Reducing tobacco supplier profits and pricing power: Modelling the impact of a tobacco price cap and tax increase on socioeconomic inequalities in England

Background

The tobacco industry generates substantial profits from products causing significant health and societal costs. These profits enable the industry to use pricing as a flexible marketing tool. Consequently, calls exist for a scheme to cap wholesale tobacco prices and offset this with higher taxation, reducing price variation and potentially raising revenue. This study models the health and economic impact of such a scheme in England.

Methods

We used the Sheffield Tobacco and Alcohol Policy Model, an individual-level microsimulation, to project tobacco consumption, spending, and health outcomes for adults in England aged 18–89 from 2025 to 2044. We investigated six scenarios for a wholesale price cap and concomitant tax rises, comparing outcomes against a business-as-usual scenario.

Results

Outcomes varied with the price cap level; lower caps and higher tax rises yielded larger behavioural effects, particularly for the most disadvantaged quintile. All scenarios showed a narrower market price range, lower smoking prevalence, higher tax revenue, reduced mortality, and fewer hospital admissions. Industry revenues declined, while consumer expenditure remained largely unchanged. An immediate hard cap could generate £4.9 billion by 2029 and, by 2044, 1,636 fewer deaths, 43,987 fewer years of life lost, and 10,073 fewer hospital admissions. Sensitivity analyses show health benefits are robust, although stronger consumer responses slightly reduce tax revenue while increasing health gains.

Conclusions

A tobacco wholesale price cap and tax increase scheme could raise substantial tax revenue, improve health, and reduce health inequalities, whilst limiting the scope to use price as a marketing tool.