18 September 2015: The Institute of Economic Affairs’ (IEA) recent discussion paper, ‘Alcohol and the Public Purse’, attempts to calculate the net cost of alcohol to the state. It estimates the direct cost to government departments resulting from alcohol, and compares this to the revenue generated from taxing drinking. The IEA claim that while direct alcohol-related costs in England in 2015 amount to £3.9bn, the revenue generated from alcohol taxes amounts to £10.4bn. They therefore conclude that in aggregate alcohol provides a net benefit of £6.5bn to the Exchequer.
The Institute of Alcohol Studies has published a response, and by contrast, argues that:
- ‘Alcohol and the Public Purse’ addresses an excessively narrow question, ignoring social and economic costs that must, ultimately, be borne by somebody
- Framing the issue as a balance of fiscal costs and benefits misses the point that it is better to avoid the costs in the first place
- The neglect of private costs undermine the IEA’s claim that drinkers are subsidising non-drinkers
- Though the IEA is correct that it is vitally important to avoid conflating fiscal and economic costs, press reporting of the study encourages similar confusion
- The IEA make methodological judgements that are likely to have understated the full cost of alcohol to the state
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