‘Sin taxes’ are positive for government finances

So-called ‘sin taxes’ on alcohol, tobacco and sugar will raise £24.7bn in revenues by 2018, more than amount the government spends dealing with the impact of drinking, smoking and obesity, according to research by the Institute of Economic Affairs, which says taxpayers are being unfairly demonised over their negative behaviours

The think tank argues that the money raised is more than sufficient to cover the costs that these lifestyle choices impose on public finances, providing a net saving to the government of £22.8bn.

According to its calculation, the government spends £3.6bn treating smoking-related diseases on the NHS and up to £1bn collecting cigarette butts and extinguishing smoking-related house fires. However, the government saves £9.8bn annually in pension, healthcare and other benefit payments due to premature mortality, and brings in £9.5bn annually in duty paid on tobacco.

The IEA says this means that smoking produces a net saving to the government of £14.7bn a year, at current rates of consumption.

The think tank puts the gross cost to public services, including healthcare for drinking related diseases and expenditure on public order, at £4.6bn.

It says the government brings in £10.7bn annually in duty paid on alcohol, and calculates this produces a net benefit of £6.1bn.

Only obesity incurs a net cost to the taxpayer of £2.5bn a year, which will be cut to £2bn once the new sugar levy is introduced in 2018.

Christopher Snowdon, the IEA’s head of lifestyle economics and the report’s author, said: ‘We are constantly being told that people who choose to drink, smoke or eat too much are a burden on the UK taxpayer.

‘This is one reason why we have seen such aggressive hikes in taxes on alcohol, smoking and very soon, a tax on sugar. But the justification for these taxes is based on an illusion.

Smokers, drinkers and those who are obese actually provide a net benefit to the public finances, so vilifying them is futile in the quest to make savings for the NHS.

‘A careful consideration of the evidence shows that the popular belief that costs will fall if people live healthier and for longer is false. While it’s good that we now have longer life expectancies, policymakers must now address how we tackle the financial consequences of the ageing population rather than pointing the finger elsewhere.’

Smoking and the Public Purse is here.

Alcohol and the Public Purse: Do drinkers pay their way is here.

Obesity and the Public Purse is here.

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