Minimum pricing remains in the spotlight

Minimum unit pricing of alcohol remained centre-stage after the Scottish Parliament approved the Alcohol Minimum Pricing Bill and the Scottish Government announced that its preferred price for a unit is 50 pence. The Bill looks to set a minimum price for a unit of alcohol as a condition of a licence. It also sets the formula for calculating the minimum price (based on the strength of the alcohol, the volume of the alcohol and a price per unit of alcohol). The measure is expected to come into effect in April 2013.

Health Minister, Nicola Sturgeon, announced the preferred price during a visit to a gastroenterology ward at Glasgow Royal Infirmary, where 80% of patients are reported to be there because of alcohol misuse. Ms Sturgeon said:

“Cheap alcohol comes at a price and now is the time to tackle the toll that Scotland’s unhealthy relationship with alcohol is taking on our society. Too many Scots are drinking themselves to death. The problem affects people of all walks of life.

“It’s no coincidence that as affordability has increased, alcohol-related hospital admissions have quadrupled, and it is shocking that half of our prisoners now say they were drunk when they committed the offence. It’s time for this to stop.

“Introducing a minimum price per unit will enable us to tackle these problems, given the clear link between affordability and consumption. There is now a groundswell of support for the policy across the medical profession, police forces, alcohol charities and from significant parts of the drinks and licensed trade industry who recognise the benefits minimum pricing can bring – saving lives and reducing crime.

“Since 45p was first proposed as the minimum price 18 months ago, we have seen inflation of around 5%. A minimum price of 50p takes this into account and will achieve a similar level of public health benefits to what 45p would have achieved in 2010.”

Controversy

However, despite the fact that the Westminster Coalition Government has also now come out in favour of minimum pricing as a central plank of its new alcohol strategy for England, Minimum pricing remains in the spotlight debate continues as to whether the policy is either desirable or legal. Opinion on the issue appears to divide the alcohol industry, for while the major producers appear to be opposed to MUP (see page 7), some individual companies and the pub sector are supportive of the proposal. A national poll of publicans carried out by the British Institute of Innkeeping revealed that almost four in five (77%) agreed with the concept of a national minimum price. Of those who were in favour, 81% said the actual price level should come in at 50p per unit of alcohol.

Opinion is also divided within Government and the public services.

In its evidence to the House of Commons Health Select Committee inquiry into the alcohol strategy, the Office of Fair Trading (OFT) came out against MUP, basically because of fears about possible adverse unintended consequences.

While emphasizing that it fully supports the Government’s aim of reducing alcohol harm, and also accepting that increasing the price of alcohol would be likely to lead to some reduction in consumption, the OFT goes on to say that the price increase is also likely to generate windfall gains for retailers, as predicted by recent independent modelling carried out by researchers at the University of Sheffield, and, unlike an increase in tax, additional consumer spending on alcohol would go to private firms rather than to the Government.

The OFT evidence continues: “

The OFT is concerned that the unintended consequence of this increase in profit may be to give retailers an incentive to sell more, rather than less, low cost alcohol. Retailers would gain additional profit for every unit of low cost alcohol that they sold. At worst, such an incentive could dull the effectiveness of the minimum price in reducing alcohol sales.

“More generally, the OFT is concerned about the long-term impact of minimum pricing restrictions on consumers and on productivity in the retail sector. International studies, including by the OECD, suggest that restrictions on retail prices, such as banning below cost selling, ultimately lead to lower productivity and worse outcomes for consumers. For example in France, between 1997 and 2002, food prices increased faster than general inflation -11.8% compared to 6% - in part because of retail price restrictions. In Ireland, it has been estimated that Irish families were paying €500 more per year for retail items in 2005 because of rules preventing below cost selling. Taken in isolation, a minimum price for alcohol may not have a significant negative effect on productivity. However, the OFT is concerned that, by legitimising intervention to control prices in a competitive market, it will be harder for the Government to resist calls for similar measures in other parts of the retail sector in future. This could have significant long-term costs. For these reasons, the OFT considers that a change in taxation would be preferable to imposing a minimum price, with less risk of creating unintended consequences.”

Local Government Association opposes MUP

Perhaps more unexpectedly, the Local Government Association (LGA) also issued a statement attacking minimum pricing, dismissing it as a ‘gesture’, and claiming that its introduction, and the planned ban on discounted multi-buy deals, “could see a surge in potentially dangerous black market booze”. The LGA said that the Government’s focus on making alcohol less affordable could risk pushing cash-strapped adults to buy cheap counterfeit wines and spirits which could make them blind or even kill them.

