Minimum pricing for alcohol - what would happen?

breadmonkey

Any economists out there care to speculate on the possible impacts of a minimum price for alcohol? There's a proposal in Britain to set a minimum price for alcohol so that drinks would cost 50p/unit of alcohol min. Who would win/lose?

from bbc.co.uk wrote:

Brown lukewarm on alcohol pricing

Gordon Brown's reaction to the plan

Prime Minister Gordon Brown has given a lukewarm response to proposals for minimum prices for alcohol.

The proposals were unveiled by Sir Liam Donaldson, the Chief Medical Officer for England, on Monday.

Sir Liam wants a minimum price of 50p for each unit of alcohol a drink contains - taking the price of an average six pack of lager to £6.00.

But Mr Brown said he did not want to impose additional burdens on the majority, who were "moderate" drinkers.


Cheap alcohol is killing us as never before
Sir Liam Donaldson
Chief Medical Officer for England

Alcohol unit guide
However, Sir Liam disagreed with the prime minister's claim that heavy drinkers represented a minority.

He said: "I think these strong actions in public health are always controversial.

"The report has only just come out, and it needs to be debated and considered."

He said the evidence had shown that price and access were key determinants of drinking habits.

He said: "Any plan to combat a problem needs a backbone. Price and access are that backbone - I will continue to champion it.

"This is a key measure which would almost certainly make a major impact on our drink problem as a country."

Targeted measure

Sir Liam's report said a 50p minimum price for a unit of alcohol would mean a standard bottle of wine could not be sold for less than £4.50, a two litre bottle of cider for £5.50, and the average six pack of lager for £6.00.

Sir Liam Donaldson defends his recommendations
The Chief Medical Officer estimated the measure would add around £1 a month to the drinks bill of a moderate drinker - but more for those heavy drinkers who were at risk.

He said after ten years such a move would lead to 3,400 fewer deaths and 100,000 fewer hospital admissions a year.

He also suggested minimum pricing would have a significant impact on crime rates.

He said it was important to recognise the concept of what he called "passive drinking" - the damage done to innocent parties from others boozing.

"England has a drink problem and the whole of society bears the burden.

"The quality of life of families and in cities and towns up and down the country is being eroded by the effects of excessive drinking.

"Cheap alcohol is killing us as never before."

In comparison, while alcohol consumption has fallen in many European countries since 1970, England's consumption has risen by 40%.

The average UK adult consumes the equivalent of 120 bottles of wine a year.

Mixed reception

The Department of Health said it had not ruled out taking action on very cheap alcohol.


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But Prime Minister Gordon Brown said that he did not want to penalise "moderate" drinkers.

Speaking at a press conference at 10 Downing Street on Monday he said: "We don't want the responsible, sensible majority of moderate drinkers to have to pay more or suffer as a result of the excesses of a minority."

The Conservatives say it is important to deal with people's attitudes to drinking, not just supply and price, while the Liberal Democrats support putting an end to "pocket-money priced" alcohol.

Sir Liam's idea has the backing of Alcohol Concern, but the drinks industry's Portman Group believes it would have a marginal effect on harmful drinkers.

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Putting the price of alcohol up is not the way to stop people drinking too much.

Den Wood, York
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The NHS bill for alcohol abuse is an estimated £2.7bn a year.

The most recent figures show hospital admissions linked to alcohol use have more than doubled in England since 1995.

Scottish plans

The Scottish Government has already proposed minimum pricing.

Earlier this month SNP ministers put forward the suggestion to stop alcohol being sold a cut-price offers.

If the plans were adopted, Scotland will become the first country in Europe to take such a measure.

Both Wales and Northern Ireland have also expressed an interest in minimum pricing, while ministers in England have said they would not rule it out in the long-term.

Last year, research published by Sheffield University - and commissioned by the Department of Health - concluded increasing the price of alcohol would be one of the most effective measures to tackle alcohol abuse.

Petra Meier, one of the Sheffield team, said a 50p minimum price would lead to a cut of 7% in alcohol consumption across the board, and 10% cut among heavy drinkers

RedPlanet

I think it's an interesting idea.
Currently the Vinters Federation likes to moan about the drop in numbers of people going to the pub. And they either put that down to the smoking ban, or cheap alcohol available in offies.
Though I don't seem to recall any pubs lowering their price as a ploy to win back punters...

nesf

Assuming an ideal market, by setting a price floor sufficiently high you can reduce demand and thereby reduce consumption.

Off the top of my head, problems with this:

a) alcohol prices are like cigarette prices (though to a lesser degree) demand isn't perfectly elastic so you don't get the reductions in demand that you would expect from an ideal market with a price increase.

b) because you're setting a price floor rather than adding a percentage tax you are essentially punishing those who buy the cheapest alcohol, i.e. poorer consumers.

Saabdub

Minimum price, with the increase being collected as a tax I presume. Like any tax I suppose it would lead to avoidance, with larger quantities of alcohol being bought from jurisdictions with lower taxes, in our case NI, in the case of Britain, France. Some would resort to the home brew kit. Some would reduce consumption or change to drinks that cost as close to the minimum as possible. To the well-off tippler it won't make much of a difference:D

Saabdub

I think this is an area where behavioural economics might be of some practical use. People drinking at home isn't the problem. The problem is people getting smashed and causing mayhem at 2am. One way to limit that would be to increase the tax on drinks by 50c every half hour from 10pm and banning ATMs in pubs/clubs. Stricter laws/enforcement on serving drunk people would also help. That said, the policy is more like an excuse to increase tax revenues...

silverharp

how about puking on the street £200 littering fine , or drunks being billed the full recoverable charge in A&E / police cell , being drunk in public isnt a problem in itself

Carawaystick

I'd see an EU issue - the so called "unit" of ethanol in britain isn't and SI unit so not allowed. Pint's got grandfathered in under a neverending exemption ast year.
ethanol is measured in units of volume - Litres or units of mass, Kilograms.

Aligator Farmer

If only we could increase common sense as easily as we can increase prices, then we wouldn't have the same problem.
Although if Browns government did set a minimum price, I'd imagine it would benefit Ireland in that there'd be less incentive to head north for booze.

A Dub in Glasgo

This is primarily there to tackle the gob****es who buy the high vol stuff for pennies and end up using knives to solve arguments with the resultant chaos in the A&E departments.

A Dub in Glasgo

Deleted User wrote: »

I think this is an area where behavioural economics might be of some practical use. People drinking at home isn't the problem. The problem is people getting smashed and causing mayhem at 2am. One way to limit that would be to increase the tax on drinks by 50c every half hour from 10pm and banning ATMs in pubs/clubs. Stricter laws/enforcement on serving drunk people would also help. That said, the policy is more like an excuse to increase tax revenues...

Actually the problem tends to be in the off sales arena whether it is off licences or more likely heavy discounting in supermarkets