Can a policy-induced reduction in alcohol consumption improve health outcomes and stimulate the UK economy?: A potential 'double dividend'.

Abstract

The health benefits of reducing excessive alcohol consumption are well-documented and widely accepted, but policies directed to this end are often regarded as damaging to the economy. Previous UK alcohol impact studies typically focus on what are in effect the 'gross' impacts of a fall in alcohol consumption considered in isolation, so that estimated economic impacts are always negative. Here we investigate the 'net' impacts of a reduction in consumption accounting for the reallocation of household spending and the expenditure of any increase in government revenues. We employ a health-augmented, Input-Output modelling framework. We simulate the impact of a reduction in alcohol consumption due to: a change in consumer tastes that generate a reallocation of household spending; an increase in alcohol duties accompanied by the use of increased revenues to stimulate government expenditure. We find evidence of a trade-off between employment and health benefits for the case of a tastes-induced switch from alcohol consumption, but this is less severe than past analyses would suggest (and does not apply to economic activity more generally). For the case of increased taxation on alcohol (and increased government spending) we find that there is in fact no trade-off between employment on the one hand and health on the other; employment and economic activity are stimulated while health outcomes improve. There is a potential 'double-dividend' of improved health outcomes and increased economic activity as a consequence of a rise in alcohol duties.