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The affordability of alcoholic beverages in the European Union Understanding the link between alcohol affordability, consumption and harms Lila Rabinovich, Philipp-Bastian Brutscher, Han de Vries, Jan Tiessen, Jack Clift, Anais Reding Prepared for the European Commission DG SANCO EUROPE The research described in this report was prepared for the European Commission. The opinions expressed in this study are those of the authors and do not necessarily reflect the views of the European Commission. The RAND Corporation is a nonprofit research organization providing objective analysis and effective solutions that address the challenges facing the public and private sectors around the world. RAND’s publications do not necessarily reflect the opinions of its research clients and sponsors. R® is a registered trademark. © Copyright 2009 European Commission All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from the European Commission. Published 2009 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 Alcohol has historically been consumed in an unproblematic way by many people across the European Union (EU). However, a significant proportion of alcohol consumption is problematic and generates harms for individuals and societies. Europe has the highest proportion of drinkers and the highest levels of alcohol consumption per population in the world. The high levels of alcohol consumption recorded in the EU have been linked to a number of public health and other problems, including violence and crime, diseases such as liver cirrhosis, lost productivity and absenteeism, family breakdown and accidental deaths. In spite of extensive evidence that raising alcohol prices reduces consumption on a societal level, the trend is that the real price of alcoholic beverages and the real value of alcohol taxation are decreasing across the EU. Against this background DG SANCO commissioned RAND Europe to conduct a study of the affordability of alcohol products across the EU, and of the potential impacts of affordability on harmful use of alcohol. On this basis, the study is intended to provide evidence on whether alcohol affordability could be a useful policy lever to public authorities seeking to reduce harmful alcohol consumption in Europe. In order to do this, the study: 1) examines the link between the affordability of alcoholic beverages, alcohol consumption and alcohol-related harms; 2) examines the impact of cross-border tax-driven or competition-driven price differentials; and 3) investigates the policy levers that can influence the affordability of alcohol, by providing an overview of current alcohol pricing policies in place across the EU. The main findings of this study are as follows: • The real value of the EU alcohol minimum excise duty rates, and of Member States’ (MS) alcohol taxation, has decreased since the mid-1990s in most EU countries; • Alcoholic beverages have become more affordable in most EU countries since the mid-1990s – in some countries by over 50%; • There is a positive relationship between alcohol affordability and alcohol consumption in Europe; • There is a positive relationship between alcohol consumption and three types of harms, namely traffic injuries, traffic deaths and liver cirrhosis; iii • Cross-border alcohol consumption due to tax (and price) differentials can lead to increases in alcohol consumption in the higher-price country and increases in alcohol harms. RAND Europe is an independent, not-for-profit research organisation that aims to serve the public interest by improving policymaking and informing public debate. Its clients are European governments, institutions and firms with a need for rigorous, impartial, multi- disciplinary analysis. This report has been peer reviewed in accordance with RAND’s quality assurance standards (see http://www.rand.org/about/standards/) and therefore may be represented as a RAND Europe product. For more information on RAND Europe or this document, please contact: Lila Rabinovich RAND Europe Westbrook Centre Milton Road CB4 1YG Cambridge UK Tel: + 44 1223 353 329 Email: [email protected] iv Contents Table of Figures ..........................................................................................................vii Table of Tables ............................................................................................................ ix List of acronyms ......................................................................................................... xi Executive summary .................................................................................................. xiii Acknowledgements .................................................................................................. xix CHAPTER 1 Introduction .................................................................................... 1 1.1 The challenge of harmful alcohol consumption ................................................. 1 1.2 European policy responses ................................................................................. 2 1.3 Objectives of this study ..................................................................................... 3 1.4 Research approach ............................................................................................. 4 1.5 Structure of the report ....................................................................................... 5 CHAPTER 2 The price of alcohol ......................................................................... 7 2.1 Determinants of the price of alcohol .................................................................. 7 2.2 Taxation as a policy instrument ......................................................................... 8 2.3 Current levels of taxation across the EU ............................................................ 9 2.4 On- and off-trade sales of alcohol .................................................................... 18 2.5 Closing remarks ............................................................................................... 20 CHAPTER 3 Affordability of alcoholic beverages in the EU ............................... 23 3.1 Alcohol price and affordability ......................................................................... 23 3.2 Changes in alcohol affordability in Europe ...................................................... 26 3.3 Alcohol affordability among young people ....................................................... 28 CHAPTER 4 Consumption ................................................................................. 31 4.1 Consumption trends in the EU ....................................................................... 31 4.2 Affordability and consumption: previous research............................................ 34 4.3 The link between alcohol affordability and consumption in the EU ................ 38 4.4 Closing remarks ............................................................................................... 44 CHAPTER 5 Harms ...........................................................................................