The UK government will make a total of £24.7bn from so-called "sin taxes" by 2018, more than offsetting the cost smokers, drinkers and the obese have on the taxpayer, a new report suggests.
With high levels of taxation imposed on "sin" industries, policymakers are ignoring the UK's ageing population, which is the real threat to the healthcare system, the Institute of Economic Affairs (IEA) said in a study out today.
The government takes £9.5bn annually in tobacco duties, like the floor price on cigarette packs, while it spends just £3.6bn treating smoking-related diseases on the NHS and up to £1bn collecting cigarette butts and extinguishing smoking-related fires.
For drinking, the gross cost to public services is about the same at £4.6bn a year. Meanwhile, the government brings in £10.7bn annually in alcohol duties.
Obesity currently incurs a net cost to the taxpayer of £2.5bn a year. With the sugar tax expected to raise £500m a year once it comes into effect next year, this will fall to a cost of £2bn.
“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," said Christopher Snowdon, head of lifestyle economics at the IEA and author of the report.
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.