Home > Pour decisions? The case for reforming alcohol duty.

Corfe, Scott . (2019) Pour decisions? The case for reforming alcohol duty. London: The Social Market Foundation. 72 p.

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This report explores the case for reforming alcohol duty in the United Kingdom, and the principles which should underpin a new, improved alcohol duty regime.  

The report notes a number of key issues with the current alcohol duty regime:

  • Significant disparities in duty charged for same strength products. While a relatively weak 6% ABV bottle of wine faces duty of 50 pence per unit of alcohol, as of the time of writing a 6% ABV cider faces duty of just 7 pence per unit of alcohol.
  • Mixed incentives to produce weaker strength products. While beer duty increases or holds steady, on a per-unit of alcohol basis, with the strength of the product, this is not true for cider or wine. For these products, incentives to reduce product strength are limited.
  • An inconsistent approach to taxation. While beer and spirits duty are taxed according to pure alcohol content, wine and cider duty are taxed according to the volume of the final product. This is a reflection of EU regulatory requirements, which require wine and cider to be taxed in this way. Brexit could open up possibilities to rationalise alcohol taxation in the UK.
  • Lack of consideration for the alcohol tax system as a whole. Alcohol duty has become highly politicised and often driven by spurious arguments, rather than what evidence suggests would be most optimal – whether that be in terms of raising revenue, supporting jobs or improving public health outcomes.
  • Arguments often used to justify duty freezes and favourable treatment for certain beverages are deeply flawed. For example, jobs-based arguments used to justify cider and spirits duty freezes ignore the fact that cider accounts for a very small number of jobs in the economy, and the fact that about 90% of whisky is exported from the UK – meaning duty changes and domestic consumption patterns have little bearing on jobs. Jobs-based arguments also ignore work lost through excessive alcohol consumption. Analysis by Public Health England found that, in 2015, there were 167,000 working years of life lost due to alcohol consumption – 16% of all working years lost in that year. 

Arguments used to call for a more favourable tax treatment for spirits tend to focus on the need to support the Scotch whisky industry, yet UK-produced whisky accounts for just 17% of spirits consumed in the UK. Whisky’s dominance in the political discourse around spirits, with its evocation of images of charming rural distilleries, thus seems highly misguided. Vodka is in fact the most widely consumed spirit in the UK, accounting for about 30% of total consumption. 

Arguments related to the regressive nature of excise duties are also flawed. Firstly, alcohol taxation does not appear to be particularly regressive, given relatively high rates of non-drinking among lower income households. Secondly, regressivity alone is not a strong argument against alcohol duty. Inequalities in the economy are better addressed through broader tax and welfare policy, rather than through alcohol duty which should largely be concerned with addressing the health and social harms caused by alcohol consumption.

Item Type:Evidence resource
Publication Type:Report
Drug Type:Alcohol
Intervention Type:AOD disorder harm reduction
Date:September 2019
Pages:72 p.
Publisher:The Social Market Foundation
Place of Publication:London
EndNote:View
Subjects:A Substance use, abuse, and dependence > Prevalence > Substance use behaviour > Alcohol consumption
B Substances > Alcohol
G Health and disease > Substance use disorder > Alcohol use
L Social psychology and related concepts > Economic availability or accessibility
MP-MR Policy, planning, economics, work and social services > Policy > Policy on substance use > Harm reduction policy
MP-MR Policy, planning, economics, work and social services > Economic policy
MP-MR Policy, planning, economics, work and social services > Economic aspects of substance use (cost / pricing)
VA Geographic area > Europe > United Kingdom

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