Wednesday 31 July 2019

Canada's cannabis experiment

I was on field trip in Ontario last month with several MPs and charities to check out the legal cannabis market that has been in operation since October. The event was organised by the splendid drug reform group Volte Face and filmed by a BBC crew whose documentary went online yesterday.

It's well worth watching the documentary. Prior to the trip, the views of the three MPs differed. Norman Lab (Lib Dems) was firmly in favour of legalisation, David Lammy (Labour) was tempted but not convinced by arguments, and Jonathan Djanogly (Conservative) was open-minded but basically supportive of the status quo.

As the BBC reported on Monday, all three now believe that legalisation is inevitable, and Lammy is firmly in favour. Djanogly has written a thoughtful piece for Cap-X in which he weighs up both sides and discusses what is needed to make the best of legalisation.

For me, the surprise was how big the black market still is. At least two-thirds of recreational cannabis is purchased from illegal suppliers and that is unlikely to change until the government makes the legal product more attractive. The most important thing is to get legal prices down; they are currently 50 per cent higher than black market prices. It would also help if the government allowed shops to use some of the nudges of consumer capitalism. Getting rid of plain packaging would be a start...

I've written about the trip for the Spectator...

I had forgotten how much I disliked cannabis until I found myself under its influence, in the rain, trying and failing to find Toronto’s Union Train Station so I could get to the airport and go home. The plan had been to enhance my mood for a long journey, floating back to the UK in a higher state of consciousness. In practice, I just got confused, wet and was lucky to make my flight.

I had intended to purchase the kind of low-THC, high-CBD weed that disappeared from Britain’s black market when skunk took over in the 1990s. Put simply, THC is the psychoactive component that gets you high but is associated with psychosis, while CBD is the antipsychotic component that gave cannabis its natural balance before it was bred out of the plant by drug dealers. Alas, laziness prevailed and I settled for a ready-rolled joint which my vendor candidly admitted was made up of scrapings from whatever they’d been chopping up that day.

In truth, the spliff had been bought on the ‘when in Rome’ principle. Recreational cannabis has been legal in Canada since last October and I was on a fact-finding trip with a BBC film crew and a cross-party group of MPs, including Norman Lamb, David Lammy and Jonathan Djanogly. In a few months time, Illinois will become the eleventh US state to legalise recreational marijuana. With the dominos falling, it is only a matter of time before a European country, possibly Britain, follows suit. We were there to see how it works.

Do read it all.

Tuesday 30 July 2019

Laffer Curve spotted in Estonia and Latvia

Estonia came third in this year's Nanny State Index, rising up the table by twelve places. This was largely thanks to its huge alcohol tax rises in the last two years, but these were accompanied by unintended, but hardly unpredictable consequences, as I explained at the time...

Estonia’s taxes on beer, wine and spirits have been higher than the EU average for years and have risen sharply since the first Nanny State Index was published. Between 2016 and 2018, spirits duty rose by 30 per cent, wine duty rose by 50 per cent and beer duty doubled. This has led to a textbook illustration of the Laffer Curve as Estonians travel to neighbouring Latvia for their booze shopping and Finns – who have long made the trip to Estonia for theirs – go elsewhere. The government expected alcohol revenues to rise from €251 million in 2016 to €276 million in 2017. In fact, the tax rise caused revenues to fall to €229 million and had a devastating impact on small shops in poor regions close to Latvian border which relied on alcohol sales.

It has been a sobering experience for the Estonian government which has now dropped plans to introduce further tax hikes on alcohol in 2019 and 2020.

As it turns out, the government has gone further than merely dropping its planned rises. It has cut alcohol duty. By a lot.

As Estonia tries to recover its alcohol customers lost to neighbouring Latvia due to high excise duty, the parliament in Tallinn has passed a 25% cut in excise duty rate.

The cut came into effect on 1 July and led to more good news, this time in Latvia...

Following the slashing of excise duties by 25 percent on beers, ciders and strong alcohol which came into effect in Estonia at the beginning of the month, Latvia has responded with the 15 percent cut of its own, as previously promised and to come into effect on Aug. 1.

Arguments in favor of cutting Estonia's duties, which had seen successive waves of excise duty hikes, were mostly concerned with halting the cross-border alcohol trade which had seen Estonian, and even Finnish, customers heading to Latvian border towns such as Valka to stock up on drink, thus hemorrhaging Estonian tax receipts as well.

Latvian Prime Minister Krišjānis Kariņš (Unity) said on the eve of the Estonian law coming into effect that it was not how neighbors should behave towards one another, citing damage to its own alcohol retail sector.

Boo hoo.

The Latvian finance ministry projected the effect on state budget arising from the Estonian law to be €92 million, and recommended cutting excise tax on strong alcohol by at least 15 percent in order to offset said effects. The ministry said it expects the tax cut to reduce the negative fiscal impact to €32 million.

