E-Malt.com News article: United Kingdom: Minimum alcohol prices would transfer large sums from consumers to alcohol retailers and producers - report

Retail giants in the UK are expected to make as much as £700 million in additional profits if a minimum price for alcohol drinks is introduced, the Institute of Fiscal Studies said in a report published on September, 28.

A grouping of opposition Members of the Scottish Parliament recently removed plans for a minimum price of 45p per unit of alcohol from the Alcohol Bill currently in front of the Scottish Parliament, though the SNP minority Government is still in favour of the measure.

IFS researchers estimate that if a policy like this were rolled out across Britain it could transfer £700 million from alcohol consumers to retailers and manufacturers.

This contrasts to increases in alcohol taxes, which largely result in transfers to government in the form of much needed tax revenue. In the long-term, it would be desirable to restructure alcohol taxes so that they were based on alcohol strength, thus allowing the tax system to mimic the impact of a minimum price but ensuring the additional revenues went to the Government rather than firms.

Current implied taxes per unit are 17.3p for beer and 23.8p for spirits. However, a 75cl bottle of 9% strength wine is effectively taxed at 25.0p per unit whereas a bottle of 14% strength wine is taxed at only 16.1p per unit. It would be desirable to change this so that all alcohols could be taxed according to the number of units, IFS said.

The response to minimum pricing would probably be complex. Different consumers would respond to different extents, including substituting alcohol purchases towards pubs and bars which would be less affected by a minimum price. Retailers could change the price of alcohol currently sold above 45p per unit and change non-alcohol prices. Manufacturers could switch production into more expensive, higher quality products. Estimating the impact of these wider responses would require a more detailed model of behaviour.

Andrew Leicester, a Senior Research Economist at the IFS and one of the authors of the research, said: “Minimum alcohol prices would transfer large sums from consumers to those firms that retail and produce alcohol, but may target households that consume the most alcohol more directly than increases in alcohol taxes. However, higher taxes would generate much needed revenue. The Government should seek to change European regulations on how alcohol taxes can be structured, so that taxes can mimic the impact of minimum prices whilst ensuring the resulting revenues go to the Government and not firms.”


01 October, 2010