Alcohol price and duty

Despite alcohol consumption in the UK declining overall since the mid-2000s, rates of alcohol-related illness, injury and death remain stubbornly high. This is because only looking at the average consumption in the population hides a significant proportion of people who are drinking heavily. More can be done to reduce the avoidable harms resulting from alcohol and managing the price of alcohol is an important component of that work.

Consumption is linked to harm. When an individual drinks more alcohol, they are more likely to suffer alcohol-related diseases, injuries and death. The impacts of alcohol are wider than the individual drinker. Harms can include road traffic accidents from drink driving, violence and crime, both towards strangers and family members, including children, and exploitation of other vulnerable people.

International research evidence shows that the consumption of alcohol is sensitive to changes in affordability. The relationship between price and consumption is complex and subject to a range of varying ‘elasticities’ and switching behaviours. [1] However, in broad terms, when alcohol is more affordable, more is consumed; when alcohol becomes less affordable, less is consumed. [2]

Alcohol is now 74% more affordable than it was in 1987 when compared with average household income. [3] From 2008 to 2019, alcohol became 13% more affordable. [4] Most alcohol is purchased from supermarkets and off-licences, where the affordability of beer rose by 188%, and wine and spirits by 131%, between 1987 and 2018. [5] High strength white ciders and spirits are particularly cheap, with such drinks recently found on sale for as little as 19p per unit – meaning that 14 units (the maximum amount the UK’s Chief Medical Officers recommend any of us drink in a week) are available for just £2.68. [6] Consumers drinking above the low-risk guidelines account for 68% of total alcohol sales revenue, with the heaviest drinking 4% of the population accounting for nearly a third of sales. [7]

The World Health Organization recommends raising the price of alcohol as one of its three ‘best buy’ policies: the most cost-effective, well-evidenced solutions to alcohol harm. [8] Raising the price consumers pay for alcohol will, on average across the population, reduce consumption and therefore reduce harm. Evidence shows that a 10% increase in the price of alcohol would lead to a 5% decrease in consumption. [9] Heavy drinkers are more price sensitive than moderate drinkers, especially when the price of cheap alcohol in the off-trade increases. [10] This means they are more likely to change their consumption when prices increase. In Scotland, where the government introduced a minimum price of 50 pence per unit, the heaviest drinking households have reduced their purchasing of alcohol by the greatest amount. [11] The benefits of pricing policies are not just to the individual’s health. Research has shown that policies to increase the price of alcohol would decrease road traffic accident deaths, sexually transmitted infections and episodes of violence and crime, all of which can affect people other than the drinker.

There are many ways that government can influence the price at which alcohol is sold. These include banning below-cost sales, which already used in the UK, and restrictions on price promotions of alcohol such as ‘buy one get one free’, which is in place in Scotland. However, the two most-recommended and cost-effective ways [12] that the UK could raise the price of alcohol are through alcohol duty (taxation) and minimum unit pricing (MUP).

Historically, UK alcohol taxation (usually referred to as ‘duty’) has been used to adjust the price of alcohol. As well as reducing alcohol harm, duty is also a useful way for the government to generate revenue which could be spent on vital public services.

The current duty system for alcohol in the UK is loaded with historical anomalies, and the rules vary depending 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.

In 2008, the Government introduced a ‘duty escalator’, which increased the duties on alcohol by 2% above inflation every year. It was abolished in 2013 for beer and 2014 for wine. The Treasury estimates that ending the escalator cost public finances around £4 billion in the five years that followed. [13]

Alcohol duty contributes around £12 billion per year to the public purse - less than half the £27 billion estimated annual cost of alcohol harm.

One of the main criticisms of duty is that, because it increases the price of alcohol, it could unfairly impact on poorer people. Research from Institute of Alcohol Studies has found that there is little difference between better and worse off households in terms of the share of their income or expenditure which goes towards alcohol duty. [14]

1995 – 2007: There were very few duty rises, and they were not high enough to account for inflation, meaning affordability increased

2008: Duty escalator introduced, 2% above inflation every year

2013: Duty escalator abolished for beer

2014: Duty escalator abolished for wine

2014 – now: There have been some duty increases to wine but mostly alcohol duty has remained frozen or cut

2020: Government publishes a call for evidence for a review of the alcohol duty system. Read our response to the consultation here.