 The laws of economics win again.

Monday 29 July 2019

Economic illiteracy in 'public health'

Anna Gilmore can turn any academic discipline into junk, none more so than economics. As Carl Phillips remarked some years ago...

It is not entirely clear whether she is in the subset of liars who know they are disseminating disinformation or the subset who claim to be experts but simply have no idea what they are doing.  My assessment, based on her previous foray into economics (see my analysis of it) is that while she seems to be intentionally misleading about epidemiology, in economics she probably never read so much as a first-semester textbook before writing her unintentional comedy.

 She had another stab at the dismal science last week and generated a few headlines like this...

Tobacco companies raise prices more than required by tax changes, despite claims

Study undermines industry claims to be concerned that making cigarettes too expensive will push people towards illicit tobacco products

Why would anti-smoking campaigners be complaining about high cigarette prices? Because they think it shows something it doesn't.

For reasons that will soon become clear, Gilmore's latest study would never be published in an economics journal, but it was good enough for the comic Tobacco Control. You can read it here. The problem is evident from the first paragraph.

Higher retail prices, often created by tobacco taxes, are one of the most effective ways of reducing tobacco use and hence the associated harms to health. However, as part of their lobbying effort against tobacco tax increases, the tobacco industry claim [sic] the resulting higher prices will force smokers into buying illicit tobacco. The tobacco industry also claim [sic] they want to combat illicit and if the industry were truly concerned that high prices increased it, they would only increase retail prices in line with changes in taxation, particularly given their already high level of profitability.

Gilmore and her five chums then proceed to work out what proportion of tobacco price rises was due to tax hikes between 2010 and 2015 and what proportion was due to the tobacco industry raising prices. They don't even get this right. Instead, they attribute any retail price rise above and beyond the rate of tax to the tobacco industry, presumably because they don't realise that retail prices are generally set by retailers, not manufacturers.

Leaving that aside, they find that in nearly every case, the 'tobacco industry' raised prices above the rate of inflation, adding between 13p and 53p per pack every three years (while tax rises ranged from 43p to 93p - all figures in real terms).

They then triumphantly conclude:

...for all price segments (apart from the FM subvalue segment in 2013–2015 when this was seemingly being promoted by the industry) the tobacco industry was overshifting taxes, indicating that the industry was not concerned sufficiently about its alleged threat of illicit to avoid price increases. This implies that the industry does not believe their own argument that higher taxes/prices encourage illicit tobacco purchasing.

This is bollocks. It would only be true if the tobacco industry's sole aim was to minimise the size of the illicit trade. Even Gilmore et al. must realise that it isn't. The aim of any business is to maximise profit, and the tobacco industry is only interested in minimising the illicit trade insofar as it affects profits.

A very large proportion of illicit tobacco is produced by the tobacco industry abroad and imported by smugglers and booze cruisers, so it doesn't have much effect on industry profits overall.

A smaller proportion of illicit tobacco is produced by unlicensed manufacturers and criminal gangs. This does have an effect on industry sales, but that doesn't mean that it makes sense for the legal industry to minimise pricing to minimise this traffic.

If you sell 100 million units of something that has a profit margin of 50p per unit, you make more money than if you sell 120 million units with a profit margin of 30p per unit. You could always make more sales by slashing prices, but it doesn't necessarily make economic sense to do so.

As far as the government is concerned, however, revenue is lost regardless of the nature of the illicit trade. From the government's perspective, the optimal size of the illicit trade is zero, and that's why the industry makes this argument to government. It is a perfectly valid argument to make, and it is true that higher prices drive illicit activity, but that does not mean that it is in the industry's interest to minimise its profit margins.

This is really basic stuff. You'd think that at least one of the six authors would have spotted the fallacy.

You could turn their stupid argument on its head to make an equally stupid anti-anti-smoking argument:

Public health campaigners claim that higher retail prices, often created by tobacco taxes, are one of the most effective ways of reducing tobacco use. However, our study shows the industry deliberately increases cigarette prices and is therefore not concerned about consumers quitting or cutting down to avoid price increases. This implies that the industry knows that higher prices do not lead to lower consumption.

This would be mistaken and for exactly the same reason. It is the combination of margin and volume that counts, not one or the other.

Wednesday 24 July 2019

The idiocy of food reformulation

Apparently, it is asking too much of people on a diet to refrain from eating chocolate bars.

From the Telegraph...

Cadbury's has launched a diet Dairy Milk chocolate bar in the first recipe change since 1905, with lower sugar Jelly Babies and Oreos to follow.

A new version of the classic bar containing 30 per cent less sugar will go on sale on Wednesday as part of industry efforts to respond to the obesity crisis.

