The new Government is committed to repealing a law change aimed at reducing smoking rates in New Zealand because of the potential impact on small retailers. Photo / Mark Mitchell
ANALYSIS
Putting tobacco lobbyists above the health of New Zealanders is how Labour leader Chris Hipkins framed one of the new priorities of the new Coalition Government - but is it that simplistic?
The Act-National and NZ First-National coalition agreements both pledge to repeal the previous Government’s moves to create a smoke-free generation, lower nicotine levels in cigarettes by 95 per cent, and shrink the number of tobacco retailers nationwide by 90 per cent.
National didn’t campaign on rolling back these changes, but the Coalition Government’s commitment is hardly a bolt from the blue.
National and Act opposed the law change in December last year, and while Act didn’t make a song and dance about it during the campaign, its alternative Budget banked additional revenue from reversing the law. The NZ First 2023 manifesto also called for repealing the changes “put in place by Labour to achieve an illusory Smokefree 2025″.
The move has unsurprisingly led to an outcry from public health advocates, but what unintended consequences might the law have on small retailers and the tobacco black market?
About 5000 New Zealanders die every year from a smoking-related illness, says the regulatory impact statement (RIS) on the law change.
Yearly increases in tobacco taxes have contributed to lowering the smoking rate, but inequities remain: in 2019/20, 10.1 per cent of those of European/other ethnicity smoked, compared to 18.3 per cent of Pacific people and 28.7 per cent of Māori.
Why are their smoking rates higher?
A clue from 2017 Ministry of Health research on young Māori women - more likely to have no high school qualifications and be unemployed - who smoke: “Young wāhine who smoked often had complex, challenging lives and used smoking as a coping mechanism for stress and were therefore reluctant to stop.”
The law change was passed in December last year. It was hailed as a world-first and a trailblazer for creating a smoke-free generation, which is now being copied in the UK.
It means that anyone born after 2008 cannot ever legally be sold tobacco.
It also chops the number of retailers allowed to sell tobacco from about 6000 to 600, effective from July next year.
And it severely cuts the amount of nicotine in a smoked tobacco product. A cigarette typically contains about 15mg of nicotine; the new law truncates this to 0.8mg, effective from April 2025.
Modelling (commissioned by the Ministry of Health and carried out by the University of Melbourne) showed that low-nicotine cigarettes would cut the daily smoking rate among Māori women aged 20 and over from 37.3 per cent in 2023 to 10.1 per cent in 2025, and to 1.3 per cent in 2030.
For non-Māori, it would fall below 5 per cent by 2025, which is the stated goal of Smokefree Aotearoa 2025 (though for all population groups).
Using slightly different measures than the ones passed into law, the modelling estimated the gain to be 594,000 health-adjusted life years (HALYs). Low-nicotine cigarettes alone achieved 97 per cent of these HALYs, the retail store restrictions 19 per cent, and the tobacco-free generation 12 per cent, the paper on the modelling says.
Would smokers just smoke more to get their hit if the nicotine level in their cigarettes was cut by 95 per cent?
A double-blind, randomised clinical trial tested this over a six-week period and found the group smoking very low-nicotine cigarettes smoked fewer cigarettes on average by week six.
The amount of nicotine in these cigarettes - ranging from 0.4mg to 2.4mg per cigarette - was considered by a select committee looking at the bill, which ended up recommending the amount of nicotine per cigarette (0.8mg) that was ultimately passed into law.
“The proposed amount is based on the available evidence of the effectiveness of different nicotine levels, statements from existing manufacturers of low-nicotine products, and possible testing uncertainties,” the select committee report said.
Health Coalition Aotearoa says it’s “just vile” to roll back the law, which would increase the Government’s tobacco tax take, and make it easier to fund tax cuts that give more to those who earn more.
Politics isn’t just about achieving the best outcomes in health, though, but a balancing act encompassing all of the things.
Critics said the same goal could be reached without killing off the local dairy and pushing more tobacco into the black market, which will fatten gang members’ wallets.
“When the local dairy is closed and you have to drive further, consuming more petrol, emitting more fumes, thank a Labour Government who didn’t protect these people and didn’t protect their livelihoods,” said National’s Dr Shane Reti at the bill’s third reading. “Corner dairies: you are expendable for the sound bite, the Labour sound bite.”
National proposed introducing each measure one at a time, starting with low-nicotine tobacco products which, as the modelling showed, was likely to be far and away the most effective at cutting smoking rates.
In her third reading speech, Act deputy leader Brooke van Velden added: “Rather than helping our communities, [the bill] is simply nanny-State prohibition that will cause more problems in our society because, in reality, the effect is it will create a large black market, it will kill off our community dairies, and it will increase illegal activity and harm in our communities.”
She said 80 per cent of small retailers selling tobacco will close, a reference to an estimate from the Dairy and Business Owners Group chairman Sunny Kaushal.
Van Velden added that state control of tobacco retail stores would have unintended consequences.
“If you’re moving a store further and further away from someone, they either have the ability to drive further, take a bus even further, or walk further, or they can go to their local gang member and get it from there. They can get it around the corner. And that is what will happen.”
