The effect of alcohol and tobacco duties on household disposable income - 2011

Poorer households spend more of their income on alcohol duty

DATE: 19 December 2011
COVERAGE: UK THEME: Household Income

People in poorer households spend a greater proportion of their disposable income on alcohol duty than higher wage earners. Overall, the amount spent by households on alcohol duty, in real terms, has changed little in recent years, despite the recession.

Analysis released today by the Office for National Statistics (ONS) reveals that although this group paid less than the higher income groups, a larger proportion of their disposable income went on alcohol duties. Disposable income is what people have free to spend after meeting direct taxes such as income tax, employees' National Insurance contributions and council tax.

The analysis also shows the differences in the type of alcohol duty paid by households in the period 2009/10 as compared with 1995/96. It shows that all households, on average, have doubled the amount of wine duty paid as a proportion of all duty on alcohol duty paid over the 15 year period. For instance, wine duty accounted for 22 per cent of all alcohol duties paid by the richest fifth of households in 1995/96, rising to 40 per cent by 2009/10. Similarly, the poorest income group spent 10 per cent on wine duty in 1985/86, rising to 20 per cent by 2009/10.

The rise of wine duty in the composition of all alcohol duty paid is accompanied by a fall in the proportion of duty paid on beer and cider. For instance, the richest fifth of households paid 47 per cent of all alcohol duties on beer and cider duty in 1995/96 which dropped to 34 per cent by 2009/10. Similarly, the poorest income group spent 50 per cent on beer and cider duty in 1995/96, which dropped to 44 per cent by 2009/10. The changes in the composition of alcohol duties are consistent with the fact that duties levied on wine have increased relative to beer, while wine consumption has increased, over the 15-year period.

The ONS report also covers real expenditure on tobacco duty showing a decline for all households between 1995/96 to 2009/10. The greatest decline occurred for the richest fifth of households, who reduced their real expenditure on duties by 31 per cent. The changes in consumption show that cigarette smoking, the largest component of tobacco consumption has declined since the mid-1990s.

Background notes

1. 1. Follow us on www.twitter.com/statisticsONS and www.facebook.com/statisticsONS

    

2. 2. National Statistics are produced to high professional standards set out in the Code of Practice for Official Statistics. They undergo regular quality assurance reviews to ensure that they meet customer needs. They are produced free from any political interference.
   © Crown copyright 2011.
   
3. 3. The full article can be found at: http://www.ons.gov.uk/ons/rel/household-income/the-effect-of-alcohol-and-tobacco-duties-on-household-disposable-income/2011/index.html

4. 4. Household disposable income is that which is available to households for consumption, and is equal to earnings and investment income plus cash benefits (provided by the state) less direct taxes. Further details of the calculation of household disposable income can be found in The
   effects of taxes and benefits on household income article.

    

5. 5. Data are from the Living Costs and Food Survey (LCF), formally known as the Expenditure and Food Survey (EFS).

    

6. 6. Households have been ranked according to their equivalised disposable income and then divided into five groups of equal size (quintile groups). In this analysis the poorest households are those in the bottom quintile group and the richest households those in the top quintile group.

7. 7. Equivalisation is used in producing the household distribution used in this analysis as it adjusts incomes according to differences in household size and composition. The equivalence scale used is the modified-OECD scale. Data have been adjusted to 2009/10 prices using the implied expenditure deflator for the household sector.

    

8. Issued by: Office for National Statistics, Government Buildings, Cardiff Road, Newport
   NP10 8XG

   Media contact:
   Tel Jim Campbell  01633 455725

   Media Relations Team 0845 6041858

   Emergency on-call 07867 906553

   E-mail media.relations@ons.gsi.gov.uk

   Statistical contact

   Tel Richard Tonkin 01633 456082

   Website:
   http://www.ons.gov.uk

   
    

9. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gsi.gov.uk