That's the obesity crisis. The thing that Public Health England is strong-arming the food industry into mass product reformulation to tackle.

The firm announced the new bar last year, the month after the Government unveiled the second phase of proposals to halve childhood obesity by 2030.

That's childhood obesity. I can't stress the word obesity enough.

But whilst the sugar content has dropped from 56g per 100g in the original bar to 39g per 100g in the new version, the calorie content remains similar between the two bars.

It's not really a 'diet' version, then is it? And it's not going to have any effect on obesity.

And if Cadbury's think they can appease the government by cutting 30 per cent of the sugar, they've obviously forgotten that they are also expected to cut 20 per cent of the calories in the next few years.

This is all so utterly pointless. We saw the same thing with Coco Pops last year when Kellogg's annoyed their customers by taking out 30 per cent of the sugar. This reduced the energy content of a bowl of Coco Pops by a whopping one calorie. (Because - whisper it - there are not actually that many calories in a gram of sugar.)

Even if you are mad enough to believe that the government should be taking arbitrary quantities of ingredients out of food to allow people to stuff their faces without getting fat, this is clearly not the way to do it.

This is what you get when bureaucrats take over, and stupid targets take precedence over common sense.

Tobacco prohibition

Judge Magazine, 1920

It took Theresa May to resign as prime minister for us to discover what lies behind that inscrutable mask. For three years, political pundits wondered what she really believes in. In the dying days of her administration, we found out - and it is not pretty.

In recent weeks, Mrs May has put forward a string of policies designed to tie the hands of her successors and secure some sort of ‘legacy’. Some of them, such as the net zero carbon target and the creation of an ‘Office for Tackling Injustices’, are expensive gestures. Others, such as a tax on milkshakes and a ban on young people driving after dark, reveal two of Theresa May’s biggest flaws: casual authoritarianism and a penchant for simplistic solutions. It is a nasty combination.

According to the Financial Times, she wanted to announce new taxes on food as her last act as prime minister. It is hard to imagine a grubbier epitaph. If this is her domestic agenda, be thankful that Brexit consumed so much of her time in office.

May’s penchant for arbitrary targets and knee-jerk illiberalism emerged again today with a Green Paper which announced that the government is ‘setting an ambition to go “smoke-free” in England by 2030.’ This will come as a surprise to those who remember England going ‘smoke-free’ in July 2007 when smoking was banned in every building open to the public, but the meaning of ‘smoke-free’ has undergone a significant change. It now means no smoking, anywhere, ever. It means, in effect, prohibition.

How the ratchet has turned. Anti-smoking campaigners have used various arguments over the years, most of them spurious, but usually having the appearance of addressing a market failure in a way that is not wholly inconsistent with a liberal democracy. Advertising tricks people into smoking and so it must be banned, they said. Once advertising was banned, they portrayed tobacco counters and cigarette packs as a form of advertising and banned them too. Bar staff were being killed by secondhand smoke, they said, and so smoking in pubs must be banned. Anyone could see that their real aim was to make it harder for people to smoke, but at least they paid lip service to John Stuart Mill’s harm principle.

Children were often invoked. Colourful packaging lures children towards a life of addiction, they said. Taxes need to rise to keep cigarettes out of the hands of children. Smoking needed to be banned outdoors in case children started to see it as normal. Think of the children, think of the children won’t somebody think of the children?

Few of these arguments were ever sincerely deployed and they can be discarded entirely now that we are in the final phase. Today’s announcement is not about stopping children smoking. It is about stopping everybody smoking. You could be smoking a fag in the middle of a field on your own during a gale and it would still be intolerable to the Department of Health. Under the Conservatives, there will be no more smoking.

The government gives no economic or ethical justification for stamping out a risky but pleasurable activity enjoyed by 14 per cent of the population over the next ten and a half years. It doesn’t bother with the usual tepid assurances about consenting adults having the right to smoke. How could it? The government doesn’t think anybody should smoke, and in the dying hours of Theresa May’s premiership, it is jolly well going to say so.

The government is entitled to its view, even if it is patently not shared by those who like smoking. In a free society, disliking something is not sufficient reason for banning it. Contemporary Britain is not a free society.

How does the state intend to stop people smoking? The details are vague and Mrs May has handed the problem over to her successor ('Further proposals for moving towards a smoke-free 2030 will be set out at a later date’). There is talk of a levy on tobacco manufacturers, but this would amount to nothing more than another small hike in the price of cigarettes. Smokers have coped with many such tax rises in the past, not least by buying from abroad or on the black market. The impact on the smoking rate would be negligible, although it would help fill the coffers of the ‘public health’ groups that are lobbying for it.

