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WRITER, CONSULTANT AND BROADCASTER SPECIALISING IN BEER, PUBS AND CIDER. BEER WRITER OF THE YEAR 2009 AND 2012

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Tuesday, 12 January 2010

Answering the neo prohibitionists, 4 of 10: "Alcohol is becoming cheaper/more affordable"

While the consumption of alcohol has increased, taxation on spirits has declined in real terms and even more so as a fraction of average earnings.”

The Health Select Committee Report

Did you see what they did there?

They start the sentence talking about alcohol, then switch to how taxation on spirits has declined, hoping you won’t spot the change in subject mid-sentence.

The BMA adds:

Studies have also reported that price increases have the effect of reducing rates of alcohol problems including alcohol-related violence and crime… As part of a range of measures to reduce alcohol misuse, it is essential that the level of excise paid on all alcoholic beverages is increased at higher than inflation rates and that this increase is proportionate to the amount of alcohol in the product.”

The implication here is that excise paid on alcohol is currently not being increased at a rate higher than inflation. The only problem with this is that if you don’t do that weasel thing by switching to talking about spirits, the price of alcohol is already increasing higher than inflation – and always has been:

The Report ignores this, and talks about how alcohol is becoming more affordable. How can this be true? Well, alcohol is becoming more affordable because average household income is increasing. Alcohol is becoming more affordable because everything is becoming more affordable.

But as alcohol prices have on average risen by 20% more than retail prices generally since 1980, alcohol is becoming more expensive versus other goods.

As income increases, and the cost of high ticket items such as household electricals falls, people can afford to spend a greater proportion of their increased income on discretionary items such as drink – 'affordability' in this case is not directly linked with the price of alcohol.

But should we still increase duty to offset this effect anyway? Well, how much duty increase do you want? Duty on beer increased tenfold between 1965 and 2007, and increased by 18% in 2008 alone. Duty on wine trebled between 1976 and 2007.

It does seem utterly bizarre that duty has increased in reverse proportion to how strong drink is – beer has increased most, then wine, then spirits. Clearly that’s wrong and I support the Committee’s view that, relative to other drinks, duty on spirits should be increased.

But affordability and price are being treated as the same thing - they're not. By deliberately confusing ‘affordability’ (which is a function of rising disposable income) and price (which is a function of – well, price, but controlled chiefly by duty), you allow newspapers like the Telegraph to interpret these findings in the following syntax-strangled bullet point:

  • “69 - percentage alcohol is cheaper by than it was in 1980.”

This is a lie. Alcohol is NOT cheaper. It is already increasing by more than inflation, and in recent decades, it always has.

11 comments:

red dave said...

Some related data.

This the percentage of spending on alchohol by americans over the last 100 years
http://www.visualeconomics.com/100-years-of-consumer-spending/

And this is on the number of pints you can buy with the average wage in Ireland over time
http://www.finfacts.ie/Private/bestprice/guinnessindex.htm
The alcohol level of the pints has changed over time but still it is interesting.

Cooking Lager said...

An additional point would be that affordability does not only depend on wage inflation. Retired people exist on fixed incomes rising usually by a rate of general inflation and not wage inflation.

Hence it is no surprise to see expensive bars populated by younger people with higher disposable income and the old duffers necking their pints in the Spoons or in their local working mans / labour /tory /reform club.

Beer ought not be an expensive luxury item. It is a basic, like bread and milk and eggs.

When boozing abroad I notice bars where old and young rub shoulders and less social problems come home time.

I would not dismiss the idea of binge drink Britain, many town centres on a saturday night are shite holes and the largest reason is leaving the kids to get pissed up without the social constraint of having to respect the rest of society.

Cheap pints, establishments welcome to all (old, young, poor, rich, men, women, gay, straight, black white) are the solution to many of societies problems. I believe the educated call it social cohesiveness.

Oh and traditional boozers do not fit the bill, the kids don't like 'em and neither do most women. By welcoming establishments I mean something smarter and modern.

Anonymous said...

What about increasing the level of excise for alchol beverages in general, while partially exempting microbreweries? Real ales are not for bingedrinkers and a British cultural treasure.
What do you think ?
mark

Pete Brown said...

Cookie -you talk sense. Especially about the nature of bars. When I wrote my first book I thought theme bars were fine because one catered for a 'community' of sports fans, one for a 'community' of real ale fans, one for a 'community' of people on the pull, etc. But when you see the way all generations mix in, say, and Irish pub, it's got to be better.

And I'm not dismissing bingeing at all - just saying the scale of the problem is massively exaggerated.

Mark - what you suggest already exists - Progressive Beer Duty gives tax breaks to micros brewing under 30k barrels a year. It's the last brilliant thing Gordon Brown ever did, and is largely responsible for the cask ale revival we're enjoying today.

Eddie said...

On the matter of duty on spirits, the Insitute for Fiscal Studies published a report in 1999 regarding duty as purely a revenue raiser and considered the effects of increasing and decreasing duty on beer, wine and spirits seperately. It concluded that the maximum revenue would be obtained by holding spitits duty and raising beer and wine duty. Clearly this is a strategy that continues to be followed.

Curmudgeon said...

Comparing alcohol prices with incomes and saying alcohol is getting more affordable is perhaps the single biggest lie of the neo-prohibitionists, and richly deserves exposure of this kind.

Ed said...

I thought there was a policy to steadily harmonise alcohol duty so it's the same for a set amount of alcohol in all types of drinks.

Curmudgeon said...

I thought there was a policy to steadily harmonise alcohol duty so it's the same for a set amount of alcohol in all types of drinks.

In theory that may have much to commend it, but in practice it ends up with spirits being relatively cheap because the costs of production and transport per alcohol unit are less. In the off-trade, the cost per unit of name brand spirits and beers is similar, but the spirit price includes a much higher proportion of duty.

Jeff Rosenmeier said...

Pete,

I appreciate that you are having fun debunking all these documents, but aren't you preaching to the choir? Are the neo prohibitionists (if they actually do exist, I've never met one) reading your blog?

Jeff

Pete Brown said...

Jeff, I'm very conscious of that. But there are two strands to this:

Firstly, I wanted to put accurate data out there once and for all so that 'the choir' has this stuff to hand and can rebut arguments with authority whenever they see them.

Secondly, when I realised how much of this stuff I was going to have, I realised it does indeed need a wider audience. When I've finished all ten parts, I'm going to try to get it published and circulated more widely.

If anyone knows any organisation that may be interested on part-funding such a publication, please let me know!

Martyn Cornell said...

And another thing: "Studies have also reported that price increases have the effect of reducing rates of alcohol problems including alcohol-related violence and crime." But those studies have been accused of not doing their statistics properly - and in any case, unless you tell us the size of the effect against the size of the price increase, how can we tell if it's worthwhile?

Pete, 20 years ago the Institute of Economic Affairs/Social Affairs Unit published a paperback attacking neo-prohibitionism called Drinking to your Health, the allegations and the evidence - this is obviously somewhat out of date now, but it's time indeed that something like it came out again, and I would imagine they'd be happy to take a look at an up-to-date version. It's a pity that it takes a right-wing think-tank to campaign for basic liberties, but sometimes one takes the allies one can get …