Alcohol consumption and affordability

The IAS’s Dr Rachel Seabrook raised the question of the validity of the method of calculating the official alcohol affordability index in 2010. In a paper published in the scientific journal Alcohol and Alcoholism, Dr Seabrook identified five problems with the index as then constructed:

• The use of indices and adjustment for inflation made the measure unnecessarily complex and opaque

• The alcohol price index used in the calculation of affordability related to alcoholic drinks, not to alcohol itself and, therefore, did not take account of changing strengths of alcoholic drinks

• The income measure used in the calculation was a measure of the income for the whole population of the UK, not income per capita

• The income measure included ‘imaginary’ items, namely imputed rentals and attributed income from insurance policies

• The income measure was inconsistent in its treatment of housing costs

Following a Government consultation on the subject, the index has now been amended to accommodate one of Dr Seabrook’s main concerns; namely, that the income measure employed was based on changes in the total disposable income of all households, and not on per capita income. This had the effect that apparent changes in the affordability of alcohol were actually partly due to changes in the size of the population, and not to changes in the real disposable income of individual consumers. As can be seen in the graph, this, in turn, had the effect of exaggerating the extent to which alcohol had become more affordable.