The £20 billion figure originated in a report produced for the Cabinet Office in 2003. It was not, and was never intended to be, an estimate of the cost of alcohol to the taxpayer. It included all sorts of ‘societal’ costs, such as lost productivity, that are not borne by government and it did not attempt to offset legitimate costs to the government with taxes on alcohol received by the government. Moreover, it was written at a time when alcohol consumption and alcohol-related crime were at significantly higher levels than they are today.
In new research published by the Institute of Economic Affairs today, I look at the full costs and benefits of alcohol consumption to the government in England. It is clear that there are costs to the health service, police, judiciary and welfare systems but their combined total comes to less than £4 billion a year. This is not a trivial amount of money and it is not unreasonable to expect drinkers to foot this bill through additional taxation, but alcohol duty brought in £10.4 billion in England last year. In other words, drinkers are not only paying their way, they are subsidising non-drinkers to the tune of over six billion pounds each year.
The figures break down as follows: the cost to the NHS is £2 billion, the cost of alcohol-related crime is £1.6 billion, and the cost of welfare payments to those who do not work as a result of alcohol-related conditions is £300 million. These figures are not greatly different to those found in previous research. The difference is that other studies build up their estimates by putting a monetary value on emotional distress, premature mortality, lost output and other social consequences. There is nothing technically wrong with including these wider costs in an economic calculation so long as they are clearly presented to the public as non-governmental or non-financial costs, but it is quite wrong to present them as if they were bills that have to be paid by taxpayers.
Whether by accident or design, this misunderstanding takes place all the time. For instance, the Centre for Social Justice prefaced their report on alcohol and drug misuse by stating: ‘Alcohol abuse costs taxpayers £21 billion a year’ and Sarah Wollaston MP asked the House of Commons rhetorically in 2012 ‘What about taxpayers? The cost of the [drinking] epidemic is out of control. It is at least £20 billion’.It is also not unusual for temperance and public health campaigners to compare the £20 billion societal cost estimate with the £10 billion revenue the government receives in alcohol duty. The implication is that drinkers do not pay their way and alcohol taxes should be higher, but it is an apples and oranges comparison. There is no connection between the hard cash received by government and the costs of emotional distress and lost output that make up much of the societal figure.
Rather than talking about drinkers being a burden on taxpayers, we should remember that drinkers themselves are taxpayers – and rather heavy taxpayers at that. Almost incredibly, British drinkers pay 40 per cent of the EU’s entire alcohol tax bill. This amounts to far more than any plausible estimate of the alcohol-related costs to public services. The reality is that the government could halve all alcohol duty tomorrow and drinkers would still be subsidising teetotallers.
Download Alcohol and the Public Purse by Christopher Snowdon here.