The counterfeit alcohol trade is costing the Treasury up to GBP1.2bn (US$1.9bn) a year

The counterfeit alcohol trade is costing the Treasury up to GBP1.2bn (US$1.9bn) a year

Minimum pricing is likely to cause more problems than it will fix by increasing the size of the UK's black market, the author of a new report has warned. 

Chris Snowdon, a researcher at educational charity the Institute of Economic Affairs, issued the warning following the publication today (22 October) of his study Drinking in the Shadow Economy. The report argues that higher taxes in the UK are already encouraging the growth of the illicit alcohol market. 

"As prices rise, consumers are increasingly turning to the more affordable options available in the shadow economy," the report says, pointing to figures from Her Majesty's Revenue & Customs that show that the UK Treasury could be losing around GBP1.2bn (US$1.9bn) per year. Latest figures, released last week, estimated that 5% of the spirits market in the UK is illicit, with tax losses of around GBP230m.

Snowdon said: "The government’s focus on maximising tax revenues is short-sighted and dangerous.

"Aside from losing money by encouraging consumers to find cheaper illicit alternatives, public health and public order are also being put at risk by high prices. Policy-makers ought to take the threat of illicit alcohol production seriously when considering alcohol pricing in the future.”

The author also highlighted research showing that drinking levels in high tax countries, such as the UK and Finland, are the same as in low tax countries, like France and Spain.

On setting a floor price, Snowdon said: "Minimum alcohol pricing might seem like a quick fix to tackle problem drinking, but it is likely to cause many more problems by pushing people towards the black market in alcohol."

The UK government and the devolved Scottish government have both outlined plans to introduce a minimum price. However, the Scottish National Party's plans are facing a legal challenge domestically and in Europe. A judicial review, brought by the Scotch Whisky Association, is due to start in Edinburgh tomorrow