More encouragingly, the government mentions e-cigarettes and heated tobacco products. If combustible cigarettes eventually disappear, it will be thanks to such devices. There is little doubt that vaping has done more to lower the smoking rate in recent years than heavy-handed regulation, but it has been the result of consumer preferences and market forces, not arbitrary targets from the state. Regulators have only hindered the vaping revolution.

The government intends to set ‘an ultimatum for industry to make smoked tobacco obsolete by 2030, with smokers quitting or moving to reduced risk products like e-cigarettes.’ I have no doubt that many smokers will make the transition to these products over the next decade, but the industry cannot force them. Personally, I prefer vaping to smoking and made the switch seven years ago, but I know many people who greatly prefer the traditional cigarette and have no intention of quitting. The government has an unrealistic view of market economics if it thinks that industry can dictate terms to consumers.

It is conceivable - indeed, likely - that the combustible cigarette will go the way of clay pipes and snuff sooner or later. Future historians will associate them with the 20th century, not the 21st. The smoking rate will probably be very much lower in 2030 than it is today, but it will not be zero and will almost certainly be well above zero. Any attempt to push prohibition on people who have not consented to it will end in failure - and if they consent to it there is no need for prohibition.

Tuesday 23 July 2019

'Public health' vs. individual liberty - the debate

Dolly Theis is doing a PhD in 'public health' which suggests that she might waste her life working in that racket. I try to talk her out of it in this podcast. Check it out.

The blurb...

John Stuart Mill articulated the Harm Principle in On Liberty, where he argued that "the only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others."

So would he have backed the nanny state? Eating sugary food, drinking alcohol and smoking cigarettes are legal activities. But politicians still use the law to discourage them. They raise their price, prohibit or limit their advertisement, restrict where they can be sold and consumed, and sometimes ban them outright.

So do these politicians thereby violate John Stuart Mill’s famous principle that people should be free to do whatever they like, provided they harm no one but themselves? Or is the nanny state simply protecting consumers from the harms and excesses of, well, excess. The IEA’s Head of Lifestyle Economics, Christopher Snowdon, and the Programme Director of Big Tent and PhD student studying evidence-based policy Dolly Theis debate the topic.

You can subscribe to this podcast on Apple Podcasts and find more films, blogs, podcasts and reports at

Listen now.

Tuesday 16 July 2019

The chickens come home to roost at AG Barr

Before the sugar tax was introduced, someone on Twitter bet me that AG Barr’s share price would be higher in April 2019 than it was in April 2018 (when the tax came into effect).

I didn’t bet against him, but he was right. Fair play. The makers of Irn Bru have done a good job of keeping up investors’ confidence by increasing dividends and putting out good news stories like this....

Irn-Bru maker AG Barr has reported a rise in sales and profits after shrugging off the new sugar tax, the March cold snap and CO2 shortage. 
The Cumbernauld-based firm reported a 4% rise in underlying pre-tax profits to £18.2m for the six months to 28 July after sales climbed 5.5% to £129.8m. 

Earlier this year, headlines such as ‘Low-sugar Irn-Bru still hits sweet spot’ may have led you to believe that delisting your best-selling brand and replacing it with a government-approved, artificially sweetened forgery was the route to success for a soft drinks manufacturer.

Alas, today the chickens came home to roost...

AG Barr's share price plummets after profit warning

Irn-Bru maker AG Barr's share price fell sharply on Tuesday after the company issued a profit warning.  
The Cumbernauld-based said it expected sales to drop by 10% and profits by up to 20% as they struggle against a strong year in 2018. It cited poor weather and "challenges" facing some of its brands, particularly its Rockstar energy and Rubicon juice drinks. 

The weather in Scotland is becoming an all-purpose excuse for the broken promises of the ‘public health’ lobby, isn’t it?

More realistically...

AG Barr's Rubicon division has faced challenges since the introduction of the sugar tax, with several drinks companies having to change their recipes to reduce sugar levels. 

Narrator: They didn’t have to reduce them.

This has led to a backlash among some customers, who have complained about the new tastes.

No kidding. It would take a heart of stone not to laugh.

Imagine sitting on a recipe that is proven to make you money and voluntarily refuse to sell it to people who have told you repeatedly that they don’t mind paying more for it.

Thursday 11 July 2019

Last Orders with Timandra Harkness

There's a new Last Orders podcast available. This month our special guest was the performer, author and radio presenter Timandra Harkness. We had fun discussing San Francisco, Spice (the drug) and sin taxes.

Check it out.

Tuesday 9 July 2019

Sugar taxes still don't work

Adam Briggs did some of the modelling for the sugar levy back in the day and is an advocate of the policy. The 'public health' racket being what it is, he has since been put on the team tasked by the government with evaluating it.

In the meantime, he has written a response to Boris Johnson's criticisms of sin taxes for the Telegraph. Under the headline 'Revealed: The evidence which shows we need the sugar tax to fight the obesity epidemic', Briggs claims that sugar taxes are evidence-based, and yet he is unable to provide any evidence that they have ever had the slightest impact on obesity.

