing between smoking cessation and nicotine cessation, may stimulate the necessary economic incentives to market products that would significantly reduce tobacco's death toll.

8.4 Novel nicotine delivery devices from tobacco companies

In addition to filters, low tar cigarettes and tobacco substitutes, less toxic cigarette-like nicotine delivery devices have been developed and test marketed by the tobacco industry.17,18 In the late 1980s, RJ Reynolds launched a new era of novel devices with a product called 'Premier',19 which was the size and shape of a cigarette. Premier used heat created by burning a piece of carbon at its distal end to vaporise nicotine and glycerine absorbed on to alumina pellets in an aluminium tube adjacent to the heat source. The rest of the device acted as a cooling chamber to permit the formation of an aerosol. Premier delivered doses of nicotine comparable to those of a cigarette with little other toxic material except large doses of CO. Its test marketing was cut short, however, in the face of poor sales, complaints about its taste and difficulty lighting, the threat of Food and Drug Administration (FDA) regulation as a drug, and reports that it could be used to smoke crack.20

Using much the same technology, RJ Reynolds has developed another novel product, marketed in the US as 'Eclipse'.21,22 In Eclipse, nicotine and glycerine are vaporised from an aluminium-lined chamber filled with a shredded paper derived from tobacco and mixed about 1:1 with glycerine. The proximal part of the device again acts as a cooling chamber. While toxin delivery is higher from Eclipse than from Premier, it is lower than that from most, but not all, marketed cigarettes.23 Once again, nicotine delivery is comparable to that of a cigarette, and CO delivery is very high. In addition, glass fibres from the insulator around the fuel element can become dislodged, and some are loosely adherent to the mouthpiece.24 A short-term study found evidence of reduced inflammation in the tracheo-bronchial tree among subjects smoking Eclipse compared to their usual brand of cigarette.25

Eclipse has been test marketed for three years. Many smokers tried the product, but few stayed with it. Claims have been made in advertisements for reduced environmental tobacco smoke, and that the product produces less smoke smell and stain than conventional cigarettes whilst still producing satisfaction.

Philip Morris has made similar claims for its novel product, 'Accord'. Accord consists of two parts: a specially constructed cigarette, and a unique lighter into which the cigarette must be inserted. Taking a puff on Accord activates one of eight radially arrayed heating elements in the lighter that scorches a narrow segment of the cigarette. These eight heating elements are activated sequentially. The aerosol from Accord has a chemical profile similar to that of Eclipse, except that it has a substantially lower yield of CO.26,27 As with Eclipse, sales seem to have been sluggish in test markets.

Were these products to be marketed with promises, direct or implied, of substantially reduced risk to health, sales might be expected to rise substantially. Whether these products remain niche curiosities or become major players in the market may depend on the claims that their makers assert for them. However, these novel nicotine delivery devices raise a number of regulatory concerns.5,28 One important question is whether the products have less toxicity than conventional products. A review of product design, chemical analyses and various toxicological studies could address the most basic aspects of this question. More difficult to answer, though, is the nature and extent of any long-term problems. Chronic toxicity may not be revealed in short-term tests, and products such as these could conceivably - as with 'light' cigarettes - make the overall problem worse by leading to a larger total market than would otherwise be the case.4,5 It will be especially important to regulate products such as these (as well as other tobacco products) in parallel with the regulation of medicinal forms of nicotine because of the interrelated nature of the overall market for nicotine delivery devices.4

An approach to this dilemma might be to grant preliminary approval for marketing of products such as these, based on a range of information and assurances from the manufacturers.5 Post-marketing studies by the manufacturer would be required so that adverse effects on public health could be detected and promptly corrected.

Similar regulatory issues are posed by the question of how to deal with a new tobacco curing process that substantially reduces nitrosamines.29 While the tobacco-specific nitrosamines are potent carcinogens, and clearly should be removed from tobacco if at all possible, publicity or marketing claims about this could raise false public expectations about enhanced safety.

The development of Eclipse, Accord and low nitrosamine tobacco indicates that potentially useful technological innovation for tobacco products is possible. This was also demonstrated by a report by the Imperial Cancer Research Fund and Action on Smoking and Health, showing that the tobacco industry had investigated and patented many technologies that would reduce substances in cigarette smoke that cause cancer, heart disease and emphysema.30

The challenge faced by public health authorities is how to both encourage and channel innovation so that it leads to real public health benefits by reducing the illness and death caused by tobacco products. Left to their own devices or, worse still, if only loosely regulated, tobacco product manufacturers have shown in the past that they will put profits ahead of public health in their use of innovations.

