Alcohol price and duty

Why managing the price of alcohol can help to reduce avoidable alcohol harm.

Although there has been a decline in overall alcohol consumption in the UK since the mid-2000s, rates of alcohol-related illness, injury and death have remained stubbornly high. We believe that more can be done to reduce the avoidable harms resulting from alcohol misuse, and that managing the price of alcohol is an important component of that work.

International research evidence shows that the consumption of alcohol is sensitive to changes in price (or, to be more accurate, affordability). The relationship between price and consumption is complex, and subject to a range of varying ‘elasticities’ and switching behaviours. However, in broad terms, when the price of alcohol drops, more is consumed; when alcohol becomes more expensive, less is consumed.

Over the past few decades, the affordability of alcohol in the UK has risen and, overall, it is now 61% more affordable than it was in 1980 when compared with average household income. Most alcohol is purchased from supermarkets and off-licences, where the affordability of beer has risen by 188%, and wine and spirits by 131%, since 1987. High strength white ciders and spirits are especially cheap, with such drinks recently found on sale for as little as 18p per unit – meaning that 14 units (the maximum amount the UK’s Chief Medical Officers recommend any of us drink in a week) is available for just £2.52.

Given that heavy drinkers buy most of the cheapest, strongest alcohol, the Government in Scotland introduced a minimum unit price on 1 May 2018. A minimum price for alcohol sets a baseline price below which alcohol cannot be sold, and the level has been set in Scotland at 50p per unit. Research from Sheffield University, using economic and epidemiological models to predict the effect on spending, consumption and health of introducing a minimum alcohol price, indicates the measure will cut alcohol-related deaths and illnesses. For this reason, the Welsh Government also intends to implement a minimum unit price in Wales in 2019.

Historically, taxation (also referred to as ‘duty’) has been the method used in the UK to adjust the price of alcohol, although its purpose has more often been to generate revenues for the government, rather than to reduce alcohol consumption or harm. However, in 2008 the Government introduced a ‘duty escalator’, which increased the duties on alcohol by 2% above inflation every year. This was abolished in 2013 (for beer) and 2014 (for wine). The Treasury estimates that ending the escalator has cost the public finances around £4 billion since then.

The current duty system for alcohol in the UK, and which is governed by EU Directives, is loaded with historical anomalies, and the rules vary dependent on the alcohol type. For example, wine and cider are taxed per litre of product within particular strength bands, but not according to the amount of alcohol, whereas beer and spirits are taxed by their alcohol content. Cider duties are historically far lower than duties for beer, which is one reason why very strong ‘white ciders’ are able to be sold so cheaply.

A comprehensive revision of the alcohol taxation system is required, whereby tax bandings are re-structured so that they better reflect strength and are able to incentivise lower alcohol products.

We have also called for the UK Government to introduce a ‘treatment levy’: a 1% above-inflation increase in alcohol duties to be spent on supporting treatment services, which could save the NHS and other public services around £300 million annually.

The introduction of a 'treatment levy' could save the NHS and other public services around £300 million a year.