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Minimum unit pricing

In recent years, another pricing policy – minimum pricing – has attracted substantial attention. Minimum pricing is not a tax, but rather a legally mandated ‘floor price’ below which retailers are not permitted to sell alcohol. Unlike a tax, any additional revenue from raising prices is retained by retailers, rather than the government. Some form of minimum pricing is in place in six countries: Canada, certain states of the USA, Russia, Moldova, Ukraine and Uzbekistan.[1]

In the UK, debate has generally centred on minimum unit pricing (MUP), a specific version of minimum pricing whereby the floor price is set according to the alcohol content of a drink. For example, under a 50p MUP, the minimum legal price of a drink would be the number of units of alcohol it contained multiplied by 50p. The table below illustrates the impact different levels of MUP would have on a range of typical products.[2]

 


 

Minimum Unit Pricing in Scotland

In 2012, the Scottish Government passed legislation introducing a 50p minimum unit price.[3] The measure is subject to a ‘sunset clause’, which means it will have to be renewed or will expire after six years. However, the policy has yet to be implemented, following a series of legal challenges from alcohol industry bodies.

The cases have been brought by a set of alcohol producer trade associations - The Scotch Whisky Association, the European Spirits Association and Comité Européen des Entreprises Vins (CEEV). They argue that minimum unit pricing is incompatible with European Union law because:

  • it impedes trade between EU member states (contravening Article 34 of the Treaty on the Functioning of the European Union[4] and Article 6(2) of Regulation (EC) 110/2008)[5]
  • it undermines the harmonisation of agricultural policy, specifically with respect to wine production (which would breach Regulation (EC) 1234/2007 (as amended by Regulation (EC) 491/2009)[6]

The case was initially ruled on in May 2013 by the Scottish Court of Session, which found that MUP is not inconsistent with EU law, holding that insofar as MUP represents a restriction on trade, this is justified “on the grounds of the protection of the life and health of humans” (as laid down in Article 36 of the Treaty on the Functioning of the European Union).[7] MUP was also held to be consistent with EU agricultural regulations.

However, in April 2014, the Court of Session referred the case to the European Court of Justice. It judged that “although at first sight the tests to be applied under article 36 (which allows the restriction of trade to protect human life and health) might appear to be relatively well established… it would be of help to have the guidance of the Court of Justice of the European Union”.[8]

In December 2015, the European Court of Justice (ECJ) gave its ruling, confirming the earlier judgement that MUP is restrictive of trade, but that this may be justified on the basis of protecting human life and health. However, it raised the question of whether MUP is proportionate to this objective, pointing out that this goal might also be achieved by raising taxes on alcohol. Ultimately the Court did not issue a final ruling, but referred the case back to the Court of Session, setting it the task of determining “whether measures other than that provided for by the Scottish legislation, such as increased taxation on alcoholic drinks, are capable of protecting human life and health as effectively as the current legislation, while being less restrictive of trade in those products within the EU”.[9]

In October 2016, the Scottish Court of Session returned to the question and ruled that MUP is consistent with EU law. In response to the ECJ’s suggestion that alcohol taxes might be a suitable alternative, the Court of Session noted that i) increases in tax, unlike an MUP, could be absorbed by retailers and not passed onto consumers; and ii) MUP, unlike tax, can be linked to the strength of a drink (unlike wine and cider duty, see above).[10]

At the time of writing, the Scotch Whisky Association has been permitted to lodge a further appeal with the UK Supreme Court, which is likely to be heard in 2017.[11]

Minimum Unit Pricing in the rest of the British Isles

In March 2012, the Westminster government announced plans for a UK-wide minimum unit price, as part of its Alcohol Strategy. According to then Prime Minister David Cameron:

When beer is cheaper than water, it’s just too easy for people to get drunk on cheap alcohol at home before they even set foot in the pub. So we are going to introduce a new minimum unit price. For the first time it will be illegal for shops to sell alcohol for less than this set price per unit. We are consulting on the actual price, but if it is 40p that could mean 50,000 fewer crimes each year and 900 fewer alcohol-related deaths a year by the end of the decade. 

