Scotland’s Price Floor on Booze is Bad News for the Poor
Scotland will become the world’s first country to set minimum prices for alcoholic beverages, following a clearance for the law by the Supreme Court. Beginning in May 2018, vendors shall be legally required to charge at least 50 pence-per-unit. To put this into perspective, an average 750ml bottle of wine contains 10 units; Scottish vendors will thus be unable to sell bottles of wine for any cheaper than £5.00.
The idea behind minimum pricing is that the cheap, strong booze popular amongst alcoholics and teenagers will be less easily attainable, thus reducing alcohol-related illnesses, injuries, and deaths.
In reality, minimum pricing is likely going to do more harm than good.
Price floors hurt the poor
If there’s one thing we learned from America in the 1930s, it’s that people will drink whether it’s legal or illegal, cheap or expensive. Consumption just moves from the bar to the speakeasy, production from the distillery to the bathtub still, and vending from the liquor store to the back alley.
More often than not, state prohibitions on alcohol harm the poor and powerless more than anybody else. Scotland’s minimal pricing will be no exception.
The cheapest alcohol available in Scotland at the moment is a cider which sells at 18p per-unit. This means that, after May 1st, consumers will find themselves paying nearly three times as much as before.
The Scottish government believes that this price barrier will lead to reduced consumption, and thus a reduction in alcohol-related health issues. This is, however, somewhat misguided.
According to Euromonitor, alcohol is an inelastic product. This means that increases in the price of alcoholic drinks does not result in an equal reduction in consumption. This indicates that minimum pricing is unlikely to have any significant effect on Scottish alcohol consumption.
This is really bad news for Scotland’s less-well-off; they’re the only ones who’ll be paying extra.
This is mainly due to the fact that minimum pricing only affects cheap alcohol – more expensive brands which already charge above the 50p per-unit price floor won’t have to make any changes to their pricing. Instead, the law will only affect drinks which currently sell below this level, meaning anyone who decides to opt for the budget option will have to pay considerably more.
Furthermore, while alcohol consumption rates are similar between the rich and the poor, some studies suggest that poor people are more susceptible to alcohol-related illness. This is one of the reasons why some have called for a minimum price on alcohol; a somewhat misguided view that raising the price on cheap alcohol will prevent poor people from consuming.
However, since alcohol is inelastic, we can predict that poorer consumers in Scotland will continue to consume alcohol at roughly the same rate following the introduction of the price floor in May.
While the wealthy can continue their drinking habits at no extra cost, the poor will have to shell out upwards of twice of what they used to.
All the while, the alcohol issue will continue to plague public health.
No Border – No Problem
Of course, price elasticity of alcohol is only one of the problems with Scotland’s minimum price plan; another issue has to do with trade.
Only alcohol sold in Scotland will be subject to the minimum pricing laws – for the rest of the UK it’ll be business as usual. Since there are no hard borders in Great Britain, and since one can drive from Scotland to England in a matter of hours, there is nothing to stop Scottish drinkers from simply travelling south in search of cheap booze.
Cross-border shopping to take advantage of cheaper prices has long been a practise, especially since intra-EU import barriers were abolished. ‘Booze Cruises’ serve as examples of the willingness of drinkers to travel in order to procure cut-price tipples.
It is unlikely that most Scots will even have to travel to continue buying cheap alcohol. Considering the fact that alcohol consumption in Scotland is around 54% higher than that in England and Wales, there will likely be a high demand for cheap alcohol post-May. The price floor may thus bring with it an opening in the market for discount liquor imported/smuggled from south of the border.
Therefore, it would seem as though minimum pricing will not only have little effect on alcohol consumption, but will also divert sales of cheaper drinks from regulated vendors, to a black market of alcoholic goods brought from England.
While the wealthy will continue to get their drinks from off-licenses and supermarkets, the poor may be forced into procuring alcohol from an underground source. This means that poor people will receive less consumer protection than their better-off counterparts, since it is so difficult to take legal action against a black-market seller.
In other words, the power is shifted into the seller’s hands, while the consumer is left out to dry.
If the Scottish government really cares about the wellbeing of poor people in the country, it should seriously reconsider implementing a price floor on alcohol. The minimum price law will likely amount to little more than price discrimination against the poor, and do little to curb excess drinking. Let’s keep the state out of the off-license, and let consenting adults buy and sell at the prices they decide.
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