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Alcohol tax increases 'will save thousands of lives' - Department of Health

The increases in excise duty and VAT on alcohol announced in the Budget in March will save 3,250 lives in England alone by the end of March 2013, according to the Department of Health.

This assessment of the likely impact of the tax increases was given by public health Minister Dawn Primarolo in a speech to the British Medical Association’s Public Health Conference. Curiously, the Chancellor of the Exchequer himself made no reference in his Budget speech to the lifesaving benefits of the tax increases, saying only that they allowed him to provide ‘additional support for families and lift more children out of poverty’. The briefings provided by Treasury officials also seemed to suggest that the taxes on alcohol had been increased purely to raise revenue.

However, it was clear from Dawn Primarolo’s speech that the Department of Health had been pressing the health case for tax increases, and the speech represents the most direct and explicit acknowledgement by the present Government that alcohol taxation is a powerful means of tackling alcohol-related harm. Previously, the Government had been very reluctant to concede this point despite the many representations made by the public health lobby over the years, arguing that the scientific evidence shows clearly that alcohol taxation is one of, if not the, key weapons available to Government to reduce health and social harm related to alcohol. Ironically, the previous Health Secretary, Patricia Hewitt, had also argued for alcohol tax increases at each Budget, especially on alcopops, but had been publicly slapped down by the Treasury for doing so. In its National Alcohol Harm Reduction Strategy first issued in 2004 the Government explicitly rejected alcohol taxation as a means of controlling alcohol harm.

The increases

The Chancellor announced that alcohol duties would increase by 6 per cent above the rate of inflation. Beer would rise by 4p a pint, cider by 3p a litre, wine by 14p a bottle and spirits by 55p a bottle. Alcohol duties would continue to increase by 2 per cent above the rate of inflation in each of the next four years. When these year-on-year increases are compounded over this period, they represent a nominal 31 per cent increase in duty by 2012. Commenting on the tax issue, Ms Primarolo said:

“In current market conditions, and we have to recognise this, the tax increases announced by the Chancellor may not feed through fully to price and it is price which we know reduces consumption. Our estimates suggest that higher taxes, if they do feed through to price, will mainly affect the 7 per cent of the population who drink one third of all alcohol consumed in Great Britain. And that, in England alone, the total number of lives saved up to the end of March 2013 – when Budget 2012, the last Budget with a 2% above inflation increase has taken effect – will save 3,250 lives by the Department’s calculations.”

The obvious significance of this statement is not only that it recognises price and tax as key determinants of the level of alcohol consumption and harm, it also clearly rejects the counterargument put forward by the alcohol industry and others that tax rises fail to have any impact on alcohol harm, merely ‘punishing’ the responsible drinking majority, while the minority of `alcohol abusers’ carry on drinking at the same level.

There was more bad news for the industry later on in the speech when Ms Primarolo confirmed the Government’s preparedness to bring in – to the industry - very unwelcome legislation. She said:

“We share the concerns that have been expressed about the practice of deep discounting promotions, often as loss leaders, and below cost price, of alcohol. But as we move forward to challenge this, we have to make sure that any action we take is based on evidence. That is why the Department of Health has commissioned a research team from the University of Sheffield to carry out an independent review of the evidence on the relationship between the pricing and promotion of alcohol and harm. We expect the results of the review to be published in August.

We have stated that, depending on the review’s findings, that we are prepared to consult on the need to regulate change, including legislation, if this proves to be necessary. And we have informed the alcohol industry that we shall not shrink from doing so.

The same holds true pending the results later this year on monitoring the outcome of the industry’s implementation of the alcohol labelling regime that was announced last May. We have the powers now that we need to regulate in this area, if it is not delivered, and we will if necessary.”

Ms Primarolo also took the opportunity of summarising current initiatives in regard to the NHS response to alcohol, including providing specific training in alcohol problems to identify and treat excessive drinkers. (see page 14)

Reactions to the Tax Increases

Predictably, the public health community supported the Chancellor’s tax increases while alcohol industry spokesmen condemned them, speaking of `betrayal’ and ‘the worst Budget for the industry in living memory’.

Prior to the Budget, sections of the Industry had been running a campaign against alcohol tax increases, a campaign which they presumably thought had succeeded, when in an interview in the Daily Telegraph a few days before the Budget, Alistair Darling ‘made it clear he (was) not planning a big rise in alcohol duty to discourage bingedrinking’. “I don’t take the view that the best way to deal with this is to punish everybody for the sins of a minority” he said.

