And boozers pay, what, £8 billion in tax?

Fewer people are being classified as risky drinkers or admitted to hospital because of alcohol, but people consuming dangerously large amounts are costing the NHS £2.8bn a year, a charity says.

So we’ve got those public costs well covered by public revenues from the activity. If anything, this argues that booze is taxed too highly, as the externality of health care costs is more than covered. And yes, it is a standard finding that the charge for an externality should be the same as, not more than, the cost of that externality.

13 comments on “And boozers pay, what, £8 billion in tax?

  1. “And yes, it is a standard finding that the charge for an externality should be the same as, not more than, the cost of that externality.”

    Depends what you’re trying to achieve, no?

    If you’re trying to impose a Pigovian tax so that the cost of the externality is factored into consumer decision making, then sure.

    If you’re trying to raise revenue to pay for government expenditure then you want to tax stuff with inelastic demand, like booze and fags, and keep an eye on illegal or duty free imports (too much and you may be able to raise more by cutting taxes).

    Which of these options maximises utility presumably depends on what utility state expenditure has compared to the pleasure of fags and booze, but the equitable side of it is a transfer from boozers and smokers to everyone else.

  2. Booze allegedly costs the NHS £2.8bn a year, but there’s easily the same sum again in lost productivity: hangovers, sickies, injuries, etc. The costs are borne privately (either by the individual or their employer); but we still class them as externalities.

    That probably still doesn’t exceed the tax paid though.

  3. Professor Sir Richard Doll calculated a net saving to the NHS from drinking and smoking. Because drinkers and smokers tend to die earlier and faster.

    There’s also the saving on the state pension.

    So on balance the state should subsidise booze and fags. Cheers!

  4. That might cover the healthcare, sure, but there are other elements that the extortionate tax should be covering, but doesn’t. For example, late night security & policing costs in town centres…

    But, lets face it, this is purely a good source of tax revenue partially disguised as a nanny tax. Excessive drinking is bad for you, me and everyone, right?

  5. Alex, to clarify: the costs to the individual aren’t externalities, but the cost to his/her employer are.

    I’m not an economist, so feel free to correct me (again) if I’m mistaken.

  6. You’re getting in a mess with your externalities, Tim.
    The £2.8b is the cost to the health service. The remaining £5.2b is the externality of people enjoying drinking..IanB’ll explain the principal & why it’s regarded as a cost.

  7. Fag smokers pay for themselves as well, unless you factor in the costs of cleaning fag-buts from public parks in London!!!!!

  8. Thinking about it though, if we don’t raise tax on dope smoking then those whimpering wrecks on the psychiatric wards don’t pay for themselves do they.

  9. As MBE said, it depends on what you are trying to achieve.

    For your typical incompetent spend thrift politician, why not just try and maximise profit? And in which case, one would put prices up, as booze & fags are pretty inelastic.

  10. bloke in france – “Professor Sir Richard Doll calculated a net saving to the NHS from drinking and smoking. Because drinkers and smokers tend to die earlier and faster.”

    Well he was wrong about drinkers. Drinking in really quite respectable amounts is good for your health and results in you living longer. Especially it is a good protection against heart disease:

    http://www.psmag.com/navigation/health-and-behavior/truth-wont-admit-drinking-healthy-87891/

    The graphs down the bottom are worth a look. The tl;dr version? Drinking more than six drinks a day is healthier than drinking nothing.

  11. Whenever any ‘health professional” comes out with the old “your behaviour is costing the NHS x amount of money” routine, I like to point out that, on the contrary, my behaviour – you know, paying taxes, national insurance, VAT, excise taxes, etc. etc. – are what’s paying for the NHS. It is in fact his/her behaviour – large salary, huge expenses, plenty of conferences in expensive places, final salary/index linked pensiom etc. etc. – that is costing the NHS an awful lot of money.

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