Minimum Prices for Alcohol: Evaluation

Should there be a minimum legal price for alcoholic drinks in the UK as an intervention to tackle the market failures associated with excessive drinking?

The UK government introduced a ban on the sale of alcohol below cost price from May 2014. A can of average strength lager cannot be sold for less than 41p and a standard bottle of vodka cannot be sold for less than £9.06.

Arguments for a minimum price on alcohol sold in supermarkets:

• Reduces some of the externalities from people pre-loading cheap supermarket alcohol at home
• In the long term, a minimum price intervention would cut premature deaths, reduce workplace absenteeism and also reduce the burden of treating chronic illnesses linked to alcoholism. Alcohol is estimated to cost the NHS over £billion a year and there is an estimated £11 billion annual cost of alcohol-related crime.
• Pubs may benefit from higher minimum prices in supermarkets
• A minimum price might target cheaper, higher-strength drinks often used by younger drinkers

Counter-arguments against using minimum prices for alcohol:

• Minimum price is a tax on responsible drinkers – this is inequitable
• Might be better for drinsk producers to agree voluntary policies on alcohol price / strength
• Better to raise alcohol duties which will raise tax revenues to be used for socially-beneficial projects
• Demand for alcohol among problem-drinkers is likely to be inelastic and, thus, any increase in price is likely to have little effect upon their consumption
• Imposing a minimum price will require extra spending on enforcement e.g. across every drinks retailer