Minimum Pricing

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Minimum pricing is the theory that increasing the price of a commodity will reduce its consumption. It also presumes (in the case of alcohol) that there's a problem to be solved (consumption is increasing,) and that minimum pricing is the answer to that problem (by decreasing consumption.) The real problem here is that alcohol consumption in the UK isn't increasing by anything like that which we are lead to believe - it's actually decreasing.

For example, the UK government has proposed to bring in a minimum price of 40 pence per (UK) unit in an effort to make binge drinking and preloading more expensive and reduce the amount of binge drinking[1] and preloading.

The theory presumes that the commodity being priced in such a way exhibits elasticity and that the particular brands affected are the ones being consumed.

Unfortunately the commodities suggested to be subjected to minimum pricing are fairly in-elastic, in that increasing the price will not affect the demand, and the brands affected are typically far sub-premium that and aren't the ones typically being bought.

Of course, once minimum pricing is enacted, there's the fact that once it is noticed that it's not having 'the desired effect,' (see elasticity above,) there will be calls for the minimum price to increase.

Another thing rarely considered is the inevitable increase in cross-border purchasing of alcohol, and - as pointed out in a reply to the Health Committee on the subject of minimum pricing of alcohol in the UK - 'black-market' transactions:

Specifically, we appreciate that the elasticity of demand varies for different consumers, and that increases in the price of licit goods lead to increased consumption of illicit goods. These two factors have received inadequate attention in the debate over minimum pricing.

All predictions as to how minimum pricing might affect levels of crime, consumption and ill health are necessarily speculative and while the conjectural nature of the evidence is not sufficient reason to discard it, we believe there are sufficient flaws in these projections for them to be treated with great caution.[2]

The reply goes on to mention something else that is rarely mentioned with respect to attempts to control alcohol consumption purely by pricing - home-brewing and home-distilling (of which the former is - currently - legal in the UK, the latter isn't, not that, like a lot of things, stops people from doing it[3].)

UK Media - Alcohol

Debunking of the Sheffield Alcohol Policy Model, Nov 2012

Duffy & Snowdon (2012) is a research piece debunking the Sheffield Alcohol Policy Model, which is (ab)used in justifying the England/Welsh and Scottish Government's attempts at introducing minimum pricing of alcohol in the UK. It accuses the University of Sheffield of making false assumptions, creating data where there was previously no data available and ignores the economic concepts of price elasticity, the Laffer Curve and thus the existence of cross-border shopping and the black market.

The University of Sheffield farce - Sep 2012

At the start of September, "academics" at the "School of Health and Related Research" at the University of Sheffield, released "research" commissioned by the BBC programme Panorama, claiming that up to 50,000 lives could be saved over the next decade in England if it were to adopt a minimum price for alcohol.

Programme makers asked Sheffield University to model the effects of a 50p per unit minimum price, which would push the price of the cheapest bottle of vodka from about £9 to £13.

Statisticians estimated the effect would be 50,000 fewer alcohol-related deaths in England among over 65s, over the course of 10 years.

The current affairs programme, to be broadcast on BBC One at 7.30pm on Monday [10th Sep 2012], examines problem drinking among Britain’s ever-growing population of older people. [4]


The lives of 5,000 older English people who drink too much could be saved each year if the government sets its promised minimum price for alcohol at 50p a unit, new research suggests.

Academics at Sheffield University produced the estimate for next Monday's edition of the BBC's Panorama programme, which highlights the growing problem of over-65s drinking dangerously.

Around 1.4 million people over 65 are believed to be risking their health by drinking excessively. The number of over-65s admitted to hospital in England has risen by 62% in five years and more pensioners than 16- to 24-year-olds are kept in because of alcohol-related injuries and illnesses.[5]

Needless to say, this 5,000/year-50,000/decade numbers were bunkum.

Even at the time, doubt was cast on these numbers:

Forgive me if I sound jaded when I discuss these people's crystal balls, but it was only six months ago that a 50p minimum price was predicted to save 2,000 lives a year across the entire population. The government-funded sock puppet website www.minimumpricing.info says that it will save exactly 1,000 lives, again across the entire population. Suddenly saving 5,000 lives only amongst pensioners seems to be upping the ante somewhat, no? (The BBC is running the same story, but incorporates the old trick of multiplying the figure over a decade, hence 'Minimum alcohol price 'would save 50,000 pensioners'.) [6]

And on 28 Sep 2012, the BBC printed a correction, and pulled the iPlayer version of the Panorama show:

Correction 28 September 2012: The main figure in this story has been amended from 50,000 to 11,500 after it emerged that there had been an error in the calculations carried out for Panorama by the School of Health and Related Research at the University of Sheffield.[7]


The School of Health and Related Research at the University of Sheffield has confirmed to Panorama that unfortunately, due to human error, figures they produced specifically for the programme Old, Drunk and Disorderly? broadcast on 10th September 2012 were incorrect. The figures are in fact 4-5 times lower than those originally given to Panorama. The University emphasised the human error was wholly on their part and has apologised unreservedly to the BBC. The programme has been temporarily removed from iPlayer and is being re-edited to reflect the correct figures.[8]

UK Government - Alcohol

As noted above, the UK Government has proposed that there be a 40p minimum price per alcoholic unit. We will ignore, here, the fact that the unit is a completely arbitrary measure of alcohol and not only differs in how much alcohol it represents from country to country, but different countries have different ideas on how much alcohol is the 'recommended daily/weekly intake.'

