Christopher Snowdon is Head of Lifestyle Economics at the Institute of Economic Affairs.
It’s a mark of how much the currency has been debased that £20 billion in 2001 would, if it kept pace with inflation, be worth £36 billion today.
That £20bn was the “societal cost” of alcohol to England in 2001, according to an economic analysis from the Cabinet Office. That estimate has never been officially revisited.
However, the neo-temperance Institute of Alcohol Studies (IAS) put out an unofficial update on Monday to coincide with a Health and Social Care Select Committee on the subject. IAS’s estimate is £27.4bn – and this is being touted as a 40 per cent increase; the Guardian ran with “alcohol abuse costs soar to £27bn a year” on its front page.
But this ignores inflation. In real terms, the costs have fallen by around 25 per cent, and both the Cabinet Office estimate and the new estimate are gross overestimates.
When I calculated the cost of alcohol misuse to the government in 2015, I arrived at a figure of £3.9bn. Updating my estimates with fresh data last week, it became clear that the total is still below £5 billion and is less than half of the amount the government rakes in from alcohol duty every year.
Why are my figures so different to those of the IAS? There are a few methodological reasons.
For example, following the Cabinet Office’s lead, the IAS assumes that 35 per cent of all A&E admissions and ambulance call-outs are alcohol-related. But, as I said in my 2015 report, that figure has never been credible; I used a more plausible figure of 14 per cent. That’s the main reason my estimate for healthcare costs (£2.8bn) is lower than the IAS’s (£4.9bn).
The IAS haven’t provided much information about how they estimated the costs of alcohol-related crime to the state, but using the Cabinet Office’s methodology, I get a much lower figure than they do.
Indeed, the figure should have fallen in real terms since 2001 because there has been a substantial drop in alcohol-related crime since then. For example, the number of alcohol-related violent crimes has fallen from 1,151,500 in 2001 to 384,000 in 2023. We’ve come a long way.
These discrepancies add up, but the main reason the estimates are so far apart is that they are simply measuring different things. In my report, I was interested in the costs to public services. Not only are they the most relevant figures in the debate about alcohol taxation, but they can be objectively measured.
The Cabinet Office and the IAS, on the other hand, were looking at a much broader range of costs, including some highly-intangible “emotional costs” and some costs, such as lost productivity, which fall primarily on drinkers themselves.
While there is nothing wrong with an analysis that looks at wider, intangible costs, there is a risk of producing a figure that misleads the general public. When people hear that alcohol misuse costs society £27bn a year, most of them probably – and understandably – assume that this is a direct financial cost to them as taxpayers. They might also reasonably assume that it is a net figure, i.e. benefits minus costs.
But it isn’t. A full cost-benefit analysis would include emotional benefits as well as emotional costs. It would offset “lost output due to premature death” with the financial savings to the NHS and welfare state due to premature death. It would also include the economic contribution of the alcohol industry, which employs 770,000 people and is worth – according to IAS’s own figures – £46bn to the UK economy.
The estimates from the Cabinet Office and the IAS do none of this. They do not claim to be a cost-benefit analysis; they are simply a cost analysis.
That is fine so far as it goes, but the relevant question is what would be the economic consequences be if alcohol disappeared tomorrow? That question cannot be answered unless we acknowledge the social and economic benefits of drinking (and the health benefits, for that matter).
I can’t pretend to be able to put a number on it. But I can say with confidence that drinkers pay their way when it comes to public services. Considering that the UK has some of the highest alcohol taxes in the world, especially on wine and spirits, that should not be too surprising.
