The government has been under a lot of pressure to tackle the culture of binge drinking. Figures for 2006/7 show that the cost to the NHS of binge drinking was £2.7 billion per year. In response, MPs are calling for a change in government policy towards the alcohol industry, arguing that at present the drinks industry has more control over policy than health experts. So what can be done?
In a report published in early January 2010, the House of Commons Health Select Committee proposed a minimum price per unit of alcohol, tighter controls on advertising and mandatory labelling. A minimum price, the Committee argued, would reduce demand by heavy drinkers who are looking for cheap alcohol. At present, many supermarkets have promotions that involve selling cider and beer at below cost, allowing people to ‘pre-load’ cheaply at home before going out drinking. The report suggested that a minimum price of alcohol of 50p per unit would save more than 3000 lives per year and a minimum price of 40p per unit would save 1100 lives.
Dr. Richard Taylor, an independent MP and member of the Commons Health Select Committee, said:
“The evidence we took showed that minimum pricing was the most effective way forward and at the moment you can sometimes buy beer cheaper than water. Our message is that the price would be put up but only by a little for moderate drinkers. Surely that is a sacrifice to pay for the good health of young people.”
However, those opposed to setting a minimum price per unit of alcohol argue that it would be unfair on moderate drinkers, that it wouldn’t work and that it could even be illegal. Instead, they argue that that government intervention needs to be smarter. It should not target everyone, but solely those groups consuming the most alcohol. The British Beer and Pub Association suggests that 10% of the population consumes 44% of all alcohol.
It appears that the government won’t be following Scotland’s minimum price on alcohol, but will instead impose bans on all-you-can-drink deals and introduce compulsory identity checks. However, supermarket deals don’t appear to have been targeted. Successive governments have failed to tackle this problem sufficiently, but with an election approaching, will this be a proposal that is promoted?
Raise alcohol price to save lives, MPs argue Telegraph, Rebecca Smith (8/1/10)
Commons committee backs minimum alcohol pricing BBC News (8/1/10)
Campagain to tackle cut price alchol The Arran Banner (8/1/10)
Wyre Forest MP calls for alcohol minimum pricing The Shuttle (8/1/10)
Should 50p be minimum price for a unit of alcohol? Have your say BBC News (8/1/10)
BBPA: minimum price would be ineffective Morning Advertiser, Ewan Turney (8/1/10)
Cost of binge drinking doubles for the NHS rises to £2.7 billion Mirror, James Lyons (2/1/10)
Bring in 50p minimum price for alcohol, MPs urge Guardian, Toby Helm (3/1/10)
All-you-can-drink pub offers facing ban BBC News (19/1/10)
Too much of the hard stuff: what alcohol costs the NHS THE NHS Confederation, Issue 193 January 2010
Minimum pricing for alcohol essential, says Health Committee Marketing Week, David Burrows (8/1/10)
Minimum alcohol pricing ‘will affect the poor’ BBC News, Kevin Barron and Gavin Partington debate (8/1/10)
Questions
- How is the equilibrium price of alcohol determined?
- Illustrate and explain the effects of the imposition of a minimum price.
- To what extent is a minimum price likely to be effective? How is elasticity likely to play a role in the effectiveness of such a policy?
- Why could the introduction of a minimum price on alcohol be illegal and contravene European competition law?
- What are the arguments for and against a minimum price on alcohol? Explain how and why some people will gain and others will lose.
- How would a minimum price on alcohol affect government spending? Would more investment in prevention lead to a lower cost to the NHS? Explain your answer.
- Why might bans on all-you-can-drink deals be ineffective?
The UK section of the North Sea used to be sufficient to supply all of the country’s gas requirements, but now some has to be imported from countries such as Norway. With the cold weather, the usage of gas has increased to record levels and there are now concerns for future supplies, especially if the cold weather returns.
However, the National Grid has said that there isn’t a problem, despite a glitch with a Norwegian gas supply. Gas supplies from various sources have been increased to deal with this record demand. There have been calls for Britain to build more gas storage facilities and the National Grid did issue ‘gas balancing alerts’, asking power firms and other large industries to cut back on their gas consumption. There are suggestions that even if supplies of gas aren’t a problem at the moment, we could see serious shortages in a few years.
Following growing demand for gas supplies, wholesale prices rose, but they did fall again when supplies were increased. Prices of household bills could be affected in the future, but for now, it’s too soon to tell. However, rising prices could spell further trouble for ours and other economies suffering from extreme weather on top of a financial crisis. Economic recovery could be put in jeopardy.
This fear of gas shortages and security of supply has led environmental and business groups to argue that Britain needs to diversify its energy supplies and become less dependent on foreign exports. This issue fits in with the latest developments in new investment in wind turbines.
