A nasty surprise for Tariana – non-smoking is bad for the health of the Govt’s finances

The sooner they start smoking, the less likely it is they will become superannuitants.

It’s as Alf has long suspected. Smokers are doing the taxpayer a favour. They are helping to get the books back into surplus, too.

The more the merrier – for the health of the financial statements, anyway.

Discouraging them from smoking, accordingly, is to do the taxpayer a disfavour.

The grandmotherly Tariana Turia, fair to say, has her heart in the right place.

But someone has to tell her (a) she is becoming something of a harpie, as she rails against smoking and the tobacco industry; and (b) she is championing a cause that is increasing the tax burden on Alf’s (and other MPs’) hard-working constituents.

Alf’s thinking on this, which did not go down well with Tariana when he had a natter on the matter, is fortified today by a Treasury report that has been flushed into the clean open air. It acknowledges that smoking actually saves the Government money in the long run.

Radio NZ has picked up on it (here) and broadcast its contents to the world.

The fiscal benefits of smoking have long been suspected but rarely acknowledged and a report by Treasury now puts this on the record.

In its report, Treasury says smokers often die earlier than non-smokers and save the state in superannuation costs.

Treasury says smokers pay $1.3 billion a year in excise which may already exceed the direct health costs they impose.

The report – Alf is delighted to tell you – goes on to consider broader economic questions.

It says smokers’ shorter life expectancy reduces superannuation and aged care costs, meaning they are already “paying their way in narrowly fiscal terms”

The report was prepared for last week’s Budget decision to raise the tax on cigarettes to discourage smoking.

Excise increases will lift the price of an average pack of 20 cigarettes to more than $20 by 2016.

The tobacco industry was none too happy with the increase. And according to a Herald report, they have sounded a warning.

Tobacco companies claim the tax hike will drive tobacco into an unregulated, untaxed black market.

Exactly. We can expect women smokers to be turning to prostitution to pay for their habit, and the smoking equivalent of sly-grog dens, and Black Power and other gangs making a mint from illicit tobacco supplies.

If this be so, the Government will be losing even more than it is bound to lose by weaning smokers off their habit.

The medical fraternity, of course, seized on the higher baccy taxes as good news.

The NZ Doctor dutifully recorded the key facts – tobacco excise taxes will increase by 10 per cent a year on 1 January in each of the next four years as part of a wider government programme to prevent young people from taking up smoking and encourage existing smokers to quit.

This will be in addition to the annual inflation-indexed increases in tobacco excise, and follows a 40 per cent increase in excise since April 2010.

But as well as cutting down on the revenue-gathering side of the Government’s frail finances, Budget 2012 further throws us into deficit by providing $20 million over the next four years for a new innovation fund, Pathway to Smoke-Free 2025, for programmes to discourage smoking uptake and help more New Zealanders give up.

“These measures will help improve the health of New Zealanders, reduce the long-term burden on the health system, and contribute to the Government’s goal of making New Zealand smoke-free by 2025,” Mrs Turia says.

By then the whole problem of having too many old farts living off NZ Super, and not having enough workers to provide the wherewithal to fund the pensions, will be all too acute.

So what sort of a dent in the Government’s books can we expect?

A substantial one, because (says Tariana) –

“We know that for every 10 per cent increase in the price, tobacco consumption falls by about 5 per cent. Many smokers will quit and many more will reduce their tobacco consumption.

“We also know that over 80 per cent of smokers wish they had never started smoking and that around 70 per cent have been actively trying to quit.”

She then went on to say –

On the plus side, I no longer have to pay taxes.

“The ill-health and premature loss of life caused by smoking – particularly among Māori – is an outrage and is entirely preventable. It hinders economic and human growth in our country and costs millions of dollars in healthcare.”

Dunno why the supply of tobacco should be a particular outrage for Maori. Because they are special, presumably.

But as the Treasury report shows, it’s the net effect of smoking that matters, fiscally, and a Government determined to get its books back into surplus should be encouraging more smoking, not less.

Alf accordingly is in favour of policies to encourage the habit, especially among Labour and Greenie voters.

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