New IEA paper dispels the myth that drinkers are a burden on the taxpayer

The direct costs of alcohol use to the government in England – including NHS, police, criminal justice and welfare costs – amount to just under £4 billion each year, whilst revenues from alcohol taxes amount to over £10 billion.

Using the most recent health, crime and drinking data, this new report demonstrates that contrary to popular belief, drinkers are not a burden on the taxpayer. The net cost of alcohol to the state is minus £6.5 billion. Even if the Government halved all forms of alcohol duty, it would still receive more money in tax than it spends dealing with alcohol-related problems.

Key findings:

•    Alcohol-related crime costs the Exchequer nearly £1 billion per year. Other alcohol-related crimes, including drink-driving, add a further £627 million, making a total cost to the police and criminal justice system of £1.6 billion.

•    Alcohol-related health problems cost £1.9 billion per annum. Half of this results from alcohol-related hospital admissions (£984 million) with a further £530 million spent on Accident and Emergency attendances.

•    Welfare payments given to those unable to work because of mental or physical ill health attributable to alcohol consumption incur a cost of £289 million.

The public debate around alcohol policy is often centred on a claim that alcohol use costs Britain £20 billion a year. This figure, often used by public health campaigners, is extremely misleading, conflating social and economic costs (most of which are paid by individuals and businesses) with the costs to government departments (the cost to the taxpayer).

Arbitrarily monetising intangible costs such as lost productivity – likely to be borne by the drinker and not by wider society or the taxpayer – have led to highly misrepresentative figures being commonly used by policymakers. Moreover, mainstream figures give the gross cost – failing to attempt to estimate the net cost of drinking, and ignoring tax revenue generated from the sale of alcohol.

In the first study to look at the total net cost of alcohol consumption to the Government in England, author Christopher Snowdon examines how much drinkers cost public services as a result of their drinking. Internal costs and benefits (those which only affect the individual), emotional costs and intangible costs are irrelevant. By contrast, costs and benefits usually excluded – such as welfare payments and taxes have been added.

Commenting on the report, its author Christopher Snowdon, said:

“It is time to stop pretending that drinkers are a burden on taxpayers. Drinkers are taxpayers and they pay billions of pounds more than they cost the NHS, police service and welfare system combined. The economic evidence is very clear on this. Forty per cent of the EU’s entire alcohol tax bill is paid by drinkers in Britain and, as this new research shows, teetotallers in England are being subsidised by drinkers to the tune of at least six and a half billion pounds a year.”

Notes to editors:

To arrange an interview about the report please contact Stephanie Lis, Head of Communications: [email protected] or 0207 799 8900 or 07766 221 268.

The full report, Alcohol and the Public Purse: Do Drinkers Pay Their Way?, can be downloaded here.

Methodology: The methodology of this report has been based on a report by Dr Rannia Leontaridi for the Cabinet Office in 2003, using the most recent available figures. In general, we err towards generosity rather than conservatism when compiling the cost estimates. When given the choice between two plausible figures, we use whichever is the highest. The final figure is therefore more likely to be an overestimate of the cost of alcohol use to the Government in England, than an underestimate, although there are significant knowledge gaps in all studies of this sort which necessitate a more cautious interpretation than they often receive.

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.

The IEA is a registered educational charity and independent of all political parties.