Tag: price control

The debate about a minimum price for alcohol continues to be prompted by concerns over high levels of drinking, its effect on public health and public order, and a widespread belief that most of the alcohol that contributes to drunken behaviour is irresponsibly priced and sold. Minimum pricing for alcohol, although considered a radical intervention, is not a new policy. A minimum unit price (MUP) for alcohol was introduced in Scotland in 2018, in Wales in 2020, in the Republic of Ireland in 2022 and looks likely to be introduced in Northern Ireland.

Despite more countries following Scotland’s lead, there are no current plans to consider an application of an MUP in England. However, with recent increases in the MUP in Scotland and the findings of a five-year review in Wales, it would suggest that this policy will continue to be at the forefront of discussions of how to tackle impacts of alcohol consumption.

Reasons and options for intervention

The main goal of introducing a minimum unit price for alcohol is to tackle unwanted consequences from the consumption of alcohol. While many people consume alcoholic drinks safely without any problems, some patterns of alcohol use are associated with significant physical, mental and social harm.

It costs UK society more than £27 billion a year through a combination of health, crime, workplace and social welfare costs. Therefore, some governments in the British Isles have deemed it necessary to intervene in this market to reduce alcohol-related harm and protect the health of those regularly drinking more than the recommended 14 units per week.

Research has shown that making alcohol less affordable can reduce consumption and hence related harms. The World Health Organization considers minimum pricing one of its ‘best buys’ for tackling harmful alcohol use.

There are three main policy options that aim to reduce the consumption of alcohol by making alcohol less affordable. One is to tax alcoholic drinks; the second is to set a minimum price per unit of alcohol; the third is to ban the sale of alcohol drinks below cost price (the level of alcohol duty plus VAT).

The policy option of an MUP has been adopted by Scotland, Wales and the Republic of Ireland; England has opted to use a ban on selling alcohol below the level of alcohol duty plus VAT (since 28 May 2014).

What is a minimum price?

The introduction by the government of a minimum price for a product means that it cannot legally be sold below that price. It can be set in order to achieve certain economic or social objectives that are not currently being achieved at equilibrium in the market. In order for the policy to have an effect, the minimum price must be set above the equilibrium price. This price floor then prevents prices from falling too low and settling back at equilibrium below the MUP.

A common misconception is that introducing a minimum price for alcohol is a form of taxation. However, this is not the case. Implementing an MUP means that any extra money from higher prices goes to the retailers and producers, not to the government.

Why choose a minimum price floor?

The policy has two main objectives. The first is to protect the interests of drinkers who may make poor decisions on their own behalf. This may be from lack of information, social pressures or a disregard for their own long-term health or welfare.

The second objective is to reduce the external costs placed on health services, the police, the criminal justice system, on fellow citizens or employers. There are also longer-term external costs when alcohol abuse impacts on productivity or leads to repeated absences from work.

It is argued that MUP intervention can encourage positive changes in behaviour of both consumers and producers. It can target harmful excessive drinking, while leaving the more moderate drinker relatively unaffected.

A positive impact on consumers is the possible changes in demand. People who previously consumed cheap, and often strong, drinks, such as cheap cider, will find that their marginal private cost of consuming alcohol has increased. Depending on the price elasticity of demand, their consumption will decrease and there will be a reduction in alcohol-related violence and other external costs. A positive impact on producers is that it can encourage drinks manufacturers themselves to reduce the alcohol content of their products and, therefore, limit any increase in price passed on to the consumer.

How it differs in the different parts of the British Isles

While minimum alcohol pricing is in place in several countries, policies differ. In terms of the British Isles, in 2018 Scotland became the first country to introduce a national minimum price for all types of alcohol. Two years later, Wales followed suit. The Republic of Ireland introduced minimum pricing in January 2022, while Northern Ireland has been engaged in consultation on the policy for several years. The following table shows when MUP was introduced and at what rates.

Has the MUP been effective?

