The UK government decided to freeze the alcohol tax duty in the Budget 2022. The controversial decision is a reversal of course, cancelling a planned increase of alcohol taxes in the country. The latest freeze is valued at £3 billion revenue which is lost and could have been invested in support services to better help people with alcohol problems. These mental health and addiction services have taken a serious a hit during the pandemic.
This is not the first time the UK government froze alcohol taxes. Earlier in the year, taxes were frozen in the 2021 Budget. By continuing to freeze taxes the UK government continues to fuel the harm caused by cheap alcohol in the country.
All the evidence indicates that if the price of alcohol goes up, people [consume] less [alcohol] and are healthy,” said Labour peer Lord Brooke of Alverthorpe, as per GB News.
If the price of alcohol goes down, if the duty goes down, people in fact [consume] more [alcohol].
More people go to hospital, more people die.”
Labour peer Lord Brooke of Alverthorpe
Alcohol is easily affordable and available and causes large-scale harm
The cheaper alcohol is, the higher are the alcohol sales for the industry. Cheap alcohol specifically preys on already vulnerable people, for example people with heavy alcohol use or people with lower socio-economic status. But the alcohol industry lobbies to maintain cheap prices because they profit, while people’s health is harmed and society pays for the costs.
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 industry revenue.
The alcohol tax cuts since 2012 took the lives of 2000 people, caused 61,000 avoidable hospital admissions and fueled 111,000 alcohol-related crime cases.
In the UK, especially in England, alcohol is not only becoming more affordable due to years of alcohol tax cuts and freezes. Alcohol is also widely and easily available. In fact, according to the Office for National Statistics, beer is the most available product on shop shelves in the country.
The debate on whether to increase alcohol taxes takes place every year in the UK. And every year since 2012 the tax duty on the alcohol industry has been cut or frozen. The citizens of the UK have suffered the brunt of this decision and even pubs and bars see no positive effect.
According to a survey in 2018, the pub sector will not see much benefit from freezing alcohol taxes either. In the 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 themselves, they have closed down much more frequently since the tax cuts. Cheap alcohol in supermarkets is a bigger problem for these businesses than higher alcohol taxes.
Plans to overhaul UK tax system
Along with freezing alcohol taxes, the UK government announced plans for an overhaul of the duty system in the UK which will see taxes fall further for draught beer, cider and sparkling wine. The proposed new system is set to come into force from February 2023.
According to the proposed system, a standard method of taxation will be introduced, taxed in proportion to alcohol content by volume (ABV). The stronger the content of alcohol is in a product, the higher the tax will be. There are three principles for the proposed system:
- All products should be taxed in direct proportion to their ABV.
- Products with the same ABV should pay the same rate of tax.
- The duty structure should be progressive, with rates increasing as the ABV increase.
Alcohol products between 3.5% to 8.4% which include Beer, Cider, Wine, Made-Wine and Spirits will be based on the product at standardized rates. Tax rate of Beer, Cider, Wine, Made-Wine when sold in licensed venues (draught products) is proposed to be lower than when sold in shops.
Colin Angus, Senior Research Fellow in the Sheffield Alcohol Research Group within the School of Health and Related Research (ScHARR) at the University of Sheffield, is one of the leading experts in the scientific community concerning modelling the potential impact of alcohol taxation and Minimum Unit Pricing policies on alcohol consumption and related harm and understanding the distribution of these impacts across the population.
Mr Angus commented on the government’s approach to alcohol taxation with a compelling Twitter thread. It puts the tax system overhaul into perspective.
Scott Corfe has written a report for the Social Market Foundation exploring the case for reforming alcohol duty in the UK. The report “Pour decisions: the case for reforming alcohol duty” outlines the principles that should underpin a new, improved alcohol duty regime.
The report includes consideration of alcohol duty reforms that are possible now that the UK is not part of the EU’s alcohol taxation regime anymore, after Brexit. The report sets out five recommendations for a revised alcohol duty system:
- Introducing a duty strength escalator, to focus alcohol duty on the higher strength products;
- Levelling the playing field across same-strength products, so that products of the same strength face the same rate of duty and duty is a function of the pure alcohol content of alcoholic drinks;
- Allowing pubs to claim back a proportion of alcohol duty through a new “Pub Relief”;
- Explicitly linking alcohol duty to the social costs of alcohol, rather than treating it as a cash cow. At the very least, alcohol duty should cover the health, crime and welfare costs to government and wider society (the “externalities” associated with alcohol consumption); and
- Regularising the uprating of alcohol duty, with inflation or earnings uprating being the “norm”. This would help depoliticise the setting of alcohol duty.
