Tobacco factoids

By Eric Crampton 01/07/2013


The Ministry of Health has an RFP out looking for an evaluation of their overall tobacco control policies; they want to know whether they could be more effective in getting to a zero-tobacco New Zealand by 2025.

Whether NZ should be Smokefree in 2025 is out of scope, but as it’s policy set by the Minister, it’s not really MoH’s job to commission somebody to suggest that the government’s priority is wrong here. Or, at least that’s how it should be. When the Government isn’t sufficiently anti-alcohol or anti-tobacco, there seems to be plenty of money to fund NGOs to urge the government to change its policy.

Anyway, one tidbit in their RFP, HT: @CarrickGraham:

The financial cost to society of smoking has been estimated to be $1.685 billion per annum (approximately 1.1% of GDP).  Major components of this cost include loss of productivity associated with premature, smoking-related morbidity and mortality, and preventable healthcare costs. Interventions that reduce the prevalence of smoking are cost effective actions that can reduce poor health outcomes and the associated costs to the health system.

A few points:

First, the $1.685b figure comes from the O’Dea report. In descending order, here are the costs they reported:

  1. $570m in reduced production from premature mortality, although smokers on average come from cohort with reduced average life expectancy and lower earnings even if they don’t smoke AND smokers bear the cost of this through reduced earnings;
  2. $470m in resources diverted for tobacco consumption: smokers’ spending on cigarettes net of taxes and net of the $180m in benefits that O’Dea reckons smokers get from their $650m in non-excise spending on tobacco;
  3. $350m in costs to the public health system (note that tobacco taxes are roughly three times this amount);
  4. $280m in reduced production from morbidity (although smokers bear the cost of this through lower wages);
  5. $15m from smoking-induced fires (some of which will fall on the fire department).

More than a quarter of total reported costs are smokers’ expenditures on tobacco. It’s the second largest component overall. It’s be kinda hard to tell that from the MoH summary though. Why do they keep pulling stuff like this?

So the only and substantial real cost to the public purse here is health care expenditures, which are more than compensated by excise paid and by savings to the superannuation system. The O’Dea Report agrees, noting that smokers are a boon to the public purse:

Without trying to calculate a precise estimate of ‘external costs’ it does seem reasonably apparent that the tax contribution of approximately $1 billion annually by smokers exceeds substantially the external costs of smoking which fall on non-smokers. If savings on pension costs from premature mortality of smokers were added as well the net fiscal contribution of smokers, to the fiscal gain of non-smokers, would be further increased.

I do hope that whoever winds up running the evaluation gives some thought to the cost-effectiveness of e-cigarettes in promotion of SmokeFree 2025. I wonder how John Key will pay for all the roads and stadiums without the net $650m/year or so that smokers contribute.