Modelling the economic effects of reducing the consumption of unhealthy commodities: An inter-sectoral input-output...

Industry arguments against public health policies that reduce the consumption of unhealthy commodities often include the assertion that the policy will harm the economy by reducing production and costing jobs. However, this argument does not consider that consumers may spend money previously used for unhealthy commodity consumption on other products, benefiting other sectors and potentially offsetting those negative economic consequences. In this study we aimed to estimate the macroeconomic impacts of reducing consumption of alcohol, tobacco, confectionary and gambling, accounting for reallocation of spending from these commodities to alternatives.

We developed the open-source Commercial Determinants of Health Input-Output (CDOHIO) model version 1.1.0. CDOHIO models inter-sectoral linkages in the United Kingdom (UK) economy using published input-output tables to estimate the macroeconomic outcomes of changes in the total national consumer expenditure on selected unhealthy commodities and the reallocation of this expenditure to other consumption. We modelled a 10% decrease in total consumer expenditure on (1) alcohol, (2) tobacco, (3) confectionary and (4) gambling, assuming that the reduced expenditure was reallocated entirely to other products. The comparator in each case was no change in expenditure. We analysed six economic outcomes: (i) output (the total value of production in the economy), (ii) tax receipts from employees, (iii) tax receipts from employers, (iv) full-time equivalent employment, (v) total net earnings to individuals, and (vi) Gross Value Added (GVA), which is the primary outcome measure used as a proxy for national Gross Domestic Product.

For tobacco, confectionary and gambling, reduced spending was estimated to yield positive effects across all six measures. The total effect of a 10% reduction in confectionary spending was an increase in GVA of £0.389 billion (0.02%), for reduced spending on tobacco, +£1.859 billion GVA (+0.09%) and for gambling +£1.250 billion GVA (+0.06%). For alcohol, a 10% reduction in spending led to a small negative effect on GVA (-£0.134 billion, -0.01%), which is the net effect of positive effects of reduced spending on off-trade alcohol (+£2.543 billion) and negative effects of reduced spending on on-trade alcohol (-£2.677 billion).

The potential negative macroeconomic impacts of reducing spending on tobacco, confectionary and gambling in the United Kingdom could be more than mitigated when consumers reallocate money spent on these products to other consumption. This is also the case for off-trade alcohol consumption, but not for on-trade alcohol consumption.