What is the evidence for minimum unit pricing?
Does minimum unit pricing penalise particular groups?
What is the difference between minimum unit pricing compared with alcohol duty increases?
Will the UK Government’s proposed policy of a ban on below cost selling of alcohol be equally effective?
What are the some key findings from SARG's research?
What is Minimum Unit Pricing (MUP)?
Minimum unit pricing (MUP) directly links price to alcohol content by setting a floor price below which a single unit of alcohol cannot be sold to consumers. For example a 50p minimum unit price would mean a pint of beer containing two units would need to cost at least £1.00 and a bottle of wine containing nine units would need to cost at least £4.50. If the minimum unit price was slightly lower at 45p per unit, the beer would need to cost 90p and the wine would need to cost £4.05.
MUPs are not taxes and additional revenue from higher prices is retained by retailers with their profits estimated to increase under the policy. The main impact of an MUP will be on alcohol sold in supermarkets and off-licenses; particularly where it is sold in multipacks, promotional deals or in relatively low-cost but high strength products. Prices in the on-trade (e.g. pubs and clubs) will be largely unaffected as they typically sell at well above the minimum levels under discussion.
There is an extensive and robust body of international evidence showing that increases in the price of alcohol are associated with falls in both alcohol consumption and alcohol-related harm. This evidence includes several meta-analyses and systematic reviews covering over 100 studies and was summarised in a major review by the University of Sheffield. MUP is a specific form of price increase which target the price of the relatively cheap and high-strength alcohol which is disproportionately purchased by those drinking at higher levels.
The Sheffield Alcohol Policy Model is an influential modelling study by the University of Sheffield. It has estimated the impacts of MUP in different countries and at different times and consistently found that the policy is an effective and well-targeted approach to reducing alcohol-related harm. The most recent analyses have been published in the Lancet and the British Medical Journal.
The Lancet paper demonstrates that if a 45p MUP had been introduced in England, 2014/15 it was estimated to reduce consumption by 1.6% overall and by 3.7% amongst harmful drinkers compared to 0.6% for moderate drinkers. This is partly due to harmful drinkers buying more cheap alcohol than moderate drinkers. Our study also estimated this policy would lead to 34,200 fewer crimes in the first year and 624 fewer deaths and 23,700 fewer hospital admissions per year in the tenth year after the policy was implemented.
Sheffield’s findings are supported by research from Canada where similar policies have been in place for many years. Different Canadian provinces have different approaches to minimum pricing; for example some set a minimum price for different types of drinks (e.g. beer, rum, wine) and this may be linked to the amount of alcohol in the drink or the size of the drink. Evaluations of increases in Canadian minimum prices have shown that these increases are associated with falls in alcohol consumption, alcohol-related hospital admissions and deaths wholly attributable to alcohol. For example, based on analyses of data from British Columbia, it was estimated that a 10% increase in the average minimum price for alcohol in the province would be associated with a 32% fall in deaths wholly attributable to alcohol.
How does minimum unit pricing affect particular groups?
Some people are concerned that MUP would mean people have to pay more for their alcohol. The price of alcohol bought in the on-trade (e.g. bars, pubs and restaurants) would largely be unaffected as it is typically sold for substantially more than the MUPs which are being discussed. Alcohol sold in the off-trade (e.g. supermarkets and off-licenses) would increase in price but only products sold below the MUP would be directly affected.
Our research shows that, because moderate drinkers buy very little alcohol which is sold below the proposed MUP, they would see very little impact on their spending. For example, in both England and Scotland, moderate drinkers buy less than two units of alcohol per week for less than 50p and this cheap alcohol accounts for less than a third of their consumption. This is the case even if they are moderate drinkers with low incomes. In contrast, harmful drinkers buy large quantities of alcohol each week for less than 50p per unit. In Scotland, as illustrated in the graph below, harmful drinkers on low incomes buy 60 units per week for less than 50p per unit and this is 63% of all they alcohol they buy.
After changing their consumption following the introduction of a 50p MUP, an average moderate drinker in England would spend just £2.25 extra per year on alcohol. A harmful drinker would spend around £11.78 more. Similar results are seen in other UK countries considering introducing an MUP.
There have also been concerns that MUP penalises those with low incomes. Our most recent findings do suggest MUP has different impacts on different income groups. Overall, the impact on low income drinkers is larger than on higher income drinkers. However, the policy only has substantial impacts on those drinking at high levels whereas moderate drinkers are largely unaffected. Moderate drinkers with low incomes in England would reduce their consumption by just 6 units per year under a 50 MUP (approximately 3 pints of beer per year). In contrast, harmful drinkers with low incomes in England would reduce their consumption by 425 units per year (over 200 pints of beer) and harmful drinkers with higher incomes would reduce their consumption by 50 units per year.
Using the same analysis in England, spending changes also vary by income group but are again very small for both low and high income moderate drinkers – annual increases of just £1.32 and £3.60 per drinker respectively. For harmful drinkers spending changes are much bigger, but low income harmful drinkers would spend £33.15 less and higher income harmful drinkers would spend £45.37 more. This compares to an average annual spend on alcohol of approximately £2,800 for harmful drinkers.
Why introduce minimum unit pricing rather than alcohol duty increases?
Although evidence reviews suggest duty increases would also be effective policies, MUP specifically targets the cheaper and high-strength alcohol favoured by heavier drinkers. As a result, it achieves large reductions in both harmful consumption and alcohol-related harms to health. However, under MUP increased revenue benefits retailers whereas revenue from increases in duty or other taxes is returned to the exchequer.
A further problem with alcohol taxes is retailers and producers are not obliged to pass tax increases onto prices. Instead they can absorb them within profits, pass the cost on to the supply or distribution chain, increase the price of other alcoholic or non-alcoholic products or choose some combination of these options. Research by the University of Sheffield shows that when alcohol taxes are increased, UK supermarkets increase the price of cheaper products by less than would be expected given the tax change. Conversely, they increase the price of more expensive product by more than would be expected given the tax change. As heavier drinkers buy a disproportionate amount of cheap alcohol, supermarket pricing strategies which protect the price of cheaper drinks, may reduce the effectiveness of alcohol taxes in combating alcohol-related harm.
Will the UK Government’s policy of a ban on below cost selling of alcohol be equally effective?
Following consultation on The Government’s Alcohol Strategy, the UK Government announced it was abandoning its commitment to introduce a MUP and would instead ban the below cost sale of alcohol. Calculating the cost to producers and retailers of bringing a single product to market is difficult, so the Government chose to define cost as the cost of the duty payable on the product and the VAT payable on that duty. This ban on sales of alcohol below the cost of duty plus VAT was introduced in England and Wales in May 2014.
Results from the Sheffield Alcohol Policy Model show the policy would only have very small impacts on alcohol consumption and related harms. Under a ban on sales of alcohol below the cost of duty and VAT, Alcohol consumption is estimated to fall by 0.04% overall and by 0.08% among harmful drinkers which equates to 3 units per harmful drinker per year. Note that harmful drinkers consume an estimated 3,700 units per year on average. In the 10th year after implementing the policy, there would be an estimated 14 fewer alcohol-related deaths, 500 fewer hospital admission and 900 fewer alcohol-related crimes.
The main reason a ban on the sale of alcohol below the cost of duty and VAT is so ineffective is because it only affects the price of a around 1% of the alcohol sold in the UK and the prices that are affected are only affected to a small degree. For example, a bottle of wine could still be sold under the policy for £2.46, a typical can of lager could still be sold for 40p and a 2 litre bottle of strong cider could still be sold for as little as 95p.