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Minimum unit pricing is an effective policy to reduce alcohol harm by setting a legal minimum price per unit of alcohol — currently 65p in Scotland. It’s also in place in Wales and Ireland, with Northern Ireland considering it. Given its success, MUP is likely to be discussed in Westminster.
However, one criticism of MUP is that it allows retailers – especially large supermarkets – to make extra profits, while the Treasury loses revenue from alcohol duty. Estimates suggest that if MUP were introduced in England and Wales, retailers would gain an extra £550 million in profit, while the UK government would lose about £300 million in tax.
This report by the Social Market Foundation for IAS and Alcohol Focus Scotland explores how to recoup that windfall. Simply raising alcohol duty isn’t well targeted – it would affect all alcohol, not just the cheap products hit by MUP, and could make MUP less politically viable by raising prices for everyone.
Instead, the SMF recommends introducing a Minimum Unit Tax (MUT). This would ensure that each unit of alcohol carries a minimum level of tax (e.g. 36p), targeting only the products most affected by MUP. It wouldn’t significantly increase prices for most drinkers, but it would recover much of the retailer windfall – around £481 million. A higher rate for spirits could increase that to £659 million.
Although MUT adds some complexity to the alcohol tax system, it’s more precise and politically palatable than a blanket duty rise. There’s already a similar system in place for tobacco, so the idea isn’t entirely new.
If the UK government doesn’t act, devolved governments could consider alternative taxes like a retailer levy, though these would be less precise and harder to implement. A reasonable fallback could be a levy based on business rates, similar to Scotland’s Public Health Supplement.
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