As it stands the government needs all the cash it can get so to a point, yes they want the tax revenue.
Lets assume they enforce a very strict non-smoking policy and tax them to high heaven to force smokers out of the habit.
The real question is: If we assume the money spent on smoking related health problems increases proportionally to the people smoking (therefore tax revenue), can we assume that (given a enough time of course) a reduction in number of smokers, and therefore tax revenue lost, will be proportional to a reduction in NHS costs?
In other words, will we have a short term deficit in tax terms or will it all even out in the end?
An if this is the case, and due to the long time periods involved in the effects of smoking (10, 20 years??), how will we fill this gap?
Lots of questions, I'm afraid I don't have answers though!