Pricing plans in disarray?

Pricing plans in disarray?

Plans to introduce minimum alcohol pricing in Scotland appear to be faltering, while political support for such a move south of the border appears thin on the ground. With questionable legality under EU law a key stumbling block, Ben Cooper examines the question of minimum pricing in the context of the wider alcohol policy debate in the EU.

Minimum alcohol pricing has been much in the news in recent weeks, with the Scottish National Party (SNP) battling to keep alive its plans to introduce the measure in Scotland and the House of Commons Health Select Committee recommending minimum pricing south of the border.

But while industry advocates have been quick to mount a stout case against minimum pricing, the prospect of such a measure being introduced in Scotland, England or anywhere in the EU for that matter in the foreseeable future appears increasingly unlikely, owing to a combination of questionable legality and a lack of political will.

Earlier this month, a report by the Scottish Parliament's Subordinate Legislation Committee, which considers the competency and legality of bills, insisted ministers would need to set the minimum price in the bill which the SNP has so far not been prepared to do. The Committee said 'a complex assessment' would need to be made to determine if the policy fell within the competence of the Parliament.

The level of political support has also been further brought further into question. Labour MSPs have not backed the move and this month the Scottish Labour Party launched a commission, to be chaired by Professor Sally Brown, to investigate alternative policies for tackling Scotland's alcohol-related problems.

Minimum pricing has also been a subject of discussion in Westminster but there too there appears little political appetite for the idea. The call for minimum pricing in the House of Commons Health Select Committee report on alcohol misuse, published in January, has not been taken up by either the Labour Party or the Conservatives.

In both England and Scotland, the drinks industry has been vocal in its opposition to the idea and vigorous in its lobbying, further undermining political support. The contention by the Scotch Whisky Association (SWA), articulated by chief executive Gavin Hewitt at a hearing of the Scottish Parliament's Finance Committee earlier this month, that it could cost the industry as much as GBP600m will have done little to galvanise favourable opinion.

Notwithstanding other reservations about minimum pricing, it is the question of its legality under EU law that lies at the heart of most arguments against it. Opponents insist that such legislation could be challenged as trade restrictive under EU law. This is not only weakening support in the UK but is also the main reason why minimum pricing has not been taken forward more enthusiastically as a policy option by EU institutions as they too search for viable interventions to tackle alcohol-related harm.

But while minimum pricing appears problematic, the question of alcohol pricing and the effect it has on consumption, and on alcohol-related harms in particular, has been widely discussed and examined in the development of EU alcohol policy.

Last year, the Directorate General for Health and Consumer Affairs (DG Sanco) commissioned research from Rand Europe on the effect pricing has on alcohol consumption.

Rand found that alcoholic beverages had become more affordable in most EU countries since the mid-1990s, in some countries by over 50%, and that there is a positive correlation between alcohol affordability and alcohol consumption in Europe. It also found evidence for a positive correlation between alcohol consumption and three types of harm, namely traffic injuries, traffic deaths and liver cirrhosis.

The Rand report noted that policymakers across the EU have shown interest in minimum pricing as a policy option but expressed reservations about its legality. While the report said there was "extensive evidence" that minimum prices could be effective in reducing harmful and hazardous drinking, especially among youth and heavy drinkers, it said the measure "could potentially be considered to be in contravention of EU competition regulations".

The report suggested minimum pricing would probably only be acceptable if the measure were deemed proportional to the expected benefit, or if there were no other measures considered less trade-restrictive that could achieve similar gains.

The report adds that "a possible effective alternative would be bans on sales below cost, which are not trade-restrictive".

A recent ruling by the European Court of Justice against minimum pricing of tobacco upheld the prevailing view in EU competition law that raising taxation is a better means of lowering consumption and is not trade-restrictive in the way that minimum pricing would be. However, advocates of minimum pricing for alcohol counter this by pointing out that below-cost selling by supermarkets means that higher alcohol taxation is not achieving the objective of raising prices and therefore not suppressing demand.

As the Rand report points out, minimum pricing remains attractive to public health bodies because it can "achieve health goals that taxation alone cannot reach", namely by circumventing the off-trade sector's ability to absorb increases in alcohol taxation and to use deep discounting and below-cost sales.

But there is another outcome of minimum pricing that the public health lobby would find less palatable. Minimum prices are a regressive policy measure, the Rand report points out, "which would transfer welfare and any additional revenue to the alcohol industry and retailers", unlike higher taxation which would see additional revenue go straight into the public coffers.

Crucially, the report points out that a ban on below-cost selling could be an industry self-regulatory measure. Minimum pricing for alcohol, however, could not be self-regulated as this would certainly go against existing anti-cartel legislation.

Self-regulated bans on below-cost selling already exist in some sectors in EU countries. But as yet bans on below-cost selling of alcohol are not widespread, though they have been put in place in Belgium, France, Portugal and Spain. Nevertheless, their public health impact when applied to alcohol sales remains unexplored, Rand concludes.

It is interesting to note that in the UK the Conservatives have included a ban on below-cost selling in their proposed alcohol policy rather than supporting the Select Committee's call for minimum pricing.

Rand said the European Commission could play a role in providing legal and practical guidance and support to member states in the use of restrictions on sales below-cost as an alcohol policy.

Not all believe that a ban on below-cost selling would be the answer. Dr Rachel Seabrook of the Institute of Alcohol Studies says while it has "an intuitive appeal" it carries "practical difficulties because you've got to establish what the cost is and that is commercially sensitive information subject to potentially complex financial arrangements between retailer and producer". This makes bans on below-cost selling "impractical to implement," whereas a minimum price is "straightforward and transparent".

However, the experience in Scotland would appear to demonstrate that from a political standpoint at least, minimum alcohol pricing is anything but straightforward. Whether or not moves towards a ban on below-cost selling would prove any easier to negotiate remains to be seen but this is likely to be increasingly discussed in the coming months, particularly if Scottish moves for minimum pricing founder.