Petition to scrap beer-duty escalator The e-petition to scrap the beer-duty escalator has reached the target of 100,000 signatures — and is only the 12th e-petition out of 16,000 to reach the milestone. The escalator, introduced in 2008 by former Chancellor Alistair Darling, puts up the tax on alcohol by 2% above inflation every year, and has resulted in a 42% tax hike on beer since 2008. Hitting the 100,000 target opens the way to a debate in the House of Commons, although this is not automatic, according to Parliamentary procedure. The trade newspaper The Morning Advertiser reports that Greg Mulholland MP, Chair of the All-Party Parliamentary Save the Pub Group, along with Andrew Griffiths MP, Chairman of the All-Party Parliamentary Beer Group, will push for a full three-hour debate. Griffiths said: “The beer-duty escalator introduced by Labour and continued by this Government is damaging pubs and urgently needs to be scrapped. Reaching 100,000 signatures is a landmark opportunity to hold the Government to account and debate the effect this is having on the industry. “This is the end of the beginning, not the beginning of the end. There is still a great deal more work to do to get a change in tax policy. We shouldn’t kid ourselves that we are anywhere near achieving that. There needs to be a continued effort.” Mulholland added: “It’s high time the Government noticed the level of beer duty we pay in this country. The tax is damaging to Britain’s pubs and breweries.” The Morning Advertiser also reports that CAMRA, the Campaign for Real Ale, has announced it is to hold a Mass Parliamentary Lobby in Westminster with over 1,000 people expected to attend. Attendees will be asking to speak to their respective local MPs, and seeking their support to protect the nation’s beer and pub industry. Colin Valentine, CAMRA national Chairman, said: “CAMRA’s next step is …. to maintain the impetus with our Mass Parliamentary Lobby, which will reinforce to MPs the groundswell of support for this campaign. With all the battering it has taken, the beer and pub sector still manages to contribute over £21 billion a year to the UK’s GDP, and supports one million jobs, so it’s about time the Government honoured its pledge to be pub friendly.”

In a statement issued following the LGA’s Alcohol Strategy Conference in April 2012, the Association said that attempts to increase alcohol prices would also fail to curb binge drinking or tackle the associated antisocial behaviour and health problems it creates.

Cllr David Rogers, Chair of the LGA’s Community Wellbeing Board, said:

“We are concerned that targeting cheap alcohol could push people to the black market and cheaper drinks. When drinking counterfeit brands, you can never be sure what you are putting into your body. People who think they are getting a bargain could end up making themselves blind or even drinking themselves to death.

“We know there is no simple solution to alcohol abuse but tackling cheap drinks is only one part of the problem. Focusing solely on making alcohol less affordable will fail to address the root causes of binge drinking as well as the nuisance, vandalism and risks to health it causes.

“National gestures like minimum pricing and banning multi-buy discounts will only go so far in deterring binge drinking and don’t take into account the varying issues in town and city centres across the country. We need to see councils given the powers and flexibility to tackle problems locally.

“We now need a system that allows local authorities to act on the concerns of the people in their area by saying ‘no’ to a new late night club on a street that is already saturated with them. We also want to see health experts given a say on whether the opening of a corner shop selling cheap booze could contribute to alcohol dependency in a particular area.”

The LGA statement added that tests on bottles of fake vodka seized by council trading standards officers around the country have revealed alarming levels of methanol, a key ingredient used to make anti-freeze, which could potentially lead to blindness or death. Other industrial chemicals like isopropanol, used in cleaning fluids, and chloroform, used in pesticides, have also been found in bogus brands.

In April 2012, Southampton City Council’s Trading Standards team seized 124 bottles of fake vodka and wine from a local newsagent. The haul included 35 Jacobs Creek wine bottles with incorrect spellings of Australia and 45 bottles of Arctic Ice vodka, a brand that was found to be made-up. Recently a shopkeeper was fined £16,000 after Surrey County Council Trading Standards seized fake Glen’s vodka which, when tested, contained 235 times more methanol than the legal limit. Just five teaspoons of methanol can be fatal. While in Staffordshire, trading standards officers acted after people reported suffering from burning throats after drinking vodka that was later found to contain methanol. A recent crackdown has found suspected counterfeit alcohol in more than one in six (18%) of off-licenses in the county.

The LGA is now calling for the introduction of a broad package of measures which would give local areas the flexibility to address problems that are particular to them through licensing powers and the new public health role for councils. This includes ensuring the bureaucracy in the licensing system is reduced to allow local authorities to act more quickly on the concerns of people in their local area. This would include being able to refuse permission for a new nightclub or bar on a street that already has a proliferation of them. In addition, health experts should be given a say on whether the opening of a corner shop selling cheap booze could contribute to alcohol dependency in a particular area.

