In an attempt to try and undo the effects of years of NHS underfunding, reports have surfaced suggesting that the Tory government is rediscovering a policy it has spent years undermining: taxing alcohol. It is about time. Paying a little bit more for our booze would provide the health service with hundreds of millions of pounds a year more to invest in staff, facilities, treatments and prevention. At the same time, it would relieve some of the pressure on our hospitals from alcohol-related illness and injury.
Cheered on by alcohol industry lobbyists, Philip Hammond and George Osborne have repeatedly slashed alcohol duties, leaving a vast sum of money on the table. The Treasury’s own estimates indicate that the Government would have raised £4 billion extra in revenue if alcohol taxes had just risen in line with inflation. Instead, the rate of beer duty is 16% lower in real terms than it was in 2012, and spirits and cider duties have been cut by 8% over the same period. Merely returning alcohol taxes to their 2012 level would raise over £1 billion a year.
However, despite receiving these substantial tax breaks for almost a decade, an industry-funded campaign surfaced last week demanding yet more cuts. Our NHS cannot afford for government to roll over; increasing alcohol taxes would reduce costs as well as raising revenue. Alcohol is responsible for over a million hospital admissions every year in England, costing the NHS £3.5 billion annually. If you believe that prevention is better than cure, higher alcohol taxes should be part of the answer. Taxing alcohol is widely acknowledged – for example, by the World Health Organization and the OECD – to be one of the most effective ways of reducing alcohol-related harm. Raising alcohol taxes has been found not only to reduce alcohol-related disease, but also traffic accidents, suicides and violence. Modelling suggests that a 10% increase in alcohol tax would be expected to save 350 lives a year.
Tory governments have stalled our progress in fighting alcohol harm. In 2008, the last Labour government introduced the alcohol duty escalator, which ensured that alcohol tax rose above inflation each year. At that point, the alcohol-related death rate was 15.8 per 100,000. When the Tory government scrapped the duty escalator in 2012 the death rate had fallen to 14.0, where it has remained stuck. Overall alcohol consumption shows a similar trend: falling significantly between 2008 and 2012, before leveling off.
Cutting alcohol duty is commonly presented as a way to reduce the cost of living for struggling households. This is misleading. In general, the poorer you are, the less you drink. Less than half of people earning under £10,000 a year drink alcohol in any given week, compared to 79% of those earning over £40,000. Consequently, in 2011 the Institute for Fiscal Studies estimated that a 5% rise in alcohol taxes would amount to 0.2% of the richest households’ budgets, compared to 0.1% for the poorest.
Moreover, alcohol taxes are likely to reduce health inequalities. Though poorer people drink less on average, they are more responsive to price and they face greater risk of disease for a given level of drinking. As a result, they are more likely to experience the health benefits of lower alcohol consumption. It has been estimated that almost 60% of the lives saved from a tax increase would be from the lowest socio-economic group.
Despite what industry-funded lobbying, like the recently launched £9 million ‘Long Live the Local’ campaign, would suggest, it is similarly misguided to cut alcohol duty in order to support pubs. Publicans generally agree that the single greatest threat to their industry is cheap supermarket alcohol. Yet reducing duty simply allows supermarkets to further undercut pubs. Meanwhile, many pub owners have complained that lower duty rates are not passed onto them by breweries. By contrast, the period of the duty escalator – when tax was rising – was the only period in recent history when pubs and supermarkets increased prices at similar rates. Indeed, some have questioned the campaign’s motives, with Greg Mulholland, founder of the All Party Parliamentary Group ‘Save the Pub’, calling the campaign “a cynical ploy”, suggesting duty cuts benefit supermarkets over pubs.
Higher alcohol duty will help us fund the NHS more sustainably, while staunching the flow of patients it has to deal with. More importantly, it will save hundreds of lives, most of them people from disadvantaged backgrounds – without imposing a disproportionate financial cost on the poorest. It is a fair measure whose time has come again.