Alcohol pricing plan to hit low income households hardest

by Robert Powell on 12 April 2012  |  21 comments
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Government plans to introduce a minimum price for alcohol will hit low income, heavy drinking households as well as moderate consumers, according to an influential think tank.

It’s been a rough few weeks for those who enjoy a tipple. First the Chancellor reaffirmed a rise in alcohol duty, adding 5p onto the price of a pint and pushing the cost of an average bottle of wine over the £5 mark. And now the Government has tabled plans to introduce a minimum unit price for alcohol.

However – just as it did with the Government’s Stamp Duty plans – the Institute for Fiscal Studies (IFS) has cast a critical eye over the policy and picked apart several of the proposals.

Minimum pricing

The Government’s alcohol strategy would see a minimum price of 40p per unit slapped on alcohol in England and Wales, as well as a ban introduced on multi-buy discount deals in supermarkets. A consultation on the plan is tabled for the summer, with the aim to introduce legislation by autumn ahead of the introduction of minimum pricing in 2014.

The pricing tactic is designed to crack down on ‘pre-loading’, where people get drunk on cheap shop-bought alcohol before heading out to pubs and clubs. The Government claims that a 40p minimum price could mean 50,000 fewer crimes each year and 900 fewer alcohol-related deaths a year by the end of the decade.

However the verdict on the pricing strategy from the IFS paints a far gloomier picture.

Low earner hit hard

In an observation piece, Senior Economists Andrew Leicester and Martin O’Connell estimate that a 40p minimum per unit price would hand an additional £850 million pounds to the alcohol industry.

The think tank says the average off licence sells alcohol at around 44.8p per unit. So overall, 47% of units would be directly affected by the minimum price. The report goes on: “The policy would therefore have a significant impact for off-licence alcohol retailing, and would not simply affect the very bottom of the price distribution.”

The impact would also vary by alcohol type: over 80% of cider units would be affected while sparkling wine and alcopops would escape relatively unscathed by the change.

For consumers, the IFS said that those with lower incomes would be hardest hit, as they tend to buy cheaper alcohol. Households with annual incomes of less than £10,000 that consume between 21 and 35 units (the equivalent of two to three bottles of wine*) per week will see a 3.05% increase in their grocery budget, while those who consume over 35 units will pay 5.87% more.

Heavy-drinking, medium-income households will also lose out from the changes. Those with an income between £20,000 and £30,000 who consume over 35 units per week will see their spend increase by 4.44%.

However moderate drinkers will lose out as well, if the changes are implemented. This is because almost 40% households that consume fewer than seven units per week (three to four pints of lager) buy alcohol that costs less than 40p per unit.

The think tank said that it would be preferable to introduce minimum pricing through taxation. This would allow duty levels to be varied according to alcohol type and strength and would raise money for the state, not the booze industry.

Saving money when shopping

Finally, for some top tips on slashing your supermarket spend take a look at Save money on food.

What do you think?

Is a minimum pricing policy for alcohol fair?

Have your say using the comment box below.

*Bottle of wine = ten units. Pint of lager = two units.

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