A thought experiment: what if everyone stopped drinking, smoking and overeating?
The temperance lobby currently claims that drinking costs Britain up to £52 billion per annum. Anti-smoking campaigners claim that tobacco imposes a cost of £13.7 billion per annum. The cost of obesity to the NHS is said by some to be £16 billion a year, rising to £47 billion a year if wider costs are included.
Taken together, it implies that Britain would enjoy an economic boon of over £100 billion per annum if we stopped smoking, lost weight and cut down on the booze. If this £100 billion was a direct cost to the taxpayer – as many people assume it is when presented with such figures – it would cover the entire budget of NHS England.
In fact, most of these costs do not fall on the taxpayer and so reducing them would not benefit the taxpayer. For the most part, they are not external costs; they fall on the individual drinker, smoker or obese person. This is as it should be and it is no business of the government if people wish to impose costs on themselves alongside benefits.
Genuine external costs do exist – to the health service, for example – but a calculation of how much smokers and the obese cost the NHS is only meaningful if we know how much they would have cost the NHS if they did not smoke and were not obese. It is possible that they would use less healthcare if they led healthier lives but the cost estimates of ‘public health’ campaigners make no attempt to prove this. They simply assume that an obese person who requires hospital treatment and dies would never have troubled the NHS had he been slim. This is obviously ridiculous. The chances are that he would have used NHS services and drawn his state pension for years to come.
The real question is whether government expenditure would be higher or lower if alcohol, cigarettes and obesity disappeared tomorrow. The figures cited above imply that the nation’s finances would be much improved, but they are based on a partial view of gross societal costs whereas what is needed is a full account of net financial costs.
Today sees the publication of the third volume of the IEA’s ‘Public Purse’ trilogy of discussion papers looking at what the costs to the state would be in the absence of alcohol, smoking and obesity. In 2015, Alcohol and the Public Purse found that the cost of excessive drinking amounted to no more than £3.9 billion per annum in England. Given that alcohol duty raises £10.4 billion, this is a net saving of £6.5 billion. Earlier this year, Mark Tovey’s Obesity and the Public Purse found that the net cost of obesity to the government was no more than £2.5 billion. There is no specific tax revenue to offset these obesity-related costs although a sugar tax will be introduced next year which is expected to rake in £500 million per annum.
Our latest report, Smoking and the Public Purse, shows that the government would have to spend an extra £5.2 billion per annum and would lose £9.5 billion in tobacco duty revenue if nobody smoked. In total, the treasury would be £14.7 billion worse off in the absence of smoking.
Taken together, the total cost to the government of the three most hotly discussed ‘lifestyle factors’ – alcohol, obesity and smoking – is not a cost at all. It is a saving of £22.3 billion per annum, rising to £22.8 billion when the sugar tax is introduced.
If everybody in Britain suddenly started living a healthy lifestyle, the treasury would have to make up this shortfall. It could, for example, raise VAT from 20 per cent to 24 per cent. Such a sharp increase in general taxation might be enough to wake people up to the cold fact that these lifestyle factors were never a burden on taxpayers to begin with. Or perhaps they will have found some new scapegoats by then.
Download Smoking and the Public Purse here.