2021: Government publishes a proposed new alcohol duty system at the Autumn Budget, based on the evidence submitted in 2020. The consultation closed 30 January 2022. This proposed system simplifies the rates and links duty to strength across all types of alcohol for the first time.

Following a 2019 manifesto commitment to review alcohol duty, in October 2020 the government opened a call for evidence, partially focused on the public health impact of alcohol harm. This is an important opportunity for the government to rationalise an outdated and unfair system and to put harm reduction at the heart of alcohol tax policy.

We, along with other organisations working to reduce the harm caused by alcohol, are calling for four key changes to the way alcohol is taxed.

• Alcohol duty to at least cover the costs of alcohol to society

Alcohol must be taxed in proportion with the harm it causes. Alcohol duty currently contributes around £12bn a year in revenue [15], while alcohol harm is estimated to cost between £27bn and £52bn a year – more than double, and possibly up to four times as much. [16]

• Alcohol to be taxed according to strength

To have the greatest impact on health, the duty system should recognise that stronger drinks create more harm and should be taxed at a higher rate per unit than lower-strength drinks. This scaled approach would encourage producers to reformulate their drinks and create better quality drinks at lower strengths.

• Alcohol duty to be consistent across drink types

The current system creates a market for cheap, high-strength products, which do most damage to health. The system should be consistent across drink types, rather than giving preferential tax rates to some and not others.

• Alcohol duty to automatically increase in line with inflation or earnings

To ensure it always performs a harm reduction role, duty can’t be indefinitely frozen or allowed to stagnate. This would make sure progress is made towards reducing harm and improving health, year-on-year.

A minimum unit price (MUP) is the lowest price for which a single unit of alcohol may be sold. Modelling research from Sheffield University has found that introducing MUP across the UK would significantly cut alcohol-related deaths and illnesses. [17]

In the UK, both Scotland and Wales have an MUP, but England and Northern Ireland do not. In both Scotland and Wales, the MUP is 50 pence, meaning a single 25ml measure of spirits cannot be sold for less than 50p, a pint of regular strength beer or cider for less than £1, and most bottles of wine £5. Both the Scottish and Welsh MUP policies are being thoroughly evaluated to assess not just whether it is effective in reducing alcohol harm, but also the wide-ranging impacts of the policy across society, from the effects on the alcohol industry, to effects on vulnerable groups such as children and homeless people. [18]

Setting an MUP has no impact on the price of drinks that are already sold for more than that amount, which includes most, if not all, drinks sold in pubs, clubs and restaurants. Instead, it mostly affects the very cheap strong ciders which cause severe harm to the heaviest drinkers, and drinks sold by supermarkets at multi-purchase discounts.

2012: The coalition government’s Alcohol Strategy included a commitment to introduce MUP for England and Wales, which was later dropped after a change in government.

2012: Scottish Parliament passed the Alcohol (Minimum Pricing) (Scotland) Act 2012

May 2018: MUP of 50p introduced in Scotland

2018: Welsh Assembly passed the Public Health (Minimum Price for Alcohol) (Wales) Act 2018

March 2020: MUP of 50p introduced in Wales

July 2020: Northern Ireland commits to consulting on MUP within a year

January 2022: The Republic of Ireland introduces an MUP of 10 cents per gram of alcohol, which is equivalent to 67p per unit

2023: Final evaluation report for MUP in Scotland. The UK Government has said it will wait for the outcomes of the evaluations in Scotland before it considers whether to introduce MUP in England.

