Yet, alcohol duty is no different in the on- or the off-trade: around 44p on a pint of lager (or equivalent large can). That 44p makes up a much greater proportion of the price of beer on the supermarket shelf than in the pub. The Chancellor compared the latest duty freeze to a 2p cut in duty on a pint of beer. Assuming pubs and shops pass that cut onto consumers, economic theory tells us that taking 2p off the price of a large can of beer costing £1.16 will have a much greater effect on people’s purchasing behaviour than taking 2p off the price of a pint costing £3.50. So while we’d expect an effective duty cut to increase the amount of alcohol people buy everywhere, that effect is likely to be considerably larger for shops than for pubs.
Ultimately cutting duty increases the relative gap in prices between the on- and the off-trades and will have a much larger impact on alcohol sales in the supermarket than in the pub. The evidence for this is clear already – since 2012 beer duty has been cut by 24% in real terms, yet beer sales in pubs have fallen by 17% while supermarket sales have increased by 11% over the same period.
It seems that cutting alcohol duty isn’t such a great idea if your aim is to help the hospitality industry.
The duty freeze isn’t too great for the Treasury
either – the government’s own impact assessment of the latest freeze is that it will cost £1.7 billion in lost duty revenue by 2026.
But what about impacts on wider society? In 2019, my colleague Maddy Henney and I modelled the impacts of government cuts and freezes in alcohol duty since 2012 and compared them to what might have happened if duty had simply increased in line with inflation instead. We found that between 2012-19, government duty policy led to an estimated 37,000 additional hospital admissions, 1,400 additional deaths and cost the NHS almost £200 million.
Worse still, duty cuts and freezes have a larger impact on the drinking of the most deprived in society. This is because cutting duties has a bigger impact on prices in the off-trade, and drinkers in more deprived groups buy a greater proportion of their alcohol from shops rather than the pub. This means that a greater proportion of the additional burden of alcohol harm also falls on these groups, who already suffer much higher rates of alcohol-related hospitalisations and deaths. Our research showed that cutting or freezing alcohol duties therefore increases health inequalities. This latest freeze comes at a time when the health and economic impacts of COVID have already had a hugely disproportionate effect on more deprived groups in society, making this even more concerning.