Wednesday, 1 March 2017

Et tu, Irn-Bru?

I have some extremely distressing news:

AG Barr is to halve the amount of sugar in its leading Irn Bru brand, ahead of a government crackdown on the fizzy drinks industry.

The Cumbernauld-based firm, which also makes Rubicon and Tizer, said it would cut Irn Bru's sugar content from about 10g per 100ml to just below 5g.

Irn-Bru is one of the best soft drinks on the market, in my opinion. At least, it used to be. I won't be drinking it again if they're going to replace sugar with horrible artificial sweeteners. It already has two artificially sweetened versions. This is an outrage.

Much of the reaction on Twitter echoes my sentiments.









Needless to say, I hope their business collapses and they have to make a hasty volte-face.

Problem gambling - apocalypse postponed again

There has been a small amount of coverage of the latest statistics from the Gambling Commission, but it has focused on the unexceptional news that 'nearly half of Britons like a flutter'. The Gambling Commission's report also contains an estimate of the number of problem gamblers, which the Express reports as follows:

Among those who have gambled in the past 12 months, 0.7 per cent were identified as problem gamblers, up from 0.5 per cent in 2015

If this is a rise in problem gambling it must be about the thirteenth rise since the media became obsessed with this issue in 2004. I have written before about the claim that problem gambling keeps doubling and doubling despite the number of problem gamblers never getting any bigger.

In truth, the rate of problem gambling has been within the narrow margins of 0.4 per cent and 0.9 per cent ever since it first began to be measured in 1999. The first three reports in 1999, 2007 and 2010 used two different methodologies and came up with the following estimates:

1999: 0.6 per cent (DSM-IV), N/A (PGSI)

2007: 0.6 per cent (DSM-IV), 0.6 per cent (PGSI)

2010: 0.9 per cent (DSM-IV), 0.7 per cent  (PGSI)

Responsibility for collecting the data was then handed to public health bodies who came up with the following estimate for England and Scotland (combined) for 2012:

2012: 0.5 per cent (DSM-IV), 0.4 per cent  (PGSI)

Since 2013, the figures have been collected by the Gambling Commission which only uses the PGSI methodology. Results are as follows:

2013: 0.5 per cent

2014: 0.5 per cent

2015: 0.5 per cent

2016: 0.7 per cent

The Gambling Commission's sample size is only 4,000 people, which is not much when you consider that less than one per cent of them are going to be problem gamblers (ie. fewer than 40 people). The different between the 2015 and 2016 estimate is, the Commission notes, not statistically significant and we now have data from a period of 17 years that shows no change in the number of problem gamblers.

This, despite the panic about online gambling, gambling advertising and fixed odds betting terminals.

Speaking of fixed odds betting terminals, some research was conducted in 2011, based on the 2007 gambling survey, which found that 'controlling for gambling involvement substantially reduced or eliminated all statistically significant relationships between individual gambling activities and problem gambling, except in the case of machines in bookmakers'.

However, the same researcher has now done a similar analysis of the data from the 2010 and 2012 surveys and found that...

  • The original conclusion that there is no consistent evidence that particular gambling activities are predictive of problem gambling, after controlling for the level of involvement, holds true in 2010 and 2012.
  • The 2007 finding that machines in bookmakers are the exception does not persist into 2010 and 2012.
  • It appears that any ‘significant’ effects borne out of the results are most likely an unexplained variation in the sample.

In other words, there has been no rise in problem gambling and no one type of gambling product can be said to 'cause' problem gambling, including fixed-odds betting terminals.

Perhaps it is time everybody calmed down a bit?

Tuesday, 28 February 2017

Scotland's sockpuppet state

From the BBC...

Children are exposed to "unacceptably high levels" of alcohol marketing through sports sponsorship and public adverts, according to a report.

Alcohol Focus Scotland (AFS) said there was "clear evidence" that exposure to alcohol marketing led children to start drinking at a younger age.

It has called for the Scottish government to take action.

Alcohol Focus Group is a sockpuppet of the Scottish government which has gathered together a group of the country's most fanatical 'public health' teeth-grinders, including Gerard Hastings, to push the SNP to do something that the SNP would love to do. The Scottish health secretary said last year...

“This government has made it clear we believe the UK Government should do more to protect our children from exposure to alcohol advertising in all its forms which is why we established a wider review of alcohol advertising.”

The press release for this wafer-thin report even came with a supportive quote from a government official. This is blatant sockpuppetry and I've written about it today for Spiked...