8.5 Tobacco regulation in the USA

In early 1994, the US FDA launched an investigation of cigarettes and smokeless tobacco products,31 with two sequential aims:

To determine if these products came within the jurisdiction of the FDA.
To regulate these products in ways that protected the public health.

Since the 1950s, the agency had occasionally regulated individual tobacco products on a case-by-case basis, but had never asserted jurisdiction over a whole class of products. The 18-month investigation led to an assertion of jurisdiction and proposed regulations.32 The jurisdictional determination was based on converging evidence that established that cigarettes and smokeless tobacco produced pharmacological effects, including addiction, in consumers, and that the manufacturers of these products intended these effects.

Industry manipulation of tobacco

Much of the evidence on which the agency relied was newly revealed as a result of litigation and indicated that cigarettes are highly refined, carefully engineered products. A substantial part of these data showed that the modern manufactured cigarette depends on numerous manipulations to produce a consistent product that reliably delivers doses of nicotine in the desired range.18

In testimony before Congress in March 1994, FDA Commissioner David Kessler compared the tobacco industry to the pharmaceutical industry in its emphasis on the bioavailability of nicotine and its exploration of nicotine analogues.33 He reported that cigarettes in the US market have contained gradually increasing nicotine-to-tar ratios, a phenomenon which requires substantial control over numerous aspects of cigarette design and construction. The FDA also found that the nicotine contents of the tobacco in three sub-brands of Merit (Philip Morris) were inversely proportional to the machine-measured 'tar' delivery of the sub-brands.32,33

The use of nicotine-rich tobaccos in cigarettes designed to have lower 'tar' yields has been a regular feature in the industry for decades.34 William Farone, a former director of applied research at Philip Morris, reflecting on his years in the business, noted:

Product developers and blend and leaf specialists were responsible for manipulating and controlling the design and production of cigarettes in order to satisfy the consumer's need for nicotine in lower yield products.

Blend changes were an especially important tool used to ensure desired nicotine levels.34

Dr Kessler also referred to the development of 'Y-1' tobacco by the Brown & Williamson Tobacco Company (a subsidiary of British American Tobacco).34,35 Using advanced biotechnology, the company engineered a strain of tobacco that produces leaf with a substantially higher nicotine content.

The Food and Drug Administration tobacco rule

The FDA made an initial determination that cigarettes and smokeless tobacco products fit the legal definitions of both drugs and devices. The agency decided to regulate them as devices since the rules for drugs would have required these products to be banned as unsafe. Following extensive public consultation, the FDA issued a final rule in August 1996.34

Since then, the matter has been in court. A district judge upheld the agency's jurisdiction, but an appeals court ruled in favour of the industry. The issue is currently before the Supreme Court, with a decision expected by June 2000. If the Supreme Court decides that the FDA has jurisdiction, the agency can proceed with regulation of tobacco products. If it rules against the FDA, the only way the agency can regulate tobacco products will be by the enactment of new legislation by Congress.

The FDA's initial regulations focused on preventing the uptake of tobacco use by young people. Their main features were modest limits on advertising, and a series of measures establishing a federal age of sale (18 years) and related enforcement provisions. However, under current law, the agency could regulate virtually every aspect of the production and marketing of tobacco products.5,36 It could establish minimum standards for the composition of these products, and require the disclosure of information to consumers about them. A key area would be the regulation of health claims for tobacco products. The false expectations generated by filtered cigarettes and 'light' cigarettes4,5 have made it clear that tobacco product manufacturers must be accountable both for the claims they make and also for the effects of these claims on the consumption of their products.

The FDA also regulates medicinal forms of nicotine. While tobacco products may never be subject to the stringent rules that are applied to medicines, it is possible for the agency to 'coregulate' nicotine delivery devices from tobacco companies, on the one hand, and nicotine delivery devices from pharmaceutical companies, on the other, to achieve optimal public health benefit.28

The Federal Trade Commission test

In September 1997, the US FTC solicited comments on proposed revisions to the FTC test, acknowledging the limitations of the existing test method. Their proposed revisions included:

measuring tar, nicotine and CO yields obtained under two different smoking conditions
public education to make smokers aware that any benefits of switching to lower yield cigarettes are small compared with quitting, and
a re-examination of the system at least every five years to evaluate whether the protocol is maintaining its utility to the smoker.