Asda are currently selling 8x275ml Smirnoff Ice (5%) for £7.50. That's 2.2l x 5 = 11 UK units. Or 68.18p per unit. Tescos are currently selling 3x12X284ml Stella (5%) for £22.00. That's 10.224l x5 = 51.12 units. Or 43.04p per unit.

Proponents for minimum pricing claim that this is intended to target the 'cheaper' brands, and won't affect the more expensive brands (such as Smirnoff Ice or Stella,) but if the cheaper brands are pushed close to the same price point as the premium brands, the premium brands must put their prices up to preserve the 'air of premiumness' they currently enjoy.

University of Sheffield study debunked - 12 Oct 2012

The Sheffield team do acknowledge some quite significant discrepancies between their model and previous work. Faced with the fact that their methodology produces results inconsistent with other findings for price elasticity in heavier drinkers they do provide an analysis that is consistent with the literature…

“To enable more direct comparability with the estimates in the literature we have also generated elasticity estimates for total alcohol purchasing from the EFS, shown in Table 11. These are in broad agreement with the literature, showing that - at the highest level of aggregation – hazardous and harmful drinkers (combined elasticity of -0.21) are less price elastic than moderate drinkers (elasticity of -0.47).”

….but then ignore it.

“Note that these high-level estimates are provided for reference only and are not included in the model.”

[9]

The Minimum Price Escalator - Sep 2012

In response to the House of Commons Health Select Committee report of Session 2012-13, the Govenment's reply is out[10]

First they start with (pdf page 5)

The Committee shares concerns about the social impact of binge drinking but we believe it is also important to ensure that the Government’s strategy recognises and responds to the evidence of an increasing health impact of excessive alcohol consumption

Which promulgates the false ideas that

  1. there is a problem with binge drinking in the UK - there isn't; consumption of alcohol in the UK has been in decline since 2004/5,
  2. the solution to binge drinking is to penalise everyone by increasing the price, instead of penalising the offenders by arresting them, and
  3. anything over 2 pints of lager for a bloke in a 'session' is excessive, when the limits were plucked out of thin air.

Anyway, the government's solution to #2 is (pdf pages 7-8):

Given the Government’s decision to introduce a minimum unit price, the debate has been about the level at which it should be set – whether it should be 40, 45 or 50 pence – but the setting of a minimum unit price will not be a one-off event. Once a minimum price is introduced, if it is judged to be successful, the level will need to be monitored and adjusted over time. A mechanism will need to be put in place in order to do this

Scottish Government - Alcohol

The Scottish Government have proposed a 50p minimum price per unit.[11]

Scottish Government postpones plans - 15 Oct 2012

Plans to introduce minimum pricing on alcohol in Scotland have been postponed indefinitely by ministers as a result of a growing legal challenge to the controversial move.

[...]

The SNP’s flagship health policy was already hitting difficulties after the European Commission ruled last month that it was opposed to it on the grounds it broke free trade laws. SNP ministers have until the end of the year to try and make their case to EC chiefs and avoid a potentially-damaging legal battle at the European Court of Justice.[12]

Alcohol Focus Scotland represents government - 26 Sep 2012

Alcohol Focus Scotland, a fake-charity that got nearly half of it's £1M funding for 2011 from the Government[13], is to represent the Scottish government in a legal fight with manufacturers against the concept of a minimum price for alcohol.

Alcohol Focus Scotland was given permission by the court of session in Scotland to back the government by submitting a dossier of evidence on the harm alcohol can do and the positive impact that unit pricing can have on public health. The drinks manufacturers bringing the judicial review have argued there is no such evidence. They opposed the charity's appeal to the court to be allowed to intervene.[14]

Considering the wealth of information that, in the UK in general, [Alcohol_Consumption#United_Kingdom|alcohol consumption] has been decreasing steadily, one wonders what evidence AFS are proposing to submit. Sadly the Guardian article quoted above is somewhat light on the details. As is AFS's site[15]; unsurprising since one of the articles seems to be largely a copy/paste of the other.

As pointed out at the end of the Guardian article, minimum pricing will not fix the alleged problems that are said to exist:

Outlining the Scotch Whisky Association's reasons for taking legal action against the government, Gavin Hewitt, the chief executive, said in a statement in July: "We agree that Scotland must address the harmful use of alcohol, but policy needs to be targeted on the problem. Some 30% of those who drink consume 80% of the alcohol sold. Despite warnings that minimum pricing of alcohol would be illegal, the Scottish government has pressed ahead with its ill-targeted policy and misguided legislation. The Scotch whisky industry is left with no option but to oppose the legislation in Europe and through the Scottish courts."[14]

Australian Government

Minimum price of AU$8-AU10 for a bottle of wine

The Federal Government's Australian National Preventative Health Agency will advise this week that a "floor price" and new taxes be calculated as a way to make alcohol dearer.

The prohibition plan to stop cheap drunks binging on discount drinks - including cask wine and cleanskins - has delighted health groups but sparked an alcohol industry revolt.

Consumers who drink cheap wine are not all drunks, industry groups have told the agency, and not everyone can afford an expensive tipple.

But the agency found pricing is "recognised as one of the most effective measures to reducing alcohol-related harm".[16]

There's that elasticity again...

References