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Government launches Alcohol Strategy Consultation

The Coalition Government’s Alcohol Strategy is taking its final shape with the launch of a public consultation on key elements. The exercise centres around minimum unit pricing (MUP) and the question posed is about the level at which the minimum price should be set, not the principle of MUP as such. The consultation also seeks views on banning heavily discounted alcohol such as in multi-buy promotions.


However, press reports suggest that while Prime Minister David Cameron is still strongly for MUP, he has not succeeded in convincing several of his cabinet colleagues of its merits.  Education Secretary Michael Gove, Chancellor George Osborne and Home Secretary Theresa May herself, whose department would be responsible for overseeing the alcohol strategy, are all reported to have serious reservations about the policy or to be positively opposed.  


Dead in the water


So, too, it is reported, is Deputy Prime Minister, Nick Clegg, apparently on the grounds that MUP would be a ‘tax on the poor’.  Some press reports suggest that Clegg’s Liberal Democrats are privately briefing the media with the line that there is so much opposition that MUP is effectively ‘dead in the water’.


Moreover, legal challenges across Europe are set to delay plans to introduce MUP in England and Wales for another two years at least, a leading Conservative proponent of MUP has stated. Conservative Health Committee member, Dr Sarah Wollaston MP, said in a letter to her constituency that it would be at least 2014 before the Government could push ahead with its plans. Her letter followed the admission of Scottish ministers that their plans for minimum pricing would not be able to proceed while it fights a legal challenge from drinks firms. 


The likelihood of the European Commission being a major obstacle to MUP was further emphasised by the publication of the Commission’s legal opinion that MUP is illegal under EU law.


Government Consultation


In launching the consultation, the Government framed the issues in terms of tackling binge drinking and the impact it has on communities, hospitals, streets and towns.  The measures being proposed are designed, the Government said, to cut crime, save lives and reduce consumption.


“For the first time ever we are asking people what they think about prohibiting the sale of alcohol below a sensible, minimum price per unit.  We are also consulting on whether to ban multi-buy promotions in shops and off-licences, such as two-for-the-price of one or buy-one-get-one-free. This is NOT about stopping responsible drinking.  For example, it WON’T put an end to supermarket ‘meal for two with a bottle of wine’ deals.  But it WILL seek to address the ludicrous imbalance whereby in some instances beer is cheaper than water.”


The Government emphasises that the new consultation follows on from what has already been done, including...


“Rebalanced the Licensing Act in favour of local communities – for instance by removing the ‘vicinity test’ to ensure that anyone – no matter where they live – can input into a decision to grant or revoke a licence


“Late night levy – empowering local authorities to make those businesses that sell alcohol late at night contribute towards the cost of policing and wider local authority action


Early Morning Alcohol Restriction Order – enables local areas to restrict the sale of alcohol late at night in all or part of their area if there are problems


“Why do we need a consultation? Binge Britain and what it means for our communities and individuals


“Instead of the café culture promised by the last Government’s Licensing Act, too many of our high streets and town centres have become no-go areas on a Friday and Saturday night with just under half of all violent crimes involving alcohol and a great deal of alcohol-fuelled anti-social behaviour.


“And it is responsible drinkers, businesses and the wider community who are paying the price in terms of crime and disorder on our streets, violent, alcohol-related injuries clogging up our Accident and Emergency rooms and significant long-term health problems.


“The Government will consult on a new approach to turn the tide against irresponsible drinking which costs the UK taxpayer £21billion a year.

“It will help reverse a culture that led to almost 1 million alcohol-related violent crimes and 1.2 million alcohol-related hospital admissions last year alone.


“Our consultation is targeted explicitly at those harmful drinkers, problem pubs and irresponsible shops.


“It is NOT about stopping sensible, responsible drinking.


“Those who enjoy a quiet drink or two have nothing to fear from our proposals. The local pub – the backbone of many communities – has nothing to fear. The responsible off-licence has nothing to fear. Indeed the consultation seeks to cut red tape for responsible businesses.


“More powers for pubs to stop serving alcohol to people who are already drunk.


“Local areas will be given the powers to tackle local problems, including the ability to restrict opening and closing hours, control the density of licensed premises and charge a late-night levy to support policing.


“We have already started to target those who have shown they cannot drink responsibly - and who have been convicted of an alcohol-related offence - with new pilot sobriety schemes and the late night levy has been introduced to put an end to local people picking up the tab for irresponsible drinking.


“And a real effort to get to grips with the root cause of the problem. And that means stemming the tide of cheap alcohol.


“We will consult on Minimum Unit Pricing, so that alcohol can only be sold at a sensible and appropriate price. We found that alcohol has been so heavily discounted that it is possible to buy a can of lager for as little as 20p and a two litre bottle of cider for £1.69.


“We will also consult on introducing a ban on multi-buy promotions in shops to stop them encouraging people to buy more than they really want or need.