These proposals were strongly criticised by US scientists as not being sufficient either to provide consumers with accurate information or to give appropriate parameters for ensuring future reductions in harm. The FTC has now withdrawn the proposed new methodology and has suggested a rethink lasting 18 months.

8.6 Future nicotine regulation in the UK

The evidence reviewed in the preceding sections demonstrates that cigarettes are highly engineered drug delivery devices which remain largely unregulated. Steps have been taken in the US to bring cigarettes under the auspices of the FDA, enabling all nicotine containing products to be regulated by one body. The question now arises as to whether there is scope for similar regulation in the UK.

Regulation at a national level

A common regulatory framework for nicotine products could be introduced in the UK by an extension to pharmaceutical regulation, the Medicines Act (1968), to include all nicotine containing products, or by introducing new legislation to develop a new nicotine regulatory authority.

In the mid-1970s, the then Health Minister, Dr David Owen, made an attempt to bring cigarettes under the Medicines Act. Section 105 of this Act empowered the Minister to include by order in the Act any substance which, while not itself a medicine, nevertheless:
if used without proper safeguards, is capable of causing danger to the health of the community.

By tabling an order decreeing tobacco to be such a substance, the Medicines Act could be used to control cigarettes. These plans were dropped following ministerial reshuffles.

Regulation at a European level

In February 1999, Commissioner Flynn announced that the European Commission was considering legislation concerning tar, nicotine and CO yields, as well as new provisions to regulate additives and the labelling of tobacco products. This could also be a useful route to introduce an improved regulatory framework for nicotine products throughout the EU.

The scope of future nicotine regulation

Some broad conclusions can be drawn about the direction of future nicotine regulation:

It is clear that the FTC test should no longer be used as the basis for product regulation in the long term. New protocols for measuring cigarette emissions should take account of recommendations emanating from the 18-month review now underway in the US.
The concept of 'tar' as an undifferentiated whole is misleading, and should not be used for regulatory purposes. Tar has markedly different compositions between products which are likely to cause different degrees of harm. For example, most of the tar fraction from Eclipse is actually glycerine.
The branding of low tar cigarettes, using implied health claim terms such as 'light' or 'mild' is completely unjustified.
Tar and nicotine yields based on the existing FTC measurements provide no meaningful information for consumers and should be removed from the pack.
The use of additives in cigarettes was justified on the grounds that they might facilitate the acceptance of low-yield cigarettes. As low tar cigarettes have now been discredited, it is difficult to justify the use of additives on this basis.
Before meaningful regulation can be introduced, regulators need a detailed characterisation of cigarette products. A precedent for this has been set by the government of British Columbia.37
The separate regulatory systems for treatments and tobacco products have thus far given great advantage to tobacco. Cigarettes and other tobacco products should, in fact, be subject to the same safety requirements as any other drug delivery device.
For the future a common nicotine framework should be established to prioritise adjustment of perverse regulatory imbalances that favour the dirtiest nicotine delivery over cleaner forms. It could then enable common approaches to be established to test whether new product developments are in the public interest.

As nicotine contributes to harm from tobacco mainly by creating and sustaining addiction, but does not appear to make a major direct contribution to the adverse health effects of tobacco, there is some debate about the appropriate direction of future nicotine regulation. On the basis that nicotine addiction is the underlying cause of tobacco-related harm, some have argued that permitted nicotine delivery from cigarettes, as determined by absolute nicotine bioavailability rather than by machine-smoking yields, should be progressively reduced to a non-addictive threshold.38 Others have contended that, since the harm caused by smoking is mainly attributable to the contaminated delivery system (the cigarette) rather than to the drug itself (nicotine), regulation should seek to limit users' exposure to cigarette toxins (tar and gas phase components) while leaving nicotine itself largely unregulated.39 The future regulation of nicotine products needs to take account of these views, while seeking the most effective regulatory framework to improve the public health in Britain.

Conclusions

The measures so far introduced by governments to control the cigarette product have generally failed to deliver significant public health benefits. Technological developments in nicotine delivery systems point to an emerging convergence between products aimed at satisfying consumers' addiction and pharmaceutical cessation aids. In principle, these products should all, therefore, be subject to the same regulations. A coordinated nicotine regulatory framework has the potential markedly to reduce tobacco-related harms, and should be an urgent priority for the UK government.