This isn’t about stopping responsible drinking, adding burdens on business or some new kind of stealth tax - it's about fast, immediate action where universal change is needed.[12]

This was followed by a consultation on the strategy, in which the Government sought stakeholder views on the appropriate level of the minimum unit price, the mechanism for adjusting this level over time and the impact of the policy.[13] The consultation based its assessment of the impact of a 45p MUP, implying that this was the Government’s preferred level.

However, in July 2013, the Government reversed its plans. Then Home Secretary Theresa May claimed:

That consultation has been extremely useful. But it has not provided evidence that conclusively demonstrates that Minimum Unit Pricing (MUP) will actually do what it is meant to: reduce problem drinking without penalising all those who drink responsibly. In the absence of that empirical evidence, we have decided that it would be a mistake to implement MUP at this stage. We are not rejecting MUP – merely delaying it until we have conclusive evidence that it will be effective.[14]

In responding to the alcohol strategy consultation in parliament, then Minister of State for Home Affairs, Jeremy Browne, described MUP as “under consideration”.[15] This has remained the Government’s position: responses to recent parliamentary questions show that it is monitoring the progress of the Scottish Government’s legal case, but is not taking any active steps towards introducing the policy.

The Government has no plans to introduce Minimum Unit Pricing although the evidence for all policy approaches is kept under review.

We have noted the recent opinion of the EU Advocate General. We await a final ruling from the Court of Justice of the European Union and we will continue to monitor developments.

Jane Ellison, Parliamentary Under-Secretary of State for Health, 15th December 2015[16]

In 2015, the Welsh Government published a draft bill proposing a minimum unit price for alcohol in Wales of 50p.[17] However, it currently lacks the relevant powers to introduce the policy, and In September 2016 the UK government rejected to devolve alcohol pricing to Wales.[18] The Northern Irish Government has also expressed a desire to introduce MUP.[19]

At the time of writing, the Republic of Ireland is in the process of passing legislation to introduce a €1 per unit MUP. The measure is part of the Public Health (Alcohol) Bill, which was introduced to the Seanad (parliament) in December 2015.[20]

Evidence of the effectiveness of MUP

Evidence on the effect of minimum unit pricing comes from broadly two sources:

  • ‘natural experiments’ from places that have introduced or adjusted similar policies
  • academic models, based on the best available evidence, simulating the likely effects of the policy

Most academic analysis of real-world minimum pricing policy has focused on Canadian provinces, in particular British Columbia and Saskatchewan. It is important to note that the policy in these provinces is subtly different from minimum unit pricing in two ways: i) the minimum price is proportionate to the volume of liquid in the drink, rather than volume of alcohol; ii) the level of the minimum price varies by drink. However, it has been argued that in practice these policies are similar enough to those proposed in the UK that the effects of both are likely to be similar.[21]

A team of researchers at the Centre for Addictions Research of British Columbia have used changes in the level of minimum prices to estimate the effectiveness of such policies. In British Columbia (where over 20 years, minimum prices rose to around 43p per unit),[22] they have found that on average a 10% increase in minimum prices is associated with:

  • a 3% reduction in consumption[23]
  • a 32% reduction in wholly caused alcohol deaths (though no significant association was found with acute alcohol related deaths, primarily injuries)[24]
  • a 9% reduction in alcohol-attributable hospital admissions[25]

In Saskatchewan, which has a higher minimum price (typically 45–60p per unit in 2010), they found on average a 10% increase in minimum prices is associated with a reduction in alcohol consumption of 8%.[26]

The most prominent simulations of the effects of minimum unit pricing are produced by Sheffield University’s Sheffield Alcohol Policy Model (SAPM). This contains two elements. First, econometric analysis that estimates the effect of changes in price of different drinks on consumption (using price elasticities as described above). Second, models of the relationship between alcohol consumption and different types of harm, based on the best available epidemiological evidence.[27]

By putting these two elements together, the SAPM can estimate the likely effects of a minimum unit price. According to the most recent available analyses, a 50p minimum unit price in England would:[28]