Boosting business for gangs is also being cited by NZ First Cabinet Minister Shane Jones, who told Newstalk ZB: “Banning smoking would only enrich gangs through illicit cigarette sales.”
And Prime Minister Christopher Luxon said he also had an issue with prohibition, telling RNZ that it didn’t make sense that “a 36-year-old can smoke, but a 35-year-old can’t (in the year 2044)”.
He conceded that reversing the law would boost the Government coffers - by $1 billion over three years, according to Treasury forecasts - but claimed that wasn’t the main reason for scrapping it.
Treasury noted the uncertainty in its forecasts, though: “A number of these interventions have not been trialled extensively in other jurisdictions, and there is incomplete international evidence to indicate to what degree these collective actions will impact smoked tobacco consumption.”
In short - maybe.
The RIS specifically says that mandating very low-nicotine cigarettes is “likely to lead to an increase in the illicit market”.
It also says that prohibition for those born after a certain date was “more vulnerable to legal challenge”, presumably due to age discrimination, and that regulating the number and location of retailers “may be seen as paternalistic”.
Tobacco companies commonly push the idea that making cigarettes more expensive and harder to get will boost the black market.
An industry-commissioned report, by KPMG UK, found that the share of the black market has grown as excise tax increases pushed up prices each year. It was 9.2 per cent in 2017, 10.2 per cent in 2018, 11.5 per cent in 2019, and 12.1 per cent in 2022 (no reports were commissioned in 2020 and 2021 due to Covid).
Total illicit tobacco consumption dropped by 27 per cent since 2019, slightly less than the 30 per cent drop in legal smoking, meaning the proportion being smoked illicitly had gone up by 0.6 per cent.
Public health experts have challenged the KPMG UK report, saying it inappropriately assumes a large share of the black market for loose tobacco, which can be legally grown at home (up to 5kg) but not sold.
An Otago University study found the black market made up only 5.4 per cent of the total market share in 2021/22. The study was based on a survey of discarded tobacco packets, and how many of them were from overseas/smuggled. The survey was done at a time when the borders were mostly closed due to the pandemic, meaning there were fewer travellers’ cigarette packets mixing among the discarded ones.
A report released last month, by the University of Auckland’s school of population health, said there was evidence of a “downward trend in illicit trade in tobacco in NZ”.
It estimated the black market to be 8.4 per cent - about 143 million cigarettes in 2022 - of the total market, qualified however by “a high degree of imprecision”.
“Historically, there is little evidence that significant increases in the illicit tobacco trade in NZ have taken place in response to past tobacco control measures, despite claims from the tobacco industry and other interested parties this would occur,” the report says.
“For example, in 2019 the proportion of illicit tobacco was higher compared with other years, but this deviation in trend did not follow major increases in taxation on tobacco nor other new tobacco control policies.”
A public health expert briefing in 2021 on the black market said that less addictive and less appealing cigarettes “could theoretically create a demand for illicit products”.
“Yet the widespread availability of vaping products, which are likely to be cheaper and more accessible to many smokers than illicit tobacco from smugglers or illegal growers, is likely to limit the size of the illicit market in NZ.”
What does all that mean?
That there’s a lot of uncertainty, and that a valid argument could be made either way.
The NZ Association of Convenience Stores has claimed that tobacco sales account for up to 40 per cent of sales, while the Dairy and Business Owners Group says sometimes it can be upwards of 50 per cent.
The RIS on the bill noted: “Many told us it would have a severe and possibly terminal impact on their business. However, research suggests this impact may be overstated.”
It has also been claimed - and repeated by politicians - that strict tobacco control will hurt retailers because customers who buy cigarettes often buy other things like milk and bread.
A 2021 public health expert briefing on the tobacco industry’s influence challenges this: “An intercept survey of customers exiting convenience stores in Dunedin found that only 14 per cent of transactions contained tobacco, and most tobacco purchasers bought only tobacco; only 5 per cent of all transactions included tobacco and an additional non-tobacco item.”
The research was repeated in Wellington and Auckland with similar results: 14 per cent of transactions contained tobacco, and 6 per cent included tobacco and non-tobacco items.
The briefing continues: “Estimates suggest that the margin on tobacco products is around 6 per cent compared to an average of 24 per cent for the other convenience products.” The reference for the claim, however, is a 2016 report from two pieces of research in the UK.
A Save Our Stores petition opposing the law change was, also unsurprisingly, supported by British American Tobacco New Zealand and Imperial Brands.
The companies - which respectively make up about 60 and 30 per cent of the New Zealand tobacco market, worth nearly $3 billion in 2021 - said there was nothing wrong with “supporting the voice of New Zealand’s small convenience store owners being pushed out of business”.
As is often the case in politics, there was no certainty about the impact of the law as it was passed.
And there is no certainty about what we might lose, now that the Government has committed to repealing the law by early next year.
Derek Cheng is a senior journalist who started at the Herald in 2004. He has worked several stints in the press gallery and is a former deputy political editor.
Jobs data published this week came in at 12% of what economists expected.