Scandinavian research suggests that duties on alcohol do little to quench our thirst, writes Consumer Affairs Correspondent Paul Cullen
A group of Scandinavian researchers looked at the effects of large decreases in alcohol taxation in Denmark and Finland, and large increases in travellers' allowances in Finland and Sweden after 2003. Far from finding the expected increase in alcohol consumption, the scientists discovered that consumption remained constant or even fell in the various countries.
Their results, published in the current edition of the periodical Addiction, have been seized upon by the drinks industry in Ireland, which is watching with concern the growing pressure on the Government to increase taxes on drink as a way of dealing with alcohol-related problems such as binge drinking and anti-social behaviour.
"What this empirical evidence shows is that the old assumptions do not work," says Michael Patten of the umbrella association for manufacturers, Drinks Industry Group Ireland. "There is a prevailing view that you can deal with alcohol issues by changing pricing and taxation, but we would argue that price consumption theory doesn't fit in relation to alcohol products, particularly in high-income countries."
In Patten's view, Irish drinkers are more income sensitive than price sensitive. If prices go up, they'll just move to cheaper brands, but their consumption will remain unaffected. And if prices fall, they won't necessarily start drinking more.
By way of local evidence, he points out that drink prices fell in 2007 as a result of competition between retailers after the Groceries Order ban on below-cost invoicing was abolished the previous year. Yet the consumption figures, which are due out shortly, are expected to show a further decline.
However, the team behind the Addiction article, who admit to being surprised by the results of their survey of 7,500 people in three Scandinavian countries, are not convinced.
"I would trust the national statistics and registers more than this survey, and they tell us that consumption did actually increase, and alcohol-related harm rose sharply, after taxes on drink were reduced," says Pia Makala, of Finland's National Research and Development Centre for Welfare and Health.
The excise cuts were forced on the Scandinavian countries after EU-wide changes in duty-free allowances came into force and Estonia, which is close to Finland and has lower drink prices, joined the EU in 2004.
Faced with the likelihood of its citizens travelling en masse to neighbouring countries to buy their drink more cheaply, the Scandinavian government opted to dismantle its long-standing high-tax policy on alcohol. Finland cut taxes on spirit by 44 per cent, and on beer by 32 per cent, and Denmark cut taxes on spirits by 45 per cent.
Yet in Denmark consumption decreased, in Finland men's consumption decreased, and there was no change in consumption in southern Sweden.
Makala believes a "saturation point" has been reached in alcohol consumption (presumably no pun intended) in the region and points out that, historically, alcohol consumption tends to change in "long waves" that are not linked in any obvious way to economic factors or policy intervention.
Heavy drinkers may have failed to respond to the survey while normal drinkers may have under-estimated their consumption, she also hypothesises.
The drinking habits of Scandinavians might seem a long way off the current debate in Ireland, but not so. The experience of Ireland and Finland in relation to alcohol consumption is remarkably similar in recent decades (see graph, right).
"We are both binge-drinking countries where consumption has increased from a low level in the 1960s to much higher levels today," Makala points out.
In contrast to the decline in alcohol consumption in Mediterranean countries, such as Italy and France, the Irish and Finnish trends are upwards, with the only interruptions coming during periods of economic recession at the beginning of the 1980s and 1990s, respectively.
Whatever about the arguments surrounding consumption, the other effects of Finland's introduction of lower excise taxes on alcohol have been uniformly negative, Makala says. Arrests for drunkenness went up 11 per cent, injuries caused by drunk drivers 9 per cent and alcohol-related deaths among men rose by 20 per cent.
The most remarkable increase was in the rate of liver cirrhosis deaths, up by 30 per cent in 2003 to 2004 and another 20 per cent the following year.
"At first, this seems counter-intuitive. How can the death rate increase so much in a year for a condition that takes years to develop? The obvious reason for this is that there is a large number of heavy drinkers whose livers are already damaged. It is clear the tax cuts had a fatal impact on this group."
Patten, who is employed by Diageo, admits our consumption has "gone through the roof", though it has started to decline. Between 1993 and 2001, the amount we drank increased by 40 per cent; since then, it has fallen 7.5 per cent.
The increase is generally attributed to rising incomes in the Celtic Tiger, the demographic bulge of young people, who tend to consume more than other age groups, and the end of what Patten calls "the conformist State".
He points out that regulations differ according to whether drink is sold in off-licences or pubs and says we need to achieve a "mature and balanced" approach to the selling of alcohol across all channels.
Whether that new approach includes increased taxes will be for the Government's advisory group on alcohol and, ultimately, the Minister for Justice and his Cabinet colleagues to decide.