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Monday, March 26, 2012

How significant is a minimum unit price for alcohol of 40p?

The Home Office has today published its alcohol strategy which contains a number of measures designed to curb excess alcohol consumption and the associated social harms. The most high-profile is the plan to introduce a minimum price per unit of alcohol in England and Wales (a similar policy is currently before the Scottish Parliament), with 40p per unit set as an illustrative rate.

As in our previous analyses of minimum pricing, we continue to argue that a preferable approach would be to introduce a floor price for alcohol through the duty system, moving towards a more equal tax treatment of alcohol by type and strength combined with a restriction on selling alcohol below the total tax levied on it. Such a system could be designed to achieve an increase in the price of low cost alcohol similar to that that from a minimum price. But it would have the advantage of raising money for the Exchequer, whereas a minimum price would transfer revenues to the alcohol industry instead. If set at 40p, we estimate that these transfers could be as much as £850 million per year. The alcohol strategy document suggests that the government will "... work with industry to use any additional revenue to provide better value to customers in other areas ..." though quite how this could be enforced or monitored is hard to see.

How significant would a 40p minimum price be? We examine the policy using detailed data recording the off-licence alcohol purchased by more than 19,000 households in 2010. The data do not include alcohol bought in pubs and restaurants. However, it is unlikely that a minimum price would have much direct impact for on-licence prices. > > > > Read More