The LGA has also called for late-night pubs and nightclubs to contribute towards the cost of cleaning up the mess caused by rowdy alcohol-fuelled nights out through a late-night levy, with the police and councils able to decide locally how to spend and share the money.

Responsibility for alcohol services moves from the NHS to local Government from April 2013. The LGA wants to see reduced bureaucracy of the current licensing system to allow councils to act more quickly on residents’ concerns, local authorities given the power to decide locally how to spend a late night levy on nightclubs and bars, and local health experts given a say on the opening of new off-licenses selling cheap alcohol.

Illegal alcohol ‘not an issue’

However, speaking to Alcohol Alert, Dr Evelyn Gillan, Chief Executive of Alcohol Focus Scotland, rejected the LGA claims. “The Scottish Government has stated that illegal sales of alcohol are not a significant problem. In order to make an assessment of the level of unpaid duty, HMRC makes an estimate, annually, of the size of the illicit market. Currently the methodology only allows consideration of spirits and beer. For the UK, in 2008-09, this estimate was around 2% of total consumption; a figure which has been falling since 2006-07.”

Moreover, Dr Gillan continued,

“In evidence to the (Scottish) Health and Sport Committee in 2010, senior police officers indicated that across all eight forces in Scotland there was no evidence that illegal sales of alcohol were an issue nor did they consider that it was likely to become one.” Dr Gillan added: “Last year, the number of Scots dying as a result of alcohol was twice as high as in the early 1980s and alcohol-related hospital admissions were four times higher. We have reached the point where Government action is necessary to protect the public and begin to change our relationship with alcohol.

“The minimum price has been set at a level which will deliver significant health and social benefits for the people of Scotland by putting an end to supermarkets’ irresponsible practices where a unit of alcohol can be sold for less than 15p. Introducing minimum pricing sends out a clear signal that alcohol is not an ordinary commodity like bread or milk and shouldn’t be sold or marketed as such. The benefits of minimum pricing are clear. Estimates from Sheffield University suggest that in the first year of minimum pricing in Scotland there could be 60 fewer deaths; 1600 fewer alcohol-related hospital admissions and around 3500 fewer crimes.”

For the Institute of Alcohol Studies, Katherine Brown said:

“It is essential that the issue of illegal alcohol does not become a barrier to implementing effective pricing policies that will benefit public health and well being. By its own admission, the Government has failed to work with the drinks industry to secure supply chains in order to reduce the volume of alcohol that is illegally diverted back from the Continent for illicit sale in the UK. Better enforcement is needed so that large scale tax avoidance operations do not deprive the public purse of funds and do not undermine health policy.”

But is MUP legal?

However, the legality of minimum pricing under European Union competition law remains uncertain. The Daily Telegraph reports that three days after the launch of the Government’s alcohol strategy, the issue of minimum unit pricing was discussed at a prearranged meeting at the Treasury with senior alcohol industry figures. Afterwards, the industry representatives claimed that Treasury officials told them that there were questions about the legality of minimum pricing. The Treasury disputed this interpretation, but the Telegraph reported a Treasury spokesman as saying:

“The Government is taking a range of action to tackle the availability of cheap alcohol. We will introduce a minimum unit price for alcohol, ensuring for the first time that alcohol can only be sold at a sensible and appropriate price. The Government continues to take legal advice on this subject and will consider any potential legal implications as part of its forthcoming consultation.”

The legality of minimum pricing may be tested fairly soon, as a response to the Scottish Government’s notifying the European Commission of its intended unit price. Opponents of minimum pricing hope the notification will trigger an inquiry and potentially a legal challenge by other European Union member states. Bodies such as the Scotch Whisky Association and the Wine and Spirit Trade Association, and drinks companies such as Diageo, hope it will fail to comply with European law as it acts as a domestic barrier to free trade.

However, the desire for a legal challenge is not restricted to opponents of minimum pricing. The Scottish Conservatives are also urging other EU member states to challenge the policy to ensure a quick decision on whether it meets free trade rules.

Conservative health spokesman, Jackson Carlaw, said:

“This is not an attempt to thwart the Bill but rather to ensure that every effort is made to determine whether the measure is legal.”

His party agreed to back the policy after securing a voluntary commitment by the Scottish Government to notify the European Commission (EC) of its plan.

The EC might not give a ruling unless there is a challenge from one of the 27 EU member states, said Mr Carlaw.

He said: “It is vital that minimum pricing is given a robust MOT to ensure it does not break EU free trade rules. So, to ensure that the EC expresses a view, Scottish Conservatives intend to meet and encourage concerned member states to mount a challenge so we can have clarification from Europe on the legality of a 50p unit price for alcohol.

If other European member states do contest plans put forward by the Scottish Government, it would be the Westminster Government that would have to argue the case, as Scotland is not a member of the EU in its own right.