Why minimum pricing for alcohol won’t reduce harmful drinking

This economic policy will end up raising extra revenue for the alcohol industry rather than addressing consumption or addiction

Source: https://www.rte.ie/brainstorm/

By Lucille Destrade, KU Leuven and Michel Destrade, NUI Galway

January 8, 2022

As they emerge bleary-eyed from end of year and at-home festivities, Irish people might be inclined to understand the logic behind the minimum pricing for alcohol policy which came into force this week. The measure is part of the implementation of the Public Health Alcohol Act (2018) and the HSE describes it as “one of a number of public health measures being introduced under this legislation, all aimed at reducing the harm that alcohol causes to our society”.

Although there are a number of arguments that can be made to support that view, they are not entirely grounded in real-world data and seem to be mostly based on opinions and moral views. We believe that this economic policy will ultimately prove ineffective in its objective to reduce ‘harmful drinking’. Instead, it will have many negative impacts on the Irish social fabric, especially by making alcohol retailers and illegal drug criminals richer, with no pecuniary return to the health services or Irish society at large.

From January 2022 on, alcohol cannot be sold below 10 cents per gram, regardless of the setting. The minimum price is the same at a fine wine retailer, an off-licence, a high-end food store, discount price supermarket, a bar or a restaurant. One standard drink in Ireland contains 10 grams of alcohol, so the minimum price for one standard drink will now be ?1.

A 12.5% bottle of wine has 74 grams of alcohol and it cannot now be sold for less than ?7.40. A bottle of spirit like vodka or whiskey cannot be sold for less than ?21. A point to note here is that the price of a bottle of champagne (which cost more than ?7.40 in 2021) or fine whiskey (which cost more than ?21 in 2021) remains unchanged.

The harm that alcohol causes to Irish society is deeply embedded in history. Beneath the surface of jovial Irish drinking culture, there is a complex and stigmatised relationship with alcohol. According to the World Health Organization, the total alcohol consumption in litres of pure alcohol per capita was 12.75 litres in Ireland in 2019. This compares to averages of 9.5 litres in Europe, 9.1 litres in the OECD, and 5.8 litres globally. A recent research paper found that 73% of men and 41% of women met the criteria for ‘hazardous drinking’.

When faced with this data, we may expect an economic policy aiming to reduce the harm of alcohol to be openly welcomed and celebrated. However, there are numerous arguments to be made that put the soundness of this policy into question.

The main issue is that it is a price floor instead of a tax. The HSE believes that “people drink more alcohol if it is cheap. If you raise taxes for alcohol, you are raising the cost of alcohol for everyone. Minimum pricing most impacts people who are drinking alcohol harmfully. It is designed to target the heaviest drinkers who seek the cheapest alcohol, which means it will have the greatest effect among those who experience the most harm”. However, no evidence is provided for these claims. Is it wise or correct for the Government to base an economic policy on the assumptions that price is enough to deter heavy drinkers and that heavy drinkers only seek cheap alcohol?

As reported by The Guardian, high earners in professional jobs, such as doctors, lawyers and teachers, are much more likely to be regular alcohol drinkers than those on average incomes. Many of the 1.35 million harmful drinkers in Ireland already seek more expensive alcohol. “Middle-class drinkers are unlikely to pay attention to government health warnings as they may be less likely to get excessively drunk, and can withstand increases in prices,” says Steve Clarke, an alcohol addiction therapy services manager quoted in the article.

The HSE will find that their policy will not be enough to deter even the harmful drinkers who seek the cheapest alcohol. It is possible that a sharp price rise for some drinks might incentivise some problem drinkers to sober up. However, it is also entirely more likely that heavy drinkers will switch to different beverage categories, cut down on other outgoings, travel more to Northern Ireland or France, support contraband, and switch to or increase their consumption of legal and illegal intoxicants.

Research published in the European Journal of Health Economics showed that “heavy drinkers are much less price elastic than moderate drinkers. The implication is that price-based policies may have little effect in reducing consumption amongst the heaviest drinkers”. This is the exact opposite to the expected benefits of the new policy!

The HSE says that “we know [minimum pricing] will work” because “alcohol purchases in Scotland reduced by 7.6% in the year after it was introduced”. But later evidence showed plenty of switching between categories and no overall decline. Two years later, the fall in alcohol consumption had stalled and the number of alcohol-related deaths continued to rise.

We can’t help but suspect an element of class snobbery with this policy. It is doubtful that setting the minimum price at ?1 exactly for a standard drink was “evidence-based”, as it is unlikely that scientific evidence would have led to such a round number. This also leads to an interesting question, regarding the evidence-based effect that a ?1.50 or ?2 minimum price could have. Presumably, a ?5 minimum unit price, or even ?10, would work even better, but no member of the Irish parliament is calling for that to happen. This is probably because it is deemed acceptable to increase the cost of living only for people who tend to buy cheap alcohol, while making sure that those who can afford more expensive tipples are not affected.

Another problem with this economic policy is identifying who it benefits financially. Because it is a price floor instead of a tax, the extra money raised will not be revenue for the State. It could have been used to fund the costs of social programmes and treatments which help to treat alcoholism. Instead, it will automatically raise extra revenue for the alcohol industry and alcohol retailers in Ireland.

Once people are faced with choosing between a low-quality own-brand store vodka and a higher-quality vodka which will now be priced the same, they will naturally choose the better known brand. Hence, this policy will directly benefit the alcohol industry, especially those with products already above the upcoming minimum pricing. In Scotland, this blank-cheque is estimated to represent a windfall of £125 million (?149.55m) per year for the alcohol industry.

As price-based policies are not enough to reduce consumption or addiction, it is easy to see that the implementation of price-based policies should be based on taxation and not price flooring. We can look at the cigarette tax put in place around Europe in the 2000s as an example. This tax was accompanied by several non-monetary measures, including banning smoking in restaurants and public indoor spaces. Ireland was a leading country in the campaign to reduce tobacco consumption and was the first country in the world to ban smoking in closed public spaces. One of the keys to success was a rigorous national cessation programme, that provided care and support for those struggling with tobacco and nicotine dependence.

After such a successful campaign with tobacco, it is surprising to see Ireland opt for a different approach for alcohol. A tax would be much more effective to address alcohol consumption, and would help the state fund its health services instead of seeing some private companies and some criminals enrich themselves without having to do anything.

The compassionate understanding that nicotine addicts need state funded programmes providing care and support should also be extended to those dealing with alcoholism or harmful drinking. Research published in The Lancet examined alcohol control policies in England and recommended a combination of minimum pricing and tax increases to reduce alcohol harm and increase government revenue. Moreover, it showed the effectiveness and cost-effectiveness of policies that also address marketing and reduction in temporal availability of alcohol.

As things currently stand, advertisements and marketing for alcohol are allowed in Ireland, and the Government are planning new laws to introduce longer opening hours for pubs and nightclubs. So where is the logic?