Does minimum pricing work?

The PM will indicate support for the measure to reduce problem drinking. But does it make sense?

Anyone who's ever come home from a night out with an empty wallet will groan at the thought, but David Cameron is to indicate support for putting a minimum price on alcohol today. During a visit to a hospital in the north-east, he will say that excess consumption of alcohol is costing the NHS £2.7bn a year. This comes ahead of a government strategy on alcohol, due to be published soon after nearly a year of consultation with health professionals and the drinks industry.

If minimum prices are endorsed, it will mark a change in the government's policy. Cameron is instinctively opposed to further regulation, while the public health minister, Ann Milton, has queried whether it would be legal under European free trade legislation. Scotland, which has gone furthest on prices, is still testing the legality.

Of course, minimum prices will have the greatest impact on supermarkets and shops, where discount selling is more common than in pubs or bars. But is it an effective way to reduce dangerous drinking and alcohol-related problems?

Minimum prices would have most effect on the cheapest, strongest end of the spectrum, substantially upping the price of budget ciders (like the notorious, discontinued White Lightning). Some of these could more than double in price. For this reason, it has gained the support of a wide range of health campaigners: upping the prices of these drinks could target the most problematic drinkers.

Over at the BBC, Branwen Jeffreys explains some of the evidence cited by those in favour of the move:

Those who support a minimum price say there is strong evidence internationally that price is linked to consumption, and higher consumption is linked to higher harm. They point to Finland where in 2004 a dramatic cut in prices via taxes led within a year to an increase of 9% in consumption, according to official figures.

Most alcohol in Finland is sold through tightly controlled government-run shops. By 2005 alcohol-related problems were the most common cause of death among Finns of working age.

A 2008 model by the University of Sheffield suggested that a high enough minimum price could significantly reduce the impact and cost of alcohol to society. It found that problem drinkers seek out the cheapest ways to get drunk as they tend to be either young or those who drink a lot, and therefore would change their behaviour in response to price increases more than moderate drinkers would. (It has been strongly challenged by the drinks industry).

While the international examples may be compelling, it is worth pointing out that minimum prices have not yet been introduced in a country with a history of few limitations on the sale of alcohol. States in Canada which have used minimum pricing have a history of prohibition, and the Nordic countries have a tradition of selling alcohol through government-owned shops. That's why the example of Scotland will be watched closely.

On the other hand, some question the efficacy of minimum pricing on economic grounds. Tim Harford points out that it would up the profit margins of supermarkets -- and that in fact, if they decided a minimum price amongst themselves (rather than having one imposed by the government), they would be in breach of competition laws. He recommends increasing taxation further instead, as this would ensure that prices rise in proportion and would put the extra revenue in the hands of government rather than supermarkets. Rather paradoxically, minimum prices could make cheap alcohol a very lucrative product for supermarkets (because of the mark up).

Although the long-term benefits to society are difficult to prove conclusively, most people would agree that less cheap alcohol would have a positive effect. The evidence that alcohol consumption goes down when prices goes up is fairly strong. The best economic method of doing this remains to be seen.

Samira Shackle is a freelance journalist, who tweets @samirashackle. She was formerly a staff writer for the New Statesman.

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What type of Brexit did we vote for? 150,000 Conservative members will decide

As Michael Gove launches his leadership bid, what Leave looks like will be decided by Conservative activists.

Why did 17 million people vote to the leave the European Union, and what did they want? That’s the question that will shape the direction of British politics and economics for the next half-century, perhaps longer.

Vote Leave triumphed in part because they fought a campaign that combined ruthless precision about what the European Union would do – the illusory £350m a week that could be clawed back with a Brexit vote, the imagined 75 million Turks who would rock up to Britain in the days after a Remain vote – with calculated ambiguity about what exit would look like.

Now that ambiguity will be clarified – by just 150,000 people.

 That’s part of why the initial Brexit losses on the stock market have been clawed back – there is still some expectation that we may end up with a more diluted version of a Leave vote than the version offered by Vote Leave. Within the Treasury, the expectation is that the initial “Brexit shock” has been pushed back until the last quarter of the year, when the election of a new Conservative leader will give markets an idea of what to expect.  

Michael Gove, who kicked off his surprise bid today, is running as the “full-fat” version offered by Vote Leave: exit from not just the European Union but from the single market, a cash bounty for Britain’s public services, more investment in science and education. Make Britain great again!

Although my reading of the Conservative parliamentary party is that Gove’s chances of getting to the top two are receding, with Andrea Leadsom the likely beneficiary. She, too, will offer something close to the unadulterated version of exit that Gove is running on. That is the version that is making officials in Whitehall and the Bank of England most nervous, as they expect it means exit on World Trade Organisation terms, followed by lengthy and severe recession.

Elsewhere, both Stephen Crabb and Theresa May, who supported a Remain vote, have kicked off their campaigns with a promise that “Brexit means Brexit” in the words of May, while Crabb has conceded that, in his view, the Leave vote means that Britain will have to take more control of its borders as part of any exit deal. May has made retaining Britain’s single market access a priority, Crabb has not.

On the Labour side, John McDonnell has set out his red lines in a Brexit negotiation, and again remaining in the single market is a red line, alongside access to the European Investment Bank, and the maintenance of “social Europe”. But he, too, has stated that Brexit means the “end of free movement”.

My reading – and indeed the reading within McDonnell’s circle – is that it is the loyalists who are likely to emerge victorious in Labour’s power struggle, although it could yet be under a different leader. (Serious figures in that camp are thinking about whether Clive Lewis might be the solution to the party’s woes.) Even if they don’t, the rebels’ alternate is likely either to be drawn from the party’s Brownite tendency or to have that faction acting as its guarantors, making an end to free movement a near-certainty on the Labour side.

Why does that matter? Well, the emerging consensus on Whitehall is that, provided you were willing to sacrifice the bulk of Britain’s financial services to Frankfurt and Paris, there is a deal to be struck in which Britain remains subject to only three of the four freedoms – free movement of goods, services, capital and people – but retains access to the single market. 

That means that what Brexit actually looks like remains a matter of conjecture, a subject of considerable consternation for British officials. For staff at the Bank of England,  who have to make a judgement call in their August inflation report as to what the impact of an out vote will be. The Office of Budget Responsibility expects that it will be heavily led by the Bank. Britain's short-term economic future will be driven not by elected politicians but by polls of the Conservative membership. A tense few months await. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.