price of alcohol - iasspirits wine cider beer stronger wines and ciders have lower duty per unit, as...
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Price of alcohol
Factsheets
PRICE OF ALCOHOL FACTSHEET
What determines the price of a drink?
CostsIncluding:
LabourRaw materials
PackagingTransport
RentMarketing
Retailer profit
Producer profit
Excise duty
Value Added Tax VAT is 20% of pre-tax price / 17% of post-tax price
Excise duty varies between products, but on average accounts for around 25% of the final price*
A 4% ABV beer typically costs:
On-trade Off-trade£3.64
£1.24
43p of the beer price is duty, which represents
12% of the on-trade retail price
35% of the off-trade retail price
Sources: * Bhattacharya, A. (2017) | Alcohol’s impact on the economy. London: Institute of Alcohol Studies** The British Beer & Pub Association | Statistical Handbook
PRICE OF ALCOHOL FACTSHEET
How much do people pay for alcohol?
Source: NHS Health Scotland | MESAS Monitoring Report 2018 – alcohol sales
Off-TradeOn-Trade
£1.78
£0.55
Average price per unit paid in England & Wales(on- versus off-trade)
PRICE OF ALCOHOL FACTSHEET
How much do people pay for alcohol?
Source: NHS Health Scotland | MESAS Monitoring Report 2018 – alcohol sales
Average price per unit paid in England & Wales
(by product)
0.99
Cider
Perry
Wine
Beer
Spirits
0.98
0.82
0.78
0.29
How does price vary between alcoholic products?PRICE OF ALCOHOL FACTSHEET
Source: NHS Health Scotland | MESAS Monitoring Report 2018 – alcohol price and affordability
Spirits WinePerry
40-49p
50-59p
60p+
<25p
Cider Beer
25-39p
Total
100%
20%
100%
27%
25%
100%100%
31%
100% 100%0%
29%
3%
9%
29%
2%
13%
14%
33%
55%
22%
45%
3%
23%
39%
12%
46%
1%
25%
28%
17%
21%23%
1%
3%
Share of volume sales in the off-trade by price per unit, England & Wales 2017
Who buys cheap alcohol?PRICE OF ALCOHOL FACTSHEET
Proportion of alcohol purchases below 50p per unit, England, 2011
Note: Higher risk drinkers are men consuming over 50 units per week and women consuming over 35; increasing risk drinkers are men consuming 15-50 units and women consuming 15-35 units per week
Quintile 1 Quintile 2 Quintile 5Quintile 3 Quintile 4
15%
9%
42%
36%
28%
34%
47%
39%
53%
25%
20%
57%
19%
31%
58%
Increasing risk
Moderate
Higher risk
Higher income
Source: University of Sheffield | Analysis of Living Costs and Food Survey data 2010-15 (combined with market research data from CGA Strategy and Nielsen)
Alcohol is 64%more affordable
today than in 1987
Source: NHS Digital | Statistics on Alcohol England
How has alcohol affordability changed over time?PRICE OF ALCOHOL FACTSHEET
161 162153
164
154 151 152161
148
136 140
150 153
142 145
156161
116113
124 127118 122
111116
111 111100
112
105
60
160
180
20
100
40
80
120
140
02004 20061998 2000 2002 2014 2016 20182008 20121988 1990 201019961992 1994
159 153
Duty EscalatorBetween 2008 and 2014, alcohol taxes were raised by 2%
above inflation
UK Alcohol Affordability Index, 1980-2015 (Indexed, 1980=100)
The rise in affordability has been driven by off-trade prices, particularly beer
How has alcohol affordability changed over time?PRICE OF ALCOHOL FACTSHEET
Sources: NHS Digital | Statistics on Alcohol EnglandOffice for National Statistics (2019) | Consumer Price Inflation time series dataset
0
300
100
150
200
250
50
20042000 2002 20102006 200819901988 19981992 1994 2012 20181996 20162014
133
204218
128121
245246
143
244
135
291
129
168
134159
Duty EscalatorBetween 2008 and 2014, alcohol taxes were raised by 2%
above inflation
UK Alcohol Affordability Index, 1980-2015 (Indexed, 1980=100)
Off-trade beer is almost three times more affordable than in 1987
Off-tradeOn-trade
BeerWine/spirits
As a rule of thumb, for every 1% increase in the price of alcohol,
consumption falls by 0.5%
How does alcohol affordability affect consumption?PRICE OF ALCOHOL FACTSHEET
Two major meta-analyses each combining estimates from over 100 studies found:
The effect of a 1% increase in prices (Gallet, 2007)
The effect of a 1% increase in prices (Wagenaar et al, 2009)
The effect of a 1% increase in income (Gallet, 2007)
0.68%
0.36%
0.70%
0.50%Overall alcohol consumption:
1.00%
0.39%
1.10%
0.69%
0.80%
0.46%
0.69%Wine
