The old adage that there is no smoke without fire has taken on a sinister meaning in Australia after a series of arson attacks on tobacconists. The word “series” barely does it justice. “Endless succession” is closer to the mark. When a shop selling illegal tobacco was firebombed in Adelaide last Tuesday, it was the 16th such incident in South Australia and the 130th nationwide since the “tobacco turf wars” began last year. It was followed by another firebombing in Adelaide on Saturday, an arson attack on a gym in Melbourne on Sunday, two tobacconists set ablaze in Melbourne on Tuesday and a smoke shop in New South Wales being ram-raided and blown up yesterday. 

With drive-by shootings and murders in broad daylight, Australia’s black market in tobacco and vapes should be a cautionary tale, but it has received little attention in the Northern hemisphere. The root of the problem is obvious. Australia has the highest tobacco taxes in the world and has banned e-cigarettes entirely. The market for both products is now largely in the hands of criminal gangs who encourage shopkeepers to sell their products by telling them to “earn or burn”. 

One of the more peculiar elements of “public health” ideology is the belief that taxes and regulation do not fuel the illicit trade, but when your nightly news bulletins start to resemble something from Judge Dredd, that becomes difficult to sustain. Even the Australian Broadcasting Corporation (ABC), which makes the BBC look like GB News, has had to acknowledge that “excessively high” cigarette taxes are responsible for the self-described “world leader in tobacco control” becoming a basket case.

The idea of taxing and regulating nicotine products in a way that is normal in other countries is unthinkable to Australians

There is no end in sight for Australia’s tobacco turf wars and yet they could easily be ended by legalising e-cigarettes and bringing tobacco duty down to an affordable level. This, however, is the one thing that the government will never contemplate. The idea of taxing and regulating nicotine products in a way that is normal in other countries is unthinkable to Australians. Instead, they have normalised firebombings.

Is the UK heading in the same direction? Vapes are legal here but the kind of vapes used by over a million adults will be banned next year and tobacco taxes are prohibitively high. A close look at the data suggests that we have hit a tipping point. According to the government’s own figures, between 2021/22 and 2023/24 the number of cigarettes sold legally in Britain nose-dived from 23.5 billion to 16.3 billion, a decline of 31 per cent in just two years. In the same period, the amount of rolling tobacco sold — which had been steadily rising for decades — fell by 27 per cent, from 7.7 million kilograms to 5.7 million kilograms.  

This would be all well and good if the number of smokers had fallen to a similar extent, but there is no evidence for this. Figures published last month show that the smoking rate has continued to gradually decline, but there has been no sudden acceleration. In 2021, 13.3 per cent of British adults smoked. By 2023, the figure was 11.9 per cent. This is a fall of 10 per cent. 

Perhaps smokers have suddenly started smoking fewer cigarettes? Apparently not. According to the Office for National Statistics, smokers consumed an average of 10.6 cigarettes in 2022, slightly more than in 2018. 

The facts are plain but the government is in denial

It doesn’t take Miss Marple to work out what is going on here. After years of eye-watering tobacco tax rises, including a 19 per cent tax hike on rolling baccy last November, a large and growing number of smokers have been priced out of the legal market and have gone elsewhere. Fans of the Laffer Curve may be interested to know that despite the rate of tobacco duty rising sharply, tobacco duty revenue has fallen in the last two years, from an all-time high of £10.3 billion in 2021/22 to £8.8 billion in 2023/24. That is another £1.5 billion to add to Rachel Reeves’ black hole.

The facts are plain but the government is in denial. HMRC’s estimates of the size of the tobacco black market were extremely sketchy for years, but even those meagre efforts came to an end in 2020. Since then, its estimates have been “projected” based on loose estimates from 2019. If you take these figures seriously, there has been a slight decline in both the share of the market that is illicit and the amount of tax revenue the government has lost due to illegal sales. This still produces figures of 14.5 per cent and £1.7 billion respectively, which is not chickenfeed, but it is surely a massive underestimate and most of it is due to contraband rolling tobacco. HMRC’s estimate of the illicit trade’s share of manufactured cigarettes — by far the biggest part of the market — is laughable. They reckon that it hit a record low of 6.9 per cent in 2022/23.

No one who smokes or spends any time with smokers can possibly believe this. The best way to estimate the size of the tobacco black market is to look at cigarette packs. You can do this yourself wherever you see people smoking (the giveaway is if the health warnings are in a foreign language or there is no plain packaging). Empty pack surveys, in which discarded cigarette packs are collected from streets and bins, are the gold standard and are used by KPMG to estimate the size and nature of the tobacco black market. Their figures suggest that 26 per cent of the cigarettes smoked in the UK in 2023 were counterfeit, contraband or bought abroad. Only France and Ireland — which, like the UK, have exceptionally high tobacco taxes — have a bigger black market. This has the greater ring of truth, but the research is commissioned by tobacco companies and so tends to be ignored.

The tobacco industry has every reason for wanting to know how much counterfeit tobacco is out there. The government, hellbent on prohibition, has every reason to stick its head in the sand. There has been no impact assessment of the effect of the generational tobacco ban on black market sales and the government refuses to commission the empty pack surveys that would show the scale of the problem today. We have sleepwalked into an avoidable crisis and will go on sleepwalking until the first firebombing wakes us up.