IFS: Minimum price will hurt moderate drinkers

Tim Wallace
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NEW RULES pushing up the price of alcohol will affect almost half of drinks sold at off-licences and hit moderate drinkers, a study by the Institute for Fiscal Studies claims.

Home secretary Theresa May announced the government is looking into a minimum price of 40p per unit, arguing last week that higher prices will crack down on a “significant minority in this country who drink dangerously and who cause disproportionate harm.”

However, analysis of off-licence sales by the IFS shows 47 per cent of units of alcohol sold will be affected by the minimum price.

Cider and sherry drinkers will be worst affected, with an average price in 2010 of 30.6p per unit price and 80.3 per cent of sales falling under the proposed 40p floor.

Fortified wine sales will also be hit, with an average unit cost of 39.6p and 63 per cent of sales below 40p per unit, as well as lager at 39.6 per cent on average and 55.7 per cent of sales under the level.

“The impact would be quite substantial even for more moderate alcohol consumers,” the IFS believes.

The minimum price is also being implemented in an inefficient manner, the think-tank warns.

“The policy could also lead to substantial transfers of revenue to the alcohol industry. It would seem more sensible to establish a floor price through the tax system by treating different types of alcohol more consistently, and allow these revenues to flow to the exchequer instead.”

However, the Home Office rejected that view, telling City A.M. “alcohol sold at a loss benefits the heaviest drinkers and costs the rest of us. Supermarkets can use any extra profits to lower the price of other goods and make the average shopping basket cheaper.”