Beer
Spirits
Consumption, by beverage type
Sources: Wagenaar, A. C. et al, (2009) | ‘Effects of beverage alcohol price and tax levels on drinking: a meta-analysis of 1,003 estimates from 112 studies’, Addiction 104:2, pp. 179-90Gallet, C. A. (2007) | ‘The demand for alcohol: a meta-analysis of elasticities’, The Australasian Journal of Agricultural and Resource Economics 51:2, pp. 121-35
How does the price of alcohol affect levels of harm?PRICE OF ALCOHOL FACTSHEET
A meta-analysis combining 50 studies found that doubling alcohol taxes reduces:
Alcohol-related mortality by 35% Traffic collisions by 11%
Sexually transmitted diseases by 6% Suicides by 5%
Violence by 2% Crime by 1%
Sources: Wagenaar, A. C. et al, (2010) | Effects of Alcohol Tax and Price Policies on Morbidity and Mortality: A Systematic Review, American Journal of Public Health100:11, pp. 2,270-8
Source: Ally, A. K. et al, (2014) | ‘Alcohol tax pass-through across the product and price range: do retailers treat cheap alcohol differently?’, Addiction 109:12, pp. 1,994-2,002
What is the relationship between taxes and prices?PRICE OF ALCOHOL FACTSHEET
UK alcohol duties are charged toproducers, not consumers.
Alcohol producers and retailersmay choose to pay an increase intaxes out of their own profits (orretain any cut in taxes).
In general, the price of cheaperproducts tends to change by lessthan the tax and the reverse forexpensive products.
In this example, the price of the cheapest beers tends to change by less than the change in tax (< 1)
But the price of more expensive beers rose by more than the full tax increase (> 1)
What is the relationship between taxes and harm?PRICE OF ALCOHOL FACTSHEET
Natural experiments• In 2004, Finland reduced alcohol taxes ahead of neighbouring
Estonia joining the European Union
• Tax on spirits was reduced by 44%, beer 32% and wine 10%• As a result, consumption rose by 10%, alcohol-attributable deaths by 19%,
deaths from liver disease by 29% and alcohol-related hospitalisations by 9% (see charts)
• In 1999, World Trade Organization regulations required Switzerland
to reduce tax on imported spirits, leading to a 30-50% price drop
• As a result, consumption of spirits rose by 29%, with no significant change in wine or beer consumption
Sources: Mäkelä, P., and Österberg, E., (2009) | ‘Weakening of one more alcohol control pillar: a review of the effects of the alcohol tax cuts in Finland in 2004’, Addiction 104:4, pp. 554-63
Heeb, J. L., (2003) | ‘Changes in alcohol consumption following a reduction in the price of spirits: a natural experiment in Switzerland’, Addiction 98:10, pp. 1,433-46
What is the relationship between taxes and harm?PRICE OF ALCOHOL FACTSHEET
One off 1%increase in allalcohol taxes
One off 10%increase in allalcohol taxes
Reintroduce dutyescalator for five
years
351
35
605
The Sheffield Alcohol Policy Model contains two elements:
• Econometric analysis to estimate the effect of changes in prices on consumption
• Models of the relationship between alcohol consumption and different types of harm, based on the best epidemiological evidence
Putting these together, theSAPM can estimate thelikely effects of different taxpolicies
Reduction in alcohol-attributable deaths in England
Reduction in alcohol-attributable hospitalisations in England
(% change)
-0.3%
-2.9%
-5.0%
16,309
1,642
29,507
-0.2%
-2.0%
-3.7%
Source: Angus, C., Holmes, J., Pryce, R., Meier, P., and Brennan, A., (2016) | Alcohol and cancer trends: Intervention Studies. University of Sheffield and Cancer Research UK
Scenario modelling
Source: Gov.uk (February 2019) | Rates and allowances: Excise Duty – Alcohol Duty
Current UK rates of alcohol dutyPRICE OF ALCOHOL FACTSHEET
As of 1 February 2019
Source: HM Revenue & Customs (2019) | ‘Alcohol Bulletin’
Duty per unit by productPRICE OF ALCOHOL FACTSHEET
50
45
40
20
25
15
5
0
35
30
10
17% 18% 19%14% 15% 16% 20%4% 5% 6%2% 7% 11% 12% 13%8% 9% 10%3%
Spirits
Wine
Cider
Beer
Stronger wines and ciders have lower duty per unit, as they are taxed by volume
of liquid rather than alcohol content
Beer
Cider
Wine
Spirits
Pence per unit
ABV %Note: General beer duty, still 1.2-6.9% ABV cider and perry; 5.5-15% ABV wine.
