Alcohol consumption estimated to cause millions in losses to state

The first study of how alcohol consumption impacts the state budget has been carried out in Latvia on the order of the Ministry of Health. It suggests that losses of EUR 149.7 million were incurred for the health sector, law enforcement institutions, and social assistance in 2021, which accounted for 0.45% of gross domestic product (GDP), the Ministry said.

The study was carried out by the Baltic International Centre for Economic Policy Studies within the framework of the European Social Fund project “Complex Measures for Health Promotion and Disease Prevention” implemented by the Ministry of Health. The results will be used by the Ministry of Health to advance political initiatives and justify the need for funding to implement public health policies.

The study results show that for the health sector, costs amounted to 56.6 million euros in 2021, or 2.7% of all expenditures for the health sector; for law enforcement - 47.7 million euros, or 6.5% of general government sector spending diverted to public order and security; social assistance – 44.8 million euros or 0.97% of State and local government expenditure for the provision of social services.

Financial impact on unemployment and lower economic activity, or the indirect cost of alcohol harm is estimated at between €290 and €452 million, or 0.9% to 1.3% of GDP.  This is based on cases where alcohol use causes a person to prematurely die or become unemployed, end up in prison, sick, or have reduced work capacity and lower productivity.

Alcohol-related harm has resulted in the loss of up to 88,620 years of life in 2021, which could have been lived in good health and quality of life, the Ministry said.

Estimates from the study suggest that the biggest impact on the state budget and costs would be a reduction in alcohol sales time, especially in the evening hours, an increase in age censuses for alcohol purchases to 20 years, an increase in the excise tax rate, a reduction in drivers' permissible alcohol concentrations and a restriction on alcohol advertising.

Latvia has the highest absolute consumption of alcohol in society among the countries of the Organisation for Economic Co-operation and Development (OECD) – 12.2 liters per inhabitant.

"Alcohol consumption is a significant cause of morbidity and premature death. Its use is associated with more than 200 diseases and diagnoses, including liver diseases, trauma, malignancy, and cardiovascular diseases. In order to ensure the reduction of the consumption of alcoholic beverages in society, it is essential to introduce complex measures at the same time. These should include both legislative initiatives to create the right conditions and promote a change in people's habits and continue public outreach and education activities to promote public health," Health Minister Hosams Abu Meri said.

The research paper (in Latvian, with a summary in English) can be accessed here.

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