Wales has reached the five-year review point since the MUP was introduced. Many of the findings within the Welsh evaluation have strong resonance with those elsewhere, particularly those of the final Scottish evaluation. There have been five main findings:

• Implementation has been smooth. Retailers have largely complied with the law, and enforcement has been effective.
• Certain cheap alcohol products have disappeared. Large bottles of strong cider, for example, are now rare. There have also been shifts in promotions and product availability.
• There are indications that overall alcohol consumption in Wales has declined. While it is difficult to measure directly, purchasing data suggests a reduction.
• Concerns about unintended consequences have not materialised significantly. Predictions of a rise in home brewing, substance switching, shoplifting and cross-border purchasing have not been widely observed.
• Some drinkers have changed their purchasing habits. A minority have switched from cider to wine or spirits as price differences narrowed. Others, particularly those on low incomes, experienced further struggles in financially maintaining their drinking habits.

There was also a study published last year (2024) in the journal Economic Inquiry, looking at the impacts of the policy during lockdown restrictions. The study showed that the introduction of MUP in Wales resulted in a 15% increase in transaction prices and a sharp reduction in the amount of alcohol bought, around 20%, with an overall drop in expenditure per customer compared to England over the same period.

However, it should be noted that the COVID pandemic disrupted drinking habits and the availability of alcohol. In addition, evaluating the overall effects of the policy has been complex with other economic factors, including the cost-of-living crisis, also influencing affordability.

Is it a fair policy?

A counter argument to applying a price intervention on alcohol is that it may have unintended private and external costs. One argument claims that young people could decide to switch to cheaper non-alcoholic drugs instead. Alternatively, they may seek to purchase alcohol on illegal shadow markets.

Critics of the policy argue that it negatively impacts those who consume alcohol responsibly, especially families on average or below-average incomes. The wine and spirits industry tried to lobby against the Scottish government, arguing that it is inconsistent with the operation of the free market and that the intervention creates a barrier to trade. They claim that lower sales of alcoholic drinks will cost jobs in the UK, both in manufacturing and from reduced revenues of corner shops, pubs and other retailers.

There is also an argument that relying solely on an MUP targets the affordability of drinking rather than addressing all aspects of alcohol harm. Therefore, this policy is not necessarily effective in achieving all the government’s goals. Critics argue that this policy should be one component of a more comprehensive strategy delivery, which might include education, restricting the availability of alcohol, banning advertising, increasing alcohol duty, etc.

Conclusion

Although there are currently no plans to implement an MUP in England, there is ongoing pressure for the Government to consider adopting one. In the Autumn of 2024, Lord Darzi carried out an independent investigation of the NHS in England. This investigation into the NHS highlighted the ‘alarming’ death toll in England caused by cheap drink (see link below). This led public health leaders to call for action to increase the price of cheap alcohol in supermarkets and off-licences.

However, the policy itself is not without its critics, especially those citing continued trends in actual numbers of alcohol-related deaths. Therefore, it is suggested that the policy needs to be accompanied by well-funded treatment and support services for people experiencing alcohol-related difficulties. If combined with other policy measures and social support, it has the potential to contribute significantly to reductions in alcohol-related harm.

Despite reservations, overall a minimum price per unit of alcohol is viewed by many as a justified intervention and is well supported by evidence. It has been accepted that a minimum price is required to reduce consumption closer towards the social optimum and in order to bring about change in consumer and producer behaviour. Given the evidence provided from current MUP countries and ongoing discussions of alcohol-related deaths in England, health officials believe a review is almost certain, even though the current government reportedly ruled out minimum unit pricing shortly after winning power.

Articles

• Alcohol: minimum pricing

House of Commons Library: Briefing paper 5021, John Woodhouse (11/3/20)

• PHS welcomes increase in MUP to maintain effectiveness

Public Health Scotland (5/11/24)

• Minimum alcohol pricing: what we found in Wales after five years

The Conversation, Katy Holloway and Wulf Livingston (18/2/25)

• What is minimum pricing for alcohol and how does it work?

BBC News (8/2/24)

• Minimum alcohol pricing looks set to be introduced in NI

BBC News (17/10/24)

• England urged to bring in minimum unit price on alcohol as deaths rise 10% a year

The Observer, Jon Ungoed-Thomas (5/10/24)

• Minimum pricing for alcohol helped curb demand during COVID lockdown

Loughborough University News, Farasat Bokhari et al (6/6/24)

Reports

• Evaluating the impact of minimum unit pricing for alcohol in Scotland: A synthesis of the evidence

Public Health Scotland (27/6/23)

• Independent investigation of the NHS in England

Department of Health and Social Care, Lord Darzi’s report (12/9/24)

Questions