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Case for lower alcohol taxes 'overstated'

Industry claims of alcohol’s economic benefits to the UK have been overstated, claims a new report from the Institute of Alcohol Studies.

Splitting the Bill: Alcohol’s Impact on the UK Economy’ challenges the assertion often made by industry groups that economic growth is hampered by policy measures aimed at reducing alcohol-related health and social harms, therefore undermining the case for cutting duty in next month’s Budget.

The headline findings were:

  • Any reduction in employment and income resulting from lower spending on alcohol would be offset by spending on other goods
  • Econometric analysis of US states suggests that a 10% decrease in alcohol consumption is associated with a 0.4% increase in per capita income growth
  • Lower alcohol consumption could also reduce the economic costs of impaired workplace productivity, alcohol-related sickness, unemployment and premature death, which are estimated to cost the UK £8-11 billion a year

The IAS analysis comes as health groups urge Chancellor Philip Hammond to raise alcohol duty in his first Budget. Alcohol is 60% more affordable than it was in 1980. The Alcohol Health Alliance has called for higher tax on high strength ciders and the reintroduction of the alcohol duty escalator, which ensured above-inflation rises in alcohol tax levels every year between 2008 and 2013. Reintroducing the measure would partially reverse real terms cuts to alcohol duty in the last four Budgets, estimated to cost the Exchequer £2.9 billion.

Public Health England also recently identified raising duty as one of the most cost-effective ways to reduce alcohol-related harm. The University of Sheffield calculated that an additional 6,500 people would be hospitalised each year as a result of the alcohol duty cuts in 2015.

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

“Economic arguments are regularly used to resist policies that tackle excessive alcohol consumption, such as raising duty. Yet raising the price of alcohol is more likely to benefit the economy than harm it, by reducing the productivity costs associated with workers’ harmful alcohol consumption.

"Cuts to alcohol duty impose a heavy toll on our health service and our public finances, with no clear corresponding benefit to the economy. The Government should reverse course, and undo the damage of four successive years of falling tax on alcohol duty.”

For a short video summary of the issues around alcohol pricing, please watch the video below:

 IAS – The problems of cheap, high strength alcohol from The Institute of Alcohol Studies on Vimeo.