The ‘saint tax’ on vaping

Hear me out: is it possible that when Rishi Sunak became UK prime minister he set himself a Brewster’s Millions-style challenge of getting support for the Conservative Party down to zero by the time of the General Election? Does he have brainstorming sessions in Downing Street late at night to identify the dwindling number of people who might still vote for him and discuss how to alienate them? ‘We’ve already lost the people who use disposable vapes, but there are still people who use refillable e-cigarettes’, you can just imagine him saying. ‘How do we needlessly annoy them? I’ve got it! Let’s tax e-cigarette fluid.’

And so chancellor Jeremy Hunt stood up today at the budget and announced ‘a new duty on vaping’ to be introduced in October 2026. It was a brief and sheepish announcement, with no mention of the rate of duty the government has in mind. But a Treasury document published shortly afterwards revealed that a 10ml bottle of low-nicotine vape juice (less than 11mg of nicotine per ml) will be taxed at £2. A higher strength bottle (up to 20mg per ml) will be taxed at £3. Even nicotine-free e-cigarette fluid will be taxed, at the lower rate of £1 per 10ml. VAT will also be charged on the duty, so the tax rate will be up to £3.60 per bottle.

Bottles of vape juice currently sell for as little as £1 and rarely cost more than £3. The government therefore intends to make vaping at least twice as expensive. For many people it will be three, four or even five times more expensive. This is the thanks vapers get for doing as they are told and giving up smoking. Sin taxes are bad enough, but this is a saint tax.

Hunt claimed that the new duty is intended to ‘discourage non-smokers from taking up vaping’. And perhaps it will. But if it discourages non-smokers from taking up vaping, it is surely bound to discourage smokers from doing likewise. This is exactly what economic studies of e-cigarette taxes have shown. I have written about them before and it is unthinkable that the wonks at the Treasury are not aware of the evidence. The sorry conclusion must be that the government knows that vape taxes lead to more cigarette sales and more smoking, but simply doesn’t care. With tobacco-duty revenue in decline since 2021 – despite huge raises in the tax rate – increased cigarette sales are a feature rather than a bug of this policy.

Like butter and margarine, cigarettes and e-cigarettes are direct substitutes. If you double the price of butter, people will buy more margarine. So it is with taxing e-cigarettes. Jeremy Hunt partially acknowledged this in his speech by promising yet another tax rise on cigarettes ‘to maintain the financial incentive to choose vaping over smoking’. But the Treasury’s policy costings reveal this to be a relatively trivial 40p on a pack of cigarettes, which does not come close to maintaining the differential. In any case, the rate of tobacco duty is increasingly irrelevant in a country where so many smokers have been priced out of the legal market. The going rate for a pack of fags on the black market is a fiver and there is nothing Jeremy Hunt can do about that.

The supposed tax-cutting budget was nothing more than an exercise in robbing Peter to pay Paul. By taxing e-cigarettes at a prohibitively high level, the government has shown itself to be not only deeply illiberal – that has been obvious for some time – but also to be cynical, greedy and spiteful. Its commitment to public health has been exposed as a sham. And Jeremy Hunt will go down in history as the man who taxed people for giving up smoking.

Christopher Snowdon is director of lifestyle economics at the Institute of Economic Affairs. He is also the co-host of Last Orders, spiked’s nanny-state podcast.