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Punishing the poor, the moderate and the sensible

Wednesday November 28, 2012

Economist Eamonn Butler destroys the case for minimum alcohol pricing

Minimum alcohol pricing is another seemingly obvious but actually counterproductive and illiberal policy, pushed on politicians by pious interest groups who think they know how to run our lives better than we do.

Setting a minimum price for alcohol punishes the many for the sins of the few. The people who would be most affected would be people on low or fixed incomes – lower-income families and pensioners, who may drink perfectly responsibly, but would be priced out of this modest pleasure. A recent report from the respected Institute for Fiscal Studies confirms the fact. Households earning £10,000 or less buy the cheapest alcohol, averaging 39p a unit. Putting the minimum price up to 45p as the Government is proposing, or 50p as Scotland plans, adds a huge cost to already-strained budgets. Yes, people can do without alcohol, but what right has government to take that decision for them, and deny them the health and happiness benefits of moderate drinking?

Of course, once the 45p or 50p minimum is established, the pressure to increase it will be ever upwards. Like tobacco taxes, governments will see it as a nice little earner, and will keep nudging it up, but just in small steps so that people don’t simply give up and sign the pledge.

So the price of alcohol will rise and rise. And what will be the next target? Having first targeted the smokers, and now the drinkers, it cannot be long before the nannies start to think about putting minimum prices on fish and chips or fizzy drinks.

The two bits of ‘evidence’ put forward to justify minimum pricing are that ‘Well, it reduced consumption in Canada’ and ‘Economic modelling shows it works’. Nonsense, of course. As an economist, true enough, I know that when the price of something rises, people generally consume less of it.

Except sometimes.

Overall consumption might fall a bit, but heavy, problem drinkers are not likely to be put off their excessive consumption just because the price rises. They will just spend less on other things to feed their compulsion. The other group that the health lobbyists have in their sights is of course young people. They cite evidence of teenagers getting legless in our city centres on a Friday and Saturday night. But then most of those young people staggering down the pavement would not actually be hit by the minimum-price rule. They are buying their drinks in bars and clubs where the price is far more than 50p a shot.

As for the economics, the single economic model that has been cited is the Sheffield Alcohol Policy Model, which has been fatally undermined this week in an Adam Smith Institute report by lifestyle expert Chris Snowdon.

Put simply, the Sheffield economists use unreasonable assumptions, like the assertion that heavy drinkers are price-sensitive, which world evidence clearly refutes. They ignore large differences between different sorts of people. They offer no calculation of how far off their estimates might be, and ignore the inevitable errors in statistics and sampling. They ignore the positive benefits of alcohol, including the health benefits of moderate drinking. They forget that if poorer people have to pay more for alcohol, they might economise on other things like properly nutritious food. They do not calculate how many people might substitute alcohol (which at least is legal, open and therefore controllable) for harmful drugs (which are not). They do not think about the amount of drink that will be smuggled in from the continent, or even brewed illicitly. And so on.

But then economists, politicians and doctors are not going to be hit by this measure. They can bask in their own sanctimony while passing the cost on to people who can ill afford it.

Dr Eamonn Butler is Director of the Adam Smith Institute

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