Scotland-style minimum alcohol pricing would cost taxpayer £390m, IFS warns
Putting a minimum price of 50p per unit on alcohol would cost the taxpayer £390 million in lost revenue and hand a windfall to the drinks industry, the Institute of Fiscal Studies (IFS) has warned.
Ministers are considering whether to follow Scotland in introducing a 50p minimum pricing policy on alcohol sales in England and Wales, which would double the price of some cheaper drinks but slash the tax raised by the Treasury.
The IFS said that although a minimum price was "reasonably well targeted" at changing the habits of heavy drinkers, it undermined competition and reduced the tax raised by cutting the amount of overall drinking by as much as 11 per cent.
"The minimum unit price reduces competition in the alcohol market, reducing tax revenue and creating windfall revenues for the alcohol industry," said the IFS.
Instead, the body said the Government should overhaul duties to introduce a two-tier structure so that drinks are taxed in proportion to their alcohol content, with a higher rate on strong spirits. It said this would be almost as well targeted at heavy drinkers as a minimum unit price and would lead to an increase of more than £70 million in tax revenue.
"Combining this two-rate tax structure with a 50p minimum unit price would be as well targeted as the same minimum unit price applied on top of the current system of taxation, but would lead to much smaller falls in tax revenue," the IFS said.
Kate Smith, an associate director at the IFS and an author of the research, said: "The current system of alcohol duties is incoherent – for example, if you prefer a pint of beer to cider, you may currently pay more than twice as much tax for a drink with the same alcohol content.
"Brexit offers a valuable opportunity to improve the way we tax alcohol. A simple reform that taxes drinks in proportion to their alcohol content, with a higher rate on strong spirits, targets the purchases of heavy drinkers while raising tax revenue."