UK: Higher taxes better than minimum pricing, argues OFT

By | 16 August 2012

The OFT has warned that a minimum price will have "unintended consequences" such as boosting retailers profits

The OFT has warned that a minimum price will have "unintended consequences" such as boosting retailers' profits

The UK's Office of Fair Trading (OFT) says it believes raising alcohol duties, instead of minimum pricing, would be a better way to tackle problems. 

In its submission to a parliamentary inquiry on the government's alcohol strategy, the watchdog told MPs that a "change in taxation" would create less risk of "unintended consequences". 

It argued, in evidence that emerged this week, that the price increase under the policy would "generate windfall gains" for retailers. 

"Unlike an increase in tax, additional consumer spending on alcohol would go to private firms rather than to the government," the OFT, which is responsible for enforcing competition and consumer law in the UK, added. 

It said it is "concerned that the unintended consequence of this increase in profit may be to give retailers an incentive to sell more, rather than less, low cost alcohol". 

"Retailers would gain additional profit for every unit of low cost alcohol that they sold. At worst, such an incentive could dull the effectiveness of the minimum price in reducing alcohol sales," the submission stated. 

The watchdog, an independent, non-ministerial government department, said it believed minimum pricing was legal under UK competition law, but it could face "constraints" from "wider European law". 

The Health Committee, which conducted the inquiry, backed minimum pricing in its report published last month. However, it called for a "sunset clause" to allow the law to be overturned if it proved ineffective. 

Scotland is set to introduce a minimum price next, but is facing a major legal challenge. UK Prime Minister David Cameron has also announced similar plans for England and Wales for 2014

Sectors: Legislation, The off-trade, The on-trade

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