The current alcohol tax system in the UK is flawed. Beer and spirits are taxed by volume of alcohol, whereas cider and wine are taxed by volume of liquid. This means that the tax on a liter of 8% ABV wine is the same amount of tax as a liter of 15% ABV wine – despite containing very different amounts of alcohol.
This inconsistency in taxation has led to the production of high strength extremely cheap alcohol products such as cider. A 2.5 liter bottle of strong cider costs just £3.59, of which only £1.27 is duty. If cider was taxed at the same level as beer, it would be taxed at nearly its current sale price (£3.58).
These cheap products target vulnerable people such as heavy and high-risk alcohol users and minors who are attracted by the affordability.
The UK government sets the alcohol tax for all nations within Britain. This means that neither Scotland nor Wales have the power to change the alcohol excise tax in their jurisdictions.
The cost of weak alcohol taxation in the UK
Despite the harm alcohol causes, the pressure from the alcohol industry lobby has led the UK government to cut or freeze alcohol taxes since 2012. In 2021, alcohol taxes were frozen again. Consequently, the alcohol taxes have failed to keep pace with inflation. For example, the beer tax is now 21% cheaper than in 2012.
Treasury estimates indicate that it has lost around £1.3 billion in revenue every year due to poor alcohol taxation, since 2012. This amounts to salaries of 41,000 nurses.
The current alcohol taxes do not even cover the cost of alcohol harm in the UK. Public Health England estimates that the harm from the products and practices of the alcohol industry costs the UK at least £27 billion a year. Over the past five years, the alcohol duty has raised only £10.5 – £12.1 billion annually.
Researchers from the University of Sheffield found that cuts to the alcohol duty since 2012 have led to:
- 1,969 additional deaths,
- 61,386 additional hospitalisations,
- £317 million in additional costs to the NHS,
- 111,062 additional criminal offences, and
- 484,727 additional days of workplace sickness absence.
The pandemic brought into sharp focus the existing problems caused by alcohol in the UK. The health and social costs of the rise in alcohol problems is evident as England and Wales hit a 20 year record high in alcohol-specific deaths in 2020.
Alcohol industry benefits from poor alcohol taxation
Amidst the ongoing pandemic, cheap alcohol products which can be ordered online and delivered to homes are a major problem. Freezing alcohol taxes to help the restaurant and pub sector is of no use since the sector is more challenged by cheap alcohol sold in supermarkets.
In a survey of people who went to pubs in the North East of England carried out by Balance in 2018, a majority saw no benefit of tax cuts passed on to them. In terms of pubs itself, they have been closing down much more frequently since the tax cuts. Cheap alcohol in supermarkets is a bigger problem for these businesses than taxes.
The real beneficiary of the tax cuts is the alcohol industry. It is as much evident since Diageo – one of the world’s largest alcohol giants – was the cheerleader in praising the UK government for freezing alcohol taxes.
Cheap alcohol fuels heavy alcohol use. The cheaper the alcohol products are the higher the sales. The alcohol industry is well aware of these factors and aggressively lobbies to maintain cheap prices.
A 2018 report from the Institute of Alcohol Studies showed that heavy alcohol users only make up 25% of all alcohol users but provide 68% of alcohol industry revenue.
Communities calling for better alcohol taxation
Communities along with the Alcohol Health Alliance UK are calling on the UK government to create an alcohol tax system with the following components:
- Proportionate: the overall level of alcohol tax should cover the cost of alcohol to society;
- Consistent: same strength alcoholic products should be taxed at the same level;
- Scaled: stronger alcohol products should pay more tax, per unit alcohol, than weaker products;
- Uprated: the alcohol tax should automatically increase in line with inflation or earnings. A body similar to the Low Pay Commission should periodically review the rate and provide advice on the optimal level of the alcohol duty
Till such a system is established, the alcohol tax should be increased by 2% above inflation every year. This could save over 5,000 lives, prevent almost 300,000 crimes and save about £840 million health care costs in England and Scotland, from 2020-2032.
This is not the first time communities have called on the UK government to implement proper alcohol taxes. Ahead of the budget in 2021, communities called on the Chancellor of UK to increase the alcohol tax by 2% above inflation to save lives.
According to the Alcohol Health Alliance UK, 73% of the public thought that ‘reducing heavy/ high-risk alcohol use’ should be a key consideration for the Government when setting alcohol taxes.
The Alcohol Health Alliance UK has started a campaign to email the Minister Kemi Badenoch, calling for alcohol tax reforms. You can join the campaign and send an email by following this link.
AHA UK: “ALCOHOL DUTY REFORM“
AHA UK: “Reform alcohol tax to reduce harm“