Minimum Alcohol Unit Pricing vs Taxing Alcohol

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Although no student will ever admit it, alcohol might be too cheap. As the nation’s alcohol problem spirals out of control, we take a look at two potential remedies: alcohol taxation and minimum unit pricing.

When it comes to alcohol, there is no connoisseur quite like us students. Other adults may rave about floral tones and hints of citrus, but our tastes are for something different: value. We can sniff out an own-brand vodka, or a jug of cider the same price as a restaurant glass of mediocre wine, like a bloodhound sniffs out… well, blood presumably.

Though our dwindling bank balances may disagree, the argument has long been made that some drinks are simply too cheap for our own good, and should be made more expensive to reduce excessive alcohol consumption. There are two main ways for the government to do this. Increase alcohol taxation (AT), or adopt minimum unit pricing (MUP). So which one is best?

Let’s look at AT first. We already have an alcohol duty in the UK, which applies to all purchases. Unfortunately, the current system is a complicated mess. A litre of 7.5% beer will be taxed at over three times the amount as a litre of 7.5% cider. Much of this is due to pesky EU legislation we’ve all been hearing far too much about recently. Reforming AT (e.g. to bring cider in line with beer, and raise tax on high-strength spirits) could affect excess consumption similarly to MUP. The big benefit of using tax reform, however, is that all the lovely money goes back to us. Well, the government, anyway. The Office for Budget Responsibility (OBR) predicts alcohol duty will raise £11.6bn in 2018/2019, so AT could be lucrative if executed well. Given that one of the problems with excess alcohol consumption is the cost to the NHS and other public services, increasing alcohol duty could bring a vital cash boost to help ease their troubles. It’s rather a nice thought knowing that, as you fumble your card from your wallet to pay for that twelfth ill-advised jägerbomb, you’ve done a little bit more to ease the burden on the hospital you’ll shortly be attending (please drink responsibly).

As good as that sounds, AT has two main problems. Firstly, it’s difficult to implement. Reforming our alcohol duty would involve a lot of work for the government, and getting it right could be tricky. As a member of the EU, we may also not be able to make these reforms unless they were EU-wide. This creates a bureaucratic barrier to change and means that the government would have to try and drum up support among other EU nations. Of course, assuming Brexit goes ahead, this may soon change. The second problem with more taxation is that it will increase the prices of drinks that aren’t cheap to start with. This includes both more expensive items in shops, as well as drinks in pubs and bars. This could make it a particularly unpopular move as, while there is some public support for strong and cheap alcohol being priced up, most people do not want to see the prices rise in their local pub. This is not to mention how unpopular the policy would be with businesses.

Credit: Ang Mingxuan.
Credit: Ang Mingxuan.

What about the alternative? MUP has two notable strengths over taxation. Firstly, the narrower focus would target the most problematic drinks. Our cherished own-brand spirits and high percentage ciders would go up in price, while more expensive drinks and those sold in bars will be largely unaffected, and remain as they are. This then especially helps to target problem drinkers who binge on the cheap stuff. The second benefit is its relative efficiency. It takes far less work on behalf of the government to implement, compared to the complex reforms needed to improve alcohol duty. It is mainly a case of setting the regulations and letting the businesses adjust their prices to comply with them.

The biggest downside to MUP, however, is the lack of financial benefit. Any extra revenue generated goes straight to businesses. The only money we’d see would be from the higher priced drinks having greater VAT. This lack of benefit puts it at a disadvantage compared to AT. Another problem is that minimum unit pricing could be accused of unfairly targeting low-income drinkers. Those on low incomes purchase far more of the cheap, strong alcohol that would be affected than higher earners do. While it may reduce consumption among them, it could also have the unwanted effect of reducing living standards as they’ll spend a greater proportion of their income on alcohol. Of course, it’s worth noting that increasing alcohol duty would have a similar effect, only affecting more people.

In conclusion, both measures could be similarly effective at reducing excess consumption. However, AT seems the best option as the extra revenue can be put back into the public services. Unfortunately, it is a solution that requires an efficient, ambitious, and patient government to implement it. I’ll leave you to decide if you think this one qualifies – perhaps the post-Brexit climate will make it easier to achieve, but perhaps not. In the meantime, however, it may be better to aim for the more realistic, if arguably worse, solution of MUP.

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