Ten years’ ago, evidence for the impact of soft drink taxes on behaviour was all based on mathematical modelling (hypothetical projections) but now there are over 30 countries with such taxes and the ‘real-world’ data are filtering through.

You'd think, therefore, that sugar tax campaigners could point to at least one country where obesity has declined as a result. Alas, no.

Perhaps the most well-studied country is Mexico, where a soft drink tax of a peso per litre (around a 10 per cent price increase) led to an average 8 per cent reduction in purchases over the first two years. 

But it didn't. A model designed by soda tax campaigners (ie. one of those 'hypothetical projections') claimed that sugary drink consumption would have risen if the tax hadn't been introduced. In reality, per capita consumption of sugary drinks stayed the same.

More recent data from Philadelphia in the US has shown a 40 per cent fall in sales following a 1.5c per ounce tax.

Indeed it does. That's because people started shopping out of town. The tax was bad for business in Philadelphia (as was always the intention), but good for neighbouring areas.

So what was the net effect on calorie consumption?

Due to cross-shopping and compositional changes in demand, we do not detect a significant reduction in calorie and sugar intake.

Oh dear.

Briggs continues:

A systematic analysis of all such real-world evaluations published last month concluded that a 10 per cent price rise in soft drinks leads to – on average – a 10 per cent fall in purchases.

Yes, that's roughly the price elasticity for soft drinks. If the price of any good goes up, consumption will generally go down. That's the law of demand. It does not make a sugar tax a 'genuine evidence-based public health policy', as Briggs claims, nor does it mean that 'as single interventions go, sugary drink taxes are right up there'.

What is remarkable about soda taxes is how rarely they produce a measurable decline in sugary drink consumption, let alone in calorie consumption or obesity.

There is plenty of other real world evidence that Briggs could have cited. None of it supports his case. If sugar taxes are 'right up there' as anti-obesity policies, it is a damning indictment of all the other anti-obesity policies, which are not really anti-obesity policies but anti-smoking policies rebadged by people with no imagination and inappropriately applied to a more complex and totally different issue.

Catch up on a decade's research into sugar taxes here.

Monday 8 July 2019

Triggernometry interview

Since Eurosport started covering all the snooker tournaments, I probably spend more hours watching Triggernometry than I do the BBC. And so I was delighted to go on the show to discuss drugs, sugar, smoking, obesity and advertising with Francis and Konstantin. Click on the link below to watch it on Youtube.

And click here for Triggernometry's excellent back catalogue.

Thursday 4 July 2019

The year of the milkshake

I wrote a piece for the Telegraph about Boris Johnson's opposition to a milkshake tax...

Insofar as sin taxes encourage behavioural change, they encourage people of modest means to cut expenditure in other parts of the household budget. There’s an old Russian joke in which a boy asks his father if he will drink less now that vodka is so expensive. "No, my son," he says. "You will eat less."

Tax receipts from alcohol, tobacco, gambling and sugary drinks rake in £24 billion a year. This is a colossal sum of money that far exceeds the associated costs to the NHS and is difficult to justify in a free society. Of all the tax cuts that have been proposed during the Tory leadership contest, the most progressive – in the true sense of the word – would be to slash sin taxes.

If you have a subscription, do read it all.

Wednesday 3 July 2019

Boris says no to a milkshake tax and calls for a review of other sin taxes

Britain has had a nanny statist as prime minister for the last thirteen years (I'll give Blair a pass for his early years). Could it be that we are finally going to get a PM who stands up to the killjoys?

There are signs from the bookies' favourite, Boris Johnson, that we might...

Boris Johnson today declares war on ‘sin taxes’ on sugary and fatty foods – as he warns they hit the poorest with higher bills.

The Tory leadership frontrunner will promise to review Theresa May’s flagship sugar tax on fizzy drinks if he reaches No10, and insists it will not be extended to milkshakes.

He will also vow to freeze new taxes on foods which are high in salt, fat or sugar – and argue those who want to lose weight should just exercise more.

The policy would amount to a major reversal of government efforts to combat obesity. Last night news of the announcement sparked a backlash from health campaigners who accused Mr Johnson of ‘turning back the clock’.

Cue squealing from the nanny state lobby. Excellent.

Boris says:

‘The recent proposal for a tax on milkshakes seems to me to clobber those who can least afford it. If we want people to lose weight and live healthier lifestyles, we should encourage people to walk, cycle and generally do more exercise. Rather than just taxing people more, we should look at how effective the so-called ‘sin taxes’ really are, and if they actually change behaviour.’

‘Once we leave the EU on 31 October, we will have a historic opportunity to change the way politics is done in this country. A good way to start would be basing tax policy on clear evidence.’ 

