HM Revenue & Customs generates billions of pounds a year from ‘sin’ taxes
HM Revenue & Customs generates billions of pounds a year from so-called “sin” taxes, charged on those little vices that help get us through the day.
We’re often told our unhealthy ways are placing a massive financial burden on the NHS and state finances, but new research suggests the wages of sin are helping to keep them going.
So stop feeling guilty about your bad habits, especially since guilt never stopped anyone indulging anyway.
Every year the NHS spends £3.6 billion treating smoking-related illnesses, while the Government spends a further £1 billion collecting cigarette butts and extinguishing house fires started by smokers.
However, this is dwarfed by the income the state generates from smokers according to the Institute of Economic Affairs (IEA).
It says smokers pay £9.5 billion a year in duty on tobacco products, then give the Treasury another financial kick because they die much earlier. This saves the state £9.8 billion in pension, healthcare and other benefit payments, even after accounting for the tax revenues lost when somebody dies.
Tobacco duty and early death savings total £19.3 billion. After deducting that £4.6 billion Government spending, the state makes a cool £14.7 billion annual profit.
The Government spends just under £4 billion a year on alcohol-related problems
Campaigners warn of the burden boozing and obesity place on public services, but the IEA claims this has also been greatly exaggerated.
It has found that the Government spends just under £4 billion a year on alcohol-related problems, such as healthcare, policing, criminal justice and welfare payments for people who are unfit to work, but taxes on alcohol top £10 billion.
Christopher Snowdon, head of lifestyle economics at the IEA, says it is time to stop pretending drinkers are a tax burden: “Teetotallers are being subsidised by drinkers by at least £6.5 billion a year.”
Obesity does cost the state, but only £2.5 billion a year after deducting savings on pensions, healthcare and other benefits, far lower than the crippling £16 billion some claim.
Snowdon concludes: “Taken together, Britain’s public finances would be more than £20 billion worse off if there were no drinking, smoking or obesity.”
Smokers made up 15.9 per cent of deaths in 2015
Before you raise a glass, light a cigarette or bake a cake to celebrate, remember you have to bear a heavy cost.
Smokers made up 15.9 per cent of deaths in 2015, losing 13.3 years of life on average, as well as missing out on state, personal and workplace pension benefits.
There is also the financial cost of the habit. On a pack of 20 cigarettes costing £8.50 you pay £6.98 in tax, or a whopping 82 per cent, according to the Tobacco Manufacturers’ Association. The tax take can be as high as 90 per cent on premium brands costing around £10.
Somebody who smokes 10 premium cigarettes a day therefore is paying around £3,285 in tax every year.
Smokers pay in other ways too. For example, they shell out twice as much for term life insurance.
GoCompare.com found that a 40-year non-smoker taking out £200,000 level term life insurance pays total premiums of £4,812 over the 25-year term, against £10,257 for a smoker.
Spokesman Matt Sanders says the gap is even wider for older smokers: “They could shave thousands on life cover just by ditching cigarettes.” Smokers, heavy drinkers and the obese do gain if they buy an annuity with their pension.
Stephen Lowe, director at retirement advisers Just, says the unhealthy can get anything between 5 and 25 per cent more income from an impaired life annuity: “Your lower life expectancy means you probably will not claim the income for as long, reducing the benefit of getting more.”
Unfortunately, no amount of extra cash can compensate for the pain early death causes you and your family.
The only surefire winner from smoking, boozing and bingeing is, as ever, HM Revenue & Customs