Who knew that something as beautiful as snow could cause so much trouble and provide so much economic analysis!
National Grid warns of UK gas shortage Guardian, David Teather (5/1/10)
Is the United Kingdom facing a natural gas shortage The Oil Drum (9/1/10)
Wind farms: Generating power and jobs? BBC News (8/1/10)
Gas rationing in -22C Britain increases fears of energy crisis Mail Online, Martina Lees (8/1/10)
Gas usage hits new high in UK cold snap BBC News (8/1/10)
Energy fears over gas and kerosene shortages Scotsman (6/1/10)
Gas shortages highlights firms’ exposure to energy security risks Business Green, Tom Young (8/1/10)
Uh-oh: the return of $3 gas CNN Money, Paul R La Monica (7/1/10)
Natural gas prices seen rising with winter shortages Global Times, Chen Xiaomin (4/1/10)
Gas demand hits record on Thursday Reuters (8/1/10)
Gas demand in UK hits another highBBC News, Hugh Pym (7/1/10)
Questions
- Illustrate the effects in the gas market of increasing demand and the resulting shortages. Then show the effects of increasing the supplies of gas. How is equilibrium achieved when there is a shortage in the market?
- Why did energy prices increase and then fall?
- To what extent should the government have been able to forecast this higher demand? Should better contingency plans have been in place?
- The article from CNN Money looks at the effect of rising prices of oil and energy and how this is likely to affect consumer spending. Why could rising prices of these commodities adversely affect economic recovery?
- What is an ‘interruptible contract’ and how useful have they been in dealing with these gas shortages?
- Why has this gas shortage presented environmental groups with an opportunity to promote renewable energy supplies? Think about economic interdependence.
- What alternatives are there to our current gas sources? Are they realistic alternatives?
Whether or not you admit it, most people are aware of what’s happening in the X factor. With massive viewing figures, the X Factor remains one the most highly viewed entertainment programmes, so it’s hardly surprising that demand for advertising slots is so high especially when people are waiting for news about the contestants. The X Factor pulls in £8000 per second from TV adverts and it is estimated that the charge for a 30 second advertising slot is a staggering £190,000, expected to rise to £250,000 for the live final. It looks like the recession has had little impact on those wanting to sponsor the X Factor.
Nevertheless, there has been some controversy this week. Every Monday morning we see stories about the contestants and this week was no exception. But, it wasn’t so much about the contestants this week, but rather it concerned the voting. Following the episodes over the weekend of 7th and 8th November 2009, both the ITV and Ofcom, the telecommunications regulator, received thousands of complaints as Simon Cowell gave his support to ‘Jedward’ over Lucie Jones, even though in earlier episodes, he had said he would ‘leave the country if they won’.
However, Ofcom has said that the X Factor won’t be investigated, as the regulator only investigates voting irregularities and the treatment of contestants and not the outcome of the programme. Meanwhile, speculation is rife that Simon Cowell either wants to keep Jedward on the show, because of their viewer ratings, or that by voting Lucie off, the public will rebel and vote Jedward off this week and Simon will avoid looking like the bad guy.
Who knew that the world of entertainment could be analysed using economics!!
Ofcom won’t investigate X Factor ITN (11/11/09)
750 complain to Ofcom over Lucie’s X Factor exit Wales Online (12/11/09)
£8k a second bonanza for X Factor ads as ITV chiefs cash in on Jedward mania Mail Online (11/11/09)
Watchdog rules out X Factor probe BBC News (10/11/09)
Thousands complain to ITV and Ofcom over X Factor ATV Network News, Doug Lambert (10/11/09)
X Factor: Simon Cowell is an evil genius and we love him Telegraph, Liz Hunt (11/11/09)
Simon Cowell’s evil genius rules The X Factor Guardian, Marina Hyde (13/11/09)
Resistance is futile in the face of this master of psychology Independent, Matthew Norman (12/11/09)
Jedward: X Factor twins John and Edward help ITV rake in advertising Telegraph (11/11/09)
The X Factor becomes the ‘British Superbowl’ as advertising fees soar Tines Online, Dan Sabbagh (11/11/09)
The Ofcom site can be found at:
Ofcom (Home Page)
Questions
- What is the purpose of regulation? What are the advantages and disadvantages of legal restrictions?
- What is the role of Ofcom? How does it regulate telecommunications and what other regulators are there?
- Why is the price for an advertising slot during the X Factor so expensive? What does this tell us about price elasticity and income elasticity of demand?
- Ofcom is not going to investigate X Factor. What are the main reasons behind this decision? Do you think this was the right decision?
