Minimum alcohol pricing doesn’t work

Criticising the Welsh government’s decision to introduce minimum unit pricing for alcohol, Bill Wirtz argues it is possible to curb consumer drinking through education rather than the heavy hand of the law.

There should, however, be no ambiguity about one point: the consumption of alcohol does bring health risks that all consumers should be aware of. Educational practices should promote and enable responsible drinkers without falling into blatant paternalism the likes of which will infantilise the Welsh consumer of their consumer choice.

In an effort to combat alcohol-related deaths, illnesses and injuries, the Welsh government has approved a law in June that will see the introduction of minimum unit pricing for alcohol. Ahead of its introduction next year, this autumn the Welsh government will determine the minimum price companies will need to charge.

Wales is hardly re-inventing the wheel by introducing minimum-unit pricing. This year, the Scottish government introduced the measure after being held back by the Supreme Court for six years. The European Court of Justice in Luxembourg had ruled (in an earlier decision) that Scotland would only be allowed to set minimum pricing if it were able to prove that the measure would improve the condition for public health. However, the Supreme Court’s conclusion was that “Minimum pricing is a proportionate means of achieving a legitimate aim”. It would stand to reason that the “proportionate means” part of the argument was actually backed up by science, but the opposite is the case: no evidence points the fact that minimum pricing would actually reduce the consumption of spirits.

Empirical evidence from other EU member states has shown that large-scale meddling in the food market often backfires. This has been shown in the example of Denmark, which introduced a special fat tax on certain goods, only to repeal the bill (with the same majority) 15 months later. What had happened? Not only was the tax an additional burden on people with low incomes, it also incentivised consumers to downgrade to cheaper products in the supermarket (while maintaining their consumptions of fats), leading to no impact on health and minor impact on consumption overall.

The evidence in favour of minimum alcohol pricing is simply not here. In a 2013 review of 19 studies, only two found that a significant and substantial reduction in drinking rates in response to alcohol price rises – “and even these two showed mixed results”. Earlier studies found responsiveness to prices to be close to zero.” This 1995 paper found that the heaviest drinkers’ responsiveness to price changes was statistically indistinguishable from zero, though it was based on very old data from the 1980s. This more recent one found that hazardous and harmful drinkers (people who consume more than 17.5 units per week) had a very low response to price changes.

Minimum alcohol pricing is inherently a regressive measure, as it hits low-income households the most. The measure is therefore not only failing to achieve its own objectives, it is also unfair to a large chunk of the population While minimum prices try to prevent consumers to pivot to lower-quality products, we need to realise that funds are fungible. Nothing prevents consumers to spend less money on healthy food or other essential items, in order to afford their consumption of booze.

An even more concerning issue could be a new rise in black market alcohol sales, which are known to bring considerable health hazards to the table. Given this regressive measure hits low incomes the hardest, it makes it likely that cities like Cardiff or Swansea will see a massive rise in illicit alcohol dealers adding to the already existing black market presence for drugs.

There should, however, be no ambiguity about one point: the consumption of alcohol does bring health risks that all consumers should be aware off. Educational practices should promote and enable responsible drinkers, without falling into blatant paternalism, the likes of which will infantilise the Welsh consumer and their consumer choice.

In the Committee Stage 1 Report in March of this year, the committee on health and social care & sports writes: “We note, and agree with stakeholders, that enabling the minimum unit price to be determined in regulations could ensure its impact and effectiveness can be reviewed and updated (if necessary) in a timely manner.” Let’s hope that lawmakers will stay true to this promise, and change the policy if the scientific evidence contradicts them.

Originally published at http://commentcentral.co.uk/minimum-alcohol-pricing-doesnt-work/

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About Bill Wirtz

Bill Wirtz is policy analyst for the Consumer Choice Center, based in Brussels, Belgium. Originally from Luxembourg, his articles have appeared across the world in English, French, German, and Luxembourgish. He is Editor-in-Chief of Speak Freely, the blog of European Students for Liberty, a contributing editor for the Freedom Today Network and a regular contributor for the Foundation for Economic Education (FEE). He blogs regularly on his website in four languages.

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‘The evidence in favour of minimum alcohol pricing is simply not here. In a 2013 review of 19 studies, only two found that found a significant and substantial reduction in drinking rates in response to alcohol price increases –and even these two showed mixed results.’

‘Earlier studies found responsiveness to prices to be close to zero,’ he said in a statement.

Wirtz also suggested that as well as there being potentially no health impact, the increased prices will disproportionately impact lower-income individuals.

