Under Boris Johnson, Rishi Sunak planned to raise alcohol duty in line with the stomach-churning rate of inflation. Liz Truss then said she would freeze it. When Sunak became Prime Minister, the plan reverted to an inflation-matching increase.
And then on Monday he decided to freeze it again, but only until August.
This has led to a rollercoaster of emotions for the ‘public health’ lobby which loves nothing more than tax rises on products that displease them. It has also smoked out some profoundly ignorant beliefs about who pays tax and who benefits from changes in tax rates.
Here are three of them.
Colin Angus is one of the hired guns paid to massage the evidence to justify lowering the drinking guidelines in 2016 and he is part of the team at Sheffield University that did the modelling to justify minimum pricing. A few years ago, he and his colleagues produced a report claiming that the booze industry would have to raise prices by the equivalent of £13 billion if everyone started complying with the fictional drinking guidelines, a conclusion which betrayed some fundamental misunderstandings about the world of business.
In the tweet above, based on the calculation that raising alcohol duty in line with inflation would pull in £1.3 billion for HMRC (which is the annual figure, despite the duty freeze ending next August), he asserts that the government ‘is choosing to give away over a billion pounds a year to the alcohol industry’. I trust the reader will not need me to explain that (a) the government isn’t giving anybody anything, and (b) it is primarily drinkers who will save money from a freeze on duty, not the industry.
To be fair to Colin, he has partially retracted this claim. The same cannot be said of the so-called Institute of Alcohol Studies (the successor to the UK Temperance Alliance), whose head of policy put out the following statement…
Since the Institute of Alcohol Studies was founded by - and shares an office with - an organisation whose stated mission is to ‘spread the principles of total abstinence from alcoholic drinks’, you may question the sincerity of Ms Keen’s concerns for the British pub trade. You may also question whether the large spike in alcohol-related deaths in 2020 and 2021 had more to do with people drinking themselves in lockdown than with alcohol duty.
But the real problem with this statement is the bizarre assertion that cutting taxes in real terms has ‘cost taxpayers billions of pounds’. Before you laugh too hard, remember that there are plenty of people who think Liz Truss cost taxpayers £17 billion by failing to increase National Insurance. The mistake in both instances is the same - a basic inability to distinguish the people who pay the tax from the people at the Treasury who do the taxing.
Finally, there is this tour de force of wrongness from the CEO of Alcohol Change (formerly Alcohol Concern).
While struggling households are being asked to contribute more, this decision to subsidise alcohol producers is totally unfair.
As already mentioned, a tax freeze is not a subsidy to alcohol producers.
Cutting duty has two effects. First, it means other taxpayers have to contribute more in order to balance the books…
This is true insofar as it goes, but since drinkers are already over-taxed, it is not obvious why they are more responsible for balancing the books than non-drinkers.
…giving a subsidy to the already wealthy alcohol producers.
Stop saying that!
Second, if alcohol producers use an alcohol duty cut to keep prices lower for consumers (which they may or may not)…
They will, because it is not a cartel.
…this increases alcohol harm. Evidence shows that heavy drinkers are often price sensitive
The word ‘often’ is doing a lot of heavy lifting in that sentence. The evidence shows that heavy drinkers tend to be the least price sensitive of all alcohol consumers.
Remember, alcohol duty is a tax only on alcohol producers – not on the hospitality industry or on drinkers.
I give up. Are these people stupid enough to believe what they’re saying or do they just think we’re stupid enough to fall for it?
I’d like to wish all my subscribers a very merry Christmas. I hope you get where you’re going to and no disasters befall you.
I can't remember where I saw this research, I suspect it was from you or one of your IEA bods, but I definitely remember looking at a study that restrictions on markets are very unpopular when framed as restrictions on the consumer, but miraculously win approval when the exact same ideas are expressed as restrictions on the producer (despite it being impossible to make it harder to sell something without it also making it harder to buy it).
“…giving a subsidy to the already wealthy alcohol producers.
Stop saying that!”
Come now, you must know that trying to battle framing with facts is like trying to defend yourself from a water cannon by using a sword?
…and they don’t need people to believe them, only sufficient momentum to get their measure over the line?
Am not a big drinker tbh, as it doesn’t agree with me, but happy to defend everyone else’s right to knock themselves out as much as they like! :)