Alcohol's cost to society Vs taxpayer: politics and the £21 billion

The debate over the cost of alcohol to society - not to be confused with the cost to the taxpayer - has been reignited by a report from the Institute of Economic Affairs (IEA) and critical response from the Institute of Alcohol Studies (IAS).

Fundamentally the IEA report, Alcohol and the public purse [pdf], says that direct costs to the Government [i.e the taxpayer] must not be conflated with the wider societal or economic costs, often cited as £21 billion and reported in various ways. Instead the IEA say direct costs of alcohol use to the government in England, including the NHS, police, criminal justice system and welfare system amount to just £6.5 billion; significantly less than the alcohol tax revenue of £10.4 billion.

The IEA report argues; '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' - as such comparing to the societal estimate to tax revenue is an 'apple and orange' comparison. Specifically, many economic and societal costs are not paid by the taxpayer, rather than by individuals or businesses, for instance lost productivity costs or damage to property.

However the IAS's response [pdf] argues 'the fact that the government is not directly accountable for these costs does not mean they should be ignored', so the IEA report sidesteps 'social and economic costs that must, ultimately, be borne by somebody'. As such the IAS argue the 'IEA deliberately addresses only a very limited question – what the impact of alcohol is on the government’s fiscal balance' and that:

'This restriction inevitably limits the force of the IEA’s argument. Most people who are concerned about the level of alcohol harm in the UK are not primarily motivated by a desire to balance the government’s budget. Rather, they are concerned by the damage to public health, crime, social disorder and wider economic costs caused by excessive drinking.'

Furthermore the IAS claim the report makes 'methodological judgements that are likely to have understated the full cost of alcohol to the state', whilst the IEA claim the 'gross cost of £3.9 billion is more likely to be an over-estimate than an under-estimate'.

Edit: The EIA author Christopher Snowden has since commented on the IAS repsonse here.

Taking sides?

The IAS acknowledge that societal and fiscal costs should not be conflated, depsite subsequent press reports and even the IEA Twitter account reportedly doing so. The IEA itself is of course a 'free-market think-tank', evidently ideologically opposed to regulatory alcohol public health policies such as minimum pricing. The IAS by contrast are a public health charity originally formed out of the temperance movement, but committed to scientific research and prevention of alcohol problems. 

Politics aside, the important issue may be whether any further analysis and clarification of current national alcohol costs is to be undertaken.

The original £20 billion, or £21 adjusted for inflation, stems from a 2003 Cabinet analysis [pdf] which preceded the first national strategy in 2004. An extensive piece of work, its breakdown of the societal impact has evidently been used as the basis for a series of further Government cited estimates; £3.5 billion to the NHS, £11 billion from alcohol-related and £7 billion in lost productivity. A Findings bulletin recently explored some of the history behind the figures, but it seems there is agreement on both sides that a revised Government analysis is overdue.