Economic Implications and Public Health Alignment of the UK’s 2023 Alcohol Duty Reform: An Analysis of Strength-based Taxation and Consumer Behaviour

Anandita Dhaka

Faculty of Social and Historical Sciences, University College London, London, United Kingdom. 

Abstract

The United Kingdom’s 2023 alcohol duty reform marked a historic shift from a category-based taxation system to a strength-based Alcohol by Volume (ABV) model. This study assesses the economic implications of this reform by examining its effects on tax revenue, pricing, consumption, and elasticity across major alcoholic beverage categories—beer, cider, wine, and spirits. Drawing upon data from Statista, Our World in Data, the Office for National Statistics (ONS), and National Health Service (NHS) datasets, the analysis explores both the Pigouvian rationale and the behavioural responses to the new taxation framework.
Elasticity analysis revealed reduced demand for beer, cider, and spirits following the reforms, while wine consumption unexpectedly rose, as indicated by positive values of price elasticity. Spirits experience the sharpest predicted decline (-0.4244), aligning with public health objectives to curb high-strength alcohol use. Wine consumption, however, rose despite higher prices, exhibiting Veblen good characteristics that challenge the reform’s intended behavioural outcomes.
Further, cross-price elasticity results indicate that cider functions as a substitute for beer and spirits, supporting a partial shift toward lower-strength options. Nonetheless, distributional assessment suggests regressive tendencies, as lower-income households bear a greater financial burden due to limited consumption flexibility. Overall, the reform demonstrates a successful fiscal outcome and partial public health alignment, though its uneven social impact and unintended demand responses highlight the need for future policy refinement and targeted measures across beverage categories.

Keywords: Alcohol duty reform; Strength-based taxation; Price elasticity; Pigouvian tax; Consumer behaviour; United Kingdom

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