By Bill Wirtz
In a renewed effort to crack down on alcohol abuse, the Irish Senate has approved new policies regarding alcoholic beverages. Apart from mandatory health labelling on the products themselves, the law would also require a legal minimum unit pricing. A similar regulation had recently passed objections by the UK’s Supreme Court, as Scotland was attempting lower access to cheap booze. As a result of Scotland’s policy, the cheapest bottle of whiskey would be priced at £14 (€15.80).
As a matter of public policy, there are several reasons to oppose the minimum pricing of alcohol. First and foremost, the tax is inherently regressive. While middle- and high-income class consumers are marginally affected by rising prices, it is low income earners who will suffer the most, as consumption goods such as alcohol make up a larger part of their expenses compared to other income classes.
If, as a result of minimum pricing, the consumption would decrease (a point that will be addressed later), then it would only be on behalf of people who are already struggling with their expenses. It is in fact a quasi-prohibition for the poorest of the poor, and therefore hardly a very fair one.
Another reason is the clear ignorance of consumer behaviour on this particular issue. Alcohol survived the 1930s prohibition in the United States, with people taking the immense risk of engaging in black market production and sales, at the danger of imprisonment. The low elasticity of alcohol in itself will make this particular policy unlikely to be effective. And in fact, there is no evidence to suggest that minimum will increase public health.
The economist Sam Bowman (above) shed light on the scientific evidence refuting the idea that price changes influence alcohol sales. He writes:
“This 1995 paper found that the heaviest drinkers’ responsiveness to price changes was statistically indistinguishable from zero, though it was based on very old data from the 1980s. This more recent one found that hazardous and harmful drinkers (people who consume more than 17.5 units per week) had a very low response to price changes. And this 2013 review of 19 studies found only two that found a significant and substantial reduction in drinking rates in response to alcohol price rises – “and even these two showed mixed results”.”
So with equivalent consumption and regressive taxes, who is being harmed? Minimum pricing make low-income families worse off, as the decision to not reduce their alcohol consumption will make them save on other expenditures. Could it be food, vacations or books for their children?
“It is likely to lead to a shift from cider to spirits for dependent drinkers. A shift to the cheapest illegal drugs is also highly plausible among some groups, including young people.” said Chris Snowdon, the head of lifestyle economics of the Institute of Economic Affairs in the United Kingdom.
If the Irish is indeed willing to ignore the long-term consequences of a policy which is likely to have negative consequences, and without providing any evidence that the intent of the policy itself could event be fulfilled, then it what does it say about its intentions? It seems as if minimum alcohol pricing is nothing but virtue-signalling public policy.
There should, however, be not ambiguity about one point: the consumption of alcohol does bring health risks that all consumers should be aware off. Educational practices should promote and enable responsible drinkers, without falling into blatant paternalism, the likes of which will infantilise the Irish consumer and rob him of his consumer choice.
Bill Wirtz is a policy analyst with the Consumer Choice Center in Brussels