- If a judge’s decision can increase advertising revenue, then from a commercial point of view does that make it the ‘right’ decision?
A key determinant of the length of any phase of the business cycle is consumer confidence. If people have gloomy expectations and confidence of a recovery is low, then a recession that should have lasted 6 months ends up lasting for years. Companies don’t see an end to the recession and keep holding off on investment plans and the public don’t want to go out and start spending, because there’s no guarantee that the economy is on its way back up. The more you worry about your finances, the less likely you are to go out and start spending, even though that could be the stimulus that a shrinking economy needs.
According to the British Retail Consortium, consumer confidence in the UK is on its way back up and currently stands at an 18-month high – which doesn’t actually say much given the past 18-months!! Despite this, job worries still remain and this has been highlighted significantly in the past week, when Britain’s youngest person ever was made redundant: a 13-year old paper boy. Whilst consumer confidence is argued to be returning to the UK, consumer confidence has been going in the opposite direction in the USA, with further fears of job losses. US confidence had been improving but unexpectedly fell in October. Is that what the UK has to look forward to?
So, why is consumer confidence so important? How does it affect the length of recovery and what is expected to happen over the next few months? Read the articles below to find out more.
US consumer confidence takes hit BBC News (27/10/09)
Consumer confidence hits 18-month high The Independent, David Prosser (1/11/09)
Consumer confidence on the rise BBC News (2/11/09)
Confidence boost hints that worst of recession now over The Scotsman, Peter Ranscombe (2/11/09)
US Michigan Sentiment fell to 70.6 this month Bloomberg, Courtney Schlisserman (30/10/09)
Euro-zone Consumer confidence improves The Wall Street Journal, Ilona Billington and Roman Kessler (30/10/09)
Retailers set for a merry Christmas DIYWeek (2/11/09)
Job fears still remain despite biggest increase in consumer confidence in 18 months, says British Retail Consortium Liverpool Echo, Neil Hodgson (2/11/09)
Business and consumer surveys in each of the EU countries and in the EU as a whole can be found at:
Business and Consumer Surveys European Commission
Questions
- In what ways does consumer confidence affect economic growth?
- Are there likely to be any adverse consequences of consumer confidence returning to the market?
- What are some of the reasons for the unexpected fall in consumer confidence in the USA? Do you think a similar thing is likely to happen in the UK?
- Expectations are crucial in economics. What is the difference between adaptive and rational expectations? How do they affect adjustment to the short- and long-run equilibrium?
- Can anything be done to improve confidence or is it simply a case of leaving things as they are … and waiting?
Most students have a student loan: you need it to live; to buy text books; to survive. So, what do you do if your student loan hasn’t appeared in your bank account? This is a problem that many students have been facing. The Student Loans Company said that even after most courses had started, 175,358 students had still not had their loan application processed. This represented 16% of applications. There are various reasons given for this delay, but one that appears more often is the current economic downturn. This has been a crucial factor in so many students being without the necessary finance to begin university. Another reason is that many documents have been misplaced. On the other hand, a spokesman for the Student Loans Company (SLC) said that actually delays this year were no worse than in previous years, even though this is the first year when students applied directly to the SLC. Does this suggest that actually the whole system of student loans is still inefficient and needs to be overhauled again? Is there a better method?
In order to help students, many universities have made emergency payments to those without their loans. What’s the opportunity cost of this money? Surely it could be used for other purposes. Universities have seen their highest ever number of applications, although there has been a drop in Scottish student numbers and there are suggestions that tuition fees will increase again. What are the implications of the problems with student loans and the massive increase in university applications?
Minister ‘sorry’ for student loan delays ePolitiX (15/10/09)
140,000 miss university places The Press Association (17/10/09)
Student loan firm explains delays BBC News (12/10/09)
Student loan delay hits 175,000 students Telegraph, Graeme Paton (9/10/09)
Enquiry to be held over late payments of student loans Guardian, Jessica Shepherd (13/10/09)
Watchdog fears over poor students BBC News (29/9/09)
Student tuition fees could increase Telegraph, Graeme Patton (14/10/09)
Student debt to soar Daily Express, Alison Little (14/10/09)
Questions
- Why has the recession had an impact on university applications?
- Should universities be able to set their own fees? What are the advantages and disadvantages of such a system? How could fees be determined?
- Primary and Secondary education is a merit good and free in the UK. What do we mean by a merit good and how can we illustrate the positive externalities associated with education? Why is higher education not free to the student? Aren’t there positive externalities associated with it?
- If tuition fees increase, student debt levels after graduation will be higher. What is the likely impact of this on the students themselves and on the economy?
- What the likely consequences for (a) students (b) universities of the delays in student loans?