The minimum alcohol price debate

The news that the government plans to introduce a minimum price per unit of alcohol is clearly a great item for discussion with AS Microeconomic students looking at government intervention policies for reducing the consumtpion of demerit goods.

I listened with interest to debate between Nicola Sturgeon from the SNP and Andrew Opie from the British Retail Consortium discuss the issue on Radio 5 this morning.

Here are some notable advantages and disadvantages to the plans:

Advantages:
* it is argued that the increase would dissuade consumption of cheap alcohol, thereby reducing the social costs associated with drunken anti-social behaviour amongst young people.
* it is argued the the policy is well targeted in tackling the types of alcohol that lie at the heart of the anti-social behaviour and demands upon emergency services, since these issues largely come about through younger people drinking cheap strong cider and lager.
* Ministers believe the policy could be good for pubs, by encouraging those who might otherwise buy cheaply priced alcohol from supermarkets to go to the pub to drink.

Disadvantages:
* Alcohol is clearly highly addictive and highly price and income inelastic. Therefore drinkers will still find a way to consume and this may lead to increased crime or less consumption of other goods (inlcuding merit goods perhaps) in order to pay for it. However, advocates of the policy may point to a wider range of measures being introduced including flexbility for local authorities to restrict licesning hours and use sobriety enrforcement orders to police this problem.
* There is little prospect of tax revenue being raised from this policy to tackle the ongoing negative externalities of binge drinking, inluding health costs as well as social costs.
* Some argue this policy is unfair on responsibile drinkers who will suffer through seeing prices rise when consumers have hard pressed budgets already. I wonder whether it would enable wine retailers to put up prices of their mid and top end products in order to continue to differentiate them in price from the cheapest products currently beneath the proposed 40p per unit threshold. On the other hand, others claim this policy does nothing to target middle-class people who have been identified as consuming in excess of the guidelines.
* There is concern that this will simply help to boost the profits of retailers, who will be forced to increase prices but will take the opportunity to increase the profits they make on the price they purchase the alcohol for from producers.

Loads for students to get their teeth into here and one that is sure to spark plenty of debate.