Drug Abuse
Gin, drugs and the bank crisis
Gordon Brown could look back to the 18th century for a way to pay for the
banks' rescue and eradicate a modern plague
by Robert Fowke

The Guardian
October 25 2008

I have a cure for the financial hangover we're about to suffer. My
cure will make us better, it will cost us nothing and it is based on solid,
historical precedent.
In 1742, Britain was involved in the Austrian war of succession, our
principle enemy being France. Our navy was very powerful but if we failed to
participate in the land war on the continent, our allies threatened to make
peace without us. We urgently needed money to finance a force of Hanoverian
troops, to be based in Flanders. Lord Carteret, secretary of state under
George II, proposed a "sinking" fund of £1.8m to pay for the troops and for
various other expenses, to be borrowed at 3% per year – and he also had a
suggestion as to how to pay for it.

In the 1740s, gin consumption in Britain had reached the proportions of a
plague. Originally encouraged as a replacement for French brandy, it
resulted in large sections of the poorest in the land becoming addicted.
There were an estimated 10,000 gin sellers in London alone. Destitution,
crime and premature death walked in that addiction's wake. Various attempts
had been made to crack down. In 1736, exorbitant licensing charges had
amounted to prohibition. The result was riots, and an increase in
consumption to an estimated 8m gallons a year by 1743. Too many people had
become dependent, either as drinkers or sellers, or both. Gin went
underground.

Now Carteret proposed a revolutionary reform. He suggested a cut in retail
licensing charges from £50 a year to £1, a level affordable for small-time
dealers. This, together with moderate duties from distillers and allowing
for costs and for a small measure of supervision, would result in sufficient
revenue to pay for the Hanoverian troops, and it might also bring about a
reduction in the evils associated with the gin trade. The naysayers were
horrified. In the parliamentary debate that followed, they insisted that gin
was evil and must be outlawed permanently. It was abhorrent to make money
from it. The debate was long and heated.

Carteret won the day, and the naysayers were comprehensively proved wrong.
His 1743 Gin Act was a triumphant success. It raised £90,000 within a year –
more than enough to pay the interest on his "sinking" fund. Indeed, gin
substantially financed British efforts in the Austrian war of succession.
But equally important, gin consumption was brought within the control of the
law and mortality rates began to fall, as did alcoholism and crime. Further
licensing during the following years tightened the screw (but not too much),
and gin gradually ceased to be a matter of public concern.

Today, as we are learning to our cost, the government is once more obliged
to raise vast sums of money, this time to counter weaknesses in the banking
system. And the sums are much more vast than they were in 1743. Gordon
Brown's "sinking" fund to part-nationalise the banks amounts to many
billions of pounds.

It is perhaps tasteless to say so, but we are fortunate that we face a
social plague very similar to that of gin – the illegal drug trade. And as
in the mid-18th century, we see the failure of abolitionist policies to
control the menace. The total value of this trade amounts to between £2bn
and £6.5bn a year – all untaxed.

Our financial hangover will be caused by the payment of interest on Brown's
bank rescue package. He should take a leaf from Lord Carteret's book. He
should license and tax the sale of all currently illegal recreational drugs
at a level that would allow a substantial number of those involved in the
trade to come in from the cold, thus incidentally reducing crime – combining
this, of course, with oversight and control.

He should ignore the naysayers, just as Lord Carteret did, and for the many
medical and social arguments in favour of abolition he might care to look at
the website of the Independent Drug Monitoring Unit. The total benefit of
such legalisation to the Exchequer is likely to be between £3.5bn and £6.3bn
a year, including excise duty, VAT and income tax from the dealers and
allowing for additional costs. This is more than enough to pay the interest
on the bank rescue package at the sort of rates a government can command.
You're a world leader, Gordon, and it's a world problem. With luck, others
will follow you – again.