A new report today produced by the Fraser of Allander Institute at the University of Strathclyde aims to shed new light on the potential impacts of changes in alcohol consumption on the economy.
Most impact studies analysing the contribution of the sector focus upon the ‘gross’ impacts of changes in consumption patterns on jobs and economic activity.
This new research argues that a more rounded assessment is needed, which incorporates the fact that changes in consumption patterns away from alcohol products will lead to changes elsewhere in how households spend their money. This shift in spending to other areas, will help support new economic activity in other sectors helping to offset any reduction in sectors tied to alcohol sales (and vice versa).
These changes mean that a study of the ‘net’ impacts are more appropriate.
To illustrate this, the FAI report models several scenarios of how the economy may respond to reductions in alcohol consumption and finds that these ‘net’ impacts can be ambiguous. The final result depends upon the industries to which any such spending is reallocated.
The study also examines how changes in taxation could impact on the economy, both through their impact on consumption but also through the re-cycling of revenues into government expenditure.
In particular, the report finds that – under certain circumstances – a reduction in alcohol consumption may not necessarily have a negative impact on the economy.
The authors conclude that the ongoing debate on alcohol taxation needs to look at the whole picture and appreciate the system-wide effects of changes in consumption patterns.
Katerina Lisenkova, one of the authors of the report, said: “What our report shows is that policies to reduce alcohol consumption may not necessarily have a detrimental impact on the economy, even before considering any health or social gains. This is because when looking at changes in consumption patterns, people tend to shift spending from one area to another rather than not spend the money at all.”
Aveek Bhattacharya, Policy Analyst at the Institute of Alcohol Studies, which funded the research, said: “This important study challenges the argument that the government cannot afford to tackle cheap alcohol. While the weight of evidence that reducing the affordability of alcohol would save lives and reduce crime and violence should be reason enough to take action, this research strengthens the economic case for raising its price through taxation and minimum unit pricing.”
The researchers focused on expenditure on labour services and material inputs rather than a comprehensive cost-benefit analysis, which would also take into account other social and health-related issues associated with alcohol consumption.
The full FAI report, The economic impact of changes in alcohol consumption in the UK can be accessed through this link: https://www.sbs.strath.ac.uk/economics/fraser/20180411/The-economic-impact-of-changes-in-alcohol-consumption-in-the-UK.pdf
Notes to Editors
Summary of the results:
A 10% reduction in alcohol sales results in a GVA (Gross Value Added) fall of £2.6 billion and a loss in employment of 63,300 FTEs (full-time equivalent jobs). This is a ‘gross’ effect.
A 10% reduction in spending on alcohol with household spending reallocated to other goods and services following the pattern of their base-year spending results in a GVA increase of £23 million and a loss in employment of 21,680 FTEs. This is a ‘net’ effect.
If 10% of alcohol sales by volume are shifted from on-trade to off-trade, the result is a reduction in GVA of £1.5 billion and a loss in employment of 40,270 FTEs.
A 10% increase in the alcohol duty with the government spending additional revenues from higher tax following the pattern of their base-year spending, has positive effect with an increase in GVA of £847 million and a gain of 17,040 FTEs.
About the Fraser of Allander Institute
Fraser of Allander Institute (FAI) is a leading economic research institute with over 40 years of experience in finding practical solutions to real-world economic problems. FAI undertakes a mix of cutting-edge academic research alongside applied commissioned economic consultancy analysis in partnership with business, local and national government, charities and third sector organisations.
The FAI is rigorously non-aligned and independent – offering insights on the performance of the Scottish and UK economies; providing analysis in key policy areas; and helping the private sector to understand the economic impact of their businesses and projects. Importantly, these contributions have all been underpinned by world leading academic research.
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This research was funded by the Institute of Alcohol Studies
About the Institute of Alcohol Studies
The Institute of Alcohol Studies is an independent institute bringing together evidence, policy and practice from home and abroad to promote an informed debate on alcohol’s impact on society.
Our purpose is to advance the use of the best available evidence in public policy decisions on alcohol. The IAS is a company limited by guarantee, No 05661538 and registered charity, No 1112671. For more information visit www.ias.org.uk.
For media enquiries please contact:
Aveek Bhattacharya, Policy Analyst, Institute of Alcohol Studies
Alliance House, 12 Caxton Street, London SW1H 0QS
Tel: 0207 222 4001