  • Reduce total alcohol consumption in the total population by 1.3%, but by 4.7% among harmful male drinkers
  • Reduce annual alcohol-attributable deaths by 4.3%
  • Reduce alcohol-attributable healthcare costs by 2.5%
  • Reduce alcohol-related criminal offences by 2.4%
  • Reduce alcohol-related workplace absences by 2.0%

The SAPM shows that minimum unit pricing is closely targeted at the most harmful drinkers, particularly those on lower incomes. An earlier analysis found that a 50p MUP would have minimal effect on moderate drinkers (men consuming less than 22 units a week, and women consuming less than 15): on average, they would drink 3 fewer units (the equivalent of a pint of strong beer) and spend £3 more on alcohol per year.[29] For moderate drinkers in the poorest 20% of the income distribution, their consumption would fall by 7 units a year, and their spending would be unchanged. By contrast, heavy drinkers (men consuming over 50 units a week, and women consuming over 35) would drink 134 fewer units a year on average, and spend £81 more. Heavy drinkers in the poorest 20% would drink 372 fewer units a year and spend £28 more.

Moreover, it has been argued that this targeting would help reduce health inequalities, with 90% of the lives saved coming from lower socio-economic groups.[30]

The relative and combined impact of MUP and tax

Though MUP and alcohol taxes both reduce alcohol-related harm, they operate in quite different ways, and so can be seen as complements rather than substitutes. As described above, MUP is relatively narrowly targeted at the cheapest alcohol favoured by the heaviest drinkers. As a result, substantial tax increases would be required in order to replicate the effects of an MUP – a recent modelling study found that duty would have to be increased by 28% to match the reduction in deaths that could be achieved by a 50p MUP in Scotland.[31] 

At the same time, taxes affect a much broader range of products, and so can reduce consumption among those who drink at hazardous or harmful levels, but favour more expensive drinks. As a result, taxes and MUP have greatest effect when used in conjunction. For example, research commissioned by Public Health England found that a five-year duty escalator and a 60p MUP together would reduce alcohol-related hospital admissions in England by 25,000 compared to a reduction of 17,000 for MUP alone or 11,000 for the duty escalator alone.[32] As the chart below shows, this is in large part because duty increases have a greater effect on drinkers in higher socioeconomic classes than MUP.[33]

 


 

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[1] Stockwell T and Thomas G (2013)., ‘Is alcohol too cheap in the UK? The case for setting a Minimum Unit Price for alcohol’, London: Institute of Alcohol Studies, p. 11

[2] Adapted from Home Office website, 'Alcohol pricing'

[3] Legislation.gov.uk, ‘Alcohol (Minimum Pricing) (Scotland) Act 2012’ <http://www.legislation.gov.uk/asp/2012/4/contents/enacted>

[4] Treaty on the Functioning of the European Union, 13 December 2007, 2012/C 326/01 <http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A12012E%2FTXT>

[5] European Commission (January 2008), ‘Regulation (EC) No 110/2008 of the European Parliament and of the Council of 15 January 2008 on the definition, description, presentation, labelling and the protection of geographical indications of spirit drinks and repealing Council Regulation (EEC) No 1576/89’, 15 January 2008 <http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32008R0110>

[6] European Commission (October 2007), ‘Council Regulation (EC) No 1234/2007 of 22 October 2007 establishing a common organisation of agricultural markets and on specific provisions for certain agricultural products (Single CMO Regulation)’ <http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2007:299:0001:0149:EN:PDF>

[7] Judiciary of Scotland (2013), ‘Petition for Judicial Review by Scotch Whisky Association and Others: Summary of Lord Docherty’s decision in the Petition for Judicial Review’

<http://www.scotland-judiciary.org.uk/9/1040/Petition-for-Judicial-Review-by-Scotch-Whisky-Association-And-Others>

[8] Scotch Whisky Association and Others v The Lord Advocate, The Advocate General for Scotland [2014] CSIH 38 <https://www.scotcourts.gov.uk/search-judgments/judgment?id=482a86a6-8980-69d2-b500-ff0000d74aa7>

[9] Court of Justice of the European Union (2015), ‘The Scottish legislation introducing a minimum price per unit of alcohol is contrary to EU law if less restrictive tax measures can be introduced, Press Release No 155/15’

