Preliminary assessment of economic impacts of alcohol pricing policy options in the UK
In an effort to understand the economic implications associated with various possible measures to tackle alcohol harms, the Home Office commissioned RAND Europe to undertake research into three particular policies — minimum pricing, ban on below-cost sales, and taxation. This study presents evidence on the links between alcohol prices and consumption and the economic impacts of each policy option, the statistical data describing the market for alcohol and findings from interviews with key stakeholders.
Main findings for each policy option are as follows:
- Ban on below cost sales (cost defined as VAT + duty): The effect on consumption may be relatively small compared with broader restrictions on discounts and promotions, and also with the introduction of certain minimum prices or tax hikes. Nevertheless, even if the effect is small, where it increases the price of the cheapest drinks, the ban could potentially lead to some reduction in hazardous/harmful drinking.
- Increased taxation: When the taxes are passed on, taxes affect all drinkers, which is why taxation has been considered a 'blunt instrument' that does not target those drinkers who cause harms, instead affecting all consumers to some extent.
- Minimum price: Depending on the minimum price introduced, the effect of this policy is especially strong for low-cost alcohol. Thus, minimum pricing has important implications for young and hazardous/harmful drinkers and low-income groups, who are more likely to purchase cheaper drinks.
Table of Contents
What do we know about the link between alcohol price and consumption?
Evidence on economic impacts of alcohol pricing policies
Data on the UK market for alcohol
Alcohol producer and retailer relations
Implementation costs of policy options
Potential economic impacts of policy options
Conclusion and discussion
Extended theoretical analysis
Descriptive statistics of the alcohol market and consumption