Patrick Basham directs the Democracy Institute and is a Cato Institute adjunct scholar. He co-authored, The Plain Truth: Does Packaging Influence Smoking.

Given the UK Government’s decision to reconsider putting cigarettes in plain packs and the first anniversary of Australia’s experiment with this measure, it’s an apt moment to assess the wisdom of Downing Street’s potential action.

Neither side in the Australian debate knew what would really happen when unattractive olive green packaging replaced a cigarette packet’s traditional commercial branding. Plain packaging advocates nonetheless forecast less smoking by fewer smokers and minimal difficulties for small retailers selling tobacco products in their corner shops.

In contrast, my book, The Plain Truth, argued that smoking rates would be unaffected by plain packaging. I also predicted there would be unintended negative consequences, such as a boost to the illicit tobacco trade, as traditionally branded cigarette packs and easily counterfeited plain packs made their way to the black market.

Although neither side could guarantee the accuracy of its respective forecasts, there’s now have enough real-world evidence to draw strong preliminary conclusions about plain packaging’s actual impact in Australia and its probable impact elsewhere.

On Monday, the top European economic consultants, London Economics, released the first comprehensive study measuring smoking rates in Australia since plain packaging was introduced. The new data collected by the study’s lead researcher, Gavan Conlon, finds the smoking rate has remained unchanged.

Critically, Dr Conlon’s analysis concentrates on actual smoking behaviour, as reported by study participants both before and after the implementation of the new tobacco packaging requirements, which more than doubled the size of the health warning on the front of the pack. Prior to the introduction of plain packaging, health warnings made up 30 percent of the front of packs and now make up 75 per cent.

Three months following the introduction of plain packaging, the proportion of adult respondents that smoked tobacco products declined from 24.8 per cent to 23.4 per cent. However, eight months following the introduction, the apparent decline experienced in the first three months started to reverse.

The proportion of respondents indicating that they smoked tobacco products increased from 23  percent to 24 percent between three and eight months after the introduction. Both of these changes in smoking prevalence are so small that Dr Conlon finds they are not statistically significant, which means there has been no change in real terms.

What has changed Down Under is the dramatic rise in illegal tobacco sales. A recent research report by KPMG, the leading international auditors, on illegal tobacco in Australia found the level of illegal consumption of tobacco had reached record levels, growing from 12 percent in June 2012 to 13 percent by June 2013.

According to the KPMG researchers, the key driver of this growth has been a large increase in the consumption of illegal, branded cigarettes. These black market cigarette packs bear no health warnings and are smuggled into the island nation thought various ports, including the Port of Melbourne, where a recent seizure netted a record 71 tonnes of tobacco in 16 shipping containers.

If these black market purchases had been made in the legal market, the Australian government would have collected £560 million in additional excise tax revenue. According to KPMG, by the end of this year illegal cigarettes will constitute an astonishing 15 per cent of the Australian market.

The plain packaging-induced rise of illicit tobacco is having dramatic impacts on Australia’s small retailers. A recent study by Roy Morgan Research, Australia’s best-known research agency, found that this summer 43 per cent of small retailers noticed an impact on their business from illegal tobacco, an increase from 36 per cent last winter. For instance, one-third report customers have asked if they can purchase illegal cigarettes from their store.

Less dramatically, but no less importantly, nearly eight-in-ten small retailers experienced increases in the time it takes to serve adult tobacco customers, while two-thirds have seen an increase in the frequency of staff supplying the wrong products primarily due to the difficulty in recognising and distinguishing between specific brands.

Australia’s public health experiment has so far failed to reduce smoking, yet has hurt retailers, while simultaneously boosting the illicit tobacco trade. Given these deeply disappointing results, it’s unwise for Downing Street to hop aboard the plain packaging bandwagon at the very moment that it’s headed for the evidentiary ditch.

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