Alcohol Pricing

Good old Tescos eh? Way back in May they grandly announced that they would support a minimum price for alcohol as long as it became a legal requirement (which incidentally did make me wonder if they only refuse sales to customers under 18 because it is a legal requirement rather than simply the responsible thing to do). We’ve not heard much from them on pricing since though have we?
I don’t suppose that’s surprising really when they can continue chugging along selling volcanic cider for less than mineral water whilst simultaneously disassociating themselves from the consequences; there’s no need for them to act unless minimum pricing becomes a legal requirement and even then they’d be pretty safe because the various mechanisms being considered for minimum pricing all look pretty ineffective. No doubt they’d worked all this out before their pronouncement in May.
Minimum Unit Pricing is the method that the Scottish Parliament has been debating recently. A minimum price is set per unit of alcohol below which it would be illegal to sell the product. First job is to work out the units in each drink; to do this you multiply the alcoholic strength of the drink (expressed as a percentage of alcohol by volume) by the number of centilitres in the container. So a 75cl bottle of wine at 12% ABV contains 9 units of alcohol (12% x 75cl) whilst a 70cl bottle of Whisky at 40% contains 28 units (40% x 70cl). Sounds pretty straightforward doesn’t it (and rather dull actually) but the only bit left to argue about is at what level the minimum price should be set. The University of Sheffield study which kicked all this off suggested 50p per unit whilst the Scottish Parliament debated 45p before kicking the idea into the long grass. The coalition government have kept pretty quiet to date, perhaps realising that this particular can does seem to be quite wormy.
Some prices would have to go up under the minimum unit price system of course, but not many. A recent visit to one of the major supermarkets suggested that a 15 can pack of 44cl Carlsberg would need to increase from £17.99 to £18.38 (2 pence more per can) whilst of bottle of “branded” wine on the shelf at £6.99 was already nicely clear of its theoretical minimum price level of £4.27. Certainly nothing on the shelves at Wines of Interest would be affected. Shame really, because as this system stands the extra revenue from these enforced price increases would belong to the retailer! Oh well.
Two other main suggestions for minimum pricing exist (and some further variants of these) which are a ban on selling below cost and a restructuring of Excise Duty. Governments traditionally like to tinker with Excise Duty, singling out particular drinks that they think deserve higher (or lower) duty; cider, alcopops….. but it all just seems to be fiddling around the edges adding a few pence here and there but not really doing anything other than increasing prices across the board each spring. If this is to be the preferred mechanism for getting the price of alcohol right something much more radical (and therefore costly to implement) would be needed.
To enforce a ban on selling below cost opens up the debate as to what “cost” actually is – is it taken as simply the combined total of Duty and VAT (the bits that must legally be paid) or does it include the costs of production and transportation as well? Frankly, either of these looks pretty impotent as a mechanism for preventing sales of “cheap” alcohol since they would have less of an effect on shelf prices than a minimum price per unit. Not really an effective mechanism for tackling “binge drinking” (you knew I’d have to mention it didn’t you) which is the banner under which the minimum price enthusiasts march. This does seem to be something of a distraction though since whilst the binge drinking culture urgently needs to be addressed there does not seem to be a consensus of opinion on what causes it and, as a result, no clear agreement on how to deal with it.
Certainly “cheap” alcohol sold in a few high profile retailers fuels binge drinking, but why do people choose to drink in this way? Can it really only be because they can?
The imbalance between irresponsibly low off-sale prices on some products and the high on-sale prices paid across the bar must be addressed. But it is just worth reflecting on the fact that if mass retailers such as Tescos took responsibility for the alcohol that they sell instead of simply worrying about the market share they’d lose, then it is unlikely that the issue of minimum pricing would ever have arisen in the first place. It’s one thing to claim the moral high ground by announcing that you intend to do something if the government force you to (actually, it’s not particularly high moral ground when you think about it) but it’s quite another to go ahead and do it anyway because you know that it’s the right thing to do.

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