Deflation without Tears So we smoked no less than 2.400
million fewer cigarettes last year than in 1964—a reduc- tion (if my arithmetic is right) of a little more than one cigarette per adult per week. This is the second year running that cigarette smoking has declined. It's also the second year running that the tobacco tax was increased. Which re- minds me of a pregnant comment little noticed at the time—made by the pundits of the National Institute of Economic and Social Research after last year's Budget.
'The effects of increasing taxes of this kind,' the experts pointed out, 'can be peculiar--and this particularly applies to tobacco, where, even before the last increase, over 70 per cent of the retail price consisted of tax. . . . Indeed a hypo- thetical, if unlikely, situation could be imagined in which, as a result of the tax increase, so many people gave up smoking [and spent their money on less heavily-taxed items instead] that the consequences of the increase in tax were ex- tremely inflationary.' Ever helpful. I commend this thought to the Chancellor of the Exchequer, as he struggles to produce the tough, realistic, popular, pre-election Budget the hour demands: why not a fearless deflationary cut in the tobacco tax?
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