Social costs of alcohol 'are vastly inflated'

THE alcohol industry counters the threat of more taxation by claiming the costs of alcohol have been exaggerated by at least $10 billion.

THE alcohol and hospitality industries are countering the threat of increased taxation by promoting new academic research that claims the negative costs of alcohol to the community have been routinely exaggerated by at least $10 billion.

This undermines a key argument used by the anti-alcohol lobby for increased excise, and represents an escalation of the robust national debate about alcohol-related health issues.

The research, conducted through the University of Canterbury in New Zealand and funded by the industry, claims that the net public costs of alcohol are lower than the amount of revenue raised in alcohol taxes.

Alcohol taxation is expected to a target for reform at the National Tax Forum in October and the Henry tax review said taxes on alcohol should be set to address "the spillover costs imposed on the community of alcohol abuse". Therefore, the estimates of those costs are a crucial element of the debate.

Health lobbyists are pushing for higher taxes on alcohol and have consistently said the costs to the community total $15bn, a figure from a 2008 paper by Australian academics David Collins and Helen Lapsley.

But the new study by Eric Crampton, commissioned by the National Alcohol Beverage Industry Council, says most of the negative costs of alcohol are borne by private individuals and the public costs total just $3.8bn, which is less than the $4bn raised by alcohol taxes.

Dr Crampton says his study simply applies "straight down the line, neo-classical economics" to the Collins/Lapsley work.

He argues that consumers of alcohol choose to drink for their own benefit, therefore any negative impacts on themselves, such as a shorter lifespan or accident and injury, are private costs and not public burdens.

Dr Crampton's study only counts the costs to third parties, such as victims of crimes or people killed and injured by drink-drivers, not the drivers themselves.

The study is bound to trigger fierce debate and, at the very least, demonstrates that if, as the Henry review recommends, alcohol taxes are to reflect the cost to the community more detailed analysis will be required.

Dr Crampton's work, for instance, says it is wrong to count money spent by alcoholics buying drinks as a public cost.

Likewise, we should not count the lost wages of people incarcerated for alcohol-related crimes or the out-of-pocket medical expenses of abusers of alcohol. These, he argues, are all private costs, not borne by the public.

NABIC chairman Peter Hurley says the research demonstrates that the oft-quoted $15bn figure is "meaningless from an economic and policy" perspective. He says the NABIC-funded research is more rigorous and exposes as "alarmist" the previous work.

"There has been no analysis of the benefits of consuming alcohol," he said.

Dr Crampton has not studied the benefits of alcohol and says more work is required in that area to provide an accurate cost/benefit outcome.

"Consumer enjoyment forms the bulk of the economic benefit consumers receive from the consumption of alcohol and by allocating zero benefit to alcohol consumption, the earlier studies convert billions of dollars in private costs to policy-relevant social costs," he said.

Health advocates, under the banner of the National Alliance for Action on Alcohol, this week have been in Canberra lobbying politicians. They are arguing for tax changes that, in particular, will make cheap alcohol like cask wine more expensive.

Such volumetric taxation is resisted by the industry on the grounds it could hurt poor consumers and the wine industry.

The NAAA insists that "alcohol pricing reform is proven to be one of the most effective ways to reduce alcohol-related harms"; it has been using an even higher figure of $36bn, which adds broad social costs to the earlier study of alcohol costs.

But this figure, too, has been disputed in an Access Economics study, also funded by the alcohol industry, which criticises the failure to calculate any personal or social benefits from alcohol.