March 2014

Do Your Duty, George!

Alcohol duty is a highly regressive tax that hits poorer people hardest

IT’S MARCH again, and time for the Chancellor’s annual Budget statement. Last year we got the welcome surprise that, not only did he scrap the hated Beer Duty Escalator, but he also made a small cut to beer duty. Hopefully this year we will see the escalator abandoned for all other categories of alcoholic drink. That will help the pub trade too, as drinks other than beer account for almost half of all alcohol sold in pubs, and whisky and cider are also substantial British industries providing large numbers of jobs.

Alcohol duty is a highly regressive form of taxation with a disproportionate impact on the less well-off. While, on average, higher income groups do drink a little more, alcohol duty (plus the VAT levied on the duty) accounts for two per cent of the disposable income of Britain’s bottom fifth of income earners, but only 0.6 per cent of the income of the top fifth. Taking the foot off the gas on duty is an effective way of helping those on low incomes.

It’s easy for holier-than-thou people to say that if those on low incomes choose to drink it’s their decision, and they have no sympathy, but that line just comes across as patronising and sanctimonious. In the real world, people do drink, and it is generally recognised that the price elasticity of alcoholic drinks is relatively low, so in practice raising duty hits the poor hardest. And who is to say the less well off shouldn’t be allowed a little pleasure in their lives once in a while?

Youth Exclusion Zone

Measures to stop underage drinking have created a less responsible drinking culture amongst the young

AVERAGE alcohol consumption has now been steadily falling for ten years, and the sharpest fall of all has been amongst the 18-24 age group, which doesn’t bode well for the future of the pub trade. However, it has been pointed out to me that the increasingly heavy-handed requirement for age verification is a major factor in deterring young people from using pubs. If you’re constantly being asked your age, even if you look well over 18, it’s inevitably going to put you off.

A generation ago, underage drinking in pubs was widely tolerated so long as no trouble was caused. This taught young people how to drink responsibly, and also got them used to the habit of pubgoing. They knew they were only there on suffrance and so had to fit in and learn the rules of the game. Any trouble, and they were out on their ear. Now, rather than running the gauntlet in the pub, it’s much easier to obtain off-trade alcohol and drink it at home or at private parties. Once you’ve been ID’d once at the off-licence, that’s it, and the flow of your evening is not being constantly interrupted. If you’re under 18, you just get your older mate to buy it.

It’s a classic case of unintended consequences that measures intended aimed with entirely good intentions to curb underage drinking have simply had the effect of shifting it from a controlled to an uncontrolled environment and, while reducing consumption overall, encouraging a less responsible drinking culture amongst young people in general. Yet I doubt whether a deliberate policy of turning a blind eye to well-behaved under-18s in pubs is going to find much favour in official circles.