Alcohol duty cuts make the Coalition’s cheap alcohol policy even less effective

Picture of a beer glass on a barLast Wednesday the Coalition government unveiled their 2014 budget, which included several new policies in relation to the selling of alcohol. One aspect of the budget which has received a lot of attention nationally is the change to alcohol duty rates, detailed below:

Alcohol duty rates – From 24 March 2014, the duty rate on general beer will be reduced by 2%. The duty rate on low strength beer will be reduced by 6% and the total duty rate on high strength beer will be reduced by 0.75%. The duty rates on spirits and most ciders will be frozen in cash terms this year. The duty rates on wine and high strength sparkling cider will increase by RPI. (Finance Bill 2014) (29, 30).

ScHARR’s Dr John Holmes has responded to the budget announcement, on behalf of the Sheffield Alcohol Research Group, with the following statement:

In 2012, the Coalition’s Alcohol Strategy identified the ready availability of cheap alcohol as the number one reason behind excessive drinking in the UK. Prime Minister David Cameron argued: “When beer is cheaper than water, it’s just too easy for people to get drunk on cheap alcohol”.

However, the Coalition has failed to introduce any policy which will meaningfully impact on the problem. It withdrew commitments made in the alcohol strategy to introduce minimum unit pricing and abandoned proposed restrictions on alcohol price discounting. The 2013 budget lowered the cost of alcohol by cutting beer duty and scrapping planned future duty increases on beer. After accounting for inflation, today’s budget makes alcohol even cheaper with a further 4.5% cut in beer duty and a 2.5% cut in spirits and cider duty. The alcohol duty escalator has also been abolished. This means proposed duty increases of 2% above inflation will no longer go ahead and no real terms duty increases are currently planned for future years.

George Osborne justified these changes by highlighting the Government’s proposed ban on selling alcohol below the cost of the duty and VAT payable on the product. He argues this is a targeted approach which will help stop problem drinking. However, the Government’s own Impact Assessment acknowledges this policy will do little to tackle the harm caused by alcohol. Estimates cited in the Impact Assessment (produced for the Government by the University of Sheffield) show the policy would lead to just 15 fewer alcohol-related deaths per year and reduce the total of 1.2 million alcohol-related hospital admissions per year by just 500. The cost of alcohol to the NHS was estimated by NICE as £2,905m in 2008/9 and the Government’s below cost selling ban is estimated to reduce that cost by just £10m.

The reason banning below cost selling has such small effects is because only 0.7% of the alcohol sold in England is sold for less than the cost of the duty and VAT payable on it. The real terms duty cuts announced in the budget will mean even fewer products are affected by the policy and reductions in harm are even smaller. Consequently, today’s announcements on alcohol duty make the Government’s policy on cheap alcohol even less effective.

Click here to learn more about the Sheffield Alcohol Research Group.

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