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Government's own numbers show that alcohol is under-taxed

A new report from the Institute of Alcohol Studies, ‘Dereliction of Duty: Are UK alcohol taxes too low?’ claims that the Government’s own estimates of the social costs of alcohol imply that alcohol duty should be raised.

The report summarises the economic theory underpinning alcohol taxation and concludes that the ideal UK tax level would be higher, finding:

  • The Government estimates that alcohol consumption imposes costs to third parties of £21 billion in England and Wales (including crime, healthcare and lost economic output).
  • Alcohol duty currently generates only £9 billion, less than half of the value of these costs.
  • The lost enjoyment of socially harmless consumers as a result of current alcohol duty is relatively small (less than £1.2 billion, 2% of total market value), and is dwarfed by the benefits of alcohol duty in terms of reducing crime, healthcare savings and higher economic output (over £4.4 billion).
  • Higher alcohol taxes can be justified solely on the basis of the harm drinking causes to wider society, without even considering the impact on the drinker themselves, or the benefit to the public purse.

The analysis comes at a timely moment, with the Chancellor of the Exchequer considering his options over alcohol duty in next week’s Budget. Dereliction of Duty challenges the alcohol industry’s claims that current levels of of tax are excessive, arguing instead that they fail to reflect the full harm alcohol causes to society – strengthening the case for a duty rise.

The report’s author, Aveek Bhattacharya, Policy Analyst at the Institute of Alcohol Studies said:

“The Government has consistently claimed that alcohol costs society £21 billion, but fails to acknowledge that duty rates should reflect this social cost. As long as it continues to accept this figure it is implausible for the Government to maintain that current levels of alcohol taxes are adequate.

“What this means is that duty should rise, not just for the sake of excessive drinkers themselves or for the government coffers, but for the sake of all of us in society. Excessive drinking leads to crime, violence, healthcare costs and a weaker economy, which affect everybody. The context of tight Government finances only strengthens the urgency of the case – recent duty cuts have cost the Treasury over £1 billion. We call upon the Chancellor to address the burden of alcohol on wider society, and to raise alcohol duty next Wednesday”.

Dereliction of Duty: Are UK alcohol taxes too low? is available for download here: http://bit.ly/dutyrp032016.