Reacting to the increases, Jeremy Beadles, for the Wine and Spirit Trade Association, said: "That the Government should commit itself and future Governments to an above inflation rate increase for alcohol for the next four years is hitting all drinkers for the sins of a minority even before it has received the results of its own report on Pricing, Promotions and Harm. A policy of commit now, hurt consumers now, study the issue later."

For the British Beer & Pub Association (BBPA) Rob Hayward said:

“Government is punishing all beer drinkers rather than tackling the minority of drunken hooligans. But Government tax policy is fuelling Britain’s binge drink problem by driving people away from beer, out of the pub into the arms of the deep discounting supermarkets. They don’t pay beer duty and don’t allow brewers to pass it on, so their rock bottom prices will remain unaffected by this tax hike.”

Following the Budget, an internet campaign was started by an Edinburgh licensee, with the aim of banning Alistair Darling from any pub in the country. (Mr Darling represents an Edinburgh constituency.) Asked about the campaign to ban him from all pubs, a spokesman for Mr Darling again avoided referring to the health benefits and said:

“The Chancellor made itclear at the time of the budget that his priorities were alleviating child poverty and helping pensioners. It’s a small price to pay for doing that.”

Public Health Support

Professor Ian Gilmore, President of the Royal College of Physicians and Chair of the UK Alcohol Health Alliance, said:

“We welcome the Chancellor’s decision to increase tax on alcohol. The international evidence suggests that even moderate taxation rises will reduce alcohol related deaths and this move, although modest, shows that the Government finally recognises the importance of taxation in reducing alcohol-related harm in the UK….”

The Institute of Alcohol Studies also welcomed the tax rises, saying that the rises would go some way towards addressing the increase in the affordability of alcohol that has occurred over the past twenty years. However, the IAS warned that the tax rise would not of itself address the growing discrepancy between the cost of alcohol in pubs and the cost of alcohol bought from supermarkets. Such pricing discrepancies continued to have worrying public health implications. The IAS called upon the government to continue pressure upon supermarkets to halt the sale of alcohol at below cost prices.

The British Medical Association and Alcohol Concern made similar comments.

Political Reactions

Conservative Party
Prior to the Budget, the Conservative Party launched its own proposals for targeted tax increases on drinks which were defined as problematic and which were claimed to contribute to binge drinking. The Conservatives attacked the Government for unfairly penalizing the responsible drinking majority because of the sins of the few, and said that what the Chancellor of the Exchequer should have done was introduce a revenue neutral alcohol taxation package that increased tax on problem drinks such as alcopops and super-strength beers and ciders, and used all the additional revenues raised to cut tax on low alcohol beers and ciders.

The Conservatives said that this approach had been highly successful in other countries; in Australia, low alcohol beers now make up 20% of the beer market, while in Germany the consumption of alcopops had fallen by half. They claimed that this policy had received support from alcohol charities and medical experts.

For example, Christopher Day, Professor of Liver Medicine at the University of Newcastle, had said: "I strongly support this targeted tax package. The strongest evidence-based approach is to increase the price of problem drinks and reduce their availability. This has worked in countries across the world - and I'm in no doubt that it will work here in the UK too."

Liberal Democrats
The Liberal Democrats also favoured targeting high strength alcoholic drinks.

Shadow Chancellor, Vince Cable, said that “taxes should be used to discourage binge drinking. Raising the tax on drinks with high alcohol content would raise £225 million, an amount that could be used to cut VAT on healthy, 100% fruit juice from 17.5% to 5%."

This, Mr Cable said, would complete the transformation of the Liberal Democrat Party from the "party of beards and sandals to the party of smoothies".

The Government dismissed the Conservatives’ and the Liberal Democrats’ plans for placing additional tax on high strength drinks as contrary to European Union law.

From the alcohol industry’s perspective,however, the disagreements between the Government and the opposition parties on tax policy are probably less significant than the fact that all three major political parties have now accepted the principle that alcohol taxation is a legitimate and effective means of tackling alcohol related harm.

Bargain Booze

Ms Primarolo’s uncertainty as to whether the tax increase would feed through fully to the price paid by the consumer proved to be well founded. Immediately following the Budget, Bargain Booze, a company with a range of off-icensed outlets, informed its suppliers that the company would not accept any price rises consequent upon the tax increases and that the suppliers would have to absorb the costs themselves. The letter read:

“As you know, the aggressive market that we’re all trading in continues to place massive pressure on our industry, and our retail outlets - like everyone else - are feeling the pinch. Given the discount pricing strategies adopted in the past few years by the multiple grocers we are not confident that the Budget will result in material increases in retail prices.