 The charade works like this. The government finds (or creates) a charity, lavishes it with taxpayers’ money and encourages it to lobby for taxes and regulation. After a few years of astro-turf campaigning by state-funded activists, the government passes laws which punish, stigmatise and exploit its citizens while claiming to be capitulating to the demands of civil society.

Do read the whole article.

Talking sugar tax blues

I was recently interviewed by the consumer website A Spokesman Said about sugar taxes and minimum pricing...

The government says it isn’t a tax on consumers. Instead, costs will be absorbed by companies that make sugary drinks – what do you say to that?

George Osborne presented it as a tax on corporations, but that was just spin. The evidence from other countries shows that companies nearly always pass taxes onto consumers (as economic theory would predict).

Indeed, they tend to pass it onto consumers and then some. So, that bottle of Coke is probably going to be rounded up from £1.92 to £1.99.

Osborne also tried to portray the tax as optional on the basis that the ‘corporations’ wouldn’t have to pay it at all if they take all the sugar out of their drinks.
That is obviously silly. As long as there is demand for sugary drinks, the companies are going to keep producing them.

Have a read of it all.

I also did an interview with Cameron English reflecting on Jacob Grier's excellent Slate article about secondhand smoke. You can read that here.

Monday, 27 February 2017

Revealed preferences: a case study

A photo tells a thousand words. This one was taken by Michael F. Cannon at the 'Creating a Culture of Health' conference last week, hosted by billionaire nannies of the Robert Wood Johnson Foundation.





Saturday, 25 February 2017

Peter Hitchens on drugs

Peter Hitchens has written a blog post titled 'Stupid arguments for drug legalisation examined and refuted'. For the most part, the arguments are not silly and Hitchens hasn't seriously examined, let alone refuted, them. 

I won't respond to all his points because some of them are not really arguments for drug legalisation at all - they are just arguments he has with legalisers from time to time. In particular, he spends a lot of time arguing against people who say 'what about alcohol, tobacco, motorcycles etc?' That line of attack can expose the double standards of some prohibitionists but it cuts no ice with Hitchens because he would happily ban these products too if it were feasible. I shall therefore pass over that argument and address some of his other points.

'WHY ALLOW CRIMINALS TO CONTROL THE TRADE? MAKING IT LEGAL WOULD DRIVE THEM OUT'

This is demonstrably untrue. Alcohol and tobacco( see above) are legal. Yet in Britain, HM Revenue and Customs use huge resources trying to combat the criminal gangs which smuggle illicit cigarettes into the country, or who manufacture and distribute illicit alcohol. This is because they are very heavily taxed, just as legal marijuana would be very heavily taxed. In fact it is already being taxed in Colorado, on the US states which has legalised it. Illegal sellers still operate there, trading at well under the taxed price in legal outlets.

Nobody claims that prohibition is the sole cause of black market activity. Britain has a thriving black market in alcohol and tobacco because it has taken the advice of people like Peter Hitchens and introduced every measure short of prohibition to deter the sale of these products. Taxation, in particular, has created demand for illicit goods because, as John Stuart Mill once wrote, 'every increase of cost is a prohibition, to those whose means do not come up to the augmented price.' 

If Britain had a less punitive system of sin taxes, criminals would be driven out of these markets. Criminal manufacturers will never be able to produce products more cheaply than legal corporations. The only reason there is a price gap between the licit and illicit product is that paternalistic governments have set taxes too high.

By contrast, if we had full prohibition the market would be entirely run by criminals. The fact that there is a significant amount of criminal activity in a market that has several characteristics of an illicit activity, as tobacco does (artificially high prices, no advertising, and now no branding) is an argument for less regulation in that market, not prohibition in another. 

As with tobacco and alcohol in Britain, the tax on cannabis is Colorado is so high that it is cheaper to buy it on the black market. It should be lowered.

All crime is caused by law

In any case, no thought has gone into this. All crime is caused by law. To have law means to have crime. If you have no law, you will have no crime. But think what this means in reality. If we banned nothing, we’d need no police, courts or prisons. But we’d also live in much worse, more dangerous and unpleasant world. We ban things because they are dangerous or have other evil effects.

It is trivially true to say that there would be fewer crimes if there were fewer laws, and it is true that this is not an argument for repealing laws. The real question is whether cannabis is sufficiently 'dangerous' to justify prohibition and whether the costs to the 'police, courts or prisons' are justified given that smoking cannabis is a relatively benign self-regarding behaviour. The costs of enforcing prohibition are real and they fall on the general taxpayer. Prohibition, in other words, creates negative externalities for everybody in society. 

