Merryn's Blog

Higher taxes won't cut binge drinking

The Conservative party has promised to introduce a new booze tax to curb anti-social drinking. But pricier booze won't turn people, especially binge drinkers, off alcohol.

The Conservative party has promised to introduce a new booze tax to curb anti-social drinking. Speaking at the party's annual conference in Manchester, Shadow Home Secretary Chris Grayling said that once in government, the Tories would increase taxes on super-strength beer, cider and alcopops to stop teenagers getting "very drunk, quickly and cheaply".

But will pricier booze really turn people, especially binge drinkers, off alcohol? Probably not.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

Putting up the price on specific types of drink is like telling children in a sweet shop that the price of Mars bars has gone up by 50p, but the price of Kit-Kats has stayed the same. The kids will just start eating the Kit-Kats.

When the price of something rises be that through government intervention or simple changes in supply and demand people don't just do without. They find ways to get around the problem. They get cheap booze from elsewhere, for example. Finland had to drop its draconian tax on alcohol in 2004, because people just smuggled it in from the Baltic states, hitting the Finnish exchequer.

Advertisement - Article continues below

Or they just substitute one drink for another that has the same effect. Last year, the Australian government increased the tax on alcopops by 70% under its own plan to tackle teenage binge drinking. Under the increase, the price of alcopops jumped from $39.36 per litre of alcohol content to $66.67. But according to a report from Access Economics in February, the alcopops tax did nothing to cut the number of alcohol-related hospital admissions. Teens kept swigging, probably by making their own alcopops with cans of Fanta and vodka from their parents' drinks cabinet.

Don't get me wrong here. When booze is more expensive, consumption does drop. Take Norway, where a pint costs about £5.50 and people drink about a third as much as we do here in Britain.

The trouble is, it's mostly moderate drinkers who ease off. The people who actually need to cut down the most, don't. That's because having a drink problem is usually down to factors other than price.

For example, a 2004 study conducted with the Center for Disease Control in San Diego found that adverse childhood experiences (ACEs) such as sexual abuse, missing parents, physical abuse, drug abusing parents and other incidents are highly correlated with substance abuse (including alcohol abuse, tobacco use, drug abuse and obesity). In fact, only 3% of adults who never had an ACE were alcoholics. That rose to 10% among those with two ACEs.

So if politicians really want to tackle problem drinking, they need to look at what's behind it not just make it more expensive.




How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019

Beyond the Brexit talk, the British economy isn’t doing too badly

The political Brexit pantomime aside, Britain is in pretty good shape. With near-record employment, strong wage growth and modest inflation, there is …
17 Oct 2019

Will Britain close its doors to immigrants post-Brexit?

Details have not yet been forthcoming, but Britain will soon have a new immigration policy. What will that mean for businesses and investors?
8 Feb 2020
House prices

Is the jump in house prices just a Brexit bounce, or is it more durable?

UK house prices rose sharply in January. Some of that is down to the end of Brexit uncertainty – but not all. There is a real risk that prices will ke…
7 Feb 2020

Most Popular

Silver and other precious metals

You should all own some silver. Just don’t expect it to make you rich

Silver is cool, beautiful and immensely useful. But for investors it's the most frustrating of metals. Dominic Frisby explains why you should own some…
12 Feb 2020

Money Minute Wednesday 12 February: grim times for European industry

Today's Money Minute previews industrial production in the eurozone, plus the latest from America's central bank.
12 Feb 2020
Investment strategy

The secret to avoiding being panicked out of your portfolio

With the coronavirus continuing to occupy headlines, investors still aren’t sure how to react. But the one thing you mustn’t do is panic. Tim Price ex…
11 Feb 2020

Why investors shouldn’t overlook Europe

SPONSORED CONTENT - Ollie Beckett, manager of the TR European Growth Trust, tackles investor questions around Europe’s economic outlook and the conseq…
6 Nov 2019