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Tuesday, November 29, 2011

Small beer? assessing the Government's alcohol policies

The March 2011 Budget raised the duty on strong beers (above 7.5% ABV) by 25% and cut the duty on weak beers (2.8% or less) by half. The Home Office has also announced plans to ban 'below-cost' alcohol sales in England and Wales, with 'cost' defined as the total tax (duty and VAT) due on each purchase, though precisely when the ban is to be implemented is unclear. In Scotland, the SNP Government has introduced a Bill to implement a minimum price per alcohol unit from 2012, following an unsuccessful attempt to do so last year. A new Briefing Note published today looks at these three policies in depth, using detailed data recording the off-licence alcohol purchases of more than 25,000 British households.

The changes to beer duty came into force in October. For the products affected, the effect is significant: the total tax (including VAT) due on a 4 x 440ml purchase of 2% ABV lager fell from 78p to 39p, whilst at 8% ABV the tax rose from £3.33 to £4.17. However, strong beers made up just 0.8% of all off-licence alcohol units purchased in 2010 and weak beers just 0.2%, so the policy has a big effect on a very small part of the market. The biggest impact is likely to be on households who consume large amounts of alcohol (more than 35 units per adult per week), who buy 23% of all off-licence units but 53% of strong beer units. Notably, the reform did not affect cider. This means that, on a per-unit basis, the duty on a strong 7.6% ABV beer (23.2p) is now more than three times higher than the duty on a 7.6% ABV cider (7.1p). Rather than switching to low-strength beer, the reform might encourage strong beer drinkers to consume strong cider instead. > > > > Read More