'Evil effects' are not sufficient to justify prohibition. People should be free to impose costs on themselves. Prohibition can only be justified if there are negative externalities which exceed the negative externalities of prohibition, and which cannot be captured with a Pigouvian tax. In general, however, smoking marijuana is a victimless crime that does not tick these boxes, although Hitchens disagrees...

'MARIJUANA USE IS A VICTIMLESS CRIME'

Only if you do it on a desert island, quite alone, and nobody loves you. In all other cases, the user runs the risk of doing himself serious harm ( see below on correlation between cannabis use and mental illness). And if he does, his family will be terribly grieved and quite possibly forced to look after him, and pay for his upkeep for the rest of this natural life. They are victims. Alternatively, the user may end up in a mental hospital, expensively cared for at the charge of the taxpayer, who is also his victim. Even so his family’s grief and distress will last for as long as they live.

This is a reference to the alleged link between cannabis and schizophrenia. Given the widespread use of cannabis and the relative scarcity of schizophrenia, we might assume that the risk to any individual cannabis smoker - if it exists at all - is not great. Hitchens nevertheless wants people who smoke cannabis to be thrown in prison pour encourager les autres on the basis that the hurt or cost to third parties is intolerable. 

Since people can be 'terribly grieved' about all sorts of things, and since taxpayers foot the bill for most health and welfare costs, it is difficult to think of many activities that are truly victimless (and therefore permissible) under Hitchens' definition. It is a principle that, as Mill might say, 'acknowledges no right to any freedom whatever, except perhaps to that of holding opinions in secret'.

In any case, it is not clear why Peter Hitchens cares more about an individual's loved ones than the individual does. If the friends and family of a cannabis user have a self-interested stake in his well-being, they can argue and reason with him. Ultimately, however, they must accept that his life is his own and that there is no duty on an individual to minimise every risk in case they wind up upsetting their friends or visiting an NHS doctor.

Nor should we assume that parents who have suffered as a result of their children taking drugs necessarily support Hitchens' position. The Anyone's Child campaign is run by dozens of parents who believe that their children would still be alive if drugs were re-legalised and regulated.

Why are cynical businessmen so much better than criminal gangs?

Why exactly are cynical businessmen better than criminal gangs?, who can wrap their dangerous products in pretty packets and sell them in shops and on the internet, and advertise them on TV and in cinemas, so much more desirable than criminals? Criminals cannot do these things, and can reach many fewer people than cynical businessmen.

'Cynical businessmen' generally don't settle their disputes by shooting one another, for a start. They don't blow up aeroplanes or employ hit-men. They abide by product regulation and pay taxes. They don't finance terrorism. They don't corrupt whole countries. They don't torture people, they don't burn down casinos and they don't throw grenades into crowds of innocent people. They don't need to do any of this because they can settle their disputes through a court of law.

On the other hand, Hitchens is right to say that 'cynical businessmen' try to make their products look attractive and tell people that they exist, subject to statutory limits on commercial speech, up to and including total prohibition. Manufacturing 'pretty packets' hardly seems comparable to mass murder, however.

In any case, this is what the UK's best selling cigarette looked like before plain packaging was introduced:



And this is some Ecstasy:



He continues:

Just because it’s regulated, doesn’t mean it’s safe.

Does the fact that cigarettes and alcohol are sold openly and ‘regulated’ mean they are safe to use and will not harm you?

Why then would it mean that legalised drugs were safe to use and would not harm you? By ‘regulating’ them, society and the state would be offering a reassurance they were not entitled to give. They would be looking the other way while something inherently dangerous was put on open sale. I can see why a greed merchant might accept this argument. But most marijuana legalisers regard themselves as being opposed to corporate cynicism. Why are they outraged at the sale of sugary drinks and greasy burgers to innocent children, but happy to ally themselves with the mighty lobby of Big Dope?

It is highly doubtful whether people interpret the legality of tobacco, alcohol or even sugary drinks as a 'reassurance' that they are totally without risk. Very few things are wholly safe. The question is whether regulated products are safer than unregulated products. Tobacco and alcohol are undoubtedly safer than they would be if they were only available from criminals on the black market. Illicit alcohol was vastly more dangerous in America under Prohibition and it continues to be vastly more dangerous wherever it is consumed today. Illicitly produced cigarettes are also more dangerous than the real thing. If sugary drinks were only available on the black market it would not be long before we had our first spate of sugary drink-related poisonings.

Unless Hitchens believes that product regulation is totally useless and unnecessary, he must accept that unregulated products carry extra risks. This is undoubtedly true of drugs like heroin and Ecstasy which require the police to give users special warnings when unusually strong or adulterated batches hit the streets.

