Minimum Unit Pricing ‘the best policy option’ says Irish report

Ahead of the Irish Government’s recent decision to introduce minimum alcohol pricing as part of its Public Health (Alcohol) Bill (24 October 2013, ‘Ireland plans to introduce minimum price for alcohol‘), the Department of Health published a report setting out the issues relating to hazardous and harmful consumption of alcohol in Ireland.

Produced by CJP Consultants Limited, The Efficacy of Minimum Unit Pricing, Fiscal and other Pricing Public Policies for Alcohol used real-world evidence from Australia and Canada to support its policy recommendations about how problems caused by hazardous alcohol consumption can and should be tackled in Ireland.

The report noted the growing gap between on and off-licence alcohol prices as part of a major shift in drinking patterns in recent years towards home consumption, and stated that if there was a health and/or social benefit from encouraging people to drink in licenced premises rather than at home, then measures would need to be adopted to reverse the trend.

This included the introduction of a minimum unit price, which was regarded as “the best policy option” but would need to be accompanied by other measures to “make it most effective in reducing harmful and hazardous consumption by drinkers who are most at risk”. It was also believed that the policy would not violate EU Competition Law and would prove very beneficial as a public health measure.

Policy options and recommendations

1. Do something. The health costs of alcohol consumption are large and growing, almost to the point where it is as big a problem as tobacco.
2. Do more than one thing: there is a menu of policy choices. There are benefits and risks associated with each choice. Sometimes it seems there is a tendency in policy making circles to imagine that only one lever at a time should be pulled.
3. Minimum unit pricing should be a key part of reform. The risk here is that government revenues fall with reduced alcohol consumption. We think this effect is likely to be small. But this risk can be mitigated by a dual policy: minimum unit pricing and higher excise taxes. This can be done, if desired, to achieve tax revenue neutrality. Or it can be part of a revenue raising package.
4. A simple ban on below cost selling has clearly been attractive to the UK government. It is a blunt instrument that, with alcohol, seems to be a unique experiment. It is a free gift to retailers’ profit margins. A special tax levied on the industry to capture potential ‘supernormal profits’ is a possibility, but this would be a cumbersome policy that would likely be very difficult to administer and would not find favour with tax collection agencies. The likely effects on consumption and health are somewhat unknown. If it is to be tried it would seem better to combine it with other measures, such as the ones we recommend, above.
5. Other countries have been slow to reform. This is just politics; it is linked to the power, in some cases, of the alcohol industry. Sometimes it seems to be simple inertia in the face of uncertainty: the long run effects of radical tax reform are never fully foreseeable.
6. Other measures could include the inflation indexing of excise duties, minimum drinks prices, policies particularly targeted at problem drinkers and bans on promotions such as 2-for-1 and happy hours. All of these have benefits but should be thought of as secondary to the main options, above and, if they are to be tried, should only be part of a wider package.
7. As a public health policy, any measures that would succeed in reducing the harmful consumption of alcohol should be considered very carefully. In the short term there is an obvious risk that reduced alcohol consumption would undermine employment in the alcohol industry and undermine tax revenues. We do not believe that either of these effects would be significant and in the longer-term would be totally surpassed by the positive economic, financial and social effects of a reduction in harmful and hazardous consumption of alcohol.
8. A Minimum Unit Price looks like the best policy option, but would need to be accompanied by other measures to make it most effective in switching consumption from high alcohol content drinks to lower content alcoholic drinks, and in reducing harmful and hazardous consumption by drinkers who are most at risk.
9. A Minimum Pricing Order would inevitably be challenged in the courts, as was the case in Scotland. Indeed, that judgment is subject to appeal. The Court of Session in Scotland rejected the appeals on the basis that none of the challenges to the MUP measure were well founded. In its judgment it stated that alternative measures such as excise duty increases, would be less effective in achieving the legitimate aims which the minimum pricing measures pursue. Furthermore it observed that there is literature and oral evidence that excise duty rises might not be passed on (or not passed on in full) to consumers. The potential problem does not arise under minimum pricing.”