April 2024: Sunset clause for MUP in Scotland – Scottish Parliament must vote for MUP to continue

August 2024: Sunset clause for MUP in Wales – Welsh Assembly must vote for MUP to continue

Several months after MUP was introduced in Wales in March 2020, in October 2020, Alcohol Change UK polled 1,000 adults in Wales and found that three-quarters of them knew about MUP. Of these, 10% said they were drinking less alcohol because of it. [19]

Emerging evaluation findings from Scotland and Wales show that MUP is effectively targeting the heaviest drinkers.

• In 2018, Scotland experienced its lowest alcohol consumption rate in 25 years. [20]

• There has been a 7.6% reduction in weekly alcohol purchases by households, mostly from heavier drinking households. [21]
• There has been a 7% reduction in hospitalisations for alcoholic liver disease, with the greatest reduction in lower income groups. [22]
• In 2020, there was a 7.7% in alcohol purchased. [23]
• Since MUP was introduced in Wales on 2 March 2020, there has been an 8.6% decrease in the amount of alcohol purchased compared with western England. [24]

As Scotland and Wales start to feel the benefit of MUP and Northern Ireland seeks to introduce it alongside the Republic of Ireland [25], England is lagging behind. The UK government has no plans to introduce an MUP for England but reports that it will continue to monitor the impact of MUP in Scotland. [26]

It’s time for the government to bring MUP back onto the table, ensuring consistent alcohol pricing - and health protection - across the UK nations. We are calling on the UK government to reduce the harm caused by alcohol by introducing a minimum price for a unit of alcohol in England, at the same level as other nations of the UK.

Duty reform and MUP each have distinct advantages and impacts and work best to reduce alcohol harm when implemented together.

• Reducing harm. Duty reform alone cannot guarantee the price of alcohol will increase enough to decrease consumption and prevent harm, as manufacturers and retailers can choose to absorb some of the cost of alcohol duty rather than passing it on to consumers. It is not enough to protect the heaviest, most harmful drinkers either, as they are more likely to switch to cheaper alternatives than to reduce consumption when price rises. [27] For this reason MUP complements duty by preventing the sale of extremely cheap, high strength products, even if manufacturers absorb the duty.
• Public revenue. MUP alone does not create any additional public revenue – and may risk lowering duty revenue. November 2020 research from the Institute for Fiscal Studies shows that implementing both MUP and a strength-based duty system can achieve the desired impact of reducing harm without the potential drop in revenue that results from MUP alone. [28] Strength-based, scaled increases to duty would complement MUP by decreasing consumption across the population, preventing ill health and death, and generating revenue to offset the cost of alcohol harm and fund public services.
• Changing the landscape. A reformed duty system could incentivise reformulation of drinks, and both duty and MUP can encourage smaller container sizes, so these policies in conjunction can have an important impact across a whole population, including risky drinkers. Both policies could push alcohol producers to create, manufacture, package, market and sell less harmful products.

The greatest impact on alcohol harm would come from the combination of both MUP and strength-based, inflation-linked duty.

[1] See, for example, Gallet, C.A.: The demand for alcohol: a meta-analysis of elasticities. Aust. J. Agric. Resour. Econ. 51(2), 121–135 (2007) doi 10.1111/j.1467-8489.2007.00365.x and Wagenaar, A.C., Salois, M.J., Komro, K.A.: Effect of beverage alcohol price and tax levels on drinking: a meta-analysis of 1003 estimates from 112 studies. Addiction 104(2), 179–190 (2009) doi 10.1111/j.1360-0443.2008.02438.x

[2] Public Health England (2016) The public health burden of alcohol and the effectiveness and cost-effectiveness of alcohol control policies

[3] World Health Organization (2017) Tackling NCDs: “best buys” and other recommended interventions for the prevention and control of noncommunicable diseases

[4] NHS Digital (2020). Statistics on Alcohol, England 2020. Part 7: Expenditure and affordability.

[5] Institute of Alcohol Studies (2018) The rising affordability of alcohol

[6] Alcohol Health Alliance (2020) Small change: alcohol at pocket money prices, AHA pricing survey 2020

[7] Bhattacharya, A., Angus, C., Pryce, R., Holmes, J., Brennan, A., and Meier, P. S. (2018) How dependent is the alcohol industry on heavy drinking in England?. Addiction, 113: 2225– 2232. https://doi.org/10.1111/add.14386.