8.7 Economic effects of nicotine regulation

One of the major arguments that has always been raised about any regulation of the tobacco industry has been the economic impact of such regulation. Particular concern has been raised about the potential loss of jobs and government revenue. What is the evidence of such economic impact, and can the potential impact of nicotine regulation be predicted?

Employment

The tobacco industry is itself only a small employer in the UK, with less than 12,000 employees in 1992. There have been large job losses in the industry, but this has been due to productivity changes through increased mechanisation, with any fall in domestic consumption being offset by increased exports. Although reducing sales in the UK as a result of any new regulation may result in some job losses in retail and other support industries, reduced tobacco consumption has other economic consequences. Those who stop smoking have more income to spend, and these changes in consumption habits also impact on employment. A study in the UK40 estimated that a 40% fall in tobacco consumption would result in a gain of 115,000 full-time equivalent jobs - the result of those quitting smoking spending more on travel, recreation, meals out and other services. These items of expenditure create more jobs than those lost from tobacco related industry.

Similar conclusions have been reached in other countries. A recent report from the World Bank41 concluded that a global fall in tobacco consumption would mean that 'more jobs are likely to be created than are lost'.

Tax revenue

Part of the adjustment to major declines in tobacco consumption will be some fall in tobacco tax revenue. While tax receipts have been boosted by increased tax rates in the last few years, over a longer time frame the real value of tobacco taxation has fallen. The importance of tobacco revenue has also fallen dramatically over the longer term as new sources such as Value Added Tax have been introduced. Thus, tobacco tax accounted for 29% of all expenditure taxes in 1960 and 12% of all government current receipts, but by 1995 the corresponding figures were 14% and 3.6%, respectively. Clearly, governments like to preserve their sources of revenue, but can recoup any shortfall from one source. Any reduction in revenue from the effects of regulation is likely to be gradual rather than sudden. Adjustment can therefore be planned by the government; as a result, long-term reduction in the real revenue yield is unlikely to have any major economic consequences.

Regulatory changes involve economic costs as well as benefits. In the main, the costs of changes in manufacture are borne by the industry, but additional resources may be required from government to enforce new regulations. Industry may well seek to pass on any cost of change through increased prices, which has the additional benefit of bringing further reductions in consumption and consequent increases in health benefits.

One potential cost may, however, be to increase incentives to smuggle goods from less regulated parts of the world. Analysis of the patterns of smuggling suggest that the issue is complex. Joossens and Raw42 found that within Europe it was the countries with the lowest rates of cigarette prices, rather than the highest, where smuggling was highest. It would seem unlikely therefore that changes in regulation would have a significant impact on smuggling. Also, the conclusion from most research is that the best approach is to tackle the crime of smuggling directly and at an international level.41

Other effects of smoking reduction

Reductions in smoking may have a number of other consequences. Clearly, people who stop smoking live longer, and are able to contribute to society for a longer period as well as being alive to draw on pensions and make use of health services. It is sometimes argued that there is some sort of economic loss if smokers choose to give up and benefit from a longer life. This argument could be extended to all policies which help to save lives, especially young lives. Clearly, balancing items such as contributions to tax and pensions and individuals' expenditure is one of fairness. The economic argument is around the use of scarce resources, and needs to take account of the value of the life both to the smoker and society. Prabhat and Chaloupka set out the value for money of tobacco control measures.41 Their figures do not specifically consider changes in regulation, but indicate that tobacco control measures are a highly cost-effective means of improving health in low-, middle- and high-income countries.

Conclusions

While economic impacts have been used to argue against tobacco control measures, independent research suggests that the overall economic impact of reductions in tobacco consumption is likely to be small, even for cigarette producing countries such as the UK. More specifically, the result of people stopping smoking in the UK will be lower demands on the NHS for treatment for smoking related diseases, and more UK employment. The government will get good value for money from additional policies to regulate nicotine, saving many lives at a small cost.

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Contents

Contributors, Foreword and Key Points
1 Tobacco smoking in Britain: an overview
2 Physical and pharmacological effects of nicotine
3 Psychological effects of nicotine and smoking in man
4 Is nicotine a drug of addiction?
5 The natural history of smoking: the smoker's career
6 Regulation of nicotine intake for smokers, and implications for health
7 The management of nicotine addiction
8 Regulatory approaches to tobacco products in Britain
9 Summary and recommendations

This page last updated on May 4, 2001