‘Minimum alcohol pricing is inherently a regressive measure, as it hits low-income households the most,’ he said.

‘The measure is therefore not only failing to achieve its own objectives, it is also fundamentally unfair to a large segment of the population.’

‘While minimum prices tries to prevent consumers from pivoting to lower-quality products, we need to realise that funds are fungible.’

‘Nothing prevents consumers from spending less money on healthy food or other essential items, in order to afford their consumption of alcohol,’ says Wirtz.

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About Bill Wirtz

Bill Wirtz is policy analyst for the Consumer Choice Center, based in Brussels, Belgium. Originally from Luxembourg, his articles have appeared across the world in English, French, German, and Luxembourgish. He is Editor-in-Chief of Speak Freely, the blog of European Students for Liberty, a contributing editor for the Freedom Today Network and a regular contributor for the Foundation for Economic Education (FEE). He blogs regularly on his website in four languages.

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About Bill Wirtz

Bill Wirtz is policy analyst for the Consumer Choice Center, based in Brussels, Belgium. Originally from Luxembourg, his articles have appeared across the world in English, French, German, and Luxembourgish. He is Editor-in-Chief of Speak Freely, the blog of European Students for Liberty, a contributing editor for the Freedom Today Network and a regular contributor for the Foundation for Economic Education (FEE). He blogs regularly on his website in four languages.

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About Bill Wirtz

Bill Wirtz is policy analyst for the Consumer Choice Center, based in Brussels, Belgium. Originally from Luxembourg, his articles have appeared across the world in English, French, German, and Luxembourgish. He is Editor-in-Chief of Speak Freely, the blog of European Students for Liberty, a contributing editor for the Freedom Today Network and a regular contributor for the Foundation for Economic Education (FEE). He blogs regularly on his website in four languages.

Is Moral Panic Justified? The Effect of Alcohol Privatization on Impaired Driving in Alberta

By Heather Bone, Research Fellow, Consumer Choice Center

Nearly every time the prospect of privatizing alcohol sales in Ontario is debated, there is a moral panic. If alcohol sales are privatized, the argument goes, alcohol will be more easily accessible, and there will be an increase in alcohol-related crime. In this research brief, I investigate the extent to which we should be concerned about an increase in social ills resulting from liquor store privatization by focusing on Alberta’s experience with impaired driving (due to limited data availability on other crimes like underage drinking). Thus, this paper answers the following question: Does the retail distribution system of alcohol affect impaired driving rates?

If you were to trust the Ontario Public Sector Employees Union (OPSEU), which represents the province’s 7,500 LCBO employees, you would assume that the relationship is positive – that is, that private liquor distribution systems bring about higher rates of impaired driving. A radio ad released by OPSEU argued: “In Alberta, you can buy alcohol at the grocery chains and in Alberta, it’s three-and-a-half times more likely that the person you pass coming out of the parking lot is driving drunk. Do you want to make that kind of a trade-off in Ontario? A little bit of convenience for a whole lot of pain and suffering.”[1] However, the data tells a different story.

Using data from Statistics Canada and the differences-in-differences econometric technique, I compared Alberta’s impaired driving rates in the four years after the privatization of their state-run liquor stores (in 1993) to their predicted rates in the absence of the policy change (using a computer-generated synthetic counterfactual composed of the impaired driving rates of Newfoundland and the Yukon – two jurisdictions which experienced no change in alcohol policy over the period studied). I found a statistically significant decline in impaired driving rates in response to the policy change. What OPSEU, in their analysis, conveniently omitted was that Alberta’s rates of impaired driving were much higher than Ontario’s prior to liquor store privatization.

My research suggests, if anything, that private retailers can be trusted more than government at keeping alcohol out of the hands of those who are most likely to abuse it. The key results are shown in Table 1 and visually depicted in Figure 1 below. The parameter of interest is the interaction between province and time (Alberta*After) which is negative and statistically significant, demonstrating that the policy change resulted in less impaired driving.

Table 1:

Impaired Vehicle Operation Offenses in Alberta per 100,000 people

Alberta -1.5

(37.2)

After -684.8***

(49.0)

Alberta*After -150.7*

(62.5)

Source: CANSIM Table 252-0013, Statistics Canada

***p <0.001, **p<0.01, *p<0.05

Figure 1: Impaired Vehicle Operation Offenses Per 100,000 People Over Time

Source: CANSIM Table 252-0013, Statistics Canada

The idea that Ontario, and other jurisdictions with state-owned liquor stores, need to choose between social ills and more consumer choice is a false dichotomy. While the costs of liberalizing alcohol sales are overstated, the benefits are clear. As a result of privatization, Alberta drastically expanded the range of products available to consumers from just 2,200 varieties of beer, wine, and spirits in 1993 to over 19,000 varieties today.[2] Ontario, and similar jurisdictions where the state is responsible for the sale of liquor, should, therefore, follow Alberta’s example and pursue privatization for the sake of consumer choice.

