April 2012

Prohibition by Price

Minimum alcohol pricing is a thoroughly bad idea that should not be entertained for a second by anyone concerned for the pub and brewing industries

THE IDEA of setting a minimum price per unit of alcohol has been widely touted as a means of reducing the level of alcohol-related problems in society, and at the same giving a boost to the pub trade. It has been adopted as the official policy of the devolved Scottish Government, and has been talked of sympathetically by David Cameron. But would it really deliver the benefits that are claimed for it?

While it is often portrayed as only affecting drinkers of cheap cider and bulk-buy super­market lager, in reality the effect would spread far wider. An investigation by the Institute for Fiscal Studies showed that 71% of all alcohol units bought in the off-trade ware under 45p per unit, and that setting a minimum price at this level would affect 91% of all households buying off-trade drinks. It could easily make a couple £300 a year worse off without even approaching the official “recommended” drinking levels, something not to be sneezed at when many people are already struggling to make ends meet. Heavy drinkers, and especially those clinically dependent on alcohol, could end up sacrificing other items of household expenditure to keep up their intake. It has been said that one of the main results of hiking drink prices is simply poorer alcoholics.

It is also a fundamentally patronising and √©litist idea, implying that it is fine for the well-heeled to continue swigging single malts, claret and craft ales, but that the irresponsible proles are not to be trusted with an abundance of Carling, Glen’s Vodka and Lambrini. As the famous Victorian liberal philosopher John Stuart Mill said, “Every increase of cost is a prohibition to those whose means do not come up to the augmented price.”

The major brewers have been oddly quiet on the subject, with some, such as Mike Lees of Tennent Caledonian, even expressing qualified support. No real surprise there, as, given that the overall demand for alcohol is not highly price-elastic, it would in effect be legitimising a price-fixing ring by alcohol producers, something normally prohibited by competition law.

It would inevitably lead to an upsurge in alcohol smuggling and illegal brewing and distilling. The authorities have signally failed to make any inroads into tobacco smuggling resulting from ever-increasing duty rates, and it is unlikely they would do any better with alcohol. Unlike legitimate retailers, smugglers are hardly going to exercise much discretion about selling to underage customers. Recently, a Sheffield student had her eyesight permanently damaged by drinking counterfeit vodka, and last year five Lithuanian men were killed in Boston, Lincolnshire, by an explosion at an illegal vodka distillery. Minimum pricing would lead to many more such tragedies.

While it might somewhat reduce the price differential between the on- and off-trades, there is no guarantee that minimum pricing would actually do anything to tempt more people into pubs. Under any credible scenario, off-trade alcohol would still be substantially cheaper, and it wouldn’t give people a single extra penny to spend in pubs. Indeed, by squeezing house­hold budgets, it could end up reducing their discretionary spending. What is more, the study by the University of Sheffield that is used to underpin the argument for minimum pricing actually concludes that the most “beneficial” results would come from setting differential minimum prices for on- and off-trades, with that for pubs and bars more than twice as high.

Once introduced, what guarantee would there be that, if it was felt not to be “working”, the minimum price would not be ratcheted up year-on-year by considerably more than the rate of inflation? It would be letting a Trojan Horse of government pricing control into the entire drinks trade.

And, if you still think minimum pricing might have something to be said for it, just pinch yourself and look at who you are lining up with – all the miserable, Puritanical, pub-hating killjoys of the anti-drink lobby like Don Shenker, Anne Milton and Sir Ian Gilmore. If you care at all about pubs and the brewing industry, is that really the side of the debate you want to be on?