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Preliminary Assessment of Economic Impacts of Alcohol Pricing Policy Options in the UK

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Preliminary Assessment of Economic Impacts of Alcohol Pricing Policy Options in the UK CHILDREN AND FAMILIES The RAND Corporation is a nonprofit institution that helps improve policy and EDUCATION AND THE ARTS decisionmaking through research and analysis. ENERGY AND ENVIRONMENT HEALTH AND HEALTH CARE This electronic document was made available from www.rand.org as a public INFRASTRUCTURE AND service of the RAND Corporation. TRANSPORTATION INTERNATIONAL AFFAIRS LAW AND BUSINESS NATIONAL SECURITY Skip all front matter: Jump to Page 16 POPULATION AND AGING PUBLIC SAFETY SCIENCE AND TECHNOLOGY Support RAND TERRORISM AND Browse Reports & Bookstore HOMELAND SECURITY Make a charitable contribution For More Information Visit RAND at www.rand.org Explore RAND Europe View document details Limited Electronic Distribution Rights This document and trademark(s) contained herein are protected by law as indicated in a notice appearing later in this work. This electronic representation of RAND intellectual property is provided for non-commercial use only. Unauthorized posting of RAND electronic documents to a non-RAND Web site is prohibited. RAND electronic documents are protected under copyright law. Permission is required from RAND to reproduce, or reuse in another form, any of our research documents for commercial use. For information on reprint and linking permissions, please see RAND Permissions. This product is part of the RAND Corporation technical report series. Reports may include research findings on a specific topic that is limited in scope; present discussions of the methodology employed in research; provide literature reviews, survey instru- ments, modeling exercises, guidelines for practitioners and research professionals, and supporting documentation; or deliver preliminary findings. All RAND reports un- dergo rigorous peer review to ensure that they meet high standards for research quality and objectivity. Preliminary assessment of economic impacts of alcohol pricing policy options in the UK Priscillia Hunt, Lila Rabinovich, Ben Baumberg Sponsored by the Home Office EUROPE The research described in this report was sponsored by the Home Office. The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND’s publications do not necessarily reflect the opinions of its research clients and sponsors. R® is a registered trademark. © Copyright 2011 RAND Corporation Permission is given to duplicate this document for personal use only, as long as it is unaltered and complete. Copies may not be duplicated for commercial purposes. Unauthorized posting of RAND documents to a non-RAND website is prohibited. RAND documents are protected under copyright law. For information on reprint and linking permissions, please visit the RAND permissions page (http://www.rand.org/publications/ permissions.html). Published 2011 by the RAND Corporation 1776 Main Street, P.O. Box 2138, Santa Monica, CA 90407-2138 1200 South Hayes Street, Arlington, VA 22202-5050 4570 Fifth Avenue, Suite 600, Pittsburgh, PA 15213-2665 Westbrook Centre, Milton Road, Cambridge CB4 1YG, United Kingdom RAND URL: http://www.rand.org RAND Europe URL: http://www.rand.org/randeurope To order RAND documents or to obtain additional information, contact Distribution Services: Telephone: (310) 451-7002; Fax: (310) 451-6915; Email: [email protected] Preface The UK Home Department (Home Office) has general responsibility to inform Government on the state of alcohol-related crime in England and Wales and to consider policies to reduce alcohol-related harms. The Home Office states, “[t]he links between alcohol and violence are well established. But we are determined to rid our streets of this serious problem”.1 In an effort to understand the economic implications associated with various possible measures to tackle alcohol harms, the Home Office commissioned RAND Europe to undertake research into three particular policies – minimum pricing, ban on below-cost sales, and taxation. This study starts by presenting the evidence on the links between alcohol prices and consumption, followed by a chapter on the literature examining the economic impacts of the three policies under consideration. We then present the statistical data describing the market for alcohol in the UK. Lastly, using the literature and findings from interviews with key stakeholders, we explain the relationship between actors in the UK alcohol market, such as producers, retailers and consumers, and discuss how these actors may respond to the proposed policies. The report concludes with a discussion on knowledge gaps. This report was produced with funding support from the Home Office. The report will be of interest to government officials dealing with alcohol issues and will contribute to the UK Government’s policy- and decisionmaking to address alcohol-related harms. RAND Europe is an independent not-for-profit policy research organisation that aims to serve the public interest by improving policymaking and informing public debate. Its clients are European governments and institutions with a need for rigorous, impartial, multidisciplinary policy analysis. For more information about RAND Europe or this document, please contact: Priscillia Hunt RAND Europe 37, Square de Meeûs 1000, Brussels Tel: +32(0)2791 7536 Email: [email protected] 1 http://www.homeoffice.gov.uk/crime-victims/reducing-crime/alcohol-related-crime/ i Contents Preface .......................................................................................................................... i Contents ...................................................................................................................... ii Table of Figures ........................................................................................................... iv Table of Tables ............................................................................................................ vi Abbreviations............................................................................................................. viii Executive summary ...................................................................................................... ix Acknowledgements ..................................................................................................... xii CHAPTER 1 Introduction .................................................................................... 1 1.1 Background ....................................................................................................... 1 1.2 What is the problem? ........................................................................................ 1 1.3 Aims of this study .............................................................................................. 4 1.4 Research approach ............................................................................................. 5 CHAPTER 2 What do we know about the link between alcohol price and consumption? ................................................................................... 6 2.1 Do consumers respond to changes in alcohol prices? ......................................... 6 2.2 Link between alcohol prices and alcohol-related harm ..................................... 10 2.3 Final remarks................................................................................................... 11 CHAPTER 3 Evidence on economic impacts of alcohol pricing policies ............. 12 3.1 Rationale behind pricing policy interventions .................................................. 12 3.2 Taxation .......................................................................................................... 13 3.3 Minimum pricing ............................................................................................ 17 3.4 Bans on alcohol sales below cost ...................................................................... 19 3.5 Summary of findings and gaps in existing research .......................................... 22 CHAPTER 4 Data on the UK market for alcohol ................................................ 24 4.1 Supply of alcohol in the UK ............................................................................ 24 4.2 Demand for alcohol in the UK ........................................................................ 30 4.3 Prices of alcohol in the UK .............................................................................. 34 4.4 Government revenue ....................................................................................... 39 4.5 Summary ......................................................................................................... 42 CHAPTER 5 Alcohol producer and retailer relations .......................................... 43 ii Preliminary assessment of the economic impacts of alcohol pricing policy options in the UK 5.1 The market for alcohol ..................................................................................... 43 5.2 How may producers and retailers respond to pricing interventions? ................. 46 5.3 Role of major retailers in the alcohol industry .................................................. 47 5.4 Summary ......................................................................................................... 50 CHAPTER 6 Implementation costs of policy options .......................................... 51 6.1 Direct cost to government ................................................................................ 51 6.2 Direct costs to producers and the on- and off-trade .......................................... 53
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