Meet The Real Mr Big - it’s You

These are the people who seek the dangerous, selfish pleasures of drugs. These are the real Mr Bigs of the drug trade. Without the cash they willingly hand over for their chemical joy, there would be no cartels, no smuggling, no mules, no gang wars.

This is why it is so astonishing that the people at the heart of the drug trade, the buyers and users, are the only ones in whom the law is utterly uninterested. If they were systematically arrested and prosecuted, the drug trade would rapidly dwindle, most of all in the places now enslaved by it.

No Mr Hitchens, The Real Mr Big is you and your fellow prohibitionists. Without drug prohibitionists, there would be 'no cartels, no smuggling, no mules, no gang wars.' There were none of these before the war on drugs started and there will be none of them when it is finally ended. It is fatuous to blame the victims of the drug war for the inevitable consequences of the prohibitionists' utopian fantasies.

'BUT YOU CAN’T PUT HUNDREDS OF THOUSANDS OF PEOPLE IN PRISON'

No, you can’t. The point of prison is to deter. Once it is clear that a crime is being taken seriously, its incidence falls ( see Japan and South Korea and pre-1971 Britain). A fairly small number of high-profile arrests and prosecutions, and the use by police of informers on a large scale so that nobody knew if they were in fact buying from a police nark, would rapidly persuade most people that drug abuse wasn’t worth the risk. And if everyone had heard of someone who *had* been jailed for drug possession, they’d change their behaviour. Drug abuse is a crime of affluence and choice. Anyone can stop committing it if he wants to. Nobody needs to do it.

Nice theory, but it hasn't worked in the United States where drug users are routinely sent to prison, nor in countries such as Russia or Iran which treat drug users even worse. The idea that people will stop taking drugs if word gets around that you can be sent to prison for it is naive. It is well known that large numbers of people are sent to prison for many years for the crime of dealing drugs, and yet drug-dealing continues.

Dictators love having stupefied subjects. They’re easier to fool, and to push around

Self-stupefaction is not some mighty freedom, like the freedoms of speech, thought and assembly. It is rather the opposite. Any tyrant would be glad to have a stupefied, compliant and credulous population, accepting what it was told and too passive and flaccid to resist. See Huxley’s ‘Brave New World’, inn which the masses are controlled by the pleasure-drug Soma.

This slightly conspiratorial theory is not borne out by experience. Nearly every government in the world has banned narcotics. Only a tiny handful have legalised cannabis. Even if we accept the idea that 'dictators love having stupefied subjects' it is a matter of historical record that the worst dictators have fought the war on drugs more savagely than anybody. Chairman Mao came close to wiping out opium use in China using the most brutal methods. Putin, like his communist predecessors, takes a zero tolerance approach. Rodrigo Duterte is currently massacring drug users in their thousands in the Philippines. And whilst it is true that Hitler dished out drugs to his soldiers, the Nazis' drug of choice - amphetamine - was hardly likely to stupefy them.

In short, if governments of any stripe want a stupefied population, they have a funny way of showing it.


Friday, 24 February 2017

Tobacco tax evasion - what's the story now?

I have written before about the sketchy guesswork used by the government to estimate the size of the illicit tobacco market. HMRC's current methodology is to...

... estimate how many smokers there are and multiply it by the estimate of how many cigarettes they each smoke. They then subtract the number of recorded sales - plus an estimate of how much is bought legally abroad - from the total and the figure that emerges is the amount of non-duty paid tobacco.

I have suggested that the decline in legal tobacco sales since 2009/10 - when tobacco taxes began to rise well above inflation - has been far greater than the decline in smoking prevalence would predict. In 2009/10, 49 billion cigarettes were sold. By 2014/15, this had fallen to 33 billion, meaning that sales had fallen by a third. Sales of hand-rolling tobacco, meanwhile, had remained the same at around 6.6 million kilograms. The graphs below show legal sales of cigarettes and other tobacco (mainly hand-rolling tobacco) since 1992. Note the big dip in 2000 when cross-border shopping from the EU began in earnest.




Over this period, the smoking rate has fallen by just 10 per cent (or two percentage points), from 21 per cent to 19 per cent, and half of that drop has taken place since 2010. Since 2010, the smoking rate has fallen by just five per cent but cigarette sales have fallen by more than a quarter. Moreover, the population has grown by four per cent.

It is possible that this can be explained by smokers sharply cutting down their consumption (perhaps because of e-cigarettes), but it is also possible that higher prices have pushed more people into the illicit market.

