If you have a fag in one hand, you can only hold the steering wheel in a weakling pincer grip with that hand.
Therefore you are not in full control of the vehicle.
Therefore it should be an offence, and probably already comes under driving without due care as someone said above.
The same would apply to trying to hold a pencil whilst driving (difference being that you won't burn anything when you drop it in order to swerve to avoid a hazard.)
To avoid stealth, should state that I have been bereaved by car crash multiple times. It infuriates me when people see cars as a kind of portable lounge area.