Source: HM Revenue & Customs (2019) | ‘Alcohol Bulletin’
How have UK alcohol taxes changed over time?PRICE OF ALCOHOL FACTSHEET
UK nominal alcohol duty rate by product, 1995–2019 (Indexed, 1995=100)
140
100
120
160
40
180
60
200
80
0
20
220
20021995 2003 200520041997 1998 1999 20011996 2000 2016 20172014 2015 2018 201920132008 20092006 2007 201220112010
170
140
212
176
Beer
Cider
Wine
Spirits
Duty EscalatorBetween 2008 and 2014, alcohol taxes were raised by 2%
above inflation
Since 2013, only wine duty has seen
significant increases
Between 1995 and 2007, alcohol duty failed to keep up with inflation.
Spirits duty was 5% lower in nominal terms
Note: General beer duty, still 1.2-6.9% ABV cider and perry; 5.5-15% ABV wine.
Source: HM Revenue & Customs (2018) | Policy Paper: Alcohol Duty Uprating // HM Revenue & Customs (2019) | Alcohol BulletinOffice for Budget Responsibility (2018) | Economy Supplementary Tables
How have UK alcohol taxes changed over time?PRICE OF ALCOHOL FACTSHEET
UK real alcohol duty rate by product, 2013–2020 (Indexed, 2013=100)
85
105
100
90
0
95
110
2012/13 2013/14 2018/19 2019/202017/182014/15 2015/16 2016/17
102
100
979595
89
98
101 101
98
100 100
103102 102
87
92
84
87
82
90
92
90
95
100
Adjusting for inflation, compared with 2012/13:
Beer duty is 18% lower
Cider and spirits duties are 10% lower
Wine duty is 2% lower
Minimum unit pricingPRICE OF ALCOHOL FACTSHEET
Minimum pricing involves the government setting a ‘floor price’, below which it is not permitted to sell alcohol
Under minimum unit pricing (MUP) the floor price is set according to the alcohol content of the drink. For example, under a 50p MUP, a drink containing one unit could not be sold for less than 50p
It is not a tax, and any additional revenue from raising prices goes to retailers rather than the government
Seven countries have some form of minimum alcohol pricing:
Certain provinces / states
Minimum pricing legislation nationwide
First nation to introduce minimum pricing per unit in 2018
Have legislated for minimum pricing per unit – awaiting finalisation
Examples of minimum unit pricingPRICE OF ALCOHOL FACTSHEET
Volume Alcohol By Volume/ Strength (%) Units Price (£)
70cl 40 28 14
70cl 37.5 26.3 13.13
3l 7.5 22.5 11.25
75cl 12 9 4.50
1.76l (440ml x 4) 4 7 3.52
568ml 4 26.3 1.14Beer
Cider (x4)
Wine
White cider
Vodka
Whisky
Evidence of minimum unit pricing’s effectivenessPRICE OF ALCOHOL FACTSHEET
Canadian natural experiments
Sources: Stockwell, T., et al, (2013) | Misleading UK alcohol industry criticism of Canadian research on minimum pricing, Addiction 108:6; Stockwell, T., et al, (2012) | ‘Does minimum pricing reduce alcohol consumption? The experience of a Canadian province’, Addiction 107:5, pp. 912-20Zhao, J., et al, (2013) | ‘The relationship between changes to minimum alcohol price, outlet densities and alcohol-related death in British Columbia, 2002-2009’, Addiction 108:6, pp. 1,059-69;Stockwell, T., et al, (2013) | ‘Minimum alcohol prices and outlet densities in British Columbia, Canada: Estimated impacts on alcohol attributable hospital admissions’, American Journal of Public Health 103:11, pp. 2,014-20Stockwell, T., et al, (2012) | ‘The raising of minimum alcohol prices in Saskatchewan, Canada: impacts on consumption and implications for public health’, American Journal of Public Health102:12, e103-10
There was a dramatic fall inalcohol-attributable deaths*