“The Government is now conducting a full public consultation over a ten week period.”


Reactions


The launch of the consultation was, of course, welcomed by the public health lobby as a major step forward, though virtually all of the main organisations favour a 50p unit price rather than the 45p proposed by the Government. 

The Royal College of Physicians said: “The RCP has long called for the introduction of a minimum unit price (MUP) for alcohol, which the evidence tells us will reap significant health benefits across the population. While the RCP has called for a 50 pence MUP, we support the government’s intention of tackling cheap alcohol.”


For the Institute of Alcohol Studies, Katherine Brown said:  


“We fully support the introduction of minimum pricing. This is a targeted policy that will tackle heavy and harmful drinkers whilst having little impact on moderate drinkers. Everyone stands to gain from the benefits of MUP as we see lower rates of crime and social disorder and a reduced strain on our health and emergency services.”


Industry


Reactions from the alcohol industry were far more diverse than those of the public health lobby, and ranged from fierce opposition to complaints that the Government’s proposals did not go nearly far enough. 


For the Wine and Spirits Trade Association (WSTA), Chief Executive, Miles Beale said:


“It is hard to understand why the Government is pushing ahead with the consultation now, when there is a wall of opposition in Europe, a legal challenge in Scotland, a lack of any real evidence to support minimum unit pricing, opposition from consumers and concerns raised from within Cabinet itself. 


“Minimum unit pricing and the proposed restrictions to promotions are wholly untargeted and will unfairly punish millions of consumers and businesses in the UK, while doing nothing to tackle the root causes of alcohol misuse or associated crime and disorder.


“Minimum unit pricing will punish responsible consumers with higher prices, hitting the poorest hardest and will do nothing to address the causes of alcohol misuse.


“There is no evidence that minimum unit pricing will tackle alcohol misuse – in fact the international evidence suggests that problem drinkers are the least likely to be deterred by price rises. On promotions there is no compelling evidence linking retailer promotions with alcohol misuse – indeed overall levels of alcohol consumption are falling. The most recent evaluation of the ‘multi-buy’ ban in Scotland showed that it has had no significant impact on alcohol sales. This raises serious doubts about the effectiveness of a promotions ban in reducing alcohol misuse.”


The opposite viewpoint was expressed by the Licensed Multiple Retailers’ Association’s Strategic Affairs Director, Kate Nicholls:


“We are pleased that Governments both sides of the border have now finally woken up to the fact that it is the plethora of pocket money priced alcohol promotions which are the real problem. With 70% of alcohol now bought and consumed at home, and widespread loss leading, punitive measures against pubs and bars are not delivering either Government’s public policy objectives on health and crime and disorder.


“We are disappointed that the consultation does not go further and get a grip on bulk sales, price-led advertising and in-store promotions. There is nothing here which will stop supermarkets continuing to sell wholesale quantities of alcohol to the public at prices some pubs cannot buy it. The consultation itself acknowledges that there will be net benefit to the off-trade.”

A more middling position was put by Brigid Simmonds for the British Beer & Pub Association (BBPA) 

 

“It is good that the Government acknowledges that sensible, responsible drinking supports pubs as part of our community fabric. I hope that the policies emerging from this review will reflect that - any review of the Mandatory Code should not result in new onerous legislation or regulation for pubs. We do however welcome further clarification on the ban on promotions, to give greater clarity…. On multi-buy promotions, this would affect beer more than any other drinks as beer is the most common type of drink sold in this way.


“However, if the Government is seeking to introduce minimum pricing, it is difficult to see why they feel the need for this.


“On minimum pricing, there are differing views on its potential role in tackling alcohol-related harm. We strongly believe that alcohol should be priced in a way that is socially responsible, but there are concerns that minimum pricing would penalise a sensible majority of people who drink in moderation. The BBPA has always supported a ban on below-cost selling, and we would have been happy to work with the Government in looking at ways to achieve this.”


The European Complication


The Scottish Government’s plans to introduce MUP are facing a legal challenge domestically from the Scotch Whisky Association and its European partners, and some Member countries of the European Union have also tabled objections. In response to the Scottish proposals, the European Commission has now published a detailed legal opinion, which, while not binding, does suggest that gaining the approval of the European Court of Justice may not be straightforward.


In its Detailed Opinion, the Commission expresses sympathy with the intentions behind the Scottish proposal, but states that, while EU legislation does not prohibit MUP as such, any policy to introduce it must be compatible with other provisions of EU law, including rules on the free movement of goods. It states that EU case law is unequivocal that MUP falls within the remit of Article 34 of the Treaty, and would count as having an effect equivalent to a quantitative restriction on trade, impeding imports of alcohol products.


The Opinion states that MUP might discriminate against imports by preventing foreign manufacturers from benefiting from lower production costs. MUP could also constitute a barrier to entry into the Scottish market of new products, by denying goods seeking to enter the market lower prices to encourage supermarket listing and consumer trial.


