Yesterday, the Chancellor of Exchequer, George Osborne, presented the budget for 2014. The big mantra was “hardworking people”—the state aims to protect and promote the interests of the “makers, doers and savers”. One of the measures he announced was that the beer duty will be lowered by 1p per pint. Admittedly this cut will not have a tremendous impact on most people—you need to drink 100 pints to save £1—but it is important for what it represents.

Decreasing the tax on booze in a country that clearly has a problem with alcohol does not seem like a good idea; it doesn’t send a good message. Whilst in the past thirty years the overall alcohol consumption in OECD countries fell by 9%, the UK saw an increase of 9%. So I posted the following on twitter: “Call me weird but it seems a terrible idea to lower taxes on beer considering the alcohol abuse problem of Britain”.

One of the responses I got was that taxation should not be used to change people’s behaviours, that’s what education is for. My immediate response was that education was definitely the most important part of the process and taxation can be a facilitator to this process. Let us consider the pros and cons of using public policy (and taxation specifically) as an instrument of changing social behaviours.

The main advantage of using taxation as a disincentive for undesirable behaviours, is that it can increase the pace of change towards the preferred outcome, especially when the habit that we want to get rid of is embedded into the social norms of a country. Smoking is a paradigmatic case. Smoking has been fetishised by the media for more than half a century and became embedded into the social consciousness through images of Audrey Hepburn in Breakfast at Tiffany’s, Sean Connery in James Bond, and Lucky Luke lighting a fag whilst riding towards the sunset. We have been socially conditioned to think of smoking as something that cool people do, and getting rid of this image, requires drastic measures. Education is central to this process; people need to realise the harmful effects of smoking and should be able to make an informed decision as to whether to take it on or not. One of the problems of using education as the only deterrent, is that it takes time for its effects to show. Taxation can be a good way to accelerate this process, firstly by raising awareness of the issue—and taxation surely does that, although it is not its primary function—and secondly, by acting as a disincentive, not because the government should be a moral police, but because it has a duty to allocate the costs of bad choices to those that make them, provided, of course, that they have knowledge of the effects associated with smoking—thus the importance of education. In the case of smoking, the combination of education and public policy has positive effects. Five years on, 78% of British people still support the smoking ban, exposure of children to second hand smoking decreased by 70% and the ban triggered many people to give up the bad habit, as seen by the percentage of smokers that declined from 29% to 21%.

The two most important disadvantages is that the state should not be in the business of regulating people’s behaviours—the freedom argument—and that taxation has disproportionate effects on those at the lower end of the socioeconomic ladder—the class argument. The class argument is the most powerful, I think. Most smokers are working class people and are those more likely to be penalised for their choice. If you are Rupert Murdoch and your cigars get a bit more expensive you won’t mind. In fact, you won’t mind if they get a lot more expensive. It makes sense that a universal tax will disadvantage people with less money because it sucks up more percentage of their income.

The freedom argument is also valid, but to a lesser extent—yes, people should be free to make the choices they want, but the wider society should not share the costs of these choices if they are the product of informed decision making.

The freedom argument becomes stronger when it is framed within the class argument. Working class people live much harder lives—for instance men in Blackpool live an average of 73.2 years, whereas their counterparts in Kensignton and Chelsea live for 10.5 years longer—and smoking is one of the few pleasures that they get; smoking is one of their choices and the state should not penalise them without asking for those benefitted from their situation to pay their fair share. If the well-being of working class people is of interest to the state and its privileged elites, then why are they not doing anything (themselves) to minimise the life expectancy gap between rich and poor? Why pass the costs to the working class without themselves bearing their share of the responsibility? For it is not only smoking that contributes to the gap; in the past it was working in a mine, now it’s working exposed to British weather and polluted air, not affording to make healthy eating choices and not receiving a good enough education to enable you to avoid the choices that the government is now penalising you for. All of these are a product of a system where some people benefit at other people’s detriment, yet those that benefit, never compensate for their privilege.

The freedom argument becomes weaker when addressed form a social rather than an individualistic perspective. Smoking is not a solitary habit. Smoking affects others—it affects non-smokers, it affects future children of smoking mothers and it affects all of us who pay for the NHS cancer treatment of smokers, half of which die from cancer, a quarter of which between the ages of 39 to 69 (see stats). There is negative social impact and a social cost to smoking, it is not just the exercise of the freedom of some individuals. In an earlier post, I argued that we should pay for the treatment of people that get sick, even if their sickness is a product of the bad choices that they make. I want to live in a civilised country that takes care of the people that live within its bounds; I don’t want to live in a society that abandons people who suffer, even if the suffrage was a product of their own volition. After all, we don’t live in the US. So, in order to be able to afford this civilised society, we need to find incentives to compliment the process of education. Taxation might not be the optimum way to go, and I realise that this is not the purpose of taxation, but judging from the results, it seems like it’s working.

The problem with the freedom argument is that it can only be justified if its advocates accept that all people should bear the full cost of their choices. I don’t want to live in a country where people are left to die because they have made bad choices. I don’t want to live in a country where someone is declined chemotherapy or pain relief treatment because she is a smoker that doesn’t have money to pay for the hospital bill. And in order to avoid these situations we need to balance freedom of choice with other social values.

The freedom argument doesn’t hold very much when it comes to addictive substances either. The more addictive a substance becomes, the harder it is to label it as ‘choice’. A more appealing argument would be to challenge the tax on cigarets or alcohol by comparing it to coffee, which is similarly addictive and bad for one’s health (if taken in excess quantities), but no one is treating it as such because it is beneficial to capitalism; it makes people more ‘productive’—just walk by a construction side and see how many people hold those disgusting large energy drinks, or ask the average academic how much coffee or tea s/he consumes on a daily basis. There is an obvious discrepancy on the way these decisions are made and the government should be held accountable; but merely waving around the word ‘freedom’ without considering the other (social( effects, won’t get you far either.

In closing, I want to clarify my view, which, as always, is open to challenge and revision: taxation is unjustifiable if it is not predated and accompanied by education, awareness and information about the effects of specific bad habits. But the freedom argument has effects that are itself undesirable—there is value in having a social safety net, and for that safety net to exist, we all need to make some concessions, based on other non-individualistic, social considerations.


Disclaimer: I know nothing about taxation. This is just my rough, uneducated reasoning, which I would like challenged, in order to get exposed to more sides of the argument. Corrections and clarifications very much appreciated.