BERL responds

I’m pleased to see that BERL have responded to some of the criticism of their report concluding the cost of alcohol abuse in NZ was close to $5 billion a year.

Treasury have apologised to BERL for some of their comments, on the basis that BERL were not asked to do a full cost/benefit study. In that regards, it is fair enough that BERL not be criticised for working to their brief.

However as someone interested in public policy, there are real questions abotu why Government agencies both commissioned something that was not a full cost benefit study and further why it was promoted by such.  The research was being treated as gospel, and we now know it was research only looking at costs without benefits.

BERL have said Crampton and Burgess made some mistakes in their analysis, and Crampton has blogged that yes there were two mistakes. However they only add $36 million onto the costs. And as it happens they had also missed out the portion of excise tax collected by Customs which increases external benefits by $197 million. This means that their original figure of a net cost of $146 million is now a net benefit of 38 million. That is close enough to zero – in other words the current excise taxes cover the external costs of alcohol, and there is no case for increasing them.

I hope suitable scrutiny will be directed towards other research reports which do not look at both benefits and costs, and get used by lobby groups and government agencies incorrectly.

Roger Kerr makes some good points in a recent column:

Liquor is in many ways not special. Hundreds of products – matches, detergents, electricity, pharmaceuticals, motor vehicles and firearms, for example – cause problems if misused.

Nevertheless, there are external social costs, such as drink driving, which give rise to legitimate concerns.

The challenge for policy is to target these problems with effective interventions (and enforcement of existing laws), not to penalise with regulations or taxes the vast majority of responsible drinkers.

As one commentator has noted, “Raising taxes on alcohol to prevent problem drinking is akin to raising the price of gasoline to prevent people from speeding.”

Absolutely. Too often the Government goes for the easy approach which pubishes everyone equally, rather than target those causing the problem.

The Law Commission needs to engage with this analysis and follow the Generic Tax Policy Process for any recommendations on tax.

Similarly, it should follow the required Regulatory Impact Statement process for any recommendations on regulations in its forthcoming discussion paper.

That process requires a demonstration that the benefits of any recommendations or regulations exceed the costs. Competent analysis requires benefits and costs to be quantified, not just asserted, otherwise serious public policy errors could be made.

It is highly unlikely that proposals to restrict liquor outlets, for example, would meet a cost-benefit test.

I agree. They won’t stop problem drinkers getting alcohol but will make it harder for most people to buy alcohol conveniently.

Instead, the Law Commission should focus on ways of internalising the external costs of alcohol abuse.

For example, why should those who injure themselves in an alcohol-fuelled assaults or burglaries enjoy generous ACC benefits? Many foreigners would regard such treatment as ludicrous. Will Sir Geoffrey Palmer, one of the ‘fathers’ of ACC, be open-minded enough to look at such an obvious remedy?

Similarly, if we are willing to confiscate the vehicles of boy racers, why should we not confiscate the vehicles of serial drink drivers?

Target the offenders, don’t try and social engineer the entire population.