In Defence of Liberty

Driven by data; ridden with liberty.

Against Alcohol Minimum Pricing

The Coalition government will launch a strategy for tackling irresponsible drinking and other alcohol-related problems, including the outlawing of multi-buy deals and setting a minimum price for each unit of alcohol. A minimum price of alcohol units has also been established by the Scottish executive, with the Scottish National Party setting the price at a minimum of 50p per unit. This measure aims to reduce Scotland’s historic problems with alcohol abuse. The plans mean that the cheapest bottle of wine would be £4.69 and a four-packet of lager would be at least £3.52.

There are powerful perceptions of harmful and excessive drinking in town and city centres, with twitching curtains concerning themselves with ‘pre-loading’. Despite these apprehensions, alcohol drinking has actually declined over recent years. According to the Information Centre for Health and Social Care (ICHSC), which is run in congruence with the National Health Service, the consumption of alcohol outside of the home has declined from 733ml per person per week (pppw) in 2001 to 413ml pppw in 2010. Over the same period, drinking booze inside the home has only increased by about 40 ml pppw.

Conclusions about the ICHSC’s data on individual consumption are difficult to draw, as multiple different methods were used over the years of study. However, under each of the stages governed by a single method, the general trend has been for the percentage of teetotallers to increase and for excessive drinkers to decrease. For example, under the ‘updated method’ running from 2008 to 2010, male non-drinkers rose from 11% to 13%, whilst the percentage of men who consumed over 51 units a week, the highest category recorded, declined from 7% to 6%. The mean weekly units for men went from 16.8 to 15.9 over these two years. A similar trend can be observed for women.

Campaigners for the alcohol minimum pricing, such as Sarah Wollaston MP (Totnes, Conservative), are quick to draw the link between “ultra-cheap alcohol from virtually every street corner” and the crimes associated with alcohol. This would suggest that there is a clear causality between the affordability of alcohol and its overall consumption throughout society. Christopher Snowdon’s new paper for the Institute of Economic Affairs, entitled Drinking in the Shadow Economy, demonstrates the complete absence of an international correlation between alcohol affordability and alcohol consumption.

There have also been a series of highly varied estimates for the number of people that the introduction of alcohol minimum pricing would ‘save’ each year. As Christopher Snowdon notes at the spiked online magazine, the Home Office claims it will be about 900 people a year, whilst the Royal College of Physicians claims it will be nearly 10,000 a year. The medical journal Lancet believes minimum pricing would result in 3,393 fewer deaths over the whole population, whilst a research group at Sheffield University states that the policy will stop 5,000 deaths in the elderly population alone. The varied nature of these estimates arises from different assumptions made on human behaviour, once a minimum price of alcohol units has been fixed. The ICHSC found that in 2010, there were 6,699 deaths in England directly attributable to alcohol, of which 4,275 died from alcoholic liver disease. Hence, these estimates are largely exaggerations, apparently ‘saving’ more people from death than are actually dying from alcohol-caused deaths.

Whilst it would violate one of the well-known laws of economics if increasing the price of a product did not reduce its consumption, the proponents of alcohol minimum pricing are not concerned with general consumption, but with excessive and dangerous drinking. However, price changes do not affect the behaviour of all people in a society uniformly. From the economic study of price elasticity, heavy consumers of a product are less sensitive to prices than their moderate counterparts. This is especially true when that product is addictive, as is the case with tobacco and alcohol.

The researchers at Sheffield University, who produced the estimate of 5,000 older people avoiding death thanks to the coalition government’s new policy, stated in their research that:

These are broad agreement with the literature, showing that – at the highest level of aggregation – that hazardous and harmful drinkers (combined elasticity of -0.21) are less price elastic than moderate drinkers (elasticity of -0.47).

This observation is then utterly ignored:

Note that these high-level estimates are provided for reference only and are not included in the model.

By snubbing this observation, the researchers are substituting their own assumption: heavy drinkers are more price sensitive than moderate drinkers, which stands counterpoised to reality.

Given the vast majority of hazardous and harmful drinkers will not change their behaviour after alcohol prices increase, the case for alcohol minimum pricing deflates. The Institute for Fiscal Studies found that households with an annual income less than £10,000 pay 39.8p per unit, whilst households earning over £50,000 a year pay 49.3p per unit. This is the fundamental truth of this policy: it will make the poor poorer for buying beers and spirits, so the rich and well-off can feel better in spirit.

Since the cited beneficiary, the shrinking number of drunkards in this country, will most likely be unaffected by this policy, it is worth considering who will gain the most. This, undoubtedly, will be supermarkets. It is supermarkets, the retailers blamed for using booze as a ‘loss-leader’ to attract customers, which will be unable to sell their products cheaply. No seller wants to trade their goods for a lower price than they have to, but are encouraged by the presence of competitors in the market for that good, which the customers may prefer. A price floor, as the Office for Fair Trading noted, will prevent retailers from competing on prices.

A higher price for beer, lager and wine may change the mind of the responsible drinker, but it will not change the mind of someone who believes they must be drunk in order to have fun, or someone who drinks to ameliorate past pain. This policy will make the person buying cheap lager poorer, but will not disturb the person buying quality wine and chardonnay. Alcohol minimum pricing will have little effect on Britain’s atrophying over-drinking culture, but will increase costs for families across Britain, especially those with little to spare.

Related Reading:

Statistics on Alcohol, England 2012 by the Information Centre for Health and Social Care (NHS)

Drinking in the Shadow Economy by Christopher Snowdon (Institute of Economic Affairs)

Minimum Pricing Guesstimates by Christopher Snowdon (Velvet Glove, Iron Fist)

A Black Market in Booze Fear-mongering by Christopher Snowdon (spiked)

An Evidence-Based Alcohol Policy is receding into the rear-view mirror by Alex Hern (New Statesmen)

Supermarkets ‘to be banned from discounting multiple wine bottles’ by James Kirkup (Daily Telegraph)

Minimum alcohol price ‘could save 5,000 older people’s lives a year’ by Denis Campbell (The Guardian)

Scottish minimum alcohol pricing passed by parliament by BBC

Minimum alcohol price planned for England and Wales by BBC

Is it right to introduce a minimum alcohol price to tackle alcohol-related problems? by the Centre for Policy Studies

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This entry was posted on October 24, 2012 by in Economics, National Politics and tagged , , , , .
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