This is in contrast to some depressing comments made by Jeremy Hunt recently, who seems to think it is his job to threaten businesses into forcing artificial sweeteners on consumers:

“The quickest way to deal with this [obesity] crisis, is for the people who manufacture milkshakes and other products to reduce the levels of sugar in those products so that the taste doesn’t change very much but they are much healthier.

“So, you threaten them, you say ‘we have been prepared to legislate if you won’t play ball’. But in my experience, if you make that threat, you don’t need to follow through with the dreaded milkshake tax.”

It is time for an independent review of sin taxes to be carried out without the involvement of true believers and their worthless computer models. Encouragingly, Boris's team seems to have looked at some of the empirical literature. Today's press release contains some unusually detailed notes to the editor:

In the last ten years there have been a series of academic papers that have both argued for and against the proposition that ‘sin taxes’ change people’s behaviour. While there have been some studies, and overviews of academic literature, that have concluded that ‘sin taxes’ are effective (for example, Wright et al., BMC Public Health, 2017, link), there have also been a number of studies that have raised questions over their overall effectiveness. For example, for sugar, some research has suggested that the tax could increase alcohol consumption (Quirmbach et al., Journal of Epidemiology & Community Health, link).


In the last ten years there have been a series of academic papers that have both argued for and against the proposition that ‘sin taxes’ are regressive and hit the poorest the most. While there have been some studies that have concluded that this is not the case (BMJ, link), other studies have concluded that these taxes are regressive. For example, some studies have claimed that a 20 percent tax on sugar-sweetened beverages would take three times as much from lower-income households than from higher income households, as a percentage of disposable income (Sharma et al., the effects of taxing sugar-sweetened beverages across different income groups, Health Economics, link). In addition, recent studies have suggested that sugar taxes do not reduce socioeconomic inequalities in diet-related health (University of York, July 2018, link).

It is very difficult to argue that sin taxes are not regressive. Indirect taxes on widely consumed items invariably hit the poor harder than the rich. The BMJ editorial (cited above) claimed otherwise by resorting to logical contortions and bald assertions.

As I said at the time, the BMJ article sought to redefine the word regressive, taking it away from economics and framing it in terms of health. Its basic argument is that although the poor pay more as a proportion of their income, they also benefit the most because they respond more to the tax.

Even if this were true, it would not stop sin taxes being regressive. But it is not true. There is no evidence that taxing soft drinks improves anybody's health, and rich people are more responsive to cigarette price hikes than poor people.

If Boris wants chapter and verse on the economic literature, he should read my short discussion paper Of Course Sin Taxes Are Regressive:

Many studies have shown the regressive impact of taxes on food, alcohol, tobacco and soft drinks; the very taxes that the Lancet wants to see increased. Often the studies are written by proponents of such taxes who acknowledge the added financial burden on the poor even while advocating for them. Lorenzi (2004: 61), for example, accepts that ‘[s]in taxes are regressive in practice if not in their design’ and Sharma et al. (2014: 17) accept that a 20 percent tax on sugar-sweetened beverages would take three times as much from lower-income households than from higher-income households, as a percentage of disposable income.

A systematic review of the literature on sugary drink taxes found that ‘[a]ll of these studies reported the tax to be financially regressive whereby lower-income households would pay a greater proportion of their income in additional tax’ (Backholer et al. 2016: 11). The findings of Chudá and Jansky (2016: 445), who use empirical evidence from the Czech Republic, ‘confirm the overwhelming evidence from other countries, that fat taxes are regressive in income.’ Chouinard et al. (2015) found that taxes on high-fat foods (in the USA) are ‘extremely regressive, and the elderly and poor suffer much greater welfare losses from the taxes than do younger and richer consumers.’ Interestingly, they also found ‘almost no behavioural effect’, with even a 50 per cent tax only lowering fat consumption by three per cent (ibid.: 20). Badenas-Pla and Jones (2003: 130) note that ‘excise taxes on alcohol and tobacco are regressive with respect to income (the usual measure of ability to pay), if poorer and more affluent consumers smoke and drink at the same rate. The regressivity is exacerbated if the prevalence is inversely related to income.’

The regressive impact is plain to see if we look at expenditure of whole income groups (quintiles, deciles etc.), but since not everybody in the group consumes the taxed product, we also need to look at the expenditure of individual consumers. When we do this, the impact is even more pronounced. Farrelly et al. (2012) found that expenditure on tobacco among low-income smokers in New York City increased from a sizeable 11.6 per cent to a staggering 23.6 per cent of disposable income following large rises in the excise tax on cigarettes. Across the USA in general, low-income smokers spent 14.2 per cent of their income on cigarettes in 2010/11 whereas high-income smokers spent just 2.2 per cent (ibid.).