<http://curia.europa.eu/jcms/upload/docs/application/pdf/2015-12/cp150155en.pdf>

[10] Judiciary of Scotland (2016), ‘Scotch Whisky Association and others v Lord Advocate and Advocate General for Scotland: A summary of the Opinion of the Court in the reclaiming motion by the Scotch Whisky Association and others against the Lord Advocate and the Advocate General for Scotland’ <http://bit.ly/2m2TqaS\>

[11] Scottish Legal News (2016), ‘Court of Session allows Scotch Whisky Association appeal to Supreme Court’ <http://bit.ly/2lH9xzL>

[12] HM Government (2012), ‘The Government’s Alcohol Strategy’ <https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/224075/alcohol-strategy.pdf>

[13] Home Office (2012), ‘A consultation on delivering the Government’s policies to cut alcohol fuelled crime and anti-social behaviour’ <http://bit.ly/2n2ZbKU>

[14] Home Office (2013), Next steps following the consultation on delivering the Government’s alcohol strategy <http://bit.ly/2mECpb6>

[15] UK Parliament (July 2013), Hansard HC Deb. Vol 566 <https://hansard.parliament.uk/Commons/2013-07-17/debates/13071772000005/AlcoholStrategyConsultation>

[16] UK Parliament (December 2015) ‘Alcoholic Drinks: Written question – 19122; HC Deb <http://bit.ly/2n325PA>

[17] BBC News (July 2015), ‘Proposed minimum alcohol price law is published’ <http://www.bbc.co.uk/news/uk-wales-politics-33522647>

[18] BBC News (September 2016), ‘Doctors criticise alcohol minimum pricing block’ <http://www.bbc.co.uk/news/uk-wales-politics-37318469>

[19] BBC News (December 2014), ‘Alcohol: Jim Wells plans to bring in minimum pricing per unit’ <http://www.bbc.co.uk/news/uk-northern-ireland-30296398>

[20] Shiels McNamee M (December 2016)., ‘Alcohol pricing: Here’s how the planned change will affect your pocket’, The Journal <http://www.thejournal.ie/alcohol-pricing-advertising-announced-2491642-Dec2015/>

[21] Stockwell and Thomas (2013), op. cit

[22] Stockwell and Thomas (2013), op. cit., p. 12

[23] Stockwell T et al (2012)., ‘Does minimum pricing reduce alcohol consumption? The experience of a Canadian province’, Addiction 107:5, pp. 912–20

[24] Zhao J et al (2013)., ‘The relationship between changes to minimum alcohol price, outlet densities and alcohol-related death in British Columbia, 2002–2009’, Addiction 108:6, pp. 1059–69

[25] Stockwell T., et al (2013)., ‘Minimum alcohol prices and outlet densities in British Columbia, Canada: Estimated impacts on alcohol attributable hospital admissions’, American Journal of Public Health 103:11, pp. 2014–20

[26] Stockwell T., et al (2012)., ‘The raising of minimum alcohol prices in Saskatchewan, Canada: impacts on consumption and implications for public health’, American Journal of Public Health 102:12, e103–10

[27] The Sheffield Alcohol Policy Model (SAPM) <http://www.shef.ac.uk/scharr/sections/ph/research/alpol/research/sapm>

[28] Angus C., et al (2016)., ‘Alcohol and cancer trends: Intervention Studies University of Sheffield and Cancer Research UK’

[29] Meier P., et al (2016)., ‘Estimated Effects of Different Alcohol Taxation and Price Policies on Health Inequalities: A Mathematical Modelling Study’, PLOS Medicine, doi: http://dx.doi.org/10.1371/journal.pmed.1001963

[30] Ibid

[31] Angus C., et al (2016)., ‘Model-based appraisal of the comparative impact of Minimum Unit Pricing and taxation policies in Scotland’, Sheffield: ScHARR, University of Sheffield.

[32] Angus C., and Ally A (2015)., ‘Modelling the potential impact of duty policies using the Sheffield Alcohol Policy Model Version 3’, Sheffield: ScHARR, University of Sheffield.

[33] Public Health England (2016), op. cit., p. 94