An OECD blog post of 13 January 2022 is entitled Revisiting Alcohol Pricing Policies for Healthier Lives. The blog post notes that decisions on alcohol policy involve a balance between health objectives and broader economic aims, and examines the case for upscaling the alcohol pricing policy in the context of a broad alcohol strategy. This balance will be more difficult in countries where alcohol production is an important part of the economy.
Increasing alcohol prices, restricting the advertising of alcohol, information campaigns and prevention of drink driving are all accepted as efficient measures to improve public health. Generally alcohol has become more affordable in recent decades, and analysis of the US and European countries has shown that there is correlation between a relative fall in the price of alcohol and a failure to adjust excise taxes on alcohol to allow for inflation. Countries that have adjusted excise taxes for inflation have seen either unchanged affordability of alcohol or increases in the relative price of alcohol.
The statistics show that harmful consumption of alcohol is widespread among all population groups and harmful alcohol consumption is known to be a cause of serious health conditions, injuries and premature death. On average, treatment for these conditions costs around 1.2% of the total annual health expenditure in the G20 countries. People suffering from these conditions are less likely to be employed and are less productive when in work. The reduction in productivity as a result of alcohol related conditions is projected at around 1.9% of GDP annually over the next thirty years.
Priority should be given to harmonizing taxation policy in relation to different products and to ensure that taxes on alcohol are adjusted for inflation. In the study of fifty countries, around 80% tax all types of alcoholic beverage but 20% only tax beer and spirits. Around 74% of the countries do not make automatic adjustments for inflation in setting their alcohol taxes. Only a few high income countries have implemented minimum unit pricing (MUP), setting a floor price for an alcohol unit. As low-priced alcohol is consumed disproportionately by heavy drinkers, the MUP is useful in increasing the price. Studies show that this reduces the amount of alcohol purchased in the households that consume the most alcohol.
The OECD studies indicate that pricing policies such as alcohol taxation and the MUP are the most effective measure because they generate savings in health expenditure that exceed the cost of implementing the policy. Increased alcohol taxes could therefore help developing countries to achieve the sustainable development goals. Revenue from alcohol taxes could also help to close the gaps in healthcare financing that have opened up during the pandemic.
Increasing alcohol prices may also have a negative impact on the economy and on employment, so there may be difficult decisions to be made and the government will need to decide precisely which consumers are to be targeted by its alcohol strategy. Countries therefore need to draw up comprehensive policy packages rather than making isolated policy decisions. The blog post refers to a comprehensive package covering the protection of children from alcohol promotion; improved police enforcement to prevent alcohol-related traffic injuries; stronger primary care to help patients with harmful alcohol consumption; and stronger pricing policies to limit the affordability of alcohol.
