Perhaps the most controversial recommendation (at least so far) from Iain Duncan Smith’s Social Justice Policy Group is the recommendation of higher alcohol taxes.  The Sun attacked the suggestion as "potty".  Iain Dale called the policy "ludicrous".  I can’t say that I’m yet persuaded but I know IDS very well.  He’s a taxcutting Tory and I know he wouldn’t have made the recommendation without having given it a lot of thought.

There are three main justifications in the report for higher alcohol taxes:

The need for the drinks industry to help meet the social costs of alcohol abuse.  Alcohol consumption has increased dramatically in recent years – particularly amongst women and the young.  The Breakdown Britain report documented how children as young as eleven and twelve were binge drinking regularly.  60% of boys have been binge drinking by the age of 15.  Cirrhosis of the liver has gone up 350%.  There are 23,000 acts of alcohol-related violence every week.  20% of violent crimes take place near a club or pub.  Much workplace absentee-ism and underperformance is drink-related.  Surveys also suggest that alcohol misuse is a gateway to drug misuse.  The annual cost to society of alcohol and drug misuse – including anti-social behaviour and health problems – could be as much as £39bn says the SJPG.  Money raised by higher taxes could fund treatments for people with addiction problems.

The price of alcohol is at historically low levels.
  The graphs opposite (click to enlarge) illustrate that alcohol prices have held steady or fallen in real terms.  This has occured while disposable incomes have risen steadily.

Consumption of alcohol is sensitive to price changes.
The Institute of Alcohol Studies suggests that young people, because of
their low levels of disposable income, are particularly sensitive to
price changes.  Even addicts – because of an economic theory called ‘rational addiction’ – can cut consumption because of price changes.  Alcohol Concern reports that the Academy of Medical Sciences believes a 10% increase in the price of alcoholic drinks could cut related deaths by more than a third.

In a submission to the SJPG, the Institute of Alcohol Studies said:

"The Government was rejecting the advices of virtually the whole scientific and public health community based on the accumulated international evidence that the price of alcohol is one of the principal influences on levels of consumption and harm."

The Campaign for Real Ale has dismissed the Tory plans as unworkable, however:

“A beer tax increase of 10% will lead to people buying their alcohol at supermarkets where beer is irresponsibly used as a loss leader. The drop in trade will force pubs to close and communities that use those pubs will lose yet another valuable amenity. In addition there will be an increase in cheap alcohol being smuggled in from lower tax countries further eroding the Treasury’s cut and promoting uncontrolled and underage drinking."

75 comments for: The case for higher tax on alcohol

Leave a Reply

You must be logged in to post a comment.