Such taxes are not just regressive in the short-term. They also tend to be regressive over the course of a lifetime. Lyon and Schwab (1995: 405) found that the regressivity of cigarette taxes in the life-cycle is ‘virtually identical’ to the regressivity over one year (i.e. highly regressive). Alcohol taxes become ‘slightly less regressive’ if they are studied over the lifecycle but they remain ‘firmly regressive’ compared to general sales taxes (ibid.).

The regressive nature of such taxes was even apparent in the issue of the Lancet which implied otherwise. It included a study by Sassi et al. which focused on middle- and low-income countries where wealthier people tend to consume more tobacco, alcohol, snacks and soft drinks than the poor. Despite this, the authors were forced to conclude that ‘[l]ow income households bear the largest tobacco tax burden consistently across all countries’. When it came to ‘price policies targeting soft drinks and snacks ... again, the low-income households consuming these products tend to bear the largest financial burden’ (Sassi et al. 2018: 2067). Alcohol taxes were the only partial exception. They took a larger share of income from the richest quintile, but only because there were more teetotallers in the poorest quintile. When rich drinkers were compared to poor drinkers, ‘the burden borne by just the low-income households that consume alcohol is proportionately larger than the burden borne by high-income households consuming alcohol’ (ibid.).

This is so well established that most 'public health' campaigners don't bother trying to deny it (many of the studies mentioned above were written by dyed-in-the-wool nanny statists).

As for behavioural change, this is usually small to nonexistent because the products being taxed are price inelastic. Soft drink taxes have remarkably little impact on soft drink consumption, let alone calorie consumption, and have never reduced obesity anywhere, ever. Alcohol taxes have little impact on the heavy drinkers and alcoholics whose health is realistically at risk. And tobacco taxes have to be sky high before they have the kind of effect campaigners expect - at a huge cost to those of us who choose to smoke.

A lot of tax cuts have been promised during the Conservative leadership campaign, not all of them sensible or affordable. This is more like it from Johnson. The priority should be slashing the taxes which hit the poor hardest and punish people for their lifestyles.

Britain has extortionate taxes on alcohol and tobacco, and the sugar levy will soon spread to other products unless we get a prime minister who is prepared to stand up to the killjoys. 

Monday 1 July 2019

The 'public health' budget hasn't been cut enough

Earlier this year, the Local Government Chronicle asked me to write a response to an article by Jo Bibby complaining about cuts to the 'public health' budget. I don't know whether they ever ran it (it's not online), but here is her article followed by my reply.

Jo Bibby: Keeping us healthy is not just a job for the NHS

For years the British public have been told that staying healthy is entirely their responsibility – so much so that they are starting to believe it.

It’s no wonder that some people want to perpetuate this view. Much of the rhetoric about prevention places the responsibility for staying healthy firmly on you, me and our Fitbit. But this lets governments duck their responsibility to tackle the root causes of ill health.

The recently-published NHS long-term plan puts preventing poor health at its heart, including finding and treating disease earlier and calling on the NHS to help tackle unjust differences in health between the best and worst off. These steps are welcome.

But the numbers living with health conditions that could and should be avoided is rising. Whether we are talking about respiratory problems linked to air pollution, smoking or poor housing; cancers caused by obesity, tobacco and alcohol; or the increasing levels of depression and anxiety arising from myriad factors such as debt, loneliness and insecurity, they have two things in common.

First, they all have roots in the political choices governments make. And second, by the time they are on the NHS’s radar it is largely a case of mitigating the consequences of disease rather than prevention.

It’s not that the emphasis on prevention in the long-term plan is futile. Good NHS care can be the difference between your type 2 diabetes being manageable or it leading to your foot being amputated – the fate of over 6,000 people each year.

But just looking to the NHS to prevent ill health is akin to thinking that investing in prisons will reduce levels of crime. Of course, prisons have a role in preventing re-offending; they don’t stop people committing crimes in the first place.

Poor health is the consequence of circumstances that limit people’s ability to secure the basics for a healthy life – a home, a job and a friend – thereby increasing their exposure to multiple risk factors. Any government committed to the prevention agenda needs to be look far beyond the NHS.

Putting responsibility for keeping healthy on individuals alone sidesteps the root causes of ill health – poverty being common to most of them. It also diverts attention from the commercial interests of the food and alcohol industries.

Yet the degree of control any of us can exercise over our own health is shaped by the conditions we find ourselves in. Living in poorer conditions increases the exposure to factors harmful to health: poorly-paid and poor-quality work, inadequate housing, greater air pollution, a lack of green space and affordable, healthy food.

As highlighted by the Institute for Fiscal Studies, healthcare spending has risen from 23% of public service spending in 2000 to 29% in 2010. It is set to reach 38% by 2023-24.

