Alcohol has become more affordable in the UK in recent decades. Data compiled by the Health & Social Care Information Centre (HSCIC) compare changes in the average price of alcohol with the general price of all other items. Figure 6 shows that in 2012, the price of alcohol increased by 23.8% relative to retail prices since 1980.
Figure 6: Alcohol price index relative to retail prices index (all items)***
Source: HSCIC, ‘Statistics on Alcohol - England, 2013’, Table 2.2
But the graph below (Figure 7) shows that when tied to the same index base (1980 = 100), Real Household Disposable Income (RHDI) per adult rose at a faster rate over the same period (99.2%). As a result, by comparing the relative changes in the price of alcohol with changes in RHDI per adult over the same period (with both allowing for inflation), alcoholic beverages were 61% more affordable per person in 2012 than in 1980.
Figure 7: Affordability of alcohol, 1980–2012****
Source: HSCIC, 'Statistics on Alcohol: England, 2013 tables', Table 2.2
A new measure of alcohol affordability for the UK
The measure of affordability in the UK was revised in 2011 after the publication of an IAS report highlighting flaws in the data which led to inaccurate comparisons between disposable income and price.
One noted inaccuracy in the calculation of gross disposable income was the failure to track index changes on a per capita basis. The IAS report observed that “as the population increases, so this measure of alcohol affordability inevitably increases with it”.
This meant that changes in the RHDI index over time were, in part, due to changes in the size of the population and not exclusively due to changes in real disposable income per capita. The HSCIC has since revised the data for subsequent editions of Statistics on Alcohol England going back to 1980, hence the adjusted RHDI and affordability of alcohol indices.
According to IAS figures, this and further adjustments made to the figures would result in the following affordability indices (Figure 8):
Figure 8: Affordability indices... alongside an index of consumption of pure alcohol per adult in the UK, baseline 1999
Source: Rachel Seabrook, 'A New Measure of Alcohol Affordability for the UK', Institute of Alcohol Studies
In the 'Announcement of methodological changes to Statistics on Alcohol: England, 2012' the HSCIC acknowledged that:
… further work will be necessary in the future to consider whether further amendments to the index are required. This will include... whether to apply the adjustments proposed by IAS to the existing RHDI index used in the calculations.
*** The relative alcohol price index is calculated as follows: (alcohol price index / retail prices index) x 100
**** Calculated by the following equation: (adjusted real households’ disposable income index / relative alcohol price index) x 100