[1] OPSEU (2015), “OPSEU radio ads spark strong response from Alberta’s privatized alcohol sector”, https://opseu.org/news/opseu-radio-ads-spark-strong-response-albertas-privatized-alcohol-sector

[2] Milke, “Success of Alberta’s liquor store privatization a lesson for other provinces”, https://www.fraserinstitute.org/article/success-albertas-liquor-store-privatization-lesson-other-provinces

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About Heather Bone

Heather Bone is pursuing a doctorate in economics at the University of Toronto. Her research interests are broad, but generally relate to public policy. Right now, she is particularly focused on studying the economic functioning of cryptomarkets, including what they mean for consumer choice and how online drug markets are shaped by public policy decisions. For several years, Heather has been a dedicated advocate for consumer choice. She performed research to help advocate free trade while working in the Office of the Chief Economist in the Canadian Department of Global Affairs. She then went on to work as a legislative assistant in Ontario’s provincial government before working for the Manning Centre in Calgary, Alberta where she studied the economics of Business Improvement Areas. A list of Heather’s working papers and publications can be found on her website, heatherlynnbone.com.

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About Bill Wirtz

Bill Wirtz is policy analyst for the Consumer Choice Center, based in Brussels, Belgium. Originally from Luxembourg, his articles have appeared across the world in English, French, German, and Luxembourgish. He is Editor-in-Chief of Speak Freely, the blog of European Students for Liberty, a contributing editor for the Freedom Today Network and a regular contributor for the Foundation for Economic Education (FEE). He blogs regularly on his website in four languages.

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FOR IMMEDIATE RELEASE:

CONTACT:
Luca Bertoletti
European Affairs Manager
Consumer Choice Center
[email protected]

2. March 2018
EU tariffs on blue jeans and bourbon would harm consumers

Brussels, BE – On Friday, European Union Commission President Jean-Claude Juncker suggested to German media that the EU could draw up tariffs on American products such as Kentucky Bourbon, Harley Davidson motorcycles, and American dairy in response to U.S. President Donald Trump’s attempted tariffs on aluminum and steel.
Luca Bertoletti, European Affairs Manager for the Consumer Choice Center (CCC), said such a measure will actively hurt consumers in Europe, and engaging in a trade war won’t help the people it purports to help.
“Imposing retaliatory tariffs on signature American products like Kentucky Bourbon and Wisconsin Cheese would harm European consumers, and escalate tensions,” said Bertoletti.
“The US tariffs being passed on steel and aluminum are in violation of WTO rules, and can be successfully challenged. Engaging in targeted political tariffs of widely consumed products provides no gain to Europeans beyond sending a signal of antagonism to the US. Playing geopolitics with beloved products like Bourbon and Cheese will have no winners, but will certainly make European consumers the loser.”
***CCC European Affairs Manager Luca Bertoletti is available to speak with accredited media on consumer regulations and consumer choice issues. Please send media inquiries HERE.***

The CCC represents consumers in over 100 countries across the globe. We closely monitor regulatory trends in Ottawa, Washington, Brussels, Geneva and other hotspots of regulation and inform and activate consumers to fight for #ConsumerChoice. Learn more at consumerchoicecenter.org.

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About Luca Bertoletti

Luca graduated with a degree in Political Science from the University of Milan in December 2014. He worked as a Business Economics Analyst for the Italian magazine TheFielder in Milan and as Think Thank Coordinator for the Austrian Economics Center in Vienna. He is a fellow of Competere Institute in Rome, a columnist for Atlantico Quotidiano, and he sits on the scientific board of New Direction Italia. He has been featured in the New York Times, Radio RAI, RAI 1, El Economista, The National and many other newspapers.

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About Bill Wirtz

Bill Wirtz is policy analyst for the Consumer Choice Center, based in Brussels, Belgium. Originally from Luxembourg, his articles have appeared across the world in English, French, German, and Luxembourgish. He is Editor-in-Chief of Speak Freely, the blog of European Students for Liberty, a contributing editor for the Freedom Today Network and a regular contributor for the Foundation for Economic Education (FEE). He blogs regularly on his website in four languages.