Minimum pricing: the key questions

Some aspects of the debate are more settled than others.

Minimum pricing for alcohol is back in the news today, as ministers are expected to announce that the price per unit will be 45p.

Since the new information is rather technical (importantly, the average price-per-unit in a recent IFS study was 44.8p, so this price will have a material effect), what we're actually getting is less a discussion of whether 45p is too high, too low or just right, and more rehashing of old arguments. So here they are again.

Minimum pricing lowers alcohol consumption

The Lancet concludes:

Natural experiments in Europe consequent to economic treaties have shown that as alcohol taxes and prices were lowered, so sales, alcohol consumption, and alcohol-related harm have usually increased.

Samira Shackle wrote in February that:

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's hardly surprising. All that is being concluded is that, on a societal basis, alcohol sales obey the laws of supply and demand (as an aside, it's fascinating that those normally most wedded to this rule of thumb are quickest to argue with it in this situation).

There is some countervailing evidence. An IEA paper suggests that there is no cross-national correlation between affordability of alcohol and total consumption:

Chart

Nonetheless, the balance of evidence is strongly on the side of minimum pricing having some effect on consumption.

Minimum pricing hits some types of problem drinkers harder than others

Alcoholics – people with a pathological addiction to alcohol – are unlikely to reduce their consumption that much in the face of minimum pricing. It is nearly the definition of addiction that you prioritise feeding that addiction, and that is no different with alcoholism. Minimum pricing hurts alcoholics with basically no upside (although for a few it may be the final straw to seek help).

The policy is instead aimed at a different sort of problem drinkers: binge drinkers, who suffer their own health problems but are thought to be far more price-sensitive.

In this aspect it can be seen as a trade-off: hurting alcoholics to help binge drinkers.

Minimum pricing hits the poor hardest

George Eaton writes:

As a recent ONS study noted, 'people in poorer households spend a greater proportion of their disposable income on alcohol duty than higher wage earners.'

Additionally, price-based controls always hit the poor hardest by their very nature. That doesn't necessarily mean they're aimed at the poor, just that the mechanism by which they work has less effect on people with enough disposable income not to care (cf. fuel duty, carbon taxes, prescription charges and passport fees).

Minimum pricing is a boon for supermarkets

Matt Cavanagh writes:

Last year’s IFS study [pdf] estimated that, assuming ‘no behavioural response from consumers and no wider price effects’, the 45p MUP proposed by the SNP in 2010, if introduced across the UK, ‘would transfer £1.4 billion from alcohol consumers to producers and retailers’.

This transfer is largely unavoidable if the major benefit of minimum pricing – the fact that it prevents retailers absorbing the cost – is to be maintained. As I wrote in March:

In order to prevent this increase being absorbed by supermarkets as a loss-leader (even with duty at the much lower current rates, it is possible to buy some drinks which are sold for less than the combined duty and VAT charged on them), this would have to be combined with legislation preventing shops from selling for less than the duty charged on the drink.

Enacting this plan would indeed result in a sharp rise in alcohol prices, with most or all of the increase going to the treasury rather than the supermarkets or drinks companies. But the increase would come from all drinks, rather than just the cheaper ones that the proposed minimum price is targeting.

It might be illegal under EU law

The European Union is quite prescriptive about how sin taxes work. The European Commission has warned that Scotland's implementation "causes problems with the compatibility with the EU Treaty", and previous attempts have been shot down by the courts. Not that that's not a reason not to try.

Of course, none of these questions address what is really the heart of the matter: how far does the government's right or responsibility to alter people's behaviour to protect them extend? That's a valid debate to have; but it is a separate one from whether minimum pricing would work at achieving its stated goals. To that, the answer is a cautious yes, but it remains worth noting that its goals are reducible to "stopping poorer binge drinkers from drinking so much". That may still be a valid aim, but its a weaker one that many defenders have made it out to be.

Booze. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Why Angela Merkel's comments about the UK and US shouldn't be given too much weight

The Chancellor's comments are aimed at a domestic and European audience, and she won't be abandoning Anglo-German relationships just yet.

Angela Merkel’s latest remarks do not seem well-judged but should not be given undue significance. Speaking as part of a rally in Munich for her sister party, the CSU, the German Chancellor claimed “we Europeans must really take our own fate into our hands”.

The comments should be read in the context of September's German elections and Merkel’s determination to restrain the fortune of her main political rival, Martin Schulz – obviously a strong Europhile and a committed Trump critic. Sigmar Gabriel - previously seen as a candidate to lead the left-wing SPD - has for some time been pressing for Germany and Europe to have “enough self-confidence” to stand up to Trump. He called for a “self-confident position, not just on behalf of us Germans but all Europeans”. Merkel is in part responding to this pressure.

Her words were well received by her audience. The beer hall crowd erupted into sustained applause. But taking an implicit pop at Donald Trump is hardly likely to be a divisive tactic at such a gathering. Criticising the UK post-Brexit and the US under Trump is the sort of virtue signalling guaranteed to ensure a good clap.

It’s not clear that the comments represent that much of a new departure, as she herself has since claimed. She said something similar earlier this year. In January, after the publication of Donald Trump’s interview with The Times and Bild, she said that “we Europeans have our fate in our own hands”.

At one level what Merkel said is something of a truism: in two year’s time Britain will no longer be directly deciding the fate of the EU. In future no British Prime Minister will attend the European Council, and British MEPs will leave the Parliament at the next round of European elections in 2019. Yet Merkel’s words “we Europeans”, conflate Europe and the EU, something she has previously rejected. Back in July last year, at a joint press conference with Theresa May, she said: “the UK after all remains part of Europe, if not of the Union”.

At the same press conference, Merkel also confirmed that the EU and the UK would need to continue to work together. At that time she even used the first person plural to include Britain, saying “we have certain missions also to fulfil with the rest of the world” – there the ‘we’ meant Britain and the EU, now the 'we' excludes Britain.

Her comments surely also mark a frustration born of difficulties at the G7 summit over climate change, but Britain and Germany agreed at the meeting in Sicily on the Paris Accord. More broadly, the next few months will be crucial for determining the future relationship between Britain and the EU. There will be many difficult negotiations ahead.

Merkel is widely expected to remain the German Chancellor after this autumn’s election. As the single most powerful individual in the EU27, she is the most crucial person in determining future relations between the UK and the EU. Indeed, to some extent, it was her intransigence during Cameron’s ‘renegotiation’ which precipitated Brexit itself. She also needs to watch with care growing irritation across the EU at the (perceived) extent of German influence and control over the institutions and direction of the European project. Recent reports in the Frankfurter Allgemeine Zeitung which suggested a Merkel plan for Jens Weidmann of the Bundesbank to succeed Mario Draghi at the ECB have not gone down well across southern Europe. For those critics, the hands controlling the fate of Europe are Merkel’s.

Brexit remains a crucial challenge for the EU. How the issue is handled will shape the future of the Union. Many across Europe’s capitals are worried that Brussels risks driving Britain further away than Brexit will require; they are worried lest the Channel becomes metaphorically wider and Britain turns its back on the continent. On the UK side, Theresa May has accepted the EU, and particularly Merkel’s, insistence, that there can be no cherry picking, and therefore she has committed to leaving the single market as well as the EU. May has offered a “deep and special” partnership and a comprehensive free trading arrangement. Merkel should welcome Britain’s clarity. She must work with new French President Emmanuel Macron and others to lead the EU towards a new relationship with Britain – a close partnership which protects free trade, security and the other forms of cooperation which benefit all Europeans.

Henry Newman is the director of Open Europe. He tweets @henrynewman.

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