Following a 10% increase in minimum prices in British Columbia…
* British Columbia saw a:• 3% reduction in
consumption• 32% reduction in wholly
caused alcohol deaths (though no significant effect on acute alcohol related deaths
• 9% reduction in alcohol-attributable hospital admissions
In Saskatchewan, a 10%increase in minimum prices was associated with an 8%reduction in consumption
PRICE OF ALCOHOL FACTSHEET
UK modelling – estimated impact of a minimum unit price of 50 pence in EnglandEvidence of minimum unit pricing’s effectiveness
Alcohol-attributable deaths
Alcohol-related criminal offences
Alcohol-related workplace absences
Alcohol-attributable healthcare costs
Total alcohol consumption
Consumption among harmful male drinkers
-2.0%
-2.4%
-4.3%
-1.3%
-4.7%
-2.5%
Source: Angus, C., et al (2016) | Alcohol and cancer trends: Intervention Studies. University of Sheffield and Cancer Research UK
Duty and minimum unit pricing are most effective when combined
PRICE OF ALCOHOL FACTSHEET
Change in consumption at full effect by policy and socioeconomic status (units per year)
Source: Public Health England (2016) | The Public Health Burden of Alcohol and the Effectiveness and Cost effectiveness of Alcohol Control Policies: An evidence review. London: Public Health England
• The Institute of Alcohol Studies Alcohol’s impact on the economy
• British Beer & Pub Association Statistical Handbook
• NHS Health Scotland MESAS Monitoring Report 2018
• University of Sheffield Analysis of Living Costs and Food Survey data 2010-15
• NHS Digital Statistics on Alcohol England
• Office for National Statistics Consumer Price Inflation time series dataset
• Alexander C Wagenaar et al
Effects of beverage alcohol price and tax levels on drinking: a meta-analysis of 1,003 estimates from 112 studies
Effects of Alcohol Tax and Price Policies on Morbidity and Mortality: A Systematic Review
• Craig A Gallet et al The demand for alcohol: a meta-analysis of elasticities
References
• Abdallah K Ally et alAlcohol tax pass-through across the product and price range: do retailers treat cheap alcohol differently?
• Pia Mäkelä and Esa ÖsterbergWeakening of one more alcohol control pillar: a review of the effects of the alcohol tax cuts in Finland in 2004
• Jean-Luc HeebChanges in alcohol consumption following a reduction in the price of spirits: a natural experiment in Switzerland
• University of Sheffield and Cancer Research UK Alcohol and cancer trends: Intervention Studies
• Gov.uk Rates and allowances: Excise Duty – Alcohol Duty
• HM Revenue & CustomsAlcohol Bulletin
Policy Paper: Alcohol Duty Uprating
References
• Office for Budget Responsibility Economy Supplementary Tables
• Tim Stockwell
Misleading UK alcohol industry criticism of Canadian research on minimum pricing
Does minimum pricing reduce alcohol consumption? The experience of a Canadian province
Minimum alcohol prices and outlet densities in British Columbia, Canada: Estimated impacts on alcohol attributable hospital admissions
The raising of minimum alcohol prices in Saskatchewan, Canada: impacts on consumption and implications for public health
• Jinhui ZhaoThe relationship between changes to minimum alcohol price, outlet densities and alcohol-related death in British Columbia, 2002–2009
References
• Public Health EnglandThe Public Health Burden of Alcohol and the Effectiveness and Cost effectiveness of Alcohol Control Policies: An evidence review
References