The ONS released this little nugget last week on the price of alcohol (and other goods). The headline stat: the UK alcohol beverage price level is 42.7% higher than the EU average, which is appalling news for consumers and curious news for public affairs types. A small bit of context; spare a thought for the Finns and Irish who pay more than 70% the EU average.
The data use the purchasing power parity to equalise price difference on a basket of goods, similar to how inflation is measured, in currencies and exchange rates used across the bloc. In other words, through this we can eliminate differences in price levels between countries, which in turn means we can accurately and legitimately compare prices across countries.
This is a good indication of how consumers suffer under regressive tax regimes. For example, the UK has the 4th highest price level for alcohol in the EU behind Finland, Ireland and Sweden. The UK also has the 4th duty level for spirit products, behind Sweden, Finland and Ireland (in that order). The UK has the 3rd highest wine duty rate behind Ireland and Finland (Sweden is 4th) and the third highest rate for beer, again behind Finland and Ireland (and again, Sweden is 4th). Proof if ever there was that the price of alcohol is correlated to duty rates, which is bad for consumers.
At a time when CPI inflation is 3% and RPI inflation at 4.1%, it is little wonder UK features so highly on this list, especially given other EU member states aren’t currently in the throes of such drastic rising prices (for example, current inflation rate in the Eurozone is 1.4%). As of September last year, the latest WSTA market report shows prices of wine and spirit products in the off trade increased by 4% compared to the summer of 2016, showing a direct link of the effect on consumers of a policy, enacted in March’s Budget, that indexes duty increases to RPI inflation, the much maligned measure of inflation that ONS itself has rejected. In fact, only yesterday the Governor of the Bank of England, Mark Carney, ‘called time’ on RPI, suggesting the UK scrap it altogether because it ‘has no merit’. That is why the industry was so glad to see the Chancellor freeze duty rates in November.
The ONS and other commentators expect CPI inflation to decline slowly towards the targeted 2% annual rate over 2018, though many have refrained from saying it will achieve this target this year. Commentators don’t usually comment on RPI and the Bank of England doesn’t set a target for it, but given it is almost always about 1% higher than CPI we can expect it to remain above 2%, which is further bad news for consumers and industry and why the WSTA will continue to press for, as a minimum, no further increases in alcohol duty.