Or it could be a bit of both. Unfortunately, the HMRC estimates are so rough and ready that it is impossible to tell. Last time I wrote about this, HMRC figures showed a rise in the illicit market share since 2011/12 (from 7 per cent to 10 per cent in 2014/15), but no real change since 2009/10 when the estimate was 11 per cent.
 


It should be noted that any figure between 4 per cent and 12 per cent is possible in any of these years. Look at the confidence intervals. This is a broad guesstimate that depends on a lot of assumptions.

The importance of assumptions can be illustrated by looking at the most recent HMRC estimates which use an updated methodology. All the figures have suddenly changed. Whereas HMRC previously found no change between 2013/14 and 2014/15, they now find a four percentage point decline - from 11 per cent to 7 per cent - followed by a near-doubling of the rate, from 7 per cent to 13 per cent.


HMRC say that their new methodology takes into account evidence about people who 'falsely deny they smoke'. Rightly so, but estimating how many smokers claim to be non-smokers also involves a large element of conjecture. Does the new methodology get us any nearer the truth? It is hard to say. What is clear is that the figures are highly sensitive to changes in assumptions.

HMRC add their estimate of the illicit market to the legal sales data and conclude that the total number of cigarettes sold in Britain (legal and illegal combined) has fallen from 56 billion in 2009/10 to 38.5 billion. This is a drop of nearly a third (31 per cent) in a period when smoking prevalence has declined by just ten per cent and the population has grown by four per cent. And so the puzzle remains.

A reduction in the number of cigarettes smoked per person offers a partial explanation. The ONS says that average daily cigarette consumption in England fell by two percentage points between 2009 and 2012 (from 14 to 12 for men and from 13 to 11 for women). Its most recent dataset shows a figure of 11 per day (both sexes combined). This suggests an overall decline in cigarette-per-smoker consumption of 18.5 per cent since 2009.

This is a substantial drop but not enough to explain the overall decline in (legal) sales. There were 49 billion cigarettes sold legally in 2009/10. Reducing this by 10 per cent to account for the decline in smoking prevalence takes it down to 44.1 billion.

Reducing that 44.1 billion by 18.5 per cent to take into account lower consumption by smokers gives us 36 billion.

Increasing that 36 billion by four per cent to take into account population growth gives us 37.4 billion.

But HMRC records legal sales of 31 billion in 2015/16.* HMRC reckon that a further 1.5 billion cigarettes were brought in from the EU legally. This takes our 37.4 billion down to 35.9 billion, so we are still five billion cigarettes short of what we might expect, but this could be partially explained by a shift to rolling tobacco. Despite the decline in smoking prevalence, sales of hand-rolling tobacco remain the same as they were in 2009/10.

This is a rough and ready calculation, but it suggests that HMRC's estimate that the illicit trade makes up between 8 per cent and 17 per cent of the cigarette market can be justified, although the real figure seems closer to the high end than the low end. HMRC's mid-point estimate of 7 per cent for the previous year certainly looks implausibly low.

Even if HMRC's mid-point estimate of 13 per cent is correct, the number of illegal cigarettes on the UK market is mind-boggling. It suggests that six billion cigarettes were sold on the black market in 2015/16, along with ten million kilograms of rolling tobacco. That's in addition to 1.5 billion cigarettes and 3.2 million kilograms of rolling tobacco that avoid UK duty by being brought in legally from the EU.

And, to repeat, HMRC's estimates are incredibly sensitive to changes in assumptions. For example, if the average smoker consumes 11.5 cigarettes a day, as opposed to 11.0 cigarettes as assumed above, it leaves another 1.5 billion cigarettes unaccounted for.

We are talking about a serious problem for the government and yet there does not seem to be any serious effort being made to establish the facts. For a relatively small outlay, the government could conduct empty pack surveys and get a better idea of what is going on. Unfortunately, there are perverse incentives at work because some people would rather live in darkness than light a candle. The customs agencies want to be seen to have got a grip on tobacco smuggling and the government (along with anti-smoking groups) wants to believe that it can raise taxes without fueling the black market.

Three things are clear, however. Firstly, that tobacco taxes hit the top of the Laffer Curve in 2012/13 when £9,681 million was raised. Revenues have fallen every year since and stood at £9,485 million in 2015/16, despite higher rates of duty.

Secondly, that whichever methodology is used, the illicit cigarette market has grown in recent years as a share of the overall market. The 13 per cent mid-point estimate in the most recent dataset is higher than it has been for a long time.

Thirdly, that there are reasons to think that even 13 per cent could be a significant under-estimate, but until efforts are made to measure the illicit market properly, no one will know for sure.


* The tobacco tax gap documents says 32 billion, but the tobacco bulletin says 31 billion (30,974 million, to be precise).