Meanwhile, other areas of government spending that create the conditions for healthy lives have seen big cuts. Education spending has fallen by 8% per pupil in real terms since 2009-10, welfare changes since 2011 have cut incomes for the poorest households, and Sure Start and early years services have been cut by over 40% since 2010.

Perhaps the starkest illustration of disconnected policy making is the £85m cut to the public health grant announced before Christmas, when our analysis shows that they need an additional £3.2bn a year to meet demand and address inequalities.

This situation is no longer tenable. The number of years lived in good health is falling for people who face the harshest socioeconomic circumstances. This is despite record spending on healthcare and medical advances. As such there is a growing recognition that a healthier society is about prevention.

Tackling the issue facing millions across the UK of spending years in ill health will only happen through a comprehensive prevention strategy that harnesses the contributions of all areas of government.

This demands an industrial strategy that creates the opportunity for good quality work across the whole country, a more muscular commitment to regulating the food and drink industry – particularly where it impacts on children – and investment to bring back the social infrastructure that supports the most vulnerable.

The government’s forthcoming prevention green paper provides the chance to do this and it must be done alongside adequate funding for wider public services that have a direct impact on people’s health, including those delivered by local authorities.

Creating a healthy society is good for all of us. The additional spending for the NHS will help mop up the poor political decisions of the past but isn’t enough to create a healthy future.

Jo Bibby, director of health, the Health Foundation

Christopher Snowdon: Cut deeper 

Jo Bibby complains about cuts to the public health budget but never mentions how large that budget is. It is a very large sum indeed. The figure usually quoted is around £3.5 billion, but even that large number is an underestimate since it is only the amount given to local authorities. The operating budget of Public Health England in 2017/18 was £4.3 billion. In the context of this king’s ransom, a cut of £85 million is trivial.

I would like to see the government go further and take more money out of the ‘public health’ slush fund to give to frontline services. The usual argument against this is that prevention saves money in the longterm but this stitch-in-time narrative is a self-serving myth. There is plenty of economic evidence to show that most preventive interventions are not only costly in themselves but create further costs down the line when people develop other diseases. It is the ageing population, not the phoney ‘time bombs’ of obesity and alcohol, that has led to NHS costs skyrocketing in the last twenty years.

I am assuming here that preventive interventions are effective in prolonging life, but that is by no means certain. Despite the vast expense, there is little evidence that many public health initiatives, such as the fatuous Change 4 Life campaign, have any positive effect. Some public health initiatives, such as vaccinations and sexual health, are important and necessary but it is not obvious why these cannot be provided by the NHS directly. Monitoring and tackling infectious disease is a legitimate public heath goal. Pestering grown adults about their lifestyle is not.

Public Health England urgently needs auditing by independent academics to show that its billions could not be better spent on actual healthcare. The restructuring of public health in 2013 created a gravy train for single-issue zealots and left-wing political activists to masquerade as health experts, not least by appointing dozens of Directors of Public Health with an average salary of £150,000 in local authorities across the country. These pocket dictators make a nuisance of themselves in whatever way they can. Amongst their trivial obsessions is a fanatical desire to stop people smoking in hospital car parks and a keen urge to prevent new alcohol outlets and takeaway outlets from opening, as if any of this would have the slightest impact on the health of residents.

There is no doubt, as Bibby says, that financial security, sound employment and a good social life are beneficial to both mental and physical health. The question is whether public health professionals are in any way equipped to create economic prosperity, other than by constantly demanding the government spends money it doesn’t have. Not only do they lack the tools to tackle poverty and social isolation, they actively support  regressive policies such as minimum pricing and sugar taxes which are tailor-made to exacerbate them. It is thanks to their smoking ban that thousands of traditional venues for socialising, fun and friendship - pubs, bingo halls and working men’s clubs - have closed since 2007.

There is an almost comical disconnect between the grand political ambitions of the public health lobby and the policies they spend so much time and money campaigning for. We can all agree on the need to improve living conditions, help children get a good start in life and have a clean environment, but these are complex and expensive tasks which are not made any easier by pretending that they are public health issues. Faced with these massive socio-economic challenges, what does the public health propose? A ban on buy-one-get-one-free food deals. A calorie cap on vol-au-vents. Brown cigarette packs.  Smaller wine glasses. Putting 10p on a can of Coke. Banning Tony the Tiger.

By no means all of the public health budget is spend on such ludicrous schemes, but despite the supposedly savage cuts, it is notable that there has been no decline in the volume of nanny state hectoring in recent years. Quite the reverse.

If people wish to campaign for their pet projects, they should be free to do so, but the taxpayer should not be forced to subsidise them. As far as this taxpayer is concerned, the problem is not that the public health budget has been trimmed, but that it has not been trimmed enough.

Christopher Snowdon is head of lifestyle economics at the IEA