A minimum price on alcohol is a bad idea

November 27, 2012 4:16 PM

Many of us enjoy a drink after work, or on the weekend. But it might soon become a little more expensive to unwind if the Government has its way. The Adam Smith Institute released a report yesterday on the minimum pricing of alcohol. This would mean the introduction of a floor price for alcohol, which will probably be levied at around 50p per unit.

However, the authors of the ASI’s report have highlighted serious problems with the data on which this policy is based. For one, the Sheffield model, which is used to measure the impact of alcohol policies, is wrong to assume that heavy drinkers will reduce their consumption of alcohol as a result of a price rise. What’s more, the minimum pricing of alcohol effectively increases the cost of alcohol for everyone. This hurts moderate drinkers – they are being punished with higher prices without any harmful behaviour on their part. The Telegraph reported today that a minimum price on alcohol could even impact on meal-deals where alcohol is bundled with food and sold on offer.

The policy could also hurt those on lower incomes to a greater extent than any other group. With already tight budgets, increasing alcohol prices could see them reduce their ability to spend elsewhere, lowering their living standards. It may also prove unhealthier – cuts could be made in other areas of family and personal budgets, such as the food bill.

The behaviour that the government wants to change – heavy drinking that is damaging in the long term – is the least likely to change in levels of consumption due to price changes. What is likely to happen is that the behaviour the Government wants to stop barely changes, whilst moderate drinkers and low-income earners are left poorer.

The researchers also found that the Sheffield model ignored the effects of minimum pricing on the illicit trade. This is a growing problem in the UK without introducing damaging policies. Alcohol bought and sold on the black market has the potential to be dangerous and is more likely to harm consumers – the exact opposite the government had hoped for with this measure. Past TPA research showed that £28.5 billion was lost in five years to the illicit trade in a range of products.

The intentions of the government are one thing but what will happen in reality is another. As the ASI's report shows, the Government mustn’t base policy on a flawed model.Many of us enjoy a drink after work, or on the weekend. But it might soon become a little more expensive to unwind if the Government has its way. The Adam Smith Institute released a report yesterday on the minimum pricing of alcohol. This would mean the introduction of a floor price for alcohol, which will probably be levied at around 50p per unit.

However, the authors of the ASI’s report have highlighted serious problems with the data on which this policy is based. For one, the Sheffield model, which is used to measure the impact of alcohol policies, is wrong to assume that heavy drinkers will reduce their consumption of alcohol as a result of a price rise. What’s more, the minimum pricing of alcohol effectively increases the cost of alcohol for everyone. This hurts moderate drinkers – they are being punished with higher prices without any harmful behaviour on their part. The Telegraph reported today that a minimum price on alcohol could even impact on meal-deals where alcohol is bundled with food and sold on offer.

The policy could also hurt those on lower incomes to a greater extent than any other group. With already tight budgets, increasing alcohol prices could see them reduce their ability to spend elsewhere, lowering their living standards. It may also prove unhealthier – cuts could be made in other areas of family and personal budgets, such as the food bill.

The behaviour that the government wants to change – heavy drinking that is damaging in the long term – is the least likely to change in levels of consumption due to price changes. What is likely to happen is that the behaviour the Government wants to stop barely changes, whilst moderate drinkers and low-income earners are left poorer.

The researchers also found that the Sheffield model ignored the effects of minimum pricing on the illicit trade. This is a growing problem in the UK without introducing damaging policies. Alcohol bought and sold on the black market has the potential to be dangerous and is more likely to harm consumers – the exact opposite the government had hoped for with this measure. Past TPA research showed that £28.5 billion was lost in five years to the illicit trade in a range of products.

The intentions of the government are one thing but what will happen in reality is another. As the ASI's report shows, the Government mustn’t base policy on a flawed model.

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