[8] NHS Digital (2020) Statistics on Alcohol, England 2020, Part 7: Expenditure and affordability

[9] See, for example, Gallet C. The demand for alcohol: a meta-analysis of elasticities. Aust J Agric Resour Econ. 2007;51(2):121–35., Wagenaar A, Salois M, Komro K. Effects of beverage alcohol price and tax levels on drinking: a meta-analysis of 1003 estimates from 112 studies. Addiction. 2009;104(2):179–90, and Dhalwani N. A Review of Alcohol Pricing and its Effects on Alcohol Consumption and Alcohol-Related Harm. JPMS [Internet]. 2011 [cited 2016 Feb 18];1(1). Available from: http://www.jpmsonline.com/jpms-vol1-issue1-pages23-27-ra.html

[10] Meier PS, Purshouse R, Brennan A. Policy options for alcohol price regulation: the importance of modelling population heterogeneity. Addiction. 2010;105(3):383–93.

[11] O’Donnell A, Anderson P, Jané-Llopis E, Manthey J, Kaner E, Rehm J et al. Immediate impact of minimum unit pricing on alcohol purchases in Scotland: controlled interrupted time series analysis for 2015-18 BMJ 2019; 366 :l5274 

[12] Chisholm, D., Moro, D., Bertram, M., Pretorius, C., Gmel, G., Shield, K., & Rehm, J. (2018). Are the "Best Buys" for Alcohol Control Still Valid? An Update on the Comparative Cost-Effectiveness of Alcohol Control Strategies at the Global Level. Journal of studies on alcohol and drugs, 79(4), 514–522.

[13] UK Parliament (2018) Alcohol Drinks: Excise Duties written answer 161163

[14] Bhattacharya, A. (2020). Who pays the tab? The distributional effects of UK alcohol taxes. Institute of Alcohol Studies.

[15] HM Revenue and Customs and HM Treasury (2020) Alcohol duty review: call for evidence.

[16] Burton, R. et al. (2016). A rapid evidence review of the effectiveness and cost-effectiveness of alcohol control policies: an English perspective. The Lancet VOLUME 389, ISSUE 10078, P1558-1580, APRIL 15, 2017 DOI 10.1016/S0140-6736(16)32420-5

[17] University of Sheffield, School of Health and Related Research, Alcohol Policy research

[18] Buhociu et al. (2021). Assessing the Impact of Minimum Unit Pricing for Alcohol on the Wider Population of Drinkers – Baseline.

Public Health Scotland (2021). Evaluation of minimum unit pricing (MUP).

[19] Alcohol Change UK (2020) Press release: One in ten Welsh drinkers report drinking less because of minimum pricing

[20] Giles, L., & Robinson, M. (2019) Monitoring and Evaluating Scotland’s Alcohol Strategy: Monitoring Report 2019 Edinburgh: NHS Health Scotland.

[21] Alcohol Focus Scotland (2020) Evaluation and other evidence on the impact of Minimum Unit Pricing

[22] Alcohol Focus Scotland (2020) Evaluation and other evidence on the impact of Minimum Unit Pricing

[23] The Lancet Gastroenterology & Hepatology (2021). Alcohol-related harms and the case for minimum unit pricing.

[24] The Lancet Gastroenterology & Hepatology (2021). Alcohol-related harms and the case for minimum unit pricing.

[25] Northern Ireland Department of Health (2020) Press release: Minister Swann committed to full consultation on alcohol pricing

[26] Woodhouse, J. (2020) Research briefing: Alcohol: minimum pricing. House of Commons Library.

[27] Pryce, R., Hollingsworth, B. & Walker, I. Alcohol quantity and quality price elasticities: quantile regression estimates. Eur J Health Econ 20, 439–454 (2019). https://doi.org/10.1007/s10198-018-1009-8

[28] Institute for Fiscal Studies (2020) Tackling heavy drinking through tax reform and minimum unit pricing