Alcohol is an important economic commodity in Europe, creating jobs, generating revenue in the form of alcohol taxes, and contributing around €9 billion to the EU economy through trade. However, alcohol is the third leading risk factor for death and disability in the EU, after tobacco and hypertension, and in 2003 it was estimated that the costs of alcohol misuse in the EU exceeded €125 billion. 

 

The aims of this study were:

·         to examine the link between the affordability of alcohol, alcohol consumption and alcohol-related harms;

·         to study the impact of cross-border tax-driven or competition-driven price differentials, which are an important policy concern for the EU; and

·         to examine the policy levers that can influence the affordability of alcohol.

 

In the past decade alcohol has become more affordable in all EU countries examined, apart from Italy. In six countries, including Ireland, affordability of alcohol increased by 50% or more. The analysis in this report indicates that, across the EU, 84% of the increase in alcohol affordability was driven by increases in income, and only 16% was driven by changes in alcohol prices. While incomes went up considerably across the EU, the relative price of alcohol has remained relatively stable, or has fallen at a slower rate than the income increases, in most of the EU countries included in this analysis.

 

Rates of excise duty on alcohol are not harmonised, and large variations in taxation exist across the EU despite the single European market and the introduction of minimum excise duty rates in 1992. Ireland, along with Sweden and Finland, has set higher rates on alcohol than other countries. However, except in the UK and Italy, the real value of alcohol taxation has decreased in the last decade across the EU.

 

There is a trend across the EU towards more off-trade alcohol consumption, which tends to be cheaper than alcohol sold on-trade. In the UK, Sweden, Finland, Latvia, Ireland and the Netherlands, off-trade alcohol sales appear to be growing relative to on-trade sales. This is true even in countries in which the market share of the on-trade has traditionally been larger, such as Ireland and the Netherlands. In Ireland, for example, the off-trade share of the alcohol market in monetary terms grew from 19.1% in 1991 to 27.5% in 2000 and to 35.6% in 2006 (although, according to other estimates provided in the survey, the increase in the share of off-trade alcohol sales has been larger, from around 30% to 50% in the last five years). It is possible that one of the main reasons for the increase in off-trade alcohol consumption is lower prices. In Ireland, alcohol prices in the off-trade appear to be decreasing relative to on-trade prices.

 

Existing evidence indicates that there is a negative relationship between alcohol price and consumption, and a positive relationship between income and consumption. In accordance with these findings, the analysis presented in this report indicates that there is a statistically significant positive relationship between alcohol affordability(a composite measure looking at the effect of price and income) and consumption across the EU. More specifically, a 1% increase in affordability results in an increase of 0.32% in total consumption. These elasticities are symmetrical, that is, a 1% increase in affordability has the same degree of effect as a 1% decrease in affordability.

 

The report also noted positive, statistically significant associations between alcohol consumption and related harm.  More specifically, it reported that a 1% increase in per capita alcohol consumption was associated with increases of 0.85% in fatal traffic accidents, of 0.61% in traffic injuries, and of 0.37% in the incidence of liver cirrhosis within the same year.

 

This and many other studies indicate that the price and affordability of alcohol impact on levels of harmful and hazardous alcohol consumption; policy-makers should therefore consider introducing alcohol-pricing policies as effective measures to curb hazardous and harmful drinking in Europe. As the problem is multi-factorial, policies aimed at influencing the price/affordability of alcohol should not be the only elements of a country’s alcohol strategy. Other policies with a strong evidence base are also effective in reducing hazardous and harmful alcohol consumption, such as reducing alcohol outlet density, increasing minimum legal drinking ages, and enforcing drink-driving counter-measures.

 

1. Rabinovich L, Brutscher P, de Vries H, Tiessen J, Clift J and Reding A (2009) The affordability of alcoholic beverages in the European Union: understanding the link between alcohol affordability, consumption and harms. Cambridge, UK: RAND Europe. Available at www.rand.org/randeurope/publications.