Chancellor John Healey has been warned that a tobacco tax raid in this month’s Budget would be a “bonanza” for criminal gangs selling black market cigarettes. The Freedom Association is calling for a freeze in tobacco taxes amid claims that “rogue” shops on Britain’s struggling high streets are selling “illicit tobacco, illegal vapes and counterfeit goods”.
Black Market Prices Undercut Supermarkets
A 20-pack of cigarettes bought in a supermarket now costs between £13 and £20. In contrast, illegal packs were last year trading hands for between £3 and £7.
David Campbell Bannerman, chairman of the Freedom Association, said: “More swingeing increases in tobacco taxation will be totally self-defeating, cutting the tax take and playing into the hands of smugglers and criminals by encouraging more people to resort to the black market. With the explosion in dodgy vape shops and mini marts in recent years, the average high street is turning into a permanent crime scene. If we want to push back against money launderers and black marketeers, we should hold down prices and give law-abiding shopkeepers a chance to stay afloat.”
Health and Industry Concerns
The Local Government Association warned in 2021 that fake cigarettes had been found containing “asbestos, mould, dust, dead flies, rat droppings and human excrement”.
In June this year, tobacco company Philip Morris International reported that research it commissioned from KPMG found “13% of cigarettes are purchased abroad legally, whereas 32.3% are counterfeit or contraband”. However, Action on Smoking and Health argues that consumption of illicit cigarettes has plummeted since the turn of the century and alleges “exaggerated claims about the black market are being used in an attempt to undermine tobacco taxes”.
Impact on Legitimate Retailers
Mr Campbell Bannerman insisted: “Every illegal sale hands another advantage to rogue operators over the honest independent retailers that high streets depend on. These shops can absorb seizures and fines as a cost of doing business, restock quickly and carry on trading, while legitimate businesses struggle to compete.
“Reviving Britain’s high streets means making them hostile territory for black-market traders. Driving more customers towards shops selling illicit products would achieve precisely the opposite.”
A tax hike that came into effect this month was expected to add £1.21 to the price of a packet of 20 cigarettes. According to HMRC, total tobacco duty receipts for 2025-26 were £7.6 billion, £359 million lower than the previous financial year.
Calls to Halt Further Increases
Tim Scott, chief executive of the Freedom Association, pointed to a spate of arson attacks on tobacconists in Australia in what he claimed was a “turf war”. He said: “Another big rise in taxes would be completely in the wrong direction. It is well known that the black market is booming on Britain’s streets. If the Prime Minister is serious about wanting to put the traditional high street back on its feet and tackle the criminality in its midst, he should tell the Chancellor to forget about hiking tobacco taxes again.”
A Treasury spokesperson said: “As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals.”