A recent study showed that there is a natural tendency for alcohol consumption to increase with rising income. Researchers identified a working rule of thumb for policy makers to avoid increasing affordability of alcohol: it is to increase alcohol tax rates at approximately half the long-run gross national income growth rate. For countries like the UK, this implies annual increases of approximately 1.0–1.5% in alcohol taxes.
The new duty system may not apply for Northern Ireland (NI) due to the protocol. The Institute for Fiscal Studies (IFS) pointed out that EU rules on alcohol duty continue to apply in NI. Therefore, alcohol taxes in NI must still conform to EU rules.
The Northern Ireland Protocol keeps Northern Ireland in the EU single market for goods and as part of that EU excise duty rules continue to apply. Currently, the EU sets a minimum rate of tax for alcohol products, member states can apply higher taxes as they choose.
IFS associate director David Phillips suggested the government could apply some of the UK reforms in NI or separate the NI and Great Britain alcohol tax regimes.
According to the treasury consultation document on the reform, the government is seeking a more flexible settlement regarding excise laws applicable in Northern Ireland.
Government freezes alcohol tax in 2022 Budget and civil society responds
Civil society organizations have reacted to the UK government freezing alcohol taxes yet again.
The organizations point out that alcohol harm is already at an all time high in the UK. Alcohol deaths have increased 20% in 2020.
Freezing the alcohol taxes would make alcohol even more affordable, fueling alcohol harm even more and deepening inequalities. Freezing taxes would only help massive alcohol producers who have profited at the cost of public health during the pandemic. The money from the alcohol tax revenue could have been used for COVID-19 recovery instead.
Professor Sir Ian Gilmore, Chair of the Alcohol Health Alliance UK, said the new reforms for the alcohol tax was welcome but the decision to freeze alcohol taxes again was misguided. Alcohol is causing the UK severe harm and freezing taxes would only deepen inequalities. The cost of freezing alcohol taxes has been £1.8 billion annually, money that is needed for investing in a strong COVID-19 recovery.
However, the decision to once again freeze alcohol duty is totally misguided. We are already at crisis point when it comes to alcohol harm. Deaths caused by alcohol reached record highs in 2020 and making alcohol even cheaper will only deepen the health inequalities that this government had promised to address,” said Professor Sir Ian Gilmore, Chair of the Alcohol Health Alliance UK, as per their website.
For years, alcohol duty has been cut or frozen in the Budget. This has cost the Treasury £1.8 billion annually – money that is desperately needed elsewhere to aid the COVID-19 recovery. Revenue generated from alcohol tax doesn’t even begin to cover the costs to society of alcohol harm.”
Professor Sir Ian Gilmore, Chair, Alcohol Health Alliance UK
The Alcohol Health Alliance UK hopes that the government makes most of the new duty reforms to reduce affordability of alcohol and reduce its harm to communities.
Alcohol Change UK regrets that the Chancellor has missed another important opportunity to significantly reduce the harm caused by alcohol and to cover the costs of that harm. The tax break would only help massive alcohol producers who have profited throughout the pandemic.
The tax break will,
- affect the public by decreasing revenue receipts by £500 million next year alone;
- make cheap alcohol even more affordable; and
- cause even greater harm – when deaths caused by alcohol rose by 20% in 2020.
It is deeply regrettable that the Chancellor has decided to cancel a planned increase on alcohol duty, ignoring the evidence that clearly shows that cutting duty increases alcohol harm,” stated Alcohol Change UK, in a statement.
He has missed yet another important opportunity to significantly reduce the harm caused by alcohol and to cover the costs of that harm. Instead, he has given a tax break to massive alcohol producers who have continued to see huge profits throughout the pandemic.
This cut will hurt the public purse by further decreasing revenue receipts by £500 million next year alone, and could make cheap booze even more affordable, causing greater harm – when deaths caused by alcohol rose by 20% in 2020.”Alcohol Change UK
Balance pointed out that the duty freezes and cuts on alcohol since 2012 have cost the public purse around £1.3 billion every year – a sum which could have paid for 41,000 nurses. The government was continuing to place profits of the alcohol industry over public health.
The profits of big alcohol continue to be placed above the needs of public health, with the industry benefiting year after year from government handouts while alcohol harms continue to escalate,” said Sue Taylor, Head of Alcohol Policy with Fresh and Balance, as per their website.
Action around pricing needs to be part of a much a broader, evidence based national approach to tackling alcohol harms.”
Sue Taylor, Head of Alcohol Policy, Fresh and Balance
GB News: “Government has ‘alcohol problem’ after ditching duty rise, Parliament told“
Brodies: “What changes did the Budget make to alcohol duty?“
BBC: “Budget 2021: UK alcohol tax reforms might not apply in NI“
Alcohol Health Alliance: “AHA responds to Autumn Budget 2021“
Alcohol Change UK: “Autumn Budget: our response“