‘Little convincing evidence’ of economic benefits from alcohol sales

22 February 2017: A new report from the Institute of Alcohol Studies, Splitting the Bill: Alcohol’s Impact on the UK Economy, argues that the economic benefits of the alcohol industry are overstated, undermining the economic case for cutting alcohol duty in next month’s Budget.

The report draws on government and trade statistics, academic evidence and economic theory to challenge arguments that the health and social benefits of reducing alcohol consumption are likely to come at a cost to the economy, finding:

  • Any reduction in employment and income resulting from lower spending on alcohol would be offset by spending on other goods
  • Econometric analysis of US states suggests that a 10% decrease in alcohol consumption is associated with a 0.4% increase in per capita income growth
  • Lower alcohol consumption could also reduce the economic costs of impaired workplace productivity, alcohol-related sickness, unemployment and premature death, which are estimated to cost the UK £8-11 billion a year

The analysis comes at a timely moment, with health groups urging the Chancellor to raise alcohol duty in next month’s Budget. Earlier this month, the Alcohol Health Alliance called for higher tax on high strength ciders and the reintroduction of the duty escalator, which ensured that alcohol taxes rose above inflation each year. Public Health England also recently identified raising duty as one of the most cost-effective ways to reduce alcohol-related harm.

The report’s author, Aveek Bhattacharya, Policy Analyst at the Institute of Alcohol Studies said:

“Economic arguments are regularly used to resist policies that tackle excessive alcohol consumption, such as raising duty. Yet raising the price of alcohol is more likely to benefit the economy than harm it, by reducing the productivity costs associated with workers’ harmful alcohol consumption.

“Cuts to alcohol duty impose a heavy toll on our health service and our public finances, with no clear corresponding benefit to the economy. The Government should reverse course, and undo the damage of four successive years of falling tax on alcohol duty.”

Splitting the Bill: Alcohol’s Impact on the UK Economy is available for download from the Institute of Alcohol Studies website here: bit.ly/iassplittingthebill.