Comment - Paying the (Minimum) Price for Politicking?
Is Scotland's Government pressing ahead with plans for a minimum price on alcohol knowing that, even if it fails, the issue could ignite a constitutional debate in the UK?
When this idea was first put to me, by a senior member of the drinks trade, I thought it sounded like political intrigue verging on the fantastical. And yet, having stroked my imaginary beard, there is, perhaps, some method beneath the madness.
It goes something like this:
When Scotland attempts to introduce minimum pricing on alcohol, it is expected to face a legal challenge at the EU level. However, Scotland is officially only a region within one EU member state, and so can't be taken to court at EU level. Instead, the UK Government would likely become embroiled in the dispute. This complicates things considerably, given that the current UK Government is opposed to minimum pricing per alcohol unit and has made clear that its own legal advice has said that the policy being pursued in Scotland is "probably illegal".
Could this provide an opening for the ruling Scottish National Party (SNP) to further its agenda for "full financial devolution" - or even full independence - from the UK? At the least, it provides an opportunity to create a flashpoint over who has the power to do what.
Of course, while a legal dispute on minimum pricing is likely, it is not a foregone conclusion and there are probably other motivations at play within the SNP. These include the prospect of lower health and social costs, puritanical elements among party membership and the prestige of being the first to implement such a radical proposal.
Offsetting this, though, the SNP will be aware of the European Commission's previous stance on such policies. In 2006, it began court proceedings against Ireland for setting a minimum price on cigarettes. It cited a previous European Court of Justice ruling that found "minimum prices are not necessary, since the health objectives may be attained by increased taxation of tobacco products".
The Office of Fair Trading in Scotland is notably absent on the SNP's lengthy list of advocates for minimum pricing.
On alcohol, the European Commission has thrown its weight behind duty tax rises rather than legislation. It's a more indirect method of forcing up prices. But, aside from slotting more easily around competition law, the added bonus of tax, the Commission believes, is that national governments get the increased revenue, rather than industry.
A report released last year by the UK-based Institute of Fiscal Studies (IFS) agreed. Based on a GBP0.45 (US$72) floor price per alcohol unit applied across the UK, the IFS calculated that retailers would be by far the biggest winners from the resulting higher drinks prices. By contrast, it added that increases in alcohol taxes would generate more revenue for government; something that does not appear to have been lost on UK Government thinking.
Subsequently, it is perhaps legitimate to question the extent to which the SNP is using minimum unit pricing on alcohol as a means to provoke a dispute. It might not have been the primary motive, but it could be a key outcome.
- Most Valuable Spirits Brands in 2017 - The facts
- Most Valuable Beer Brands in 2017 - The facts
- Diageo Africa president O'Keeffe on beer & spirits
- Travel Retail needs a disruptor - Comment
- Is sustainability now as important as financials?
- Diageo ready to lock horns with AB InBev in Africa
- Fever-Tree eyes bumper NPD, pack formats for 2017
- Heineken sees Tesco pull SKUs in UK
- Diageo unveils Blender's Batch in the US
- Heineken mulls M&A with $1.75bn notes issue
- Central and East Europe Report Package
- Battle of the Generations - The fight for iGen, Millennial, Gen X and Baby Boomer consumers
- Global vodka insights - market forecasts, product innovation and consumer trends
- Global Scotch insights - market forecasts, product innovation and consumer trends
- Spirit Market in the Top 5 European Countries to 2021 - Market Size, Development, and Forecasts