Moreover, in the Opinion of the Commission, MUP fails the required proportionality test: the same results could be obtained by measures less distorting of the market.


The Opinion states:  


“The Commission is fully aware of the importance of reduction of alcohol consumption among the population as a whole and in particular among the harmful drinkers. The Commission further acknowledges that the measure proposed is within Member States’ competence and - from a public health point of view - within the scope of the goals and objectives of the EU strategy to support Member States in reducing alcohol related harm (COM(2006)625 ). 


…..However, the measure at issue raises doubts as to its compatibility with the principle of proportionality …..


Keeping in mind that most of the studies prove and there is a general agreement that affordability does have an effect on drinking patterns, the question is only about the best way to exploit this tendency. Hence, the Commission does not disagree with the proposition that increases in the prices of alcoholic drinks could, other things being equal, be expected to lead to reduced demand for those drinks. The focus in this opinion is rather on whether a MUP policy, which would lead to higher prices of many alcoholic drinks and hence to an expectation of reduced consumption, is likely to be the least market-distorting policy that could be introduced to produce such an outcome.


If the goal is, for health policy reasons, to reduce alcohol consumption via increasing the prices of alcoholic beverages, that goal can be achieved by raising alcohol taxation across the board.


The price of alcohol would thus increase without causing the market distortions that… can be expected to flow from MUP. It is the Commission’s view that there is at least one alternative, regulatory option to MUP that is less restrictive of trade and less distorting of competition in relevant drinks markets… (Furthermore, other economic distortions) might arise as a consequence of the MUP. These potential distortions arise because the MUP will create greater incentives for retailers and supermarkets in particular, to sell more alcoholic beverages as a result of the fact that they will make higher margins on products affected by the policy. This will give retailers incentives to allocate increased resources to the sale of products affected by the MUP compared with what could be expected to be the case if, for example, similar average retail price increases were caused by an across-the-board increase in duty, which is an alternative policy option for reducing consumption. In economic terms, this makes MUP a less effective means of reducing consumption than duty increases.


Indeed, Union legislation provides the Member States with the possibility to control the prices of alcohol and hence choose their level of health protection by setting the excise duties. The Scottish government provided explanations in the Regulatory Impact Assessment in page 46 of why the taxation alternative was not considered as the best option.


The Commission would like to address them accordingly at the same time stressing that raising of alcohol duties is probably the more suitable measure:


1) As regards the statements that the increase of duties will affect all alcohol on the market and not only cheap alcohol and will also affect the on-trade sales, the Commission would like to note that the objective of the measure at issue is to reduce overall drinking that is shown by the chosen level of the minimum price that will affect 73% / 66% of the off-trade market. Accordingly, the raising of duties option seems to be the most suitable to achieve that goal without providing any adverse effects on competition. Furthermore, the negative effects on the on-trade market can be reduced by adjusting the taxation system accordingly.


2) The Scottish authorities also claimed that increases in taxation of alcohol will not necessarily result in a proportionate or indeed any increase in the price of alcohol, as alcohol tax and duty increases are not always reflected in the price the consumer pays as some retailers engage in below cost selling to varying extents. To this effect, it could be mentioned that the second study of RAND 2012 carried out for the Commission examined to what extent changes in alcohol taxes are passed through to consumer prices. The findings indicate that changes in consumer prices depend to a large extent on reactions in the retail sector. Sufficient data for analysis was available from four countries. The pass-through is full when for example a €1.00 increase in excise duty for a product is associated with a €1.00 increase in the consumer price (or a duty reduction is similarly associated with a drop in the price). More than full pass-through means that the price increases more than that needed to cover the duty raise. Less-than full pass-through means the price increases less, as retailers cover the tax raise from other sources. In the countries studied, pass-through in the off-trade for changes in beer duties was less than full in two cases, and more than full in two cases. There was similar variation in the pass-through for changes in spirits duties. Comparison between off-trade and on-trade was possible for one country: there was no marked difference in the pass-through for beer, but for spirits the pass-through was more than full in off-trade and less than full in on-trade. Hence, the Commission would like to note it is not definite that the rise in prices will not be passed through as showed by the examples.


Furthermore, in the case Commission v Hellenic Republic (C-216/98) the Court addressed that question stating that “The ability of manufacturers and importers not to pass on increases in excise duty on their products is in any event limited by the extent of their profit margin, with the result that excise duty increases are sooner or later incorporated in retail selling prices”……


Moreover, there are other additional measures which the Scottish Government could adopt. For instance, according to information available health related harms are concentrated in particular areas of Scotland. Measures which are specifically targeted at these areas are likely to be more effective than measures aimed at the total population.


In conclusion, the Opinion states that:


“Following the above observations the Commission concludes that the draft at issue may create obstacles to the free movement of goods within the internal market contrary to article 34 TFEU and appears to be disproportionate under article 36 TFEU. The UK authorities are invited to abstain from adopting the draft legislation at issue.”