A new report from the Institute of Alcohol Studies, Splitting the Bill: Alcohol’s Impact on the UK Economy, argues that the economic benefits of the alcohol industry are overstated, undermining the economic case for cutting alcohol duty in next month’s Budget.
The report draws on government and trade statistics, academic evidence and economic theory to challenge arguments that the health and social benefits of reducing alcohol consumption are likely to come at a cost to the economy, finding:
· 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 analysis comes at a timely moment, with health groups urging the Chancellor to raise alcohol duty in next month’s Budget. Earlier this month, the Alcohol Health Alliance called for higher tax on high strength ciders and the reintroduction of the duty escalator, which ensured that alcohol taxes rose above inflation each year. Public Health England also recently identified raising duty as one of the most cost-effective ways to reduce alcohol-related harm.
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.”
Splitting the Bill: Alcohol’s Impact on the UK Economy will be available for download from 22 February on the Institute of Alcohol Studies website here: bit.ly/iassplittingthebill
Alternatively, please contact us for an advance copy under embargo.
Notes to Editors
UK Alcohol duty context
For a short video summary of the issues around alcohol pricing, please visit: https://vimeo.com/191959217
Following heavy lobbying from the alcohol industry, the last four Budgets have seen real terms cuts in alcohol duty
Alcohol is 60% more affordable than it was in 1980 – the alcohol duty escalator, introduced in 2008, which ensured that duty rose above inflation, helped mitigate this trend, but this progress has reversed since the duty escalator was scrapped in 2013
In real terms, spirits duty has halved, and wine duty fallen by a quarter since 1978-9
The Government estimates suggest that the duty cuts since 2013 will cost the Exchequer £2.9 billion over four years
The University of Sheffield estimated that an additional 6,500 people would be hospitalised each year as a result of the alcohol duty cuts in 2015
The report was peer reviewed by academic experts the fields of economics, public health and public policy prior to publication.
About the Institute of Alcohol Studies
The core aim of the Institute is to serve the public interest on public policy issues linked to alcohol, by advocating for the use of scientific evidence in policy-making to reduce alcohol-related harm. The IAS is a company limited by guarantee, No 05661538 and registered charity, No 1112671. For more information visit www.ias.org.uk.
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