I'm not sure why there's an assumption that benefit claimants have such a massive dedicated fags and booze budget that it needs government regulation.
People who spend the majority of their household budget on alcohol are addicts and likely to have a host of personal and social problems requiring support and various types of intervention. They are also in the tiny minority. Unless someone is a parent of a child/children who have been assessed as being at risk due to issues of neglect I can't honestly see any point in such a scheme.
Most people on limited resources however do the same as the well off, in relative terms, ie they budget what they can afford for luxuries. I am on a very low wage (only a few pounds more than JSA, tbh) and maybe once a month I'll splash out on a bottle of cheapo wine. Like most people (including benefit claimants) I juggle as best I can. Last month I took myself out to the cinema. Why should benefit claimants be denied the right to make choices such as these when ultimately they make no difference to the taxpayer? The fact of being a benefit claimant has no direct correlation to what you spend that benefit money on.
FWIW speaking as a taxpayer I can't believe people get in such a state about whether unemployed Bob Jones has a Sky subscription when the money we give the state goes towards funding billions of pounds' worth of horrors like MPs' expenses, dodgy banking practices, and spurious public officials.