One theory is that it was a North American saying "as drunk as an Inuit"...ie Eskimo...as they are genetically more susceptible to the effects of alcohol than most races. (It is claimed that this might also be "as drunk as an Ute", one of the native American tribes. However, nobody ever says �an Ute, any more than they say �an uniform' or �an unit'.) Another view is that, in the 18th century, gentlemen often left their horses in the care of lads, nicknamed 'newts', outside hostelries. They'd send out drinks as the evening wore on with the result that the 'carers' were often the worse for wear by the end of the day. A third possibility is that it is a corruption of a Cornish phrase: 'os pyst os yn neweth' which means 'you're daft, you're in (second) childhood'. In other words, it may have nothing to do with newts at all!
Personally, I think the last one of these is a Cornish joke...but take your pick.