The cost of binge drinking - more junk from Bath University

From the Telegraph...
 

Binge drinking is costing UK taxpayers £4.9 billion a year, a study has suggested.

... The team from University of Bath's Institute for Policy Research and the University of Essex ... said to offset these costs, policy recommendations such as including a 52 pence minimum unit price for alcohol and an increase in alcohol excise duty directly in line with alcohol strength should be considered.

This is based on a working paper (which went online six weeks ago) that makes estimates of how much binge-drinking costs the NHS and police service. These calculations have been made before, notably by the Cabinet Office in 2003. The Cabinet Office's research had its flaws, but the Bath University methodology is really shaky. For example, it derives the cost to the UK's Accident and Emergency departments by extrapolating from an estimate of the cost to one Primary Care Trust in Solihull.

The problems with the methodology are not terribly important compared to the study's main flaw, of which more in a moment. There is little doubt that drinking creates negative externalities and excess costs to public services. £4.9 billion may be in the right ballpark, albeit at the high end.

In addition there are costs from chronic, as opposed to binge, drinking. The Cabinet Office figures suggest that the total cost to government of alcohol consumption in all its forms are in the order of £4-6 billion. Adjusting for inflation and including every conceivable cost, the absolute upper limit would be £8-9 billion.

The problem with the Bath Uni research isn't so much the methodology as the conclusion.

Consider the estimate of £4.86 billion per year. According to industry estimates, each individual aged 15 or more consumed 9.9 liters of pure alcohol in 2011 (Sheen 2013). With almost 52 million individuals aged 15 or more in 2011 and noting that there are 100 alcoholic units in one liter of pure alcohol, the total number of alcoholic units drunk in the UK was 51.57 billion in 2011. Our estimate then implies a negative externality of over 9p per alcoholic unit or £9.43 per liter of pure alcohol...

That's fair enough.

...which represents an increase of at least 20% in the current average price. This is equivalent to an additional tax of 95p per bottle of wine or 22p per pint of beer.

Woah! Hold on there. Why does it require an additional tax? The government already gets £12.5 billion a year in alcohol duty. That is more than enough to cover any reasonable estimate of the externalities borne by government.

A conservative estimate of the externality is £4.86 billion per year. This implies a negative externality of 9p extra per alcoholic unit or an additional tax of 95p per bottle of a standard red wine and 22p per pint of beer.

No, it doesn't. It implies that there should be a total tax on alcohol equivalent to 9p per unit. Which there already is. And then some. Current alcohol duty amounts to an average of 24p per unit. If you wanted alcohol duty to be a Pigouvian response to the cost of binge-drinking you would reduce it by more than half.

Incredibly, the authors never mention the current rate of alcohol tax in any of the study's 75 pages, nor in the press release. Their whole argument rests on the assumption that there are no sin taxes on alcohol at all! It's extraordinary. Perhaps if it had been peer-reviewed, someone would have pointed out this glaring oversight, although since it falls under the umbrella of 'public health' probably not. In any case, at least the authors are upfront about their reasons for producing the study:

“We hope this calculation of the economic costs can act as a catalyst for policy makers in the UK to take targeted action that reduces the cost of binge drinking to society.”

One of the policies that they want to be a catalyst for is minimum pricing, which they also get completely wrong:

Based on the average retail price of 42p per unit of alcohol in 2013/14, this research suggests that even the higher minimum price of 50p per unit falls short of the adjustment needed to offset the cost of binge drinking. According to the estimates in this research, a minimum price of 52p per unit would be required to offset the cost.

This is nonsense on stilts. They don't seem to understand the difference between a minimum price and an average price. Their assumption is that drinkers should be paying an extra 10p per unit tax (it was 9p a minute ago, but never mind). They are wrong about that for the reasons given above, but even if they were right, introducing a minimum price of 52p would not result in alcohol being sold at an average price of 52p, because lots of alcohol is already sold above that price already.

Moreover, even if you introduced a 52p unit price, it would not "offset" any of the costs to the NHS and police service because minimum pricing isn't a tax (it would raise a little bit through VAT on more expensive alcohol, but that would be fairly negligible).

This research demonstrates that current and proposed policies to regulate alcohol sales and consumption are inadequate to fully mitigate the economic impact of binge drinking. Any policy solution will need to increase the average retail price of alcohol by at least 10p per unit to fully offset this cost.

No, no and thrice no. The research doesn't demonstrate that the economic impact of binge drinking is not mitigated by existing polices because it doesn't acknowledge that one of the existing policies is to have some of the highest alcohol taxes in the world. Current alcohol duty covers their dubious cost estimate with £7.9 billion to spare. The cost of binge-drinking is "fully offset" and more.

How can any self-respecting academic put their name to research that has such basic and obvious flaws that you could drive a coach and horses through it? These kind of shabby tricks are an insult to our intelligence. How much lower can policy-based evidence from the 'public health' lobby sink?