- Lower levels of smoking and drinking by Gen Z has affected the UK public finances, analysis suggests.
- Bloomberg estimates the UK missed out $11.4 billion in tobacco tax and $5.7 billion in alcohol tax since 2002.
- “Sin taxes” bring in revenue for governments, but alcohol and tobacco also cause health problems.
Gen Z is increasingly shunning alcohol and tobacco – and that’s put a $17 billion hole in Britain’s public finances over the past two decades, new analysis suggests.
Calculations by Bloomberg indicates that the UK has missed out on £9.3 billion ($11.4 billion) from tobacco taxes and £4.7 billion ($5.7 billion) in alcohol duties had revenues remained steady since 2002.
Alcohol consumption has been falling steadily in Britain since peaking in the mid-2000s, in a trend that’s partly due to changing habits of younger generations.
Some Gen Zers are shunning the drinking and smoking habits of their elders, pulling down sales in both the UK and US. The trend toward sober curiosity has also gathered pace among young people since 2018.
Governments tend to implement “sin” taxes on products that are harmful to society, such as alcohol and tobacco. As well as playing some role in deterring consumption, it’s also a vital source of tax revenue.
This year, the Office for Budget Responsibility (OBR) expects the UK government to take in £12.6 billion ($15.4 billion) in alcohol duties and £10.7 billion ($13.1 billion) in tobacco taxes.
Falling revenue from alcohol and tobacco could pose a headache for the Chancellor, Jeremy Hunt, who is trying to address a £27.6 billion ($33.7 billion) deficit in Britain’s public finances. The equivalent of the Treasury Secretary also facing falling tax income from gasoline and diesel taxes as more EVs are sold.
However, the analysis doesn’t take into account the potential upside of falling alcohol and tobacco consumption in terms of reduced demand for the UK’s public healthcare system. Alcohol-related harm is estimated to cost the National Health Service (NHS) in England £3.5 billion ($4.3 billion) a year.
But a 2015 study by the Institute for Economic Affairs suggested the government was still coming off better from the current setup, with drinkers subsidizing non-drinkers to the tune of £6.5 billion ($7.9 billion).